Stone Money – cfalover

Complexity of Money

Money is a complex concept to many, but to me, it is almost like a belief or even a religion. If people didn’t believe in money, it most likely wouldn’t exist. Before reading further on the invention of money, I believed money to be a tangible item that shows how much you are worth. When I first began to listen to the podcast about the story of “Stone Money”, it seemed bizarre to me. I had heard of currency similar to ours in other stories, but this was different. The NPR podcast called “The Invention of Money” gave me a slight background on the story of these people using stone as their money, which in all honesty, made me question the logic on this. According to Milton Friedman’s paper, the people on the island of Yap had used large thick stone wheels as their currency in the early 1900s, and they called it fei (Friedman). As I continued to analyze this information, it became clear to me that our money system in the United States is actually very similar to the system on the island of Yap.

Friedman’s article described how the German government decided to write on the fei that it was theirs when they purchased the islands. If they can’t move the currency or have it “on them” at all times, what is it worth? The value is based on what the Yaps see it as. The same event happened with the French and our Federal Reserve Bank. The French kept the gold in our reserve with labeled drawer with their name, but it wasn’t even helping them by having it in our bank. In these situations, the governments did this so that the people saw that this money was theirs; it was a form of showing power and dominance over the people. It wasn’t about the value of the money or how much money they had, it was just to establish power.

Yap’s money was definitely more abstract than our money in America is. Using large, bulky stone wheels as currency (since they were impossible to move), forced the people of Yap to create a system to know which wheels are whose. Many people on the island just knew that one wheel belonged to John, etc. If John were to purchase or trade something though to someone named Jane, then the town would know that stone as Jane’s now. In America, this type of system would make people, I think, very insecure because others can know how much money you have, and in America, that is a very touchy subject that people rightfully don’t share. Our use of these green, flimsy paper bills are not much better though. The people of Yap can’t exactly have their money become lost, destroyed, or stolen very easily. In America, our bills are not worth very much at all. Reading these stories really made me realize this. Our money can get ripped, stolen, or lost so easily since it is just small paper and coins. Not a lot of people would even realize your money is gone if you didn’t announce it. In Yap though, if your wheel was missing, everyone would know. The people of Yap, I believe, would consider how small and easily moveable our currency is extremely bizarre. They would most likely not understand how our money can be so fluid and easily exchangeable. Maybe in America, we need to create a new, abstract currency just like the island of Yap did.

Bitcoin is another popular currency in the world today that is another type of currency to look at to compare to our money and Yap’s money. Bitcoin is a very abstract take on currency, and I specifically did not know much about cryptocurrency myself besides the fact that it was becoming very popular over the last few years. The article from Market Watch gives a quick insight on what bitcoin is and why it isn’t as trustful as people believe. Jeff Reeves goes in to talk about how this cryptocurrency honestly lacks a true value because it doesn’t have a central bank like we have in real life. If we need to take out 100 dollars, we go to the bank, and withdrawal that money in cash from our account. In bitcoin, it doesn’t work that way. Its worth has also plummeted by a great value over the past years as well. It is basically now just worth whatever a person is paying for it. Since it has gone through so many peeks and declines, it isn’t very trustworthy and, according to Reeves, isn’t something people in today’s world should bother investing in. Compared to the stone wheel and our paper money, this is the most “unreal” of it all.

One important aspect in any country should be that the people need to have faith in the value of their currency. Like said prior, money is almost like a religion. People love to have the shared credence that money is incredibly valuable. In the past generations, like those on Yap island, everyone knew which stone belonged to who, and how much each person had. I don’t believe they were worried about the reliability of their currency though, considering natural disasters or other events could end up destroying everything they have. In today’s world, you need reliable money to be able to have a house, pay for food for your family, and to pay the bills. People need to feel secure and safe about their currency in order to pay for important aspects like these. Without this trust, no one would want to pay for important things with their money (like insurance, house payments, etc). Trust in their currency means a stable population and economy.

Money is something that is very much valued, especially in today’s world. In reality though, our money is just a green, flimsy paper with a number on it or a coin with a number on it. The people don’t seem to care too much about the actual physical worth of the money, but everyone believes it is valuable because it can determine your worth in some ways, as well as your successes and happiness.

References

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

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

Reeves, J. (2015). Opinion – bitcoin has no place in your- or any – portfolio. Retrieved from https://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28

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1 Response to Stone Money – cfalover

  1. davidbdale says:

    There’s plenty to admire here, CFA, and much to fix as well. You’ve clearly taken to heart the advice to depend on cows and chips to enliven your argument and populate it with recognizable objects. We see the stones of Yap several times, and are often reminded that we use flimsy paper and little coins. You also concentrate on the abstract nature of money and compare it several times to those physical objects in a variety of ways. All in all, you take a thoughtful approach to your subject and to an extent engage your readers in the mystery of what money is all about (something we probably didn’t think was mysterious until you told us).

    At the same time, your actual observations wander through the paragraphs without much coherence and they’re confusingly expressed. I can’t tell yet whether your thinking or just your phrasing is fuzzy, but the end result is that we sense there’s more to the ideas than you’re helping us understand. You’ll want some examples. Here are some from the second paragraph.

    Friedman’s article described how the German government decided to write on the fei that it was theirs when they purchased the islands.

    —Friedman’s article didn’t describe “how the German government decided” anything.
    —Friedman’s article described how the Yap reacted when the German government “canceled” their currency by painting black crosses on it.
    —It’s irrelevant to your point, and confusing, that the Germans “purchased the islands.” You make it sound like part of the same transaction, and since your readers don’t know the story, distractions make it harder to focus on what IS important.

    If they can’t move the currency or have it “on them” at all times, what is it worth?

    —We’re not sure who you mean by “they”
    —And you’ve asked a Rhetorical Question we have no way to answer.
    —We thought you told us they don’t carry the currency with them, so they never “have it on them,” so how does “writing on the fei that it was theirs” change anything?

    The value is based on what the Yaps see it as.

    —Agreed.
    —Except that you’ve just told us they’re basing their notion of the worth of the fei on what the Germans see it as.

    The same event happened with the French and our Federal Reserve Bank.

    —That leads us to believe that the French invaded the Federal Reserve Bank and wrote on our money.
    —Friedman does point out the similarity of the incidents, but we can’t describe it as “the same event.”
    —The French wanted us to send the gold to France. And they had a right to it. It was WE who decided to just label it as France’s gold, so we could hang on to it. Just as weird, but very different.

    The French kept the gold in our reserve with labeled drawer with their name, but it wasn’t even helping them by having it in our bank.

    —Not sure why you think it “didn’t help them.”
    —The world recognized the gold as a French possession.

    In these situations, the governments did this so that the people saw that this money was theirs; it was a form of showing power and dominance over the people.

    —I totally agree that the Germans Xed the fei to show their dominance.
    —I really don’t see the American/French situation as a power play.

    It wasn’t about the value of the money or how much money they had, it was just to establish power.

    —Here, I think, we see the weakness of using “it” twice to refer to something pretty vague. When we look for the antecedent (what does “it” represent?), we go back to the previous sentence, where we discover that “it” means “this,” as in “the governments did this,” which means we have to look back even farther to see the noun, which turns out to be “kept the gold in our reserve”?

    I understand it’s hard to communicate clearly and briefly the essence of anecdotes your readers haven’t read or heard, CFALover. And I apologize if the above seems like overkill. When you re-read your paragraph, do you see why it’s confusing to someone unfamiliar with the sources?

    You may revise this post or not at your discretion, CFA, but I do expect you to respond to indicate your respect for the feedback process. Thanks!

    Like

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