One thing I have known for a long time is that money has different value in every country. For example when I traveled last year one dollar would be equivalent to 70 of that country’s currency. Three dollars can get be a box of Oreo, while two hundred and ten of the other country’s currency can get me about five boxes of Oreo’s. I have no doubt that we believe in a sort of ‘fake’ money, after hearing about the concept of Stone Money.
Friedman said that the acknowledgement of ownership is all it took to add value to the currency; and that acknowledgement is passed down. This surprised me because how can generations of people put trust in something, and not question it? Then I recalled, this is similar to religion people have faith on something that could or could not be real
The US setting aside gold for the French is exactly like the German marking a number on the fei, by adding belief to it, it adds value. This created a lower monetary value for the US, while increasing the France’s monetary value even though the gold was not even moved a few feet away. This goes back to show that money is not fluid, just because a person can make others perceive something differently
The story of How Fake Money Saved Brazil by NPR also shows the effect of how we perceive money. Their story was the value of money were not stable, and in order to stabilize and return faith into the economy they had to create essentially a fake currency. By changing how much the old currency values compared to the new currency and keeping products at the new currency the same, it restored the value of the new money. Because the money was no longer varied, products maintained a value, which restored faith in the economy. This plan could have easily backfired if they did not believe in the new currency, this shows how the faith we put into currency can change the value.
And now in modern-day we have electronic currency. We can now get paid by having our money deposited directly into our bank account. And because when we check our bank balance and it shows a number we believe in it, even though it’s just a set of number. We use it to buy real products with our debit or credit card, even though we didn’t pay physical money for it, the electronic money is treated as real physical money. Money that is not backed by something valuable like gold etc… we can consider it fiction.
We also have other fiction money, such as Etherium and Bitcoin known as cryptocurrencies. Even though they have an equivalent value for other non-electronic currency, what would happen if they stopped using cryptocurrency or say they get banned in a country? That might be what we will be facing soon as there are rumors about cryptocurrency ban in China. According to Josiah Wilmoth just rumors of the ban dropped values of the currency by ten percent or more. This proves that because we believe is some rumor we affect the cryptocurrency.
To sum this all up, just because we perceive or believe something, we are capable of making a value for it.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Wilmoth, Josiah. “Ethereum, Bitcoin Prices Lead $20 Billion Slump Amid Chinese Regulatory Turbulence.” CryptoCoinsNews, Cryptocoinsnews, 9 Sept. 2017, http://www.cryptocoinsnews.com/ethereum-bitcoin-prices-lead-20-billion-slump-amid-chinese-regulatory-turbulence/.
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>>