The Counterintuitive Nature of Money
Before class TUE SEP 25, post a well-constructed Definition or Categorical argument describing the abstract nature of money as you understand it following your study of the background information. Find the resources for your assignment in the sidebar under the Category Stone Money.
- Required 1. Listen to the story of the stone money of Yap from the Planet Money team at NPR. The first 10 minutes of the broadcast (Prologue) provide a useful introduction and the stone money story. Act Two provides the material for the Brazilian real. Act Three is your background for the story of the Federal Reserve. In every case, an aspect of money’s peculiarity is offered. As you listen, continually ask yourself, “What is money, anyway?”
- Required 2. Read the closely related 5-page article, “The Island of Stone Money,” by Milton Friedman.
- Analyze the abstract concept of money as illustrated in the source materials. Describe how (and to what degree) the physical objects we have traditionally used to demonstrate wealth or simply to “pay for things” have become increasingly unimportant, perhaps obsolete, eventually disdained.
- You may illustrate with your own observations of how your thinking has changed (if it has) about money since being assigned this task, but the essay is not to be an “impression piece” reflecting on your feelings that “money isn’t everything,” or “people who are driven by the desire to accumulate wealth are shallow.”
- A Definition or Classification essay does not accept the dictionary definition as sufficient. It explores the nuances of meaning that provide a thorough understanding of a concept in its various contexts. A big limestone wheel is VERY different from an electronic bank balance, but they’re both rightly considered money. How is that possible? What characteristic do they share that makes them both money? What are the differences between terms like wealth, money, cash, currency, value, worth, denomination?
- Cite three sources. Listen to or read enough of the source material to cite three sources including the NPR broadcast and the Milton Friedman essay. Use Informal Citation to cite your sources. Ten or more “Suggested” sources are provided to expand your research and thinking, but you may also select your own.
- FIND THE REQUIRED AND RECOMMENDED SOURCES AT THE BOTTOM OF THE SIDEBAR in a section titled Stone Money.
- Include a References section.
- Publish your draft to the blog.
Notes: I’m not interested in your critique of the quality of the writing or the production values of the Planet Money team that produced the story. Instead, I want you to examine the thinking and the behavior of the people involved in the story (for example, the Yap islanders, the German government, the French Bank, the US Treasury, the Brazilians who used cruzeros, the Brazilians as they adapted to the real) and those in at least one additional reading. What is their concept of money? How does ours differ from the Yaps’? In what ways was the Yap concept of money more or less abstract than ours?
Sample questions to consider: What is the intrinsic value of money? How could labeling some gold in a basement vault in the US bring down America’s banking system and usher in the Great Depression? How fluid is the value of our money? What feature of our monetary system might the Yap consider most bizarre? What made Brazilians trust the new currency? How did the recent “fiscal cliff” debate in the US raise questions about our own money as a reliable vehicle of wealth? How could the Japanese plan to invigorate their economy go wrong? Why is public faith in the value of a currency so important?
A Sample Essay by an Actual Student
When first hearing about the concept of Stone Money in class, I could not help but think this is absurd and must be a made up story being told for affect! As I comprehended the lecture and began to read deeper into Milton Friedman’s piece The Island of Stone Money I came to realize that this is a very real piece of history and forced me to analyze how similar the Yap and their money system is with the monetary system we currently have in the United States.
As I read in Friedman’s essay, the whole ordeal that occurred with the French wanting their gold from the US is almost identical to what the German’s did the the fei. (Friedman) What is the point of money?! The gold was not helping the French at all by sitting in our national reserve, it was just the concept, or symbol of the French owning that gold that satisfied them. Was that idea of being wealthy that important that played a hand in the Great Depression? This train of thought then got me thinking what even caused the Great Depression? If money is fictional as the NPR Broadcast stated, then why were we in such a hole.
The NPR Broadcast also caught me dazed and confused when they mentioned the information about online banking. It is true, when my father pays the bills online he is not physically handing the money to Verizon, or whatever bill it is. And if the banks do not actually have our money in the checking or savings account, that they lend it out to circulate how are they getting the money to pay the Verizon company? Is it just the idea that money is getting transferred to each other that satisfies the companies demanding money? Knowing, ok, so and so has the money but the bank lent it out. He’s good for the payment. All this information has me digging deeper into all the things I once believed money to be. We are no different than the Yap who at the beginning I believed to be insane. How silly is our society that we use a piece of paper and hold it up to such high standards that we revolve our world around it. In fact the Yap’s may think we’re crazy for revolving around a piece of paper
I then went on to read How Fake Money Saved Brazil because I was intrigued at how invested citizens were in money. It kind of reminded me of what the NPR broadcast said that money is fiction, therefore the value can change from day to day. This is what was happening in Brazil, causing inflation. The Brazilians did not grasp the concept that the price of the dollar or cruzeiros in their case remained the same, but the value or how much they could purchase would change. It shocked me that a “fake” currency called URV’s could turn around a whole economy that quickly. It just reiterates that money is fiction and it has a firm hold on everyone because we all depend on it. (Chana Joffe-Walt, 2010)
As I read the article relating to Bitcoin, the E-currency I was interested, but not surpassed by what I read because it all relates. They mentioned the Bitcoin’s worth plummeted from $288 to just $54! This in a way doesn’t surprise me, no matter if money is huge ginormous stones, or paper, or virtual over the internet it is all unpredictable. And goes back once again to being fiction. No one can predict whether the inflation of value of the dollar will drop because no one knows exactly how much money is in the world because of the constant circulation!
Now after gaining all that knowledge on the history of money along with current issues about money my mind is boggled to say the least. It gave me a whole new perspective on just what money is. Even though I still haven’t figured out what it is, I gained new knowledge and look at currency and the monetary system in a whole new light!
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/
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/
“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.
Professor Feedback on the 1st Draft
This is a good start, and I’m delighted to have it early, skyblue, for your sake, and for the sake of your classmates who, I hope, will eavesdrop on our conversation and gain some insights that will help them with their first drafts.
Skyblue, I’m completely comfortable with the approach you’ve taken here, to take us on a guided tour of your reading history on the topic of money, but as a good guide, you’ll need to do more than point at things we could see for ourselves. Your job will be to provide the “local knowledge” that brings meaning to the landmarks you take us to. You can’t just point at a fort, for example; you need to describe the battle that took place, what was at stake, what the opposing armies stood for, who prevailed.
You didn’t write 1000 words. While I definitely value clarity and brevity, we use brevity to make room for more good arguments. The best work tells a very complete story with more than enough evidence, but in as few words as possible. You have 1000 to spend wisely.
Let’s examine your paragraphs in turn to see where you could be a better guide.
P1. You point us at “the concept of Stone Money” and say that you thought: “this is absurd.” I understand and you understand that your readers for this essay heard the same lecture you heard, skyblue, but even so, “the concept of Stone Money” is so vague as to have almost no meaning, so we certainly can’t know what about it you considered absurd.
—Was it that the Yap were willing to navigate 400 miles to find the stones?
—Was it that anyone should consider stone a proper currency?
—Was it that they made the stones so impractically huge?
—Was it that ownership could be transferred without moving the stones?
—Was it that the Yap took on faith the story of the massive fei they never saw?
—Was it that they felt impoverished when the Germans painted Xs on the fei?
If you answer: “Yes, all of those and more,” you’ll be missing the point that your reader needs to hear the details that are most important to your understanding and theirs, so that you can convince them by the end of the tour that they have learned something.
Your last sentence gives us a clue, but not much of one. You say the Yap’s money system is similar to the monetary system we use in the United States. That would certainly be a claim worth proving, but what is the claim exactly?
—That we have faith in the story of the massive fei we’ve never seen?
—Or that ownership of wealth can be transferred without physically moving anything?
Are you starting to understand what a good tour guide does?
P2. Consider these two versions of your first sentence, one points at a fort; the other describes the battle.
First, we point:
As I read in Friedman’s essay, the whole ordeal that occurred with the French wanting their gold from the US is almost identical to what the German’s did the the fei.
Then we describe:
As Friedman explained, when the US Treasury agreed to place certain gold bars into special cabinets marked “property of France” to alleviate France’s concerns about the stability of the US dollar, they were echoing the erasing of the black painted Xs from the biggest fei by the Germans to restore to the Yap their sense of being wealthy.
Granted, only readers familiar with the Friedman essay will understand any of that, but your approach assumes that all readers of your essay have attended the same lecture you did, and read the same background material. It’s still your obligation to name the specifics of the story that are parallel, and to guide your readers to the understanding.
P2 is also the first instance of your claim that “money is fictional.” This too you’re going to need to explain.
P3. You ask a lot of rhetorical questions, skyblue. They’re good evidence that you’re unsure about a lot of things, but not very helpful in guiding your readers to any sort of understanding. As you will discover, I ban them from all essays except for very rare uses that must be earned.
One question you ask contains what sounds like a positive claim, that “the banks do not actually have our money.” Maybe this is what you mean by “fiction.” If so, you’ll need to use your terms carefully. Most likely you mean they don’t have our currency, the paper bills or coins that represent our wealth. Of course, banks dispensed with most currency transactions generations ago. It’s been a long time since most employees were paid in cash, so maybe checks were the first “fiction” in money trading. “Money” transfers now without so much as a paper check representing paper currency changing hands. You point at some of this without explaining it and then say to the readers on your tour: “All this information has me digging deeper into all the things I once believed money to be. We are no different than the Yap who at the beginning I believed to be insane.” You shouldn’t be surprised if the readers on your tour don’t immediately understand the similarity.
P4. Here, you really can’t take for granted that your readers understand anything of what you say, since you can’t be sure they read what you read, skyblue. Consequently, you have more of an obligation to provide the needed background details, all the while you’re explaining what’s absurd about the story AND why it has parallels to our own “fictional” money system, which appears to be your thesis.
This time when you say money is fictional, you explain that “the value can change from day to day.” I wonder if the changing value is evidence of fiction.
Suppose I make shoes but I don’t grow apples. In the fall, when apples are plentiful, you might be willing to give me a bushel of apples for a pair of shoes, and I might find that a fair transaction. In the winter, though, when apples are hard to find, I might be willing to sell you a pair of shoes for a dozen apples, and you might think that’s too expensive. The price for the same shoes ranges from a dozen apples to a bushel of apples, but neither the apples nor the shoes are fictional. They do, however, have “relative value,” which is conceptual, not physical, (and therefore “fictional”) based in part on how available they are. Maybe this is what you mean by values changing from day to day.
Dollar bills aren’t fictional either, but their value is abstract, and as the Brazilians and Japanese have learned, their availability changes their value dramatically.
P5. By the time you examine Bitcoin, your claim that “it all relates” is hard to understand, skyblue. No doubt the value of Bitcoin from day to day is hard to predict, but is it identical to the value of apples, dollars, and fei? France was worried that dollars might be less stable than gold. They trusted that their creditors would always value gold, and feared that the US economy was not so certifiable. Where’s the basis for faith in Bitcoin? What country issues it? What government certifies it? The Yap trusted each other enough to have faith in stones they couldn’t see. But who can we trust to vouch for Bitcoin?
(Please note these are not rhetorical questions.🙂 I truly want you to try to answer them for yourself.)
P6. I have no doubt you have gained a lot of knowledge in the past few days, skyblue. Your essay is evidence you’ve been studying and you’re asking good questions. But essays provide answers, not questions. Usually those answers are just good guesses, but they sound like answers. It’s not enough to point at “a whole new perspective on just what money is” and “a whole new light.” You need to share that perspective with your readers, shine the light of understanding on the subject for us.
Again, thank you for sharing your draft and subjecting yourself to this scrutiny, skyblue. I admire your willingness to tackle the absurdity, and there’s plenty of good material here for you to shape. Thank you also for the excellent References section.
Informal Citation. You need to adopt our class policy of using Informal Citation, skyblue. For example, using MLA citation techniques, you say:
It shocked me that a “fake” currency called URV’s could turn around a whole economy that quickly. It just reiterates that money is fiction and it has a firm hold on everyone because we all depend on it. (Chana Joffe-Walt, 2010)
What you should do instead is to build the citation into the grammar of your own sentence, trusting the References section to provide any necessary details. So:
What Chana Joffe-Walt makes clear in “How Fake Money Saved Brazil” is that money is a fiction we all depend on.
Respond unless you want to be ignored.
Critique the critique: If you appreciate receiving feedback, skyblue, please reply to indicate whether you found the critique helpful or not, and if so, how it was helpful.
- DUE BEFORE CLASS TUE SEP 25 (11:59 pm MON SEP 24).
- Publish your assignment in two categories: Stone Money and the category for your Username.
- Give your post the title Stone Money–Username, substituting your own username, of course.
- Cite one source in addition to the NPR broadcast and the Friedman essay.
- Include a References section.
- 1000 words. No fewer than 1000 (not counting the References section), and no more than 1100, please. As always, clarity and brevity are the primary goals. Squeeze as many brilliant ideas as possible into your small budget of 1000 words. Flabbiness and wordiness are sins.
- You will receive just one grade for this draft, which is intended to diagnose your abilities and needs. If you request feedback, you’ll receive guidance to help you improve your grade, one time, with a Rewrite.
- Customary late penalties. (0-24 hours 10%) (24-48 hours 20%) (48+ hours, 0 grade)
- Non-Portfolio Assignment