Stone Money- AlpacaQueen

P1. Whether we like it or not, money plays a significant role in our lives. Maybe not that familiar green piece of paper that we’ve all seen, but more-so the construct of currency we’ve established as a society. It lies in that small printed number on the side of your paycheck, in the square metallic chip on your credit card, it’s what allows you to put a roof over your head, a meal in your stomach, and keeps you up at night. And after all this research I’ve realized that the funniest part is that a large majority of the time we don’t even see it.

P2. So why is it that we allow this idea, this intangible value, to dictate our lives? Milton Friedman offered a new perspective on this concept in his piece titled, “The Island of Stone Money”, where he described the native’s monetary system. The island of Yap, located in Micronesia in the early 1900’s, used a form of currency like no other. With no precious metals to be found on the island, the population resorted to limestone, which often required as much labor to acquire as gold would have. What’s interesting about this form of currency is that these stones did not come in small, easily-exchangeable pieces, but instead took the form of massive discs with an opening in the center. When one wanted to exchange the stone for something such as a home, the seller would simply acknowledge that the disc now belonged to them, as did the rest of the civilization. There was no need for a physical exchange of the stone from the hands of one man to another, it was plainly known that the rock now lied in the hands of a new owner. This unorthodox transaction is later demonstrated when a group attempted to retrieve a stone disc from an island miles away. Although on the voyage home the stone accidentally sank to the bottom of the sea a few miles from Yap, the islanders still accepted the value of the stone as if the crew had brought it before their very eyes. Now you might not be able to walk into Target and claim that your $200 dollar balance is waiting for them at the bottom of the ocean, but I think there’s still a lesson to be learned here. The villagers did not need to see the stone to know that it still existed, just as we don’t see every dollar of our earnings when we receive a check.

P3. Broadcast journalists at NPR radio took this story behind the people of Yap and expanded it to a more modern day scenario. Beginning in the 1950’s, Brazil had been dealing with massive amounts of inflation. Presidents had tried everything from price freezing to restricting people from moving money in their bank. In either instance, merchandisers would hide their products from the public until the freeze broke, or locals became furious at the thought of their money being held captive in the bank. Eventually, in 1993 Brazil’s finance minister turned to economist Edman Bacha for an answer. Bacha knew if he was going to be able to fix this economy, he would need to renew the people’s faith in money, he would have to keep them believing in that rock lying at the bottom of the ocean. He and his friends proposed a plan they had been working on for years, a plan that was unheard of by the means of the finance minister: create a virtual currency. Instead of using the constantly changing Brazilian real, there would now be the URV. Slowly but surely Bacha integrated this new currency into the lives of Brazilians. Taxes, prices, and checks were delivered out in URV dollars. Milk that used to vary in price from two to five to ten reals was now shown as just one URV. When locals began correlating the URV prices with the amount of URV’s they were being paid, they became quite comfortable with seeing an ever-constant 1 URV dollar milk. Soon the people of Brazil had no problem in adopting this form of currency into their lives. That sense of financial stability was returned to them, and surely enough, inflation rates decreased dramatically.

P4. So how do these anecdotes apply to the ever-changing definition of money today? What if we took virtual currency to the next level? Well, that’s where companies like BitCoin come in. Jeff Reeves, a columnist on the website Market Watch, gave me some insight on the dangers of taking this loose concept of money and making it a little too abstract. Bitcoin is a marketplace that seems to take pride in its unconventional system, lacking a central bank or any kind of administration that could make its currency a little more credible. Because of this, who knows how many people will still exchange these “bitcoins” as currency before they start to realize how unstable it really is. In addition, although Bitcoin promises no extra costs for transactions, it’s all anonymous. It seems everything is becoming a little too vague at this point. So soon enough, my virtually anonymous currency will be anonymously transferred and possibly hacked by an anonymous user that I can’t trace? It’s no wonder this marketplace has had such a large number of people declining Bitcoin. Although some see Bitcoin as a rough draft of what could be the next step in virtual monetary evolution, if anything becomes more abstract than it is already I might have to resort back to hiding money under my bed. 

P5. So that brings me back to my original question, why do we as a society allow this intangible value called money, or URV’s, or bitcoins, or limestone discs at the bottom of the ocean, dictate our lives? The answer is simply because we believe that it does. People only find value in acquiring payment because they know they can easily get rid of it for something of real value. In a way, currency is almost like Santa Claus. It is only as valuable is its users believe it is. The magic goes away when the consumers stop believing.

 

References

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2011, January 7). The Invention of Money [Audio blog post]. Retrieved September 22, 2018, from https://www.thisamericanlife.org/423/the-invention-of-money

Friedman, M. (n.d.). The Island of Stone Money (Working paper). Stanford University: The Hoover Institution. February 1991. https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Reeves, J. (2015, January 31). Bitcoin has no place in your – or any – portfolio. Retrieved September 22, 2018, from https://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28

 

 

 

One thought on “Stone Money- AlpacaQueen”

  1. Hey, Alpaca. Thank you for requesting Feedback. I’m happy to engage and feel quite worthless when I’m not asked.

    I’ve numbered your paragraphs to make referring to them easier. (I’ll probably run out of time here in the Language Lab, but I’ll get started here and now, then return when I can.)

    P1. I like the specificity of your details, Alpaca. I couldn’t help visualizing a paycheck, the metallic chip, even the meal in my stomach (thanks for that!). But I can’t let you use the 2nd person in those details. You correctly started and you correctly finish with the first-person plural WE, so stick with it throughout. It’s friendlier and more inclusive than lecturing to a bunch of YOUs.

    Another important change: In your second sentence money is that paper we’ve all SEEN. But the point of your paragraph, as shown by your conclusion, is that most of the time we DON’T EVEN SEE IT. So . . . work on that. Need the paper? You might be able to keep it, but you’ll have to move it to a place where you can immediately negate it.

    P2. You make a promise you don’t keep. I’m not sure it’s a promise worth making. Does it matter that we’re motivated by an idea? Would it make more sense to be motivated by a piece of paper? Why wonder about money’s power in an essay devoted to the question of how it came to be a mental construct no longer material? (That’s enough mystery for now.) And THAT—how immaterial it can be—Milton Friedman does address.

    Punctuation Note: Periods and commas ALWAYS ALWAYS ALWAYS ALWAYS ALWAYS go inside the Quotation marks.

    Your summary of the stone money anecdote is lovely if too long, but you squander it a bit with your peculiar Target analogy. There are many ways in which our money is invisible that don’t require us to make jokes at the checkout counter. This example will likely just confuse readers while a stronger comparison could capitalize on the good work you’ve done establishing the immateriality of money, the need for trust in all our transactions, the essentially fictional nature of our contemporary currency.

    OK?
    [more to come]

    P3. You’ve done perhaps too good a job demystifying the story of the Brazilian real, Alpaca. Your approach is sane and sober, but it doesn’t begin to communicate the desperation behind the move or the nearly insane notion that a currency could be replaced overnight with another one. I credit you for the clarity of your narrative, but I doubt it convinces the reader that anything radical happened. Special praise, however, for this: “he would have to keep them believing in that rock lying at the bottom of the ocean.” That’s a genius move.

    P4. You’re an accomplished maker of sentences, Alpaca, and your explanations here are clear and direct. I understand everything you say and admire your approach . . . except . . . I’d have to know how Bitcoin works to understand it. If you were rewriting this paragraph, to help your readers understand just how abstract the currency is, you’d have to SHOW more of the method of mining and distributing the coins and EXPLAIN less of the consequences. Readers will feel the oddity if they know the methodology.

    P5. It might be a quibble, but you’re injecting the “dictates our lives” line of thinking again needlessly. Your more central point is the faith in currency, or the loss of that faith. You’ve mentioned it often but not demonstrated it as you might. The loss of faith in currency in Brazil had clear and demonstrable consequences (no savings, the panic to immediately spend, the prices changing so fast that shoppers had to stay ahead of the price-sticker gun). Those details would be very valuable here.

    I hope these Notes will cause you to consider alternatives to your already very capable approach, Alpaca.

    I would appreciate your response, and will be much more likely to spend serious time on your writing next time if you engage in a feedback loop.

    Like

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