Stone Money-rowanstudent24

Posted on September 21, 2020 by rowanstudent24

The Money Perspective

The more I read about the topic of money, the more it made me really think about what money really means to different people. Money around the world can have a different meaning for everyone. Some people can say money as just pieces of paper instead of something that has value. Many people see money in a variety of different ways.

Money around the world to us can be seen as just a piece of paper with no value. Friedman states in the chapter “The Island of Stone Money,” that money of other countries often seem to us as worthless paper or metal. Money also has different value in other countries. Like a Euro is worth a bit more than a U.S. dollar. The opinion of money is different for everyone especially people from different countries. For example, if someone had spent their whole life in the United States and take a trip to a different country, they would have to convert their American dollars to something else. That new money that they get is going to mean something different for them than it would for someone that is from that country.

Bitcoin was a big way to make money. When you invest in bitcoin, you can eventually trade bitcoin for cash. It’s almost like taking jewelry into a pawn shop and exchanging that for cash. Bitcoin has sadly not gone well over the past few years. In an article titled “Bitcoin Has No Place in Your or Any Portfolio” by Jeff Reeves, he states that “Bitcoin is simply worth whatever a random person is willing to pay because profits rely on your ability to find someone more foolish than yourself who is willing to buy higher.” After reading through this article, it allowed me to come to the realization that bitcoin can be a bad investment and hard to make any kind of money from it. The bitcoin values, however, can be seen as different values to everyone. For example, someone could pay a lot more than someone else simply because they believe that it is worth more than what other people think.

One of the first countries to develop paper money was China. On the show Morning Edition, hosted by Noel King, he had Jacob Goldstein on to interview. Jacob Goldstein wrote a book called, Money: The True Story of a Made-Up Thing. They start off the show by talking about China and Money. China was the first country to ever make paper money. Before that, everyone used iron to pay for things and you’d have to carry around like a pound of iron. The Mogol emperor, Kublai Khan was the one that created the first paper money. Back then, there were a lot of different things people used to pay for things. For example, Gold and Silver was being used in the 1820’s in the United States. People can see many different things as value. China saw iron as having value and eventually evolved into seeing paper as having value.

The opinion of money is different for everyone around the world. Money value around the world is different like some countries use Euros, some use pounds and of course the United States uses U.S. Dollars. People from these countries see their money as being worth something compared to having money from another country. They could see that as a worthless piece of paper. It’s the same thing that happened in China. Other countries didn’t see paper as having any sort of value. Bitcoin is another example of the perspective of money. Some people see the investment they put into bitcoin as being worth something but other people may see it differently. Money is a great thing in this world but it can be interpreted differently all throughout the world.

References

Friedman, M. (1991). The Island Of Stone Money. Stanford, California: The Hoover Institution.

King, N., & Goldstein, J. (2020, September 08). What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’. Retrieved September 21, 2020, from https://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction

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—dayzur

Posted on September 21, 2020 by dayzur

Rocks, Paper, and Nothing?

Generally when talking about the word “worth”, you think about how much money is needed to obtain what you are searching for. Thinking deeper, what is money really worth? What we use today to get items to suit our needs has changed. We can have money while not having it at the same time nowadays, online stored somewhere we can’t even see it, or anyone else for that matter. Makes you think, is it really even there? As said by Jacob Goldstein in his book, Money: The True Story of a Made-Up Thing, money is a “shared fiction”. It isn’t actually there. Money is just an idea, and the people agree upon this. 

Let’s travel back a century, from the paper written by Milton Friedman we learn about the Island of Yap, an island apart of the Caroline Islands in Micronesia. To them, wealth and money is just an idea as well, but a little different from what we think of today, and by a little different I mean 1 foot to 12 feet in diameter carved out limestone circles with holes in the center called Fei. A little something to add on is that these stones weren’t even made on Yap. They had to be transported from an island hundreds of miles away by boat. Having one of these stones to the people basically signified your “wealth”, and the Fei didn’t even have to be in your possession. In one instance, while a Fei was being transported, a massive storm hit as the boat was just in bound of the island, and the Fei fell into the water and was lost at sea, probably still sitting there to this day. The people on Yap had no issue with this because they knew of that Fei, and that someone owned it, even though it is not in their immediate possession. That was the thing that gave the Fei its wealth, the possession of it. 

In 1898, Germany claimed ownership of the islands in which Yap rested on, and the idea of money was tested on the natives. On Yap, there were no functional roads or highways, and this needed to be fixed. The Germans told the chiefs of the island that this needed to be done, but for the people of Yap, this wasn’t necessary. The natives were completely content with the current state of the roads they had. So, the Germans decided they needed to be punished for disobeying their orders.  The German government sent people who went and painted big black crosses on the most valuable Fei, claiming them. And thus, they were rendered almost worthless. The people on Yap stepped up and did what was needed and just like that, the black crosses were removed, and once again the people had their “wealth” back. Just like that. This happens today as well. Our money we hold so highly, is just as real as the stone currency used by these islanders. 

Unlike the giant stones shown off in Yap, there are now forms of currency which aren’t really even there in physical possession, or ever were. I am talking about E-currency, but more specifically in this case bitcoin. Around the time of the financial crash in 2008, just a year after in fact, a programmer appeared anonymously and created a new form of currency not depending on a financial institution. There is a process to obtain this bitcoin which basically anyone with a computer could partake in called “mining”. What bitcoin actually is though is a system of super complex code that is cracked by computers by this “mining” process, and then sent to one’s virtual wallet. But here is the catch, where is the real value in this currency? Bitcoin essentially has no real value because there is no bank or financial institution behind it, so the worth of it generally just depends on what a person is willing to cough up for it. There is also the fact that it is not a safe investment and prices can change at any time drastically rising or lowering. In one instance we have seen the value of bitcoin go from $266 to just $54 in a matter of two days. 

When the bitcoin drops in value, where does this money go to? That’s the thing. This “currency” is just an idea that people are buying into. There is nowhere that this money is or will be, it is just a floating number in your virtual bank account. That isn’t just all that could go wrong with this. The virtual currency is vulnerable to cyber attacks. People can hack into your wallet and completely take all of your “currency”. Even with all this happening we still learn, heads of massive corporations are buying into it. From an article from Yahoo News we learn that a pair, The Winklevoss Brothers , “had bought $11 million worth of Bitcoins”. As we may know today, bitcoin has surpassed its numbers from years ago. This article from 2009, really shows us how far the E-currency has come as well as a much deeper look into the idea of money. Or more on the case that money is an idea again, and the people are completely buying into it and ditching their old forms of currency. Out with the paper bills and giant stones, and in with the, in fact, nothing. Just some numbers online, telling you how much your valueless coins are worth. 

It seems as if money is getting smaller and smaller, as the idea of it becomes bigger and bigger. We went from giant stones that identify your wealth, to paper bills, and now, nothing at all. It seems to appear from thin air, all this money is made, and yet nothing of actual possession is being used. This is what the people are agreeing on. The people’s idea of money has completely changed, and they are the reason behind it. These new forms of currency are fueled by the people believing in the ideas of them and continue to flourish because of it. As said by Jacob Goldstein, money is a “shared fiction”, and we are the ones backing this.

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

Renaut, A. (2013, April 13). The bubble bursts on e-currency Bitcoin. Retrieved September 21, 2020, from https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html

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Stone Money-oaktree1234

Posted on September 21, 2020 by oaktree1234

Comparing Currencies 

For decades, American people have used their currency without ever questioning too much about it. The US dollar, to us, is reliable and realistic. We have become so accustomed to our currency, that any alternative form of money seems outlandish.  Personally, I have never thought about the logistics of the US dollar before listening to the NPR broadcast, with the Planet Money Team, “The Invention of Money”. During this session, the island of Yap and its unique approach to currency is discussed. Initially, Yap’s method of using large rocks in place of paper currency seems outrageous. As the broadcast continues, this stone currency, that appeared to be so counterintuitive, presents itself to be more logical. With careful investigation, it becomes evident that Yap’s stone money is much more similar to the US dollar than we may believe. 

In Milton Friedman’s essay, “The Island of Stone Money,” the technicalities of this currency are explained. “As their island yields no metal, they had to recourse to stone; stone on which labour in fetching and fashining has been expended, is as truly a representation of labour as the mind and minted coins of civilization.” The stone used to create these larger than life coins, called “fei”, is limestone. The limestone is sculpted into sphere-like shapes up to twelve feet in diameter. Then, holes are drilled into the center for potential transportation with the help of an extremely strong pole. These coins are used exactly how one would use their credit card or twenty dollar bill. The only difference is they rarely ever move. Instead, when one of these stone coins changes hands, it is just universally known and accepted that it now belongs to the new owner. 

In order to understand the similarities between the US dollar and the fei used in Yap, it’s important to recognize how far the system of American currency has come. Before cash and credit cards were available to the public, bartering was used as payment for goods. This is very different from the cashless transactions we see today. “I pay my bills online…  you don’t have to touch it (money), you don’t have to see it, it’s just information,” The Planet Money Team explains on the NPR broadcast. They go into further detail of how there is no physical exchange of cash between the bank and the phone company when a bill is paid online. Despite this, the payment is still considered valid and complete. This is very similar to how the fei’s do not have to be physically moved into the possession of the new owner to belong to them. 

One intriguing example of this occurred just outside the island of Yap. Since the raw materials to make the fei was not found on the island, the people of Yap would have to sail out 250 miles to sculpt them. After, they would have to secure them to handmade rafts and bring them back to the island. On one occasion, an intense storm caused one of these stones to be left at the bottom of the sea. “My faithful friend, Fatuma, assured me that there was in a village near-by a family whose wealth was unquestioned, acknowledged by everyone, and yet no one, not even the family itself had ever laid eye or hand on this wealth; it consisted of an enormous fei, whereof the size is known only by tradition; for the past two or three generations it had been, and at that very time it was laying at the bottom of the sea!” Friedman recounts the story. Although we can’t see or hold all of our wealth in cash, we still know that we have possession of it. Similarly, the people of Yap still accept and exchange currency without it having to be physically present.

Before cash as we know it today existed, the gold standard was in effect. Until 1933, cash money was a statement that could be traded in for its equivalent value in gold. Now, the money we use is essentially worthless, meaning there is nothing to back it. The only reason money has value is because we as a society agreed upon it. “We all agree to believe that a paper twenty dollar bill or the numbers in my savings account are worth something,” NPR’s Noel King expresses in his author interview with Jacob Goldstien entitled “What is Money”. The same system of empty faith in a worthless currency applies to the stone currency of Yap. Each of their limestone coins is simply just stone and holds no true value. Despite this, every individual and business in Yap still accepts the fei as payment, much like Americans do with dollars.

Another similarity between the fei and dollar bill is the way government officials can regulate them. “After Germany acquired the island at the turn of the century, its officials had difficulty inducing the residents to repair the footpaths until they resorted to the desperate expedient of taking possession of many of the stones  by marking them with a cross in black paint, to be removed when the paths were repaired,” Friedman explains. This black cross is essentially the same as a bank claiming a property as a result of one failing to pay their mortgage. Both the black cross and the repossession of homes have the same effect on the public. 

Money is a concept that can be difficult to understand. We tend to think it’s simply a tangible item that we value so dearly, but it’s much more complex. The money we use is more of a well developed theory than anything. Whether it’s paper, coin, or stone, all money is similar in the sense that its worth is dependent on society. Without the collective belief that our money holds value, the economy would be in turmoil. After researching dollars and feis, it’s apparent that despite their differences, they are both extremely similar in their function. Understanding other currencies is a crucial part of learning more about our own.

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

Weeks, Linton. “The Trouble With Trillions.” NPR, NPR, 23 Aug. 2011, http://www.npr.org/2011/08/22/139846133/the-trouble-with-trillions.

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Stone Money- Sonnypetro29

Posted on September 21, 2020 by sonnypetro29

Now you see Money, Now you Don’t

What is money? It’s a really good question that I never really thought about much until I was assigned to read about “Stone Money”. We all think of money as a tangible item which it is most of the time, but is it really there? Money is a very confusing topic and these lectures and readings really dive into how crazy money can be. Money is ever changing, new innovations on how money can be used and seen change rapidly. 

As I sat down and started listening to the NPR podcast they started talking about a small island civilization called Yap. This island was home to about 5-6 thousand people. What could make a small little island with this small of a population so interesting? Money! The natives of this island use a form of currency called “Stone Money” . Yes I said it they use stone as money, not just some little pebble sized stone I’m talking about way over a 100 pounds of Stone. What is even more interesting is that these stones hold value even though the person who owns the stone does not even have to be in possession of it, In Milton Friedman’s essay “ Island of Stone Money” he said it was just the “ Bare acknowledgement”.  It could be on someone else’s land but it was seen as their wealth. In Yap you could be the wealthiest family and you would never see any of that wealth because it is a giant stone somewhere in the ocean.Yap had no roads that allowed carts to be driven on them they were used for the people to walk on but when the German government came in and colonized them they were told that they have to repave the roads and if they did not they would be fined. The people of Yap did not repave the roads so the German government came in and saw these giant stones laying around so they painted black X’s on them so the people would know the government owned them. Once the people saw the paintings on their stones they repaved the roads and made them almost perfect. It’s the value of their currency that made them do this, they believed in the Stone Money so once they saw what happened to them it forced them to do the work. 

  If the people of Yap could see how currency is used in the United States they would think the most bizarre thing is that we can carry our money around in a wallet, inside of that wallet is a little plastic card that contains money also or even our cell phone that allows us to just tap and order something. Our government is trying to push for everything to be done online, right now there is a shortage of coins. How can there be a shortage when the federal reserve can just push more into circulation just like they do with money. 

This reminds me a little bit like how the United States shows wealth. Right now 93% of Americans use direct deposit, we work 40 hours a week and then get a little notification that our money has been put in our account. Is that money real or is it just a number that is put there at the end of the week. When we use direct deposit sometimes we will never see that money in person, we pay most of our bills online so that is just another transfer of numbers online. Nothing tangible is being exchanged between two parties, it is just a tap of a button and the money is sent. Money nowadays is comparable to the island of Yap’s currency. You don’t always have to see the money infront of you, it’s just the idea of knowing it’s there. 

In Act 2 of the NPR broadcast, “The Invention of Money” we learned about the struggles of inflation in Brazil. Brazil was stuck in a period of time where the market was so inflated that the crucero was practically worth nothing. The Brazilian government went through multiple Presidents and still could not fix their financial problems. Finally after years of inflation the government asked 4 economists to help them fix their inflation problems. It took a very long time for the government to get the 4 economists on their side to help fix the issue, they finally agreed to help out. They came up with a plan that would introduce the “URV”, this is a new virtual currency. The thing about the “URV” is that it is not real, it is just a virtual currency that was made to trick the people of Brazil. They would use the “URV” everyday until one day when the government would release the real Money. This virtual currency was made so they could erase the inflation in the Brazilian economy and it really worked and now Brazil is one of the best economies in the world.

The new thing in our world today is Bitcoin. Bitcoin is a virtual currency that was invented in 2009. Bitcoin came out of nowhere and took the market by storm. Bitcoin is very risky and many people try to stay away from it, Steve Hanke of Johns Hopkins University said this about Bitcoin “a very uncertain, speculative venture,” because it is not backed by a commodity.” Bitcoin is based on one person’s opinion versus another person’s opinion. Up until 1971 the United States was backed by gold until Nixon did way with the Gold Standard. We now go off of the Federal reserve and we trust that the government holds the value of our currency and does not let the market get inflated.

Paper money will soon be gone, our country will advance its technology and do away with paper and coins. Everything is starting to be done online, right now we are seeing a coin shortage because the government wants everything to start being online. Paper money will soon just be a thing off the past, just like the Gold Standard. There will be something better and more efficient for the economy.

References

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?guccounter=1. 

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

King, N., & Goldstein, J. (2020, September 08). What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’. Retrieved September 20, 2020, from https://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2018, February 19). The Invention of Money. Retrieved September 20, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

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Stone Money- clementine102

Posted on September 21, 2020 by clementine102

Fei and Our Concept of Credit 

What if I told you that a big limestone wheel and an electronic bank balance are equally alike? Both entities are completely different, but some time ago, a big limestone wheel was worth everything. The origin story of our monetary system is fairly complex which I found very surprising. As time has progressed, money has gotten more abstract and complicated. Certain aspects of our monetary system today, specifically the use of credit and loans, would definitely surprise the people of the Island of Yap who used limestone wheels as their form of currency. 

Milton Freedman’s piece The Island of Stone Money shows us how the people of the Island of Yap used their simple but effective monetary system. The Island of Yap was a German colony which had a population between five to six thousand. In 1903, William Henry Furness III, an American anthropologist, studied the culture of their community. To his interest, he came to find that their monetary system was quite remarkable. Currency on the Island of Yap was called fei, which consisted of huge, thick, stone wheels that varied from a foot to twelve feet. Everyone on the island’s wealth was unquestioned and was also acknowledged by everyone. There was a universal faithfulness of what everyone possessed. Their monetary system can be best displayed by one situation they had with Germany. 

In 1898, Spain had sold The Caroline Islands (which the Island of Yap is in) to the German government so the Germans could have ownership of them. The German government soon realized after purchasing the islands that many paths and highways were in rough shape there. The chiefs of several districts were ordered to have them repaired. The people of the island thought their blocks of coral would do just fine but were not good enough according to the German government. For the chiefs of the districts disobedience to fix the roads, Germany fined them by drawing a large black “X” on their fei that told the people of Yap that those fei belonged to the German government. The action of fining them worked so well that the people started repairing the highways from one island to the other. Once they were finished, the German government took away the black “X”’s off the fei which meant the people of the islands paid their fine. 

From the Yap’s history of their currency exchanges and possession of currency, we can see how simple and easily exchangeable their currency was, despite the difficulty of not being able to physically maneuver their currency. When they had been fined by Germany, Germany found a way to easily keep track of whose money was whose and when to take away their money. In the 1930s, the U.S. kept track of their currency in a very similar way to the Yap. 

According to Freedman’s The Island of Stone Money, the U.S relied on the Gold Standard which established gold to be the standard for redeeming money starting in 1900. In 1932-1933, the Bank of France was afraid that the U.S. would abandon the Gold Standard. In response to their fear, they ordered the Federal Reserve Bank of New York to convert their dollar assets that they had in the U.S. into gold. Just like how the Germans marked down what fei was theirs, the France wanted to make sure their assets were defiantly secure. France’s fear soon caused the U.S.s’ gold reserves to be down. The Gold Standard was very similar to the principle of fei but the gold standard ultimately failed. 

Since the Gold Standard had failed, The U.Ss’ monetary system eventually evolved into letting people borrow money that they do not have. Many other countries adopted the idea of credit which either hurt them or helped them. The idea of credit was a new idea to Brazil and credit led them to having high inflation in 1990. According to The Invention of Money broadcast, Brazil’s inflation increased eighty percent a month! The world of credit dug Brazil in a deeper hole when purchasing inflated items. Unfortunately, the U.S. monetary system went through our up and downs as well but also left us with an extreme amount of debt. In the 1920s, America was introduced to credit which let anymore borrow money they didn’t have as long as they paid it back to their bank. People who couldn’t pay back what they borrowed were in something called debt. As of 2011, the U.S. government had a debt of $14.4 trillion and that debt is increasingly rising as of today, according to Linton Weeks in his article, The Trouble with Trillions. He goes on to tell us that the number is so big that adding zeros to the number really wouldn’t matter. However, to the Yap, I think they would think it would matter. 

The Yap only used the currency that they had available to them which leads me to conclude that their financing was a lot easier to manage. Since their money was easier to manage, the Yap would ultimately have no idea where to start on how debt is even a thing in the first place. The concept of credit is so abstract that it was always doomed for disaster. What good is credit if you don’t have the money to pay your debt back? Absolutely nothing. The Yap would not be able to implement this aspect of our system since they couldn’t fabricate the amount of limestone wheels they possessed. They would think the concept is too complicated to understand and fully manage. The fact that our monetary system now is more complicated than the Yap’s system is not surprising, but you would think that as time progressed, we would have a better, more sophisticated, and structured system that we could rely on. In fact, our system we have now is not nearly as reliable as the Yap’s. We borrow money out of thin air and some people don’t take into consideration how it will affect us in the long run when in the Island of Yap, they did not have to worry about fei they didn’t have! Whatever the Yap possessed, is what they had and there was no in between. I think that the people of Yap would be disappointed by the way we created a system where in some cases, we can’t bounce back from. It is now very easy to think that the people of the Island of Yap would find the U.Ss’ monetary system to be so fabricated and very bizarre. 

References

Friedman, M. (1991) The Island of Stone Money. Hoover Institution, Stanford University

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2018, February 19). The Invention of Money. Retrieved September 20, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

Weeks, Linton. (2011, August 22). The Trouble With Trillions. Retrieved September 20, 2020, https://www.npr.org/2011/08/22/139846133/the-trouble-with-trillions

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Stone Money – mhmookaysure

Posted on September 21, 2020 by kowiklinski

Cash or Trash?

“Money makes the world go round” is something we’ve all heard before. When speaking of value, the primary assumption made is how much money something is worth, or what is its monetary value. What turns this question upside down is the fact that “money is fiction” as Jacob Goldstein, author of Money: The True Story Of A Made-Up Thing says. It’s existence isn’t fiction, but instead the power it holds is theoretical, being based off of the agreement of society. Throughout history, there have been many examples of value being fictitiously assigned to objects, in order to consider them “money”. Whether it was the exchange of paper for coin, stone for house, or the click of a button to transfer ownership as is the case today, the constant change in what is considered money throughout time leads us to believe that money is not a physical concept, but instead a theoretical one.

A seemingly comical, yet anchored in truth example of this phenomenon comes in the story of the Island of Yap. Located in the Pacific Ocean, the island nation showed financial innovation in the invention of its own currency. Moving on from the age old barter system, where an exchange occurred in the form of product for product, the island people decided to bypass this in the form of a currency. Instead of having to give products in order to acquire something, people of the island were now able to make purchases instead of exchanging goods. In an attempt to limit islanders’ ability to create this new currency, they chose limestone rocks which were found on a separate island found two hundred and fifty miles away as a means of exchange. Sculpted into large disks, some being taller than man, these limestone rocks were called fei, and were agreed upon as the currency of the land. This size proved to be an issue however, with exchange of the currency being strenuous, so the island came up with a method of exchange that stands to this day, payment based on belief that the currency exists. Instead of having to physically possess the fei, islanders would in turn trust one another that the fei existed, and would exchange ownership of a specific stone. This went on to such an extreme, that for decades, a fei lost at sea during a storm was passed on as payment from generation to generation.

In some cases however, the trust in a currency is dashed by the increased production of it, as was the case in Brazil during the 1950s. Spurred by then President Juscelino Kubitschek’s wishes to create a new capital city in the jungle, the Brazilian government went on to print more and more money in order to cover the cost of this endeavor. Seemingly flawless logic, “let’s just make more money” does not realistically work however, due to the economic phenomenon known as inflation. Today the more money that is in circulation, the less the currency itself is worth, as it is not tied to a tangible asset such as gold as it was in the past. Because of this, by printing more and more money, the Brazilian government essentially lost all faith from its citizens, as the money was essentially worthless. Because of this, the nation was faced with inflation rates as high as 80% a month, meaning that an item that cost 10 cruzeiros, which was Brazil’s currency at the time, would cost nearly 10,000 cruzeiros a year later. This issue went on for decades, with no solution in sight, until four economists decided what better way to solve the problem of distrust in currency than to make up a new currency. “People have to be tricked into thinking money will hold its value” says economist Edmar Bacha in NPR’s Planet Money article How Fake Money Saved Brazil conducted by Chana Joffe-Walt. Thus the Unit of Real Value or URV was born. Completely virtual, the new currency had weight against the Cruzeiro, meaning that while prices in URV remained constant, how much Cruzeiros one URV was worth fluctuated. Seeing that prices remained constant, although the value of the currency changed, the people were led to believe that inflation was no more, and that the currency once again had strength. This psychological change worked so well that within months people once more trusted the currency of the nation, which eventually fully replaced the old Cruzeiro. Just the idea of a new and “stable” currency turned an entire nation’s economy around, so what’s to stop any country from declaring their currency to be more powerful than it is?

Well, frankly nothing can stop the concept of money. It is created from thin air, and established across the globe as legal tender. Who governs these unwritten rules and has the ability to conjure money out of thin air? In the United States, that would be the Federal Reserve. With the concept being explored by Alex Blumberg and David Kestenbaum of NPR’s Planet Money, one learns that the way that money is created is by a simple click of a button. Something that one cannot live without, arguably one of the most important things needed for survival in today’s time, is simply created by someone in a position of power tacking on a couple of extra zeros into a bank account, allowing it to be distributed via loans or bonds. That’s right, a select group of people, working independently from the federal government itself decides when and if the country is in need of adding a couple billion or trillion dollars into circulation.

As a society, we have advanced from the concept of physical value. No longer is precious metal dictating what something is worth, instead a concept of worth is assigned to an otherwise worthless object. We’re able to transfer money virtually, without ever seeing it or knowing that it exists based on the trust that it in fact is there. Money as we know it is no longer a tangible asset, it has no real value, instead as a society we agree on the fact that it is the method of exchange. This leads to the question: is cash anything other than a load of trash?

References


King, Noel. “What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’.” NPR, NPR, (2020, September 8), Retrieved 20 September 2020, from http://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction.

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2018, February 19). The Invention of Money. Retrieved September 20, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

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

Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. (2010 October 4), Retrieved 20 September 2020, from http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil/

Posted in mhmokaysure, Stone Money | Leave a comment

Stone Money- Thecommoncase

Posted on September 21, 2020 by thecommoncase

Modern Currency

The idea of the American Dream, or the idea of being financially stable, is something anyone can imagine for it’s been implemented into American culture for decades. Money is the biggest motivator for people today, and we praise the “hustlers” of the world for their work ethic and business savvy. But in today’s digitized world, how can materialistic wealth compare to numbers in your bank account, especially when you have never seen the cash with your own eyes? I learned about concepts of money from different countries, and the interesting ways something can represent money. In the most abstract sense, money doesn’t even exist, money never really belongs to any single person. Nowadays, money is a comforting illusion that simply helps keep important aspects of life organized, and encourages people to make more fictional money to grow the economy.

While listening to NPR’s podcast episode, “The Invention of Money”, I heard Ira Glass, the host of This American Life, and Planet Money producer Jacob Goldstein discuss their thoughts on the 2008 financial crisis, and explain where all that money could have gone. In reality, the money was simply worth less than it was. When the stock market crashed, no physical money was lost. Houses had lost their value “simply because that’s what everyone now agreed. No money changed hands, no many vanished.”  I can see how many factors come into play when determining the value of something, but it is difficult for me to understand how markets can lower in value, how everyone could come to agree on that, and not do anything to regulate it or stop it.

 Diving deeper into the concept of fictional money, Goldstein realized that in many systems of currency, there is an idea of how money is not a tangible commodity. This could be best explained by introducing the monetary practices of the people on an island called Yap. In Milton Friedman’s article The Island of Stone Money, he described that their currency was stone wheels that could weigh more than a car, and were only used for large, important purchases. The people of Yap did not have to bring the stone with them to know that it was theirs when they bought something. The person who “gave” them the stone had received what they wanted in return and did not have use for the stone wheel, so it does not harm anyone to leave it where it was. This counterintuitive system is comparable to the U.S. banking system prior to the 1930’s, when carrying around heavy gold pieces was becoming too tiresome. Instead of gold, Americans would carry around pieces of paper that could be exchanged for gold, which was kept in the vaults. 

But as for money in the 21st century, Goldstein states that, “… currency even now is like old-fashioned. You don’t have to touch money. You don’t have to see it. It’s just information.” This made me think about my own bank account and how much of my money I actually obtain. At any job I have had, I have used direct deposit because it’s simply more convenient. But in today’s world even paper checks can be scanned and deposited into your account through a banking app. Money in the 21st century is evolving digitally and blurring the definition of what it means to make and receive money, especially with new types of electronic currency.

Bitcoin is still new and confusing to the world. In the Yahoo News article “The Bubble Bursts on E-currency Bitcoin”, written by Anne Renaut, she says that the currency was made by an unknown programmer in 2009, who wished to create a currency that was free from any financial bank and be able to use that money anonymously. Since this was created in 2009, it seems clear that he created this after suffering through the financial crisis. Over the years it grew in popularity, and the prices were steadily moving up. Then in 2013, Bitcoin had it’s first serious crash. But Bitcoin foundation chief Gavin Andresen states that he “predicted the crash would not spell the end of the Internet-era currency.” He believes that with more time for its value to grow, Bitcoin will have a price that’s comparable to other currencies. 

The inner-workings of e-money is extremely complex, it is all made by intricate lines of code. “Mining” essentially adds transaction records to a page that anyone using a computer can access and make sure their transactions are accounted for. If Bitcoin was the main type of currency I was discussing in this essay, then I assume that complex lines of code would be the answer to questions like, “what is money?” or “where does my money go?” That explanation might be an easier way to comprehend how we exchange money. In a way Bitcoin shows proof that money is more tangible through coding. The bank takes the money in someone’s account and then lends that money to different people, but shows that person the number of how much money they think they have. I believe the future of currency is heading in this direction, but there are still vast improvements that need to be made and time to adjust to this large technological step. Though anonymity is appealing in some ways, European Central Bank claims it also could be a “monetary alternative for drug dealing and money laundering,” 

Though thinking about the concept of money in this way is tough to grasp, it has always been a detail that was part of the systems of currency for centuries. Today, money has been pulled apart and become an abstract concept of the money that is made but never seen. If the use of card payments and other forms of electronic payment continue to grow, Bitcoin might be in the somewhat far future if it becomes more stable. As long as people continue to make the economy grow and keep it from inflating, deciphering the exact definition money is incidental for now.

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

Renaut, A. (2013, April 13). The bubble bursts on e-currency Bitcoin. Retrieved September 21, 2020, from https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html

Posted in Stone Money, thecommoncase | 3 Comments

Stone Money- cardinal

Posted on September 19, 2020 by cardinal7218

Funny Money

When considering what something is worth, the answer often lies in monetary value. What is less often considered is the value of money itself. That’s no surprise. It seems absurd to question the value of money when money defines the value of our material world. What, though, defines the value of money? Perhaps it is less absurd to question the value of money than it seems. Perhaps the real absurdity lies in the fact that money is, as Jacob Goldstein, author of Money: The True Story Of A Made-Up Thing, puts it, “shared fiction” and is only worth something because the world has collectively agreed that it does.

To demonstrate the phenomenon on a smaller scale, consider the story of the island of Yap. In the late 19th and early 20th century on a Micronesian island called Yap, giant circular stones called fei were used as currency. The diameter of these coins was anywhere from one to twelve feet and they were quarried from limestone on an island 400 miles away. That is not the most ridiculous thing about the fei, though. According to Milton Friedman’s essay “The Island of Stone Money,” a person did not have to physically possess a fei to own it, and “the bare acknowledgement of ownership” was possession enough for the people of Yap since fei were so difficult to transport. The stone coin could be lying at the bottom of the sea and it wouldn’t matter; as long as a person claimed ownership, the fei was owned. In fact, there was a fei that lay on the ocean floor for generations, all the while ownership was passed from family to family. 

The German government later proved that taking this money away was just as easy as claiming it. When Germany took control of Yap in 1898, it wanted the islanders to fix Yap’s roads. To encourage cooperation, Germany “marked” the fei with “a cross in black paint” to indicate ownership by Germany, Friedman relates. Those simple black crosses threw the islanders into poverty and did indeed push them to fix the roads. Once the people of Yap had done their job, the German government simply washed the fei of black markings and suddenly, the islanders were wealthy once again. It seems absurd that wealth- which did not have to be possessed to be owned in the first place- could be taken away and granted by painting and removing markings. It seems like the sort of thing that could only happen on a primitive Micronesian island. However, something similar occurred between France and the United States in 1932-1933. When the Bank of France was concerned that the gold standard value would not remain constant in the U.S dollar, it requested that the Federal Reserve convert its assets to gold. Instead of shipping the gold to France, the Federal Reserve simply sectioned off the right amount of gold for France in the Bank of New York and marked it off. Then, even though the gold remained in New York, the perceived ownership by France caused the franc to become more valuable than the dollar and even contributed to the Banking Crisis of 1933. It’s really not so different from Germany and the Island of Yap.

Another example of the grand fantasy that is money can be found in ancient China. For a time, China used physical coins as currency, and the worth of those coins was equivalent to what the coins were made of. Something like an iron coin wouldn’t be worth much, and it would take a lot of coins to pay for something. Instead of going through the hassle of exchanging so many iron coins, merchants would give people a note that vouched for a person’s ownership of their coins. Mongol emperor Kublai Khan observed this and decided that the coins didn’t have to be part of the equation at all. He decided that the paper notes would be the new form of currency, and China prospered under the new, more abstract idea of money. Eventually, though, paper money was overproduced and it caused inflation, and a new emperor got rid of paper money entirely and went back to using grain for commerce. In the words of Jacob Goldstein, mentioned earlier, the “economic flourishing that had happened, it just [went] away” and the wealthy suddenly became poor. The value of these paper notes completely changed over time. At first they were backed by physical wealth, then they were backed by sheer faith, and then they were nothing. 

That, though, is history. Just old civilizations figuring out how to build an economy. The world must have a less abstract view of money now. Alex Blumberg and David Kestenbaum of NPR’s Planet Money team looked into exactly that by investigating the power of America’s central bank, the Federal Reserve. That power boils down to “conjuring money out of the void,” in the perfectly chosen words of Blumberg. So, no, money is not less abstract now than it was before- it’s more abstract than ever. It truly is like magic. All it takes to put billions of dollars into the economy is a few clicks on a keyboard and the press of a button. The Fed buys large amounts of treasury bonds from banks, who then distribute money into the economy. That transaction happens by someone at the Fed accessing a bank’s account on a computer, typing a few more billion dollars into that account, and pressing a button to finalize it. Money was already abstract enough. The retirement of the gold standard meant that the physical dollar was officially worth nothing more than our belief in it, but now the physical dollar isn’t even needed. A computer is all that is necessary.

While the technology of commerce has come a long way- giant stone coins are certainly no computer screen- our concept of money has historically, absurdly rested on little more than faith. The admission must be made: money is just a little bit funny.

References

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

King, Noel. “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.

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

Posted in cardinal, Stone Money | Leave a comment

Stone Money–runnerd4

Posted on September 18, 2020 by 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.

Posted in runnerd4, Stone Money | 1 Comment

My Hypothesis-Hailthegreat8

Posted on September 16, 2020 by hailthegreat8

1. Does an Authoritarian parent style affect a child more than an Uninvolved parenting style?

2. Signs of Permissive parent

3. Difference between Authoritarian and Authoritative parent style

4. Which parenting style demonstrates the best results in a child

Posted in hailthegreat8, My Hypothesis | Leave a comment