Stone Money-Philly321

P1. Money originated from a string of shared beliefs in 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 his 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”.  Although the massive stones rarely moved, the system assumed ownership regarding a trade based on these large stones.  In this respect, America’s banking system collapsed based on of the Yap ideas of ownership.  As French gold reserves grew, the United States gold reserves plummeted, thus causing the downfall of the U.S. Economy.  Ownership of the gold allowed France to feel a sense of dominance over the United States even though their gold was based in the United States.  This idea of ownership based on a mark or label really baffles me. I have difficulty understanding the ability to own something that may not be in your physical presence.  I feel an overwhelming sense of distance from the things that I “own” such as my car or television.  Having thought in depth about the concept of money, my perspective on currency and the things that I supposedly “own” has drastically changed.

P2. Furthermore, the 21st century is very complex when it comes to cash management and movement. Technology has taken ‘money’ by storm in terms of physical storage and distribution.  Online banking started in New York in 1981 with the help of large banks such as Citibank. New York set a platform for the online banking system, which may have been strange for the Yap Islanders. However, a connection could be made in terms of ownership between the Yap Islands and people of the 21st century as the Yap Islanders may have not seen their stone they were trading for, but they knew someone on the island must own it. Similar to earlier banking, people may not see their cash and earnings, but they know that it is safe in a bank based on a computer record and added government regulation. After hearing about these concepts my mind is filled with questions and ideas about the intrinsic value of money. The Yap Islanders based all of their trades on something that was not in their possession. I gained a great deal of knowledge from the birth of money and how the banking system was created. Although the concept of money is tough to wrap my head around, the Yap Islanders gave me a whole new perspective on the innate value of money.

P3. The public’s faith in the value of currency allows an economy to maintain stability. Once the public establishes a little bit of faith, the value of currency develops. In 1994, during the presidency of Itamar Franco, Edmar Bacha used a “Unit of Real Value” to gain the public’s trust. In the article, “Brazil-The Real Plan”, Country Studies said, “The Unit of Real Value did not depend on general price and wage freeze to stop inflation”. Bacha used this false idea of money to make it appear that Brazilian’s were not facing a constant rise in inflation. However, the Unit of Real Value differed in cruzeiros, which meant the Brazilians were still paying different amounts depending on the day. Once Brazilian’s bought into the URVs, people never bothered to question the price in cruzeiros — the economy turned around based on blind faith in something fictitious.  In relation to the Yap Islands, I find it extraordinary that money can be presented in various different ways representing different values nearly at the same time. I strongly believe that money is fictitious. Bacha was able to gain the Brazilians’ trust even though his idea of money was not real.  Brazil’s belief in a Unit of Real Value gave their banking system stability and helped them to avoid major debt, unlike Japan.  Japan’s plan to rebuild their economy has many advantages such as fixing inflation, developing new technologies, supporting finance firms overseas, etc., but their major problem lies with Europe.  If other countries adapt similar strategies, Japan could be in for a currency war across Europe.  Therefore, I believe that it is important for Japan to really sell its financial ideas to the people in order to be successful.  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.

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.


Stone Money- belladonna98

Kit-Kats for Nerds

P1. Children do not understand the value of money. On Halloween, they’ll trade a Kit-Kat for a box of Nerds, but they won’t take a dollar for that same box. Humans, on our most basic level, value trade of goods and services for something comparable in return. This system of trade has become bastardized, however, from exchange of goods to exchange of gold, to paper, and so on, until we don’t even know if what we’re exchanging even exists. For the most part, it doesn’t. It is simply numbers on a screen that tell us that we have the power to buy something that we need. So, is there really any value for children, or anyone, to understand? Does money have value anymore?

P2. In the western Pacific Ocean, as a piece of the Caroline Islands, lies the island of Yap. Its inhabitants are fairly unremarkable, save for how they do business. Their particularly scintillating form of currency consists of sometimes giant limestone discs that litter the island. Their diameter can measure a foot or twelve feet, each with varying sizes of holes in the middle. The larger the stone, the more value it holds. If it seems utterly impractical, that is because it is. The stones hardly ever actually change hands, as carrying them would result in braking said hands. So instead, everyone just agrees that a stone has a certain owner. Something large is purchased, and everyone is notified that the stone’s owner has changed. One family is incredibly rich, but has never seen their riches, as they rest at the bottom of the ocean. This may seem primitive, but in reality it is not too different from the American economy. (Friedman)

P3. In 1933, France demanded gold of the United States. Concerned about the value of the dollars they held, they wanted something more tangible in their possession to assure them of their fiscal security. However, instead of physically sending gold to the French, the Federal Reserve set aside gold for France. The actual gold did not travel anywhere, but everyone now knew that it was France’s gold. Sound familiar? (Friedman)

P4. This action of setting aside gold sent the country tumbling off of its fiscal cliff and into the Banking Crisis of 1933. (Friedman) The fiscal cliff is a relatively modern term, but can be applied in the situation of 1933. In recent history, the fiscal cliff referrs to the possible rise in taxes and cuts in spending that would take effect in 2013 due to a federal deficit reduction plan. (Calmes) If this one decision can send the economy into such chaos, then it must not be very stable. Any set of circumstances could manipulate the value of the dollar and its spending power, which begs the question, is the dollar really a stable form of currency? Is anything?

P5. In Brazil, they don’t have dollars. But that doesn’t mean that their currency is not easily manipulated and their economy not fragile. In 1990, inflation was so horrifically high that prices were increasing by 80% each month. (Joffe) Prices were changing constantly, and no federal intervention was able to fix the problem. That is, however, until 1992. That year, four economists put the Unit of Real Value into play, which was essentially currency with nothing to back it up. Prices stayed stable at a certain amount of URVs, wages were always in the same amount of URVs, everything was in URVs and inflation practically disappeared. Fake money solved real financial issues. But it wasn’t the money, it was the peoples’ faith in it. People saw that inflation had ceased and believed that the economy was fixed, and it was. (Glass)

P6. This goes to show how much sway public faith in currency has on the economy. Even if fake money is being used, people will see stable prices and believe in a stable economy. But who is to say what is fake and what is not? The legitimacy of money lies in what valuable commodity it represents. In the United States, that used to be gold, but in recent years the federal government has denied that gold has any bearing on the modern dollar. So the dollar is worth whatever it can buy. In one store, this may be a pack of gum. In another, it may be a child’s toy. People simply agree that something is worth one dollar, and everyone seems to accept it. But in modern times, physical money doesn’t even have to change hands in order for payment to be made.

P7. We live in a digital age, and that ushers in digital money. One very prominent form of digital money is Bitcoin, a completely digital “mine-able” currency that some businesses accept as payment. (Reeves) From the beginning, its creators have admitted to its lack of true worth, but customers mine away, spending dollars on bitcoins. At any given time, a bitcoin is worth a certain number of dollars, which is worth… what? At this point, in this age of the bastardization of payment, dollars may have much less value than we have been lead to believe.

P8. If anyone can make currency out of nothing, such is the case in Brazil and with Bitcoin, then what value does traditional currency have? That is, if currency is even used, and it is not just numbers on a computer screen that tell a person that they have currency. People are told to work for this number, people die because they don’t have this number, people base their entire lives around numbers on a screen, simply because everyone agrees that that number is the be-all-end-all of economics.

P9. In the end, the United States is not that different from the island of Yap, of 1990’s Brazil, or any economy that uses money with “no value”. Items have value, such as the Kit-Kat that is traded on Halloween, or the food exchanged for labor in the dawn of economics. Money used to be backed by valuable metals, but that is no longer the case. Virtual money is coming into power and even physical currency has no concrete backing. The only logical conclusion is that money as we know it today has no intrinsic value. We have all been tricked into believing in the URV, we all have giant stones that we agree someone owns. The economy that fuels millions of lives could disappear tomorrow and no one would have any less. In fact, a lack of a modern economy, at this point, sounds like a better idea. The world may be better off going back to trading corn for labor. At least you can eat corn. How am I going to make dinner out of Bitcoins?

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.