The Mystery of Money

The only reason money has value is because we believe it does. If everybody in America decided that the dollars in their wallet meant nothing, they would be nothing but another piece of paper. In fact, money is not even just valuable paper anymore! It’s completely invisible and is amounted to mere numbers on a computer screen with no actual evidence of its existence. We swipe plastic cards in a machine to buy goods and services and just accept this as proof that our money is real. The economy relies on the peoples’ fictional belief in money to continue to function and flourish. If we ask ourselves what money is, coming up with an answer that makes complete sense will be near impossible. Money is an illusion and, better yet, whatever we deem it to be.

For decades, Brazil was one of the most economically troubled countries in the world and suffered from a state of inflation beyond belief. One week, a pair of sunglasses would cost ten dollars, then the next, the same glasses would cost ten thousand!

Many of the country’s leaders made attempts to solve this issue, though were faced with great failure. An ongoing cycle of trial and error repeated itself endlessly, until one day, four men came up with a plan to save the economy in Brazil. Unlike the presidents who had tried to do things like freeze prices or lock citizens out of their bank accounts, these men knew that eliminating inflation would take more than just a financial and clear-cut solution. The answer to their problem was to get inside Brazilians’ minds and change the way they viewed money. At this point in time, it was likely they did not trust the value of money, because their entire lives, prices were everchanging. They had to be convinced that money was worth something.

The four men created a virtual currency called URV, which, according to NPR’s “The Invention of Money,” was “a plan for a new currency, one that was stable, dependable, trustworthy.” Taxes, wages, and all prices were listed in URV. While the value of this currency fluctuated daily, the prices of items, such as one URV for a gallon of milk, never wavered. This process eventually restored Brazilians’ faith in money and now it is one of the most economically successful countries in the world. The only way to give money back its power was to convince people it obtained it in the first place.

Speaking of virtual currency, unless someone lives under a rock, they have probably heard of Bitcoin and the hold it has on those who invest in it. While it is extremely difficult to define (though what form of money isn’t?), it is basically a form of e-currency that operates separately from any government or political control. The creators of Bitcoin have goals to shape it into a form of currency that will be able to compare to things like the dollar or the peso. They expect this plan to succeed because, in the words of James Surowiecki, quoted in Anne Renaut’s “The Bubble Bursts on E-Currency Bitcoin,” “you can get along perfectly well without ever spending [Bitcoin],” which causes them to differ from any most forms of currency known to man.

Bitcoin has its flaws though, being especially vulnerable to hackers who will make it disappear in an instant, as well as, more recently, being prone to crashing. One week in April 2013, a single Bitcoin went from being worth $266 to $54 in just three days. This makes us question how real Bitcoin, or virtual currency in general, actually is, and wonder how it could lose so much value in a matter of seconds. If one simple transaction could send the worth of Bitcoin plummeting, did it ever even exist to begin with? Bitcoin and its recent surge in popularity is just another chapter in the mystery of money and adds more layers to the question of its perplexing existence.

Let’s take a break from talking about URV and Bitcoin for a second and, instead, examine the stone at the bottom of the ocean that holds unimaginable value to the people of Yap. What if I said that, in the words of Milton Friedman stated in his article “The Island of Stone Money,” there is a family on this island who are considered to be of high wealth because a while back, an ancestor of theirs, “secured this remarkably large and exceedingly valuable stone,” that eventually, “sank out of sight,” following a storm that hit their raft on their way home? Though, not only does that one stone hold value on the Island of Yap!

Stones, also known as fei, are their main form of currency and can range from high to low worth. Some may think this is crazy. How could a rock symbolize anything of importance? Well, maybe we will come to realize that it is not much different than the paper we call “dollars” and deem valuable. The stone at the bottom of the ocean is not too outlandish from our concept of money either, considering people place large amounts of money into the bank and believe it exists because the computer said so. Money could be a stick, for all that matters, as long as people believe and say it has merit.

Gold, paper, plastic, and stones could all hold an equal worth when compared across countries and cultures. The paper money we consider a prized possession may make the people of Yap laugh, as their fei does to us. In reality, both concepts of money are ridiculous and hold no provable worth or quality. Over time, the meaning of money will continue to change and different objects will be chosen to represent it. Be careful putting our trust into the numbers on the app we use to check our bank accounts, because with all things considered, it does not really exist and could evaporate into thin air right before our eyes.

References

Joffe-Walt, C. (2017, December 14). 423: The invention of money. This American Life. Retrieved September 27, 2022, from https://www.thisamericanlife.org/423/transcript

Renaut, A. (2013, April 13). The bubble bursts on e-currency bitcoin. Yahoo! News. Retrieved September 27, 2022, from https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html

Friedman, M. (2012, October 5). 1991 island stone money – hoover institution. The Collected Works of Milton Friedman. Retrieved September 27, 2022, from https://miltonfriedman.hoover.org/internal/media/dispatcher/215061/full