From Stones to Dollars

In a world where transactions govern our daily lives, money stands as a cornerstone upon which our modern economies are built. From barter systems to the financial instruments of the 21st century, the evolution of money has mirrored the development of human civilization. Money’s influence on human behavior, decision-making, and the distribution of power can’t be overstated. Money has evolved over centuries, transforming from a simple medium of exchange to complex digital forms of currency like ‘cryptocurrency’. Money has become one of the most important things in today’s society. People are willing to commit sacrifices, and spend most of their time to make ‘money’. When I was younger, my father would work the whole day, just to earn a living for us. But don’t you ever just stop and ponder how this whole economy started in the first place? Do you ever just wonder how the concept of money came up? How it gained it’s value? And how it’s made? 

It all started one hundred years ago on the island of Yap, located in the western Pacific Ocean. There was no such thing as gold and silver, but large coins made of stones, as big as cars. These were large circular limestone discs with diameters ranging from a few centimeters to several meters. These discs, known as “rai stones” are not physically moved during transactions because of their size. You would use it for something big, stone money they might trade. Instead, ownership is transferred through an agreement, with the recognition that there is a change in ownership of the “rai stone”. One significant difference between the Yapese concept of money and our own is the absence of physical possession or transportation of the currency. They said in the podcast that while delivering the limestones across the ocean, there was an instance where it dropped. But even though it dropped down to the ocean floor, the ownership is still acknowledged and the value is still there. That made me realize that money is simply just printed paper that we value so much. That money simply never existed, and how it’s just fiction. The Yapese people realized that they could use these stones as a monetary system and create their own medium of exchange. Instead of relying on barter, where goods are directly exchanged, the “rai stones” provide a common unit of value that is widely accepted. Even in today’s society, we still use this concept with our dollars. While the Yapese concept of money may appear different from our own, both systems serve as mediums of exchange, stores of value, and units of account within their respective contexts. 

In the 1950s, Brazil faced a severe economic crisis because of hyperinflation. What happened was the president wanted to build a massive city in the middle of the jungle which would cost a lot of money. The government didn’t have the funds to support this project, therefore they did what any other government would do in this situation. Print more money. This then led to hyperinflation for the next five decades. According to Chana Joffe-Walt, “Brazilian money was worth less and less. Say you get a one thousand dollar bonus from work. You put that money in a drawer. A year later it’s worth a fraction of what it was” (Walt, 2011). That is crazy to believe. The country experienced skyrocketing prices, economic instability, and a loss of confidence in the national currency. In the face of this crisis, a couple of presidents tried but failed. The first president tried a price freeze, but that failed because no one would sell anything. There was no use to sell anything because there was no profit. The second president tried confiscating money, but that didn’t go well. It was so bad that it led to multiple cases of suicide across Brazil.

When you mess with people’s money, you lose their trust. Which can eventually lead to riots, etc. The economy and the country were at a low. That’s when four heroes were hired by the new Brazilian president to solve the whole hyperinflation problem for good. They came up with this brilliant idea of a ‘virtual economy’. These four heroes didn’t want to change the underlying causes of inflation. They wanted to change the people themselves. According to Chana Joffe-Walt, “People had to be tricked into thinking money had value, when all signs told them that was not absolutely true” (Walt, 2011). They made a virtual currency, one that was stable, dependent, and trustworthy for the people. In this economy, prices wouldn’t change at all, what would change is the currency over time. They used URVs (unit of real value). This is when four men tricked a whole country into using a fake virtual currency that doesn’t exist. It was called ‘Real Plan’. This changed the economy in Brazil forever and made Brazil one of the most successful economies (8th in the world). 

The Federal Reserve System, commonly referred to as the Fed, plays a crucial role in the U.S. economy. While some aspects of the Fed’s actions and policies can be seen as complex or daunting, it is important to note that its primary mandate is to promote economic stability and financial well-being. The Fed has the power and responsibility to print money out of nothing whenever it wants. This is why it is dangerous being the chairman as you have to balance making money. If you print too much, you might get more businesses to start up and have more opportunities. But at the same time, look what happened to Brazil with hyperinflation. According to Alex Blumberg, “remember the mortgaged back security program? One and a quarter trillion dollars. That number was essentially pulled out of thin air. And yet, once the Fed officials in charge of purchasing those securities were given the number–” (Blumberg, 2011). Whether you liked it or not, that was the system. Empower a secret society of PhD with the ability to create trillions of dollars out of nothing and hope we can trust them to get it right and stay as boring and human as possible. 

In conclusion, the currency has evolved throughout the years and had the most interesting changes. From limestones to virtual currency, etc. But the concept of money will never change. It will always be accepted as the medium of exchange to facilitate transactions, store value in goods, and serve as a unit of account in an economy. Money can also take various forms including physical and digital forms like banknotes, electronic transfers, and cryptocurrencies. Money doesn’t actually exist, it could be a piece of paper or digits in someone bank account. Like currently people are buying NFTs of pictures and selling virtual item skins. If you were to tell someone 50 years ago, that a Sniper from Counter-Strike is worth 10,000 $ they would say you are full of shit. I am both scared and excited about what the future has in store when it comes to the evolution of the economy. 

References

423: The invention of money. This American Life. (2017, December 14). https://www.thisamericanlife.org/423/transcript

Bowen, T. (2020, October 1). 10 video game currencies and their real world values. Game Rant. https://gamerant.com/video-game-currency-real-world-value/#zeni-monster-hunter—1-105

Goldstein, J. (2014, February 28). The invention of “The economy.” NPR. https://www.npr.org/sections/money/2014/02/28/283477546/the-invention-of-the-economy

Goldstein, J., & Kestenbaum, D. (2010, December 10). The island of Stone Money. NPR. https://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money

WordPress.com. (n.d.). https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf