Counterintuitive Fall 2024

The Stone Rush

What would you do as a child if you saw a dollar on the street? I would have picked it up as a child and showed my mom immediately. I would have thought I was rich because now I had a dollar. However, if I saw a dollar on the street today, I would just keep walking. Money is valued and seen differently by different ages of people, different cultures of people, and even the form in which the money is. From learning and researching about the economy these past few days, I have realized there is so much more to money than I initially thought. Money is being spent and used every day throughout the US. Yet, only some worldwide use the same currency, let alone have the same value for their money as everyone else. In addition, money is just used as a placeholder to show value or wealth while it can be much bigger than that. 

One example of one form of currency that was used was limestone. The Yap people used this to trade or buy things from each other on their island. Milton Friedman explained in his article titled “The Island Of Stone Money” stating “[A]s their island yields no metal, they have had recourse to stone; stone, on which labor in fetching and fashioning has been expended, is as truly a representation of labor as the mined and minted coins of civilisation.” (Freidman , 1991). Due to having no metal on their island, the Yap people used boats to go over 100 miles around from their island to retrieve limestones and bring them back to their island to use as money. These limestones were not minor; most would not move from their spot on the island when sold or used. The ownership of the limestone would just change to the next person. The people of Yap also did not refer to their currency as stones or limestones. Instead, they called it fei. These large pieces of Fei seem to be unrealistic due to their size, the location in which they are from, and since they are so heavy and can’t be moved easily. However, all of the Yap people agreed that the Fei had value and it was their currency that they would use on the island. Thinking about that today, it seems funny or weird that they would just use some rocks or stones, but it is not that much different than how the economy in the US works today. 

Today, we use cash, checks, and banks to exchange money in the US. However, we started with gold and then moved to cash. We never see the gold but simply understand that cash, check, and money in the bank has value. This is similar to the people of Yap and their Fei. When changing from gold to cash, the Bank of France became involved. In the article “The Island of Stone Money,” Milton Friedman explained that when the New York bank handed over the gold to the Bank of France by changing the name of ownership and word of mouth, it upset the people of the US. The people of the US could not fully understand and trust that the US dollar was of as much value as the amount of gold given to France. Later on, the people realized that the US’s new currency was valuable since they could purchase and use the money in the same way with no issues. 

There are many similarities between the US current currency, the US dollar, and the Yap people’s, Fei. They may have seemed very different initially, but that is not the case. Both currencies had and have the value that the people acknowledged and used. The Yap people used their limestone to show wealth, while today, the US uses paper dollar bills to show their wealth. How we today use money to buy things is no different than how the Yap people did, just in different ways. 

References 

Stonemoneyessay.pdf. (n.d.). Retrieved September 18, 2023, from https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Friedman, Milton. The Island of Stone Money. (1991, February). Hoover Institution. stonemoneyessay.pdf (wordpress.com)

The Value of Nothing  

In 2020 I watched a documentary called The Price of Everything, it detailed the history of the modern art market and how it evolved and changed over the years. In the documentary we see paintings that go for more on the market than what some people would ever make in their lifetime twice over. I really like art and see why someone would pay a competitive price for a nice piece but still I was so confused, like how can these paintings be worth more than houses? The documentary uses a quote from the Irish poet Oscar Wilde “Nowadays people know the price of everything and the value of nothing.”

Economists around the world must deal with all thing’s money, The pricing of goods, taxes banks, inflation all must deal with money in one way or another, but some economists have had trouble to concretely pin down what is “money;” Yap a small island in the Pacific Ocean is their answer. Their currency comes in the form of large limestone discs mined from limestone mines and delivered via ship to its destination. Everyone on the island uses the discs but more importantly they trust and believe in the discs’ value and have faith that ownership is accurately represented. The Stones are usually too much of a hassle to deliver when a transaction is made. The group in the transaction simply say that one’s disc is now another’s discs, and everyone agrees with that. To me that was strange how could a man trust that a piece of currency that is not in his collection directly was his? Trust is the answer not just trust in the value of the disc but trust in their neighbor their community to recognize the man’s ownership of the disc(s). This is a web of trust weaved throughout the island that makes up the value and ownership of the discs. Whether a disc is at the bottom of the ocean or across the island it will retain its value as a piece of currency even if its “invisible.” Imagine balling up a hundred dolor bill and throwing into the ocean and still using to pay for a ride or imagine going to a cash only restaurant and paying with money that’s at your grandma’s house in another country; seems unbelievable at first thought I know it did for me but when you think about it, we use this “invisible” money all the time. We use banks and money transfer apps like Venmo and ApplePay and trust that they send the correct amount a sizable number of the world trusts apps like that, apps run in part by machines and can fail to handle our money our metaphorical lifeblood that keeps able to participate in society. When I put it like that in my head it almost made more sense to trust a person that you can go a talk do directly having our money and then any modern way of management.  

Belief in a currency and its value is more important than the actual currency itself if the people you are presenting it to do not believe it is worthless in their eyes. The most common way for a major currency to lose value is inflation like what happened in Brazil. The belief in cruzeiro (the Brazilian currency before the real) was dwindling and things just got more expensive it got so bad that it got combative. After repeated failed attempts by the government the cruzeiro was scoured earth a currency that would never garner the trust of the Brazilian people again and something needed to change, and something did. The government hired four economists to save the brazilin economy; they created URV (unit of real value) as a replacement to the old currency. A virtual invisible currency to replace something tangible a real? The trick was that the URVs had value equal to the Curzio giving Brazilians a throughline to compare and the debt of trust the Curzio had not carried over to the Urv, a blank slate for Brazil to try again. The old currency was grandfathered out the Urv became real resetting that public belief and saving Brazil.  

Virtual currency is a common occurrence in video games whether it be gold coins or a spoof of the dollar the intangible money has been in games for a while and in the 2000s onward some have real world value. Many would hand wave this statement but if you think about what makes v-bucks for example different from URVs can a made-up currency for a video game become more valuable than legit cash, the answer is yes. Venezuela was a similar position to Brazil since 2019 inflation making their currency worthless some citizens turned to a game called RuneScape an early 2000s MMORPG to farm gold making a living wage in the process “A gold farmer can earn $40 a month, a tidy sum in a country where the minimum wage is worth $7.50 a month.” (the Economist, 2019 para 2). In this instance the collective trust in a currency’s value for a game made in 2001 was higher than the Venezuelan bolivar; the digital world beat the physical as lines of code dwarf printed paper in value. The value of digital currency, especially for multiplayer games, is so important to these companies that they hire trained economists to manage it for them. In game currency has become a growing market so much so that game companies make more from in-game currency than from the game itself. Same is true both ways gamers have been able to make money from the games they play, some owning digital property and other special items ranging from the tens to hundreds to the thousands and in rare cases hundreds of thousands of dollars. EVE online is a massive multiplayer space sim where players create their own factions who can start many business ventures in the game to make money and buy increasingly rare and expensive ships. These factions can clash causing a virtual war with a real-life dollar tag to it. In 2021 a war the biggest factions of the game broke the world record for the costliest video game battle of all time “with a full total loss of 3,404 ships destroyed. These losses totaled 29,111,604,784,863 ISK, equating to $378,012 USD” (CCP Log,2021, para 2). Something this costly could only have been done with the trust of the players and the value they place on their ships.  

If you think about it digital currency and online items it is all nothing, lines of code that could be deleted with one press of a button, but it is still there, we can feel its Mass through our screens its power through our wallets and its value in our hearts and that is what it’s all about. just like owning a piece of art, pulling a rare trading card, or owning an expensive car it is about what we as a people put into it with our collective believe we make these things mean something, to us and to others around us we make nothing everything. 

Citations  

The Americas. (2019). Venezuela’s paper currency is worthless, so its people seek Virtual Gold. The Economist. https://www.economist.com/the-americas/2019/11/21/venezuelas-paper-currency-is-worthless-so-its-people-seek-virtual-gold  

CCP Games Log. (2021, February 4). The most expensive video game battle ever earns two Guinness World RecordsTM titles for eve online. CCP Games log. https://www.ccpgames.com/news/2021/the-most-expensive-video-game-battle-ever-earns-two-guinness-world-records  

Friedman, M. (1991). WordPress.com. THE ISLAND OF STONE MONEY. https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf  

Goldstein, J., & Kestenbaum, D. (2010, December 10). The island of Stone Money. NPR. https://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money  

The invention of money. This American Life. (2018, February 19). https://www.thisamericanlife.org/423/the-invention-of-money#play 

Money, Money, Money

Money is what we all are looking for right now. Everything you do in your life is for. Money, all the success you work hard for, it is for money. Sometimes it can lead you to bad stuff to have it because it’s the money is you’re without money you cannot live. Issue like the story of money on the island of Yap is a fascinating exploration of the abstract nature of currency and the role of faith in financial systems. I have been searching and looking in different sources, including the three podcast segments by the Planet Money team at NPR, Milton Friedman’s article “The Island of Stone Money,” and additional materials related to cryptocurrency, in-game currency, and Argentina’s hyperinflation. These sources have provided me with deeper information into the concept of money, wealth, and our faith in intangible assets. In the old days, when there was no concept of money, people used the barter system. People used to trade goods or services of equal or similar value for other goods, such as tea, food items, labor, weapons, salt, clothing, animals. Over time, people started using metal coins, gold bars, or silver coins. We can consider coins as an important part of the history of money since it allowed people to count the number of coins for purchasing different items. That was not the case in the barter system. Today, we are talking about the Yap islanders’ concept of money is notably different from our conventional understanding of currency. They used large stone discs called “rai” as money, even though these discs were immobile and not easily transferable. The value of these stones was based on a communal belief system, rather than any inherent utility. Yap islanders placed their faith in the collective acknowledgment of ownership and history behind each stone, making it a unique representation of value. This contrasts starkly with our contemporary concept of money, which is predominantly based on fiat currency issued by governments and central banks. Our money exists primarily as electronic records or paper notes, with no intrinsic value. Instead, we place our faith in the stability and trustworthiness of the issuing authorities, such as the US Treasury or the Federal Reserve. His mission is to keep our money is abstract and relies on a shared belief in its worth, much like the Yap islanders’ rai, also it can create job opportunities by promoting the conditions that enable economic growth and stability at home and abroad, strengthen national security by combating threats and protecting the integrity of the financial system, and manage the U.S. Government’s finances and resources effectively. The Yap concept of money may seem more abstract in some ways, as the physicality of the stone discs doesn’t inherently represent their value. However, perhaps this system was more concrete in terms of transparency and immutability. Every rai had a clear history, and everyone on the island knew who owned which stone. In contrast, our digital money system can be opaque and complex, with transactions occurring invisibly and the average person having limited insight into the inner workings of the financial system. The value of our money is also remarkably fluid, as we see in the Planet Money podcast about the Brazilian real. The governments decide to change the currency caused significant disruption and required people to adapt quickly to a new form of money. This illustrates how easily the value of our money can be manipulated or eroded by monetary policy and economic conditions, also this Law help to introduce material improvements to Brazil’s currency exchange rules and its treatment of foreign investors. The Brazilian real anecdote highlights the role of faith in our financial systems. People had to trust that the new currency, the real, would hold its value and serve as a reliable medium of exchange. They built this faith on the credibility of the government and the central bank. The Yap islanders’ faith in their stone money was deeply rooted in their cultural and social systems. They knew the history and provenance of each rai, and this collective knowledge reinforced their belief in the value of these stones. It was a system built on trust and communal understanding rather than government decision. Cryptocurrency, like Bitcoin, represents a modern-day twist on the abstract nature of money. I do not tie its value to any physical asset. You can have it between your hand or government, but to the trust of its users and the technology underpinning it. In-game currency, used in video games, showcases how abstract money can be even within virtual worlds, where players invest time and real money into digital assets. Argentina’s hyperinflation serves as a baffling reminder of how fragile faith in a currency can be. When hyperinflation strikes, the value of a nation’s currency can plummet rapidly, eroding people’s savings and faith in the financial system and a lot of economic issues can happen and people lost a lot of money. In conclusion, the story of money on the island of Yap and the related materials have educate more and keep me safer in my thinking about money like don’t trust a lot all the technology currency for example, wealth, and our faith in intangible assets. It has reinforced the idea that money is ultimately a belief system, whether it’s as stone discs, fiat currency, cryptocurrency, or in-game currency. Our faith in these systems gives them value as people, and their abstract nature allows for both resilience and vulnerability in the face of economic and social changes. Understanding this concept is crucial in navigating the complexities of modern financial systems and appreciating the historical and cultural diversity of monetary systems worldwide. Always remember that it nothing call money and the world used to Exchange food and service, also don’t forget too that some currency you won’t have always have access too has Cryptocurrency, so how can you pay for a peanut butter sandwich with crypto currency?

Sources:

1. (n.d.). Money Vocabulary. Splash Learn. https://www.splashlearn.com/math-vocabulary/money/money
2. (n.d.). Megalithic Money on Yap Island. Ancient Origins Reconstructing the Story of Humanity’s Past. https://www.ancient-origins.net/
3. (n.d.). Role of the Treasury. U.S. DEPARTMENT OF THE TREASURY. https://home.treasury.gov/about/general-information/role-of-the-treasury
4. (n.d.). Title: Money and Currency. Laws of Brazil. https://lawsofbrazil.com/2023/01/03/brazil-has-a-new-foreign-exchange-law/
5. (n.d.). Money and Currency. BITESIZE. https://www.bbc.co.uk/bitesize/articles/zfsvy9q

Money Is Magic And We Are All Magicians

How old were you when you found out you were a magician? This may sound ridiculous however hear me out. When we were children we claimed the value of things such as toys, candy,  games, accessories, etc and made trades between one another without any real currency. For example, personally I was a beyblade fanatic in my younger years and me and my cousins used to trade these parts of our respective Beyblades in efforts to make the strongest performing and coolest looking out of all others. 

These parts were nothing more than small pieces of plastic , metal , or even rubber in some cases. Which in real world currency may’ve cost the manufacturer less than a dollar in material to form each piece. However my cousins and I viewed these inexpensive little pieces or “parts” to our Beyblades as the closest thing to gold.  With each of us having our own set value for each piece we’d often find ourselves even trading things completely outside of beyblade pieces such as other toys , candy , or even more time to play on Mario Kart. Take a moment to truly think about the “Mario Kart time” , I just traded my physical item for a more mental “item” and this is a legitimate agreement between both parties and respected throughout the house.

Now if you had interactions like that in your childhood or maybe even today this is the magic. Without having a clue as to how much it actually cost to manufacture these pieces to our toys we decided whether a “spin tip” was worth something like a bag of more time on a game , another piece to a beyblade, or even something as simple as a few skittles. We single handedly saw these pieces and said “Hey , this is worth this much because we think it works/looks better than others” and immediately respected one another’s view contrary to any of the actual value of the piece.

Sitting north of New Guinea within the Caroline Islands, The Island Of Yap’s early system of currency had a similar structure. Instead of me and my cousins Beyblade pieces they used round pieces of Limestone. They had to resort to using limestone rather than something customary like coins due to the fact that the Island of Yap had no metal. Milton Freidman addressed this point in his article titled “The Island Of Stone Money” stating “[A]s their island yields no metal, they have had recourse to stone; stone, on which labour in fetching and fashioning has been expended, is as truly a representation of labour as the mined and minted coins of civilisation.” (Freidman , 1991).

These limestone discs called “Fei” served the meaning to the people of Yap that minted money does to us today. These ranged from sizes that some would be able to stick a pole through and roll to the desired place all the way to sizes that the strongest man on the planet let alone the island couldn’t move. The biggest piece of stone would be worth more than the smaller. I’m sure to some this sounds ridiculous but you can’t have anything close to proper economic structure without some sort of currency.

The Fei’s outrageous size and weight quickly led to a lack of physical movement of these discs when transactions were completed. Rather than moving them , the people of Yap verbally made their transactions and this change of ownership was respected. So imagine you were a farmer and I wanted to buy  “1,000 apples” from your farm. This would require a rather large piece of Fei. I’m no superhero , I couldn’t possibly roll my fei to you to complete this purchase.

In “The Island Of Stone Money” by NPR they introduce this notion that “One person gives it to another person. But the stone doesn’t move. It’s just that everybody in the village knows the stone now has a new owner.” (“Goldstein” & “Kestenbaum”, 2010)   Sound familiar?

Again a transaction between two parties that involves a physical item and a more mental “item” but is still legitimate and respected but this time it’s not a house we are talking about, it’s an entire village. Now let’s take a look into the Video Game world. The video game world has changed significantly over the past few decades , in older times people would find themselves going in-store to purchase things like video games , add-ons , or even just general gift cards. 

Times are different now , those same purchases we used to in-store for can all be purchased within the game its-self.  The typical person would think that once you buy a game that you’ve bought it and now have access to everything it offers. In older times maybe but over the some odd years that narrative has shifted. 

“Smash Bros. Ultimate Lets You Spend Money For In-Game Currency” an article written by John Coulson states “Microtransactions and paying hard-earned cash for virtual currency is rife in the mobile gaming world.”  ( Coulson , 2019).  Just about any game you buy today you are simply just buying access to the game itself you should almost expect to have to spend money in the games respective subcategories. Whether it be skins , special weapons , abilities , or even in game currency whatever the case may be you have to now purchase these items within the game itself. All can be done with the simple push of a few buttons , there is no real physical movement of these funds and “merchandise”. Similar to the Island of Yap’s ideology of their transactions with the larger discs of limestone.

The difference between the people of Yap’s system and video games is that you would give up ownership of your Fei , get your merchandise and the transaction is complete . In video games you often find yourself having to buy more than needed just to get what you wanted in the first place.  Sometimes they won’t allow you to flat out just pay for what you want. In “The Perils of In-Game Currency” by Jamie Madigan states “You know the drill: if you want to level up your battle pass or accelerate the construction on that barracks, you have to spend 100 gold coins. Only you can’t just buy 100 coins for one dollar. You have to buy 650 for five dollars. Now you’ve got 550 coins left and you’re minutes away from mortgaging your dog for more of those sweet, sweet in-app purchases.” (Madigan , 2019). Now you’ve taken more from yourself, having to buy more than you initially desired. 

Nevertheless you select “complete purchase” and instantaneously what you purchased is now in your inventory and the funds have been pulled from your account. When in actuality all you saw was that number in your bank account decrease and the item appears on your screen, again no physical movement of the funds.  That’s the magic of money , you are able to purchase merchandise no matter if they are physical items themselves or just a mental ownership (something you can’t physically possess).

Stone Money

Money’s impact on civilization as a whole is second to none. An object that was created that’s only value is what we humans hold society together. The value that money has is set by each nation’s economy. Throughout history, money has taken many different forms one example is, on a tiny island called Yap the people of this island use stones as a form of currency which shows how it may be different then what we are used to but to them it holds the same value as any other currency. What is money, why do we waste years of our life to do a job we may not like just to earn money to survive? Why do we subject ourselves to currency to control our lives? If you are born into a family with more money than others you get a headstart in life whereas if you’re born into poverty you gotta work twice as hard to make a living. A mere piece of paper can determine how much a person is worth.

On a tiny Island called Yap, we learn of a past civilization that used stones as currency. This one-hundred-year-old civilization is loved by economists because it answers what is money. We are told how the civilization realized that other countries used a form of currency they found on their own which was unique but got the job done. These stone pieces would come in all sizes and the bigger the better. While the currency being stone was already interesting the ways they recognized it was even more. For example, if Bob had a large stone in the village everyone knew it was his, so if Bob wanted to purchase something he would shift the ownership to whomever they bought from. Everyone would now recognize that the stone belonged to the new person. Another interesting thing about their civilization was how even if the stone was not on the island they would still count it as ownership. To compare this system I believe would not work in a larger country today. I believe this only worked because of how small the civilization was which led them to be able to maintain this. If this were tried in say America, with how large the Country is this would fail immediately. We may laugh at the idea of how they used stones as their currency but to them, our currency would be laughed at as well. 

In Brazil, in 1990 the inflation was so high that it got up to 80% each month. It got so bad the civilians were paid in IRV’s which were all virtual. This meant that none of their money was printed physically. Essentially this currency worked as a good substitute for cash as people could use this to buy food and pay the government, however, this was a lie all of the money was fake. But somehow this would work in ending the inflation that plagued the country. Thanks to four men who came to the Country and proposed this idea the Country was able to keep going.

To compare, to a current day example would be from “What is Bitcoin and How does it Work” by Matthew Sparks, in this article Sparks explains how people turn their money into these online assets that can gain value or lose value. A lot of the time these assets will lose value as time goes on as they start red hot but over time they will amount to nothing. This I would compare to Yap island and its people. I think how they set up their currency is pretty similar to the online assets in the sense that everyone knows whose online asset it belongs to and when ownership transfers everybody recognizes this just like with the stone.

Another example to compare would be, “The Bubble Burst on E-Currency Bitcoin ” Another bitcoin article however in this reading it explains how in 2018 there was an 80% collapse in crypto from its peak in January. This was the worst crypto fall in its history. I would compare this situation to the Brazil crisis in 1990 when inflation rose to 80% as well and both would make a big change and fix their systems for the better.

To conclude, currency has many kinds of forms, in the older civilization the Yaps had their stones, and we have our dollar bill and crypto. We human beings give these items value and without that, they are the same. We will work our entire lives just to earn more of this money.

Sparkes, M. (2021). What is bitcoin and how does it work? New Scientist. https://www.newscientist.com/definition/bitcoin/

Renaut, A. (n.d.). “The Bubble Burt on E-Currency Bitcoin. https://doi.org/10.1057/9781137382559.0014

Joffe-Walt, C. (2010, October 4). How fake money saved Brazil. NPR. https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil

Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 10 Sept. 2016.

The Significance of Currency

Across all the different human cultures throughout history a structured system for financial exchange has always existed or always has been used and whether we are examining the Yap people or ancient Egyptian or ancient Greeks are they all had some form of money. Money remains a fundamental concept. The capability of displaying personal wealth or accumulated material or possessions will always be something human beings do and live by because they like to show off how wealthy they are. Money is so important to us, human beings, and to really anyone because it is an aspect of our lives and you really can’t do anything without money because of the power it holds in today’s society because our lives are money driven.

In The Island of Stone Money by Milton Friedman says the people that lived on the yap island used large stones as a form of currency. These stones were cut from limestone into large discs that varied in size and shape, the larger the stone, the more valuable the stone was to be. The diameter of the stone was measured by cutting a hole in the center of the stone, easily visible to everyone. This form of currency is not coming known because the possession of the item was not actually taken from the original owner. The way these stones were given to the new owners was not actually delivering the stone to them, but buying them verbally, knowing who is in possession of the stone, and who’s stone it is. The stones in today’s modern society can be related to money vaults that are in banks. And the ownership of the stone will be transferred to the buyer of the stone and its possession might stay with the previous owner, because some stones are too large to move to the other possession. This process is also very similar to modern day bank transactions. The concept of stone money was only visible to the people that lived on this island, or because these people kept their integrity of the value of the stone and ownership of the stones was word of mouth, as there was no feasible way to move these stones to two different locations due to size. 

In today’s modern society the significance of money has never been more important, yet, so fading  and dying out from our transactions that we do daily. Most goods that we acquire, or without the exchange of physical coherence. The credit systems and cryptocurrency have bloomed over the past few years and have currently taken the center of the stage as the top form of currency right now. The prices of items in stores change at any moment, because they all depend on the value of the dollar. At any given second the value of the dollar can change. The emergence of cryptocurrencies like bitcoins and Ethereum introduced a new level of dimension to the financial world. And I. purchasing crypto currencies may seem odd or strange to the average human being, because it is such a new concept. Also a major factor because it is digital currency or digital assets have a lot of intrinsic value. What is the true value of money itself? Money’s worth is shaped by the human perspective and how the human perceives the money. For example, if a group of people believe a sack of flour is worth eight dollars then if they agree on that, then it could hold its value. This could also go with any other item that people can agree on a value. In “Decoding Crypto: What Is It, How It Works, and How to Get Started ” the author underscores the differences between traditional stocks and the cryptocurrency world. Traditional starts correlate with specific companies and their states and trust in the shareholders investment in the company, which the shareholders will invest into the stocks and buy their stocks. The value of cryptocurrency is primarily linked to the investor. These people who are buying crypto currencies, and holding these currencies in their possessions, the value of the currency is primarily linked to the investor himself, because if he perceives the value of cryptocurrency to be what it is, then I will remain steady or raise the price or decrease, depending on the investors perception. The dynamics change when the individuals who were the investors in these stocks, start short selling these socks. This is known as a ‘whale’ that liquidates a large portion of the investors hoarding in the stocks, causing a substantial drop in price in the cryptocurrency world or stock world.

Brazil’s crackling with a lack of trust in its currency, sees dire consequences, but government interventions paved the way for a remarkable outcome, and turn around in events. In “The Invention of Money” the authors review how the government managed to rebuild their currency and faith among the people of a population of 150 million despite a complete absence of supporting evidence. The author states “The government tricked a hundred fifty million people into believing again that their money was worth something, but there was no absolute evidence to support that claim by the government” (423,2017). The reason for this financial crisis in Brazil was due to its crippling hyperinflation in rendering the basic necessities beyond reach, as the author describes “with 80% inflection, the price is $18. Six months later the sunglasses are $340. And by the end of the year the price tag reads “more than $10,000 Brazilians lived with high inflation like this for decades” (423,2017). They strived to expand and build infrastructure without a significant amount of funds to support this project. Brazil resorted to making new money, so they basically were printing money out of thin air, and no one knew where it came from. This turned into an astronomical inflation in this country in this practice, as the author explains results in the devaluation of each dollar known as inflation. “If there’s say a hundred dollars in the economy you create a hundred more now every dollar is half as much. That inflation and in Brazil inflation continued for the next five decades. Year after year Brazilian money was worth less and less” (423,2017). As the value of the money in Brazil plummeted, the prices became a product of the market dynamics and consumer demand, rather than reflecting the government’s assessment of their work. And the government rabbit we created money, and tried to restore the trust of their people, and the peoples trust in their currency. And the restoration of the faith among the population of Brazil was very important, because the populace in the value of money was a major impact of the runaway inflation of their currency this believed, and created an allusion that the Brazilian economy was on the mend promoting inflation to gradually dissipate and go away.

In conclusion, what bestows money with its importance and what grants money such intrinsic value is the people in the ways that these people perceive the money in assets. It all comes down to how the individual uses it, and shapes their life money serves as a key way to material acquisitions while complementary currency is far from being rigidly backed by the federal reserve as it once was its value remains usable in every day transactions because it has been brought back and restored to its original value. And the amount of money one individual may have or possess may flow with market dynamics because of how much currency is going through these markets, but it’s significant lies in the capacity to facilitate the exchange for goods and services, if needed to be. It’s not merely the mirror call figure displayed on the screen, but rather the materials repossessing have with us the number is a whole different meaning then the objects we actually obtain.

But but one matter that has not change is the manner in which we acquire food, and other essentials that we need, as human beings has always been in the same structure as past cultures what has evolved is the meaning of trade and what trade means instead of bartering tangible goods, such as self made clothing or homegrown vegetables or food now we use money instead of bees. The money is represented as the value of the time and effort these people invested in providing services or creating the product for the other people. You are compensated for your time which you turn in to pay for other time and expertise of others. This principle stands and holds true regardless of your circumstance, or wherever you are in this world this fundamental principle will always be true. 

References

Hyatt, John. “Decoding Crypto: What It Is, How It Works, and How to Get Started.” Nasdaq.com, 6 July 2021, http://www.nasdaq.com/articles/news-and-insights/what-is-cryptocurrency-and-how-it-works.

“The History of Stone Money – Manta Ray Bay Resort – Yap, Micronesia.” Manta Ray Bay Resort, http://www.mantaray.com/discover-yap/the-history-of-stone-money/. Accessed 20 Sept. 2023.

Friedman, Milton . “The Island of Stone Money.” Miltonfriedman.hoover.org, 1991, miltonfriedman.hoover.org/objects/56723/the-island-of-stone-money. Accessed 19 Dec. 2021.

Money Isn’t Real

Money’s role in life is presented every single day, even if one does not realize it. It does not matter if the money being used is a credit card, a dollar bill, a coin, or a Fei. The value of each form of currency is set by the economy. In modern day society, people offer a specific amount of “money” which in essence is just a piece of paper for a service. People decide to dedicate 40, 50, and in some cases 60 hours a week just to receive paper put into their bank account. The thing is that no one needs to see the money they make. They are confident that the employer is transferring the money to their accounts. According to the NPR broadcast, “money is fiction.” It seems to be money is not real thing. Money is modern day society is changing more and more everyday.

The broadcast by NPR reports that money is not necessarily a real thing. It is just paper with thoughtful meaning behind it. People’s belief give money the meaning. Because of the fact that money is liquified, it is impossible to count every piece of money in the world. People are able to transfer money to any account or take out physical cash whenever they please with the use of an ATM or a bank. Titled, “Yap in the South Pacific”, this book talks about how the Yap used currency the way modern society uses banks. Similar to how people put money in the bank and take it back when it is needed; the Yap would trade ownership of large stone sculptures. The sculptures would be used for bigger purchases and opportunities. The Yaps believed they had currency if they had a stone. Similar to the Yaps, we believe we have currency because of the number next to our name at the bank. “The Island of Stone Money”, a book by Milton Friedman, talks about how forms of currency have changed throughout the years. One point in history Milton makes a point about how the French were scared that the U.S would no longer use gold as a currency. Because of this, the Federal Reserve Bank began to take dollars for gold. This began the rise of the U.S trading with more countries and accepting different types of currency.

In 1990, Brazil was in a very deep hole when it comes to inflation. It became so bad that inflation rates were increasing up to 80% a month. To put that in perspective a pair of shoes that cost $25 during the first week of the month, would cost $45 dollars the first week of the next month, and it kept going. The Brazilians was not able to keep up with the constant rise of inflation. The value of their currency began to drop lower and lower everyday. Brazil brought in four economic friends who created a their own currency. The currency they made was called URVs. This currency was virtual just like how banks transfer money. This means there was zero of their money actually printed. People began to get paid in URVs. They were able to pay taxes as well as paying for groceries. The inflation was put to an end by creating a new form of money. In a way, the entire country’s debt was cleared away by making fake money.

In today’s world, the majority of the world’s currency is online. We have created new ways of exchanging it. For example, a lot of people across the world invest in “Crypto” which is short for cryptocurrency. An article by Anne Renaut titled “The Bubble Burt on E-currency Bitcoin” speaks about Bitcoin can drop so fast. In a span of three days, Bitcoin’s worth decreased from $266 to $54. This is a problem because of how easy it is to fluctuate. The value of money is always changing because of how many different types of currency there are. It rises and falls as the stock market rises and falls. New money is being printed every single day, which does not allow for a sole type of currency. The articles and NPR broadcast all proclaimed that money is a physical object, that has mental meaning. No dollar is ever worth the same. People put a meaning behind the dollar if it is physical or mental.

References

Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 10 Sept. 2016.

NPR. (2020, September 8). What is money? Jacob Goldstein’s book explains “shared fiction.” NPR. https://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction

Renaut, A. (n.d.). “The Bubble Burt on E-Currency Bitcoin. https://doi.org/10.1057/9781137382559.0014

Joffe-Walt, C. (2010, October 4). How fake money saved Brazil. NPR. https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil

Existing Through Money

Money is the heart of our daily lives, even though we do not usually portray it that way. As civilization grew, our need for a stable and convenient economy did as well. All over the world people knew that we would need something that everyone would value enough to buy and sell goods. Whether we are from the United using the dollar bill or from the island of Yap using Fei, the value we put behind these items has built our economy drastically. The value we put towards our daily earnings is the prime reason jobs a done; no person in their right mind would do any work unless there was compensation that would end up in their bank account. Iris Glass in, This American Life, said money is simply fiction, we assume it is there when it never really existed in the first place. Money is so abstract that we do not even need to see money to believe it is there, our bank account numbers changing is just enough evidence.

Imagine a young boy on his birthday opening his birthday presents, so excited he has just received the new Lego set he has been wanting, and then the next gift he opens is a card with a fifty-dollar Visa gift card in it. The child is just as excited because he just sees a piece of plastic with a fifty-dollar value on the face of it. Though the child does not see the physical money that the gift card holds, he understands that it is a form of money that could buy him more Lego sets. How do we really know physical money is being used to purchase the gift card if it was just purchased with another credit card? We do not know; all we see is a value number that we decide is enough to make purchases.

On the island of Yap, one of the islands off the West Pacific Coast, lived the Yapese people. These people were building a place where they wanted people to live and trade and eventually realized that a monetary system everyone valued was necessary in order for the island to bloom into an economy. Most other places around the world decided on cash currency and bank accounts to be the way of transporting money, but the Yapese people decided to use stone money instead. On Jacob Goldstein’s podcast, “The Island of Stone Money,” he talked about Yapese crew workers that had to travel far off their island in order to access the materials that created these discs, limestone. The limestone was only located hundreds of miles away from their island that work crews would have to sail to get them, so they decided it was the best way to make money. You are thinking that it is ridiculous people gave big pieces of stone any value, but it is not too different than the United States economy if you think about it.

As the United States developed, we have moved from using gold, to cash, to checks and bank accounts more than any other form of payment. The numbers we are so eager to see change at the end of the demanding work week are simply just notetaking that you have earned money. How do we value these numbers if we have never even seen them in the form of cash currency? How do we value something that might not even exist? No one has the answer to these questions because the only thing that really matters is that everyone agreed on this method of payment that works best for us if we are getting transferable money. This also goes for the Yapese people all agreeing that the limestone discs would work best for them, because of the value they gave it.

When in the process of the United States changing the active currency from gold to cash, the bank of France was concerned. In the text, “The Island of Stone Money,” Milton Friedman explained that the New York bank switching around few labels in a basement that put the gold under the bank of France’s ownership. The bank of France just trusted that this gold was real and that the bank of New York gave them the ownership with word of mouth. This made the people in the United States believe that the French Franc was worth more than the United States dollar. They reacted this way because people in the U.S. did not agree that the dollar bill was being valued as highly as the gold France had “taken” from us, even though it was. Eventually, the people in the United States agreed that the money could be worth the amount of gold when they were able to make the same purchases with using cash currency.

Something more modern that follows a similar outline as bank accounts is e-currency Bitcoin. Often, people wonder bitcoins’ worth and question how people can use this as a form of payment when you cannot even see it. Bitcoin is just as valuable as cash money and gold, but the difference is it is all digital. Matthew Sparks in, “What is bitcoin and how does it work,” describes that bitcoins can convert to cash like any other asset, but how do we get cash from digital currencies? People who take part in this digital wallet trust that their bitcoins are worth cash currency if they decide to convert it, even though they only see numbers change on a screen. These people just trust that the system works and that this e-currency will turn into cash.

In the end, people can give anything value if they believe it does, like the child with his Lego set, Yapese people with their Fei, or e-currency users with bitcoin. Money is so abstract that no one questions if money is even real, we just use it every day. No matter what the items are that have maintained value, these items have built a diverse number of economies all over the world. Our dependence on currency has grown to such an enormous extent that no one actually notices if it is real or not. As long as people are receiving their payments for the work they do, I do not think they will be asking questions about their money anytime soon.

References

Iris Glass: The Invention of Money. (2017, December 14). This American Life. 423: The Invention of Money (thisamericanlife.org)

Sparkes, M. (2021). What is bitcoin and how does it work? New Scientist. https://www.newscientist.com/definition/bitcoin/

Friedman, Milton. The Island of Stone Money. (1991, February). Hoover Institution. stonemoneyessay.pdf (wordpress.com)

Goldstein, Jacob and Kestenbaum, David, directors. NPR, NPR, 10 Dec. 2010, The Island Of Stone Money : Planet Money : NPR.

   The Illusion of Value: From Stone Money to Digital Currencies

The concept of money and its value have evolved throughout history, from tangible items like stones on the island of Yap to today’s digital currencies like Bitcoin. This reflective analysis explores the abstract nature of money and challenges the idea of its intrinsic value in a modern, digital age. By examining historical examples and modern financial systems, we will question whether money truly has value or if it is merely a construct based on societal agreement.

Understanding the Value of Money

Children’s perception of money provides an interesting starting point. On Halloween, they willingly exchange a Kit-Kat for a box of Nerds but refuse a dollar bill for the same box. This anecdote highlights the abstract nature of money’s value, as children value tangible goods over currency. It prompts us to question whether money holds intrinsic value or if its worth is determined by the trust and agreement of a society.

P1. The Yap Stone Money: An Unconventional Currency

Author Friedman in the article said, The Yap islanders in the western Pacific Ocean use massive limestone discs as their currency. These stones, some as large as twelve feet in diameter, hardly change hands physically due to their impracticality. Instead, ownership is agreed upon, and transactions occur through communal consensus. This system may seem primitive but bears a striking resemblance to modern economic systems, where trust and agreement determine the value of money (Friedman, 1991).

The Yap stone money, known as “rai,” is a fascinating example of how a society can assign value to something that lacks inherent utility. These stones, quarried hundreds of miles away on a different island, serve as a unique form of currency. Their value is not derived from their physical properties, as they are too cumbersome to be practically moved, but from the community’s recognition of ownership.

The larger the stone, the more value it holds, and transactions involving rai are conducted verbally, with the community acknowledging the transfer of ownership. This system, based on trust and communal agreement, may seem impractical to outsiders, but it raises profound questions about the nature of money itself.

P2. The Federal Reserve’s Gold Reserve and the Banking Crisis of 1933

In 1933, France demanded gold from the United States to secure its fiscal security. The Federal Reserve, instead of physically sending gold, set aside gold reserves for France, essentially confirming its ownership without the gold changing location which has clearly been mentioned by Calmes. This decision played a role in triggering the Banking Crisis of 1933, demonstrating the fragile nature of currency value. The question about the stability of modern currencies are raised, as one decision can have a significant impact on an entire economy.

In the beginning of the early 20th century, the gold standard was a prevailing system that tied the value of currencies to a specific quantity of gold. Nations held gold reserves to back their paper money, ensuring its convertibility into a fixed amount of gold upon request. This system was intended to provide stability to currencies and prevent excessive inflation.

In 1933, as France demanded its gold holdings from the United States, the Federal Reserve took a controversial step. Instead of physically transporting the gold across the Atlantic, they set aside gold reserves earmarked for France, effectively acknowledging its ownership. Although the gold remained in U.S. vaults, the action demonstrated the power of trust and acknowledgment in determining the value of assets.

This decision alone had significant consequences in contributing to the Banking Crisis of 1933, which was a pivotal moment in U.S. financial history. It highlighted the intricate relationship between trust, perceived value, and the stability of an economic system.

P3. The Tenuous Nature of Currency: Brazil’s Experience

Brazil’s history with inflation and economic instability can be seen as a case study in the fragility of currency value. In the 1990s, hyperinflation led to economic turmoil. However, the introduction of the Unit of Real Value (URV), a currency with no physical backing, stabilized prices and wages, highlighting the power of public faith in currency. This episode from the author Joffe-walt, underscores the sway that public belief has over an economy’s stability.

Brazil’s experience in the 1990s provides a good illustration of the tenuous nature of currency value. During this period, hyperinflation ran rampant, with prices increasing at an alarming rate, sometimes by as much as 80% each month. The economy was in decline, and no amount of federal intervention seemed to remedy the situation.

However, in 1992, four economists introduced a novel concept: the Unit of Real Value (URV). Essentially, the URV was a form of currency with no physical backing. Instead, it existed as a unit of account, a reference point for pricing and wages. Prices were denominated in URVs, and wages were based on URVs, providing a stable framework in a time of extreme volatility (Glass et al., 2011).

The most intriguing aspect of the URV experiment was that it worked not because of the intrinsic value of the currency itself, but because people believed in it. It represented a shift from a tangible backing like gold to a purely conceptual and agreed-upon value. This transformation showcased the immense influence of public faith in shaping the stability of an economy.

P4. Bitcoin and the Digital Age of Currency

The evolution of Bitcoin, best written by Reeves, Jeff, is a completely digital, de-fi and decentralized currency, challenges traditional aspects of value. Bitcoin’s value is very speculative, and its creators openly acknowledge its absolute lack of intrinsic worth. This raises questions about the legitimacy of digital currencies and the perceived value of traditional currencies in an age of digital transactions (Reeves, 2015).

The emergence of the digital era has ushered in novel forms of currency, with Bitcoin standing out as a prominent example. Bitcoin, classified as a cryptocurrency, represents a digital manifestation of currency functioning within a decentralized system known as the blockchain. In stark contrast to conventional currencies, Bitcoin lacks a physical form and remains divorced from governmental endorsements or tangible assets.

What sets Bitcoin apart is the explicit admission by its creators that it possesses no inherent value. Its value remains profoundly speculative and characterized by significant volatility, as its exchange rates against traditional currencies exhibit drastic fluctuations. Instead of deriving its value from tangible assets or a central authority, Bitcoin’s worth hinges entirely on the intricate interplay of supply and demand dynamics.

While detractors emphasize Bitcoin’s propensity for volatility and its speculative nature, leading to concerns regarding its suitability as a store of value and investment, proponents argue fervently for its transformative potential within financial systems. They highlight the underlying blockchain technology as a harbinger of transparency and security. Bitcoin’s presence in the financial landscape actively challenges preconceived notions of what constitutes value in the digital age.

P5. The Ambiguity of Modern Money

Modern economies increasingly rely on digital money, with physical currency representing only numbers on a screen. The value of money varies depending on what it can purchase, with individuals and society collectively agreeing on its worth. This ambiguity highlights the malleable nature of money and its detachment from intrinsic value.

In contemporary society, physical currency has become less common, with digital transactions dominating economic activities. Money is often represented as numbers on computer screens, debit cards, and mobile payment apps. While these digital representations facilitate convenience, they also underscore the abstract nature of modern money.

The value of money in the digital age is defined by the goods and services it can acquire. In essence, money’s worth is subjective and depends on the collective agreement of individuals within a society. 

 Reference

1) Friedman, Milton. “The Island of Stone Money.” 

2) Calmes, Jackie. “Demystifying the Fiscal Impasse That Is Vexing Washington.” The New York Times. (Publication Date, 15 Nov. 2012).

3) “423: The Invention of Money.” This American Life. (Broadcast Date, e.g., 7 Jan. 2011). 

4) Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. (Publication, 4 Oct. 2010).

5) Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch. (Publication Date, 31 Jan. 2015).