Monday, May 4, 2009

So..... what is a dollar?

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In my never ending quest to warp young minds, I engaged a few of my students in discussion today. The subject.... 'what is money?'

No, this is not part of the program curriculum, but instead comes under the heading of 'life lessons'. I'd be remiss in my duties if I didn't at least offer them the chance to consider the matter. It's a safe bet no one else is going to. Certainly not in any 'institution of higher learning' I am aware of.

The concept of working for money came up, and it's one I whole heartedly endorse. That said.... an important part of the equation is usually left undefined. What is money? What exactly is it we get in exchange for our labors? What are we handing off across the counter when we buy a cup of coffee at the local shop?

Setting aside the morality of money and the evils of floating currency for the moment, I concentrated on the actual concept of money. There was one particular point I wanted to get across to my young charges. That being.... what we call 'cash' is simply paper, and has no intrinsic value of it's own.

Huh? Wha? Money has no value?!? Then why the heck can I buy stuff with it?

First, cash may be money, but money must not necessarily be cash. That said, lets look at cash. What gives that piece of paper value?

Put forth was a vague notion about a Federal Reserve... gold.... and some nebulous 'backing' for our cash. I dashed that myth, telling the boys there is no gold, and nothing backs our 'money' but an agreement that it's worth something. Nothing more than that..... and belief can be fleeting, and agreements can fade away.

I used an old trick on the boys, and one that usually sets thinking people back on their heels for a while. I laid a dollar bill on the desk, and asked them what it was. Responses varied. "A dollar", "Money", and my favorite "Mine if you don't watch it closely". I got the boys to agree that it was one dollar, and that it was money, and that it was cash... all at the same time.

Next, I tore a piece of paper to about the size of a dollar bill, and replaced the greenback with the blank paper. In the upper corner of the paper, I traced the number one with a marker. Telling the boys that this now represents the dollar bill... I had them look at it a moment. "One dollar, right boys?" Okay.... I added a '0' after the one, making it a ten. "Now what is it boys? Ten dollars, right?"

Sure............ "Okay... why is it now worth ten times more than when it had a mere '1' on it? Did the one hundredth of a gram of ink I put on make it worth ten times as much?"

Silence..... as I laid the one dollar bill back down, with a ten dollar bill next to it. "Ok boys, why is this bill worth ten times this other bill?" There is no gold behind it, there is nothing backing it.... what makes one worth ten times the other?

More stunned silence.

I reiterated; Our 'money' has value because we believe it does, and for no other reason. We all share the illusion of wealth that this green paper carries, but it could just as easily be rubles, or yen, or sea shells with holes drilled in them.

One boy... the smart one.... said "This should be a class of it's own".

It is, my boy, it is.


8 comments:

Crucis said...

Few adults know that bit of information as well.

I know folks who cry to go back to the Gold or Silver standard. Truth be told, there isn't enough Silver or Gold to back the amount of Dollars floating around the world. Hasn't been since FDR.

Old NFO said...

Crucis beat me to it... NO currency world wide is currently backed by ANY hard standard... sigh...

Earl said...

You need some Zimbabwe dollars to make the connection between belief and reality sink home.

Of course, some real Confederate Dollars would make the same point about value in currency.

Asphyxiated Emancipation said...

Excellent! Hopefully they'll spread the word amongst their peers. I remember the shock I felt when I learned this same lesson years ago. Eye opening.

Willorith said...

I love to read about your bright kids. It fills my heart with hope. Thank you for making the effort against what can seem like overwhelming obstructions in your path.
A few teachers like you made the difference for me. If Mr. Mayberry, my geometry and physics teacher could see me now, he would shit. I own an industrial repair machine shop. Everyday I calculate horsepower, torque, hydraulic pressure and force. Things that he tried to teach me. When I needed it in the real world, The knowledge came oozing back out. Thank you Mr. Mayberry. Thank you, Mr. Carteacho.

Everett said...

Well I shamelessly palagarized your whole lesson plan and laid that whole trip on my grandchildren who think money just automatically flows out their mothers pockets at their every whim. They had no idea why money "was" or where it came from. Most of the education system in this state,RI, in much more concerned with getting the kids,"in touch with themselves and building their self esteem"! What a useless waste of time and money! You build self esteem by doing esteemable "things" in my experience.

"He's just this guy, you know?" said...

Thanks folks. I try....

hobbitt said...

I've done the same thing when I taught math. I burn a dollar bill. One student jumped up and beat the fire out. Read carefully "legal tender for debts." It only has value because we say it does.


(a very old one and I stop while I still have half a bill, to destroy a dollar is an offense)