Counterintuitive Fall 2024

The concept of Money

Money is very important in our world and everyone has the same concept for it. They use it to buy things or trade it for others things or to show people how rich they are. Even though we all have the same concept , we all have different forms of money like dollar bills, coins, fies, URVs or electronically and even trading . No matter what forms money takes we believe that it belong to us and the more we have of the richer we are considered. We believe that it has value and that not gonna change anytime soon.

The yap are a great example of of believing something has value no matter its form. On a very small island in the pacific ocean live the Yap also known for being the island of stone money. The are called this because of their weird form of money which is coins made of out stones. Milton Friedman states that they refer to this a fei. The acquire these from another island since they don’t grow on their island and have to travel by boat .Since the stones are to big to move the Yap just believe the stones belong to whoever brought back to the island and its worth is yours unless stated so. The bigger the stone the more money it is worth. Many years ago while bringing the biggest stone back to the island , the yap encounter a storm and lost the stone but they told the island the story and they still believe in its worth and that it belongs to the family that brought it back even though no one has seen it. They have faith in their system no matter. Another form are shown by the Brazilian.

About 20 years Brazilian inflation sky rocketed by 80% which made the prices of things to go up about every week. This inflation made the people of Brazil not believe in their government until four men came up with a plan. Their plan was to help the people believe in the value of money by using fake money called URVs. They used the URVs to stables their use of money. They would increase the prices but the people would still believe that the prices are the same. Milk would coast 1 URVs which would be considered about 10 cruzeiros and then change to 15 cuzeiros but still be 1 URV .Their plan was a success because eventually the inflammation ended. They had faith in their plan to use a different form money and succeeded

For a while we have entrusted our money to technology . Now we pay by using our phones or watches or by simply pressing our cards against the card machine instead of sliding or inserting it . Bit coins are a good example of how we use technology as a form of money nowadays. Bitcoins are currency that can be transferred from one person to another which can increase or decrease the amount of money you have. It’s easy for us to except using our money with the use of technology because we believe in that form. It’s an easier and faster way for us because we can check our money easily through anything and without the problem of counting our money every time we want to pay the exact price.

Since we have put our money in the hands of technology we are also letting other people gain access to it. Other people can monitor our money just as much as we do if they’re smart enough to know how to work a computer. Japan was close to inflation because of monetary problems . Most people don’t know that our money is being monitored , neither did I until reading that article. Japan also has their own form of money called yen which something they were trying not to manipulate while racing to fix their inflation crisis.

Money is huge deal in this world and it has many forms. despite that, we all believe in the same thing that its has value. we didn’t make a rule to believe in the value of money or something we teach at schools, we just automatically put our faith in it.We put in our faith in coins, technology and pieces of paper we consider money. The yap put theirs in stones and Brazil theirs in URVs. Even though I believe that its weird to use big stones as money its what they believe in.The truths is none of those things truly has value but because we believe that it does its valuable. Many years an new set of people can declare using coconuts as money and it would work because its their concept of money. The concept of money is truly great because its something that works based on our belief. They should start teaching us about this concept in school because its something we should learn more and try to figure out because it would greatly benefit us and great to see someone try to explain to the world why something has value just because we believe it does.

REFERENCES

Renaut, A. (2013, April 13). The bubble bursts on e-currency Bitcoin;  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: https://www.nytimes.com/2013/01/26/business/global/japan-tries-to-ease-fears-that-its-policies-will-lead-to-currency-wars.html

planet Money (2010,October 4). How fake money Saved Brazil : https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil

Planet Money (2010, December 10). The island of Stone Money : https://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money

Friedman, M. (1991). The island of stone money : https://miltonfriedman.hoover.org/friedman_images/Collections/2016c21/Stanford_02_01_1991.pdf

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

Money Needs Faith

The idea of money is drastically different under varying viewpoints. For children, trading snacks at lunchtime for better goodies is the same as adult men trading services that more or less even out to an equal exchange. Obviously, one is more valuable than the other, but in a child’s mind, a better snack to them is worth that of a service one man can provide for another. In terms of actual currency, some places value a piece of paper, some value simple coins, and others find significant value in stones. One may seem way off when compared to the other forms of currency that are seen as having value, but that’s precisely the point. Money holds a specific value when looking at place to place, not everyone holds money to the same standards. 

 The island of Yap uses the most interesting yet bizarre form of currency: limestone discs. However these discs aren’t small and they surely cannot fit into one’s hand, they’re actually bigger than the people that use them for money. Due to the height and weight of these stones, the people of Yap simply understand which discs belong to who based solely on word of mouth which passes ownership from person to person. Even the wealthiest family on Yap cannot see their riches as it is currently at the bottom of the ocean, and yet, everyone still recognizes their wealth. While the island of Yap may seem quite bizarre, their tactics of handling their currency is exactly how the United States handles theirs. The idea of using a phone or card to purchase items is comparable to how the Yap use their stones. When using a card, a person will only see the numbers on their account go down and still, they will understand that the company they purchased from got their money without even physically seeing this happen. This is the same concept as the Yap transferring ownership over a stone disc; the stone may not move but everyone understands that the stone is under a new owner.

Similar to Yap’s stone discs and the United States’ electronic form of transferring money, France’s gold situation was settled without any physical proof. Milton Friedman, who also discussed the island of Yap’s interesting form of currency in his “The Island of Stone Money,” described the 1932-1933 gold situation. France seemed to fear that the United States would not stick to the standard price of gold at $20.67 an ounce, so they wanted to have their gold back (Friedman, 1991). The Federal Reserve wanted to avoid shipping the gold, so they simply marked the cabinets that belonged to France as theirs. None of the gold moved and yet everyone accepted that those specific cabinets were France’s and France’s alone. This move can also be related to the banking system. Each member of a bank has their accounts labeled, but even though these members will never physically see them, they will all still understand that their labeled money is theirs and theirs only. 

The use of fake money can be disastrous, but for one country, this practice saved its entire economy. During the 1990’s in Brazil, the inflation rates were dangerously high at around 80% a month. In the podcast, “How Fake Money Saved Brazil,” Chana Joffe-Walt walks through the story of how Brazil was essentially saved by four drinking buddies, who also happened to be economists, when the person in charge of economics had zero clue on how to fix the issue after there was some trial and error beforehand. Edmar Basha, who was one of the drinking buddies, talks on the podcast about the plan they had come up with to help with the ridiculously high inflation rates. Basha explained that the currency they would be introducing would be reliable but fake: “We called the unit of real value, URV. Yeah, it was a virtue that didn’t exist in fact” (Basha, 2011). Everyone in Brazil was tricked into believing that the URV was real, which in turn caused a rise in faith of the currency. For any form of money to become successful among a large group of people, there needs to be that solid feeling of faith in that particular form of money. If the faith is not there, then the foundation of that money will crumble and collapse. 

 In terms of fake money being harmful, up comes the name Bitcoin. This application is a form of digital currency that is bought with real money and then traded among user to user without any interferences. Bitcoins are stored on a user’s hard drive and can be sent to another user while being completely anonymous. In The Bubble Bursts on e-currency Bitcoin,” the European Central Bank has warned that this seemingly innocent application can become a “monetary alternative for drug dealing and money laundering.” This is due to the whole idea that users are anonymous which in turn invites these types of illegal activity to occur. Along with this harmful possibility, there is also the fact that Bitcoin is a very complex application. The software is so complex in fact that it is hard to even generate new Bitcoins (Renaut, 2013). Compared to the case of Brazil in which fake money actually goes some good and solves a country’s economy crisis, Bitcoin seems to only serve as an area to where crimes could take place and rarely would anyone find out about them. The case surrounding Bitcoin is just another reason as to why fake money usually does more harm than it will ever do good. 

When it comes down to it, there cannot be a single definition on the value of money. The currency used throughout the world is varied in both looks and the deemed value. For the United States there are dollar bills, for Great Britain there are pounds, and for most of Europe there are euros. However, for places like the island of Yap, the people there use stone discs. While that is hard to believe for most people, the Yap may find it insane that most people nowadays rely on electronic forms of currency, trusting numbers on a screen. Despite feeling as though the Yap’s form of currency is completely out of this world, there needs to be this sole reminder: the value of money is immeasurable as not everyone holds it to the same exact standards.

References

Friedman, Milton. (1991, February). The Island of Stone Money. Retrieved from: https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Joffe-Walt, Chana. (2010, October). How Fake Money Saved Brazil. Retrieved from: https://www.thisamericanlife.org/423/transcript

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

Currency, at least in my mind, is a system of balance. Growing up in the twenty-first century, my perception of wealth has always been based on the pieces of paper within one’s pocket. Life without currency seems like chaos to me. Who’s to say the cow farmer is wealthier than the carrot farmer when business and transactions were based on the agreements of trade? Is a cow worth one hundred carrots? Who’s to set the principle? I found Milton Friedman’s article “The Island of Stone Money” discussing the island of Yap to be an easy way to understand the concept of currency through a culture with an unorthodox method of transactions.

The island of Yap, with its inhabitants, the Yap, have a currency called fei. It would sound outlandish for me to say their currency is a variety of beautifully decorated stone discs larger than a person scattered around the island if it were not true. According to Friedman in his article, the island does not contain enough metal to make signature coins, so the islanders had to resort to stone. Some fei may be a few feet wide or large enough to fill a small room, so when there is a transaction in which a fei may be too much of a hassle to move, the acknowledgement of ownership is exchanged.

The Yap’s mentality regarding the exchange of large fei is similar in our modern normality of digital banking and cryptocurrency. Arguably the most well-known cryptocurrency, Bitcoin, is not physical. It cannot be seen or traced, due to its existence solely relying on the owner’s hard drive. Bitcoin can be transferred from one person to another, of course. However, it is easy to imagine your numbers being decreased in order to increase the numbers of the person you are paying. For digital banking, it is easy to imagine the bank transferring your cash to another’s account when the transaction notification goes through their system. For the Yap, simply stating the transfer of ownership is good enough for the community.

I would feel uncomfortable with the fact that my valuable stone disc remains on the property of the previous owner. At least with digital transactions I can see my numbers deplete, giving myself a sense that I am growing ever poorer with my financial decisions. In the early 1900s, The United States of America engaged in a transaction of gold with France in which the gold being held by the Federal Reserve in New York had a change in label to being France’s gold. I feel safe knowing there is a label on the transaction to save the time and effort of moving gold internationally, but it still is almost the same as what the Yap do.

I have faith in currency systems but I value clarification regarding my money. If I bought something through digital means and did not see my numbers decrease, I would not complain since I just purchased something for free, but that is chaos and a reason to lose a little bit of faith in the service used in the means of purchase. This minor hiccup, while it benefits me, does not benefit the bigger picture. I’d be a fool not to take advantage of the hiccup but is it really the right thing to do? The New York Times article “Japan Tries to Ease Fears That Its Policies Will Lead to Currency Wars” explains things regarding the deflation of the Japanese Yen over time and what Japan is trying to do to fix it. The average citizen of Earth does not know how their nation’s currency is monitored and regulated. I’m going to school to study these types of things and I still don’t know how the currency of my country is regulated. While reading the aforementioned article I had trouble understanding it. While I don’t understand it, I have faith that the Japanese government is doing whatever they need to do to fix their problems.

I can’t see what is happening nor do I fully understand it, yet I have faith in it. I’m sure the majority of people can relate to that statement when it comes to how our currency is managed, as well as many other things. I’m not entirely sure how the computer I am currently using works, but it functions how I expect it to when I press the power button, so I have faith in it. The Yap are all okay with accepting ownership of their fei with one another, so why should I not think it is right if it seems to be working? The United States economy has failed in the past, yet I still have faith. Human faith in currency seems counterintuitive when there is proof of failure and constant discussion of the highs and lows of an economy.

The Yap’s currency consists of agreements as well as working like normal money. A merchant could deny the worth of one’s fei if they do not feel it is fit for their good. It has no value outside having the ability to purchase goods, yet there is no documented value. Is this not similar to the predicament between the cow farmer and the carrot farmer? The only difference is the value and possibilities of the things being traded. Giving away a stone disc gives away purchasing power, but giving away carrots is giving away food, coloring, the ability to farm more carrots, and more. The Yap have a physical currency that is dependent on nonphysical principles. It works and there is faith. While I still prefer the clarification that my account is overdrawn, I would not mind the Yap’s currency culture.

References

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

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

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

Money Is A Social Construct But Many of Us Don’t See It

As a society, money is used everyday for survival or even for pleasure. It has become a very familiar practice to us, but in reality, currency is a very abstract concept. Money is merely something we put value into, so money can essentially be anything that holds value to us. To a child, a piece of candy holds the same value as a piece of jewelry to an adult. 

In the beginning of time, people traded goods to get what they needed, but there was even value placed on trading. A modern day example would be that someone wouldn’t trade a smartphone for a pizza because the smartphone is obviously worth way more than a pizza pie. This system is a common practice in the money we know today, but it has also existed in other forms of valuable exchange. 

In the late 19th century, the Island of Yap, located in the Pacific Ocean, created a unique way of currency. The idea was that men would sail hundreds of miles to shape limestone into large discs. Some discs were so large that they were bigger than a man. A hole was made in the center to place a rod in to move them because of the inconvenience to move them by hand. The larger stones were naturally seen as more valuable. Men had to sail a raft to a far distance for the stone, so labor and rarity placed value on the stones. The people of Yap would pay for houses and other goods using this currency. One interesting point is that the money did not necessarily have to be in someone’s possession to be theirs. For example, if Person A had a 12 foot stone and wanted to pay Person B for a house, Person A could keep the stone on their newly owned property, but the stone now belongs to Person B. Most of the Western World would see this stone money idea to be absolutely ridiculous. How could someone have money, if they don’t personally have the money? Well, whether we realize it or not, our modern money system has evolved into a similar one to the people of Yap. 

Paper money and coins exist in most places in the world as a form of currency, but with modern technology, many people don’t have to carry physical money anymore. A plastic card can represent the money saved in a bank account or an app on our phones can show the amount of money we own. When we pay for something using these modern methods, it simply just deducts a number on our screen and transfers it to someone else’s. So does the money actually exist or is it just numbers on a screen representing an amount? The answer is yes and no. Money exists, but if we added all of the money owned by individuals in America, that amount of paper money probably does not exist physically. All of this American currency is modified by the Federal Reserve (The Fed). The Fed controls American currency and can decide the value in which loans can be valued at. When the market crashed in 2008, people had a very hard time obtaining the money they needed to buy a home or invest in other goods. The Fed decided that one way to battle this problem was to allow cheaper collateral for a higher loan amount than what it would be originally worth under normal circumstances. This was just one situation in which money and value fluctuate depending on the economic climate. 

Evidence of the economic climate dramatically changing can be witnessed from the 1980’s Brazil crisis. The crisis truly began in the ‘50’s when the government printed new money to build a new capital in Brasilia. The President failed when trying to execute this by freezing prices and bank accounts. Eventually inflation hit 80% per month which rapidly increased the prices of goods. It got so extreme that someone working in a grocery store would walk around and continuously change the prices. The problem was getting worse and no one had a solution until four college friends in Rio discussed how they would possibly fix the inflation crisis. They came up with an idea to create a new currency that people could depend on to be stable. The only catch: This currency would not be real.  No coins, no bills. It was fake. The new currency was named, Unit of Real Value (URV’s). The Brazilian people would still use the cruzeiro, but the prices would be listed in URV’s. The main goal was to change the mindset of expecting prices to continuously increase. As the URV continued to be the stable trademark of the country, the economy turned around and Brazil became a major exporter. This experience raises interest about the psychological side of money. When there was a crisis, people would rush out to get the use of their cruzeiro before the value decreased. With a stable currency, the price never changed even though the cruzeiro still lost value for a little while longer and people became confident in the currency. Ultimately this shows how money is a social construct. How we interact with it as a people causes either stability or mayhem. 

Again with the modern age, it brings the opportunity for more digital mediums of money. Cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions. The most well-known cryptocurrency is called Bitcoin. It was started in 2009 as a new representation of currency, but the concept of Bitcoin can get very complex. People put money into Bitcoin to invest in it like a stock. The value of one single Bitcoin fluctuates constantly. In 2017 it was about $17,000, but currently it has dropped to about $9,000. Most people do not use Bitcoin to purchase items, however, many stores accept it as a form of payment. People mostly buy it as an investment and hope the value goes up so that they can eventually sell it for true currency. The Bitcoin situation has gotten so extreme that people will try to illegally mine for it to make it look like they have Bitcoin in their possession when they truly do not. At that point, they can sell their fake Bitcoin for the real Bitcoin value and con people. This goes back to the previous discussion of money not existing in the first place. If people can mine out fake Bitcoin, how can we trust in a currency that can be proven alterable? 

We really can’t put too much trust into currency of any kind. Though Bitcoin is being altered illegally in some cases, the value goes up and down just as the American dollar’s value goes up and down, even if the value is a small percentage each year. A good comparison of this  if an item in 1913 was bought for $1 in America, that same item in 2019 would cost $25.82. Inflation is constantly happening, but it is all relative to what we honestly see as valuable in a given point and time.

References 

Cryptocurrency. (2020, January 27). Retrieved from https://en.wikipedia.org/wiki/Cryptocurrency

(2017, December 19). Retrieved February 3, 2020, from https://www.youtube.com/watch?v=2X9eJF1nLiY

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

Social constructionism. (2020, January 24). Retrieved from https://en.wikipedia.org/wiki/Social_constructionism

Staff, U. S. I. C. (2020, January 14). US Inflation Calculator. Retrieved from https://www.usinflationcalculator.com/

For generations society has valued absurd objects. While growing up many kids gave value to Pokémon cards. Pokémon cards were just a basic cardboard card with a picture and description of a Pokémon character. Some of these cards were considered common and almost had no value. But kids would value uncommon cards and trade them to receive other objects or different Pokémon cards. As cards got rarer and rarer, they would be worth more. Suppose you were able to ask most of society, “How much money do they have?” most of society would resort to the number on their online banking applications, or how much money they have invested on their bitcoin profile. But what does that number really mean if anything? Hundreds of years ago civilization would trade goods to obtain another. But through the years this process has become tiresome, so society resulted in giving “valuable” objects a monetary value to obtain another good. But, through the years this monetary object has evolved into something that just represents this “valuable” object. But what gives these trade object any value?  

            A great example of an absurd economic system can be found on the island of Yap inhabited by the Yap. According to the article “The Island of Stone Money,” written by Milton Freeman the Yap’s currency was called Fei. But the currency of Fei was not your usually dollar bill. Instead the Fei were large limestone disc with a hole in the middle of the disc. The bigger the disc the more valuable it was, some said to be much bigger than a man. But what made these discs so valuable was that limestone was not found on the island of Yap. To obtain these large stone disc the Yap would have to travel by boat hundreds of miles to an island that contained limestone. When these large discs were brought back, they could be used to purchase houses, or a popular to spend Fei was to pay neighboring colonies to return the bodies of fallen warriors that were killed in combat. But as you would expect it is immensely hard to move the Fei. Instead of moving the disc the Yap would instead that a certain Fei belong to one person wherever the disc was. For example, a group traveled hundreds of miles to obtain another large limestone disc but, on their way back encountered a storm not far out from the island of Yap. To survive the men on the boat had to release the large disc and let it sink to the bottom of the ocean floor. When the men returned to Yap, they told this story and instead of letting all the work go to waste the people of yap that Fei at the bottom of the sea still had value, even if no one could physically see it. So, that disc at the bottom of the sea was still able to to be traded from person to person even if they were not able to see it.   

            During the Planet Money teams podcast at NPR, they explain how the high inflation was solved in Brazil’s economy. To being with the inflation started when the government was attempting to create a new capital city. But the government did not have the funds to create this city. To solve this issue the government essentially printed money to fund the construction of the capital city. This began the devaluation of Brazil’s currency. The prices of goods were changing everyday and the people began to rapidly spend their money before it was not worth anything. To solve this issue economist Edmar Bacha created a fake currency called URV. These URV’s simply just represented Brazil’s current currency but the URV’s tricked people into stop raising prices because the people believed the URVs were more stable. Instead every store now took URV’s as payment and because of this fake currency Brazils economy began to stable out and eventually become one of the words major economies.

            Another great example of the words absurd economic system can be found also be found in by Milton Freeman’s article “The Island of Stone Money.” Freeman explains “he Bank of France feared that the U.S. would not stick to the gold standard at the traditional price of $20.67 an ounce of gold.” To fix this problem instead of sending the gold back to France the United States Federal Reserve Bank labeled France gold. Surprisingly France was okay with this. They didn’t need the gold in their procession to know that it was theirs.

            On the topic of not physically having the money in your procession a great example of this is Bitcoin. Bitcoin can not be touched or seen at all, you can only see how much bitcoin you have and what its worth on your online bitcoin wallet. Essentially bitcoin is just a number on your computer screen that is worth a certain amount. According to the article “What is Bitcoin, and How Does it Work?” written by Nathaniel Popper, Bitcoins are created from Bitcoin mining. Popper describes Bitcoin mining as “The computers involved in Bitcoin mining are in a sort of computational race to process new transactions coming onto the network.” Bitcoins worth is determined by the bidders attempting to buy bitcoin.  

            In the article “Should We Be Worried That Our “Money” Is Just Numbers on a Screen?” the author explains that most of today’s currency is just based off faith and numbers on a computer screen. Technically those numbers are just numbers, but we believe those numbers to have value. Most of the currency we use to buy things today are not even seen. In the end most of the time when we buy products numbers are just transferred from one bank account to the other. France did not even need to see the gold in the Federal Reserves to know that it is theirs. This concept is extremely similar to the way the Yap used the Fei in the fact they didn’t have to see the large stone disc to trade them. Or the way people trade Bitcoin. Everything involving currency today is just numbers on a computer screen and society believing those numbers have value.

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

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

Popper, N. (2017, October 1). What Is Bitcoin, and How Does It Work? Retrieved from https://www.nytimes.com/2017/10/01/technology/what-is-bitcoin-price.html

Should We Be Worried That Our “Money” Is Just Numbers on a Screen? (n.d.). Retrieved from https://www.profinancialsolutions.com/2017/08/28/should-we-be-worried-that-our aeoemoneyae-is-just-numbers-on-a-screen-2/

The Evolution of Money

Today the idea of money is not quite the same as what it used to be. In today’s world money is literally thrown around unlike hundreds of years ago when the invention of money first began. The invention of money has simply been one of the best inventions and is still prevalent in mankind today. Today, money is thin and made out of paper, essentially cotton and linen, with the expectations of coins, but in reality who even uses coins anymore. When the idea first came about money was nothing short of heavy, big coins and even slabs of huge rock. Yes, in fact the people who used the rock slabs were called the Yap. I know it must be hard for you to believe because in today’s world money weighs almost nothing, but back then it was made out of huge limestone slabs that measured, varying from 1 foot to 12 feet in diameter, the larger the more money it was worth. Now you may be thinking how can anyone possibly use that as money? Or how does one move it around to use? Or how does the value get determined? All of this was predetermined by the Yap culture and they had a pretty good system down.

It is unclear if the limestone started out being used for money but when the Yap realized that they needed something to show worth and value they thought what better than this beautiful stone. When I first got to thinking about this, I thought it was very unusual and impractical, but the more I thought, the more I realized that if we didn’t have paper money we would have to use gold. The idea of having gold back up the value of the money we use today was created by the Central Bank, or the Federal Reserve. We just use bills and coins because it is more convenient. So is it really that unusual? Well maybe the process is.

 They first discovered the limestone on an island hundreds of miles away. They began carving it into huge round disks, with holes in the middle to which they would bring back on their bamboo made boats. I am very surprised that the boats didn’t sink because the stones weighed hundreds of pounds. When they would bring these stone pieces home they would value it and that would be how much money you had. Because they were so big they often didn’t leave the spot they were placed which was usually outside ones home. Fitzpatrick says “They often talk about the stones themselves not changing hands at all.” This system of money was based on a lot of trust and abstract thinking. There is a famous story that said workers had been bringing back a very large stone back for a family but on the way back they hit a very bad storm. Instead of having them remake their stone, because it is such a long hard process they decided to take the word of the men and grant that family the value of the stone. For hundreds of years that families money was based on a stone no one had ever seen, it was all abstract.

Although, when you think about money in the US and all over the world now, is it that much different? If you go online and pay for something with a credit card are you actually giving them the cash upfront? No, you simply are buying something now in the hopes that eventually there will be enough money in your bank account to back up what you have spent. So therefore, there is still a sense of trust that we use today. After learning about the Yap and their way of ownership and trust, my opinion on the world of money has completely changed. If you think about it, when you get paid you are happy to have that much more money in your pocket. When people save money in the bank you are happy to know that that money is there and it is yours but is it really? If all of our money is really backed up by the gold we have in the US, what if something were to happen to the gold or to the value of it. What we can’t see and don’t know can hurt us.

For example, in 1933 France had asked for their gold that was kept in the United States back because they were worried about the worth of it. But being how the US is we decided that instead of actually shipping the gold to France and losing it, we just said it was Frances gold and put their name on it. This sounds like when the Yap had bought something for a very large amount and instead of physically moving the stone they just said it was that persons. This is what set the country into the Banking Crisis of 1933. It also led to the raising of taxes and cuts in spending that took effect in 2013. They named it the fiscal cliff. This again goes back to my question of knowing if the value of our money is ok if one little change can affect the whole economy.

Another example I listened to was the podcast The Lie that Saved Brazil, which explains that their economy was going through a rough time and how they tried to help change it, but only led to it getting worse. In Brazil they use currency called Krazero’s. In 1990 the inflation was so high that the price of goods were going up 80% each month. This made it so people were no longer able to save their money because at the end of a work day they were rushing to the store to get to the food before the price went up within the next hour. This made a lot of people trust the faith in the stability of the currency and the economy. The economist realized they had to do something, so they decided to invent URV’s to help make the economy more stable. The Unit of Real Value(URV’s) went into play around 1992, which essentially was money with nothing to back it up. This didn’t help solve all the economies problems but it helped the people’s faith in the economy again. They saw that inflation stopped so therefore it did.

So it goes to show that anyone can come up with a new type of currency. For example, the Yap making up their own form of money, in Brazil they came up with URV’s to help save the economy, and even Bitcoin. Bitcoin is online money that is like a stock that you invest in. Some businesses let you pay in bitcoin, mostly those who don’t want the payment to be known about because it is private. But since it is like a stock it can crash at anytime, which it eventually did. Steve Hanke from Johns Hopkins University said “Either way, Bitcoin remains “a very uncertain, speculative venture,” because it is not backed by a commodity.” At least the money we use today is said to be backed by gold.

All in all, when you think about the different kinds of money used in the world today they aren’t so different. Someone came up with them to have a stable form of currency in that country. We have trust in each type of currency that we use knowing full well that the value could change anytime and the economy could crash at anytime. The evolution of money has become a pretty amazing process. We started with 12 foot long slabs of limestone to paying for things online with no actual physical money. Along with the physical evolution of money came the trust with it. Many economy crashes, inflation wars, and stock market crashes and still we trust the Federal Reserve because what other option do we have. Who knows in 100 even 50 years where we will be in terms of money. Will physical money cease to exist as we know it?

References

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

Friedman, M. (1991, February). The Island Of Stone Money. Retrieved February 2, 2020, from https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Renaut, Annie “The Bubble Bursts on E-currency Bitcoin” Yahoo News. Yahoo News, 2013, April 13

The True Value of Money

            Money is what makes the world go around, but how often do we physically see our money these days? Since the beginning we have evolved from trading goods, to paying with gold, to coins and paper money, as well as paper checks and plastic credit cards. Now today we download an app, log in our credit or debit card information, type in a value and press “send” to pay for anything as little as food or as big as cars. It has come to the point where people don’t even carry around cash anymore because all they need to do is have a charged phone and Bitcoin. We can all blindly say how much we care about our funds but how much do we really value them if we no longer can see or touch them?

            In “The Island of Stone Money” written by Milton Freidman(2010) he shares with us the small island of Yap, that is inhabited by the Yap people. Unlike us, the Yap do not use paper money or an app to pay for purchases, they use stone money. Specifically, heavy giant discs that can be bigger than those who own them or only a foot long. The size of the discs determines how much it is worth, but they are all made from limestone. The Yap found the limestone very beautiful just like the U.S. found gold very pretty and decided to make it their currency. This is when the stone discs start to sound like Bitcoin though, the person receiving the disc never actually sees it. Since the stones were found hundreds of miles away from Yap and brought back to their island on a vigorous adventure they are deemed way more valuable to the people, though they are just littered throughout the land because they are too much of a burden to physically move. Everyone in Yap knows how wealthy or not wealthy everyone is without ever seeing their riches. They all go by word of mouth, much like when us Americans send money to someone through our phone and just trust it got to them. The Yap might find the fact that our currency is a small dirty paper bill that we can exchange to one another is strange, just like us as Americans were shocked reading this story, but will not be shocked with our more convenient way of electronically trusting our money is where its meant to be similar to their economic system.

            Another deal that occurred that was similar to the Yaps economic system is what we, the U.S., did with France when they requested back gold they thought was rightfully theirs. It would’ve been hard for the United States to ensure that all the gold made it to France so just like in Yap they set aside that fortune and deemed it “France’s Money”. Even today this is how our U.S. banks work when holding our money, they label each citizens wealth, but we may never even see it.

            Our value on money is lessening because people stopped caring about holding paper bills in their wallet. This issue is mostly due to apps such as Bitcoin, in the article Bitcoin Has no Place in your our any Portfolio by Jeff Reeves (2015) he speaks about the devasting creation Bitcoin has on our economy, Bitcoin was a fake currency created where you could virtually buy these coins with the U.S. currency and spend these coins like real money. Jeff Reeves says this is not a sufficient way to pay for things or to invest in because, “In short, your bitcoins can go to zero either because they have no underlying value or because some hacker has stolen them and left you with no recourse. And even if they don’t go to zero, drops like the nearly 85% decline in the past few years can leave investors with a boatload of pain in a hurry,”(Reeves, 2015). In reality, Bitcoin is hurting our economy not helping it, it is very easy to hack accounts and get all your coins stolen.

            On the other hand, though, another country’s economy was saved due to fake money. In How Fake Money Saved Brazil by Chana Joffe-Walt (2010) it talks about how Brazil’s inflation rate went up 80% per year. Until a group of friends, including Edmar Bacaha, decided to come up with a resolution that would solve the problem for Brazilians. They came up with a fake currency called URVs, Unit of Real Value, and tricked the citizens into using them. The Brazilians put their trust in the URVs causing the inflation to dramatically go down over the years, almost completely healing their economy.

            More controversy in the economic world struck in 2013 when Japan decided to take aggressive action when trying to end 20 years of deflation and not manipulate the yen. In an article by the New York Times titled Japanese Tries to Ease Fears That Is Policies Will Lead to Currency Wars, a clip from the article reads, “Prime Minister Shinzo Abe’s calls for aggressive action by the central bank, which have prompted a slide in the yen, have also raised fears in Europe of a currency war if other central banks adopt similar policies,”. This proves that when one country makes an economic decision it affects the whole world and makes them feel in a competition, thus proving that money is truly what makes the world go around like I said in the beginning.

            Before starting this class, I had no prior knowledge to any of these interesting yet terrifying topics or any insight on economic topics. Now after reading these articles and listening to the podcasts I have earned a greater appreciation for how our American concept of money has evolved over the decades and how it may differ or be similar to other countries economy. The Yaps way of stone money seems absurd at first glance, but after analyzing it further the U.S. banks do the same in the fact that we as account owners never physically see our riches we just put faith in the fact that they hold it for us. Money is a complex thing, but how much do we really value it if we never see it?

Work Cited

Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 23 Jan. 2017.

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

Web. 23 Jan. 2017.

Reeves, J. (2015, January 31). Bitcoin has no place in your – or any – portfolio. Retrieved from https://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28

“Japan Tries to Ease Fears That Its Policies Will Lead to Currency Wars.” The New York Times. The New York Times, 25 Jan. 2013. Web. 23 Jan. 2017.