P1. Money originated from a string of shared beliefs in Yap, a small group of islands in the Pacific Ocean. A large, cylinder-like stone, referred to as a rai stone, was used as a source of currency to pay for trade amongst the Yap Islanders. In his article, “The Megalithic Money of Yap”, Stella Novus said, “the rai stones were special, reserved for things like a bride’s dowry or exchanged when one tribe came to the aid of another in time of war and hardship”. Although the massive stones rarely moved, the system assumed ownership regarding a trade based on these large stones. In this respect, America’s banking system collapsed based on of the Yap ideas of ownership. As French gold reserves grew, the United States gold reserves plummeted, thus causing the downfall of the U.S. Economy. Ownership of the gold allowed France to feel a sense of dominance over the United States even though their gold was based in the United States. This idea of ownership based on a mark or label really baffles me. I have difficulty understanding the ability to own something that may not be in your physical presence. I feel an overwhelming sense of distance from the things that I “own” such as my car or television. Having thought in depth about the concept of money, my perspective on currency and the things that I supposedly “own” has drastically changed.
P2. Furthermore, the 21st century is very complex when it comes to cash management and movement. Technology has taken ‘money’ by storm in terms of physical storage and distribution. Online banking started in New York in 1981 with the help of large banks such as Citibank. New York set a platform for the online banking system, which may have been strange for the Yap Islanders. However, a connection could be made in terms of ownership between the Yap Islands and people of the 21st century as the Yap Islanders may have not seen their stone they were trading for, but they knew someone on the island must own it. Similar to earlier banking, people may not see their cash and earnings, but they know that it is safe in a bank based on a computer record and added government regulation. After hearing about these concepts my mind is filled with questions and ideas about the intrinsic value of money. The Yap Islanders based all of their trades on something that was not in their possession. I gained a great deal of knowledge from the birth of money and how the banking system was created. Although the concept of money is tough to wrap my head around, the Yap Islanders gave me a whole new perspective on the innate value of money.
P3. The public’s faith in the value of currency allows an economy to maintain stability. Once the public establishes a little bit of faith, the value of currency develops. In 1994, during the presidency of Itamar Franco, Edmar Bacha used a “Unit of Real Value” to gain the public’s trust. In the article, “Brazil-The Real Plan”, Country Studies said, “The Unit of Real Value did not depend on general price and wage freeze to stop inflation”. Bacha used this false idea of money to make it appear that Brazilian’s were not facing a constant rise in inflation. However, the Unit of Real Value differed in cruzeiros, which meant the Brazilians were still paying different amounts depending on the day. Once Brazilian’s bought into the URVs, people never bothered to question the price in cruzeiros — the economy turned around based on blind faith in something fictitious. In relation to the Yap Islands, I find it extraordinary that money can be presented in various different ways representing different values nearly at the same time. I strongly believe that money is fictitious. Bacha was able to gain the Brazilians’ trust even though his idea of money was not real. Brazil’s belief in a Unit of Real Value gave their banking system stability and helped them to avoid major debt, unlike Japan. Japan’s plan to rebuild their economy has many advantages such as fixing inflation, developing new technologies, supporting finance firms overseas, etc., but their major problem lies with Europe. If other countries adapt similar strategies, Japan could be in for a currency war across Europe. Therefore, I believe that it is important for Japan to really sell its financial ideas to the people in order to be successful. As Edmar Bacha believed, the people are the foundation for an effective economy.
Country Studies. “Brazil- The Real Plan.” Brazil- The Real Plan. U.S. Library of Congress, 2012. Web. 13 Sept. 2016.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, Feb. 1991. Web. 13 Sept. 2016.
Novus, Stella. “The Megalithic Money of Yap.” Ancient Origins. Ancient Origins, 04 Jan. 2013. Web. 12 Sept. 2016.
“The Invention of Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago. 7 Jan. 2011. Web. 13 Sept. 2016.