“According to economic theory, anything that constitutes money should function as a medium of exchange, a store of value, and a unit of account. Money should be a system which facillitates the sale of goods and services, holds its value for a long time and lends meaning to profits and losses, assets and liabilities. Any object which satisfies any of these requirements can be classified as money.”
There was one country which took this to the extreme.
Once upon a time, in a land far far away, there was a country full of monkeys. Being stereotypical monkeys straight out of someone’s imagination, they venerated bananas, had a banana god and even wore the color yellow at all times. It would not be surprising when we consider that their currency was also, literally bananas.
Banana skins were their national currency. Their national mint consisted of large banana plantations. Once every year, a banana harvest was conducted where banana peels were extracted, weighed and hardened which held the peel’s value was held for a longer duration. These peels were broken down into pieces of differing weights, with their denominations stamped onto them.
Everything had an exchange rate in terms of peels. A kilogram of tomatoes could be exchanged for ten ounces by weight; a pizza was worth 15 ounces while a box of baby diapers could be exchanged for 20 units. Business, merchants and traders also kept accounts to monitor the performances of their activities using this currency.
Banana peels satisfied all the three functions of money.
However, there was a drawback. Banana peels were heavy and the poor monkeys couldn’t a big load of them around. In addition, several new territories were added, and not all of them had extensive banana plantations to serve as a new source of both food and money.
So they decided to institute representative money.
A new bank, called the Central Banana Bank was created which operated banana farms in those regions on the new territories (and the old one too) which had soil conducive for banana growth. They put these in greenhouses, monitored their quality and hence the supply of “good” banana peels, and also introduced a new representative currency in circulation called the Peeliya
The Peeliya was pegged 1 P to 10 ounces of peels, and could be broken down into different denominations as opposed to the commodity money from the previous era. The inherent value of banana peels did not decrease, since the number of trees remained the same. A kilogram of tomatoes now could be exchanged for 1 P worth of paper money, a pizza could be bought for 1.5 P and box of baby diapers could be purchased for 2 P. These items were still valued the same, but the medium of exchange changed.
Businesses could still be run and their performance could still be evaluated based on the new currency. If anything the denominations made their evaluations even more accurate, down to the third decimal.
Being printed in paper meant that being weighed down was not a problem. They also did not have to keep building new banana plantations to harvest more peels. They could expand the land size and increase the stock of peels as and when they needed in case more currency was required.
These efforts future-proofed the monetary system, until the next one major disaster came around...
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