Acceptance of Money
P1. It is said that money does not grow on trees, yet after reading Milton Friedman’s paper “The Island of Stone Money,” I no longer know what to believe. In his paper, Friedman spoke of an island in Micronesia called Yap where the inhabitants used giant limestone disks as money. The concept of limestone money seems outrageous but invited me to research what money actually was. Bernard Lietaer wrote in his article “The Future of Money” that “economic textbooks define money by what it does; that is, they describe its classic functions as a standard of value, means of exchange, and store of value.” To my surprise, it was described as a placeholder for someones current value and ironically enough, limestone money fit that definition as much as the U.S. dollar.
P2. In Friedman’s paper about the Yap, he explained that their limestone currency too large for people to even bother moving! Instead, the community just acknowledges that the currency now belongs to someone else. While this may seem strange at first glance, it’s not that different from our situation now.
P3. Being a soldier in the United States Army, I have no choice other than to have my pay directly deposited into my bank account. I never get to lay eyes on the physical entity of the money, nor do I ever get to touch it. Even though I’ve never seen it, I am told that I have it. This is very similar to how the people of Yap operate. My community acknowledges that I have money just as I acknowledge that I have been payed. I have money I’ve never seen and to pay a bill online, I transfer that unseen money to someone else who does not see it.
P4. Say that instead of paying an online bill, I go to an ATM and withdraw cash. I see this as trading in “fake money” for “real money” offered by the ATM. This is when the value of the real money is brought up. How valuable is the “real money” that the ATM offers? The reality is, it’s nothing more than a piece of paper with numbers on it. The true value of money comes from what it can buy. For example, someone accepts a piece of paper with numbers on it in exchange for a muffin. The acknowledgment of this piece of paper as legitimate payment is crucial in the success of the currency. Just as the people of Yap acknowledged those who had wealth in their country, we find our money’s value in what we can get for it. If looked at objectively, the world economy is a web of nonexistent currency and currency floating on faith.
P5. In “How Fake Money Saved Brazil,” Chana Joffe-Walt explained how Brazil was plagued with an inflation epidemic that was causing basic human needs to become unaffordable to the country. Inflation was rising by 80% a month and the country was doomed. Yet how this was fixed confirms what I stated in paragraph four. This American Life broadcast “The Invention of Money,” explained that Brazil’s inflation problem was solved by the creation of a fake currency system called Units of real Value or “URV’s.” The URV was a nonexistent currency that the Brazilian government had to convince its people was real. In doing so, the people of Brazil began to acknowledge this form of currency and to use it for buying and selling purposes. The people began to realize that the URV maintained its value from day to day, what would cost 10 URV’s one day would still cost 10 URV’s another. With prices no longer fluctuating, the country began to tame its inflation. This faith saved the country and demonstrated how crucial it is for people to acknowledge the value of their currency.
P6. To keep our currency alive, we need to acknowledge its legitimacy. If we acknowledge our country’s currency as legitimate, can we make up our own currency and convince others it’s legitimate? Yes, in fact we can. According to “Private Currency,” this is known as private currency and is actually pretty common. An example of fake currency is credit card reward points. Some credit cards offer rewards point redeemable for restaurant gift cards. We cannot trade these points with a bank for a house, but we can return these points to the credit card company for a reward. Along with that, we can pay credit card companies to even collect points. Many American Express credit cards have an annual fee. By paying this fee, a door is opened to a world of reward points. We pay in legitimate currency to be able to access private currency that holds no value outside the given institution. The company then rewards us when enough of the private currency is built up. This is just another aspect of how fluid money is.
P7. Money is introduced to most at a young age as something that can help find true happiness or destroy any opportunity thereof. When we think about money, we tend to think about the U.S. dollar or the Euro. The reality shows that money can literally be a rock. This concept shows how the backbone behind money isn’t what’s printed on the bill but how it’s acknowledged.
Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money (1991): 3-7. Web. 23 Jan. 2017.
Glass, Ira, Chana Joffe-Walt, Alex Blumberg, and Dave Kestenbaum. “423: The Invention of Money.” This American Life. Prod. Planet Money. 7 Jan. 2011. This American Life. Web. 23 Jan. 2017.
Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 23 Jan. 2017.
Lietaer, Bernard. “The Future of Money.” BUSINESS: The Ultimate Resource, Jonathan Law, A&C Black, 2011. Credo Reference, http://ezproxy.rowan.edu/login?url=http://search.credoreference.com/content/entry/ultimatebusiness/the_future_of_money/0. Accessed 23 Jan. 2017.
“Private Currency.” Dictionary of Finance and Investment Terms, John Downes, and Jordan Elliot Goodman, Barron’s Educational Series, 2014. Credo Reference, http://ezproxy.rowan.edu/login?url=http://search.credoreference.com/content/entry/barronsfin/private_currency/0. Accessed 23 Jan. 2017.