Can I Pay for This in Cardboard?
The idea of money has always confused me as money is not a constant entity. The exchange of something valuable like a loaf of bread or a house for a flimsy piece of paper does not confuse people as it was established that the flimsy piece of paper had enough value to get that bread. However, a person trying to hand the same person a piece of cardboard in exchange for a piece of bread in the same regard would result in worrying glares and possibly a call for the police. But if handing something physical results in massive confusion, then it becomes even weirder that a swipe of a plastic card in a machine and pressing something saying credit or debit is completely fine. The fact is money is whatever people want to hold value in and nothing else really matters.
The faith in money is something that is only backed up with the faith humans put in it, which is absurd. Most societies happened to decide that money would be based on the rare and valuable material that is gold, but the material itself is arbitrary. Money just had to be something that a certain group, whether it be a city or an empire, backed up with any material they wished to. In the intriguing case of the island of Yap, the people of the island decided that gigantic limestone boulders that they held in such high regard would be what represented value. However, instead of making the money that was based off limestone something easily accessible such as the paper money that most people are familiar with, the habitants of Yap decided that they would use huge circular slabs of the material, ranging from a diameter of a foot to twelve feet, with a “convenient” hole in the middle as their currency. This Fei, which is what the island of Yap called the currency, tended to be so large and heavy that moving the Fei was virtually impossible. So, the inhabitants nominally claim the large slabs and everyone collectively understands that the claimed stone is the speaker’s worth. A transaction for Fei would just state that the person that “received” the Fei and is shifted to another person in just name alone.
The concept of Fei initially sounds absurd, but the concept is still the same as the US dollar albeit less convenient. Both forms of currency utilize a representation of the material, with the Island of Yap using gargantuan immovable limestone and the US using flimsy pieces of paper with weird symbols and numbers. This item that the people agree is valuable is then used to exchange and keep track of wealth in different transactions to get the goods that they want. The person doesn’t even need to have the money physically. What the inhabitants of the island of Yap consider a common exchange can just simply be compared to exchanging things digitally, as a person can now digitally transfer massive amounts of money they are assumed to have with a swipe of a tiny plastic card. In fact, a currency that is more current could be considered to be just as bad if not more absurd than Fei, the digital Bitcoin. The idea of the digital currency free from the bank seems to be a legitimate idea, but the downfall is that the online currency’s worth is only worth what other people want it to be. This means that the Bitcoin which could sell for the equivalent of $266 on one day could become as little as $54 for essentially no reason.
Yet while Fei still backs up the money with material and Bitcoin’s worth remains changing forever, the handling of the economic crisis of Brazil shows that money doesn’t even have to be backed up by material but by the faith that the money was worth something. During the 1990’s, the constant inflation for forty years made the inflation rate rise to 80% per month, which would eventually make the costs of everyday items insurmountable for the people of Brazil. This caused sporadic changes in the costs of goods that made the Brazilian currency, the cruzeiro, have a sense of inevitable doom for the people. In order to solve this economic downfall, Edmar Bacha and his three friends devised a new currency that eventually replaced the cruzeiro and stabilized the entire countries economy, the URV. This virtual currency was technically based off of the erratic cruzeiro but everything of society from the wages of the workers to the goods that they would purchase was based on the stable URV that stayed static throughout the increasing costs of the cruzeiro. As the URV became more integrated into Brazil, Brazil simply swapped the failing currency with the URV and the inflation vanished. This completely overturns the very idea of money as something that was backed by another varying currency which was based on the common idea of money.
Money is man’s greatest invention. Without it, things such as markets would change into barter areas as the lack of money leaves people only with the power of bargaining. This concept stabilizes society as whole, allowing massive amounts of people to trade with things that everyone would find valuable. But money’s true worth simply lies on what people believe it has.
Works Cited
Friedman, Milton. “The Island of Stone Money.” Working Papers in Economics (1991): 1-7. The Hoover Institution Standford University. Web. 13 Sept. 2016.
Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.
Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch. MarketWatch, 31 Jan. 2015. Web. 13 Sept. 2016.
Anne Renaut, Anne. “The Bubble Bursts on E-currency Bitcoin.” Yahoo! News. Yahoo!, n.d. Web. 13 Sept. 2016.
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