Faith in Currency and it’s Demise

Money has no value. There is no distinct value of the dollar bill that millions of Americans have come to worship. Though it has no, we continue to use that same one dollar bill and trade it for goods and services. But we don’t do it because that’s what we, as people, learned to do. We do it because it is more convenient to trade than metals or an i.o.u. The currency we have today is based on the blind faith that we put in it. If we believe the dollar bill has value, then we will always believe that it has value.

One example of people having blind faith in their currency is the people of Yap, where they have faith in their limestone coins. Milton Friedman’s article, The Island of Stone Money, explains what the people of Uap do with their money, saying “As their island yields no metal, they have had recourse to stone; stone, on which labor in fetching and fashioning has been expended, is as truly a representation of labor as the mined and minted coins of civilization.” His article goes on to say “it is not necessary for its owner to reduce [fei] to possession. After concluding a bargain which involves the price of a fei too large to be conveniently moved, its new owner is quite content to accept the bare acknowledgement of ownership…” The islanders’ currency is a rock that they have designed. The island has a mutual agreement where the rock can be exchanged for goods and services. Having possession of the rock can also prove to be a display of islanders’ wealth. They can even claim possession of the rock and be considered wealthy. Another point to address is when the islanders were fined by the German government, the government “marked a certain number of the most valuable fei with a cross in black paint to show that the stones were claimed by the government.” When this happened to the people of Uap, they thought their currency was taken from them. The article explains that the islanders worked on the roads, and the government removed the markings from their money like nothing happened, and everything went back to normal. The markings led them to think their money was taken. Because it was changed from, they worked to get it restored. 

Another example of people having blind faith in their currency is in Brazil when the value of their money came to nothing. The NPR Broadcast addressed the situation. The government was trying to do things they couldn’t afford, so they printed a lot of money. Because of the money that the government printed, the money was becoming more and more worthless. This also led to a really bad inflation. The prices of everything in the country went up and things weren’t doing well. To fix the problem, the government came to four guys; economists that had plans to fix the problem at hand. Their plan was to stabilize the faith of the money the Brazilian people were using. The economists introduced another form of currency that would substitute for the current one. Brazil went along with the plan for some time and in doing so, they tricked themselves into believing the fake currency was real. For the plan to work, they needed people to believe in their currency, and it worked because they had that. It worked so well that the economy was fixed and became one of the best in the world. Chana Joffe-Walt, a speaker for the broadcast says “Brazil went from being an irrelevant, economic basket-case to one of the most important economies out there. The eighth largest in the world.” This situation helps to prove that the currency that is used is only valuable if it is given a value. While the people were losing faith in the local cruzeiros, those same people used the URVs faithfully, going along with the economist’s plans to fix the economy for the better. 

One final example of people having blind faith in currency is bitcoin. Bitcoins is a cryptocurrency that has the world on it’s toes. People were told to invest because it’s a new thing, but truthfully, bitcoin has no distinguished value. Jeff Reeves, author of the article, “Opinion: Bitcoins has no place in your– or any– portfolio,” gives reasons as to why people shouldn’t invest in the cryptocurrency. The first reason is, as previously stated, it has no value. Reeves believes that a bitcoin is worth “whatever a random person is willing to pay– derisively known as the ‘greater fool’ theory, because profits rely on your ability to find someone more foolish than yourself who is willing to buy higher.” Cryptocurrency is no different than the other currencies that were discussed. The value is given by the people who believe in it. In this case, bitcoin is only worth what people are willing to send to invest in it. It makes people look like utter fools. Economists and capitalists alike think that this is a very dumb move. Namely because “your bitcoins can go to zero either because they have no underlying value or because some hacker has stolen them and left you with recourse. And even if they don’t go to zero, drops like the nearly 85% decline in the past few years can leave investors with a boatload of pain in a hurry.” 

The money and currencies that are used around the world do not have a distinct value. They are given a value based on what the people who believe in them feel they are worth. The large stone that is used as currency on the island of Uap, is used as a mode of exchange for transactions by those people. The islanders refused to acknowledge the stone as their currency when it was temporarily changed because it wasn’t their original currency. They genuinely believed that their money was taken. The people of Brazil had put their faith in a completely different and made up currency to help fix their economy. People who invest in bitcoin have a very good chance of losing their money if someone decides to hack it, but at the same time, it’s worth what the people believe it’s worth. In the end, all the economies work for different areas of the world. However, the faith that people put into their currencies is what makes it real and valuable. So, money doesn’t have a set value, but it is worth something if there are people who believe in it as a way to exchange goods and services.  

Resources:

423: The invention of money. This American Life. (2017, December 14). Retrieved September 26, 2022, from https://www.thisamericanlife.org/423/transcript

Friedman, M. (n.d.). 1991 island stone money – hoover institution. Retrieved September 27, 2022, from https://miltonfriedman.hoover.org/internal/media/dispatcher/215061/full

Reeves, J. (2015, January 31). Opinion: Bitcoin has no place in your – or any – portfolio. MarketWatch. Retrieved September 26, 2022, from https://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28