P1. Currency is a crinkled piece of paper and a hefty limestone rock. Currency is whatever we want it to be. The definition of currency depends 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 make your worth. While others across the globe could hold the standard of wealth to the greatness of your limestone. Our currency is controlled by people who decide on the importance of said currency. Increase, decrease, demand and value are all set in place.
P2. As we learn in, “Island of Stone Money” by Milton Friedman, a small island made of five to six thousand people base their wealth on a large limestone rock in their possession. Yaps are pre-industrial people who used massive stone sculptures as currency, known as fei. They collected this limestone from an island several hundreds of miles away. Fleets of boats were sent to travel the distance, across dangerous water, just to seek the limestone. Once found, they began to work on shaping the large stone. After this task was completed they heaved the heavy stones into the boats to bring back to their homeland. The ownership and possession of the stone was known amongst the people even though the stone never moved from its resting place outside. These giant stones were never exchanged between hands; simple acknowledgement of ownership was all that was warranted. The Yaps knew which families were in possession of which stones. Although, one wealthy family had no stone in sight the Yaps were sure of its existence. While the men were bringing back stones, there was a storm in which the stone went overboard and sank to the bottom of the ocean. When the men told the people back home of the lost stone they were unwavering in their trust that the stone was out there. The stone in the ocean was possessed by a family who had never seen the stone along with all the other villagers. The importance was unquestioned. The men who ventured on this journey to bring back the stone determined the source of currency. Just like the Yaps the American system has certain men who determine our currency.
P3. The Federal Reserve is not a part of the government, although federal is in its title, and they do not look to the government for any decisions. “Invention of Money” discusses in detail, how the Federal Reserve can create currency out of nothing. It can whip up pieces of paper and small coins within moments. These items make the world go around. Paper and chips of metal are what people spend their whole lives working for; yet the Federal Reserve can produce it in seconds. They decide every six weeks if there should 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 relies upon this magic trick. If the determination of our currency was left in the hands of the people madness would ensue. Citizens would print more money every day. This is problematic because the more money in circulation the higher the inflation.
P4. Money is not only the paper in our pocket but it is also something we can’t see. Digital money is easier to manage and easier to lose. From our phone screens, we can move money to one account into another. But people hundreds of miles away can move that money into their possession just as easy. My debit card account was recently tampered with and it feels as if someone walked into your home and broke into your piggy bank. Whether the paper is in your pocket or a number on an ATM screen it doesn’t make it any less personable when someone steals from you. Someone taking your money makes you feel unsafe in all aspects of money handling.
P5. Its bewildering to look at a stock market or housing market crash; we wonder how did the value just plummeted. We ask where did those millions and trillions of dollars go? The answer: it doesn’t go anywhere because it never existed. In “Invention of Money”, the Planet Money team questioned the idea of disappearing money. As logical people who understand million and trillion is a very large number the enormous loss confuses us. The Plant Money team explains that money is only a concept and not tangible thing. Money doesn’t exist as a thing but rather an idea. Money isn’t solid and its value could disappear at any given moment. So, one day your house could be worth three hundred thousand and a week later be reduced to two hundred fifty thousand. Your house didn’t change but the market did. Nothing made your house worth fifty thousand less, expect the fact that perspective buyers changed.
P6. There isn’t much difference 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 hold or even lay our eyes on such measurements of wealth yet we believe in them. The power of money is only registered and fueled by our unyielding belief.
P7. In “Invention of Money” we learn the Brazilian people had to be tricked into believing that their money was more valuable than it currently was. In the 1950’s Brazil’s president wanted to build Brasilia, a beautiful new city. In order to get the money for such a pricey expansion. He printed more money which raised inflation dramatically. From this point on, Brazil was on a downward spiral. The price of milk one day could be one dollar and over the next few weeks it would double. The changing prices were sky rocketing and grocery stores were always adjusting prices. Four underdog economists working with the Brazilian government, created virtual currency in hopes that this would fix the economy. Virtual currency was created which is synonymous with imaginary money. People trusted this new currency after they saw prices steady. For milk, the price was one URV (Unit of Real Value), but the one URV might be worth 10-20 cruzerios (Planet Money). Fake money became real money when the people believed in it. They used their virtual currency to purchase items that would normally take several months to pay off. With virtual currency the price was attainable and would be paid off at a later date. People began spending. This brought Brazil into the eighth largest economic country. From nothing to everything; all in the belief of this new money. This idea relied on the publics belief.
P8. Americans, Yaps and Brazilians are all on the same page. Americans believe in paper, Yaps believe in stones, and Brazilians in virtual currency. 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. 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.
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.