Stone Money Essay- HazelnutLatte

Our Impact on the Value of Money

What is money? Although a simple question, it has a much more complex answer. People in today’s world are socialized to realize that money is important in many aspects, but nobody asks the question, what is money? This is because, all around the world, people share the basic understanding that you need money in order to purchase most of the necessities, and desires, in life. However, nobody sits back and thinks about why money holds the value that it does today, or our impact on the value of money.

When thinking about the concept of money, I think of the paper money known as the dollar, and the piece of plastic we swipe, known as the credit card. To me, these concepts are simple: you give someone the paper or you swipe your piece of plastic and you receive whatever it is that you are trying to purchase. Even though this concept seems so simple, how do we determine the value within that piece of plastic. You don’t hand the cashier a piece of paper with the number twenty, meaning twenty dollars, but you immediately get twenty dollars taken out of your bank account. When listening to “Planet Money” on “The Invention of Stone Money,” Ira Glass made me realize that this concept is extremely similar to how the Yaps went about their system of money. Glass described how the Yaps created a giant stone that represented a certain amount of money, but when the workers began to transport the stone, from the island it was made on, to their own island, it fell to the bottom of the sea, but continued to represent a value. Much like how our bank accounts work, the Yaps had faith in simply saying that an individual who is said to own the stone, has the wealth that the stone represents. In “The Island of Stone Money,” Milton Friedman says how the faith in the stone led to its extreme value because others who saw the stone “…testified that the [stone] was of magnificent proportions and of extraordinary quality…” The magnificence of the stone increased its demand, which led to its increase in value. This concept may seem to be preposterous, but it is almost exactly correlated to how we evaluate the value of money in our banks, and how we share money electronically.

We are told from the start of our lives that money gets us the materialistic items that we desire in life. Much like how the Yaps use the idea of the stone to determine the wealth that an individual has, in modern times, we use electronic money. When sending money through apps like bitcoin, the user obtains a number on the screen, but not an actual dollar in their hand. When reading “The Bubble Bursts on E-currency Bitcoin,” Anne Renaut makes you realize that when we exchange money through this electronic process, we are essentially exchanging imaginary money. Renaut emphasizes that when using Bitcoin, you “…can only cash out [your] money if other people want to buy [your] Bitcoins.” This broadens the idea that the money is never actually there. Transferring bitcoins to the next user is virtually just giving them a number that has a value. Renaut says that a person can go their whole life spending their own money, and still having their bitcoin value in the bitcoin account. You could never touch this money, or you could send it to someone else, or to your own bank, but you will never obtain an actual bitcoin. We deal with this everyday when paying bills online or doing virtually anything through our banking system.

When dealing with transactions within a bank, money is transferred from account to account through numbers changing on a screen. Money is not directly and physically delivered to the receiver, but the receiver will see the number on their account rise. As said in “Planet Money,” in “The Invention of Money,” Glass tells us how this is because the money is not actually there; it is being passed on from loan to loan, but you still continue to hold the value in your bank account based on those numbers on your screen. Every time a transaction is made, money is not being physically picked up and taken out of a person’s account and put into another. This would be extremely time consuming and create chaos if money is misplaced. These numbers represent how much money you hold under your name. When listening to act two, “Weekend at Bernankes,” in “The Invention of Money,” Alex Blumberg and David Kestenbaum tell us how the federal reserve can essentially create money. The creation of money can make or break an economy. This closely relates to how Brazil went about their economic issues. The president wanted to create a new capital, so they began to create money to make this make this vision happen. When they began to create money, it started a rise in inflation, leading to the start of price freezing. This creation of money hurt their economy because the inflation was too large. This occurs throughout the world, especially in our own economy through the federal reserve. In the U.S., the federal reserve can decide to create money to make it easier to get loans and create businesses and jobs, but they must be aware of the possible inflation (Blumberg & Kestenbaum 2011). The value of money is determined by the demand of the dollar at that point in time. When inflation goes up, so will the value of the dollar throughout that country. We base our value of money off of what we are told that the demand is, and what we are told the dollar is worth.

The story of the Yaps, and their large valuable stone, may seem like an insane and unlikely process of how we determine the wealth of an individual. However, this story is not too far off from how we function as a society, and how we go about controlling our economy. With every swipe of a credit card, and every virtual bill or transaction being made, we are essentially giving someone invisible money that somehow has a value because we accept that fact. Without the acceptance of society, money would be worth little to nothing, and we could possibly have completely different currencies. Just like the Yaps, and the people of Brazil, we utilize our bank systems and our electronic transactions in ways that act as stone money.

References

Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991

“The Invention of Money.” 423: The Invention of Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.

Renaut, Anne . “The bubble bursts on e-currency Bitcoin.” Yahoo.com. 13 Apr. 2013. 30 Jan. 2015.  https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html/ 

 

 

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3 Responses to Stone Money Essay- HazelnutLatte

  1. hazelnutlatte123 says:

    I think I understood this assignment, and constructed my essay okay, but can you please check if my essay flows logically.

  2. davidbdale says:

    I value your question, Hazelnut, and I thank you for engaging me in a conversation about your work. I will answer more fully in my next Reply, but I’m going to begin with an impolite observation. Your first paragraph says the same thing three times.

    What is money? Although a simple question, it has a much more complex answer.

    People in today’s world are socialized to realize that money is important in many aspects, but nobody asks the question, what is money?

    This is because, all around the world, people share the basic understanding that you need money in order to purchase most of the necessities, and desires, in life. However, nobody sits back and thinks about why money holds the value that it does today, or our impact on the value of money.

    Each time you tell us that we know money has functional value, but that we don’t ask ourselves what it actually IS.

    A reasonable substitute for this first paragraph, which I seriously advise you to consider using, would be:

    We know what money does, but we don’t ask what it is.

  3. davidbdale says:

    A further word about the opening of your second paragraph.

    When thinking about the concept of money, I think of the paper money known as the dollar, and the piece of plastic we swipe, known as the credit card. To me, these concepts are simple: you give someone the paper or you swipe your piece of plastic and you receive whatever it is that you are trying to purchase. Even though this concept seems so simple, how do we determine the value within that piece of plastic. You don’t hand the cashier a piece of paper with the number twenty, meaning twenty dollars, but you immediately get twenty dollars taken out of your bank account.

    A logical next step after your opening question: “What is money?” would be to examine the characteristics of money to see if they provide an answer. I think that’s what you’re getting at here. Our first impression of money is that it’s a physical object. A dollar bill or a credit card. But you immediately abandon that aspect of your investigation for a different observation about function: How do we use that object? Then you distract yourself with another question: How do we determine the value of that object? And then you ask the seemingly unrelated question of how a debit card relates to a twenty dollar bill.

    So, I’m glad you asked about logic flow, Latte. I can help with this. In this paragraph, all your observations should flow from the physical aspect of money. Is it what makes money money?

    Our first impression of money is that it’s a physical object, a paper dollar bill or a credit or debit card that for some reason can be swapped or swiped for potato chips. But unlike most other physical objects—books or hammers or pineapples—that have intrinsic value, the dollar bill doesn’t seem to be good for anything EXCEPT being swappable. So the first peculiarity of money is that store owners will accept it from us not because of what it is, but because of what it can do. In other words, its physical nature is the last thing we should consider about money, not the first.

    Does that illustration get you started on examining the rest of your essay for logic flow, Latte? If so, make some revisions yourself and report back. I’ll be happy to provide more feedback and keep the conversation going. If not, Drop me a Reply here to let me know I’ve done a terrible job and not helped you much. I won’t give up until I get it right.

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