Money plays a key role in today’s society. However, did you ever once consider the idea that the money you hold in your bank account or your wallet holds no value? What value does money hold? Upon reading the article The Island of Stone Money, I realized that money could very well be an idea, or just an acknowledgement of value. In the article, there is an island called yap in Micronesia that uses a large stone disk as their currency. The people would use these disks otherwise known as fei to buy houses and make other large purchases, and because they were so heavy they would sometimes just leave the stones where they were and acknowledge the owners.In one case, the yap set out on a mission to get a big fei stone. They went to an island, and created the massive fei out of stone from the island. It was said to be the biggest fei they have ever seen. Because of its massive size, it held much more wealth than the other fei. On the way back, there was some difficulties transporting the stone. The stone was lost at sea during a massive storm, and the entire island still acknowledged the wealth it held. I’m shocked by the idea that these people just kept track of who owned certain fei, as someone could have their entire savings out in front of someone else’s house. Friedman stated that later on, the Germans took control of the island, and found that the island badly needed new roads and requested that the district chiefs repair them. However, They wouldn’t listen, so the government painted black crossed on the fei, ultimately claiming the fei as their own. The people of yap saw this, and realized the situation they were in. Later on the roads were fixed, and the crosses were removed, restoring the people of yap’s wealth. To me this seems counterintuitive to accept that simply by marking one’s fei automatically they lose their wealth, however, they accepted it. I believe the people of the island of yap revealed to us that money is not a physical object, and that you can have wealth without any physical identity to show for it. The value of money can change, and has done so before.
Further research led me to look for current economies that can prove this. Upon reading the article How Fake Money Saved Brazil, I can never look at the dollar bill the same way anymore. In brazil, there currency has a rediculous inflation rate. At one point it was at 80%, which is astounding! If we had the same inflation rate in the United States, our economy would be in chaos! How people and shops in Brazil are able to operate is unbelievable, and the fact that the prices changed rapidly made it hard to buy goods at a consistent price. Holding onto money is useless in an economy like this, as the value of items will skyrocket and your money will hold no value. This makes it very intriguing to understand how the people in brazil save money, from what it sounds like, they don’t. Due to the rapidly fluxuating currency and price of goods going up, there is no reason to. The government tried to fix this, but in most cases it just made it worse. Many presidents in the past tried to freeze prices, print money, but all of their efforts have failed. There has always been inflation in brazil, and the people have learned to live with it.
Sometimes the best way to show how unpredictable money can be is to look at the digital kind, cryptocurrency. Bitcoin, otherwise known as BTC, is starting to become accepted as a new form of currency in the United States and in China. In the article The Bubble Bursts on e-Currency Bitcoin, I learned about how the crypto market experienced a significant crash in value. Right around April in 2013, Bitcoin reached an all time high of 266 USD, and was rocketing in value. Just three days later, it fell off a cliff. It went all the way down to 54$, and people were left with their devalued Bitcoins. This is very similar to our stock market crash, and because of that some investors were able to predict this event and didn’t buy. Some people sold their bitcoins and took their losses, others held theirs in hopes of a rise in value. Today, you can buy a bitcoin for 4187 USD, and it will probably change once your done reading this. Cryptocurrency, like stocks, can sporadically change in value in a moments notice. This currency is not quite like the USD, as it is much more susceptible to inflation. Think of cryptocurrency like a race car. It can take fast turns, accelerate and brake fast, and when in the wrong hands, can crash. The thing that’s interesting about bitcoins is, it’s just an icon on a screen, or a line of encrypted code. It has no physical backing, and is still widely traded to this day.
Even in the United States at one point their was an issue with our own currency. In Friedman’s article, he talks about the gold standard. France wanted to turn its dollars into gold, and at the time US currency was backed by a certain amount of gold, that was yours any time you asked for it. The United States didn’t want to have to ship all the gold overseas, so France agreed to just have them leave a note on a desk with the gold, kind of reserving it for them. This lowered the value of the US dollar, and helped raise the gold value in france. All over what may or may not be gold in the federal reserve. This acknowledgement of value, is what money in the world today is. The value in your account, the cash in your pocket, is no longer backed by anything. It’s crazy to think that our cash isn’t really worth anything physical, but it’s still there. We sleep soundly knowing that we have a set amount of value in an account somewhere, because the bank tells us we have it. When you look at all the currencies and how they are backed, you will find out that almost every one does not have a set value. They all run off what the government says they are worth. There is no more gold, or any sort of backing, just word or a stone in your yard. This idea that we call money is what paid for our house, food, and all our necessities. You may never get to even see your money, but you know it’s there.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Renaut, Anne. “The Bubble Bursts on E-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web.
Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 9 Sept. 2017. <http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil>>