The Concept of Money

A time that shows that money was just a concept is Yap. In 1899-1919 there was a little colony in Micronesia called the “Island of Yap”. The colony had a unique form of currency called “Fei”. Milton Freidman in “The island of Stone Money” describes Fei as large, thick, stone wheels ranging from a diameter of a foot to twelve feet. The fei was a type of currency.

After reading “The Island of Stone Money ” and having discussed the topic, my thinking about money hasn’t changed since the last discussion. Money is “any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context”. It isn’t something that is physical. If I have a million dollars to my name, I don’t physically have that million dollars on me. It’s in the bank. We put our trust in that the bank is safely securing it. 

When you compare “in-game currencies” with Bitcoin, one isn’t more abstract than the other because they are almost identical. Bitcoin, “A form of “e-money,” Bitcoin is made of strings of dazzlingly complex code created by raw computing power — a process called “mining” that can in theory be carried out by anyone with a computer.” Both Bitcoin, and in game currency  run without a financial system or government authorities. In the gaming world, objects in the world can be traded using in-game currency. It’s almost similar to bitcoin, buying objects with bitcoin, and receiving it. Also, in a way they are the same because if you lose bitcoin or corrupt the file, you can’t get it back. If you delete the app where the “in-game currency is held, you also lose that currency. So at the end of the day, they are similar. 

The world that we live in is a very digital based world. Everything is online, even money. Crypto currency has changed the world and continues to show its negative and positive effects. By using Crypto, it’s easier to transfer money without the involvement of banks. A fear that many people have is losing their money or getting hacked. With Crypto, your money is safely secured. According to Forbes, “No one can access your funds unless they gain access to your crypto wallet’s private key. In case you forget or lose your key then you cannot recover your funds” .The sense of security is definitely a benefit of using cryptocurrency, “nearly 48% of adults are concerned about the money that they have in backs and other financial institutions”.(CNN). Some people see crypto as the future of money, but others are cautious. 

Our money has proven to be a reliable vehicle of wealth over time. Obviously, anything that creates uncertainty in the world can create doubts, and with the recent “fiscal cliff” debate, people are worried. They worry about the impact the economy will have. For example, inflation or a decline. But we shouldn’t be too worried because we have trust. We have trusted for a long time that U.S currency is reliable.  The U.S dollar has been shown to be a reliable vehicle of wealth over time. 

The people in Brazil trusted the new currency because of the stability. In the NPR broadcast “How Fake Money Saved Brazil,” Channa Jofee Walt said “ because Brazil had incredibly high inflation. In 1990, inflation in Brazil was 80% a month. Not a year, a month.” Their inflation rates were skyrocketing. Brazil ended up still using their type of currency (cruzeiros), but when they got paid it would be listed in URV’s. They made tables with the equivalence of a cruzeiro to a URV. Once they started using this method, everything was starting to improve. Channa Joffee Walt said ,“Everyone in Brazil, collectively, as a country, tricked themselves into believing that this fake currency was real. More real than the actual physical bill they were holding in their hands. And that made all the difference. That made it real. For money, it’s crazy but that’s all you need.”. It was the money that they needed. They went from being a “economic basket- case”, to being the most important economy out there. It stabilized Brazil. 

Other countries like Japan, have a low inflation rate, different from Brazil’s. Their government has been experimenting with different measures to stimulate inflation growth. Japan has been making smaller banks have lesser flexibility. “the difference between the interest rate earned on lending versus that paid on deposits — than the megabanks. They focus on domestic customers, where an aging population that is also shrinking puts limits on consumer demand and spending.”. They’re also making regional lenders favor long term bonds to improve their margins. “The average maturity of bonds in their portfolio rose to 7.3 years by March 2023, from 4.6 years in March 2017. The average maturity of bonds held by major banks stayed around 3.2 years during the same period, the data shows.”

Last point, Our monetary system is quite different from the Yap. Our electronic currencies and physical currency could confuse them considering they’re not used to it. We use a monetary system that is based on “Fiat Currency ”, which means that the currency isn’t connected to anything physical.  They are used for physical pieces of rock that are higher in “price” depending on the size. Whereas we use a piece of paper called cash, and those have different prices on it. We also put money onto a debit or credit card. Everyone puts their trust and faith into this currency whereas Yap’s was different. In Yap, when a transaction would happen, the one person would verbally send the money off. In a way, the types of currency are the same. I don’t think Yap’s way of currency would be feasible in our world currently  because of the lack of trust and the amount of people in the U.S.A. 

References

Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 10 Sept. 2016.

“How Bank Failures Contributed to the Great Depression.” History.Com, A&E Television Networks, http://www.history.com/news/bank-failures-great-depression-1929-crash. Accessed 3 Feb. 2024. 

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. 4 Oct. 2010

Renaut, Anne, “The bubble bursts on e-currency Bitcoin” AFP News, 13 April 2013