Newsweek - USA (2019-08-09)

BY

GALIA BENARTZI

@galiabenartzi

If you’re Facebook and nobody

likes you, that’s a problem. » P.

NEWSWEEK.COM 11

money is one of the world’s most widely

used but least understood technologies.

We often wonder how human society could have

evolved—or even existed—without language. But

could we have cooperated without money? Lan-

guage enables us to share information, our inner

worlds. With collaboration and trade, later im-

proved upon by money, we share our value, in the

form of our goods and services. Without people to

use it with, money is powerless—and yet we live

with the feeling that money holds a tremendous

amount of power over us.

As we commemorate the historic Bretton Woods

Agreement, which took place 75 years ago last

month and ushered in the modern era of money,

the world is on the verge of a new financial age—

one potentially driven by people rather than finan-

ciers. It’s an appropriate juncture to take stock of

how our system of money began, what it’s evolved

into and where we go from here.

This much has been true through-

out: Money functions as a collective

accounting system, to help us keep

track of who has given what to oth-

ers, and thus who is entitled to how

much from others. That’s it. That’s all money is

supposed to do.

But as we know, it’s far from that simple.

What makes money work as intended is the

shared willingness of many people to receive it in

exchange for their time, things or knowledge. This

network effect of belief in a particular money is the

only actual condition for anything that we use as

money to have value.

Take gold, for example. Put aside that it has actual

utility in manufacturing processes: Because gold is

widely recognizable, divisible (by melting), hard to

counterfeit and scarce, it is also said to have intrinsic

value. But gold’s value is actually due to its almost

religious power—the fact that many people believe

they will be able to exchange it for goods and ser-

vices. Same goes for national currencies. We accept

them as long as we are confident someone else will

accept them later. Lose that belief, and currencies

lose their value—as we see in crisis

after crisis around the world.

Our methods for creating and

maintaining this belief throughout so-

ciety have changed dramatically over

time, and with it, so has our money.

How To

(Re)Make

Money

On the 75th anniversary of the Bretton Woods Agreement,

a new ɿnancial era is dawning. Call it Money .

ECONOMICS

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