Faith in Money

From economics to international affairs, money powers our world and has the ability to make or break a person’s quality of life. The same piece of paper that buys one family a ticket to Disney World can later be used to put food on another family’s table. The power of money has led many, including NPR broadcaster Jacob Goldstein, to question where exactly money originated, how it evolved, and how it gained the inherent value that it seems to have today. In his studies, Goldstein cites a peculiar story of the people of Yap. In their village, the currency was a block of the rare metal limestone. The citizen that held ownership of the stone, even if it was not in his or her direct possession, could make purchases with the stone. If Jack was the current owner of the stone and he bought Sally’s house with it, the stone could stay with Jack but the village would be informed that the stone was now Sally’s. The citizens of Yap had to have faith that the other citizens would recognize the true owner of the stone, even if it wasn’t present. Since money runs on human faith, as long as that faith persisted, the system could continue.  

The story of the Yaps, although seemingly bizarre at first, sounds very familiar. America started its currency evolution in an almost identical way. Gold, a metal that is considered rare and beautiful, was used as a means of currency. When gold became a hassle to transport, paper money was created. Each paper dollar represented an amount of gold. As the Yaps exchanged their stone through word of mouth, Americans exchanged their gold through paper money. The gold never moved, only the ownership changed. As time moved forward, American money was no longer backed by gold. A dollar bill was just a dollar bill. Its value was not an amount of gold, but now just valued at whatever it can be exchanged for. In present day America, even cash is starting to go out of style. Now, the average American’s finances are based on electronics. Salaries are awarded, bills are paid, and purchases are made just by numbers changing on a bank account statement. If everyone lost their faith in the banking system and attempted to withdraw all their cash, the system would collapse. This is because there is not enough money to back every number on every bank account. As long as people continue to trust the banking system and the value of their dollar, the system can continue to grow.

The idea of faith ruling a country’s economic success is shown in Brazil. When the Brazilian economy began to stumble and inflation was increasing, Brazilians began to lose faith in their currency. One day a cruzeiro could get them three pieces of gum and the next week it could only get them one piece. Each day their cruzeiro could get them less product, so there was a rush to spend it all quickly instead of saving it. This made inflation even worse and the cycle continued, until Edmar Bacha created a system of “real value” currency. Units of real value meant that prices always appeared to stay steady, the only thing that fluctuated was the amount of cruzeiros that was equivalent to the real value currency. For example, if the price of a piece of gum was 1 URV, it would remain 1 URV all throughout the week and the next week and the week after that. However, in week one, 1 URV may have equaled 15 cruzeiros while in week two 1 URV could equal 20 cruzeiros. The people of Brazil began to think in terms of URV’s so prices appeared to be staying steady. Although nothing had really changed, people’s confidence in their currency was regained, and that confidence allowed for a true change in the Brazilian economy.

All in all, the people’s trust in their currency is the most important aspect of a stable monetary system. If people have faith in the value of their currency, they will feel safe saving, spending, and accepting it. If one day all American companies decided that the dollar was worthless and they would not accept it as payment, then it would be worthless because it cannot be exchanged for any goods or services. However, as long as companies continue to feel as though the dollar is something to be sought after, the dollar does have value. When it’s broken down it means that one day someone can be rich and the next day they could have nothing. Despite the system’s apparent fragility, it’s not time to lose faith now. Currency systems like the United States’ are essential to society and as illogical as they seem, they work. By how things are going now, people are not likely to lose their idea of value in the dollar any time soon. Companies continue to seek the dollar crazily. People work tirelessly just to see the numbers in their bank account rise each week. As long as this pattern of intense desire for the dollar continues, the American monetary system will be able to thrive indefinitely.

References

Goldstein, Jacob. “The Invention Of ‘The Economy’” Planet Money. NPR, 28 Feb. 2014. Web. 13 Sept. 2016.

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

“How Fake Money Saved Brazil.” Planet Money. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

“The Invention of Money.” This American Life. This American Life, 7 Jan. 2011. Web. 13  Sept. 2016.

Money, Is it really worth it?

The great debate of money has finally crossed paths with a counter intuitive intellectual like myself. One would say money has no intrinsic value at all. According to some of these sources money doesn’t even have to be seen and people still believe that it is valuable. Literally someone can say that this piece of paper that we call money has this specific amount and as long as that person who told them has someone to vouch for them one would believe them. For example people buy merchandise off of eBay all the time without knowing the specific value of an item or if the person they are paying for the item is giving them what they intend to buy. All they know as the buyer is that some numbers from their bank account are being decreased as if they purchased what they wanted. They don’t necessarily know for a fact that the person who sold them the merchandise has received the money for the item or if they are going to receive the item that they believe they purchased.

That was just one of the many examples of how the intrinsic value of money varies. Some would say it doesn’t have any at all especially with the proof provided.` It isn’t set in stone that they would get what they payed for on eBay, but people still buy merchandise off of that website everyday. Even though they know the consequences of their actions can result in loss of their hard earned money, and they might receive an item that they did not want.The point I am trying to get across is that we don’t always have to see it to believe it. In some circumstances money doesn’t even have to be present and we still believe it is there because some numbers in our bank account get changed around. So sometimes I ask myself is money even a real thing? Why do we cherish this piece of paper so much?

People can be so oblivious to the fact that we worship this piece of paper and it controls so much of our lives. Money is so powerful in the world today it’s actually crazy. It really is the one language that everyone seems to understand. It has taken over our world as we speak. We are so greedy in this world today, and we have let this piece of paper suck the life out of our country by making every little thing about money. Health care is a prime example as to why our country is greedy for no reason. We are apparently the richest country in the world, but yet we are one of the only countries who has to pay for health care. If that isn’t counter intuitive then i don’t know what is. We have the most money in the world but we have to pay the “richest country” for health care? We can’t even help save our own citizens lives for free. We have to pay for unnecessary things in this country and its quite astonishing. We let our government get out of hand with what they charge us for in this country.

It’s amazing to me how unbelievably true some of these articles are. The people in America and all around the world  just believe what people of higher power say about this piece of paper and we just go with it. We literally just sit there and accept what someone of a higher power says. According Milton Friedman The yap used huge stone disk as their money. The yap would not be able to believe how this small piece of paper could be so valuable, powerful, and easily transported around the world. When in their time they just left this huge piece of almost impossible to transport stone where it was and told everyone in the community who the new owner was. I personally believe the yap wouldn’t understand  how we have several banks all around the country and we can deposit and withdraw money so easily.  They would be amazed as to how convenient this piece of paper can be compared to that huge piece of stone. A step that may have seemed impossible back in their time has evolved as one of the best inventions of all time and one that we will use forever.

The Brazilians trusted the currency because it was actually a stable, trustworthy, and dependable method. The method was actually fake in the beginning, and it had no real value. Until they realized that this method actually worked for the better and it made things easier for everyone.  The prices of things were very clear to them and eventually turned out to work in their favor. This specific “fake money” method actually saved Brazil. There was a huge inflation in the country and it was happening at rapid speed. So someone had to come up with a plan to potentially save the country from bankruptcy and it worked. People would say using this method is absurd and risky but since it worked there isn’t really much to say.

Works Cited

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

Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015. <http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil&gt;.

Money is Truly Fictional

Money is something that is involved in all aspects of life around the world. What does a new mother in France trying to get formula for her baby have in common with a young man fresh out of college in the US in search of a suit for an interview? Well the answer is they are both in need of money, because everything out there cost money. Even though each country uses a different type of currency, they all still use a form of money to be able to live their everyday life in society. What really makes each type of currency different though is how exactly each economy values the money they have and in what way they use this currency to trade.

The island of Yap is a great example of how their form of currency is not only limestone rocks but may also never be in their physical posession. Yap does not value direct ownership of money in their hand to know that they are wealthy, yet they value the idea of ownership even when it is not their direct possession. For some that may seem very odd, the idea that I own this stone that is worth so much but I may never actually have it in my hands or may not even see it. While this seems very far fetch to some it is not much different from what we do here in America with bank account and dirrect deposit or what Brazil does with URVs.

As they talked about in the NPR broadcast this is really not much different from what we do here in the United States. When we get paid from our jobs and it is deposited directly into our accounts. We see that we have this money digitally but we never actually physically possess this money. Then we pay a bill from our account and now that company has that money yet no one has ever physically held this money in their hands, which really means it may not actually exist. This just proves that what we do here in the United States is not all that much different from what the people of Yap did, just their basis of ownership is based on trust and is not done electronically.

This is also similar to the Brazilian currency of URVs. URVs was a fake currency designed to help the economy grow and the value of something be consistent. All of this was done virtually creating a sense that there was money even when nothing physically was being traded, it was all just numbers on a screen. This also helped the Brazilian economy realized the worth of certain things and helped their economy flourish instead of becoming more and more in debt.

The way people trade and value their money is something that is all very abstract and obscure but is not different from a child who trades and values a trading card. We view money in the same way a young child values their Pokemon Cards, where one child values a Pikachu more than the other child who values their Charmander. In a sense it’s viewed the same way that the way one person values a stone can be the same way another values a dollar, or the way someone else values gold locked in a box three thousand miles away. Money is really just fictional and is only worth whatever the person viewing it perceives and values it.

 

Work Cited

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

Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015. <http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil&gt;.

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

The Illusion of Money

Money. One word with countless definitions. To understand the concept of money, I searched the internet and came upon the article by Adriene Hill, “Money: The Myth We All Believe in.” In the article, psychologist Adam Waytz said, “Money is a shared illusion.” Money is not a physical paper or metal, but a pure and dedicated belief in an object with no real value other than the value of what others believe it to be. If every citizen in the United States thought buttons or sea shells had monetary value, then the use those objects would become our currency. To a seven-year-old, the colorful Monopoly game hundred dollar bill could have the same value as a real hundred dollar bill if that was what his parents made him think. In reality, that child couldn’t use the Monopoly money to buy their favorite candy from the dollar store because Monopoly currency isn’t excepted as “real” money to the cashier ringing up the treats. Literally anything can be money if everyone thinks it has monetary value.

Take for instance, the natives of the island Yap mentioned in Friedman’s essay “The Island of Stone Money.” While here in the United States we make our deals and purchases with paper money and copper pennies, the Yaps use large, carved limestone wheels called fei as their physical money. The fei is an immovable stone where its owner can change with only an agreement between two inhabitants of the island of Yap basically states, “It’s yours now” and the other responds with, “I own it.” In the essay, Friedman mentioned how a family’s wealth is “acknowledged by every one” despite the fact that no has seen the fei that makes the family as wealthy as it is. How can anyone, let alone everyone, believe that the family owns some stone only seen by the family’s ancestor and his expedition crew? It is only because they believe that the stone exists that the stone has value. The “illusion” that a carved piece of stone, seen or not seen, has value because everyone says it does is baffling, but they’re not the only ones in the world with this view on money.

Similar to the Yaps, the United States relies on the customers of banks and business to believe in what we call credit. Today, many U.S. citizens use credit to purchase items despite the only evidence of one having “money” is a plastic card, maybe containing a chip, that according to the bank has a value of so-and-so dollars.  We neither see the money that is acknowledged as ours by the bank and the establishments we use the credit to buy merchandise from nor move the money physically because we trust that the credit will move from the bank to our account to the establishment through virtual means. The only difference to the Yaps is that we have a third party involved, a.k.a. the bank, during agreements of “I own this, now you own this.”

As I mentioned previously, the value of money is due to the pure and dedicated belief that the currency used is real. My point is further proven by NPR’s article about Brazil’s currency change from cruzeiros to reals. In the beginning, Brazil suffered from inflation that made the cost of items in cruzeiros increase day after day. Brazilians lost faith in the cruzeiro’s value. The government then introduced a virtual price, URV, that had the price f items remain at a constant price unlike the ever-changing prices in cruzeiro. Overtime, the URV was trusted and believed in more than the cruzeiros, thus leading to the end of the cruzeiro and the beginning of the Brazilian real. The real was only able to be made the new currency because of the collective thought that this currency was better than the old cruzeiro currency. Money is valued only by how much everyone believes in the currency as seen by how the Brazilian cruzeiro became obsolete when a better looking, new currency was introduced.

The German government, as mentioned in “Bitcoin Recognized by Germany as ‘private money'” on CNBC, planned to have Bitcoin potentially become the new currency if the faith in the euro decreases like it did for the Brazilian cruzeiro. Bitcoin is more similar to the Yap islanders’ money exchange because of the lack of the middle man, the bank, and how the lack of physical evidence does not affect the value of the Bitcoin, since it is purely an electronic currency. This raises the questions, Is this real money? Is there any value? All I can say, is that the value of the Bitcoin will be what the people of Germany and the world will believe it to be. ((((((need to add Clinch in this paragraph))))))))

Physical money can be paper, metal, or stone, but the true value of money depends on the thoughts and beliefs of the people who use it.

Works Cited 

• Clinch, Matt. “Bitcoin Recognized by Germany as ‘private money'” CNBC. CNBC, 21 Aug. 2013. Web. 13 Sept. 2016.
• Friedman, Milton. “The Island of Stone Money.” (n.d.): n. pag. The Hoover Institution, Feb. 1991. Web. 13 Sept. 2016.
• Hill, Adriene. “Money: The Myth We All Believe in.” Money: The Myth We All Believe in. Marketplace, 12 July 2013. Web. 13 Sept. 2016.
• “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 14 Sept. 2016.

Talking Money

P1. Money is what makes the world go ’round. We all recognize the importance of money in our capitalist society. After all, we spend over 20 years of our lives receiving an education for what? To earn money. Money is traded blindly for everything from a bag of chips to a house.

P2. In 1991, anthropologist Milton Friedman visited an island called Yap, over 8,000 miles away in a subregion of Micronesia.  The official currency of the island is Fei. The currency is created out of sandstone which is designed in the shape of a donut, ranging from one foot in diameter to twelve feet. These “coins” are typically taller than a man, and weigh more than a car. For the reason that these stones are so large and heavy, one is not required to possess the coins in order for them to be property. After a transaction, the new owner of the stone is broadly recognized, which disposed of the need to equip them. As a result of this, there are situations in which rich families of Yap have never even seen their wealth.

P3. Years ago, relatives of a rich family were hunting for Fei. After the discovery of a massive Fei stone, the family captured it and tied it to their boat in an attempt to bring the money home. Disastrously, there was a violent storm on the night of their voyage home. As a result, the family had no choice but to save their lives and drop the Fei overboard. Once back at the village, they had to testify for their money that was dropped. The family explained the massive size and wealth of the stone, and declared that it was lost through no fault of their own. The family was then permitted to retain the stone as their own with absolutely no loss of value. Now, it is accepted in their village that there is a stone in the ocean that has never been seen yet holds massive wealth.

P4. Does the idea of not actually having your money on-hand sounds trivial? Well the Fei is very close to the American currency system.

P5. Before 1933, American currency was backed by gold. This meant that the trade of dollar bills was a promise of gold which was held in banks. After 1933, the decision was made that we may no longer trade money for gold at our banks. The American dollar was officially unbacked.

P6. As of today, our money is still unbacked and the only true value of the dollar is what someone can buy with that dollar. Further, money is now optionally paperless. The money that is held in bank is utilized to give loans. The money that resides in the bank is essentially a fictional number with no actual cost, money may not even be in the account at the moment. At this point in our society, citizens are trading virtually useless pieces of paper for goods and services. The only reason these pieces of paper have value is because we want it to. We believe it has wealth.

P7. Growing up, I never understood money. However, after my new education on the topic, I’ve recognize that the fictional value we place on money is a necessity. Without money, contrary to popular belief, the world would be chaos. What is the incentive provide services or create and trade goods? We would not have teachers, doctors, lawyers, or even public officials. The blind faith that we hold in our currency, although dangerous, is currently essential.

Works Cited

The Planet Money Team. “The Invention of Money.” Audio blog post. This American Life, 7               Jan. 2011. Web. 23 Oct. 2016.

Friedman, Milton. “The Island of Stone Money.” The Economic Journal 25.98 (1991): 281.                   Web.
The Planet Money Team. “The Lie that Saved Brazil.” Audio blog post. This American Life,                 7 Jan. 2011. Web. 23 Oct. 2016.
“How Fake Money Saved Brazil : Planet Money : NPR.” Planet Money. NPR, 4 Oct. 2010.                     Web. 23 Oct. 2016.
Renaut, Anne. “The Bubble Bursts on E-currency Bitcoin – Yahoo.” Yahoo. AFP, 13 Apr.                      2013. Web. 23 Oct. 2016.

Does Money Truly Exist?

For as long as I can remember, I have always viewed money as a physical item whose digital presence only existed for as much money as there really was in the physical world. However, NPR’s broadcast on money made me realize that money is not truly physical, but more so an idea that expresses wealth. Through further research on the topic, I learned not only that money as an idea has been seen throughout history, but how it works and even helps.

Initially, I was introduced to the concept through the aforementioned NPR broadcast. The hosts of the broadcast discussed how all money cannot be truly accounted for. If someone makes a deposit of cash to a bank, then it is possible for that same cash to be loaned to a startup business. The money that the original man deposited is still his, but its physical form is no longer in his possession. (NPR) Despite not having physical money, an individual’s wealth is undisputed through digital numbers. A significant amount of purchases, withdrawals, deposits, etc. occur by simply transferring these numbers. For example, if someone wanted a computer then they would give them money in order to acquire it. Where this gets interesting is that most people will not purchase an expensive computer with physical cash. Rather, they will swipe a debit or credit card and their digital numbers will transfer over to the store. Now they have officially bought the computer as far as the business is concerned. This may appear normal at face value, but when I was thinking critically about it, it was almost baffling to consider that someone can get a real item with the use of non-existent currency. This made me realize that money is more imaginary than it is real.

Alongside the broadcast’s discussion of money as an idea, one of the hosts brings up a story that is elaborated in Milton Friedman’s The Island of Stone Money. In this essay, Friedman talks about the Island of Yap and how its residents would use giant stones to make major trades. These stones stayed in one spot even if it was traded. Natives of the island simply took a mental note of who the new owner was. (Friedman) While it may come off as a foreign concept, the idea of stone money being traded in a mental, almost imaginary space is no different from the way modern day countries have their “money” as numbers stored in a digital space. The stones of the Yap culture share the same exact presence and purpose as the digital currency of present day.

This concept reminded me of discussions I would have with my father. He had been experimenting with bitcoin mining, and as such would frequently talk about it. However, I never could grasp the concept of people digitally mining money that had real world value until now. Bitcoin miners have machines that compute complex code in order to generate bitcoins into a virtual wallet. These bitcoins can then be used as currency while remaining anonymous. (Renaut) What had always perplexed me was how these bitcoins, which didn’t exist in the real world, could have value to them. Through my recent research, I realize that people hold value in bitcoins, because they trust it. The people of Yap learned to trust the stones. The people of America have learned to trust the number shown in their bank account page. It may seem overly simple, but it really is just that. If something can be vouched for, then people will trust it. The wealthiest family of Yap did not even have a stone on the island. People simply vouched for their ancestors that their stone was not only the grandest of all, but it had fallen into the ocean. What banks of the modern day do is no different. A bank is simply assuring its users that the numbers they see in their account are legitimate.

The idea of money not existing in a physical sense had even saved the nation of Brazil. During the 1950s, Brazil printed so much paper money that over the years they faced a massive problem of inflation. In 1992, four men countered this by coming up with the Unit of Real Value or URV. URVs was a virtual value of everything from prices to wages. The URV of any given thing never changed, but the amount of cruzeiros, Brazil’s currency, that a URV was worth did change. (Joffe-Walt) While this concept of imaginary money is a little different from the ones previously discussed, it still relies on people’s faith in a non-physical form of currency. While people are going out using cruzeiros as a means to purchase items, their paper money is only worth as much as its value in URVs. Citizens of Brazil have to put their faith in a constantly changing URV similarly to how the people of Yap put their faith in the value of stones.

After all of that extensive research, it is still a little hard to swallow that money has to be trusted and is not something that can be known for sure. What if banks mess with an account’s numbers? What if the wealthiest family on Yap lied about their giant stone at the bottom of the ocean? Despite the abundance of questions I may have, I did get an understanding of how it works and in the case of Brazil, how it can even help.

Works Cited

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

Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015. <http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil&gt;.

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;.

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

What is Money Really Worth

The value of money is just what one may believe the monetary value of it is worth. A rock for a good, money for an island was based off a stone that people couldn’t physically hold but  were able to trade and this was based off a german colonized island called Yaps. This island value of money was based off a large stone which was never moved or was touched just left there and had different owners. Based off exchanges and trades made the stone would have a different owner. “They often talk about the stones themselves not changing hands at all, “Fitzpatrick says. “In fact, most of the time they wouldn’t.” No matter where the money lied on the island it was yours. They even had an occasion where the stone had fallen off a man boat and laid at the bottom of the ocean, and the people of the island still agreed the stone had value to it. The Yaps never had a different system of money and they believed that their system worked they knew what stone they owned and how much it was worth during and exchange and never saw a problem so they kept with their logic. While in the U.S they used money as a monetary value for gold. France felt as if the value of money would fade and that France wanted there money in gold. U.S bank if New York just placed the gold aside and had it labeled for France. As time went on Frances banks increased while U.S banks collapsed which cause a major problem in the economy. Frances power of money increased while U.S drops even though France didn’t have physical possession of the gold or no where near them, meanwhile the gold is just sitting in a U.S vault while the U.S suffers but they can’t use the gold because it technically not theirs.

For me I believe I should have possession of my money, if I wanted to make an exchange for a M&M I would want to be able to hold my side up which would be providing the money, be given the M&M I need to complete the transaction. I wouldn’t want to be like my horse is down the street but it is yours now. I would want to be able to show the horse in exchange to to buy the M&M. I would also want it to be the other way around, if someone is trying to buy a product off me such as milk I would want the money while the exchange is happening for my milk. In today’s world people don’t even carry money on them, they just have a digital showing of how much money they have in the bank by an app on there phone or a bank statement almost as if they have a stone at the end of their street that is theres but have no real possession of it and just claims that there stone is worth a gallon of milk. Most people don’t care too much about having the hard cash on them as long as they look into there bank account and see the money rise they are satisfied, which is something I don’t like. People today are paying in stone and credit cards and the seller could have no idea if the person really even has the stone to make an exchange but they could care less as long as they see something in exchange that could help validate that the person may or may not have the money. Today’s world the dollar is only worth what one believes it is worth. Money can be represented as a bolder and if I believe that the bolder is worth a gallon of milk and so does the man on the other side of the exchange then we both can agree on it, we can make the exchange and I could get my gallon of milk. Money’s worth as much as. The bolder can only be worth as much as the next person in line is willing to trade for it, that bolder can buy one gallon for one store but if we go down the street that same exact bolder can get 3 gallons of milk. Value of money can only be inherited to one’s belief of how much a dollar should be worth.

While in Brazil they were having problems with inflation of money and keeping a stabilized economy. No one was able to figure out what was causing this inflation but it caused the people of Brazil to spend money instead of saving it due to the prices raising everyday. Then four economists, and they went on and had to create fake currency called URV. They believed people of Brazil needed to regain hope in the faith of a stable cruzeiro, and believed the URV was the thing to trigger a more stable economy. “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.” They went on to change all cruzeiro into URV, such as wages, taxes and food. By doing so whatever the inflation rate of a given item was the URV would stabilize it so that there was no inflation. The people in Brazil were using fake money that really meant nothing to them. Since it brought down the inflation of the economy no one cared and just brought happiness back to the people of Brazil.

The physical property of money means nothing to people as one can see from Brazil. The people of Brazil were able to be tricked into believing in a system of money that was fake and really was worth nothing. Just by what Brazil did you can tell what the real thoughts of money means to the people of Brazil. They believed in having a physical property that met the demand of a need. The economy in Brazil used to be like chasing a tail just as you thought the price of your chips would stay stable and at the same price it would just raise, so the people would almost be chasing the tail of chips trying to get ahead of it so that they could get as much as they can for as little price as they can. This is what forced the economics to create this fake value of money called URV, so they could help the people afford chips at the low price. People believed this would be a good idea in this type of need happiness to me comes from money because there are so many things you can do with it such as travel and buy nice and fancy stuff and just be able to enjoy some aspects of life that many aren’t able to do. But when you have to worry about spending your money because prices will increase. Value of money to them meant nothing they were able to trade invisible money just like a rock across the town for there chips. That value of money was able to restore the economy of Brazil at such a quick rate which proved that the value of money means nothing to a whole, but more to the individual trying to get that bag of chips for the lowest amount of rocks possible.  

Work cited

Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford                         University, Feb. 1991. Web. 13 Sept. 2016.

Country Studies. “Brazil- The Real Plan.” Brazil- The Real Plan. U.S. Library of Congress,         2012. Web. 13 Sept. 2016.

Novus, Stella. “The Megalithic Money of Yap.” Ancient Origins. Ancient Origins, 04 Jan.                   2013. Web. 12 Sept. 2016.

Money: What is it Worth?

P1. Every country in the world has some type of currency. The United States and Canada use dollars, the United Kingdom uses the pound sterling, and most of Europe uses the euro.  Each of these currencies have different values and ever changing exchange rates. For example, when I went to Canada this summer one US dollar was worth more than one Canadian dollar and this got me thinking what is the difference? I was not complaining because the exchange rate was in my favor but I was very curious.  One question that kept going through my mind was “Can one US dollar purchase more goods that one Canadian dollar?”

P2. One way to simplify how one values currency is to compare it to cows and chips. When I was in high school I remember hearing about bitcoin for the first time. At first I had no idea what a bitcoin was and my first question I asked my friend was “Which country created bitcoin?” The correct answer was no country did, but it was created by someone and a bitcoin is not an actual coin. In the article, “Bitcoin Has No Place in Your – or Any – Portfolio”, by Jeff Reves, one important thing about money is that a bitcoin is that it is not owned or backed by any bank . So a bitcoin’s value is based off what it is traded for in the market exchange. The value of a bitcoin can vary from day to day just like a stock. With a bitcoin, it literally is worth what people say it is worth which makes me wonder if a bitcoin really worth anything in real value. It is important to note that people use many different currencies to buy bitcoins, a few examples are United States dollars, Canadian dollars and the euro. No country backs the bitcoin as an official currency and it is not backed by gold or anything of value. So if the local 7/11 store charges one bitcoin for a bag of chips then that one bitcoin is only worth a bag of chips. One week later a farmer charges half a bitcoin for one cow. So now the value of a bitcoin may have changed, depending on what people value as more important, a cow or a bag of chips. So how does society value what is more important? A bag of chips could be worth more than a cow to some people, but to others a cow can be more valuable.

P3. While the United States currency is officially the US dollar, some countries have more unique currencies. One example of a country that uses a unique currency is the island of Yap.In the article, “The Island of Stone Money“, by Milton Friedman, it is told that the Islanders of Yap used stones as their currency . The interesting about is that some of the stones were too large to carry around in a pocket, so they were left somewhere and people would just know who owns the stone today. In a way it is not too different than the money in our bank accounts. I know the money is in my savings account but I cannot see it unless I went to the bank and withdrew it.Another concept that I found interesting in the article,  “The Invention of Money”, by Ira Glass, was that mind money is physically real but only worth what society values it for. One example would be if someone says “I will give you one dollar for the soda,” then one dollar is worth a soda but if a different person said “I will give you a soda for $3,” then one dollar is not worth a soda. Money is what society says it is worth, but the value of the United States dollar is almost universal because most stores will not charge someone more than two dollars for a soda .

P4. While I am not an economist or economics major, I know how bad inflation can be. From the 1950’s to the 1980’s, Brazil had a chronic inflation problem, according to Channa Joffe-Walt in the article “How Fake Money Saved Brazil.” The problem in Brazil was that prices kept rising and people had no faith in money, also most people were probably not  saving their money because over time it would lose its value. If I lived in Brazil at this time I would have no faith in my country’s money system. Rampant inflation makes people feel that their money is losing value every day because in a way it is. Currently, I do have faith in the United States dollar because it is considered a stable currency worldwide and while the value of the dollar has inflated, the inflation rate is very low.

P5. Over the last two weeks my concept of money has not changed, although I do feel that I have learned a lot more about currency and some aspects of economics. I still do have faith in the United States dollar. I know it is a stable currency and at least in my lifetime has not experienced rampant inflation. Although I understand how the Yap island currency can be similar to the United States currency today. An example would be that when I got paid this summer I was paid via direct deposit, so I knew I had the money, but I did not physically have it in my possession. Another reason I had faith in the money in my bank account was that I used it to pay off a credit card bill so I know the numbers in my bank account have value. If my credit card was not paid off my credit score would go down and I would be charged even more money, so the numbers in a bank account are important. In brief, I believe money is very valuable and a necessary thing for society to thrive.

Works Cited

Friedman,Milton. “The Island of Stone Money”. Hoover Institution. February 1991. Web.

Glass, Ira. “This American Life.” 423: The Invention of Money. N.p., n.d. Web. 13 Sept. 2016.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 10 Oct. 2010. Web. 13 Sept. 2016.

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

The Value of Green

When we first hear about the island of Yap and their money, we think it’s counterintuitive that the transfer of limestone rocks (some of which are never seen) could be physically exchanged in return for tangible goods and services. On Yap, a small group of islands in the Pacific Ocean, a large, cylinder-like stone, referred to as a rai stone, was used as a source of currency to pay for trade amongst the Yap Islanders. In the article The Megalithic Money of Yap, Stella Novus said, “the rai stones were special, reserved for things like a bride’s dowry or exchanged when one tribe came to the aid of another in time of war and hardship.” Yap came to trust in their money so completely that they dispensed with the need to move huge stones from one person’s house to another. Ownership of the rock “changed hands” only metaphorically. So why does it at first seem counterintuitive, and then, when we (the “moderns” looking back at the changeover) compare it to our own system, why does it seem to be at least as reasonable as ours? Of course, money did not simply acquire power. It had to legitimize under the counterintuitive notion that paper could be equivalent to gold. Once this idea took hold, we developed a system similar to the island of Yap by transferring money electronically (that could be paid later) in exchange for palpable goods and services. Our trust in technology and money (most of which is never seen) correlates directly to the Yap’s trust amongst other islanders and limestone rocks.

Our banking system [via online banking, direct deposit and paperless bank statements] makes an economy run smooth and effectively. On Yap, a limestone (that may not even be real) was being exchanged for tangible good or services. Yap had an abstract concept of the value of money (relative to currency) long ago and we’ve seemingly advanced this idea by accommodating to an ancient method of valuing money. By reflecting and seeking out the insufficiencies in Yap culture, we were able to build a more sufficient economy that’s fast and efficient.

The intrinsic value of money stems from how people perceive its worth. Worth can be defined through the perceived importance of something palpable or impalpable. For example, the Blackfeet tribe, an indian tribe in Montana, found value in their horses after utilizing their beneficiaries and capabilities. A horse could carry large amounts of luggage and allowed Native Americans to both move and catch their prey quickly. All of these attributes were seen as assets that gave a horse value. The Native American’s ideology directly correlates to America’s perception of a small, green slip of paper. Take a sandwich for example. A sandwich could have cheese, turkey and mayonnaise, however, without bread the sandwich is incomplete and unworthy. The people are the missing bread to the sandwich.The public’s faith in the value of currency allows an economical system to run effectively. Once the public establishes a little bit of faith, the value of currency develops. Humans, in the most basic form, have the ability to determine what is and isn’t significant to them.

Money originated from a string of shared beliefs in Yap, a small group of islands in the Pacific Ocean. A large, cylinder-like stone, called a rai stone, was carved of limestone formed from calcite crystals. Rai stones were used as a source of currency to pay for trade amongst the Yap Islanders. The rai stones weighed in at nearly 4 metric tons, which made it nearly impossible for people to move these stones around. How did the Yap Islanders know who owned the rai stone? Truth is, the rai stone switched hands rapidly and had new owners more frequent than not. The people figured out who owned the stone pending a tradeoff among two of the islanders. Although it seems ridiculous, Yap paved the way for American economics based on their transactions and cultural practices.

In “The Megalithic Money of Yap,” Stella Novus notes the similarities between our present economy and the tribal culture of Yap.  Online banking is an electronic payment system that enables consumers to make transactions via the Internet. Online banking started in New York in 1981, with the help of large banks such as Citibank and Chase Manhattan. New York set a platform for the online banking system by creating an new, innovative way to make business transactions both quick and easy. People are now able to make a payment online with the click of a button. The physical storage and distribution of money has been revolutionized by technology. Management and movement of cash during the 20th century may have been very complex on the island of Yap, but at the same time there is an obvious connection. On Yap, people may not have been able to see their rai stones, but they knew they were on the island somewhere. This relates to the idea of online banking because we might not able to see our money, but we make the assumption that our money is placed safely in the bank of our choice.

In 1931, France necessitated that the United States pay them gold to help stabilize their economy. Instead of physically sending the French gold, the United States set aside gold in their national bank to satisfy the French. The gold assumed ownership, by virtue of their agreement, under France’s name similar to early Yap practices. As French gold reserves grew, the United States gold reserves plummeted, thus causing the downfall of the U.S. economy.

In 1994, during the presidency of Itamar Franco, Edmar Bacha introduced the idea of the “Unit of Real Value”. The “Unit of Real Value” was virtually make-believe money that served as a unit of currency used to value goods. How did it work? In “Brazil-The Real Plan,” Country Studies explains that the number of cruzeiros rose every couple of days while people were distracted by the idea of new currency. For example, someone may buy an apple and use one “Unite of Real Value” worth ten cruzeiros. The next day someone might by the same exact apple and use one “Unit of Real Value” worth twelve cruzeiros. The fluctuation between the underlying worth of the apple drove inflation numbers back to normal. Bacha’s plan saved Brazil’s economy by stabilizing inflation in the form of a new currency.

Ultimately, the United States does not differ much from other economic backgrounds. A slip of paper was a simple concept until someone wrote symbols on it and deemed it essential to our way of life. France gained its wealth with gold that was stationed in the United States. The evolution of money has made its way into the digital form. Brazil’s economy has made a drastic recovery based on the public’s blind faith in something fictitious. Yet, we still ask, what is money? The only rational explanation is that money has no intrinsic value. Currency is a string of beliefs that has been made up to make it easier for someone to purchase a horse without having to trade a pig or cow in return. In the end, none of these scenarios would have been accomplished without the individuals behind them. As Edmar Bacha believed, the people are the foundation for an effective economy.

Works Cited

Country Studies. “Brazil- The Real Plan.” Brazil- The Real Plan. U.S. Library of     Congress, 2012. Web. 13 Sept. 2016.

Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford            University, Feb. 1991. Web. 13 Sept. 2016.

Moore, E.R. “Horses and Plains Indians.”Horses and Plains Indians. Rolf E. Moore and Texarch Associates, Feb 2013. Web. 02 Nov. 2016.

Novus, Stella. “The Megalithic Money of Yap.” Ancient Origins. Ancient Origins, 04 Jan.     2013. Web. 12 Sept. 2016.

“The Invention of Money.” 423: The Invention of Stone Money. This Is American Life,      WBEZ. Chicago. 7 Jan. 2011. Web. 13 Sept. 2016.