The Evolution of Money
Today the idea of money is not quite the same as what it used to be. In today’s world money is literally thrown around unlike hundreds of years ago when the invention of money first began. The invention of money has simply been one of the best inventions and is still prevalent in mankind today. Today, money is thin and made out of paper, essentially cotton and linen, with the expectations of coins, but in reality who even uses coins anymore. When the idea first came about money was nothing short of heavy, big coins and even slabs of huge rock. Yes, in fact the people who used the rock slabs were called the Yap. I know it must be hard for you to believe because in today’s world money weighs almost nothing, but back then it was made out of huge limestone slabs that measured, varying from 1 foot to 12 feet in diameter, the larger the more money it was worth. Now you may be thinking how can anyone possibly use that as money? Or how does one move it around to use? Or how does the value get determined? All of this was predetermined by the Yap culture and they had a pretty good system down.
It is unclear if the limestone started out being used for money but when the Yap realized that they needed something to show worth and value they thought what better than this beautiful stone. When I first got to thinking about this, I thought it was very unusual and impractical, but the more I thought, the more I realized that if we didn’t have paper money we would have to use gold. The idea of having gold back up the value of the money we use today was created by the Central Bank, or the Federal Reserve. We just use bills and coins because it is more convenient. So is it really that unusual? Well maybe the process is.
They first discovered the limestone on an island hundreds of miles away. They began carving it into huge round disks, with holes in the middle to which they would bring back on their bamboo made boats. I am very surprised that the boats didn’t sink because the stones weighed hundreds of pounds. When they would bring these stone pieces home they would value it and that would be how much money you had. Because they were so big they often didn’t leave the spot they were placed which was usually outside ones home. Fitzpatrick says “They often talk about the stones themselves not changing hands at all.” This system of money was based on a lot of trust and abstract thinking. There is a famous story that said workers had been bringing back a very large stone back for a family but on the way back they hit a very bad storm. Instead of having them remake their stone, because it is such a long hard process they decided to take the word of the men and grant that family the value of the stone. For hundreds of years that families money was based on a stone no one had ever seen, it was all abstract.
Although, when you think about money in the US and all over the world now, is it that much different? If you go online and pay for something with a credit card are you actually giving them the cash upfront? No, you simply are buying something now in the hopes that eventually there will be enough money in your bank account to back up what you have spent. So therefore, there is still a sense of trust that we use today. After learning about the Yap and their way of ownership and trust, my opinion on the world of money has completely changed. If you think about it, when you get paid you are happy to have that much more money in your pocket. When people save money in the bank you are happy to know that that money is there and it is yours but is it really? If all of our money is really backed up by the gold we have in the US, what if something were to happen to the gold or to the value of it. What we can’t see and don’t know can hurt us.
For example, in 1933 France had asked for their gold that was kept in the United States back because they were worried about the worth of it. But being how the US is we decided that instead of actually shipping the gold to France and losing it, we just said it was Frances gold and put their name on it. This sounds like when the Yap had bought something for a very large amount and instead of physically moving the stone they just said it was that persons. This is what set the country into the Banking Crisis of 1933. It also led to the raising of taxes and cuts in spending that took effect in 2013. They named it the fiscal cliff. This again goes back to my question of knowing if the value of our money is ok if one little change can affect the whole economy.
Another example I listened to was the podcast The Lie that Saved Brazil, which explains that their economy was going through a rough time and how they tried to help change it, but only led to it getting worse. In Brazil they use currency called Krazero’s. In 1990 the inflation was so high that the price of goods were going up 80% each month. This made it so people were no longer able to save their money because at the end of a work day they were rushing to the store to get to the food before the price went up within the next hour. This made a lot of people trust the faith in the stability of the currency and the economy. The economist realized they had to do something, so they decided to invent URV’s to help make the economy more stable. The Unit of Real Value(URV’s) went into play around 1992, which essentially was money with nothing to back it up. This didn’t help solve all the economies problems but it helped the people’s faith in the economy again. They saw that inflation stopped so therefore it did.
So it goes to show that anyone can come up with a new type of currency. For example, the Yap making up their own form of money, in Brazil they came up with URV’s to help save the economy, and even Bitcoin. Bitcoin is online money that is like a stock that you invest in. Some businesses let you pay in bitcoin, mostly those who don’t want the payment to be known about because it is private. But since it is like a stock it can crash at anytime, which it eventually did. Steve Hanke from Johns Hopkins University said “Either way, Bitcoin remains “a very uncertain, speculative venture,” because it is not backed by a commodity.” At least the money we use today is said to be backed by gold.
All in all, when you think about the different kinds of money used in the world today they aren’t so different. Someone came up with them to have a stable form of currency in that country. We have trust in each type of currency that we use knowing full well that the value could change anytime and the economy could crash at anytime. The evolution of money has become a pretty amazing process. We started with 12 foot long slabs of limestone to paying for things online with no actual physical money. Along with the physical evolution of money came the trust with it. Many economy crashes, inflation wars, and stock market crashes and still we trust the Federal Reserve because what other option do we have. Who knows in 100 even 50 years where we will be in terms of money. Will physical money cease to exist as we know it?
Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 10 Sept. 2016.
Friedman, M. (1991, February). The Island Of Stone Money. Retrieved February 2, 2020, from https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf
Renaut, Annie “The Bubble Bursts on E-currency Bitcoin” Yahoo News. Yahoo News, 2013, April 13