The thought of using stones as money is absurd to people today. Modern day society is uses paper money or credit to purchase items. Before there was paper money, most societies used coins like gold and silver, or they would barter items of similar value. A standard currency that was accepted by everyone, was portable, and could be broken down into smaller amounts was eventually created so people could purchase any item. Money brought an end to most trading and increased the market for goods people could acquire. Money is only valuable because we trust that it will be considered valuable to someone else in the future when we trade it for a product or service.
To me it is strange that a society about one-hundred years ago would use stones as money. After listening to “The Invention of Money” by the Planet Money team, I understand stone money and I have doubts about the real value of money. Brazil began printing money in the 1960’s to fund projects that the government wanted to complete, and ended up causing over inflation. After the massive amount of printing money, prices in Brazil increased absurdly. There was a job that consisted of an employee walking around the store all day to increase prices on items to compensate for inflation. In the podcast, a Brazilian native states, “The government explained to the nation that all the money will be taken from the people to end inflation”. People were left with worthless paper and many committed suicide because they had no way to support their families. There was a group of college students that were able to come up with a plan to restore economic stability and were seen as heroes by the Brazilian people once inflation was ceased. The Brazilian people were tricked by a fake currency that was “virtual” and only had value because the people believed in it.
Modern society has given money an insurmountable amount of power. Our lives revolve around it, people are constantly receiving or using money. The American dollar used to be a representation of the amount of gold the Federal reserve had. Eventually the federal reserve stopped backing money with gold and money became represented by the American people’s belief in the dollar. In the podcast, the Planet Money team states, “The Federal reserve created over 1 trillion dollars to lend out to failing companies in 2008”. How did this 1 trillion have any value? How did this not cause extreme inflation? The federal reserve does not work with the government or have any structured rules and regulations. There are certain plans they go about, but the money they create and how they influx the economy with the dollar. The American people continue to have faith and believe in the dollar. Without believing the dollar is a legitimate currency, the United States economy would collapse.
In 1933, the United States stopped backing the dollar with gold. This was because the Bank of France purchased gold from the United States in order to back their own currency. In The Island of Stone Money, Milton Friedman states, “The result was headlines in the financial newspapers about ‘The loss of Gold’, the threat to the American financial system, and the like”(4). When the Bank of France took this gold from America, the people did not know how to react. The dollar was no longer backed by gold, and society knew it meant nothing. The Great Depression was hitting families all around the country and the federal reserve was at a loss about what to do. It took years of trust and effort to stabilize the economy and bring back value to the dollar.
A new form of currency used is called Bitcoin. Bitcoin is an online currency that can be sent to anyone and stored in an online wallet or that person. This currency is not backed by any real world items or a nations current currency. Bitcoin can be used for purchase of everyday items to black market goods like drugs and illegal firearms. Investors bought Bitcoin in hopes that it could stabilize and become recognized as a legitimate international form of currency. For a while it seemed like Bitcoin had the footing to become an international currency contender. Anne Renaut with AFP News wrote the article, “The Bubble bursts on e-currency bitcoin”. In this article, she states, “Many saw it coming, but that didn’t stop the Bitcoin bubble from bursting: after rising to dizzying heights, the digital currency suffered its first true crash this week”. Just like currencies controlled by governments or private corporations, the online currency system can suffer from value fluctuations and cause people to lose their investment.
After reading how money has changed around the world and finding out all the different forms of it, I am not convinced that the American dollar is valuable. Money controls many peoples lives and is an integral part of modern society, but it is not valuable outside of us making it valuable. Money is a fictitious thing that we give value to, so that we can buy and sell items. All the dollar consists of is green cotton fiber paper and a mutual agreement that we will accept it for products or services because we will be able to use it again for something else. Without the American peoples’ trust and belief in the dollar, its just a piece of paper.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Renaut, Anne . “The bubble bursts on e-currency Bitcoin.” Yahoo.com. 13 Apr. 2013. 30 Jan. 2015. <https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html>.
“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.