The Intrinsic Value of Money
P.1. What is the value of money? When you think about it, money really has no value. As Americans, we started out with exchanging goods, to gold, to paper money, and now we are exchanging money that might not even completely exist, such as the Bitcoin. Other cultures used very different materials for money like giant stones, but they had the same concept as us. This concept was that money meant power and the goal was to earn as much of it as you can to be successful. We believe that money has value, and even when we physically don’t have the money on us we know that it is valuable.
P.2. One culture that is extremely similar to America’s is the Yap. They are the inhabitants of a tiny island on the Caroline Islands in the pacific. As Milton Friedman mentions in “The Island of Stone Money,” the Yap’s exchange system was called fei, which was limestone carved into a thick round wheel with a hole in the center of it. It was larger than a man and heavier than a car so they clearly could not walk around with that. When someone new becomes the owner of a persons stone they do not physically take the stone, they simply keep it at the former owners house, but everyone knows it belongs to them. The Yap simply trusted each other and would believe the amount of each others fei without having to see it for themselves. It is said that one owner lost their fei in the bottom of the ocean and everyone believed him and he was still able to use it at a marketable value without it being really there. Years later when the German Government took ownership of the Yap, they went around and marked the most valuable fei with a cross of black paint in order to get the Yap to fix the roadways. It instantly worked and when the roads were complete and the black paint was removed and it was like their payment was made.
P.3. This was very similar to the Americans in 1933 when they owed France gold. Instead of shipping the gold to them the Federal Reserve bank put aside the set amount of gold and labeled it in France’s name. France didn’t actually receive the gold but headlines spread across the newspaper saying that America’s gold reserves were down while France’s were up. This was just like how the German’s marked the Yap’s stones with the black paint to indicate that the money was theirs until they paved the roads. In the podcast “The Island of Stone Money,” Jacob Goldstein and David Kestenbaum said “This system, in the end, feels really familiar. If you go online to pay your electric bill, what’s really changing in the world? Some digits in your bank account get shifted around, along with some digits in the power company’s bank account.” At first we think of the Yap’s way of handling money as silly, but in reality is extremely similar to our own. We don’t have to physically show someone how much money we have we can simply go online and look at numbers on a screen.
P.4. Meanwhile, other countries across the globe were struggling with severe inflation such as Brazil. In 1990 the inflation was up to eighty percent a month which destroyed the economy. In the audio blog, “The Lie That Saved Brazil,” it mentions how prices were rising every day and how a pair of sunglasses could cost you ten dollars one day, and then in just a year they would cost ten thousand dollars. This shows how quickly the prices are rising. They could not figure out how to stop the inflation until a group of four men, who were drinking buddies from graduate school, came up with a plan to make the people believe their money had value again. They were able to successfully trick over 150,000,000 people that their money was worth something and it wound up stopping the inflation. Now, the people of Brazil can just walk out of the store with an item and pay for it later through payments. The value of money has changed here in an instant over a simple lie that made people believe there was value.
P.5. Another form of currency, which is an e-currency called the Bitcoin, has a value that rises and drops drastically. In the article, “The Bubble Bursts on Bitcoin,” by Anne Renaut, she talks about how Bitcoin is an online money system where people have a virtual wallet. She explains that hopefully over time this online system will be more stable because these wild swings are not good for the Bitcoin system. Also the fact that you can send money to other people anonymously increases the risk for things such as money laundering and drug dealing. After all though, people are putting their money as Bitcoins and trusting its value as a currency. There is no physical money, everything is done online. This shows that the value of money doesn’t have to be in physical sight, just like the Yap with their stone money.
P.6. Overall, money is simply a concept that people value, and throughout the different countries across the world, the trust and physicality of money differ. Money is something that the world cannot live without and when all is failing, like the inflation crisis in Brazil, simply a new one is created to find balance. We don’t even have to physically see a person’s wealth anymore, for example the Bitcoin, which is just a bunch of digits on a computer screen. The value of physical money no longer exists, we put all of our trust into other people, like the Yap, or we put our trust into online banking. It is mind blowing how someone can just make up a currency out of nothing, whether it be from stone, paper, or online.
Friedman, Milton. The island of stone money. Stanford, CA: Hoover Institution, Stanford U, 1991. Print.
Goldstein, Jacob, and David Kestenbaum. “The Island of Stone Money.” Audio blog post. N.p., 10 Dec. 2010. Web. 18 Jan. 2017.
Renaut, Anne. “The bubble bursts on e-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web. 23 Jan. 2017.
“The Lie That Saved Brazil.” This American Life. NPR, 7 Jan. 2011. Web.
Chippy, you do a pretty good job of describing the money situation on Yap, once you get going. Your second and third paragraphs are mostly clear, whereas your first paragraphs wanders so unpredictably it’s hard to tell what you mean at all.
I can’t tell if you understand Bitcoin yourself, and your explanation of the Brazilian URV doesn’t even try to describe how currency stabilization was accomplished: you simply say that it was.
If we took an hour to work on this together, I think you could learn a great deal about how to clearly communicate the complex ideas in straightforward language. You’re almost there in P2 and P3. I’m ready to start when you are. Meanwhile . . .
Provisional Grade recorded at the Blackboard Grade Center
You’re next in line for a Regrade, Chippy.
Your grade has significantly improved, Chippy. If you’d like further advice on ways to improve this essay, I’ll be happy to help. For now, I’m removing it from the Feedback Please category.