Stone Money—rainbow

P1. As defined by the widely used and accepted dictionary Merriam-Webster, money is “something generally accepted as a medium of exchange, a measure of value, or a means of payment.” However, this textbook interpretation does not explain the abstract question as to why society accepts a flimsy piece of paper or a transfer of virtual numbers on a computer screen as a sign of growth. As a small child I can recall asking my father a very similar question. I frequently asked “Why is money worth anything? It is only paper. Why do people care how much paper they own?” My father struggled to provide an explanation that I found sufficient. I decided, with my decision being recently confirmed in a podcast entitled “The Invention of Money,” that the only thing that you need for money to work is for people to believe in it. If people believe that it is valuable, then it is valuable. As soon as trust is lost, the value is also lost. It is similar to a car. When a new model is released, everyone wants to get their hands on it. However, one year later, people no longer want the old car. Therefore, it loses value. This simple yet complex theory has been proven true in a variety of ways among many different societies.

P2. It is difficult to comprehend the simplicity of a currency system. The island of Yap, a small island located in the Pacific Ocean, has a monetary system comprised of large stones called Fei. In the United States, small paper bills called dollars are exchanged regularly. Although being physically extremely different, the Fei and the dollar are one in the same. The only source of security that either provide is their respective society’s trust in the object’s worth. In Yap, if ownership of a Fei is transferred from one person to another, the Fei is not physically transported to the new owner. Everyone in the community simply accepts that ownership has changed from one person to another. Milton Friedman’s essay entitled “The Island of Stone Money” chronicles this concept even further. In the 1800’s, Yap was a German colony. Upon inspection of the island, the German government insisted that the citizens of Yap work to fix the roads. The people refused, so the Germans used black paint to draw crosses on many of the Fei. The black cross represented German ownership. It was done to motivate the people of Yap to abide by the German’s wishes. This small action caused the citizens of Yap to quickly agree to fix the roads. Once the task was completed, the paint was washed away and the Fei once again belonged to the original owner. It is strange to think that a small action such as painting an object can cause an entire group to believe that they are losing wealth. The Fei was never moved from its location, yet to the people of Yap, the Fei was no longer theirs to own.

P3. This idea has been displayed throughout history many times. An example of this occurred during the span of time when the United States backed their money by gold. France did not want to depend on the pieces of paper that represented the gold, so the country asked the US Federal Reserve Bank for their supply of gold upfront. Instead of physically sending France their gold, the Bank chose to move the gold to a separate part of their office and essentially, label it as “France’s Gold.” No objects were physically traded. Although the gold was still in the United States, it was considered to belong to France because people believed that it belonged to France. In comparison, an article written by Anne Renaut for Yahoo! News discusses a virtual currency system called Bitcoin. The entirety of exchanges conducted through this resource are done on the internet. Physical objects are never traded. The only representation that ownership of funds changes is a number change on a computer screen. Although seeming trivial, the significance of this change is confirmed by the trust that people put into it. In every case discussed, the exchange of money is considered important and valuable because people believe that it is so. Without this faith, money would not succeed as a system of exchange.

P4. In the late 1900s, Brazil struggled with extremely high rates of inflation. At its highest, the inflation rate was eighty percent per month. It was the norm for people to spend their paycheck as soon as it was received because the money was losing its value. In comparison, it was as though someone was handed the equivalent of a US one hundred dollar bill on Friday night, and it would be worth significantly less 0n Saturday morning. Brazil’s problem with inflation originated in the 1950s when money was created to fund the building of a new capital to be called Brasilia. Due to the mass production of money in a short time period, all money lost value. This issue worsened for the remainder of the century until several economists implanted an entirely new form of currency. People had lost faith in the old system of currency. Therefore, it was no longer functioning properly. By creating a new system using the real, people once again trusted that their money was valuable. As the citizens of Brazil adapted to the new currency, inflation rates quickly returned to a reasonable level. This event further emphasizes on the point that trust and belief are the primary reasons that money is considered valuable.

P5. It has been proven in a multitude of settings and cultures that a successful economy is formed and maintained by trust. In order for money to be valuable, people have to believe in its value. Without trust, a dollar bill would be nothing more than a piece of paper, and a Fei would be nothing more than a large stone. It is important to realize how powerful the idea of trust truly is. Without it, a functioning currency system would not exist, along with many other concepts. Belief in an idea is what gives it its power and influence over a group. Because we as a society believe that money represents wealth and influence, we consider it valuable. Therefore, it is valuable. My perspective on this topic has not changed drastically since reading more about it, though I do appreciate the acquired knowledge. As a child, I often thought about topics of the like, and I still believe that if were people not to believe in the value of the dollar, the Fei, the real, or any other form of currency, that it would not exist as it does today.

Works Cited

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

“The Invention of Money.” This American Life. N.p., n.d. Web.

“Money.” Merriam-Webster. Merriam-Webster, n.d. Web.

Renaut, Anne. “The Bubble Bursts on E-currency Bitcoin.” Yahoo! News. Yahoo!, 13 Apr. 2013. Web.

8 thoughts on “Stone Money—rainbow”

  1. Hello Professor! If possible, I would like feedback on general advice on how to improve my piece. I am unsure as to how to proceed. Thank you!


  2. Sure thing, Rainbow. In your Preview Survey the first week of class you said that in your most recent writing class you had received only general comments that didn’t help you much.

    You also said you’d value extensive notes and models of good essay writing you could emulate. So far I’ve done my best to provide lots of examples of feedback on other students’ writing, and to model an entire range of writing from barely competent to very good.

    1. Has what I’ve done so far helped you?
    2. More specifically, did the pages we examined together in class on Wednesday (Revision—Mechanics / Revision—Argument / Revision—Rhetoric) provide you the “general advice” you asked for in your Reply of September 29?
    3. If so, should I proceed with very specific comments on your particular writing?
    4. Or do you have another preference?

    Please number your answers. 🙂


    1. Hello!
      1.) You’re examples of good essay writing has helped me a lot. I like to have a model to base my work off of because it reassures that I am performing expectedly.
      2.) Yes, the pages we examined were helpful. I think I am struggling the most with structuring my argument.
      3.) Specific comments would be much appreciated if you have the time.

      Thank you!


  3. Thanks for the guidance, Rainbow. I’ll skip detailed Notes on smaller matters for the time being, then, and provide advice on “structuring your argument.”

    Let’s analyze your primary claims
    —Money is a generally accepted medium of exchange used for payments.
    —Its form can be abstract
    —Its markers have no intrinsic value
    —It relies for its worth on the faith of others
    —Its value can fluctuate like the value of all commodities

    —Both dollars and fei rely for their efficiency on social trust in their value
    —Ownership of fei does not require physical possession
    —The powerful on Yap can seize fei without moving them

    —The US government can transfer gold to France by labeling it “France’s gold.”
    —Bitcoin are traded digitally.
    —The trust of trading partners confers all the value

    —In Brazil the value of currency deflated so quickly it disrupted the economy
    —Too many cruzeros chasing too few products started an inflation spiral
    —The solution was to replace the old currency with one the public could trust

    —Money is worthless without its users’ faith in its value
    —Our money is valuable because it “represents wealth and influence.”

    That appears to be your argument, distilled to its essence. The rest is illustration and rhetoric. You’ve used summaries well to help readers grasp the intangible claims. But I think good readers might be drawing different conclusions from your examples, or wondering why you’ve left things unsaid. In other words, you’re not using your example to their best advantage.

    The child’s question is impossible to answer, of course. She means “why do people value this valueless paper?” The answer, clearly, is, “because other people value it,” an answer that doesn’t satisfy a child OR a thinking adult. But you attempt to illustrate it with a thoughtful example: Last year’s model loses value as soon as this year’s model is released. It’s a good example of fluctuating value. Another would be: I discover five mint-condition Babe Ruth rookie baseball cards and offer them for sale. They command $50,000 each at auction. What was my mistake? I should have offered just one for sale. It would have commanded $500,000 if bidders thought it was the only such card. You suggest, but don’t quite make clear, in this paragraph, that MONEY itself can fluctuate in value just like other commodities. If that’s your primary argument, be sure every sentence in your introduction supports that thesis. Equally important, be sure the examples in your later paragraphs illustrate the “fluctuating value of money as a commodity based on the RELATIVE faith of its users.”

    Your dollar/fei comparison doesn’t really advance the argument of the fluctuating value of money. It develops instead the concept that ownership doesn’t require physical possession. There’s no evidence here that the Yap’s faith in fei has ever wavered. Instead, your focus is on possession. The points are related, but readers depend on you to clarify the relationship. They trusted in the ownership of the fei at the bottom of the ocean (because they had a social trust in one another to mutually respect that ownership understanding). But they doubted the value of the fei once the Germans “seized” ownership, because their relationship with the Germans was not an equivalent relationship. (In a different society, the Germans would have stolen the gold by seizing the stones and moving them to the German headquarters. On Yap, they didn’t have to move them to steal them.)

    France’s gold and Bitcoin are two more wonderful examples in need of explanation. The French weren’t worried that the US would steal their dollars. They were worried that their dollars were going to be worthless. (They were worried that a “the new car model” or the “previously unknown Babe Ruth rookie card” would emerge and make their car and their cards lose value.) They wanted a commodity they knew everybody would accept and value. Where does Bitcoin figure in all this talk of commodities and value? Is it more like money or more like a commodity? In its earliest days, almost nobody would accept Bitcoin as payment for actual goods and services. Even now, we might find it nearly impossible to buy a car with them. Their only value was to other “collectors,” who figured they could always find another bidder willing to pay more. But like all recognized currencies, Bitcoin has a value in dollars, and a value in Yen and Euros. If I buy Bitcoin for a dollar and sell them later for ten dollars, I can buy my car with the dollars. Why do they appreciate in value? Because the more vendors accept them, the more customers are willing to pursue them. As faith in their value increases, their value increases.

    The Brazilians never lost faith in their cruzeros, did they? They knew their fellow Brazilians would always accept them for coffee and potato chips. The problem was every minute the same cruzero bought less coffee. Suppose in Brazil at the height of inflation American dollars had appeared in circulation and quickly found favor. Every minute, exactly in the way it bought less coffee, a cruzero would have bought fewer dollars. If more dollars were pumped into the economy, and faith in the dollar’s value continued, the “new currency” would gradually squeeze out the old, and everybody would want to convert their paychecks into dollars for their stability. That’s what in fact happened in Brazil. The genius of their solution was to introduce a new currency THAT WASN’T ALREADY CONSIDERED VALUABLE. How they managed that boggles the mind.

    Your conclusions are entirely correct, Rainbow. Money is worthless without its users’ faith in its value. And money is valuable because it represents wealth and influence. But that doesn’t answer the child’s question. Why do people want money? Except for true misers, the answer is, Nobody wants money. They want the power to get stuff. They want to be able to make people give them stuff and do things for them. Money’s only value is its buying power. In that way, it’s unlike last year’s car. The 2017 Corolla will be useful almost exactly as long as the 2018 Corolla, but even ten years from now, people will pay more for the 2018, even if they prefer the 2017, because of “resale value,” the perception that other people value it. We want money because other people value it.

    Working through this with you, I’ve concluded that your struggle to “structure your argument” is probably an unclear understanding of the argument value of your examples. Is that fair, Rainbow? We either argue what the evidence proves or we find the evidence that proves what we want to argue. In your case, since you’re not doing original research but instead making use of provided sources, the best course is to understand clearly what the available evidence proves.

    Thank you so much for engaging in this conversation, Rainbow. I look forward to your reply and your rewrite. Post your best version by the deadline with the clear understanding that that doesn’t end the process. You are welcome (you are advised!) to continue to improve your work before and after you post it, before and after it’s graded.


      1. You’re more than welcome, Rainbow. To receive more feedback, you need only specify the aspects of your work that you think need the most attention. I’ll focus on whatever’s troubling you most.


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