Stone Money- CompIIStudent

The Concept Of Money

The concept of money is not one that is usually a topic of debate. Currency is somethng that the world has had in common for centuries, as you need something to exchange for goods and basically everything. Money is at the forefront of society, and it can be argued that it is mainly present in the economy. The economy- such as vast idea for people to grasp at, some understand it much better than others, but we all know it affects our society greatly. When we look back through history and currencies of old, we think of silver and gold and other metals. But what if there wasn’t any metal for you to use? The people on the island of Yap faced that very problem.

Milton Friedman, a Senior Research Fellow at the Hoover Instituition wrote about the people of Yap and their solution to their lack of metal. The island, located in the south pacific ocean, was colonized by the Germans from 1899 to 1919. During that time, American anthropoligist named William Henry Furness III researched and wrote about the native people’s way of life. He was particularly fascinated by their currency, which were thick stone discs that could be as tall as 12 feet. Furness wrote, “As their island yields no metal, they have to recourse to stone on which labour is fetching and fashion has been expanded, is as truly a representation of labour as the mined and minted coins of civilazation.” These stones did not have to be directly exchanged when “buying” something, as the owner of the disc just acknowledged the new ownership. The disc was obiously too inconvenient to move around, so it just stayed were it was. It seems wild that people could sustain a monetary system such as this one.

This is not the only time we have seen strange systems of currency. Much stranger situations have happened in countries much bigger than the island of Yap. For example, Brazil found itself in maybe the worst case of inflation of all time. The government wanted to build a city in the deep rain forest that they knew they did not have the money for. They thought that it was an easy solution to just print more money. No harm done, right? Wrong. This sent the country into a period of infation, which cause caused the population to completely lose faith in their money, rightfully so. Chana Joffe Walt researched their crisis, talking to numerous subjects who lived through it.

The situation was solved by these four ecconomists who just happened to create a bizzarre plan to save the country in college, and they were reached out to by the government to help them. Edmar Bacha was called to help. The new administration’s finance minister called Bacha and said “Well, I’ve just been named the finance minister. You know I don’t know economics, so please come meet me in Brasilia tomorrow.” The plan was to slow down the creation of money, while regaining the publics trust in said money. The catch to this plan was, this money was fake. There would be no coins or bills, it would just be numbers. They called it the Unit of Real Value, or UVR. Everything would be counted in UVR. Wages would be worth UVR. Something like milk could be listed as 1 UVR. It’s pretty crazy to think about because it didn’t actually exist. The government convinced the entire population that this was their currency now, and as time went on, they believed it. From the ashes of decades of inflation, Brazil got 20 million out of poverty and became one of the worlds largest exporters.

Today, actual money is starting to die out. More and more people have all of their money in banks and carry around less cash. They use apps like Venmo and Apple Wallet for transactions. Another very popular form of virtual currency is Bitcoin. Bitcoin was created in 2009 right after the finnancial crisis, and people invested heavily in it in different ways, buying and selling rapidly. Well in 2013, it hit its first big snag. Shares rapidly dropped from $266 to just $54. Anne Renaut wrote about the crash. She said, “The software is written in such a way that it becomes increasingly difficult to generate new bitcoins, with the number in circulation designed to top out at 21 million.” essentially this means since there is a finite number of these “coins” availible, the more valuable they are bound to become.

We came into an unexpected recession last year due to the pandemic, but before that there was the great recession of 2008. The question was posed on This American Life, a podcast hosted by Ira Glass, where did all the money go? It seemed that it all just disappeared, when actually, the money just became less valuable. The episode of the podcast was titled “The Invention of Money”, and it featured Planet Money producer, Jacob Goldstein. They tackled the question by diving back through history, and taking a look atthe people of the island Yap, the Brazilian government’s failures to prevent inflation, and the United States federal reserve’s response to the recession in 2008.

So with all of this information, the way money has evolved over the years is prety remarkable. From stone discs the size of a house, to a completely made up currency that solved a multi decade long inflation issue, to now a more virtual world of currency. What is learned from all this, is basically that money can be subjective. There is no specific rule to how money is valued. Sure everything in life is based around money in some way. But why should it be. Why can’t it be based around how many lamps you have? Or how many electrical sockets are in your walls? Or anything else for that matter. Those four economists just created a new form of currency and convinced the people it was the real thing. If we wanted to, couldn’t we uproot our system and make a new one? Maybe, maybe not. But if we can look at money as this thing with subjective value, there are a ton of options to be explored.

References

https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html?guccounter=1

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?guccounter=1

https://www.thisamericanlife.org/423/the-invention-of-money

Glass, I., & Goldstein, J. (n.d.). This American Life- The Invention Of Money [Audio blog post]. Retrieved January 7, 2011, from https://www.thisamericanlife.org/423/the-invention-of-money

Friedman, M. (1991). The Island of Stone Money. In Working Papers in Economics (pp. 1-5).

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8 Responses to Stone Money- CompIIStudent

  1. davidbdale says:

    Please don’t use “tags” to categorize your posts, Comp2. I found this Stone Money assignment of yours by accident. Use “categories” only. Thanks.

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  2. davidbdale says:

    Comp2, I hope I didn’t prejudice everyone by suggesting that someone’s example of a good Stone Money essay was the only way to craft a successful argument. There’s a worrying similarity of approach to this semester’s essays that suggests that I did get countless examples of what it seemed I was asking for.

    My reading of your enjoyable introduction is that it could and probably should be replaced by something as simple as:

    MONEY IS AIR

    The people of Yap had no gold, no gems, no precious metals from which to mint their money, so they settled on limestone disks too big to move as currency and then, because they were cumbersome, dispensed with the need to even move them from one pocket to another, and with that brilliant innovation anticipated our modern cashless economy!

    Maybe you and I are different, but I would read the rest of any essay that started like that. And it’s not so different from the content of your own. Just a matter of emphasis and momentum.

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  3. davidbdale says:

    Paragraph 2. Your summary of the Yap and their stones is lovely, nicely written, and rich in needless detail that should be replaced by something more important to your own thesis. For example, spend 25 words describing WHY the stones didn’t have to be moved and HOW the Yap managed to sustain this (to us) incomprehensible system of tracking wealth. Would it work for our society? DOES IT work for our society?

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  4. davidbdale says:

    More charm. Undeniable charm. But also more waste. The NPR team had an entire hour to tell the three stories of the Yap, the REAL, and the Fed. You have the 8 minutes it will take a reader to get through your 1000 words. You can’t afford to spend 194 on the “storyline” behind Brazil’s new currency and 00 words explaining how the sleight-of-hand worked.

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  5. davidbdale says:

    Be more careful with your terms, Comp2.
    Money is in no way disappearing even if physical currency definitely is.
    There is little similarity between Bitcoin and Venmo, although it’s easy to see how they could be confused. Venmo is just a way to transfer Dollars or Francs or Pounds or Yen, etc. without physical transfer of objects. But Bitcoin is a currency to itself, like Dollars or Francs or Yen. AND it’s VERY different from those in that it’s not issued (minted) by the USA or France or Japan. It’s minted by some anonymous guy who made the stuff up.

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  6. davidbdale says:

    Paragraph 6 serves no purpose that I can discern.

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  7. davidbdale says:

    Instead of concluding that the world is just crazy and no rules make any kind of sense: . . .

    There is no specific rule to how money is valued. Sure everything in life is based around money in some way. But why should it be. Why can’t it be based around how many lamps you have?

    . . . it would be more persuasive to reveal the hidden logic that DOES make sense of every system of currency.
    —What happens in a world where governments and economies provide a stable support for speculation on commodities of various types? Fortunes can be made and lost by speculating on what people are likely to value in the near future (whether that’s Bitcoin or commodities like oil).
    —What happens in a world (like Mad Max’s) where governments have disappeared and mayhem rules? Gasoline becomes more precious than any currency and the world resorts to barter.

    So what is it that provides the support for our increasingly non-physical purely digital sometimes non-government-sanctioned currencies? Insanity?

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  8. davidbdale says:

    I’ve graded your post at Canvas, Comp2. No rewrite is required. But you may, for one week, respond to this feedback by revising your post for a Regrade. You will receive no further feedback since you didn’t request any before grading. But if you want to try your luck, make significant revisions and place this post into the Regrade Please category within one week starting now.

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