The value of paper money

Economics

How money became 'the most powerful metaphor' in the world

Faith is all that separates cash from printer paper

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The likeness of Benjamin Franklin shown from $100 bills in Dallas, January 22, 2020. 

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LM Otero/AP

Money is “a social agreement,” according to Frederick Kaufman, a journalism professor at the City University of New York. You and the cashier both agree that a $20 bill — a green piece of paper that any baby or dog wouldn’t hesitate to tear to shreds — is worth something, and this consensus imbues the bill with value. Eventually, babies get on board, as they’re taught the value humans have long ascribed to different types of currency — a value that’s socially constructed, but so deeply ingrained in our society that it feels silly to question.

This consensus has led Kaufman to crown money “the most powerful metaphor.” In his new book, "The Money Plot," Kaufman unravels the myth-making that has underpinned financial transactions from bartering to bitcoin.

Three Takeaways:

  • When modern researchers cracked the languages of ancient peoples like the Sumerians, they expected to finally read the history and creation myths of bygone civilizations. Instead, they found accounting: tablets tracking how many oxen or wives dignitaries had. Kaufman points to this as an example of how integral financial transactions are to the stories of societies. Another example? The designs placed on currency — so, in the case of the US $1 bill, George Washington, a bald eagle, and E Pluribus Unum — are called “legends.”
  • According to Kaufman, “The Wall Street guys are the greatest poets on Earth.” Why? Because they constantly deal in the realm of the fictional. A dollar is a dollar because we all believe it's a dollar — that’s it. When faith in this premise shakes, like it did during the financial crisis of the late 1980s, the economy falters. It’s the job of brokers and bankers to keep the fiction of the dollar afloat.
  • In 1971, when President Nixon decided to untether the dollar from gold, some speculated that the end of Western civilization had arrived. Instead, production and employment boomed in the US. This leap, which escalated “the metaphorical quality of money,” opened the floodgates for the development of cryptocurrencies and the monetization of quantifying market fear. 

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