A01: Stone Money

A Counterintuitive Assignment:
Stone Money

Before midnight, MON JAN 23, post a reflective response to the story of money on the island of Yap. Find the resources for your assignment in the sidebar under the Category A01: Stone Money.

  1. Listen to the three podcast segments from the Planet Money team at NPR.
  2. The first tells the story of the stone money of Yap.
  3. The second provides a deeper understanding of the role of faith in money systems through the anecdote of the Brazilian real.
  4. The third uses an introduction to the Federal Reserve system to provide a somewhat terrifying glimpse of the operational design of the US economy.
  5. Read the closely related 5-page article, “The Island of Stone Money,” by Milton Friedman.
  6. Analyze the abstract concept of money. In informal academic language, describe how your thinking has changed in just two days (or why it hasn’t) about money, wealth, and our faith in things we never see.
  7. Listen to or read enough of the source material to cite two sources besides the NPR broadcast and the Milton Friedman essay.
    1. I have provided links to sources about Bitcoin and the Japanese yen that might interest you. If they don’t, find your own additional sources.
  8. Post your response to the blog (see Details below).

    Notes: I’m not interested in your critique of the quality of the writing or the production values of the Planet Money team that produced the story. Instead, I want you to examine the thinking and the behavior of the people involved in the story: for example, the Yap islanders, the German government, the French Bank, the US Treasury, the Brazilians who used cruzeros, the Brazilians as they adapted to the real. What is their concept of money? How does ours differ from the Yaps’? In what ways was the Yap concept of money more or less abstract than ours? How fluid is the value of our money?

Sample questions to consider: What is the intrinsic value of money? How could labeling some gold in a basement vault in the US bring down America’s banking system and usher in the Great Depression? What feature of our monetary system might the Yap consider most bizarre? What made Brazilians trust the new currency? How did the recent “fiscal cliff” debate in the US raise questions about our own money as a reliable vehicle of wealth? How could the Japanese plan to invigorate their economy go wrong? Why is public faith in the value of a currency so important?

First Draft
Sample Essay by an Actual Student

Kit-Kats for Nerds

P1. Children do not understand the value of money. On Halloween, they’ll trade a Kit-Kat for a box of Nerds, but they won’t take a dollar for that same box. Humans, on our most basic level, value trade of goods and services for something comparable in return. This system of trade has become bastardized, however, from exchange of goods to exchange of gold, to paper, and so on, until we don’t even know if what we’re exchanging even exists. For the most part, it doesn’t. It is simply numbers on a screen that tell us that we have the power to buy something that we need. So, is there really any value for children, or anyone, to understand? Does money have value anymore?

P2. In the western Pacific Ocean, as a piece of the Caroline Islands, lies the island of Yap. Its inhabitants—the Yap— are fairly unremarkable, save for how they do business. Milton Friedman, in “The Island of Stone Money,” describes their unique currency: giant limestone discs that litter the island. Their diameter can measure a foot or twelve feet, each with varying sizes of holes in the middle. The larger the stone, the more value it holds. If it seems utterly impractical, that is because it is. The stones hardly ever actually change hands, as carrying them would result in braking said hands. So instead, everyone just agrees that a stone has a certain owner. Something large is purchased, and everyone is notified that the stone’s owner has changed. One family is incredibly rich, but has never seen their riches, as they rest at the bottom of the ocean. This may seem primitive, but in reality it is not too different from the American economy.

P3. For example: In 1933, France demanded gold of the United States. Concerned about the value of the dollars they held, they wanted something more tangible in their possession to assure them of their fiscal security. However, instead of physically sending gold to the French, the Federal Reserve set aside gold for France. The actual gold did not travel anywhere, but everyone now knew that it was France’s gold. Sound familiar?

P4. This action of setting aside gold sent the country tumbling off of its fiscal cliff and into the Banking Crisis of 1933. The fiscal cliff is a relatively modern term, but can be applied in the situation of 1933. Jackie Calmes, in “Demystifying the Fiscal Impasse That Is Vexing Washington,”describes the fiscal cliff as the possible rise in taxes and cuts in spending that would take effect in 2013 due to a federal deficit reduction plan. If this one decision can send the economy into such chaos, then it must not be very stable. Any set of circumstances could manipulate the value of the dollar and its spending power, which begs the question, is the dollar really a stable form of currency? Is anything?

P5. In the NPR broadcast “How Fake Money Saved Brazil,” Chana Joffe-Walt offers evidence of the tenuous nature of currency. In Brazil, they don’t have dollars, but their currency is easily manipulated and their economy is fragile. In 1990, inflation was so horrifically high that prices were increasing by 80% each month. Prices were changing constantly, and no federal intervention was able to fix the problem. That is, however, until 1992. That year, according to the This American Life broadcast “The Invention of Money,” four economists put the Unit of Real Value into play, which was essentially currency with nothing to back it up. Prices stayed stable at a certain amount of URVs, wages were always in the same amount of URVs, everything was in URVs and inflation practically disappeared. Fake money solved real financial issues. But it wasn’t the money, it was the peoples’ faith in it. People saw that inflation had ceased and believed that the economy was fixed, and therefore it was.

P6. This goes to show how much sway public faith in currency has on the economy. Even if fake money is being used, people will see stable prices and believe in a stable economy. But who is to say what is fake and what is not? The legitimacy of money lies in what valuable commodity it represents. In the United States, that used to be gold, but in recent years the federal government has denied that gold has any bearing on the modern dollar. So the dollar is worth whatever it can buy. In one store, this may be a pack of gum. In another, it may be a child’s toy. People simply agree that something is worth one dollar, and everyone seems to accept it. But in modern times, physical money doesn’t even have to change hands in order for payment to be made.

P7. We live in a digital age, and that ushers in digital money. One very prominent form of digital money is Bitcoin, a completely digital “mine-able” currency that some businesses accept as payment. (Reeves) From the beginning, its creators have admitted to its lack of true worth, but customers mine away, spending dollars on bitcoins. At any given time, a bitcoin is worth a certain number of dollars, which is worth… what? Because of its highly speculative nature, Jeff Reeves suggests in “Bitcoin Has No Place in Your – or Any – Portfolio” that serious investors avoid it altogether. At this point, in this age of the bastardization of payment, dollars may have much less value than we have been led to believe.

P8. If anyone can make currency out of nothing—as in the case in Brazil, and with Bitcoin—then what value does traditional currency have? That is, if currency is even used, and it is not just numbers on a computer screen that tell a person that they have currency. People are told to work for this number, people die because they don’t have this number, people base their entire lives around numbers on a screen, simply because everyone agrees that that number is the be-all-end-all of economics.

P9. In the end, the United States is not that different from the island of Yap, or 1990’s Brazil, or any economy that uses money with “no value”. Items have value, such as the Kit-Kat that is traded on Halloween, or the food exchanged for labor in the dawn of economics, but obviously not the same value for everyone. Money used to be backed by valuable metals, but that is no longer the case. Virtual money is coming into power and even physical currency has no concrete backing. The only logical conclusion is that money as we know it today has no intrinsic value. We have all been tricked into believing in the URV; we all have giant stones that we agree someone owns. The economy that fuels millions of lives could disappear tomorrow and no one would have any less. In fact, the lack of a modern economy, at this point, sounds like a better idea. The world may be better off going back to trading corn for labor. At least you can eat corn. How am I going to make dinner out of Bitcoins?

Works Cited

Calmes, Jackie. “Demystifying the Fiscal Impasse That Is Vexing Washington.” The New York Times. The New York Times, 15 Nov. 2012. Web. 10 Sept. 2016.

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.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch. MarketWatch, 31 Jan. 2015. Web. 10 Sept. 2016.

Professor Feedback on the 1st Draft

You’re a good writer, MyStudent. You have a nice touch. You start strong and maintain an authoritative tone. You undercut that tone too often with cute touches, but they are easy to control.

First Feedback and Grade. As you know, you’ll receive quick grades in four grading criteria (ARMS). Grades can always be improved by revision. You’ll receive your feedback here on the blog, but grades will be posted at Blackboard. You’ll receive a quick grade on your first draft, plus some brief feedback on the Grading Criterion (ARMS) that requires the most attention.

Earning Additional Feedback. If you want additional feedback, you can earn it by making substantial changes responsive to my first notes. When you’ve made those changes categorize your post in the Feedback please category and Update.

ARGUMENT (See Blackboard for Grade)—Your introduction, P1, establishes a basic argument. We used to trade tangible goods and services, which have been replaced by increasingly intangible commodities. What remains, though, is the “power to buy something that we need.” When you ask, therefore, “is there really any value?,” you’ve already answered your own question. Sure, money has value: the power to buy what we need.

You make an original argument in P1, but in P2 and P3 you merely summarize the source material to point out what it points out: that physical possession of currency is not its essential property. Surely this was not always the case, and represents the second “bastardization” after the first, which was the very idea that goods could be represented by coins.

I very much appreciate your scholarship in P4. You’ve secured a valuable outside source. Naming the “fiscal cliff” concept is not enough to make its use or relevance clear here though. I can sense its value and application, but I couldn’t possibly paraphrase your argument to anyone else without studying the phenomena myself. You have work to do here.

There’s plenty to say about P5, but I’ve already been on your post for 30 minutes.

In P6, you make a peculiar claim, that “the legitimacy of money lies in what valuable commodity it represents.” I think your essay means to describe a gradual shift from commodity (corn) to abstract (screen symbols). Somewhere in there, we stopped saying the currency issuer (government) had reserves of some inherently valuable stuff to “back” the currency. Your position on when these changes occurred shifts from paragraph to paragraph.

In P7, you say customers “mine away” as if they are creating their own Bitcoin (like minting their own dollars) instead of merely trading in Bitcoin or trading with Bitcoin.

RHETORIC (See Blackboard for Grade)—Your introduction, P1, makes good use of children’s faith in barter, distrust of money. But it needs follow-through. Children value the candy, not the dollar. You say “humans at our most basic” do too. So we’re like children. But we’ve lost our way somehow. We change work for screen symbols, or we trade Dollar symbols for Euro symbols as if they were valuable, like candy. We do so because “they have the power to buy.” Why don’t kids value the dollar? Do they not recognize it could buy Nerds from someone who has them?

Be VERY wary of Rhetorical Questions like those you employ at the end of P1, MyStudent. These do more harm than good. FAR BETTER are your bold declaratives: “For the most part, it doesn’t” and “Money is numbers on a screen.” Your questions are teases and mostly irrelevant. You know the value of money. Your question is a different one: “Is that value secure? Is it based on something we can trust? Could my money suddenly become worthless?”

Two risks of rhetorical flourishes: 1) they distract readers from the essential argument; 2) they actually confuse readers. As an example: “Their particularly scintillating form of currency consists of sometimes giant limestone discs that litter the island.” Scintillating is completely distracting, sending us in search of some explanation. “Limestone discs litter the island” to anyone who hasn’t read Friedman means limestone discs are local phenomena, cheap as trash, not the repository of wealth. You know what you mean (they aren’t found where they belong), but readers don’t. Similarly, only your classmates could possibly understand how the rich family gains wealth from a rock at the bottom of the ocean. It’s not easy communicating the whole story in just a few words, but it must be done.

Admittedly, it’s very difficult to talk about abstracts like money and currency, but . . . you don’t carefully distinguish between US currency and dollar bills. The bills are the tangible objects. The currency is a measure of value relative to other currencies. We can trade in currencies without swapping bills, as when we buy Euros with dollars to travel to France.

MECHANICS (See Blackboard for Grade)—Use in-line citations everywhere, please. I’ve sticken the Reeves note in P9. Your inline citation in P2 is the correct style for this class:

For example. Milton Friedman, in “The Island of Stone Money,” describes the unique currency of the Yap, inhabitants of the island of Yap, in the western Pacific.

Regarding commas in compound sentences: “Something large is purchased, and everyone is notified that the stone’s owner has changed.” This is correct because the clauses have two subjects: something and everyone. However: “One family is incredibly rich, but has never seen their riches, as they rest at the bottom of the ocean.” This sentence requires no commas at all. There’s only one subject for “is rich” and “has seen.” Also, the family IS rich makes the family singular, which is possible and fine. But “HAS never seen THEIR riches” makes the family once singular and once plural. You’ll have to choose. (One choice per sentence is best.)

Either: The family IS rich but HAS never seen ITS riches.
Or: The family ARE rich but HAVE never seen THEIR riches.

The United States might be just like the island of Yap, but that’s not what your sentence means to compare. Your sentence refers to “the United States” as an “economy that uses money.” You can compare the US to Yap, or compare the US economy to the economy of Yap.

Periods and commas ALWAYS ALWAYS ALWAYS ALWAYS ALWAYS go INSIDE THE QUOTATION MARK. As in: . . . any economy that uses money with “no value.”

SCHOLARSHIP (See Blackboard for Grade) —Once you replace your current citations with the inline version, I’ll be able to judge better how well you attribute ideas to other authors. The “fiscal cliff” source is a very good idea and will earn you credit once you incorporate it better into your argument.


  • DUE: Midnight Monday (11:59 pm MON JAN 23).
  • Publish your assignment in two categories: A01: Stone Money and the category for your Username found under Author.
  • Give your post the title Stone Money–Username, substituting your own username, of course.
  • Cite two sources in addition to the NPR broadcast and the Friedman essay.
  • Include a Works Cited.
  • 1000 Words not counting the Works Cited, but thorough analyses of whatever length will be graded higher than superficial writing that wastes words. Complex ideas briefly expressed are rewarded best.
  • You will receive just one grade for this draft, which is intended to diagnose your abilities and needs. If you earn feedback through substantial revisions, you’ll receive guidance to help you improve your grade, one time, with a Rewrite.
  • Customary late penalties. (0-24 hours 10%) (24-48 hours 20%) (48+ hours, 0 grade)
  • Minor (Non-Portfolio) Assignment (10%)