Stone Money – gooferious

Posted on September 21, 2020 by gooferious

Money… fiction?

Cash, credit, debit… these are all terms used to define money, more importantly your money. One would assume that a person would want all their money easily accessible, at hand’s reach one would say but money isn’t all that we think it is. After listening to the NPR broadcast called The Invention of Money, my perception of money and it’s worth has definitely changed.

Initially, I believed that money is what makes the world go round. This statement after careful thought is somewhat true yet invalid at the same time. The broadcasters really get you to think about the concept of money. Money is something that was created to give value to objects. We in America use the dollar bill while in Mexico pesos are used. Regardless where you go some form of currency is used to be exchanged for goods and/or services. According to what was said in the broadcast, listeners are told money is fiction. How can that be so?

While listening, the story of the island of Yap is told. In Yap, it’s residents use sculptures as a form of currency. By sculptures, I am referring to big rocks of limestone. It is implied that this form of money is no different than what we use here in our own country. In the United States, we entrust banks to keep our money secured safely. These banks put our cash in huge vaults underground for storage. Once the process of delivering money to the bank is complete, your bank account balance should go up and one is satisfied with that. How can you be satisfied with something that you cannot see? You ensure yourself that the bank will hold your money safely so you shouldn’t have to worry about it. This is no different from what is done on the island of Yap.

On the island of Yap, residents first started to trade big stones as currency to exchange goods and/or services. One would have to physically move their “transaction” from the home of the buyer to the home of the merchant. This method however grew to be tiresome for many. That’s when an idea was suggested to the people of Yap. Basically what was informed to the citizens of the island was a way to pay for your products without having to physically move the huge stones. If the limestone was kept at the home of the buyer then once he has made a purchase, the ownership of his stone would now go to the merchant but it would remain in the same place. Sound far-fetched? Well it’s not because that’s what we do here in America. The only actual physical item of money would be the cash bills and coins but after the broadcast these bills and coins are as significant as that huge stone leaning on the house of the buyer. Companies make transactions cryptically, it’s done over a computer. Physical money is rarely used in banks unless a member of that bank is making a withdrawal of cash from their account.

As the broadcast keeps ongoing, listeners hear the story of how cruisers from the island were coming back with a limestone that would be given to someone. While at sea, a storm caused the big stone to fall off the ship and sunk to the bottom of the ocean. When the sailors returned to shore and told their story, the people of Yap believed them and said that the big limestone was still valuable and can still be used even at the bottom of the ocean. How can this be? Well someone has ownership of that stone and when they buy something that stone’s ownership would now go to the person who is selling to the buyer. This is a constant cycle of who claims ownership for a giant rock at the bottom of the ocean. This method is ironically used here as well. We keep money in banks and when we need to pay a bill or make any form of payment, most of the time money is exchanged electronically; should that be via credit or debit card. We physically are not giving cash to someone we are actually giving ownership of our money in the bank to another person. While your account balance goes down, the cash money is still in that vault in the bank. Sound familiar?

In Milton Friedman’s article titled The Island Of Stone Money, Friedman gives an insight on the story of the people of Yap from his perspective. He at first found it completely weird that their form of money were big rocks but soon came to the realization that those rocks and our money are actually no different. We do not physically touch our money once it’s in the bank just like how the owner of the stone does not physically touch his money. What really stood out to me from the article was a statement Friedman wrote which said that the “civilized” world made their money from metals that came from the ground, which were then refined at great labor, which eventually was transported to multiple locations and then is stored once again in vaults underground. How is this any different from a very big stone wheel at the bottom of the ocean?

In an article written by Anne Renaut called The Bubble Bursts on e-Currency Bitcoin, Renaut provides readers with the dangers that come along with e-currency and it’s transactions. In her article, Renaut states that “Bitcoin is made of strings of dazzlingly complex code created by a process called mining”. While we have established that paper money, coins, and stones are all of insignificant value, Renaut gives readers a warning about the dangers of e-currency which is what is mainly used in today’s society. She goes on to state that once the virtual money is mined, Bitcoins are stored in the virtual wallet of it’s user. Sending money is kept anonymous which can be dangerous. Renaut calls it a “high degree of anonymity” which is then switched over to how this anonymity can be used as an alternative form of payment for drug dealing and money laundering. Any form of money has it’s advantages and disadvantages but overall I believe the statement that “money is fiction” is accurate.

References

This American Life. 2020. The Invention Of Money – This American Life. [online] Available at: <https://www.thisamericanlife.org/423/the-invention-of-money&gt; [Accessed 21 September 2020].

Friedman, Milton. The Island Of Stone Money. Hoover Institution, Stanford University, 1991. [Accessed 21 September 2020]

Renaut, Anne. The Bubble Bursts on e-Currency Bitcoin. Yahoo! News, AFP News, 13 Apr. 2013, sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html. [Accessed 21 September 2020]

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Stone Money- gabythefujoshi

Posted on September 21, 2020 by gabythefujoshi18

Money is a Lie

“Money is a fiction.” This is a line mentioned in the beginning of the NPR broadcast, Planet Money. Anyone who hears this would find it absurd because nobody would associate money as something made up. It’s something our country heavily relies on, it’s part of one’s stability. How could something of such importance be considered made up? Money itself is worthless and really doesn’t exist, but it’s people’s strong belief in those numbers that bring it to life. The faith that people put on money, regardless of whether it is tangible to them or not, is what truly makes up its monetary value. 

An NPR broadcast, The Invention of the Economy, discusses the beginnings of our reliance on numbers. As mentioned by Karabell, writer of The Leading Indicators, the economy was invented as a result of the Great Depression. The country was suffering tremendous loss to its businesses, employment and overall well-being of the people. It’s because of the overwhelming short-run effects of the Great Depression that we now have a long-run effect, a nationwide financial system. Suddenly, the country was reading out numbers of GDP, national income, and these numbers brought prosperity or demise for the country. These numbers determined whether someone felt it best to invest in stock or if they will have enough to buy food for the week. However, these measures aren’t concrete either. As mentioned in the broadcast, the measure of the gross domestic product (GDP) doesn’t count the black market, so its readings are not accurate. At the end of the day, GDP is just an idea that gives people peace of mind. Without a system where we can measure our finances, the country would still be in disarray like they were during the Great Depression. The people’s belief in these numbers is what helps drive an economy and the overall country from distress. 

A prime example of people’s faith being a driving component in our universal dependence of money was the sudden boom in the economy in Brazil in the nineties. In Act 1 of the NPR broadcast, The Invention of Money, they discussed how the government of Brazil had tried to control the means of the economy through tactics such as freezing prices to decline the high inflation rates. The majority of these attempts proved to be unsuccessful, so the Financial Minister of Brazil in 1993 invited four graduate students to come up with a solution to the economic distress of the country. The coordinator of this act of Planet Money themselves were baffled in hearing that virtual money was the key to reducing inflation, getting the country to be in equilibrium, as well as developing a new currency. The key to this madness, as the economists mentioned, was to trick the people into believing this virtual money was worth something. Regardless of how the government fluctuated the prices of goods and services, the economy was still failing and the only way it was able to stabilize itself was through people’s trust in virtual money. People’s strong believe in a completely distinct economic system almost seems ridiculous, but the country had nothing to lose. In a time of desperation, people are willing to place their hopes on anything. While the monetary and numerical value of currency didn’t change much, it’s the belief that people have placed on this new currency that has enhanced its value. 

Believing isn’t just seeing and this is something that has been proven through the interactions of the Yap Islanders and the French with the U.S. In the essay, “The Island Stone Money,” the writer mentions an anthropologist by the name of William Henry Furness III who wrote about the monetary system of the Island of Yap. Their means of exchange is done through stones made of limestone found on another island some 400 miles away from the island. Because of how far away the other island is from Yap, there was bound to be mishaps that followed the journeys back home. One incident recounted in the essay is during a violent storm, an enormous fei, the stone currency, fell to the bottom of the ocean. Regardless, the owner of the fei still deemed themselves to be wealthy without having the stone in their possession. This idea itself sounds ridiculous, but the U.S and France did something similar with France’s gold. Friedman, writer of the essay, further goes on to explain that the French firmly believed that with a couple marks made, the gold was theirs. This resulted in one of the biggest financial crises in the U.S. when the country believed to be out of gold. Both the French and the Yap Islanders believed in a wealth that was miles away from them regardless of the inability to have it in their vicinity, they felt wealthy. 

Friedman questions in his essay, “The Island Stone Money” if this system is any different from today, challenging the ideas of how we put faith in something we cannot see. We still do this today daily. Today, we are in worldwide pandemic that had shut down our economy, something that has never been done before. Money, something we heavily rely on, suddenly becomes inaccessible to thousands of people. Currently, with the coin and paper shortage of the printing of money, we now more than ever use money that we cannot touch. Everything nowadays is paid through Venmo, online bank transfers, and phone applications. Most of shopping is done online so one no longer sees their money being put into the cash register. All these forms of exchange cannot be done without putting trust in the system, exactly how the Yap Islanders and French did. It’s not something out of the ordinary and it seems that currency is heading in the direction where it will be purely digital. 

If it weren’t for the human faith and need for social structure, money would be completely worthless. These numbers allow us to properly function as a society and gives us a sense of security.  

References

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

Glass, I. (2018, February 19). The Invention of Money. Retrieved September 21, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

Goldstein, J. (2014, February 28). The Invention Of ‘The Economy’. Retrieved September 22, 2020, from https://www.npr.org/sections/money/2014/02/28/283477546/the-invention-of-the-economy

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Stone Money – shadowswife

Posted on September 21, 2020 by shadowswife

The Perception of Money

           When thinking of how one uses currency to purchase products, one gives a physical value in the form of denominations. If in the United States, money has a physical appearance with different set values. For example, there are denominations of one, five, ten, twenty, fifty, and one hundred bills utilized as a form of payment. Further, there are bank checks that can be used to pay when money is not in possession or if the receiving company has a preference. With the introduction of money wired transfers, the idea that a monetary transaction can be made electronically called for speculation of the perception of money. This took the physical aspect of money and gave it a different concept. Therefore, while listening to the King’s, What is Money? Jacob Goldstein’s Book Explains’ Shared Fiction, Milton Friedman’s article on The Island of Stone Money, and Krugman’s The Curious Case of Japan’s Economic Stimulus, the perception of money and its transaction was a phenomenon worth discussing.

To think that something that is not visible or an object with no defined features seems counterintuitive to assign value. In The Island of Stone Money by Milton Friedman, one can assert that value “is in the eye of the beholder.” This notion stems from the foundation that establishes a value system of currency that is provided from immovable stones. In the Island of Yap, the idea of the need to carry, count, or engage in a physical exchange of goods for money as it is done by society today seems like an artificial event. For example, the power to purchase is not so much weighted on an assigned physical number, such as in the value given to a Benjamin Franklyn one hundred dollar bill. In their monetary system, the value was not in the form of a written word; rather, it was in the form of an established idea of the value of the stone and for the purpose that it was being used. In fact, as stated by Friedman, the sunken rock had as much value in the ocean as it would have while in display on the road or in any given space; thus, the sunken stone, while not being seen, still had value and was used as a form of currency. This value assignment and its use allows one to understand the exchange of gold or stock shares between countries. As indicated in The Island of Stone Money, gold was never exchanged between France and the U.S. In this occasion, the gold was simply tagged as becoming France’s property, thus forcing a financial market crisis within the U.S. The gold was never carried from one country to another in a similar manner as it is done on the Island of Yap.

           The NPR Broadcast also indicated the idea that a non-visible or undefined object has value. Here, the discussion focused on the idea that money is fiction. This idea of fiction money was motivated by thinking about the loss of trillions of dollars during the housing market crash. Here, the ironic nature of calling money fictional at first had a counterintuitive impression. In this regard, the question that came to mind was if there was no real value, and if the money is fictional, then how can a housing market crash cause a disturbance to the economy? Is the market or the stock exchange also fictional? Perhaps, King in What is Money? also based the discussion on the idea that there is no set value for a particular object that is being used as a form of payment; thus, money is fiction. As an example for not having value, the stones in the Island of Yap had no fixed value. It was indicated that the value of a stone consisted of who was giving it or owned it and for what purpose was the stone being used. This idea seems counterintuitive, especially when trying to make use of the stone for a particular payment; yet, using the same stone to pay for a completely different kind of payment. In this regard, how does one keep track of its value? The answer to this is, “you don’t!” As indicated by King in What is Money?, the stone has a value that differs by its creation and the difficulty of obtaining it. This discussion runs parallel to the established idea of value, and it is used as indicated by Friedman.

           Understanding the stand taken by King in What is Money? on fictional money and the idea that a stone still possesses its value even if not present or seen as indicated by Friedman, one can appreciate Japan’s economic stimulus and the fluctuating interest rates as it relates to actual transactions. In Krugman’s article, Japan’s economic stimulus to counter deflation was believed to be crucial to stimulating the economy. Here, a 10.3 trillion dollars in Yen currency stimulus package was approved to allow spending and purchasing by businesses and consumers, respectively. As quickly as the long-term interest rates increased during a specific period due to the economic stimulus, the rates fell as the economic recovery efforts faded. Regarding the transaction of money by Japan’s government and understanding that the ability to carry that much money or have it printed may be a tremendous task, one can speculate that the stimulus was not a real physical transaction. One can make an inference that the stimulus was in the form of a non-visible or physical object. 

           In essence, the idea that a visible value or physical transaction is required may not be as counterintuitive as once thought. These articles provided the foundation that value and a monetary transaction do not necessarily require physical or visible. One can apply these points of view to the stimulus that was provided during the COVID-19 economic stimulus. Here, one can ask if the stimulus as a form of transaction with monetary value was similar to the idea of value given to a stone; thus, providing truth to indicate that money is fiction.

References:

Friedman, M. (1991). The Island of Stone Money. Retrieved from https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

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

Krugman, P.(2013). The Curious Case of Japan’s Economic Stimulus. Retrieved from https://truthout.org/articles/the-curious-case-of-japans-economic-stimulus/

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stone money- corinnebuck1219

Posted on September 21, 2020 by corinnebuck1219

Cash, or crap?

While living in a very materialistic world, it seems people never ask themselves: “what even is money?”, “Where does money come from”, and “how does money even come about?”. The simplest answer: it’s not real. Now, I will say in a society today it does seem apparent to be very real and valuable, but how does such a thing even come about? Well crazy thing is, out of thin air. Money is so made up with no actual value. Money can simply be a rock or a piece of green paper labeled to be currency. While listening to a podcast called “The Invention of Money” they state the most unsettling statement, that money is purely fiction (thisamericanlife.org, 2018). I first heard this while drinking my overpriced coffee I just purchased, and just sat there and pondered for a few minutes. Hearing such a thing really just puts a pit in your stomach thinking about how everything in your life can just really be made up.

The scariest part about money is how the value can fluctuate. In the podcast, they made mentions of the housing market. When the housing market crashes, where does all the money go? Well it turns out, the money quite possibly never existed in the first place. That being said, money isn’t always certain, its value can slowly disappear. In the United States, the dollar in 1913 held the equilivlant as $26 dollars in 2020 (Amadeo, 2020). According to Kim Amadeo, from thebalance.com, three factors can make our money lose value: 1) higher demand for products/ services, 2) restrictions on available supplies, and 3) an increase on the amount of money being printed (Amadeo, 2020). Now in Yaps’ case, how does our concept of money differ from ours? Basically, our money is based on gold, while theirs is based on huge stone sculptures taller than a man. In Yap there was an incident where a crew picked up one of these stones and tried to go across the sea with it. To make a long story short, the boat went through a storm and lost the huge disk stone. Even though this stone is now sitting at the bottom of the ocean, the people of Yap believed their Government and that this sunken stone is still owned by someone, therefore still giving it value despite location (thisamericanlife.org, 2018). Now in a perfect world this makes sense though, right? 

Think about current times, we don’t get paid cash in hand, its direct deposit. It’s just numbers that get added into our bank account, so then does that money really even need to exist? The cashless trend started in China when they were allowed to turn in their coins to get paper receipts instead of carrying around these big heavy coins. Same thing happened in America when Marco Polo was amazed how China used paper money, and it has us Americans floored. We stopped with the gold and followed China in the use of paper currency (basically a paper note that was a claim on gold and silver from the bank), but now in 2020, we barely even see the cash. That’s where things like ‘Bitcoins’ jump in. Bitcoins are a form of “e-money” where investing into this software creates a more anonymous way to spend money. Bitcoin can have a negative connotation since it became the way to launder money and drug deals. That being said though, people are weary of those claims saying since it is private money, it can be a direct threat to governments, which leaves them to make these accusations (Renaut, 2013). 

Now that we addressed the issues with money, let’s chat about the economy. The economy was created as a response to the great depression, where the government calculates based on the national income. Thats where GDP, gross domestic product, also came about giving value to all the goods and services produced in the country for a year. The GDP does not care about anything but measuring the economy. This measure of GDP can be challenging though, where the US does not count off the book workers or the black market like other countries do. In the 80’s Italy counted its black market and before you know it, the Italian economy grew massive compared to the UK economy. Similar to Italy, US in 2013 slightly tweaked the way we measure GDP which instantly profited our economy $500 billion dollars (Goldstein, 2020). 

To conclude, the public faith in currency is what makes the economy what it is today. If we didn’t believe in it there would be no value in anything in life. We would be living like barbarians doing what it takes to survive. There would be no Louis Vuitton or fancy restaurants because we could just simply kill someone for leather or food. So was money just a prop to make us act more civilized? On the other hand, money might have simply just been created just for the government to dip in and charge us taxes. That’s for you to determine. On a more normal note, the world would never be what it is without this exchange of currency. Despite the many flaws in the system, money does create technology to help us advance as a whole, whether it being ‘fake’ or not. Money allows us to explore and learn more about the world everyday. So maybe biting into this idea wasn’t such a bad thing after all.

“The Invention of Money.” This American Life, 19 Feb. 2018, http://www.thisamericanlife.org/423/the-invention-of-money.&nbsp;

Amadeo, Kimberly. “Why the Dollar Is Worth So Much Less Than It Used to Be.” The Balance, 21 Aug. 2020, http://www.thebalance.com/what-is-the-value-of-a-dollar-today-3306105.&nbsp;

“What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’.” NPR, NPR, 8 Sept. 2020, http://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction.&nbsp;

Renaut, Anne. “The Bubble Bursts on e-Currency Bitcoin.” Yahoo! News, Yahoo!, 13 Apr. 2013, sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html. 

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Stone Money – PardonmyFrench

Posted on September 21, 2020 by pardonmyfrench13

What’s it Worth?

During everyday life, people do not always stop and think about the form of money and how it has grown and changed through different eras. Before we started talking about the idea of money in class, I hadn’t either. After listening to the NPR broadcast, “The Invention of Money”, I was quick to understand that even though the form of currency we use has changed, the idea is still the same. This only opened up my mind to try and better grasp what money really is and how crazy it can be.

“The Invention of Money” brings a lot of great points into view. The NPR Broadcast explains different forms of currency, its history, and tries its best to explain what “money” truly is. Money technically has no value unless we give it one. It’s a strange concept but one that makes perfect sense. Money was just paper until we were told it held value. This is one of the things that intrigued me most since I had never realized it before. Technically anything could be given a value if the right person says it, and this can best be seen beginning on the island of Yap.

Milton Friedman’s piece “The Island of Stone Money” quickly dives into talks about an island known as Yap. Yap was a small island civilization that had a form of currency called Fei. Fei is “large, solid, thick, stone wheels” that were formed hundreds of miles away and brought to the island.  Since there was no metal on the island to create coins, they had to use this limestone. One of the most significant facts being when fei is exchanged it technically does not have to go into the new owner’s possession, it is just acknowledged. When the island was sold to the German government, fei was still used since it is what held “value” to these people. If patrons didn’t abide by what the government said, “fines” would be enforced, and black crosses would be drawn across the fei. When the debts were finally paid, the crosses would be removed.

The island of Yap clearly had a system of currency that worked well for them even though they could not tangibly exchange it. Even after Germany became apart of the situation, they also adapted and were able to keep track of who’s money was who’s. Also mentioned in this article is how the United States did something very similar to this in the 1930’s. The Bank of France worried at one time that the United States would not stick to golds standard as they did. With this being said the French asked the United States to convert their dollar assets to gold and instead of shipping them put them on Frances account. The United States Federal Reserve Bank literally “went to the gold vault, put in separate drawers the correct amount of gold ingots, and put a label mark on those drawers indicating they were property of the French”. Even though there was no physical movement of currency the U.S dollar was made weaker and the French was stronger from this transaction. This is much like we see in the current world today.

In the U.S there is an overwhelming use of credit cards, Venmo, Apple Pay, and other forms of electric payments that have taken over our economy. Even paying your bills now days is done through the touch of a button and not an actual exchange of currency, kind of like fei. You physically don’t have the money, but it is still being exchanged as such and deducted from a bank account. The US dollar is not as tangible as it one was. Its being developed to become more and more digital. Personally, half of the money I own I have never even seen since it just is deposited into my bank account. This knocks down a lot of barriers to what the meaning of possessing money actually means. For me, all of this information poses the question, will paper money diminish completely?

The currency of money is always advancing and changing as previously stated. Jeff Reeves wrote an article called “Bitcoin has no place in your -or any -portfolio”, in which Reeves speaks about a form of money in today’s world. Bitcoin is “digital currency that took the world by storm”. It technically has no true value and is only worth what the next bidder will pay. This is confusing and still a very new concept. It isn’t regulated by a central bank and since its all-digital, Bitcoins can easily be stolen. Things such as these put this form of currency at risk and make citizens skeptical to invest in it. Although there are some downfalls, Bitcoin allows for a world of new “innovation and improvement in how transactions are made”. For now, Bitcoin will continue to make advancements, but it will be interesting to see where it goes and how other digital currency evolves as time goes on.

The saying “money makes the world go round” is one of the truest statements. Everything runs through the process of money and the economy depends upon it. It is confusing, complex and really takes a lot of research to truly understand. With time money will continue to advance and take on new forms depending on what’s important and holds value. Money isn’t necessarily real in the way we are but will always be represented as such. Limestone, gold, paper, coins, or electronic all represent money and tie us together in the same sense. As a coin shortage has begun, maybe electronic money will be the next world standard. For me it’s interesting to think about what could possibly even be next in store after electronic payments. The monetary system is now something I view as unique and unpredictable. Understanding not only our own current currencies, but past, and other countries present currencies, is important for the future of where we take money and how we can evolve it.

References:

Friedman, M. (1991, February). The Island of Stone Money. Retrieved September 21, 2020, from https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2018, February 19). The Invention of Money. Retrieved September 21, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

Reeves, J. (2015, January 31). Bitcoin has no place in your – or any – portfolio. Retrieved September 21, 2020, from https://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28

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Stone Money-Profs22

Posted on September 21, 2020 by Jessicariccio

The concept of money is very counterintuitive to popular beliefs. Upon watching the NPR broadcast, The Invention of Money, I found a deeper insight into the way that money is viewed in our everyday lives. All this time I thought that money was of actual real value, when really it turns out that money is a fictional concept. The value of money is only what other people are willing to pay for it and what everyone believes is the correct amount of what it is worth. The value of money is not solid it can increase or decrease at any time, making the value very unreliable. In the village of Yap massive stone sculptures were used as money to trade, it did not need to be moved physically but the ownership of the stone sculpture would switch upon trading. To the people of Yap it was not a matter of physically owning the currency it was a representation of who had possession of the stone, meaning that they were only as rich as the value was worth. I find it interesting that in today’s day and age, physically being able to trade and possess money is very important in our society, but the people in this village found that it had no real meaning to physically possess currency in such an old society, the people of Yap were able to figure this out so why have things changed since then in today’s world? Because people value authenticity and we think that authenticity is proven in a physical object.

            Also, in the NPR broadcast, The Invention of Money, a women interviewed older Brazilian citizens who lived through the worst time period of inflation in Brazil. Their value of money would increase as more and more time went by. This meant that people were paying a higher price for things that they originally bought for lower price and that they were losing money because the value would continue to go down. The government created more money which caused the value to keep going down overtime over the next five decades. Initially the government introduced a price freeze, which allowed the value of the currency to stay at the same price point so that people could afford to buy goods. The issue with this price freeze was that no one wanted to sell their items so they waited until the value of the money went back up so that the citizens were forced to pay the higher price. This was a problem because no one was able to buy the things that they needed, and they were losing money rapidly inflation was a horrific issue in Brazil and affected the daily lives of everyone.

            Returning to the topic of stone money, the people on the island of Yap used large stone wheels as their monetary system which required a lot of labor to build out of heavy limestone slabs since the island did not have any metal. Their exchange of currency was called “fei” which was large, heavy stone wheels that ranged up to twelve feet in diameter. The wheels often contained a hole in the middle so that they could put poles through to make them easier to move. Friedman Milton explains in The Island of Stone Money “a noteworthy feature of the stone currency is that it is not necessary for its owner to reduce it to possession”. The wealth would not be acknowledged simply by having possession of the stone the ownership would be acknowledged by everyone in the village without anyone ever laying on a finger on the stone. One day on an expedition a storm approached the boat that the stone was on an it fell into the sea. The villagers accepted it and left it there knowing that whoever had ownership of the stone possessed whatever value it held.  When the island was taken over by the German government, they claimed the fei when a citizen was charged with disobedience by having them mark the stone with a black cross. This was the government’s way of making sure that the citizens of Yap would be obedient to the new rulership of the German government and allow for them to spend money on new roads throughout the island otherwise the massive stone structures would be confiscated. As Germany is to Yap, France is to the United States. When France ruled over the US they decided to convert gold to dollar bills and the French government then claimed the gold, which threatened the American financial system so that the United States would continue to follow the gold standard. This just goes to show that our money system appears real and rational when it was really being controlled by the government. Friedman Milton also says in The Island of Stone Money, “What both examples illustrate is how important ‘myth’, unquestioned belief, is in monetary matters”.  Meaning that money is simply an illusion and that we ultimately determine the value.

            In today’s society, money can even be used virtually. A virtual currency called Bitcoin raised red flags when it skyrocketed in value and in a matter of three days plummeted back to nothing. In the excerpt The bubble Burst on e-currency Bitcoin, Bitcoin foundation chief scientist Gavin Anderson says “we believe that as the value of Bitcoin grows and the infrastructure around it grows and matures, the price relative to other currencies will get more stable”.  The reason that the value of Bitcoin fluctuated so dramatically was because of pressure from investors. Unlike normal currencies there is no limit on how far down a virtual currency can go. It is difficult to generate new bitcoins. Anne Renaut, the author of The Bubble Bursts on E currency Bitcoin, explains “the high degree of a nominee could lead Bitcoin to become a monetary alternative for drug dealing and money laundering”. Bitcoin can be a very beneficial and innovative way to help the community, but it is also very vulnerable to cyber-attacks and is at risk of “Ponzi schemes” in which investors can receive returns.

            There is no way to determine the true value of money when it is not backed by anything.  The only value comes from what people place on it which proves that money is purely an obscure fictional concept that we all choose to believe in without question.

References

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

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/ 

Planet Money Team. “The Invention of Money.” This American Life, NPR News, 7 Jan. 2011

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Stone Money – sunshine2818

Posted on September 21, 2020 by sunshine2818

Cash isn’t real

Cash isn’t real, in fact it doesn’t exist. This statement really made me think, if we were in the middle of a Zombie Apocalypse, and someone tried to trade me 1,000 dollars for my gun, I’m keeping the gun. Humans put monetary values on money which give us the ability to purchase items of actual value. The perfect demonstration that money does not exist is in the 2008 housing crisis. In an American life story, “The Invention of Money”, an interviewer asked a businesswoman where did all the money go during the stock market crash and she replied, “money is fiction”, therefore it never existed. Even though the idea of money isn’t real, money is still a key factor in today’s society. In addition to that, the idea of money, and where it came from is actually even more strange.  

Approximately 300 years ago, in China, Jacob Goldstein in an interview with Noel King talking about his new book “What is Money”, describes how China used iron pieces to represent money. The problem was iron wasn’t worth much, so a person would need several pieces, in fact bags of iron just to pay for simpler items. He compared it to “walking in a grocery store and paying in pennies”, it’s just not convent. In order to counteract this they came up with a system of paying with recites representing the iron. Eventually they just started making paper money all together. The problem was during that time they did not understand that making too much money causes inflation. Overtime they gave up and just went back to using regular bartering. Most of those people who had gathered up that much paper money, now had paper worth nothing. They went from rich to poor in an instant, which further confirms that money doesn’t have a real value at all.  

In the early 20th century, the island of Yap used money in the form of stones. Milton Friedman wrote an article “The Island of Stone Money” in which focused on the cultural customs of the Yap people depicted by William Furness. The people of the Yap would make large carvings of stone in the shape of a coin ranging from a foot to 12 feet tall and people would claim them creating value. When these giant pieces of stone were given values, they were then used and traded. These stones were too large to move. So, even though the stone was not in your direct viewpoint or even at the bottom of the sea, it still had value and someone owned it. The concept seems funny now, but how is that different from putting your own money into a bank? 

Even during the early days of the US, Goldstein described how there were at least 8,000 different currencies. At that time anyone was able to get into the banking business without regulation and make up their own money. Then merchants had to decide if they were going to accept the dollar at its worth or not accept the dollar at all. Gold and silver were also used as currencies and you were able to exchange gold for dollars because during that time they were the same cost.   

Money may not be real, but the value placed upon it is. A story that interested me most was “The Lie that saved Brazil”, act one of “The Invention of Money”. Brazil was going through an inflation crisis due to over printing and the government spending what it didn’t have. Prices were going up everyday to the point that by the time a worker got their paycheck, it was already worth less than the day they received. In the mid 90s, the only solution to the issue was to trick the people that their money was worth something. They implemented a new currency to balance out the current one in order to level the prices of goods. One women though that this was a “fantasy”, the new currency was called a URV, a virtual currency. This wasn’t money that was even printed, yet it still had value. They were trying to simply trick the minds of the population to believing their dollars were worth something. This act brought down the inflation from 80 to 40 percent within a few years. The implementation of the URV was eventually disband and a new currency took its place making Brazil the 8th largest economy in the world. 

In the events leading up to the economic housing crisis, a huge system known as the Federal Reserve, in which I had no idea existed, responsible for our entire economy including the worth of our dollar, started to create large sums of money in order to bail out large companies. In order to put money into the market you have to buy something in exchange. Originally the federal reserve strictly stuck to bonds, but this time they started investing into regular home properties, eventually causing the housing bubble. The federal reserve is supposed to be an independent system, but now they were working as the largest bank in the world. Soon people started hearing stories about the federal reserve owning land properties as if they were a bank. Also the process of putting money in the economy is littered like adding zeros to someone’s bank account, by the press of some keys you could be 1 1/4 trillion dollars richer. That aspect is so difficult to imagine, the quality of a person’s life could be shifted just by the press of some keys. 

Understanding the full picture of money is one thing, but Goldstein was asked if it was a bad thing. And his answer was there are really no other options. Unless we were a small close knit society which doesn’t really exist in the world anymore or a totalitarian working government in which people at the top would decide what other people would get, no other system would work. The point is that “Money is a tool” and for the most part it does its job. Goldstein continued stating, “It does the thing it’s supposed to do, even though it creates a lot of problems”.      

References 

 Friedman, M. The Island of Stone Money. Stanford, CA: Hoover Institution, Stanford University.

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

King, N. (2020, September 08). What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’. Retrieved September 22, 2020, from https://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction

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Stone Money- Jeffbezos

Posted on September 21, 2020 by jeffbezos123

Worthless Paper 

When looking back, when I first heard Stone Money in class, I was completely dumbfounded by the country of Yap. To understand who they are, they were a small country in the Pasicific Ocean. Here the Islanders had these stone coins that could of been over 12 feet tall. These were not used for everyday buying power, they were made for special occasions. One example  that you hear about in the story invention of money is “They used to use these to buy dead bodies of warriors. This is when you would offer the stone coin.” The most counterintuitive part about this was, when they made the deal, they would never get this stone. It was too big to move. They just told everyone who it was and that was it. The owner may never see it but they know that the stone coin was theirs. 

Now that you have some backstory about what Stone money is about, you may think this is insane. Now take a second and think about our economy. Each dollar amount is worth a certain amount of gold. We keep this locked in a vault at fort Knox. No one ever thinks about it but we never see it. 

Then when you think about the country of Yap, doest it sound familiar? The only difference with them was that they never had this fake thing like a dolar made up. We get checks from your job every week or two. There is no money ever being transferred. You go home, you cash the check and look at it in your bank account. Then you go and buy something from a store such as walmart. You use your debit card and those fictional numbers lower and get added to someone else’s account, where the same process repeats and repeats. There is no such thing as a dollar bill, we just came up with the idea of it. 

When you listen to the lie that saved Brazil, by Chana Joffe-Waly, you find out how brazilians could not grasp the idea of money and inflation. Each month, you find out that the thing you sold to your friend last month for $10 was now only worth about $5. This completely shocked me because if something like this happened in the US people would lose their minds. Many of our lives revolve around making money. What would happen to our values, if whatever you did last week is worth less than half what you thought it did. Confusing? I know, It took me days of reading to actually grasp the idea of what was actually going on. 

To try and fix this situation, the government of Brazil tried many things. One of the things they did was hold all of the citizens’ money. When this happened, many people committed sucide. I wanted to say this because, what would we do if we couldn’t touch our money from the banks. I know all chaos would break loose among us. Peoples entire life revolve around it, and in my opinion it is a made up object. 

The whole reason why this situation was because of four drinking buddies. The solution that they came up with was tricking the people that the money had value again. They did this by printing a new currency. This followed the rules of economics, they would not be printing anymore. The only way this could work was if the people believed it had value. This was a completely made up currency just to save the country. 

Money is a very marteritic and numeral thing. Our country alone is over 14 trillion dollars in debt. When you look at that your jaw may drop but you need to understand that there will never be that much money every made. I will lay it out you would need to spend one million dollars a year for 14 million years. No matter where you look money makes the world go round. People work their lives away 9 hours a day to get it. Without it we have nothing, and with too much of it you hold too much power. In reality money we use is made up, but that is all we know.

References

Friedman, M. The Island of Stone Money. Stanford, CA: Hoover Institution, Stanford University.

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

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Stone Money-ComicDub

Posted on September 21, 2020 by comicdub

The Truth About Money

Money is one of the most widespread and well maintained lies in the history of mankind. If you were to ask the average person why money has value, they would most likely reply with their brainwashed-esque response that “money has value because it’s money”. Before listening to the NPR broadcast The Invention of Money that would have been my exact response, money has value because it just does. The broadcast changed my whole view of how money works, where it comes from and how it is valued. One of the first things mentioned in the broadcast is that money is fiction. If any normal person were to hear this their immediate reaction would be: “What? How can money be fake if I have it right here in my wallet and or bank account?” 

To Answer this question of how money is fiction, a good place to start would be all the way back in 1903 on the most westerly island of the Carolina Islands called Yap. To start things off, in an essay titled The Island of Stone Money, the author, Milton Friedman writes of a man named William Henry Furness III who spent several months on the island writing about the unusual habits and customs of its inhabitants, particularly their money system. The currency used by these people was large disk shaped stones with holes in the center called fei. Using stones as currency already sounds strange enough but the fact is, this wasn’t even the strangest part. The strange part was that the people of Yap did not consider possession of this stone money to be ownership of it. This meant that they were content with acknowledging that a certain person could own one of these stones while being in the possession of another. As Milton Friedman puts it, “Unless you are very unusual, your immediate reaction… will be: ‘How silly. How can people be so illogical?’” However, it is worth noting that this is very similar to something that was done in the United States back in 1933. France worried that the U.S. would start to stray away from the standard of gold backed money so they asked the Federal Reserve to put aside their assets that they had in the U.S. in gold. This was fundamentally the same way the monetary system of the people of Yap operated where the owner of the money did not physically have possession of it but it was still accepted as that person owning it.

This all relates back to the main topic that money is fiction because in the cases of the people on the island of Yap and the incident with the French and the U.S., the money in both situations was built on the trust of the involved parties. What I mean by this is no physical objects with any actual value were exchanged, only the acknowledgement from both parties that one side now owns the money in possession of the other. So going back to the previously quoted NPR broadcast, after stating that money is fiction, they continued on to talk about how money not being real is both good and bad at the same time. It’s good in the way that you don’t have to carry around these thousand pound stones or tons of gold when making simple purchases but it’s bad in the sense that because that money is not a physical thing, it’s value could disappear in the blink of an eye. Once everyone stops believing in it’s value, it becomes obsolete.

To further develop this idea that money is fiction, the NPR broadcast The Invention of Money continues on to discuss how Brazil used this idea of “fake money” to dig themselves out of the greatest economical crisis the country has ever seen. In 1990 the rate of inflation in Brazil was a staggering 80% per month so the prices of products were changing constantly. It was so bad that there were dedicated jobs for people to go around stores updating prices throughout the day. For years numerous presidents tried to fix this problem all with no real results until in 1993 when four people single handedly saved the Brazilian economy with “fake money”. But getting the entire population of a country to believe in money that isn’t even real isn’t something you can do over night. So they started off by creating this new non-physical currency called URV that would then correspond to a certain amount of Brazil’s real physical currency called cruzeiros. Products would then be set at a certain unchanging amount of URVs thus slowly getting people accustomed to this fake currency. Once people started to believe in this “fake money” they simply got rid of the cruzeiros and launched their new fake currency, the real. “The fictional quality of money is inherent in the very idea of money in any system of currency”, this is a quote from the same NPR broadcast that pretty much sums up everything discussed so far.

When researching more into this concept of fictional money, I also came across another aspect of the economy that is just as fictional as money but is still widely believed by everyone, and that is the GDP. GDP stands for Gross Domestic Product, which essentially means the national income. As stated by Jacob Goldstein in the NPR broadcast The Invention Of ‘The Economy’, “…the most important thing to remember about GDP is it’s not a thing. It’s an idea.” The idea of GDP was created during the Great Depression and quickly people start to put too much meaning into the GDP. Instead of becoming a way to measure the current economy, it becomes a sort of Cold War of economies to see who’s doing better than who. Now going back to the main point about money, the GDP is another thing that is not real but people still widely believe in and trust without knowing why. Like I said in the opening of this paper it’s sort of like people are brainwashed into believing in these ideas, but that isn’t necessarily a bad thing because without the idea of fake money, we would still be stuck in the centuries old ways of a bartering economy.

References

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

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2018, February 19). The Invention of Money. Retrieved September 21, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

The Invention Of ‘The Economy’ [Radio broadcast]. (2014, February 28). In All Things Considered. NPR. https://www.npr.org/sections/money/2014/02/28/283477546/the-invention-of-the-economy

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Stone Money – l8tersk8ter

Posted on September 21, 2020 by l8tersk8ter

Show Me the Money

The monetary system of the people of Yap does seem crazy upon first glance, but when thought about is no crazier than the concept of our modern money. In Milton Friedman’s paper The Island of Stone Money he explains how the people of Yap have a currency based off of, as you could probably guess, stone. What might first come to mind is small rocks exchanged as we may do with coins, or in some countries pesos. However, this image is incorrect. This population of people creates larger than life “coins,” ranging from one to twelve feet in diameter, from limestone. This is definitely not just pocket change. The makeup of these coins though, is not even the crazy part. What seems even more bizarre is that this money is only ever exchanged by word of mouth. They have developed their system in such a way that once the stone is acquired it is placed in a singular location never to be touched again. When used as payment, people are simply just aware that the ownership of that rock as changed. Friedman recounts a story of a crew from Yap that went to retrieve limestone from the island on which they harvest it, but on the way back weather became a challenge. For the sake of making it back home alive they had the lost the stone and let it sink into the sea. No one but this crew ever laid eyes on this carved stone coin, but everyone trusted that it did exist, and that was enough for someone to have ownership of it, even if it was on the bottom of the sea. The concept of the value of the stone is all that would be exchanged anyway.

Now, you might be thinking it is kind of crazy that they trust each other enough to not need to actually possess the stone for it to be considered theirs. They trust that the stone exists and that it was the owners property to spend. But that practically invisible, completely imaginary in essence, exchange of money is the basis of what our online banking consists of. In the NPR broadcast “The Invention of Money” Jacob Goldstein of the Planet Money team observes that most of his money is never even hard currency. Salaries are paid in direct deposits where no cash is ever really exchanged between hands. Ira Glass responds to him by including that bills are paid online and the only transaction that is made is shown in words on a screen. Later in the broadcast Vincent Reinhart says that the foundation of the central bank is based on the trust of the people. If this trust were to disappear, their whole monetary system would be worthless. It is like this: if you can convince someone that an empty wrapper is worth something, then it has worth, but once they see through you and get their wits together that it’s just an empty wrapper, it becomes nothing more than trash. Anything is anything because someone told you that it is. Money is something and valuable because the banks tell you that it exists and that you need it for basically everything in life. And we trust that they are right, even if we do not see the money. Not only is the money not seen, but most of the money in general does not even physically exist. It is an idea that we have learned to trust, and this trust is placed in the banks.

Our banks are where most of our money takes refuge. I think it would be safe to say a majority of people prefer not to carry around cash. In a world that is so digital cash is sparsely needed, because who needs a piece of paper when you can just swipe your smartphone over a scanner and spend money in an instant. Aside from assets, and money invested in stocks and such, most of one’s fortune is sitting in the bank accumulating depressingly low interest. Dave Kestenbaum on the NPR Broadcast proposes the question of counting how much money exists in dollars. Well the roadblock on that one, is that no money in the bank actually belongs to a singular person. He describes how your money is put into the bank, and then the bank loans it out to someone else. He gives that someone else the description of a shoe store owner, so this owner uses that money from the bank and buys a new sign and now that money is once again in someone else’s hands. You cannot count your money in the bank because it is being loaned to other people, and somewhere along the line that money will be counted twice, and as much as we wish it could money can not duplicate. We as a society just put blind trust into the bank to hold our money and hope that when we want to spend it, it will be there.

Now let us take a look at the concept of e-money. Not online money, but completely virtual, made up currency that exists literally nowhere but on our screen. Anne Renaut wrote the article “The bubble bursts on e-currency Bitcoin” about the speculation of the electronic money system. She does not explain exactly how it is acquired, but she uses the word “mined,” and says once this happens it goes into a virtual wallet to be exchanged. This is a currency that was made through a software. It makes you wonder that if someone can just randomly generate this program that gains an established value, whether the value is high or low, then what stops others from doing the same and making the Federal Reserve unnecessary. According to Kestenbaum and  Alex Blumberg in “The Invention of Money” the Federal Reserve meets every six weeks to decide whether or not more money should be made or if there is too much already in circulation. If more money is needed, then it is made. Our money is no longer backed by the gold standard either, so there is not some gold locked away somewhere that could speak for all of our dollars circulating through the economy. There is nothing backing our federal currency, there is nothing backing Bitcoin, they just exists because someone created the concept and everyone decided to go along with it. The Yap value a slab of limestone because someone said to, and that number in your bank account it no different.

References

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

Planet Money Team. “The Invention of Money.” This American Life, NPR News, 7 Jan. 2011.

Renaut, Anne. “The Bubble Bursts on e-Currency Bitcoin.” Yahoo! News, AFP News, 13 Apr. 2013, sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html.

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