P1. As a college student paying their way through school; money is so crucial. It seems to be the focus of all my thoughts. How much money is in my account? How much am I getting paid this week? I’m constantly checking my TD bank app, memorizing the numbers. Every person over the age of eighteen thinks about money at least once throughout their day. How can we, as civilized beings, not revolve around such an essential part of living in this modern world? But we must ask ourselves what is money?
P2. Is money a crinkled stained piece of paper? Or is it a hefty limestone rock? Doesn’t the definition of money depend on an individual’s belief and culture? As Americans, we are raised around the mindset that the paper in your wallet and the number on a ATM slip of paper makes your worth. As we learn in “Island of Stone Money” by Milton Friedman the Yaps, a small island made of five to six thousand people their wealth is based around a large limestone rock in their possession. Yaps are pre-industrial people who used massive stone sculptures as currency, this currency is known as fei. They collected this limestone from an island several hundreds of miles away and brought it to their home land to be used as currency. The ownership and possession of the stone was known amongst the people. The importance was unquestioned.
P3. To some the concept of hefty unmoving stones used as currency may seem ridiculous. But when a financial crisis occurs we ask where did those millions and trillions of dollars go? “Invention of Money” broadcasted by Planet Money the idea of disappearing money is questioned. As logical people who understand million and trillion is a very large number we must question how did it disappear and who got it? The answer is that money was only a concept and never a tangible thing. Money doesn’t exist as a thing but rather an idea. Money isn’t solid and its value could disappear.
P4. What’s so different between a stone at the bottom of the ocean and a number from the ATM? Both we cannot see, we simply trust they’re present. We depend on the rock at the bottom of the sea and the printed numbers from the bank. We never can hold or even lay our eyes on such measurements of wealth yet we believe in them. We believe so blindly, that our own blindness is unknown to us. We were born blind to the emptiness of money. The power of money is only registered and fueled by our unyielding belief.
P5. With belief, the Brazilian people knew their money had value again. In “Invention of Money” we learn that with no hard proof, the people had to be tricked into believing. Virtual currency was created which was basically imaginary money. The idea of virtual currency was created because Brazil had such high inflation and the economy was almost impossible to fix. Four underdog economists created virtual currency in hopes that this would fix the economy. People trusted this knew currency, the fake money became real money when the people believed in it. This brought Brazil into the eighth largest economic country. From nothing to everything, all in the belief of this new money. This idea relied heavily on the publics belief. Without their belief in this new money the idea would crumble like all the other ideas.
P6. As human beings, we prefer to be able to explain things rather than cast them away as phenomenon or chance. When the Great Depression crumbled America most people wondered how this could happen. “The Invention of ‘The Economy’” teaches us that before the Great Depression the economy never existed. It wasn’t until the 20th century that the economy came into existence. The government started crunching numbers to figure out an official number for the value of goods and services within the nation’s year. This would be the national income. Soon enough everybody is talking about the economy. Something that had never existed before had now swept the nation and become something of great importance to every class in America. America soon wasn’t the only one keeping score. Eventually, other nations began calculating and measuring their wealth. Economy became a measuring tool for power and status. Which country was winning? Simply, check the economy.
P7. “Invention of Money” discusses in details that the Federal Reserve can create money out of nothing, can whip up pieces of paper and small coins, items that make the world go around. Federal Reserve is not a part of the government and doesn’t look to the government for any decisions. They decide every six weeks should there be more or less money in the US? More money which can mean more jobs and opportunities but also can mean high inflation. Less money can slow down the economy too much. This is a balancing act that if not done right can devastate. Federal Reserve gives money to banks in return for treasury bonds. Button pressing, that’s what it comes down too. Our money system is relied upon this magic trick. Magic of Central Banking is based on trust, without it Central Banking becomes nothing.
P8. Americans, Yaps and Brazilians are all on the same page. Americans believe in paper, Yaps believe in stones, and Brazilians in virtual currency. Each of these do not become currency without belief. We give meaning to our own currency’s. A dollar bill means nothing to the Yaps while the same goes for a large stone in America. And virtual currency would mean nothing without the Brazilians belief. Could we blame our belief or disintegrating belief on our economic status? If we believe our money is more than it currently is, would that change anything? I never knew anything about economics until this assignment. It’s quite alarming to see the differences in currency but mostly the interworking’s of currency. It reminds me of the Wizard of OZ and the great Wizard of Oz is nothing but one man hiding behind a curtain, pushing buttons. Millions out of mole hills. Money is what we make it. Money is both our rise and our fall.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, 1991.
“The Invention of Money.” 423: The Invention of Money. This Is American Life, WBEZ. Chicago. 7 Jan 2011.
Goldstein, Jacob. “The Invention Of ‘The Economy’.” NPR, NPR, 28 Feb. 2014, http://www.npr.org/sections/money/2014/02/28/283477546/the-invention-of-the-economy. Accessed 19 Sept. 2017.