Is Money Really Valuable?

To illustrate how worthless a dollar truly is, first we must envision the impact the dollar has on an economy. The economy can be affected greatly by the value of the dollar, for example the Great Depression and Brazil. These two examples display that the dollar itself only holds as much value as the people within that region claims it does. During both situations the dollar lost its value and as a result the people in that culture suffered greatly because the economy plummeted. The dollar value changes constantly in actuality the dollar or paper money is not worth much the reason it holds value is because the culture states the value of the money.

Within the essay “The Island of Stone Money,” by Milton Friedman, he emphasizes a method used for transactions within his story about a cultured known as the Yaps. The Yaps transactions where similar to what the France bank and the United States bank did when the France wanted gold from the U.S. The Yaps transactions never moved however the ownership did. Their currency was in stones and the stone took the place of the limestone that was on a different island. This is relatable to what the France Bank and The United States went through because the bank of France noticed the value of the U.S. dollar was depleting. As a result of the bank of France taking note of this they asked for gold in exchange for their previous transactions with the U.S. dollar. Similar to the Yaps and their transactions the U.S. put a certain amount of gold aside for the French and labeled that the property of France. The French approved of this transaction and likewise to the Yaps transactions the stone never moved, however the owner of the stone changed.

Similarly with the French and U.S. banking situation it reveals how the value of money doesn’t remain the same. Within the Yaps society, the use stones as their currency and the value of their stones can change depending on who is involved in the transaction. The stones held this value due to their society accepting it. However not every person within the society accepted the same amount of stones or accepted what we can get with our stones. Some residents of the society accepted one stone for one cow, while if we walk to another part of the island another person may offer us 2 coconuts for our one stone. Our neighbor may offer us 4 bags of rice for 2 stones, but the person who lives across the river may accept 4 bags of rice for 4 stones. From these different transactions reveals that the value of the stone within the Yap society will vary based on our consumer.

Traditionally people advise us in order to obtain money, we must save our money. However within the article “Back in Power, Abe Aims to Spend Japan Back to Economic Vitality,” by Hiroko Tabuchi, it suggests in order to make money you are required to spend money. This supports within the article when it was stated that those who support Abe’s concept claim his policy will defeat deflation and generate growth. The Japan government has decided they will spend a large amount of money in order to generate a stable economy, while other governments go with a more traditional approach and save their money in order to obtain money. This shows how the value of money constantly changes because Japan is trying to spend more money in order to become stable, however they were put in this situation because they spent too much money in the first place.

Spending too much money doesn’t always produce the same results for each economy. In the article, “How Fake Money Saved Brazil” by Chana Joffe-Walt, she went in depth about how brazil’s economy was plagued by inflation and each time they tried to spend money the prices of merchandise would rise. Their structure became stable by using a “fake” money system. They used a different currency to take the place of the previous one, however the the new currency the price remained the same. However since no one had euros they used their old currency and used it in place of the new one. For instance, if one bag of chips was one euro last week, it would be one euro this week. Due to no one having any euros that one euro would convert into 7 pounds, however the next week it would remain one euro but it would convert into 14 pounds instead of 7 pounds. This system was able to provide Brazil with the solution to their economic struggle despite the fact it contradicts the concept of the value of money. It is doing so because inflation still was occurring within the economy the only difference was the fact that they attached a physical label to make it appear as if inflation was not occurring. Inflation continued because each week the customers still had to pay more and more, nonetheless from their perspective the price remained the same.

Work Cited

Friedman, Milton. “The Island of Stone Money.” (n.d.): n. pag. The Hoover Institution. Stanford University, 01 Feb. 1991. Web. 25 Sept. 2016.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 04 Oct. 2010. Web. 25 Sept. 2016.

Tabuchi, Hiroko. “Back in Power, Abe Aims to Spend Japan Back to Economic Vitality.” The New York Times. The New York Times, 22 Jan. 2013. Web. 25 Sept. 2016.

Can I Pay for This in Cardboard?

The idea of money has always confused me as money is not a constant entity. The exchange of something valuable like a loaf of bread or a house for a flimsy piece of paper does not confuse people as it was established that the flimsy piece of paper had enough value to get that bread. However, a person trying to hand the same person a piece of cardboard in exchange for a piece of bread in the same regard would result in worrying glares and possibly a call for the police. But if handing something physical results in massive confusion, then it becomes even weirder that a swipe of a plastic card in a machine and pressing something saying credit or debit is completely fine. The fact is money is whatever people want to hold value in and nothing else really matters.

The faith in money is something that is only backed up with the faith humans put in it, which is absurd. Most societies happened to decide that money would be based on the rare and valuable material that is gold, but the material itself is arbitrary. Money just had to be something that a certain group, whether it be a city or an empire, backed up with any material they wished to. In the intriguing case of the island of Yap, the people of the island decided that gigantic limestone boulders that they held in such high regard would be what represented value. However, instead of making the money that was based off limestone something easily accessible such as the paper money that most people are familiar with, the habitants of Yap decided that they would use huge circular slabs of the material, ranging from a diameter of a foot to twelve feet, with a “convenient” hole in the middle as their currency. This Fei, which is what the island of Yap called the currency, tended to be so large and heavy that moving the Fei was virtually impossible. So, the inhabitants nominally claim the large slabs and everyone collectively understands that the claimed stone is the speaker’s worth. A transaction for Fei would just state that the person that “received” the Fei and is shifted to another person in just name alone.

The concept of Fei initially sounds absurd, but the concept is still the same as the US dollar albeit less convenient. Both forms of currency utilize a representation of the material, with the Island of Yap using gargantuan immovable limestone and the US using flimsy pieces of paper with weird symbols and numbers. This item that the people agree is valuable is then used to exchange and keep track of wealth in different transactions to get the goods that they want. The person doesn’t even need to have the money physically. What the inhabitants of the island of Yap consider a common exchange can just simply be compared to exchanging things digitally, as a person can now digitally transfer massive amounts of money they are assumed to have with a swipe of a tiny plastic card. In fact, a currency that is more current could be considered to be just as bad if not more absurd than Fei, the digital Bitcoin. The idea of the digital currency free from the bank seems to be a legitimate idea, but the downfall is that the online currency’s worth is only worth what other people want it to be. This means that the Bitcoin which could sell for the equivalent of $266 on one day could become as little as $54 for essentially no reason.

Yet while Fei still backs up the money with material and Bitcoin’s worth remains changing forever, the handling of the economic crisis of Brazil shows that money doesn’t even have to be backed up by material but by the faith that the money was worth something. During the 1990’s, the constant inflation for forty years made the inflation rate rise to 80% per month, which would eventually make the costs of everyday items insurmountable for the people of Brazil. This caused sporadic changes in the costs of goods that made the Brazilian currency, the cruzeiro, have a sense of inevitable doom for the people. In order to solve this economic downfall, Edmar Bacha and his three friends devised a new currency that eventually replaced the cruzeiro and stabilized the entire countries economy, the URV. This virtual currency was technically based off of the erratic cruzeiro but everything of society from the wages of the workers to the goods that they would purchase was based on the stable URV that stayed static throughout the increasing costs of the cruzeiro. As the URV became more integrated into Brazil, Brazil simply swapped the failing currency with the URV and the inflation vanished. This completely overturns the very idea of money as something that was backed by another varying currency which was based on the common idea of money.

Money is man’s greatest invention.  Without it, things such as markets would change into barter areas as the lack of money leaves people only with the power of bargaining. This concept stabilizes society as whole, allowing massive amounts of people to trade with things that everyone would find valuable. But money’s true worth simply lies on what people believe it has.

Works Cited

Friedman, Milton. “The Island of Stone Money.” Working Papers in Economics (1991): 1-7. The Hoover Institution Standford University. Web. 13 Sept. 2016.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch. MarketWatch, 31 Jan. 2015. Web. 13 Sept. 2016.

Anne Renaut, Anne. “The Bubble Bursts on E-currency Bitcoin.” Yahoo! News. Yahoo!, n.d. Web. 13 Sept. 2016.

 

 

Pieces of paper? Or Gold?

P1. Whether its Stone Money, Dollars, Euros or any other form of regional currency, each has its own distinct value system, from country to country. This is when it gets tricky. When people have their own perspectives, and value their money differently. To start, ones perspective depends on the persons ideology and current socioeconomic status. Hypothetically speaking, comparing a wealthy mans perspective on value of currency, to a middle class mans perspective may show that one has a greater appreciation for the dollar that they earn. Whilst the other just stares at their banks mobile app and watches the number on the screen increase, and just has to imagine their stacks of paper in the vault of their local bank.

P2. So what makes these pieces of paper we call dollars have value? well because people in society decided to make it have value. This method of currency was created to make the trade of goods easier and faster to manage. After reading “The Island Of Stone Money” one can notice that the inhabitants of Uap had a similar system to the one we use today. Today technology has advanced so much that we can now digitally manage, distribute and hold our money through mobile apps and online websites. whether one prefers using credit cards, Pay Pal or bank apps a physical dollar is a place holder for that digital number on any of those digital outlets. Now comparing Uap’s method to our current method the people of Uap used the stones as their physical placeholder to replace their word. Essentially creating a word for product system. Whilst currently people are using a pixel for product system.

P3. The physical dollar is evaporating the more and more technology advances. It is increasing so much that eventually we may see a dollar-less future where society goes full digital. Currency is what controls our societies, pixels on a screen or worthless pieces of fabric in our wallets will always hold value to people, because money is what gives us control over our lives. It is how governments control their nations. it’s what motivates people to apply for jobs and work. it is not about the material the currency is made of it is about how one obtains the money, is what makes it valuable.

Works Cited

Calmes, Jackie. “Demystifying the Fiscal Impasse That Is Vexing Washington.” The New York Times. The New York Times, 15 Nov. 2012. Web. 10 Sept. 2016.

Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 10 Sept. 2016.

Glass, Ira, Chana Joffe-Walt, Alex Blumberg, and Dave Kestenbaum. “423: The Invention of Money.” This American Life. Prod. Planet Money. 7 Jan. 2011. This American Life. Web. 11 Sept. 2016.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch. MarketWatch, 31 Jan. 2015. Web. 10 Sept. 2016.

What’s It Worth?

P1. What is the purpose of money? We, as a nation, have grown up thinking that money was a tool for the trading of goods and other services. For some, it is a matter of survival. How we feed each other or how we purchase clothes to keep us warm. However, if you really think about it what does a piece of paper have to do with our worth?

P2. Out in the Pacific Ocean, there is a tiny island named Yap. Hundreds of years ago, their society agreed that they would use the limestone deposits as money. This limestone was usually only used big things and not everyday purchases. The only problem for them was that it was very hard to transport these big stones. During the first transportations, one ended up at the bottom of the ocean. Although you could not physically touch it, everyone decided that it was still good.

P3. The limestone that was used is very similar to Bitcoin, which became popular two years ago. Bitcoin is a digital payment system which allows transactions to occur directly between users without the use of a middle man. As you can see, neither of them can be physically touched but are still extremely valuable. Bitcoin on the other hand, has some people that doubt its value. These people talk about how it has no sense of authority or a central bank. They also bring up that a bitcoin is worth whatever a random person is willing to pay, meaning that the seller will look for the person that is willing to pay the most.

P4. In my 20 years of living, I don’t think I was ever given a straight forward answer on what money was or what the value of money truly is. One thing we know for sure is that money makes the world go round.

Work Cited

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&gt;.

Planet Money, By. “The Invention of Money.” This American Life. N.p., 7 Jan. 11.

Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch. MarketWatch, 31 Jan. 2015. Web. 10 Sept. 2016.

Money, It’s  a Hit

Money, it is more than just a catchy song title, it’s the lifeblood of a successful economy. While, it is something used everyday, explaining what it is, is actually quite difficult. Why is its existence so perplexing? All money is, is a representation of the ability to pay for goods or services. With that notion taken into account, how could a dirty sheet of green paper come to represent a trust of gold or other wealth? It all falls into the hands of the people who are going to use the currency. Users have to have faith and trust in the economic system in order for it to work. If one takes a look at “Stone Money” written by Milton Friedman, they could see this conjecture put into effect.

Friedman discusses the island of Yap, where the natives have taken up, a strange monetary system. For large purchases, such as a dowry or buying land, they can pay with large stones known as Fei (Friedman). This is not to say that someone is rolling a huge boulder to their neighbors yard when they want to buy their cow; the transaction can happen without even moving the stone. It is basically the same procedure as buying something in store with a credit card. The shopper gets what they want and all they have to do is agree that what was once their money, now belongs to the store. This fundamental theory is used in Yap, “One person gives it to another person. But the stone doesn’t move. It’s just that everybody in the village knows the stone now has a new owner.” (Goldstein). Buying a cute pair of pumps with a visa card, is essentially the same as buying a farm with a large boulder. Neither the islander’s “fei” or the shoe buyer’s money actually gets moved, just a change of title, and they can get what they want. All seems to go well for the islanders, but what about trade? How do they work with entities that use different currency? Within Cora Lee C. Gillilland’s essay “The Stone Money of Yap” she describes one way that the stones were interpreted “‘…the value of a stone measuring three hand spans remained constant, that is a stone that size was worth one pig.’ In the next century this valuation remained the accepted foreign rate.” Even giant stones could be used within international trade.

In 1932-33, between the French Bank and the Federal Reserve Bank of New York (Friedman). France wanted their dollar assets changed to gold, since they were afraid with the failing economic system that the current gold standard would not be honored. To save the trouble of shipping it across the ocean, they settled for simply putting the French gold aside in the same United States Bank (Friedman). This is no different than when one islander still has a rock on their property after making an exchange, and it now belongs to someone else. This idea of non-literal possession, that is seen daily, is so strange because how could something belong to someone just because they say so? The “money” or gold or stones, are not actually in their possession but it is still theirs. The French government felt comfortable knowing the gold was safe, simply because everyone else knew it belonged to France. It is a game of “playing pretend” because nothing is actually happening, the rules are made up as they go. The trick here is the public’s trust in the system. If the foreign “rate of exchange” as Gollilland refers to it, was not respected, or if one Yap islander decided to physically take someone’s stone and claim it as theirs, chaos would ensue. The islanders would then have to fight over the stones instead of the peaceful transition of ownership they had been enjoying.

When Brazil began to become desperate in their economic situation, their government too relied on the faith and good intention of the people. Edmar Bacha, a Brazilian economist, came up with a solution for the inflation crisis in Brazil (Joffe-Walt). It included coming up with a new currency to use in conjunction with the old. Basically, this new currency known as the Unit of Real Value (or URV) was used to tell the people how much something was actually worth. Due to inflation, something as simple as a carton of eggs could see price raises everyday; so much so, that the prices people were paying for them did not even accurately describe their worth. That is where the URV comes in, a store can assign a Unit of Real Value to their goods in an attempt to normalize their prices. The URV was not just used for consumable goods, it was also used for wages and taxes, all monetary functions used the URV. That being said, explaining the function of the URV is easier in terms of purchasable items, discussing taxes and salaries can be hard to imagine. Say a store decides a carton of eggs is worth two URVs, as the value of the Brazilian currency, the cruzeiro, fluctuates the URV will stay at two. When a customer goes to the register to pay for the eggs, there is a sign that will represent the ratio of URVs to cruzeiros for the day. While the eggs will always cost “two URVs” they will actually cost five, ten, twenty, however many cruzeiros, depending on the day. Now the same idea can be used for a paycheck, on payday the check will say 250 URVs just like it does every other Thursday. While, the check says 250 URVs, the bank may only issue 100 cruzeiros simply because that’s how much a URV converts on that day; when maybe two weeks ago the check was worth 75 cruzeiros. The important factor in his solution was trust from the people “But, just as important, you have to stabilize people’s faith in money itself. People have to be tricked into thinking money will hold its value.” (Joffe-Walt). Bacha is counting on the positive response of the Brazilian people for this idea to work.After citizens began to trust the URV and its stability, the government just stopped using cruzeiros, and just like that the inflation crisis was ended.

Teaching the people to believe in the Unit of Real Value, the US Dollar, Fei, or French gold, is a moot point if its value is not respected by the people meant to utilize it.While the concept of money is abstract and difficult to fuller ascertain, the world would not be able to function without it. Like parts to a machine, the economy would fall apart without money and the cooperation from the very people that use it.

Works Cited

Friedman, Milton. The Island of Stone Money (1991): n. pag. Web.

Gillilland, Cora Lee C. THE STONE MONEY OF YAP (1975): n. pag.Smithsonian Library. Web.

Goldstein, Jacob. “The Island Of Stone Money.” NPR. NPR, n.d. Web. 13 Sept. 2016.
Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, n.d. Web. 13 Sept. 2016.

If we think about it, Stone money played a great role in the development of our currency today. Today our currency is all computerized, merely a number on a computer screen. There is no physical displacement of the currency rather the ownership is changed. This characteristic of our modern currency is similar to how yaps stone money was not moved from one place to another rather just the ownership was changed. However, we do differ from them in other aspects such as being able to make transactions over long distances in seconds , deposit money at one location and take it out at another to suit our need. We have came a long way from stone money but the fundamentals have not changed .

Money now days has been replaced by fiat money. its means “let it be done ” as like latin words . Money has been given fiat money by government . By law the refusal of “legal tender” money in favor of some other form of payment is illegal. on the 3/10/1862 the first american money has been issued and that time money has some value but now its just a paper for some country’s . they want some valuable stuff instead of american moneys .

 It is not only american money effect in exchange money . A lot other country has effect on that too . Asia have a lot effect on the even exchange money . Indian 65 rupees equal 1  american dollar . this is the only reason that some other country want some gold . they don’t want to have other country paper bills . do u even realized that you work 2 jobs and you getting told by your work that the money have been put into you are banking account and you can check you are account  . you are money is in your bank account and now you pay your bills some online without touching you are money and then you spend all you are money online like that . for me that was the perfect example foe stone money .

work city

Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015.

http://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil?gt=

Bellis, M. (n.d.). The History of Money. Retrieved September 25, 2016, from

https://rowancounterintuitive.com/2016/09/25/money-fake-or-for-real/

 

The Counterfeit Value of Money

When I think of coins I imagine pennies, nickels, dimes, and quarters that can fit into my pant pocket. That’s a different story for the people of Yap who have coins that are taller, bigger, and stronger then themselves. They call it fei another name for it could be stone money, their stone money is a type of rock called limestone. Yap is a tiny island that is in the Pacific Ocean. When I first heard this story I thought it was really silly because they can’t move the coin when they claim it. Later, when I read the article “The Island of Stone Money” it allowed me to understand the concept of why Yap people use stone money. David Kestenbaum and a couple of other people broad casted about stone money. They were a little astounded about the size of the money that they use to purchased certain things. They also understood the value of their stone money. Money is worth whatever we an get for it. It doesn’t really have a real value of it.

Planet Money team did a broadcast of Brazil’s fight against money. In the broadcast, called “How Fake Money Saved Brazil” it talks about how inflation in Brazil reached 80% per month just because the government decided to use printed money to build a new capital. Luckily, 4 former graduate students helped save their country’s economy with “fake money”. Everyday grocery store prices went from cheap to expensive. For example, a bag of chips may cost $1, however, after a month it may cost $10 for one bag. Some customers at a grocery would see the price gun person walking down the isles changing the prices so people would cut in front of the price gun person and get to whatever they were buying before the person changed the price to a higher amount. People were tricked into thinking that money had value when that wasn’t true. They used something called “virtual currency.” It tricked them into thinking that their new currency was in URV’s (unit of real value), but in actuality it wasn’t. It was a good way to help the economy from heading towards bankruptcy.

My concept for money has changed because all my life I always heard people say that money is valuable. However, after reading the essay, listening to the broadcast,and discussing it in class. I have more of an understanding of money. That money could be fiction because it is what we can get from it. When I heard the story about the United States and how we put gold in a drawer and labeling it “France” it reminded me of the stone money in Yap because they don’t have physical possession of it but they still label it theirs, we still left it in the drawer for nobody to touch and just put a label on it. Later, we could have used it towards the Great Depression it would have tremendously helped our economy get out of the hard time this nation went through. If the people of Yap came to the United States and saw our currency and how we spend it I believe they would be shocked because we pay for everything with a swipe of a card.

Throughout the year our world is been changing at a rapid paced. Back then, Their weren’t bank accounts and plastic debit or credit that they just had to swipe to buy something. Instead, they used paper money that has been out dated because of debit/credit cards and checks. In class, I learned about the cows and chips metaphor which was basically about what the value of money really is. For example, in our the society money is worth the same amount we are spending for that dollar and so on. We can say that we are basically trading items, in this case, the chips for the dollar. The cow comes into the metaphor because it’s like trading the dollars for the cows. Cow are worth the amount you trade them for and depending on who you’re trading them with determines the value of the cow.

In the essay, “The Island of Stone Money” by Milton Friedman. He talks about how an ancestor and a group of people went out to found stone money. They were on there way back to the island but their was a strong storm and the group of people had to let go of stone money to save their saves. It sunk to the bottom of the ocean and they came back telling story about their journey. The people of the island decided that the coin at the bottom of the ocean was the ancestors. Even though it’s not physically in their possession it’s still labeled as theirs. In Caroline Lafargue article,” Yap’s Stone Money” she stated that  “And it could be easy to assume that the biggest stones would be considered the most valuable. But in reality the value can depend on each stone’s individual story.” Each person has a story to tell bout how they adventure to get this big piece of stone.

In the broadcast by NPR, they learned about the stone money at Yap and they figured out that the value of money isn’t real. For example, when people get paid they don’t get money handed to them nowadays, instead it’s sent to their bank accounts the only thing that changes it the number they see when they go into their bank account. In my class discussion I found out that the more money I have the less the dollar is worth. For example, If I get paid $288 one week and go to the store to buy something that’s a dollar it doesn’t seems expensive to me because I have $287 left. However, it might cost a dollar but that can add up to the point where I may have $5 left in my account.

Work Cited

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

Goldstein, Jacob. “The Island Of Stone Money.” NPR. Planet Money, 10 Dec. 2010. Web. 13 Sept. 2016.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 210. Web. 13 Sept. 2016.

Lafargue, Caroline. “Yap’s Stone Money: The Largest and Heaviest Currency in the World.” ABC Radio Australia. ABC Radio Australia, 11 May 2016. Web. 13 Sept. 2016.

Money: Fake or For Real

To some people, money is everything. It’s what they believe in, what they live for and/or what they arrange most of their life around. What baffles me is the incredibility of it all. It used to be that money was backed by items of real value. These green rectangles of paper used to be representative of rare metals and other valuable objects. Now, it’s an entirely faith-based system. Even though the majority of Americans know the government printed too much money for all of it to be properly supported by things of value, we still have faith in the value of our money.

Like Jansen writes in his article, “The Concept of Money And The Money Illusion,” even when entire communities were self-sufficient in making their own clothes, raising their own food and creating a home to exist in, the idea of exchanging one thing for another thing was around. It was such a natural concept that no one thought to take note of it. However, the typical monetary system has changed so drastically and become so abstract that it’s no longer a simple exchange. In order to make the economy more open and accessible, a form of common currency was established to make the system easier to track and regulate. This is also called indirect trade. Having a baseline of value created a more common idea of what something might be worth.

For example, let’s say you raise cows and are trying to sell the milk your cows produce for a profit. Your neighbor wants to buy the milk but without a common currency established, he has no cash. Instead, he wants to pay you in the soybeans he grows in his backyard. However, you have no interest in soy beans. Therefore, the currency he prefers has no value because it’s not worth anything to you. You’re left with milk you don’t need and no cash and your neighbor doesn’t get the milk he wants and now has an excess of soybeans. This creates a stagnant trade system. Thus, the concept of indirect trade was born.

The problem with indirect trade is that the common currency is entirely fake. I understand and agree that the point of the dollar bill is to be a substitute for things of value but what happens when people decide they no longer want to accept the U.S. dollar as a form of payment?

Our economy is built on a series of social contracts. We, as a country, have agreed that our government issued bills will be the intermediary in monetary transactions. Again, this makes our trade system far more accessible and easier to regulate because we have common ground on which to base the worth of certain items. Even though our economy is fragile and balances on a very fine line, it is one of the strongest ad largest economies in the world. Countries across the globe have modeled their financial systems after ours. Whether or not we will continue to stand as an example for the world, I’m truly not sure. However, I believe if recent trends continue in regards to inflation and the decline of the recession, we should be okay for at least a while longer.

Works Cited

Bellis, M. (n.d.). The History of Money. Retrieved September 25, 2016, from http://inventors.about.com/od/mstartinventions/a/money.htm

Friedman, M. (2010, December 10). The Island Of Stone Money. Retrieved September 24, 2016, from http://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money

Jansen, K. (2016). The Concept Of Money And The Money Illusion. Retrieved September 24, 2016, from https://www.bullionstar.com/blogs/koos-jansen/the-concept-of-money-and-the-money-illusion/

Joffe-Walt, C. (2010, October 4). How Fake Money Saved Brazil. Retrieved September 25, 2016, from http://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil?gt=

Zaretsky, E. (2015, April 12). The Invention of Money. Retrieved September 24, 2016, from http://www.publicseminar.org/2015/04/the-invention-of-money/

” What’s it Worth to You?”

As a child growing up [punc] I always thought as money being one definite amount value. And why wouldn’t I [punc] growing up in the United States [punc] in school its [punc] taught a dollar is worth just that [punc] a dollar. But moving forward in life I was able to experience that money is only worth what we as people give it. In the fifth grade I was able to travel to my families original country of Haiti. It was at this time that I found out first hand that money isn’t always worth what we know it to be here in the United States. Now imagine a young boy walking into the small store near his home in America. As he glances around the store he reaches in his pocket to see how much money he has and pulls out one dollar. He knows with this dollar he is able to either purchase a bottle of soda that cost one dollar or a bag a chips that also cost one dollar. Unfortunately the value of his dollar is not enough to purchase both items. Now if we were to move this young boy to Haiti doing the same thing [punc] walks into the store and pulls out of his pocket one dollar. But now the difference is being that he is in Haiti his money is no longer only worth one dollar. Being that he is now in a different country [punc] his dollar can not only get him that soda and the bag of chips but can also purchase some candy as well. That same dollar has increased in value just by relocating where it was spent.

At this moment right now the American dollar is worth 65.09 Haitian Gourdes according to exchange-rates.org. And that is the official rate from the bank but depending on what merchant you go to the dollar could be worth more or less. I know personally that American currency is much more in demand then the Haitian Gourde. Being that it is in higher demand there is more space to barter and discuss prices of certain services like cabs, workers, servants, and  items within the street markets. At a young age I was able to see that American currency was worth a higher value than Haiti’s own currency. It provided insight of the faith and value that had been put on American money. America having a history of being stable and a secure government makes its money more reliable. Being able to experience this taught me that the intrinsic value of money is really only based off of the value that people give it which ties also into how stable the government the money belongs to is. As long as there is faith in the currency whether it be dollars, stones, gold or even corn as long we give it value and are willing to trade for it then it will always have value.

After figure out what it was that gave money its worth it wasn’t much of a surprise reading the article on Brazil’s inflation problem. The value of money ties into how stable the government is at that moment. When looking at Brazil the faith in their government was at an all time low. The only way that Brazil would be able to fix the problem is by starting over, creating a new rate and form of currency in order to sway the minds of its citizens. At this point Brazil was up to an 80% inflation rate a month which is outrageous. Inflation being that high causes the value of Brazilian currency to continue to drop thereby forcing everyone to spend as quickly as possible. In the video above by Doug Levinson he clearly states that this is not good for the economy. It would cause overconsumption and hoarding of goods which would only make the prices of goods and services rise even more thereby causing more inflation.

Inflation being that high meant that the value of Brazil’s currency was low and prices of items were only getting higher causing the trust in the government to diminish. The ways in which the government attempted to address this problem had barely any effect in fact in some cases it made it worse. Leaving the people of Brazil to lose faith in the value of money. In order to fix the problem they had to do just that create faith in the government and the money system. The system that was used at the time was tarnished it would no longer be accepted or trusted by Brazilians. In order to achieve this the Brazilian finance minister invited Edmar Bacha an economist. Bacha and his team came up with a new currency they would call Unit of Real Value “URV’s” for short.  So in bring forth URV’s people could be tricked into thinking that money had value again. Because URV’s was a constant rate it was able to sway the minds of the citizens creating trust and in doing so putting faith back into the money. Doing this meant the citizens would continue to spend at a steady rate which will help the economy grow which helped create more jobs. By creating more jobs it’s a domino effect creating a bigger and stronger economy thereby causing faith in the government and its money system to grow fixing the original problem of trust between the citizens and government.

Milton Friedman’s article “The Island of Stone Money” introduces the people of Yap where there are no “valuable metals” and so as a collective the people of Yap decided to give value to stone coins. When I first read this it threw me for a loop to think that stones would be an adequate means of making purchases was beyond my comprehension. The fact that theses stone coins depending on their size could be left at another persons home but it would just be understood that this huge stone would now belong to someone else I couldn’t comprehend it. When put in comparison of the way we give value to our own money you find that it’s not so different after all. Here in the states we grew from a bartering system where goods would be traded for what we thought what was of equal value, such as trading a wagon wheel for a crate of corn. When then moved on trading gold from gold to paper money and now electronic. Now with the exchange of electronic money you never truly see the actual money its supposed to represent unless you withdrew it all. But I can go to any website enter my account number and make purchase. There is no visible transaction only the changing of numbers to my account balance to me that is not much different from the exchange of ownership the Yaps would do amongst themselves. Even though a person may have never even seen this so-called wealth by faith he owns it and is able to use it to make purchases just as we do.

Works Cited

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

Goldstein, Jacob. “The Invention of Money.” This American Life. Chicago Public Media, 7 Jan. 2011. Web. 13 Sept. 2016.

Friedman, Milton. “The Island of Stone Money.” Working Papers in Economics (1991): 1-7. The Hoover Institution Stanford University. Web. 13 Sept. 2016.

“Exchange-Rates.org World Currency Exchange Rates and Currency Exchange Rate History.” Convert US Dollars (USD) to Haitian Gourdes (HTG). MBM Media, Inc., 2016. Web. 13 Sept. 2016.

TEDEducation. “What Gives a Dollar Bill Its Value? – Doug Levinson.” YouTube. YouTube, 23 June 2014. Web. 13 Sept. 2016.

The Importance of Money

What really is money?  People nowadays work their whole lives trying to receive some pieces of paper at the end of each week in which basically runs our world.  We hear people talk about the american dream in which, is a term that can have many definitions, in which usually, results in you having enough of these pieces of paper to be financially stable.  If we think about it deeply we will realize, that we receive these pieces of paper in which are called money and then from there, we base your whole life off of them.

People trade these pieces of paper for anything from food to fuel themselves to boats in which they can have travels out in the sea with.  It is strange concept to think of because to some people, money really doesn’t exist.  In a way, we are alike the people in the island of Yap.  They had the limestones in which they did not have actual possession of, and they used it as “money” in which they traded someone in return for say, a cow or anything worth value.  These people never really had the limestones in possession, they just said they were theirs, but they sat in the same spot.  This is a great example of how that is also a way we live off today in our world.  At the end of each work week, peoples bank accounts go from a number to a higher number, in which they receive no money, just a lift on the number that it says in their accounts.  From there, some have to pay bills in which their number that just got raised, gets lowered right away and the account of the company they are paying a bill to, gets higher.  This is crazy because in both stories, there is no money that actually sit in hand of a person.

The idea of money not being in actually possession makes sense with the article of how fake money saved brazil.  Years ago, Brazils economy hit an all time low and there needed to be a way to save it.  They thought of a new way in which help save the economy by the next day.  Again their money was all based of accounts, no one had the money in actual possession which relates to how we are today and also to the island of Yap.  These people somehow fixed their economy from this method and also got a grip on how money will actually work.

Money is an adroit concept in so many ways.  The goal right when one start’s school is all played out in a long run to make more of these pieces of paper to make your life more fun and acceptable.  We start by giving these pieces of paper or numbers in an account away to go to school in which we get another piece of paper in return from that, and then this helps us get jobs and which from there, we receive more money again from ones job.  So maybe this world just revolves around paper.  Some people say stop wasting paper because it ruins our world but does it actually?  To some, it ruins the world because we need trees but also, it runs the world because everyone works everyday to get some.

There is a saying that usually parents use that goes, “does money grow on trees?”  If we really think about it, yes it does.  Its all paper which comes from trees.

Works Cited

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, n.d. Web. 25 Sept. 2016.

Goldstein, Jacob. “The Island Of Stone Money.” NPR. NPR, n.d. Web. 25 Sept. 2016.