What Is Money?
P1. Without money I believe that the world would stop turning. Money is what drives us to get up in the morning every single day and to many people it is the key to finding happiness. This is true I theory because the more money one has the less restricted they are with money and they have more freedom they have to do the things that make them happy. However, the question that people tend to overlook is, what really is money?
P2. The simplest example of what money is found in a small island in the Pacific Ocean. The Caroline islands found a very unique form of money. While reading Milton Friedman’s “The Island of Stone Money” I learned about the Yap islanders who used big lime stone rocks that they carved in to discs as currency. Basically its comparable to the gold standard which dictated that currency was worth a certain weight in gold. The yap islanders found that these stones were rare and saw value in them. So the islanders would travel on small rafts to find these huge stones for currency. However, these stones were not used for small purchases they were used mostly for big purchases such as land or in case of an emergency like a natural disaster destroying the islander’s crops. The Caroline islands had a population of six thousand people. I believe this was a great idea seeing as their population was that small an honor code can be utilized as well as a well-organized system of transaction. However, I believe that in a place with a bigger population such as the United States of America that would not work. This is because people are too spread out and with the amount of people in this country an honor code would not suffice, it calls for a more advanced and formal system which is our economy that is backed by the federal reserve bank.
P3. In the podcast “The Invention of the Economy” it spoke about how the US government essentially created the economy during the great depression when it was mostly needed. Fast forward 70 years to circa 2008 and we find that our nation’s economy is at risk to collapse. To prevent this collapse, the federal government had to rely on the federal reserve to solve the solution. In the podcast “Weekend at Bernakies” cleverly named after the Chairman of the Federal reserve, spoke about the federal reserve’s history. The federal reserve is a separate entity than the federal govermant and is not controlled by them. The Federal reserve essentially has the ability to create money out of nothing. In 2008 many companies were in dire need of bailout because they were struggling very much. If those companies went under our economy would take a very big hit. To avoid this the Federal reserve in partnership with JP Morgan Chase began to give money to different banks, hedge funds, and big corporations. This is essentially what saved our economy from complete turmoil. What the federal reserve did is essentially unexplainable since they literally just created money out of nothing. Many companies had to give collateral for the loan and they did this in the form of mortgages.
P4. This in my eyes was the economies get out of jail free card. I believe this because they had to ask for help or risk losing it all.
P5. Something very similar happened in Brazil. In the Podcast “the Lie that Saved Brazil” we learned how brazil had their own get out of jail free card. Brazil for about five decades had a very bad problem. Their problem was inflation every single day multiple times a day prices soared through the roof. So the value of the currency kept going down. To save the economy Brazil brought in four economists who single handedly saved the economy based off of one lie. They Began changing the underlying causes of inflation such as production of money and many other things. They took it one step further and wanted to change the peoples thoughts to be able to fully fix the economy. They chose to create a new virtual currency named URV. The URV was a stable currency which changed in value however the prices of the products being purchased did not. People started to think in URV’s rather than the previous Crusero. This meant they essentially eliminated the Crusero and stabilized the economy which later allowed brazil to begin their new economy and along came their new currency the Real.
P6. Money in the modern age is near impossible to put real value to it. We as a society have created a system that relies mostly on trust. We have to trust that the decisions being made by the head of the federal reserve are positive and the best decision for our country. A prime example of this is the bitcoin a virtual currency that is universal and can be used online. The value of the bitcoin has been very volatile and has gone up and down and has not been reliable. No one person or government can put a value on money because we all have different economies and values.
“The Invention Of ‘The Economy’.” NPR. NPR, n.d. Web. 24 Jan. 2017.
Renaut, Anne. “The Bubble Bursts on E-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web. 24 Jan. 2017.
“Weekend At Bernanke’s.” This American Life. N.p., n.d. Web. 24 Jan. 2017.