Stone Money

P1: Money is more than just a simple slip of paper. When ideas become present, questioning the actual worth of money, it doubts what money is to a bigger scale. To this day, people are characterized by the amount of money they have. Yet again, bringing up how money really affects each of us. On the other hand, in order to get any goods, the system of trading comes into play, using the resource of money.  By doing so, you need to have something somebody else is willing to take in place of what they are giving to you. It eventually got to a point where one’s persons belongings did not fit the need to another’s, leaving them with nothing to trade. Since this has gotten more of a struggle than a convenience, it led to the point of creating an easier way to share their wealth.

P2: There are many unusual forms and sizes of money. Specifically, in the NPR broadcast of “The Island of Stone Money” discussed how the island of Yap “needed something that everyone agrees you can use to pay for stuff.” Gradually, the question of how important money is, started to increase the more I read about it. It eventually got to a point where one’s persons belongings did not fit the need to another’s, leaving them with nothing to trade. It eventually got to a point where one’s persons belongings did not fit the need to another’s, leaving them with nothing to trade with. When researching, I learned that people were given the title of being “wealthy” even though their riches were at the “bottom of the sea”. I wondered how could that be? It seemed as if this was something fictional. Like others I started to have the sense of not believing in the dollar bill. Even the Federal Reserve believed currency was weaker because of “some marks on drawers in a basement”. It came to the littlest observations that changed the thought process of the wealth that was acquired. The money system has been fabricated to make everyone believe that everything they have is real causing, giving many the false belief that they do not have the fortunes they wish for. This has caused me to believe that people presumes money exists for the sense of comfort.

P3: While reading this information, its brought me to think what paper money actually is and how it has come to have such an immense value.  Money is only a piece of paper that people all over, carry around in order to get something in exchange. When digging into the history, it shows an evolution in not only in size, but also its importance. In the article “The Island of Stone Money”,  Milton Friedman talked about how there were stones with a “diameter of a foot to twelve feet” long from the island Yap. These huge stones was being used in order to pay for something they wish to have. Having to bring around a source of money that was bigger than the consumer itself, becomes a little outrageous.

P4: Instead of dealing with enormous pieces of stone, the Chinese started out with coins with holes in the middle. Whenever they needed to pay, they would bring a rope with a tie at the end in order to carry each coin. Eventually, the weight of carrying around thousands of them got too heavy causing them to make another way of payment. This is where they started to create the trail of paper money.  It first started with bags of coins to which consumers did not want to carry around with them anymore.Then, they decided to create a piece a paper, given the amount of money they would pay back to the seller since no one would lug coins around. This idea gradually kept growing to the point the government had to step in and create official slips of paper with real value of money. From there, the creation of paper money only expanded.

P5: Paper money was not the end if it, the digital scheme of money has also become a popular way of paying your dues. Yet, in reality, it is just “numbers back and forth in the computer.” Still, what does that all really mean? It creates the idea of money always being available and now worth something. In the article written by Jeff Reeves, he talks about how there is “no true value” to this digital money and is risky to participate in. It’s the banks telling you, you have a certain amount of money in your account leading to the thought of always having money available and feeling safe. Yet, you do not know if there would be any glitch with the system to have you believe otherwise. If problems like those occur it could lead to no faith in the system, making the significance of money to decrease.

P6: Before researching, I was skeptical of what money actually was and why it affects everyone so greatly. My original thinking did not reach as broad as the information I found, but had me realize that there is not an exact value of money. We can spend it as we want and get what we want in return, without anybody stopping us. Whether you pay online or with paper money, in the end it is just a number representing its so-called “worth.” I now see the value of money being nothing but a sense of comfort for people’s everyday needs.

Works Cited

ExtraCreditz. “The History of Paper Money – II: Not Just Noodles – Extra History.” YouTube. YouTube, 08 Oct. 2016. Web. 22 Jan. 2017.

Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money; (1991): 3-7. Web. 20 Jan. 2017

Glass, Ira, Chana Joffe-Walt, Alex Blumberg, and Dave Kestenbaum. “423: The Invention of Money.” This American Life. Prod. Planet Money. 7 Jan. 2011. This American Life. Web. 20 Jan. 2017

Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch MarketWatch, 31 Jan. 2015. Web. 22 Jan. 2017

The Importance of Faith
in an Economy

How Paper is Heavier than Metal:
The Strange Concept that is Money

p1. Everyday we as people use or see money in some way shape or form. whether it be in actual paper notes or the more obtuse forms such as bitcoin or other types, money is apart of our lives. But does anyone really take the time to truly think about what the hell money even is? We use these paper notes to exchange goods like food or clothes, which can pose as an equal trade, but what about things like precious metals, that you would think would have more worth than a paper note, even when in bulk. Also consider abstract things, like how humans try and put a numerical value on things like nature. What got me thinking  into this is the article we read on the “Island of Stone Money”, or the island home to the Uap. These people use huge limestone discs that sometimes can not even be moved, they believe in the value of these discs no matter where they are. So to us, those that use dollars,yen, etc… this seems so odd and unconventional, but how different are we really? The actual concept of money, when you break it down, seems so odd it demands an explanation.

p2.For a good place to start this exploration ,we must go back to the island of Stone Money. As discussed the Uap use these giant stone discs as currency, but that isn’t the stangest part, the strangest part is about how much the island trusts this system.”My faithful old friend Fatumak, assured me there was in the village a near by family whose wealth was unquestioned…and yet no one, not even the family itself has laid eyes on this wealth”(Friedman 2) The island mutually respects that this family is the wealthiest family on the island, and the family’s wealth is said to be sitting at the bottom of the ocean. Even better yet, when the Germans came to the island, the way they got the Uap to listen to their demands was by simply painting on big black X’s on the stone wheels, thus, in the Uap’s eyes, devalued the money to nothing. Why is it that this primitive economic system can become nothing by simply changing one aspect about its currency, is money really that malleable?

P3. To answer this question , I’m going to pose another question. What happens when inflation in your county is so bad that something like a pair of sunglasses could cost $10,000 in two weeks? The answer is you make up an entirely new currency, and that’s exactly what Brazil did with the URV, or known as the Real Value unit. You see in the 90s Brazil’s rapid inflation caused hard working people to be on a “spending timer” They would have to spend their entire paycheck that week, because they wouldn’t be able to afford the products they wanted or needed. The inflation percentage was something like 10% a day, well for the four american economy students visiting, this was a challenge to over come.”The four’s plan was allow the new currency to have an exchange rate to match the inflation with out putting people in debt, so you’d be paid 1000 URVs a month and milk would cost one URV, the next month it would be the same except, you’d get the original currency as change for the URV”(This American Life podcast 423). The real is a fine example on what pushing currency to the limit does. The fact that inflation cause a group of four college students to make up a fake note and an exchange rate for that note and have it work really hammers home that modern currency and primitive currency, I.e. The Uap’s are not really that different in nature. The fact is that currency is just a tool for an economic system, which yea of course it is, but tools can be new and tools can do only certain jobs, the real point is that every economy needs the right tool for the job and while people like the Uap keep the same tool forever, countries like Brazil someties need new ways to handle economic issues. Money is the tool, while the faith we put into it is the economy.

P4.A curious product of this concept of creating new tools is actually the Bitcoin. Bitcoin is a completely digital form of currency used on the internet for goods and services. The only difference between this made up currency and the rial is that the bitcoin wasn’t born out of necessity, it was just created as digital currency,exchange rate and everything.Bitcoin was a growing economy within the internet and more and more users did decide to dip their hands in it everyday,so how is it that some people just decide to switch over to something without having a sure idea where it’s going? Well the risk was not worth it because recently the bitcoin economy just had its first big crash. “The price of the virtual “geek” currency had soared through the stratosphere in recent weeks, trading for a high of $266 on Wednesday — only to come hurtling back to Earth in just three days.By Friday, a single Bitcoin was worth just $54, according to the Mt. Gox platform, which manages 80 percent of the Bitcoin transactions and had to briefly shut down trading Thursday.” Even from the beginning, some people had thoughts that something like this would happen at least a few times due to the nature of it being a privatized economy it was bond to burst.

P5. Why does it relate to the strange concept of money and its tool like qualities? It’s because, it’s too much like the incident with France when the US put gold aside and the market crashed, just on a much smaller scale. The actual concept of Money is a note or a tool that a group of government officials, college buddies, or some guy places a value on and the people trust its value with out considering what happens when it gets too big, or if we put away more gold than our actually currency can cover. Something similar to this is happening in Japan currently. Japan is fearing a currency war because the Yen has deflated immensely due to spending. “The yen skidded to a two-and-a-half-year low of 90.695 against the dollar Friday, which reinforced expectations for more monetary easing. The currency has slumped 11 percent against the dollar since early November as Mr. Abe stormed to an election victory in December with bold promises to end decades of intermittent growth”(NYTimes). The Yen has decreased so much that they need to reverse without changing the actual property of the Yen, or else they might insight a currency war.

P6. Money is so strange because with problems like in japan, and previous examples, like in Brazil, you can essentially just agree to stop using a currency for a new one until it balances out. Yet at the same time this could also incite an irreversible financial crisis all because the worth of some paper because too large or too small. That is the whole point of the oddity of money is that we as a country, or as people, put so much faith into a note without really thinking about it. I mean we pay for homes, and cars, and plenty of other things that, when thought about critically, seem way more valuable than the stack of papers sitting in our bank accounts. It’s almost miraculous that we, as people, pick some random thing, whether it be a paper note, a stone disc, chunks of data, or even shells, and decide that’s how our society will trade, especially when people value things differently than others.

Works Cited

Friedman, Milton. The island of stone money. Stanford, CA: Hoover Institution, Stanford U, 1991. Print.

“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.

Renaut, Anne. “The bubble bursts on e-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web. 23 Jan. 2017.

“The Lie That Saved Brazil.” This American Life. NPR, 7 Jan. 2011. Web.

Not Valuable, Not Worthless

P1. If something has value it has a certain level of importance to someone, so how is it that we can place value in something that serves virtually no purpose (Difference Between, 2011). Money is something of great value to people in today’s society, however if you break down money all it’s only paper and rocks. Paper of course meaning paper bills and rocks meaning the metal used to forge coins. Paper and rock can be very valuable to some people, perhaps people who need to create fire, but the way people use it nowadays is nothing short of idiocy. Money doesn’t have value, but it does have worth. Worth is how much of one thing is equal to another thing (Difference Between, 2011). For example one bag of peanuts is worth one dollar, or one bag of skittles is worth one snickers bar. The big question derived from this definition is how to we decide what is worth what?

P2. The most primitive answer to the previously stated question can be found many years ago with the people who inhabit the island of Yap. The Yapese used gargantuan limestone coins commonly referred to as Rai coins (Friedman 2, 1991). The coins were found on an island miles away and they had holes borrowed through the center that were probably used for easier transportation. These coins had great worth in the eyes of the Yap people and they were in high demand, but why? These coins are nothing more than big shiny rocks. The way that they calculated the worth of these coins were through factors such as, how much time it took to get the coin, how hard it was to get, the size of course, and how many people dies in route to bringing the coin back (Friedman 4). All these things were part of a complex algorithm to decide how much one of these coins is worth. Some of the Rai were so big that they couldn’t even be moved in order to show that a transaction was preformed between two people. So the people had to go off of the honor system for knowing whose Rai was whose. There could be a coin just sitting at the bottom of the Ocean and that’s Jerry’s coin. Then Jerry buys a cow from Thomas using the Ocean coin, and so the Ocean coin becomes Tom’s. It is now Tom’s coin because he says it is, and all of the Yap trust Tom.

P3. The only reason this method of transactions works is because it is widely excepted in the community. Everyone agreed that the Rai were worth something and that they were valuable, so they were. If it was the greatest thing in the world to Jerry, but it meant nothing to Tom there would be no transaction and Jerry would be shunned for loving a big rock. As long as the people in a society agree that something is worth something else anything can be currency. A prime example of this would be the emergence of the Brazilian URV. URV stood for Unit of Real Value. The URV’s saved Brazil’s economy in 1992, but it was generated out of thin air. An economist and his buddies we tasked with finding a solution the Brazil’s 80% inflation rate (Joffe-Walt). The inflation was at a rate so dramatic that if on the first day of the year eggs were 1$ at the end of the year they would be worth $1000. So what they did was invented a unit of currency that remained consistent to fight the effect of inflation. So if eggs were 1 URV a year later they would be 1 URV. The only thing that changed was how many cruzeiros a URV was worth. A cruzeiro was the actual unit of currency in brazil, so a URV could be worth 20 cruzeiros one day and then 40 the next. This fake money saved Brazil’s economy, but it doesn’t even have a physical form (Joffe-Walt). The government got the word out to all people that URV’s were the new currency and they just accepted it . People were paid in URV’s taxes were done in URV’s and all transactions were done in URV’s (Joffe-Walt). The only reason this work was because it what widely accepted.

P4. Another not-so-dramatic example of this would be the US dollar. The US dollar used to be backed by gold and silver and now there’s nothing even backing it anymore except more money. The US economy has created a cycle where every dollar is back by debt. This means all money printed by the FED is just added to the US debt (Wood 2012). This has turned The US into a ticking time bomb. Once the ignorance of the vast majority fades and people realize the US dollar is worthless, the economy will tank in an unthinkable way. Until that moment where everything goes south, the dollar is widely accepted and there for it has worth. One could even make the argument that it never had worth even when backed by gold and silver. Gold and silver are just shiny rocks with no value. They can’t b used to make tools and they don’t serve much of a purpose. So how can something with no value be worth anything? This is just due to the ignorance of people and their willingness to accept that something has worth because somebody else says it does.

P5. To conclude, money is something that has worth in the eyes of the beholder. As long as something is valuable to someone else it has worth. The Yap found worth in large limestone coins, and the Brazilians made up worth in the form of URV’s. Even the US is guilty of the illogical perception of money really having worth. As long as people continue to accept these forms of currency the economy will stay a float, but will people ever catch on to the ugly truth. The truth that money is only paper and rocks. So how do things become worth anything? The simple answer is because somebody says so. With this mindset anything can become money, even big stones.

Works Cited

Friedman, Milton. “The Island of Stone Money.” (n.d.): N.p. http://www.karlwhelan.com/IMB/Friedman-Yap.pdf. The Hoover Institution, 1991. Web. 23 Jan. 2017.

http://www.differencebetween.com/author/aron/. “Difference Between Value and Worth.” Difference Between. N.p., 29 July 2011. Web. 23 Jan. 2017.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, n.d. Web. 23 Jan. 2017.

Wood, Jennifer Shafer. “What Is the U.S. Dollar Really Backed By?” Middletown, CT Patch. Patch, 27 July 2012. Web. 23 Jan. 2017.

In Currency We Trust

P1. Although people don’t often think about it, communities are based on trust. While driving down the highway, everyone driving trusts each other, to some degree, not to cause an accident. Although this trust is based around mutually assured destruction, it shows that something that people do every day relies on trust. Before currency, goods that had an intrinsic value to each person were exchanged. If each person has something the other wants, then this system works easily. In larger systems or when people need different things, this type of trading becomes very inefficient. It could require multiple steps of trading with others until both people have something of value to the other person. On the other hand, currency has no intrinsic value. It gets its value from trust. People trust that other people will accept it in exchange for goods and services. When this trust erodes, the currency is worth less and inflation occurs. This was the problem in Brazil with the cruzeiro. People didn’t trust the currency and its value decreased everyday. The constant inflation caused a positive feedback loop that made people trust the money less and inflation to be worse. When a new currency was introduced, Brazilians trusted it because the value was stable and because other people trusted it. Money is only as valuable as other people think it is

P2. Brazil introduced a new currency, the URV. People were paid and taxed using this virtual money. The URV remained stable while the cruzeiro continued to lose value. For example, a gallon of milk may cost 20 cruzeiros one day and 30 the next while it continued to cost one URV. When people saw that it was stable, more and more businesses accepted them until they were widely used. Without inflation, people didn’t have to rush to exchange their currency into goods before it lost value. When people don’t trust a currency, they exchange it for something with intrinsic value quickly. This happened in Brazil and to Bitcoin. When the value of Bitcoin was rising, more and more people were trying to trade their Bitcoin before it lost its value. This flooded the market with people selling their Bitcoin which decreased the value. It is like playing musical chairs with people trying to get rid of their money before it is worthless. Since the value of URV remained the same, people trusted that it would continue to be stable. People felt safe holding the URVs instead of exchanging them for goods.

P3. For a person to trust a currency, everyone else needs to trust it. If everyone puts their faith in a currency, it is in everyone’s best interest to continue trusting it to ensure that their money doesn’t lose value. The Yap used large stones as a currency. The community agreed on a stone’s value and trusted that the stones would be accepted by anyone else in the community. The stone didn’t even have to be moved because everyone knew who the stone belonged to. This is similar to how a debit card works. Nothing physical moves but it is understood that money has transferred owners.

P4.In Japan, the value of the yen is losing value. Japan has been accused of starting a currency war. The less value holds, the more competitive Japan’s exports are with other countries. Having more demand for exports could help Japan’s economy. If other countries try to devalue their money, people’s money loses its worth. People will not trust their money and the world will end up with a problem similar to Brazil’s problem.

P5. In the past, American money was backed by the gold standard. In 1932-33, France was worried that American money may not be backed by gold in the future. France requested that the Federal Reserve exchange the money they held for France into gold. They did this by simply labeling the gold for France. When Americans found out that the Reserve now had less gold backing the dollar, they panicked. They thought that the French money had grown stronger and the American dollar had weakened. This caused the Banking Panic of 1933. Americans had lost trust in their money. Even though it was the same money, people thought it was worth less because it was no longer backed by as much gold. Because they trusted the dollar less, it had less value. This shows how important trust is and how easily the symbolic value of money can be changed.

P6. Whether it takes the form of paper, coins, gold, computer data, or huge stones, money is a medium for trade. It has no intrinsic value. It is given value by the people who use it. Since money only has value symbolically, it is possible that one day the world will be stuck with worthless pieces of paper or coins. This doesn’t happen because people believe that their money has value. They exchange their time and work for money with the belief that they will be able to exchange it for goods or services. No matter what form our money comes in, all types of money operate under the same belief. People trust that other people value their money. Without that trust, our money is worthless.

 Works Cited

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

“The Lie That Saved Brazil.” This American Life. NPR, 7 Jan. 2011. Web.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 23 Jan. 2017.

Renaut, Anne. “The bubble bursts on e-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web. 23 Jan. 2017.

“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.

The Value of Money

All across the globe money is constantly being exchanged for goods, services, resources, and much more.  The world is made up of all different types of currency, like the United States with the dollar and Japan with the Yen.  Currency is made out of different materials everywhere, most of the time in the forms of dollars and coins.  This is very different than the currency on the island of Yap, where they use rare rocks as their form of money.  It is very strange to see such a subjective form of currency, where a size of a rock determines how much money a person has.

On the island of Yap, individuals exchange stones with one another in order to purchase something.  These unique stones were marked when Germany seized control of the island back in the early 1900’s.  Islanders labeled certain stones across the perimeter of the island that were being taken away due to renovations occurring in the very near future.  These stones became to have value because people now considered them to be worth something due to their rarity.  This sudden idea to use rocks as currency saved the country from economic failure. 

The people of Yap really demonstrated the fact that currency is what is made of it.  It is up to the individuals of the country or place inhabited to determine what they want to deem valuable.  Something’s value also has to do with the type of culture of the region.  The Yap were a small group of five thousand or so who were able to easily use these rocks as a means of exchange.  If stones were used as currency in somewhere like Germany, it might not be so successful due to the amount of people, as well as the mind set of the people.  In other countries people like to be able to carry their money with them and be able to write down a specific dollar amount of how much money they possess.  The Yap did not feel that it was necessary to be so strict with their money.  In their culture the word of a man was trusted just as much as a stone physically in hand.  This trust was necessary for the survival of the Yap’s monetary system because some of the rocks were so large they were unable to be moved.

Currency is what people determine its worth to be, which is clearly demonstrated by the Yap.  Their currency was just like others, and there can be a surplus or a deficit when it comes to any type of money.  A lot of  countries, like Japan, have been dealing with inflation issues with their currency for a long time.  They use what is called “Yen” as their form of money.  Yen is a lot like American dollars in image, but they are worth less than the American dollar because there is a surplus of them.  When there is a surplus of money its monetary worth goes down.  This causes prices to go up, which makes people use more money to purchase less goods and services because everything costs more.  In Japan, a yen is worth about ninety cents on the dollar.  So that means that a thousand Yen is only worth ninety percent of what it actually should be, causing people to spend more and receive less.

The opposite of this occurred in the United States during the early 1900’s.  This is when the Great Depression occurred.  During the Great Depression, dollar bills were hard to come by because of the government not knowing how to handle the country’s finances.  No one realized financial aspects such as GDP and government spending needed to be factored into determining  the country’s net worth.  This made money become worth more, but also a lot harder to come by than what was best for the United States.  Money was deemed to be valued more because of it’s high demand.  This was an instance of currency’s worth being determined by what people decide it is worth. 

In order to end the Great Depression the government determined that it needed to invent what they named the “economy”.  The government realized that money could not just be spent frivolously and there needed to be things like a budget, or a structure to the financial aspect of the country.  Eventually the United States was able to pull itself out of the depression after the economy structure was developed.  By inventing the economy a dollar’s real worth was able to be determined based on it’s demand. 

As it is seen, every monetary unit is worth something different everywhere.  Even though this is true, individuals are still able to purchase goods and services in other countries by just transferring their currency into the other country’s currency.  This would not apply to the Yap, where their money would only be accepted on Yap.  Recently, there has been a new type of money that has come into the light called “bitcoins”.  A bitcoin is an online currency that is stored in a computer’s memory.  This money is universal and does not need to be transferred into another monetary unit because it can be used all across the world.  All that one has to do to use it is go online, which is completely different than the Yap’s currency.

Although bitcoins sound wonderful, there are a few drawbacks.  Even though they are universal, bitcoins can only be cashed out if someone is willing to purchase the bitcoins in cash, which means they can really only be used online.  It is not popular to buy bitcoins in cash because they are not worth the same as other currencies.  For instance, a single bitcoin was worth 244 American dollars, and their value would vary for every different currency.  Also, bitcoins are commonly used to complete illegal activities such as drug deals, so people are wary to use them.  If bitcoins popularity increases, their value will skyrocket.  They are exactly like the Yap’s stones, America’s dollars, and Japan’s yen.  Money’s value increases or decreases depending on it’s demand and determined worth by the people.

Money is the system that makes the world go round.  This is not because it is the most valued thing in the world, it is because money is used to obtain the most valued commodities in the world.  People want money to purchase goods and services.  It does not matter what the physical form of currency is, it matters what the people of a certain region want it to be worth.  This is why the Yap’s stone system saved them from financial turmoil.  Everyone just agreed on what these rare rocks were going to be worth, like how the dollar’s value is determined by the number on them.  Monetary units are what the people make of them.  Once currency is no longer deemed valuable by the people, it is basically worthless.

Furness, William Henry. “1.” The Island of Stone Money: Uap of the Carolines. Philadelphia: J.B. Lippincott, 1910. N. pag. Print.

Renaut, Anne. “The Bubble Bursts on E-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web. 22 Jan. 2017.

Global Business, Reuters Ny times. “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. 22 Jan. 2017.

Faith in an Unreal System

P1. Mediums of exchange have been used to manipulate wealth since the earliest civilizations. Mediums of Exchange have influenced survival, dictated lifestyle, and determined the worth of everything. Mediums of exchange used relies solely on the belief that the users agree that the prices are fair. If the users don’t believe in the system, then the money becomes useless. From ancient islands to modern day America, monetary systems have always been backed by the belief of the people. The monetary system is a system of belief, and once that belief is eradicated, the system is useless.

P2. In the Caroline Islands lies a German Colony known as the Island of Yap. Like most civilizations, the island of Yap uses a monetary system. However the Yaps do not use the paper money system that Americans have come to known. The Yaps use large stone wheels known as Fei to exchange goods The Yap’s use Fei like Americans use currency, exchanging them for certain goods. However, much different from American money, the Yap’s would never actually physically exchange the stones. The stones were kept on a distant island, [not true; the stones were quarried on a distant island and brought to Yap on rafts] so often the owners would never see their stone wheels. [Only once did huge fei sink into the sea and become “unseeable.”] The Yap’s just agreed that the wheels were someones property. [Problems with possessives. The plural of Yap is Yap. “The Yap used fei.” But “someone’s” needs an apostrophe.]

P3. Due to the stone’s [when a noun is both plural and possessive, first make the noun plural: stones; then make it possessive: stones’.] immobility, the stones would very seldom actually change owners. When the stone was changed possession, the villagers simply made a mark on the stone indicating the new owner. All the mark did was dictate the transaction, and the new owner. Many times the stone wouldn’t even move an inch. The Yap’s would exchange goods, and dictate lifestyle with stones that many would not even see.

P4. One family on the island became wealthy without even obtaining a stone. According to a legend, while being transported, the family’s stone wheels were lost. Due to the weight of the stone, the transporters had to throw the stone overboard. This resulted in the stone falling to the bottom of the ocean. Nobody except the transporters ever saw the stones, but everyone agreed to the legend. The family got to live a lavish lifestyle because they everyone believe in something that was non-existent. This type of believing has been present in many countries, even America.

P5. The United States Federal Bank have had exchanges similar to the Yaps. In 1933 the Great Depression was in full swing, so the value of the American dollar was in question. The United States owed a debt to France, and—concerned about the value of the dollar—the French demanded Gold. To the French request, the United States gave the rights of gold in the Federal Reserve. However the gold stayed in the basement of the United States Federal Reserve. The Federal Reserve just marked a certain amount of gold in their bank, property of the French. Using the style of monetary exchange the Yaps used. [This is a fragment, not a sentence. Attach it either to the sentence it follows or to the one that follows it.] They exchanged the monetary value, but not the actual physical medium of exchange. Showcasing the flaw, if the trust in the system is eradicated, the gold (or stone) is worthless because the owners do not have their possessions. [Huh?]

P6. NPR did a broadcast about how made-up money saved the Brazilian economy in 1992. In the broadcast “How Fake Money saved Brazil”, [Periods and commas ALWAYS go inside the quotation marks.] they discussed how due to inflation rising up to 90% a month, the Brazilian economy was crashing. To help bring down the inflation rates, and save the economy, a group of economists created a fake currency known as the Unit of Value. URV’s [Don’t use apostrophes to make plurals.] were made up by a select group, with nothing to back it up. They relied on the people’s faith that the currency had the said value. That year, the URV’s greatly reduced inflation in the Brazilian economy, and solved many of the economic problems. However it wasn’t the URVs themself, [The plural URVs requires the plural themselves.] it was the people’s belief in the system. They believed the money had the said value, so they were able to exchange the URVs with minimal issues.

P7. In the past decade Japan has also manipulated their form of currency, the Yen. In the New York Times article, “Japan Tries to Ease Fears That Its Policies Will Lead to Currency Wars,” it is discussed how the Japanese Government, in order to reduce inflation, manipulated the dollar. The article discussed that many European countries were afraid of what was deemed currency wars caused by other national banks manipulating their dollar values. As shown by the Yap’s however it can be done. Money can be manipulated in many different ways, due to the fact that because it doesn’t physically exist. Money is just a belief of the people. In order for money to work, people just have to believe, it doesn’t matter how much the dollar is said to be worth.

P8. Bitcoin, an online currency, has gone through recent value swings. The value of the currency, which does not rely on any federal bank or financial institution, was wavering through incredible highs and lows from day to day. There were many blames to this, but a prime cause was due to the pressure from investors. In other words, the people stopped believing in the system, causing its value to flux. When the users stop believing in their monetary system, the money becomes useless.

P9. Currency is an idea made created by governments that relies on the faith of the users. Money is solely backed by the belief, and not by the government. Some money systems use currency that the users don’t actually see. So people are basing their lives and how they live [pick one] over something that isn’t actually real and in some case they don’t see. People kill, die, and base their entire lives on the belief of this system that doesn’t actually exist. Sadly since the beginning of time, people have been doing horrendous things for unreal things.

P10. Be it the island of Yap, or the United States, mediums of exchanges have dictated people’s lives for a long time. Even though technically their [You need to use the contraction for they are.] different systems, both countries [both economies? both currencies?] are actually based on the same idea. Both monetary systems are backed by nothing but belief decides the fate of the people. If the people stop believing in the value of the system, the system becomes useless and the wealth eradicated. The whole idea of a good economy or bad economy is dictated simply by belief. So all this killing due to money has been caused by money could have easily altered by people simply changing their belief. So this love of the almighty dollar is really a love of a belief. [The two red sentences go off the rails.]

Works Cited

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

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

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

“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.

Acceptance of Money

P1. It is said that money does not grow on trees, yet after reading Milton Friedman’s paper “The Island of Stone Money,” I no longer know what to believe. In his paper, Friedman spoke of an island in Micronesia called Yap where the inhabitants used giant limestone disks as money. The concept of limestone money seems outrageous but invited me to research what money actually was. Bernard Lietaer wrote in his article “The Future of Money” that “economic textbooks define money by what it does; that is, they describe its classic functions as a standard of value, means of exchange, and store of value.” To my surprise, it was described as a placeholder for someones current value and ironically enough, limestone money fit that definition as much as the U.S. dollar.

P2. In Friedman’s paper about the Yap, he explained that their limestone currency too large for people to even bother moving! Instead, the community just acknowledges that the currency now belongs to someone else. While this may seem strange at first glance,  it’s not that different from our situation now.

P3. Being a soldier in the United States Army, I have no choice other than to have my pay directly deposited into my bank account. I never get to lay eyes on the physical entity of the money, nor do I ever get to touch it. Even though I’ve never seen it, I am told that I have it. This is very similar to how the people of Yap operate. My community acknowledges that I have money just as I acknowledge that I have been payed. I have money I’ve never seen and to pay a bill online, I transfer that unseen money to someone else who does not see it.

P4. Say that instead of paying an online bill, I go to an ATM and withdraw cash.  I see this as trading in “fake money” for “real money” offered by the ATM. This is when the value of the real money is brought up. How valuable is the “real money” that the ATM offers? The reality is, it’s nothing more than a piece of paper with numbers on it. The true value of money comes from what it can buy.  For example, someone accepts a piece of paper with numbers on it in exchange for a muffin. The acknowledgment of this piece of paper as legitimate payment is crucial in the success of the currency. Just as the people of Yap acknowledged those who had wealth in their country, we find our money’s value in what we can get for it. If looked at objectively, the world economy is a web of nonexistent currency and currency floating on faith.

P5. In “How Fake Money Saved Brazil,” Chana Joffe-Walt explained how Brazil was plagued with an inflation epidemic that was causing basic human needs to become unaffordable to the country. Inflation was rising by 80% a month and the country was doomed. Yet how this was fixed confirms what I stated in paragraph four. This American Life broadcast “The Invention of Money,” explained that Brazil’s inflation problem was solved by the creation of a fake currency system called Units of real Value or “URV’s.” The URV was a nonexistent currency that the Brazilian government had to convince its people was real. In doing so, the people of Brazil began to acknowledge this form of currency and to use it for buying and selling purposes. The people began to realize that the URV maintained its value from day to day, what would cost 10 URV’s one day would still cost 10 URV’s another. With prices no longer fluctuating, the country began to tame its inflation. This faith saved the country and demonstrated how crucial it is for people to acknowledge the value of their currency.

P6. To keep our currency alive, we need to acknowledge its legitimacy. If we acknowledge our country’s currency as legitimate, can we make up our own currency and convince others it’s legitimate? Yes, in fact we can. According to “Private Currency,” this is known as private currency and is actually pretty common. An example of fake currency is credit card reward points. Some credit cards offer rewards point redeemable for restaurant gift cards. We cannot trade these points with a bank for a house, but we can return these points to the credit card company for a reward. Along with that, we can pay credit card companies to even collect points. Many American Express credit cards have an annual fee. By paying this fee, a door is opened to a world of reward points. We pay in legitimate currency to be able to access private currency that holds no value outside the given institution. The company then rewards us when enough of the private currency is built up. This is just another aspect of how fluid money is.

P7. Money is introduced to most at a young age as something that can help find true happiness or destroy any opportunity thereof. When we think about money, we tend to think about the U.S. dollar or the Euro. The reality shows that money can literally be a rock. This concept shows how the backbone behind money isn’t what’s printed on the bill but how it’s acknowledged.

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

Glass, Ira, Chana Joffe-Walt, Alex Blumberg, and Dave Kestenbaum. “423: The Invention of Money.” This American Life. Prod. Planet Money. 7 Jan. 2011. This American Life. Web. 23 Jan. 2017.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 23 Jan. 2017.

Lietaer, Bernard. “The Future of Money.” BUSINESS: The Ultimate Resource, Jonathan Law, A&C Black, 2011. Credo Reference, http://ezproxy.rowan.edu/login?url=http://search.credoreference.com/content/entry/ultimatebusiness/the_future_of_money/0. Accessed 23 Jan. 2017.

“Private Currency.” Dictionary of Finance and Investment Terms, John Downes, and Jordan Elliot Goodman, Barron’s Educational Series, 2014. Credo Reference, http://ezproxy.rowan.edu/login?url=http://search.credoreference.com/content/entry/barronsfin/private_currency/0. Accessed 23 Jan. 2017.

The Intrinsic Value of Money

P.1. What is the value of money? When you think about it, money really has no value. As Americans, we started out with exchanging goods, to gold, to paper money, and now we are exchanging money that might not even completely exist, such as the Bitcoin. Other cultures used very different materials for money like giant stones, but they had the same concept as us. This concept was that money meant power and the goal was to earn as much of it as you can to be successful. We believe that money has value, and even when we physically don’t have the money on us we know that it is valuable.

P.2. One culture that is extremely similar to America’s is the Yap. They are the inhabitants of a tiny island on the Caroline Islands in the pacific. As Milton Friedman mentions in “The Island of Stone Money,” the Yap’s exchange system was called fei, which was limestone carved into a thick round wheel with a hole in the center of it. It was larger than a man and heavier than a car so they clearly could not walk around with that. When someone new becomes the owner of a persons stone they do not physically take the stone, they simply keep it at the former owners house, but everyone knows it belongs to them. The Yap simply trusted each other and would believe the amount of each others fei without having to see it for themselves. It is said that one owner lost their fei in the bottom of the ocean and everyone believed him and he was still able to use it at a marketable value without it being really there. Years later when the German Government took ownership of the Yap, they went around and marked the most valuable fei with a cross of black paint in order to get the Yap to fix the roadways. It instantly worked and when the roads were complete and the black paint was removed and it was like their payment was made.

P.3. This was very similar to the Americans in 1933 when they owed France gold. Instead of shipping the gold to them the Federal Reserve bank put aside the set amount of gold and labeled it in France’s name. France didn’t actually receive the gold but headlines spread across the newspaper saying that America’s gold reserves were down while France’s were up. This was just like how the German’s marked the Yap’s stones with the black paint to indicate that the money was theirs until they paved the roads. In the podcast “The Island of Stone Money,” Jacob Goldstein and David Kestenbaum said “This system, in the end, feels really familiar. If you go online to pay your electric bill, what’s really changing in the world? Some digits in your bank account get shifted around, along with some digits in the power company’s bank account.” At first we think of the Yap’s way of handling money as silly, but in reality is extremely similar to our own. We don’t have to physically show someone how much money we have we can simply go online and look at numbers on a screen.

P.4. Meanwhile, other countries across the globe were struggling with severe inflation such as Brazil. In 1990 the inflation was up to eighty percent a month which destroyed the economy. In the audio blog, “The Lie That Saved Brazil,” it mentions how prices were rising every day and how a pair of sunglasses could cost you ten dollars one day, and then in just a year they would cost ten thousand dollars. This shows how quickly the prices are rising. They could not figure out how to stop the inflation until a group of four men, who were drinking buddies from graduate school, came up with a plan to make the people believe their money had value again. They were able to successfully trick over 150,000,000 people that their money was worth something and it wound up stopping the inflation. Now, the people of Brazil can just walk out of the store with an item and pay for it later through payments. The value of money has changed here in an instant over a simple lie that made people believe there was value.

P.5. Another form of currency, which is  an e-currency called the Bitcoin, has a value that rises and drops drastically. In the article, “The Bubble Bursts on Bitcoin,” by Anne Renaut, she talks about how Bitcoin is an online money system where people have a virtual wallet. She explains that hopefully over time this online system will be more stable because these wild swings are not good for the Bitcoin system. Also the fact that you can send money to other people anonymously increases the risk for things such as money laundering and drug dealing. After all though, people are putting their money as Bitcoins and trusting its value as a currency. There is no physical money, everything is done online. This shows that the value of money doesn’t have to be in physical sight, just like the Yap with their stone money.

P.6. Overall, money is simply a concept that people value, and throughout the different countries across the world, the trust and physicality of money differ. Money is something that the world cannot live without and when all is failing, like the inflation crisis in Brazil, simply a new one is created to find balance. We don’t even have to physically see a person’s wealth anymore, for example the Bitcoin, which is just a bunch of digits on a computer screen. The value of physical money no longer exists, we put all of our trust into other people, like the Yap, or we put our trust into online banking. It is mind blowing how someone can just make up a currency out of nothing, whether it be from stone, paper, or online.

Works Cited

Friedman, Milton. The island of stone money. Stanford, CA: Hoover Institution, Stanford U, 1991. Print.

Goldstein, Jacob, and David Kestenbaum. “The Island of Stone Money.” Audio blog post. N.p., 10 Dec. 2010. Web. 18 Jan. 2017.

Renaut, Anne. “The bubble bursts on e-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web. 23 Jan. 2017.

“The Lie That Saved Brazil.” This American Life. NPR, 7 Jan. 2011. Web.

Determining the Value of Money

P1. In every society, material needs to have value in order to trade for more possessions. After all, we don’t carry our possessions with us at all times. This is why money was created by the inhabitants of the island of Yap—so that they could trade items without having to give away items that were used in their day-to-day life. Jacob Goldstein and David Kestenbaum, in “The Island of Stone Money,” describe the appearance of the Yap currency as large, heavy stones with holes in the middle. Their worth was based solely on their appearance. They were made from limestone deposits on islands hundreds of miles away, and were transported back across the ocean in tiny bamboo boats. The creation of this system was the beginning of many societies relying heavily on the concept of giving objects value.

P2. The idea of stone money is interesting because the stones did not actually have to be in the possession of someone for that person to own them. Milton Friedman explains in “The Island of Stone Money,” that when an exchange was made, the stones usually remained at the previous owner’s property. They did this because sometimes stones were even heavier than cars, making it nearly impossible to move them. Sometimes, the stones were not in the hands of anybody at all. Even stones that had sunk to the bottom of the ocean floor, never again to be seen, could contribute to an individual’s wealth. According to Goldstein and Kestenbaum in “The Island of Stone Money,” stones that had been lost on the trip back home to Yap could still be accepted by the trusting Yap culture without being physically verifiable.

P3. The stone system used on the island of Yap can be compared to the modern currency systems in many countries, including the U.S. Alex Blumberg and David Kestenbaum explain in “Weekend at Bernanke’s” that America’s dollar bills used to be backed up by actual gold in the Federal Reserve. Dollar bills had value because we knew they were backed up by gold. After America went off the gold standard, it started producing more dollar bills backed by nothing but the credit of the United States government. Americans now find it sufficient to possess valueless things, while the Yap thought it unnecessary to “possess” their things of value.

P4.  Even though there are similarities in the Yap currency and modern currency systems, the inhabitants of Yap could find the concept of modern currency bizarre. To them, stones had actual value since they were massive and shiny in appearance. They would find it strange to know that we put value in a small piece of paper, and that we can print out more whenever we feel like it. They would find it shocking that our currency system is mostly based on numbers on screen, and that a system like Bitcoin exists. Bitcoin is a complete online currency system not run by any government. Anne Renaut in “The Bubble Bursts on e-currency Bitcoin,” describes that Bitcoin is an online money system where users have a “virtual wallet” with all of their online money in it. Once users have Bitcoins in their virtual wallet, they can send their Bitcoins directly to other users, bypassing banks and remaining anonymous. Creators believe that as time goes on, Bitcoin will become more stable and that e-currency will be the future for the U.S. currency. With more online systems, higher amounts of money don’t seem as big as they used to seem.  No amount of money seems impossible to reach when we deal with our money solely through numbers on a computer screen. According to Linton Weeks in “The Trouble with Trillions,” America’s national debt is over fourteen trillion dollars. Just decades ago, the thought of having national debt in trillions seemed unimaginable. Now, nobody seems bothered by talking about trillions in general. Without anything to back up dollar bills, people have to put their full trust in a single entity and in America’s case, it’s the Federal Reserve. It Brazil, however, they had nothing to put their trust in for a long time.

P5. Brazilians had been living with high inflation for many decades, but the government created a fake system that tricked its citizens into believing their money was worth something. In “The Lie That Saved Brazil,” Chana Joffe-Walt explains Brazil’s money situation. Brazil’s problem started in 1950, when its government wanted to create a new city. They did not have the money to do it, so they just printed out the money which, of course, led to inflation. She stated that in 1990, Brazil had an inflation rate of 80% per month. Prices were drastically going up every day, so something had to be done to stop it. The first plan implemented was to confiscate everyone’s money, which did not work out too well. Again, the only way to have a functioning currency system is to gain the people’s trust in something. Economists in Brazil came up with a fake system that created a new currency, URVs, that were stable. People were paid in URVs and items at stores were labeled as URVs, so that prices would not have to be changed every day. The Brazilian government would put a conversion chart in the newspaper each day that converted URVs to cruzeiros. Even though URVs were completely imaginary, the system began to work. People changed their mindset to think in URVs, which were stable. They trusted in this system and believed that their currency was stable again. When people have faith in using money, it has value. In order to gain value, there needs to be some level of trust between citizens and their government to solidify that money has worth.

Works Cited

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

Glass, Ira, Chana Joffe-Walt, Alex Blumberg, and Dave Kestenbaum. “423: The Invention of Money.” This American Life. Prod. Planet Money. 7 Jan. 2011. This American Life. Web. 11 Sept. 2016.

Goldstein, Jacob, David Kestenbaum. “The Island of Stone Money.” NPR. NPR, 10 Dec.            2010. Web. 23 Jan. 2017.

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

Renaut, Anne. “The Bubble Bursts on e-currency Bitcoin.” Yahoo! News. 13 April 2013. Web. 23 Jan. 2017.

Weeks, Linton. “The Trouble with Trillions.” NPR. NPR, 22 August 2011. Web. 23 Jan. 2017.