I owe you an apology, Haveanelephantasticday. I should have been clear that your audience for this essay is someone outside our class. When we assume our readers share knowledge with us, it’s too easy to be vague. I want your writing to clearly and specifically communicate the necessary background to readers who have not read the sources and who were not part of our classroom discussion. I did not make that clear.
Since reading your fine draft, I have added an instruction to the assignment, to clarify for everyone who writes after this:
YOUR AUDIENCE WAS NOT IN OUR CLASS AND WILL NOT UNDERSTAND SUCH REFERENCES AS: “THE DISCUSSION WE HAD IN CLASS,” or “THE BITCOIN READING.” EXPLAIN THE CONCEPT OF MONEY AS REVEALED IN THE SOURCES AS IF YOU WERE ADDRESSING SOMEONE UNFAMILIAR WITH OUR CLASS AND THE SOURCES.
I’m sorry to cost you extra effort, Haveanelephantasticday, but this component of the exercise is important. I’m grateful to you for posting early so that I could see immediately how I had failed to make myself clear to the 39 students who will submit their drafts after yours.
When I heard about the Island of Yap and their currency system today in class, I couldn’t help but think that Professor Hodges had made it up to inspire a creative discussion. Needless to say, I was very interested and surprised when I listened to the radio broadcast highlighting their very unique currency system. It is rather remarkable that these people who live on such a small and underdeveloped island have such an effective and honest way of exchanging currency. It’s intriguing that their entire economy is based on trust and honesty. On Yap, if a rock or fei, is too large to transport after a transaction, all the people do is verbalize that the fei now belongs to someone else and all the people are comfortable and trusting in that system. The broadcast spoke of a man who had sent men to the island where the limestone money is mined and his men retrieved an enormous rock. Unfortunately there was a storm and the fei was unable to make it to Yap. Fortunately for the man who had sent the miners, the miners spoke of the tremendous fortune that had been harvested and they took his word for it. Without question, they believed the story and he is considered to be extremely wealthy. Despite never actually seeing the very large fei, the people of Yap are trusting in their system. To me, this is incredibly refreshing because I feel as though we live in a society where such trust would be impossible.
After reading Freidman’s work, I came to my own conclusion about money and its monetary value. Money is worthless. The idea of money is what is worth something. When the Germans claimed the large fei in Yap so the natives would pave the roads, they didn’t value the money they took. They just knew that the natives were so honest and trusting in the system that the Germans were able to manipulate the people of Yap into doing what they wanted. The concept of worthless money is also prominent through the experience we shared with the French. When the French were afraid that our bank wasn’t going to stick to the gold standard they requested to have their money exchanged for gold. Shipping all that gold back to France would be a very difficult task, so France and United States decided that the French would keep the gold here in the United States in the Federal Reserve. The United States would just put a tag on the drawers that specifies that it belongs to the French. Even though the French didn’t have the gold in their possession, they were perfectly fine with the idea of the gold being theirs.
In Brazil, there was a point in time where the people truly stop believing in their economic system. Inflation was so high that people stopped believing that their own money was worth anything. It got so bad they had to introduce a new form of currency that would help bring value back to the money system. The tricked the people by introducing this fake money system. They URV’s gave people the idea that they weren’t spending outrageous amount of money because the URV’s remained at one stable price. It’s extremely interesting because this money was just a state of their imagination.
What completely blew my mind is that the Federal Reserve is not actually part of the government. They are an independent institution that is given a very large task. I never realized that creating money is such a delicate balance. If they produce too much, money will lose its value but if we don’t produce enough it is also not a good thing. I also didn’t realize that to circulate the new money into the system it was such an extensive process. The Federal Reserve buys bonds from banks in order for the banks to lend out the newly created money.
To me, Bitcoin is brand new. Until reading the articles, I had never heard of it. It’s exceptionally interesting because essentially, it has no value. According to the article there is not a central bank behind bitcoin so they have no monetary value. But according to another article there are some driving forces that will move the company forward this upcoming year.
In just two days my idea of money has changed completely. After all discussions in class and the broadcasts I listened to, I won’t be able to think of money the same. To me, it just seems like an idea and not so much a physical asset anymore. Don’t get me wrong, I still appreciate carrying a twenty dollar bill around, but it’s still just a piece of paper with an idea attached to it. However, I really enjoy the concept that the people of Yap use when it comes to trusting their friends and neighbors when it comes to exchanging money. Even though it’s not physically in their presence, they respect that it belongs to them. I’ve also learned that wealth is just a concept and that carrying a lot of money around doesn’t necessarily mean that you are wealthy.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Phillips, John. “Bitcoin: What to Expect in 2015.” CNBC. N.p., 15 Dec. 2014. Web. 04 Sept. 2015.
Reeves, Jeff. “Bitcoin Has No Place in Your- or Any-portfolio.” Market Watch. N.p., 31 Jan. 2015. Web. 4 Sept. 2015.
“The Invention of Money | This American Life.” This American Life. N.p., 7 Jan. 2011. Web. 04 Sept. 2015.