Stone Money–runnerd4

The Abstract Reality of Cash

When someone thinks about the concept of value, they generally think about how much cash or currency something is worth. Throughout history we’ve had many forms of exchange. We have moved from bartering, to metal coins, to a complicated form of paper money, and then  finally to today’s form of paper money. After listening to NPR broadcast “The Invention of Money”, my whole view of money has shifted. The broadcast went into the history of money, along with many examples that made the audience realize that money truly has no value unless we give it value. The funny thing about that is that money itself is worth nothing unless we give it a value. Today, money seems like a simple concept to just about everyone, but the true abstract concept of money is surprising. 

Let’s start off with a brief history of money to give us some background on the concept we will be reviewing today. First, we began with bartering. Bartering is trading one good or service for another. For example, one may have traded a spice for a piece of fabric or the service of a blacksmith for the service of a seamstress. Bartering worked well for business conducted within the same community, but as trade expanded, it no longer suited the needs of the people. Next, people began to use gold or other precious metals to pay for goods or services, but the weight of these metal coins made these transactions very inconvenient. From here, people began to assign value to other objects to make the transactions easier. In the NPR broadcast, they discussed an example of going from gold to objects that were assigned value with the French. The French had stores of American gold, but instead of sending the gold back, they sent a receipt to show that the Americans owned that amount of gold in the French supply. Next, we moved onto a more complicated form of paper money. According to the NPR article “What is Money” with Jacob Goldstein, there was a time in American history where there was actually around 8000 different kinds of paper money; each bank printed their own bank notes and every merchant had to have a certain book to tell them which bank notes were actually valid. This became very complicated so finally, in the United States we moved to currency backed by gold, printed by the federal reserve. Now, as money is no longer backed by gold, the concept of money has become even more complicated, especially taking into consideration the concept of online banking . Cash, or currency, in countries around the world truly has no true value. We have assigned value to each bill and have over time, tricked our brains into thinking that cash itself holds the value. 

Although the forms of currency we have used throughout history seem to be drastically different, they all follow the same concept. In Friedman’s essays, he described the similarity of the events involving two drastically different types of currencies. The Yap form of currency was varied sizes of stones, from small to about twelve feet in diameter, called the Fei. As the Germans took over their land, they wanted the Yap to fix their roads and paths to make them easier to travel. When the Yaps did not do it, the Germans decided to fine them. The Germans saw no point in transporting the enormous pieces of stone that had nearly no value to them, so they just drew a large “X” on the Fei that belonged to the German government. A similar scenario happened between the Americans and the French. When the French became worried that the United States would not stick to the gold standard, the French requested that America would convert all of the dollar assets they had into US gold. Instead of shipping all of this gold to France, they simply put them in drawers and marked them to show that they belonged to the French, just as the Germans did to the Yaps. The two extremely different forms of currencies were viewed the same from the people of the country that the currency came from. The Yap and American people both felt as if they were losing money. The reason for this is because although the forms of currency were completely different, we all add the same type of value to these objects, whether paper or gold or stone, that makes us feel like we’re losing money. 

An example that reveals the abstract concept of money is of the resolution to the financial crisis in Brazil that I learned about in the NPR broadcast, “The Invention of Money”, Act 2. Brazil experienced a period of hyperinflation after printing money to pay for a project that they wanted to complete in the capital. After many failed attempts at fixing this issue, the Brazilian government persuaded a group of four economists to solve the problem. They realized that the main issue was that the people of Brazil no longer had faith in the Crucero currency, because the hyperinflation gave it near to no value. The economists figured out that they should create a new stable currency, called the URV, which would never be printed. The new currency would allow the Brazilian people to have more confidence in their money due to the stability of the URV compared to the Crucero currency. This plan worked as the people of Brazil tricked themselves into thinking that the URV actually had value. Just like the United States Dollar, the URV had no true value unless it was assigned value. 

Ever since we have advanced past the barter system, currency has become increasingly complex. We assign value to objects to make it mean something to buyers and sellers. This idea of assigning value to an object is the same even between the large pieces of stone that the Yap used, called the Fei, and the present day United States Dollar. Now with electronic baking, there is not even an object assigned to the value, there is just a bunch of numbers flying through the internet to represent deposits, withdrawals, and bill paying. Many people view wealth as having a large amount of money, but nowadays, even the concept of being wealthy seems a bit abstract. 

References

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2018, February 19). The Invention of Money. Retrieved September 18, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

King, N., & Goldstein, J. (2020, September 08). What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’. Retrieved September 18, 2020, from https://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction

Friedman, M. (1991). The island of stone money. Stanford: Hoover Institution, Stanford University.

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1 Response to Stone Money–runnerd4

  1. davidbdale says:

    First of all, runner, thank you and congratulations for posting early and earning the right to publish a Rewrite if you choose to do so. I promised you feedback in return for your early post, so I’ll begin that process now. If you decide to take me up on the offer of a rewrite, we can do a much more detailed feedback session. Just let me know in a reply to these Notes that you’d like a deeper analysis and review.

    In general you cover the material thoroughly and address most of the main topics of the Invention of Money, runner. Your citations make clear where you’re drawing your material from, and you do a nice job of balancing how much information you share with how much analysis you offer. Your conversational tone is inviting and comforting. We feel we’re going to be guided through the paragraphs by someone who wants us to understand. Your introduction prepares us nicely for the little journey we’ll take, and your conclusion wraps up everything we’ve covered and finishes strong. Your References section (except that you didn’t center the word References) is complete and correctly formatted.

    What separates this capable work from essays that will earn top grades is the clarity (or lack of clarity) of your explanations of the material and concepts you present. As a reader already very familiar with the broadcast, I was able to recognize and understand the concepts, but readers not already familiar with sources will have a much harder time. If you choose to rewrite, you will spend your time most profitably on improving your analysis.

    Saying so is one thing. Helping you achieve the best results is another. Let me point out some problem areas to guide you. You’ll have to find others and adopt similar strategies to them on your own.

    Bartering worked well for business conducted within the same community, but as trade expanded, it no longer suited the needs of the people.

    It should take no more than a sentence to explain why “expanded trade” made barter obsolete. You could reference the difficulty of finding someone who wants a particular good or service, or the need for “three-way” transactions where two parties don’t want what the other has, but a third person can bridge the difference. Otherwise, the transition to gold is too abrupt.

    Next, people began to use gold or other precious metals to pay for goods or services, but the weight of these metal coins made these transactions very inconvenient. From here, people began to assign value to other objects to make the transactions easier. In the NPR broadcast, they discussed an example of going from gold to objects that were assigned value with the French.

    Here you rightly cite the clumsiness of gold as a currency and promise a solution “assigning value to other objects,” but you fail to deliver on that promise. Instead, you tell a story about gold.

    The French had stores of American gold, but instead of sending the gold back, they sent a receipt to show that the Americans owned that amount of gold in the French supply.

    Here you tell the French gold story for the first time, but you oddly suggest that the French were in possession of American gold (presumably in France). Later you tell the story the other way: Gold belonging to the French was being stored in America. Readers will be confused.

    Next, we moved onto a more complicated form of paper money. According to the NPR article “What is Money” with Jacob Goldstein, there was a time in American history where there was actually around 8000 different kinds of paper money; each bank printed their own bank notes and every merchant had to have a certain book to tell them which bank notes were actually valid.

    I’m impressed that you used this example, and I understand the concept from having read the original, but unfamiliar readers probably won’t. Did those bank notes represent something of value? Have you started to tell the story of how paper came to represent gold? If so, you need to make that connection clear.

    This became very complicated so finally, in the United States we moved to currency backed by gold, printed by the federal reserve.

    It appears here that you’re completing the brief history of how US dollars came to represent gold with linen documents that could be accepted nationwide without worry. I get that. And you get that. But a reader who depends on you to draw those conclusions will not find it easy.

    Now, as money is no longer backed by gold, the concept of money has become even more complicated, especially taking into consideration the concept of online banking.

    Maybe, or maybe it’s much LESS complicated but more abstract. Paper notes from a distant, unknown bank that represented gold somewhere unknown and that had to be verified by publication in a reference book that presented ANOTHER dubious form of verification . . . THAT was complicated. But a dollar that can be spent anywhere is much simpler. Is the transition to online banking more complicated? More abstract?

    Cash, or currency, in countries around the world truly has no true value. We have assigned value to each bill and have over time, tricked our brains into thinking that cash itself holds the value.

    Presumably you’ve taken us past cash to digital online banking, so returning here to “each bill” feels like a retreat, making readers wonder why you stepped back.

    Again, runner, you’re touching the right bases in your analysis of the material and blending your two responsibilities in good measure: sharing the needed background information while analyzing its importance to your theme. The difference between doing that capably and doing it superlatively is in the clarity of your presentation. If you need a model, I could revise one paragraph for you as a guide. Let me know if that would be helpful.

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