Money Revised–Cassie Hoffman

The concept of money and what it’s worth to society is something that most people probably don’t think about often. We make money, we spend money, we lend money, we borrow money, but what does that money really represent and what is it worth? Technically, it’s a systemized means of trade. For example, we know that every ten dollar bill is worth precisely ten dollars, always. We can use that bill, worth precisely ten dollars to “trade” with someone who has an item that we want in exchange for (and that they believe is worth) that ten dollars — a T-shirt perhaps. But as the state of the economy fluctuates, so does the value of the dollar, so although that ten dollar bill will always be worth ten dollars, if the value of the dollar decreases, so does the value of that ten dollar bill. It won’t be able to get us as far as it may have once gotten us, and that T-shirt we used to want to “trade” for it will be harder to attain because it is not simply worth ten dollars anymore.

While we have grown accustomed to this routine of fluctuation in the dollar’s value, as it changes every day, it is still a very abstract concept to grasp; a dollar bill that I can hold in my hands today will  not be worth exactly the same amount by tomorrow. But another currency system that is even more mind boggling for us to think about is one that exists on the island of Yap, where they use huge pieces of limestone as a means of currency. The most intriguing thing about their system is that the stones don’t even have to physically change hands in order for a payment to be made, but instead they simply have the known ownership of them transfer to whoever payment must be made to.

In a more civilized and technological society, like that in which we live here in the United States, that system would never be plausible. Although we most certainly do not physically hold a large amount of the money that we receive or spend – paychecks in direct deposit, credit cards, loans – we are far too populated and untrusting to simply leave payment that we are owed with the person that owes it to us and accept that it is ours when we wish to take it and use it for something. However, on the island of Yap, communities appear to be smaller and more tight-knit. They also lead a very simplistic lifestyle compared to ours here in the United States. And maybe that’s why their system with these giant “fei” works for them — they have more trust in each other, less corruption to deal with, and fewer materialistic needs or desires, so they don’t need as much official paperwork and record keeping when it comes to the transfer of money. There is also probably a lot less apparent greed in their society, which essentially is the driving force behind making and spending money here in the United States – we want money to buy impressive things to make us superior, so we work hard for it; we are not accepting of others being more well off than us without working harder than us. If the community on the island of Yap had as much greed as that which exists here, there is no way that the inhabitants would allow the one famously rich family that exists there to have infinite wealth just because of a mysterious fei that it apparently owns that its ancestors lost on the bottom of the ocean. Had the inhabitants of Yap had as much greed as we do, they wouldn’t accept this fei without physical proof.

The entire idea of money in general is hard to grasp. Although generally speaking, every dollar in this country is supposed to be backed by an amount of gold equal to one dollar, this is no longer the case. We print money that we do not have gold to back, which is why it is possible for the value of the dollar (in terms of gold) to decrease to less than a dollar. Essentially, the dollar bill to us is the same value as the known ownership of each fei on the island of Yap; we just live in a society where proof of ownership means everything, and so we print money to represent our ultimate buying power. Plus it’s probably a lot easier than carving out huge pieces of limestone on some distant island and shipping them over.

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4 Responses to Money Revised–Cassie Hoffman

  1. davidbdale says:

    Hey, Cassie! I love “systematized means of trade,” and your illustration of the ten-dollar T-shirt is useful to help us visualize the exchange. I will quibble with you that it’s less important what the owner or maker of the T-shirt thinks it’s worth and much more important what the owner of the ten dollars thinks the shirt is worth. Don’t you agree? We may not be able to buy the shirt we want if we disagree with him, but if enough of us agree, he’ll have to rethink the value of the shirt to the economy.

    You need to rephrase the last sentence a bit too. Saying “it is not simply worth ten dollars anymore” sounds as if it’s worth less; I think you intend to say it’s worth more.

    Also perplexing is the comment “they simply have the known ownership of them transfer.” I understand it only because I’ve read what you read; otherwise, I’d be very confused.

    Why is the Yap system not plausible in the US (after we get over the apparent oddity of it)? How often do our dollars physically change hands? Probably less often than cards are swiped, which doesn’t require moving paper at all, just a “change in the known ownership”? We don’t leave something physical in the trust of another until we’re ready to retrieve it. We’re even more abstract and trusting. We never see the physical object at all!

    You do make an important case about greed, Cassie. The more we care about counting money, the more we measure our self-worth in dollars, the more we stand to “lose” if the system isn’t accountable and fair. Still . . . when our worth is measured in, for example, stocks or real estate, the value of which can evaporate overnight, aren’t we actually more trusting than the Yap about the method of determining who’s rich and who isn’t?

    What claim are you actually making about gold, Cassie? That we’re lying to ourselves about the myth of the gold standard? There’s no such thing as the gold standard anymore. We no longer make the claim that there’s a dollar in gold for every dollar we print. Your “is supposed to” is confusing in that regard. I truly don’t understand how the value of a dollar in terms of gold can shrink to less than a dollar. How much gold a dollar can buy will change, for sure, but however much gold it buys on Tuesday is a “dollar’s worth” of gold on Tuesday. The value of the dollar is still a dollar. The quantity of gold changes.

    I admire the depth and the range of your comments, Cassie. You’ve covered a lot of ground! Nice work.

    Fails for Grammar, Rule 5. Go to Basic Grammar (always available from the sidebar) for the rule and fix the problem to remove this note and release your real grade.

  2. choffman17 says:

    “What claim are you actually making about gold, Cassie? That we’re lying to ourselves about the myth of the gold standard? There’s no such thing as the gold standard anymore. We no longer make the claim that there’s a dollar in gold for every dollar we print. Your “is supposed to” is confusing in that regard. I truly don’t understand how the value of a dollar in terms of gold can shrink to less than a dollar. How much gold a dollar can buy will change, for sure, but however much gold it buys on Tuesday is a “dollar’s worth” of gold on Tuesday. The value of the dollar is still a dollar. The quantity of gold changes.”

    – I don’t really know how else to talk about the gold/dollar equivalency because it’s a hard concept to comprehend. If I changed the “(in terms of gold)” that’s in my post to “(in relation to foreign currencies)”, would that be more accurate? Or would my paragraph still lack the right basis for argument that it lacks now?

    • davidbdale says:

      Thanks for asking, Cassie. I know this is a tricky concept to phrase, and I’m certain I wasn’t clear enough. We can still talk about dollars and gold, or we can talk about dollars and donuts, as my Dad loved to say.

      The whole point of the dollar is that it’s always worth a dollar. Donuts aren’t identical, but dollars are. One large donut with cinnamon sugar might be worth a dollar, while at the same time two small plain donuts might be worth a dollar.

      If inflation is running at 80% a month, as it was in Brazil in the 1990s, pretty soon one large donut is worth two dollars. But the dollar isn’t worth 50 cents. It’s still worth a dollar, but the dollar buys less. The only exception is for coin collectors. To them, sometimes a dollar (the particular physical item, not all dollars) might be worth thousands.

      Is that any help, Cassie?

  3. davidbdale says:

    Grammar fixed. Rule 5 violation removed. Grade revised.

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