Stone Money – mrmba1

Money and Reality through Unanimity

   Money controls all aspects of life, food, shelter, transportation, entertainment, you name it. And yet even though all mechanisms of society point to and rely on money, it is something that we never question- we simply accept it. It runs our entire life, but does it actually exist, or is it merely a unanimously agreed upon idea? If thought about and pondered on, the fiction of money and currency unfolds. For instance, if everyone agreed that someone is rich, wouldn’t that technically make them rich in our society, even if there was no physical proof of this wealth? The idea of currency and trading things such as paper and coins seems like a normal concept, after all if we can’t trade one item for another then we wouldn’t be able to receive anything. Having a universally agreed upon means of trading is what creates stability and runs our lives, even if this means of trading is technically nonexistent and made up.

   To find out just how powerful the idea of fictional money is, it is possible to look no further than the Federal Reserve in the United States. Everyone knows that anything monetary in America at some point makes its way from or to the Federal Reserve, however the real question is where the Fed gets its money from. In This American Life’s report, The Invention of Money, Alex Blumberg states that the Reserve is “creating money out of nothing.” For instance, in late 2008 the Federal Reserve at one point purchased $1.25 TRILLION of home mortgage back securities.  That’s a lot of money and, logically, it would seem that to purchase these security bonds, the Reserve would give cash to the banks. But instead, they created the money, as Blumberg said, out of nothing. When asked where this money comes from, a reserve worker simply replies, “It’s created. That’s the nature of central banking.” They simply added a few zeros to the banks’ accounts in hopes of “injecting a lot of new money into the economy and to prop up the housing market.” The means that they took to reach this goal, by CREATING money, just goes to show how malleable the idea of money actually is. If it can just be created, out of nowhere, from nothing, how can it actually exist?

  Seeing that even today this fictional idea of currency remains as just an idea, we can look even further back to the 1980s in Brazil. The malleability of currency couldn’t have a better real life example than this, as an entirely new currency was created from nothing but thin air and the minds of two drinking buddies to save an entire economy. Brazil was facing an extreme economic crisis where inflation was destroying the country, and it wasn’t until a group of economists invented a completely new currency that the economy could begin to heal. People had to trick themselves into thinking that the new money had value, and economist Edmar Basha- being interviewed in the same This American Life’s report- stated that once enough people accepted this fake currency, they simply had to declare that “from this day, the virtual currency becomes a real currency,” and then it became a reality. The economists continued by saying, “Everyone in the country tricked themselves into believing that this fake currency was real. And that MADE it real.” The only thing holding the economy of Brazil together was the unanimous agreement of monetary value and the trust in the “fake” currency that was invented.

   To display this idea of reality through unanimity in concerns to money even further, we can take a look at Milton Friedman’s paper on “The Island of Stone Money.” A german colony island named Yap had a unique and abstract means of conceptualizing their currency. That is, they used giant rocks, several feet in diameter, and didn’t even move them most of the time after transactions were made. Their economy relied solely on the belief and trust in the value of these rocks by the majority, and the unanimous agreement on each individual’s wealth. Most of the time, Friedman states that the rock’s new owners were “quite content to accept the bare acknowledgement of ownership and without so much as a mark to indicate the exchange.” The fact that they had so much faith in this loose system of currency, and that it was carried out by rocks sometimes even without direct possession is a strange thought. But considering what took place with the Federal Reserve creating money from nothing, and in Brazil where a whole new currency was invented, it doesn’t seem that crazy. Friedman puts it best, stating “how important ‘myth,’ unquestioned belief, is in monetary matters.” There’s nothing in today’s society telling us how rich someone is except for our acceptance and agreement of what rich is, and it was the same for the Yaps.

   It seems like everything revolves around money, and a common phrase that everyone has heard is that money is the root of all evil. But when we step back, look, and really think about what money is, it’s simple to see that we created money and we continue to accept this abstract idea into our lives. We’ve invented this “evil,” no matter how vital it is to our functioning society, and view it as concrete even though we were the ones who chose and actively choose to make it into a reality. Currency and money has been created throughout history, from the beginning of currency, the Yaps in the Caroline Islands, the revival of Brazil’s economy, all the way to the present day with the Federal Reserve in one of the world’s largest economies. Money itself is an idea as abstract as they come, and it only exists because of the faith and trust of the majority population.

References

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

Glass, Ira. (2018, February 19). The Invention of Money. Retrieved February 14, 2021, from https://www.thisamericanlife.org/423/the-invention-of-money

Weeks, Linton. “The Trouble With Trillions.” NPR, 2011. https://www.npr.org/2011/08/22/139846133/the-trouble-with-trillions

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6 Responses to Stone Money – mrmba1

  1. davidbdale says:

    Your generally fine introduction is burdened by two Rhetorical Questions without which it would be much stronger. Find a way to work toward that last excellent sentence without asking questions. Replace them with claims that emphasize the peculiar, counterintuitive nature of money. Drive home the oddness of it, but positively, not letting the readers dodge questions.

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  2. davidbdale says:

    Your second question “How can money be made out of nothing?” should remind you, and your readers, that money used to be dug out of the ground. For awhile, that seemed reasonable. But now we must surely wonder, not only “what makes our money worth anything?” but also, “what made us think gold was worth something?”

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  3. davidbdale says:

    I’m a big fan of your third paragraph except that there’s NO WAY I would understand how a fake currency came to replace an earlier, discredited but supposedly REAL currency without having listened to the same broadcast you did. Your job in purposefully summarizing is to provide enough background information so that readers have the context needed to agree with your evidence. Here, that doesn’t happen.

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  4. davidbdale says:

    Most of your classmates have relied most heavily on the example of the Yap to carry the bulk of their argument. You’ve turned that around to nice effect, by describing other examples first, then using the Yap and Friedman’s comment about Myth to summarize the overall situation. It’s clever and effective.

    You do make a little mistake here, in conflating the Majority with Unanimity.

    Their economy relied solely on the belief and trust in the value of these rocks by the majority, and the unanimous agreement on each individual’s wealth.

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  5. davidbdale says:

    I don’t see the value of invoking “the root of all evil” in your conclusion, MBA. It doesn’t sink your argument, but it does nothing to help it that I can see. (Actually, it distracted me. I argued with the premise that MONEY is evil. It’s not. And it was used metaphorically in the original statement actually. GREED is the root of all evil to the person who coined the slogan. MONEY is just a stand-in for the desire to accumulate.)

    THAT’S not the chain of thought you want running through my mind when you’re trying to tie up your argument about money as a useful shared myth.

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  6. davidbdale says:

    I’ve graded your post at Canvas, MBA. 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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