Invention of Money – Mike Middleton

Currencies in most countries have very little physical value but a distinct psychological value the citizens trust making the concept of money very peculiar. Although different countries each use different currencies as a way for people to exchange services, every system is consistent. Without the use of a currency people would have to seek out an individual who has what they want as well as can provide a service the individual wants.  The biggest problem is that the likelihood of this is very small and chance is that the value of the exchanged services are different. For example, if I am very good at making muffins and I want to purchase bread, I could trade 2 or 3 muffins. Though if I wanted to trade for a car, I would have to sell the company thousands of muffins but the exact amount would be difficult to determine. Currency bridges this gap by turning services into a somewhat universal object that can be valued and understood by everyone in a society.

The people of Yap utilized carved limestone, or fei, as their currency because producing and bringing it back to the island took a great deal of work. Much like the dollar, fei represented a psychological value beyond its physical worth that everyone on the island believed in and accepted. The system the people of Yap had created for themselves became just as rational as the system we use in the United States. So similar that transactions in Yap came to the point where not even having the physical object mattered, just the ownership of it. Today in the United States, a majority of people use credit cards adding and subtracting digital numbers representing the amount of physically money they would own. Just like the people of Yap, the psychological system allows people to easily purchase services and goods without having to provide one back. The entire system is kept in balance because everyone agrees on the values and everyone accepts it. This agreed system allows people to exchange services without having to worry about not having a service to provide back.

My views on the money system have not changed after reading and analyzing the articles. I feel that the system we use in the United States is just as efficient as the system used by the people of Yap in allowing each person to buy and sell services. Having a currency connects the society to a consistent system of trading services back and forth with littler hassle. A society’s belief and trust in a currency system, knowing that tomorrow it will be equally accepted, causes it to be successful.

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8 Responses to Invention of Money – Mike Middleton

  1. mmiddleton1 says:

    I could easily write more, but I want to know if what I have so far is focused and makes sense. Feedback please. Thank you.

  2. davidbdale says:

    Hey, Mike! Good idea to ask for feedback early. As you know, I’m impossible to please, so you might as well get over my first round of objections before you collect a grade. I will comment as I read instead of reading all the way through first. That way, I’ll be reacting to your argument as it unfolds.

    P1. First Sentence. OK, you’ll probably clarify what you mean by your terms soon, but I can’t get past the first sentence without commenting. Seven words in, I’m good. The concept of money is very peculiar. But then: “having little physical value” must refer to the “concept of money,” which can’t be right. Money is both a physical thing (coins and bills), and a concept (how much money do you make?). But the “concept of money” is clearly not physical. So saying the concept has no physical value is very confusing. Both the physical money (coins and bills in my hand) and the concept of money (the idea that I make a good income) probably do have psychological value, but it certainly isn’t assigned by the government.

    Of course I understand what you mean, but you must say it more carefully anyway, Mike.

    You mean: the linen on which our dollars are printed has little physical value, yet the dollars have significant commercial value because they represent the power to buy different amounts of stuff.

    P1. Following the first sentence, I like your observation that different currencies provide a consistent way to value goods and services in an economy (not necessarily a country, but usually).

    Your third sentence identifies the one side of the bargain as having both a good and a service. You need one person with a good and another with a service.

    You say “the only issue” as if it’s a trivial objection, when in fact it’s a complete deal-breaker, isn’t it? On the other hand, I very much applaud your observation that the value of the goods and services are unlikely to be similar, thereby complicating the transaction further. That is, of course, the big advantage of currency: it’s flexible to the penny. The muffin problem you don’t identify is that the car changes hands today, while the muffins are unlikely to be useful if delivered in one batch. (Money solves that problem too, by allowing for time payments, loans, installments, interest . . . . )

    I love your clause, “Currency bridges this gap,” Mike. However else your post may change, I think you should use those four words wherever they fit best. I’m not sure currency turns services into an object, but you’ll find a use for that clause, I’m sure.

    P2. There’s a logical step missing from your first sentence here, Mike.

    The people of Yap utilized carved limestone, or fei, as their currency because it was not found on their island and could not be produced.

    The unavailability of limestone doesn’t make it a good choice for money. Unicorn horns are a bad choice for the same reason. What makes the fei a good choice is that they CAN be produced, but only at great cost.

    To be accurate, I think the big fei did have more actual value than dollars, even if their value was mostly symbolic. They were precious objects because of the effort of producing them. They conferred visible evidence of status on their owners, which dollars do not do except when rappers make it rain. Other than that, I don’t disagree with your reasoning. The belief in their value was essential to their value.

    I don’t follow the grammar of your “Even at the point” sentence, Mike, so its logic is lost on me.

    Be careful with your terms. “digital values that they do not physically have but do own” makes very little sense. Owning digital values is too abstract to follow. More squirminess follows: the system is in balance because of agreed values? What does this mean? Exchanging services without having a service to provide? How does that work? (And are we still talking about how money replaces barter? You should remind us if we are.)

    P3. You must be the only person whose view of money did not change, Mike. What is the “better regulation” you’re alluding to?

    Food for thought: The ability (for better or worse) of investment bankers to bundle debt obligations of borrowers into packages that can be sold to investors, which can then be further leveraged with additional borrowing against the values of those instruments, along with the possibility for other investors to place bets against the likelihood that those instruments will gain or lose value over time at which events they will exercise their options to purchase those instruments or allow their options to lapse and their sellers to retain the price paid for those options, is hard to imagine in a fei-based economy. Just sayin’.

    I say all this knowing that you didn’t intend your provisional post to be a finished document, Mike. You know me better than your classmates and anticipated this sort of reaction, I’m sure. I hope you find it valuable as you continue to work on this bit of writing. 🙂

  3. Mike Middleton says:

    Please provide feedback. Since I already revised once I am not sure what else to change. Also for some reason it won’t let me post a comment without my email..

  4. mmiddleton1 says:

    Please provide feedback. Thank you.

  5. davidbdale says:

    By now, I hope you’ve read through the Assignment carefully, Mike, and realize there are plenty of ways to improve your essay without specific feedback on the particulars of your first (second) draft. But I finally have a few minutes free in case you’re still waiting for more from me.

    P1. You promise a psychological value but don’t deliver one. Or is trust in something the value? But your sentence says “a psychological value the citizens trust,” which means there’s a value and they trust it. What is the value?

    If your second sentence, about different currencies, is supposed to calm our objections about other people using funny stones as currency, you need to indicate that other currencies strike us as funny. This sentence by itself only makes me think of yen and euros.

    Your third sentence is still grammatically confusing about who has a good and who has a service (and of course is too specific to cover two goods or two services).

    Absolutely currency solves the problem that individuals rarely have items of like value they can exchange to make both happy. But how does this (which is the overall point of your paragraph) grow out of your earlier sentences: psychological value, every system internally consistent? We’ve lost track of your train of thought.

    Sentence structure is a problem in your muffin/bread section. Also, why is the amount of muffinage a car is worth difficult to determine? If it is, currency won’t help. Currency only translates a known value for the muffins and a known value for the car into a number of markers for each.

    It’s a bridge, but not because it turns services into objects.

    P2. In a way, you’re right about the limestone. The Yap used it and it represented a lot of work. But did they use it BECAUSE it required work? If they’d been presented with coins, would they have rejected them as too easy? The currency represents a certain amount of labor, but does it have to require labor to physically produce? Our coins might require more labor than our bills, but represent a lot less value. The trillion dollar coin would have cost not much more to produce than a one dollar coin, right?

    You’re trying here to redeem your promise of a psychological value. What is it? Example: two loving parents in a stable home gives children the psychological advantage of an early sense of security that gives them confidence of a comfortable present and bright future. What does money provide, psychologically?

    Your “became” sends us looking for a timeline to compare to the US. It’s unnecessary and confusing. Are the systems similar? We don’t care when. Whatever do you mean by “not even having” that’s different from “the ownership of it”?

    Remember, Mike, the readers of your rewrite have not read Milton Friedman or listened to the NPR broadcast. They have no idea there are fei on the ocean floor that still function as currency. You need to provide any background you depend on.

    Why is a digital system of keeping track more of a “psychological system” than swapping physical paper? As a thought experiment, is a check for the full value of the car more or less psychological than a small cash downpayment in hundred dollar bills plus a promise of more to come?

    Your final sentences, from “Just like” to “provide back,” repeat the same claim three times without making it exactly clear, Mike. Repeating it doesn’t clarify it.

    P3. Remember, your rewrite will eliminate all commentary about how your personal views changed or didn’t. Concentrate instead on a clear analysis of the abstractions of money: its value, its exchangeability, its representative nature, its relative value shifts against other currencies, its others. And if your conclusion is that the US system is as nutty as the Yap system, be sure you’ve described the Yap system (and the US system) well enough so that we can agree with you.

  6. mmiddleton1 says:

    Ahh sorry, thought you just wanted feedback on the assignment. I take every single word into consideration and try to change everything you commented on. I hope you continue commenting as you do on work, or well at least my work! Thank you!!

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