An Everlasting Phenomenon

Despite having some previous knowledge in regard to money and the Federal Reserve, the education on the island of Yap and its currency, Fei, has sent my conceptualization of money in a whirlwind. The basis in which people own this stone money is quite the phenomenon, a process that involves one not needing to physically possess the currency or even catch sight of it. What I considered startling was the notion that ‘money is fiction’ is something that dated back to pre-technological times in the absence of mass communication forms such as text, social media, and the internet. The islanders on Yap further induced a comical aura upon the reader when it’s realized that this stone money weighs more than a car, their currency would not even be stowed anywhere like a bank as the common American is accustomed to. Owning fei came through word of mouth, a public acknowledgment of who possessed it. The informality of stone money, how it operates and how it presents itself to the mind stupefied me. What purpose does money serve if we don’t need to physically possess it to own it? Do we really ‘own’ our earned money? These questions swirled into the front of my brain, providing mere disappointment juxtaposing the reality I previously held thinking money was an end all be all way of getting things I want in life.

The relevance of the concept of stone money to current times is strikingly parallel. Taking a look at a popular currency in this current technological age, bitcoin, it functions quite similarly to stone money. In fact, bitcoin is arguably more fictional than stone money itself because there is no physical presence surrounding bitcoin. This monetary mechanism, an e-currency, having been created in the aftermath of the 2009 financial crisis, was motivated by having a currency independent of any financial institution. Truly, money out of thin air, with no literal backing. A like minded skepticism I share from Steve Hanke of Johns Hopkins University is that “Bitcoin remains ‘a very uncertain, speculative venture,’ because it is not backed by a commodity”. Prior to learning about stone money, I thought the debate around bitcoin was preposterous, and my belief was only reaffirmed through these readings. For lack of a better thought, how can something that is literally nothing be valued in the slightest? So-called experts go on the media and debate this currency as if they know it like the back of their hand when in reality bitcoin is indubitably an illusion. Bitcoin is a prime example of the notion that ‘money is fiction.’

With my mind being warped in stone money, bitcoin, and the modern day greenback, devoid of the gold standard, Brazil’s solution to decades of inflation only distorted my reality further. None other than a lie instigated stabilization of Brazil’s economy. Many attempts to tackle Brazil’s gargantuan inflation (80% per month at one point in time) were made, including a price freeze. URV’s sprouted up in Brazilian’s daily newspaper, coined by four economists, as a conversion chart in relation to Brazilian’s actual currency, the cruzeiro. The citizens of Brazil suddenly looked no further than the stable URV values in justifying its purchases. Thus, inflation was ultimately mitigated because faith and hope was restored in the cruzeiro inadvertently. 

Although this example’s irony is comical, it drives home the point that any nation’s economy is strictly contingent on citizens’ faith and hope in their own currency. In order to give currency value, one has to be convinced (usually in the form of a lie as history has proven) that spending their hard earned money is worthwhile. Looking at my own life and my parental guidance as a child, it was interesting to note financial behaviors. My father ran a small business, where he prioritized cash payments, and rightfully so to avoid uncle sam’s hand (i.e. taxes) in his earnings. However, thinking about it now, was the ideology worthwhile? These references have made me think in a healthy way about what money is and its most effective usage. Truth be told, the smartest way to use earned money is based on the current financial climate. Is stowing away cash worthwhile in an inflated economy? Quite simply not because an individual loses its spending power on those $10 earned in due time (i.e., the more time that passes, the less value the dollar has in an inflated economy). How about in grave economic times? The answer is to hold on to your money for it is valued. Inherently, that’s why savvy stock marketers are encouraged to buy low and sell high. You will make money on your money if you hold on to your money during financially turbulent times.

Another example to the notion I just alluded to is that of Japan in 2013, its push to pump an increasing amount of money into the economy with hopes to encourage people to spend to create a more viable economy. Japan did not do this in any subtle matter, but rather they approved a whopping $116 billion-dollar economic stimulus bill. As any reliable mind would come to question, how is this spending plan suitable for the country’s overall debt “which has already mushroomed to twice the size of its economy and is the largest in the industrialized world?” according to Hiroko Tabuchi. The answer is simple: it is because ‘money is fiction.’ Nobody will live to see the day any country will pay back its debts, as most debts are insurmountable beyond belief. There’s outrage within me as to why the government presses so hard on the individual to pay its taxes, its debt when the government itself cannot fulfill what it’s asking its own citizens to do. 

Deceit, illusion, misleading, are phenomena that expel the norm not only in America, but in most developed countries in relation to money. Naturally, solutions are to be thought of. But money being not so ‘fictitious’ merely seems like a dream too far gone. It has been the case since the greenback was taken off the gold standard starting in 1933, which set the stage for unprecedented amounts of fictionality as it pertains to money. Milton Friedman referred to the banking panic of 1933 in his work alluding to “the threat to the American financial system,” by removing gold as the standard backing for the U.S. dollar, and in return “the markets regarded the U.S. dollar as weaker, the French franc as stronger”. His point was the perception of how people valued money was the cause for times of panic or encouragement. Stone money was educational for me because it didn’t promote much emotion, but rather aiding me in understanding how and why currency has become the way it has on an individual and global sense. 

References

Friedman, Milton. “The Island of Stone Money – Collected Works of Milton Friedman.” From The Collected Works of Milton Friedman, Hoover Institution, miltonfriedman.hoover.org/internal/media/dispatcher/215061/full. Accessed 3 Feb. 2024. 

Glass, Ira, et al. “The Invention of Money.” This American Life, Planet Money, 19 Feb. 2018, http://www.thisamericanlife.org/423/the-invention-of-money. 

Renaut, Anne. “The Bubble Bursts on E-Currency Bitcoin.” Yahoo! News, Yahoo!, 13 Apr. 2013, sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html. 

Tabuchi, Hiroko. “Japan Approves $116 Billion for Urgent Economic Stimulus.” The New York Times, The New York Times, 11 Jan. 2013, http://www.nytimes.com/2013/01/11/business/global/japan-approves-116-billion-in-emergency-economic-stimulus.html.