For generations society has valued absurd objects. While growing up many kids gave value to Pokémon cards. Pokémon cards were just a basic cardboard card with a picture and description of a Pokémon character. Some of these cards were considered common and almost had no value. But kids would value uncommon cards and trade them to receive other objects or different Pokémon cards. As cards got rarer and rarer, they would be worth more. Suppose you were able to ask most of society, “How much money do they have?” most of society would resort to the number on their online banking applications, or how much money they have invested on their bitcoin profile. But what does that number really mean if anything? Hundreds of years ago civilization would trade goods to obtain another. But through the years this process has become tiresome, so society resulted in giving “valuable” objects a monetary value to obtain another good. But, through the years this monetary object has evolved into something that just represents this “valuable” object. But what gives these trade object any value?
A great example of an absurd economic system can be found on the island of Yap inhabited by the Yap. According to the article “The Island of Stone Money,” written by Milton Freeman the Yap’s currency was called Fei. But the currency of Fei was not your usually dollar bill. Instead the Fei were large limestone disc with a hole in the middle of the disc. The bigger the disc the more valuable it was, some said to be much bigger than a man. But what made these discs so valuable was that limestone was not found on the island of Yap. To obtain these large stone disc the Yap would have to travel by boat hundreds of miles to an island that contained limestone. When these large discs were brought back, they could be used to purchase houses, or a popular to spend Fei was to pay neighboring colonies to return the bodies of fallen warriors that were killed in combat. But as you would expect it is immensely hard to move the Fei. Instead of moving the disc the Yap would instead that a certain Fei belong to one person wherever the disc was. For example, a group traveled hundreds of miles to obtain another large limestone disc but, on their way back encountered a storm not far out from the island of Yap. To survive the men on the boat had to release the large disc and let it sink to the bottom of the ocean floor. When the men returned to Yap, they told this story and instead of letting all the work go to waste the people of yap that Fei at the bottom of the sea still had value, even if no one could physically see it. So, that disc at the bottom of the sea was still able to to be traded from person to person even if they were not able to see it.
During the Planet Money teams podcast at NPR, they explain how the high inflation was solved in Brazil’s economy. To being with the inflation started when the government was attempting to create a new capital city. But the government did not have the funds to create this city. To solve this issue the government essentially printed money to fund the construction of the capital city. This began the devaluation of Brazil’s currency. The prices of goods were changing everyday and the people began to rapidly spend their money before it was not worth anything. To solve this issue economist Edmar Bacha created a fake currency called URV. These URV’s simply just represented Brazil’s current currency but the URV’s tricked people into stop raising prices because the people believed the URVs were more stable. Instead every store now took URV’s as payment and because of this fake currency Brazils economy began to stable out and eventually become one of the words major economies.
Another great example of the words absurd economic system can be found also be found in by Milton Freeman’s article “The Island of Stone Money.” Freeman explains “he Bank of France feared that the U.S. would not stick to the gold standard at the traditional price of $20.67 an ounce of gold.” To fix this problem instead of sending the gold back to France the United States Federal Reserve Bank labeled France gold. Surprisingly France was okay with this. They didn’t need the gold in their procession to know that it was theirs.
On the topic of not physically having the money in your procession a great example of this is Bitcoin. Bitcoin can not be touched or seen at all, you can only see how much bitcoin you have and what its worth on your online bitcoin wallet. Essentially bitcoin is just a number on your computer screen that is worth a certain amount. According to the article “What is Bitcoin, and How Does it Work?” written by Nathaniel Popper, Bitcoins are created from Bitcoin mining. Popper describes Bitcoin mining as “The computers involved in Bitcoin mining are in a sort of computational race to process new transactions coming onto the network.” Bitcoins worth is determined by the bidders attempting to buy bitcoin.
In the article “Should We Be Worried That Our “Money” Is Just Numbers on a Screen?” the author explains that most of today’s currency is just based off faith and numbers on a computer screen. Technically those numbers are just numbers, but we believe those numbers to have value. Most of the currency we use to buy things today are not even seen. In the end most of the time when we buy products numbers are just transferred from one bank account to the other. France did not even need to see the gold in the Federal Reserves to know that it is theirs. This concept is extremely similar to the way the Yap used the Fei in the fact they didn’t have to see the large stone disc to trade them. Or the way people trade Bitcoin. Everything involving currency today is just numbers on a computer screen and society believing those numbers have value.
Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 10 Sept. 2016.
Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.
Popper, N. (2017, October 1). What Is Bitcoin, and How Does It Work? Retrieved from https://www.nytimes.com/2017/10/01/technology/what-is-bitcoin-price.html
Should We Be Worried That Our “Money” Is Just Numbers on a Screen? (n.d.). Retrieved from https://www.profinancialsolutions.com/2017/08/28/should-we-be-worried-that-our aeoemoneyae-is-just-numbers-on-a-screen-2/