Determining the Value of Money
P1. In every society, material needs to have value in order to trade for more possessions. After all, we don’t carry our possessions with us at all times. This is why money was created by the inhabitants of the island of Yap—so that they could trade items without having to give away items that were used in their day-to-day life. Jacob Goldstein and David Kestenbaum, in “The Island of Stone Money,” describe the appearance of the Yap currency as large, heavy stones with holes in the middle. Their worth was based solely on their appearance. They were made from limestone deposits on islands hundreds of miles away, and were transported back across the ocean in tiny bamboo boats. The creation of this system was the beginning of many societies relying heavily on the concept of giving objects value.
P2. The idea of stone money is interesting because the stones did not actually have to be in the possession of someone for that person to own them. Milton Friedman explains in “The Island of Stone Money,” that when an exchange was made, the stones usually remained at the previous owner’s property. They did this because sometimes stones were even heavier than cars, making it nearly impossible to move them. Sometimes, the stones were not in the hands of anybody at all. Even stones that had sunk to the bottom of the ocean floor, never again to be seen, could contribute to an individual’s wealth. According to Goldstein and Kestenbaum in “The Island of Stone Money,” stones that had been lost on the trip back home to Yap could still be accepted by the trusting Yap culture without being physically verifiable.
P3. The stone system used on the island of Yap can be compared to the modern currency systems in many countries, including the U.S. Alex Blumberg and David Kestenbaum explain in “Weekend at Bernanke’s” that America’s dollar bills used to be backed up by actual gold in the Federal Reserve. Dollar bills had value because we knew they were backed up by gold. After America went off the gold standard, it started producing more dollar bills backed by nothing but the credit of the United States government. Americans now find it sufficient to possess valueless things, while the Yap thought it unnecessary to “possess” their things of value.
P4. Even though there are similarities in the Yap currency and modern currency systems, the inhabitants of Yap could find the concept of modern currency bizarre. To them, stones had actual value since they were massive and shiny in appearance. They would find it strange to know that we put value in a small piece of paper, and that we can print out more whenever we feel like it. They would find it shocking that our currency system is mostly based on numbers on screen, and that a system like Bitcoin exists. Bitcoin is a complete online currency system not run by any government. Anne Renaut in “The Bubble Bursts on e-currency Bitcoin,” describes that Bitcoin is an online money system where users have a “virtual wallet” with all of their online money in it. Once users have Bitcoins in their virtual wallet, they can send their Bitcoins directly to other users, bypassing banks and remaining anonymous. Creators believe that as time goes on, Bitcoin will become more stable and that e-currency will be the future for the U.S. currency. With more online systems, higher amounts of money don’t seem as big as they used to seem. No amount of money seems impossible to reach when we deal with our money solely through numbers on a computer screen. According to Linton Weeks in “The Trouble with Trillions,” America’s national debt is over fourteen trillion dollars. Just decades ago, the thought of having national debt in trillions seemed unimaginable. Now, nobody seems bothered by talking about trillions in general. Without anything to back up dollar bills, people have to put their full trust in a single entity and in America’s case, it’s the Federal Reserve. It Brazil, however, they had nothing to put their trust in for a long time.
P5. Brazilians had been living with high inflation for many decades, but the government created a fake system that tricked its citizens into believing their money was worth something. In “The Lie That Saved Brazil,” Chana Joffe-Walt explains Brazil’s money situation. Brazil’s problem started in 1950, when its government wanted to create a new city. They did not have the money to do it, so they just printed out the money which, of course, led to inflation. She stated that in 1990, Brazil had an inflation rate of 80% per month. Prices were drastically going up every day, so something had to be done to stop it. The first plan implemented was to confiscate everyone’s money, which did not work out too well. Again, the only way to have a functioning currency system is to gain the people’s trust in something. Economists in Brazil came up with a fake system that created a new currency, URVs, that were stable. People were paid in URVs and items at stores were labeled as URVs, so that prices would not have to be changed every day. The Brazilian government would put a conversion chart in the newspaper each day that converted URVs to cruzeiros. Even though URVs were completely imaginary, the system began to work. People changed their mindset to think in URVs, which were stable. They trusted in this system and believed that their currency was stable again. When people have faith in using money, it has value. In order to gain value, there needs to be some level of trust between citizens and their government to solidify that money has worth.
Works Cited
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.
Goldstein, Jacob, David Kestenbaum. “The Island of Stone Money.” NPR. NPR, 10 Dec. 2010. Web. 23 Jan. 2017.
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.” Yahoo! News. 13 April 2013. Web. 23 Jan. 2017.
Weeks, Linton. “The Trouble with Trillions.” NPR. NPR, 22 August 2011. Web. 23 Jan. 2017.
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Counterintuitive 
Aeks, at some times, you manage to explain complex notions of value and worth quite simply and clearly. Readers unfamiliar with the source materials you describe will have no trouble understanding the concepts and following the storyline. But not always. Pros and cons for each paragraph will follow.
P1. You mean that money, “materials that have value” substitute for “items that were actually useful,” but a reader encountering your paragraph unprepared would have a hard time seeing the difference between “materials that have value” and “items that were useful.” If you start out too abstract, your reader can’t find her feet. Ground her first, then you can make abstractions. Your last sentence only “talks about” abstraction without explaining it. What is “this system,” and what is “this abstract concept”?
P2. You have a nice informal style that builds confidence, aeks. Readers will feel comfortable that they’re not going to miss anything as you lay out the oddities of the Yap currency. You only fail when you actually speak of abstraction. “This concept is very abstract since the stones were not in the actual hands of those who owned them.” By the time you say this, you’ve already told readers that stones didn’t have to be in the physical possession of their owners, so telling them again but calling it abstract accomplishes nothing. You redeem this shortcoming by transitioning so nicely to “sometimes, the stones were not in the hands of anybody at all.” And then fail again by merely pointing at the abstraction with: “when stones are in the bottom of the ocean, it’s difficult to give them value.” The final sentence doesn’t help either. It’s not easy, but you’ll have to find ways to illuminate the abstract instead of just calling it out.
P3. You promise that you’re going to compare Yap currency to “modern currency systems in many countries,” but there’s nothing about the fei and savings bonds that seem at all similar. You’re on pretty solid ground with the buying of bonds by the Federal Reserve, but this sentence is competely mystifying: “When this happens, banks then lend out that money they gained from selling savings bonds to members of their bank; therefore, results in banks to fail.” Your description of the GDP does not explain what you say it does, that “Measuring the GDP and other specific numbers gave the currency system in the U.S. a whole new meaning.” And it certainly doesn’t make money more important than it ever was. This is your least effective paragraph.
P4. I truly admire your transition skill in the early sentences here, aeks. You’re very clever to look at OUR money systems from the Yap point of view instead of the other way around. You don’t actually describe Bitcoin well, though. Unfamiliar readers will not learn that there are no physical coins, or that the currency is an invention of some individuals not backed by any government. That makes your claim that “Bitcoin will become . . . the future for the U.S. currency” very hard to understand. I’m not sure how the digitization of money results in “higher amounts of money” exactly. Are you saying we couldn’t possibly be trillions in debt if we had to actually print trillions of dollar bills? (Many real world currencies are calculated in the millions. In Colombia, people earn hundreds of thousands of pesos for a day’s work. Before the Euro, every Italian lira represented a million lire, abbreviated. And even at that, 10,000 of those million lire were worth about 6 US dollars.) You get back on track by indicating that the money system requires trust in an entity, but in America’s case, it’s not the Federal Reserve specifically. It’s the credit of the US government. But boy, aeks, you really transition well. That smooth move from the Fed to “In Brazil, however, they had nothing to put their trust in for a long time” is really sweet.
P5. Is that enough for now? I should really go bother somebody else.
Reply, please, aeks. I can only afford to spend this kind of time with my students who are responsive.
Thank you. I will try to make the first paragraph more clear and work on describing “the abstract concept” I mention. I realize I have to fix up my paragraph 3 so I will work on that as well, and do a better job of discussing Bitcoin.
Watch out for “this” and “it,” Aeks. Usually when your writing is unclear, these pronouns are the culprits. VERY OFTEN you also use the singular “it” to refer to plurals such as many dollar bills. Here’s a vague sentence that suffers from “this”:
P3. I’m pretty sure from your explanation you don’t know how banks get money from the Federal Reserve or how bonds could have caused the Great Depression. That’s OK. The subject is complicated. Don’t try to prove something you don’t understand, but DO prove in clear language the most complex ideas you do understand.
There’s plenty to like here, Aeks, and you demonstrate a promising set of skills that keep me hopeful. Make changes before asking for additional notes if you want them. Meanwhile . . .
Provisional Grade posted in the Blackboard Grade Center.
Updated. I mostly worked on P3 by changing it so I only explain the ideas I fully understood. I also fixed my introduction and tried to do a better job explaining the abstract concepts I mention.
regrade please
You’ve made significant improvements to this argument, Aeks, and are entitled to a Grade Upgrade. I wonder if you’d be interested in a final polish round, though, beginning with my highlighting some repeat errors you make. I’ll do so on your command, and the result would be another upgrade.
One last argument problem: you say in one sentence that the Yap’s stones are like American dollars in lacking intrinsic value, then in the very next paragraph you contrast them as something that does have intrinsic value.
Put this back in the Feedback Please category if you want grammar notes.
I’m willing to do a final round to polish it.
Red notes are grammar and punctuation errors. Blue notes call your attention to argument flaws or syntax.
updated again
Looking good, Aeks. Of course, I will always have new notes, as long as you’re willing to submit your work for review. A few things I have highlighted.
P1.
—Number problem. If you phrased it “materials need to be” it would be obvious that the verb needs to be plural.
—”No one” is singular, as in “not one person was infected.” Therefore, “no one can have every possession HE NEEDS at all times.” I recognize the sexist nature of this construction, but academic English hasn’t solved the problem yet. You CAN SAY:
1. “We don’t carry our possessions with us at all times.”
2. “People don’t carry their possessions with them at all times.”
3. “Nobody carries every possession at all times.”
Your “This begins” argument pretends that the Yap were the first or only culture to invent money. The odd “for decades” comment is just mysterious. I don’t understand its purpose.
P2.
—Fei (or rai) stones were not marked at all to indicate transfer. Only the Germans thought to mark them, to take them out of circulation.
—Your “we would think it seems difficult” phrase is an awkward solution to an understandable problem. Let’s look at the broader setup.
If I had to name this problem, I’d call it “Conclusion First.” The problem of having to explain later how you came to the conclusions you share first is a simple matter of re-ordering the steps.
P3.
Messy stuff here
The sequence again is very disconcerting. First you say the dollar went off the gold standard, but then claim we knew dollars were backed by gold. Then you say we “give dollar bills value” like the Yap, except that the Yap consider the fei to be intrinsically valuable. You can’t have it both ways, and shouldn’t try. The positions are incompatible. They both accept fantasies, but very different fantasies.
P4.
—”also” in addition to what?
—Depending on how you handle the disparate fantasies of Yap and US currency, you might not need the blue note about the intrinsic values of Yap currency.
—Considering Bitcoin is unaffiliated with any country, it’s hard to understand what you mean by “the” government.
—Perhaps the least important detail of Bitcoin is that users keep their money in an online wallet. Anyone unfamiliar with Bitcoin needs to know, instead, how it’s “minted,” what gives it its value, how transactions occur . . . .
—It’s not obvious that “online systems” result in easier acceptance of huge numbers. Why is this the case?
P5.
—The first plan was to confiscate everyone’s money, which did not work out too well.
Unclear here is whether the plan was implemented or not. Either it failed to be implemented, or it was implemented and failed.
—Who’s “they”?
—”Money has purpose” is the essential argument of any essay about currency, Aeks. To your credit, you say it; but your claim comes from nowhere. A better essay would turn on this central claim: that money is function. (It’s not a physical entity; it’s a belief that others will accept it.)
Make whatever changes you think are worthwhile, Aeks. Strip out the colors when you do. Put the post back into Feedback Please if you want to go on. I’m always ready.
I went through each paragraph and tried to incorporate all the suggestions you gave me.
Good work, Aeks. You put in a lot of time on this minor assignment. I hope it was a valuable learning experience.
Regraded.