Counterintuitive Spring 2024

Money Is Not Real

Money does not exist, it is nothing more than a concept that our society created to acquire social status and distribute wealth with real value. Let’s put ourselves in context, around the year 500 B.C. money as such did not exist. The people of that time survived based on exchanges between the community. For example, one person had a cow and the other had a chicken and the goods were distributed, in this case, the milk that the cow produced and the eggs that the chicken produced. But if we were so good at exchanging goods and labor, why was money invented? The reason is that exchanging goods was not an efficient thing to do, since not everyone was going to want to exchange their eggs for milk or vice versa, and that is when the role of money comes into play. That led people to use money for commerce, they put a certain value on their assets and people decided if it was worth investing or not. So, if money was used as a tool to buy materials with real value, that doesn’t mean that money by itself has no value? Or does it represent nothing more than a number that alone cannot acquire any real wealth?

A clear example that supports the idea that money is nothing more than a concept is the island of Yap and its inhabitants. Yap Island is located in the western Pacific Ocean and is best known for the way it trades among its community. In the article, “The Island of Stone Money” Senior Research fellow, Milton Friedman, describes their unique currency as “large, solid, thick, stone wheels, ranging in diameter from a foot to twelve feet, having in a center a hole varying size with the diameter of the stone” or its established name, fei. According to the system that the Yapese people use, the fei can be transferred physically, placing it in their backyards as a sign of wealth or it can simply be changed ownership through a verbal agreement. That means that there can be a fair exchange of a fei and all the inhabitants of Yap can know who the owner of the fei is even if the owner has never seen or touched the fei. So the Yapese have a giant “coin” that defines their wealth and that can be obtained physically or it can never be touched or have with them physically but they still own it, does it sound familiar? Isn’t it the same as having money in our bank account? And if it is, then, is money even real?

Not necessarily, according to the NPR broadcast “How Fake Money Saved Brazil,” Chana Joffe-Walt describes how economist Edmar Bacha developed a strategic plan with his three university colleagues that would save and completely change Brazil’s economy. In 1990, Brazil was suffering from the worst economic times in its history. Prices were constantly changing, and inflation was so high that prices increased by 80% each month while the government resorted to the same plan: a new president comes in with a new plan, president freezes prices and/or bank accounts, president fails, president gets voted out or impeached, repeat. However, according to This American Life’s broadcast “The Invention of Money,” in 1992 Bacha decided to lower the creation of money and create the Unit of Real Value, a new currency that was stable, dependable, and trustworthy but not real. This caused inflation to stop and prices to remain at the same price even when the value of the URV increased. Although this fake money played an important part in Brazil’s economic improvement, the greater impact it had on the people helped the economy be in the best state possible. The concept of money had changed in people’s minds which made them at peace with their economy and their government.

The same effect had on Americans during the Great Depression. According to the History article “Bank Run,” after the market crash of 1929, people became increasingly concerned about the safety of their money. The level of concern became so high that the rich were withdrawing their investment assets from the economy and middle and lower-class people were withdrawing their money from banks and stashing it under their mattresses, leading to the bankruptcy of more than 650 banks. But was keeping money hidden what kept people rich? Even when people claimed to keep their money safe under their mattresses, that same money quickly reduced in value. In 1933, almost immediately after Franklin D. Roosevelt took office he declared a national “bank holiday,” during which all banks would remain closed until they were determined solvent by a federal inspection. After Roosevelt ensured that all banks were legitimate, he gave his famous speech where he encouraged citizens to take their money out of their banks and deposit it in the banks. Roosevelt’s words and actions helped begin the restoration process, and when the banks reopened, many depositors showed up ready to deposit their money. This not only questioned the value that people had placed on money but also how money on its own lacked any power.

This leads us to establish two conclusions: money is a concept that changes depending on the people and their conditions and the value of money as such may not exist. Even today we can constantly see how money is manipulated and presented in different formats stipulating that it contains no value. An example of this is Bitcoin, which is a digital currency that, according to the article, “The bubble bursts on e-currency Bitcoin,” is a very uncertain company. This is because the way to acquire a bitcoin is very complex, also unlike ordinary currency, bitcoin lacks a specific limit, which leads buyers to lose real wealth such as houses, cars, etc. That said, the value of money is based on our society, but money as such does not guarantee us real wealth. Real wealth is created when we build something, grow something, mine something, or own something more than a number on a piece of paper or on a screen.

References

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

Glass, Ira, Chana Joffe-Walt, Alex Blumberg, and Dave Kestenbaum. “423: The Invention of Money.” This American Life. Prod. Planet Money. 7 Jan. 2011. This American Life. Web. 11 Sept. 2016.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

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

History.com Editors, “Bank Run” HISTORY, April 23, 2010