Would You Trade a Dollar for a Quarter?

Would you trade a dollar for a quarter? Right off the rip you would say “No a quarter is worth less than a dollar,” and wonder who in their right mind would ask such a question. But what if the government told you that that quarter was worth the same as a dollar; Would you consider it? The entire concept of currency is based on the trust and culture that has been established within our society.

If you look up the origin of money on Google, it will show you early forms of spade coins used as currency in China, or that ancient Egypt used the weight of gold bars to determine wealth. Since the beginning of human existence the concept of trade and economy has been a key factor to society. Real forms of currency started even before ancient China or Egypt, when Mesopotamians would barter or use verbal forms of currency. One form of currency stands out however: the Yap.

In the NPR Podcast “Planet Money” and the article “The Island of Stone Money” by Milton Friedman, the Yap tribe and their abstract form of currency helps us realize how far we can push the limits of what is considered money.

The Yap’s use of enormous stone discs known as “rai” as a form of currency challenges conventional notions of what constitutes money. The Yaps believe in the value of these stones, even if they are not physically moved in every transaction, meaning their real form of currency is verbal. “When Rai shift hands as the result of a land transaction, a wedding, or otherwise, the news spreads fast and it is soon common knowledge that a particular piece has a new owner. The Rai are seldom moved but remain where they stand.” (The History of Stone Money) This may seem far off from our current form of tangible money, but it is not. If you just think of money as just a piece of paper, it is easy to realize how to dematerialize the idea of currency. All money is just a concept. 

A revelation that I formed from “The Island of Stone Money” is that money’s intrinsic value is not inherent in the physical object itself but rather in the belief and trust that people place in it. Paper money would be worth nothing if it wasn’t for the system set up by our government that puts the trust of its value into the minds of our society. Cultural normalities can also contribute to a society’s faith in an economic system. The Yap economy may seem completely different from the US at a glance, but they share many similarities. The Yap rely on a shared verbal communication amongst tribe members, with little to no enforcement from a higher authority in regards to currency. In the US, the stability and trust in the nation’s economy solely relies on the government, more specifically the Federal Reserve. The Yap are different, as they depend on mere trust and culture. The Yap concept of money highlights the difference in abstraction between their system and ours. While the Yapese use massive stone discs as their currency, these objects are not frequently moved during transactions. This makes the Yapese monetary system less fluid and more abstract than modern digital currencies, like Bitcoin, which exist solely in the digital realm and can be transferred instantly across the globe. The Yap could transport their currency across the globe, but it would have to be verbally expressed.

Bitcoin and other digital currencies give us a glimpse of how currencies have evolved, and is very similar to the Yap use of Rai. Cryptocurrency is tracked only by faith in the digital communication of money. Records and agreements are the only way this system can be put in place, and it pushes the limits of a true economic system that can be viewed as sustainable.

Trust is a big key part to a successful economy. For the Yapese, trust is built through cultural norms, shared history, and belief in the value of the stones. In contrast, when Brazil transitioned from the cruzero to the real, trust in the new currency had to be carefully established. This transition involved a complex process of managing inflation, providing economic stability, and convincing people to have faith in the new currency. Several steps were set up by the government after being proposed by college students. The citizens of Brazil did not put trust into this system and it backfired at first. The Brazilian government practically took away all money to fix the state of the economy, causing many store owners to refuse sales until the system was fixed.

Now what would happen if all of the money in the United States suddenly disappeared? The International Monetary Fund states that “…if there were no money, we would be reduced to a barter economy. Every item someone wanted to purchase would have to be exchanged for something that person could provide.” (Asmundson, Oner) This would cause speech to be counted as a form of currency, similar to the Yap. If tangible money was erased from our society for a few days, economic balance would be counted on the citizens who make up the economy. Store owners would be in charge of their beliefs, causing the government to have no control in the ups and downs of the monetary system of the country. This proves how predominant the faith in an economy must be to enable it to work. 

The story of money on the island of Yap, as well as the insights from Milton Friedman and the NPR podcast segments, has provided a thought-provoking perspective on the abstract nature of money, the role of faith in monetary systems, and the relationship between money, wealth, and belief. The story of the Yap’s stark currency system challenges the way we view money, as well as guides us in understanding how the US system was built and sustained in the trust of the American people to this day. 

References

Asmundson, I., & Oner, C. (2012). Back to Basics: What Is Money? – Finance & Development, September 2012. Imf.org. https://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm

The History of Stone Money – Manta Ray Bay Resort – Yap, Micronesia. (n.d.). Manta Ray Bay Resort. https://www.mantaray.com/discover-yap/the-history-of-stone-money/

“The Island of Stone Money.” NPR, NPR, 10 Dec. 2010, http://www.npr.org/transcripts/131934618. 

Friedman, Milton. “The Island of Stone Money.” StoneMoneyEssay.Pdf, The Hoover Institution Stanford University, Feb. 1991, https://miltonfriedman.hoover.org/internal/media/dispatcher/215061/full