Invention of Money- Brianne Waters

No one ever really questions the theory of money because we are taught at a young age to accept money’s function, value, and purpose. This general knowledge of money can be questioned and changed by reading the stories of the island of Yap, inflation in Brazil, and the exchange of gold between the United States and France.

When reading the story of Yap, I could not help but think how strange it was to use gigantic limestones as a form of money. Using heavy stones as big as cars as currency sounds preposterous, especially when you realize that they could not physically exchange the money but simply accept that the ownership of the stone was changed just by word of mouth. The people even accepted its value when it was lost at the bottom of the sea. Similarly, the United States simply moved and labeled some gold bars to secure their debt to France. It is amazing how they never really had the money, but yet it was still deemed as belonging to them. I thought how strange this all was until I compared it to our monetary system today. With more than half of our money exchanges, we never see the actual cash. We simply write some information on a piece of paper or swipe a card to exchange money. The digits in our bank accounts adjust and we simply accept the fact that we now have that amount of money. Just like the people of Yap, we did not actually physically obtain that money, but yet we still trust and accept that it is ours.

The story of the island of Yap also showed the insecurity of money. When the Germans came and marked the fei, the people of Yap were terrified and therefore did what the Germans asked. This seems absurd to most because money cannot just lose its value because it has a mark on it, but in their minds it did and it would still scare us today. Whenever there is a news report stating that there is a recession or the market is crashing, consumers get scared. They are forced to believe that their money is ultimately worth less than it might have before. These reports and worries of harsher times are our money’s “black marks.”

The inflation in Brazil, the most shocking story of them all, was caused by just creating more money, with no value backing it. This bad decision by the government caused the severe rise in prices, thus hurting their people. In order to save their economy, they created a new form of currency. They then tricked their people into believing their money was still worth the same and that prices were not rising. In reality, prices were not rising, but the exchange rate was. This lie ultimately saved their economy, their government, and their people.

The lesson to be learned from all of these stories is that money is based on trust instead of numbers, markets, supply, or demand. Monetary policies and systems only work on trust. People trust that their money is worth some value. They trust that they truly do own the amount of money that some machine might tell them they have. They trust that their bank does move aside stacks of cash, puts them in a drawer, and labels them with their name when you deposit into one. They trust that their government will ultimately keep these policies in motion and will not disrupt the system in any way. They need to trust all of these things in order to use money as it is used today. Maybe, the saying “money makes the world go ’round,” should be changed to “trust makes the world go ’round.”

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4 Responses to Invention of Money- Brianne Waters

  1. briannewaters3 says:

    Hey I would appreciate some feedback on this before the rewrite. thanks!

  2. davidbdale says:

    Hey, Brianne. You know the drill. I will comment on your paragraphs in order, as I read them, instead of looking ahead, so you’ll get a reader’s reaction to your essay as it’s read.

    P1. It’s quite useful to alert readers to your intentions and to indicate that you’ll be referring to other readings in your essay, Brianne. It’s not entirely compelling, though, to say you’re going to question the “theory of money” or my “general knowledge.” I might read the second paragraph if I think I already know something about finance or economics, but so far there’s no “hook” for the casual reader. Can you put something mysterious in my hand to get me interested?

    P2. Remember, in your rewrite, you’ll ditch the “I could not help but think” language. You’ll be writing about the peculiarities of money, representative value, and abstract currency, but not about your “reactions” to it. Since your reader knows nothing about Yap and its gigantic limestones, it’s your job to inform them briefly while at the same time making your point. For example, here, you’d be saying: The people of Yap, whose “coins” were gigantic limestone disks too big to move, didn’t even bother to transfer physical ownership of their money, but merely let their community know that the massive rocks indicative of great wealth had “changed hands.”

    You will also not refer to your readers as “you,” even in such casual references as “especially when you realize.”

    You’ll have to clue your readers in on the story of the gold bars too, Brianne. And you’ll need to be more specific with your language than “It’s amazing that they never really had the money yet it was still deemed as belonging to them.”

    I want to ask you to clarify for me whether you mean “we simply accept the fact that we now have that amount of money” or “that number of dollars.” You start by saying we don’t handle the currency, and end by saying we have the money. This essay is all about what’s tangible and what’s not. Currency is. Checks are, aren’t they, but not in the same way? The debit card is tangible, but . . . . How about money? Is there any sense in which it’s ever tangible? Isn’t the very word an abstraction for something? If it weren’t the question, “What do you use for money?” would make no sense. It would be like asking “What do you use for bread?”

    P3. Money absolutely can lose its value by having a mark placed on it. When the bank freezes my account, it temporarily suspends my ability to move what it disputes I have, or own, or am entitled to spend. Am I right? And, as you rightly note, the value of our currency is fluid; it loses or gains value every day, just a little bit, depending on inflation or deflation.

    P4. While it’s true to connect money to value in the Brazil episode, is it fair to say the printing of money was backed by nothing at all? If the value of the cruzero was always just the belief that it could be used to buy stuff, what does it matter how many cruzeros are printed? It would be more accurate to claim that Brazil printed more bills than the economy could absorb without creating doubt about its worth.

    P5. Money is based on trust instead of supply or demand? Are you sure that’s where you want to draw your line? I think you’re being facetious when you say “they trust that their bank moves aside stacks of cash” in their name, but I see what you’re getting at. We certainly do trust that somebody (everybody!) will keep accurate track of what we have in our accounts, even if there’s nothing physical to count.

  3. briannewaters3 says:

    Thanks for all the help. When I first wrote this draft I was not sure how personal the language was allowed to be (using “I” and “you”), but I changed all of that language. I think throughout the essay I pretty much used money, currency, the value of money, and the value of currency all interchangeably, so I can understand where a lot of your comments were coming from on clarity. I tried to clarify and elaborate as much as possible but I was still having trouble editing P4 (about Brazil). I think this because I don’t even fully understand it yet so it is difficult to write about or explain.

    • davidbdale says:

      You may recall, Brianne, I was not at all clear how personal to be on the first draft (or what voice to use). I thought I’d get better results from fewer restrictions.I changed the rules for the rewrite mostly to help you (all of you) notice the change to your tone and focus when you eliminated your personal reflections and concentrated on the topic. I readily admit the Brazil chapter is confusing. I’m impressed you were willing to tackle it.

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