Stone Money Draft – Rose1029

The Illusion of Money

p1: In today’s world, we buy things almost effortlessly. What used to be a hand to hand exchange of paper and coins became a swipe of a plastic card, and even that is somewhat outdated. Spending money has become easier throughout the years, so easy in fact that I don’t even have to pull out my credit card to order something online, my computer already has my card number saved once it’s time to pay. I click a few buttons and whatever I wanted gets dropped off at my doorstep, and my money is taken from my account and given to the seller, but did anything happen? Did I ever have that money to begin with? It was never in my hands, or directly given to me. It’s just floating through space and passed around from person to person. The closest thing I have to seeing my money is checking my bank account balance on my phone, which ultimately is just numbers on a screen. If I’m not touching or even seeing my money, how would I fully understand the true value of it?

p2: Money is a very complex concept, but we as human beings are the ones who make it that way. In Milton Friedman’s The Island of Stone Money, he shows the readers a glimpse into the life of a native Yap and their unique way of using currency. The people of this village use limestone disks called “fei” which are so large that they’re almost impossible to move. Much like every other society, the people of yap needed something that they could give value to. They chose something they found beautiful, limestone. This can easily be compared to what most of the world formerly used as currency, gold. They use this stone to make purchases, but since they’re too big to move, the Yap simply make a general agreement on the possession of that particular stone disk. No mark or label is needed, the people of Yap already know who owns the disk on each given day. This may be a stretch from what we consider our money to be, but in fact it reflects our beliefs in money in several ways. When we buy things off of the internet, we transfer money from one account to another and trust the system to take care of our transaction. The same thing goes for the Yap, instead however they leave the trust within each other.

p3: The idea of the Yap simply claiming their massive form of currency as one’s own than another’s on any given day can be hard to grasp, but the US has done similar things in past years. In 1932-1933, in a disagreement between France and the US, the French demanded their gold back. The US refused to send the gold overseas to them, but instead offered to store the gold in France’s account, simply labeling the gold as “Property of France”. The French agreed to this, knowing and trusting that the gold that was laid on American soil was in fact their own. They didn’t need to see that gold was labeled, only by word of mouth did they know it belonged to them. 

p4: Other than the possession of money potentially causing problems, deflation and inflation pose a risk for a country’s financial stability. During an extreme inflation period in the 1980’s the Brazilian government created fake money, called URV’s, in order to gain back control over the economy. What made the people of Brazil trust this new currency was all within the word of their government, and the trust they had within themselves. They wanted their economy to be fixed, and that’s exactly what their government promised them by creating URVs, a virtual currency. 

p5: Japan in comparison was having issues with deflation for many years, meaning that their general level of prices were diminishing. Some may think that this could be a good thing. It takes less money to buy something, but the issue lies deeper within. Any advanced society has their own elaborate system of money, but what happens when each of those society’s merge with each other. They need to have another system in place in order to switch currencies. This is one of the issues Japan was having and still continue to have today, their currency (Yen) is now worth about 108 yen to 1 American dollar. What may seem to be a small issue to the simple minded, but it snowballs into many other issues the international economy has to try to fix. The only way of fixing it would be to manipulate the economy more and more, as new problems continue to arise, which is exactly what The Bank of Japan did. By doubling its inflation target to 2%, among other things, Japan would hopefully adjust their current deflation issue. Every society that has a complex economy has to make these adjustments in order to maintain the system that they created. Overall they’re just adding numbers to a larger equation which, in essence, is making it even more complicated. 

p6: We’ve came from large stone disks to complicated equations involving the notion of money, but how complex can it get? To challenge this idea, the invention of the Bitcoin came to be. The idea of the bitcoin is so complicated that it takes near geniuses to figure out the math that goes into it. As Anne Renaut would put it “Bitcoin is made of strings of dazzlingly complex code created by raw computing power” in her The bubble bursts on e-currency Bitcoin article for AFP news. A bitcoin is a type of digital currency that can be used for different transactions. What makes it distinctive compared to making a regular online transaction is that it does this without the use of a central bank. Bitcoin is something you can buy using your own known currency and can be exchanged for other things if wanted. “We believe that as the value of Bitcoin grows, and the infrastructure around it grows and matures, the price relative to other currencies will get more stable,” she says. This means that bitcoin was created in an attempt to make other currencies more balanced. Maybe someday in the not so distant future, the world will rid of conflicting currencies and agree to one “thing” of value, that being the bitcoin.

p7: So the overall question is, what is money and what is it actually worth? The Yap may have a different answer compared to the Japanese, but ultimately they both have the same idea of money. The answer to that is simply, nothing. It is all based around what we as people believe it to be. The idea of money is essentially just what we imagine it to be. Throughout the journey as a developing nation, we made it more complicated from the more problems we faced. The world makes the idea of money more intricate in an attempt to simplify it. 

Works Cited 

Friedman, M. (1991). The island of stone money. Stanford, CA: Hoover Institution, Stanford University. https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Renaut, A. (2013, April 13). The bubble bursts on e-currency Bitcoin. Retrieved from https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html

Reuters. (2013, January 25). Japan Tries to Ease Fears That Its Policies Will Lead to Currency Wars. Retrieved from https://www.nytimes.com/2013/01/26/business/global/japan-tries-to-ease-fears-that-its-policies-will-lead-to-currency-wars.html

The Invention of Money. (2018, February 19). Retrieved from https://www.thisamericanlife.org/423/the-invention-of-money#play

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1 Response to Stone Money Draft – Rose1029

  1. davidbdale says:

    Rose, I’ve had only a few minutes to scan your work, but I’m impressed with your ability to select just those few aspects of the source anecdotes you need to support your own clear claims. Also, you’re among the few students who have expressed no apprehension about Bitcoin, recognizing it as no more abstract than other currencies we already trust enough to accept as pay for our labors. Your draft is impressive.

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