Stone Money – l8tersk8ter

Show Me the Money

The monetary system of the people of Yap does seem crazy upon first glance, but when thought about is no crazier than the concept of our modern money. In Milton Friedman’s paper The Island of Stone Money he explains how the people of Yap have a currency based off of, as you could probably guess, stone. What might first come to mind is small rocks exchanged as we may do with coins, or in some countries pesos. However, this image is incorrect. This population of people creates larger than life “coins,” ranging from one to twelve feet in diameter, from limestone. This is definitely not just pocket change. The makeup of these coins though, is not even the crazy part. What seems even more bizarre is that this money is only ever exchanged by word of mouth. They have developed their system in such a way that once the stone is acquired it is placed in a singular location never to be touched again. When used as payment, people are simply just aware that the ownership of that rock as changed. Friedman recounts a story of a crew from Yap that went to retrieve limestone from the island on which they harvest it, but on the way back weather became a challenge. For the sake of making it back home alive they had the lost the stone and let it sink into the sea. No one but this crew ever laid eyes on this carved stone coin, but everyone trusted that it did exist, and that was enough for someone to have ownership of it, even if it was on the bottom of the sea. The concept of the value of the stone is all that would be exchanged anyway.

Now, you might be thinking it is kind of crazy that they trust each other enough to not need to actually possess the stone for it to be considered theirs. They trust that the stone exists and that it was the owners property to spend. But that practically invisible, completely imaginary in essence, exchange of money is the basis of what our online banking consists of. In the NPR broadcast “The Invention of Money” Jacob Goldstein of the Planet Money team observes that most of his money is never even hard currency. Salaries are paid in direct deposits where no cash is ever really exchanged between hands. Ira Glass responds to him by including that bills are paid online and the only transaction that is made is shown in words on a screen. Later in the broadcast Vincent Reinhart says that the foundation of the central bank is based on the trust of the people. If this trust were to disappear, their whole monetary system would be worthless. It is like this: if you can convince someone that an empty wrapper is worth something, then it has worth, but once they see through you and get their wits together that it’s just an empty wrapper, it becomes nothing more than trash. Anything is anything because someone told you that it is. Money is something and valuable because the banks tell you that it exists and that you need it for basically everything in life. And we trust that they are right, even if we do not see the money. Not only is the money not seen, but most of the money in general does not even physically exist. It is an idea that we have learned to trust, and this trust is placed in the banks.

Our banks are where most of our money takes refuge. I think it would be safe to say a majority of people prefer not to carry around cash. In a world that is so digital cash is sparsely needed, because who needs a piece of paper when you can just swipe your smartphone over a scanner and spend money in an instant. Aside from assets, and money invested in stocks and such, most of one’s fortune is sitting in the bank accumulating depressingly low interest. Dave Kestenbaum on the NPR Broadcast proposes the question of counting how much money exists in dollars. Well the roadblock on that one, is that no money in the bank actually belongs to a singular person. He describes how your money is put into the bank, and then the bank loans it out to someone else. He gives that someone else the description of a shoe store owner, so this owner uses that money from the bank and buys a new sign and now that money is once again in someone else’s hands. You cannot count your money in the bank because it is being loaned to other people, and somewhere along the line that money will be counted twice, and as much as we wish it could money can not duplicate. We as a society just put blind trust into the bank to hold our money and hope that when we want to spend it, it will be there.

Now let us take a look at the concept of e-money. Not online money, but completely virtual, made up currency that exists literally nowhere but on our screen. Anne Renaut wrote the article “The bubble bursts on e-currency Bitcoin” about the speculation of the electronic money system. She does not explain exactly how it is acquired, but she uses the word “mined,” and says once this happens it goes into a virtual wallet to be exchanged. This is a currency that was made through a software. It makes you wonder that if someone can just randomly generate this program that gains an established value, whether the value is high or low, then what stops others from doing the same and making the Federal Reserve unnecessary. According to Kestenbaum and  Alex Blumberg in “The Invention of Money” the Federal Reserve meets every six weeks to decide whether or not more money should be made or if there is too much already in circulation. If more money is needed, then it is made. Our money is no longer backed by the gold standard either, so there is not some gold locked away somewhere that could speak for all of our dollars circulating through the economy. There is nothing backing our federal currency, there is nothing backing Bitcoin, they just exists because someone created the concept and everyone decided to go along with it. The Yap value a slab of limestone because someone said to, and that number in your bank account it no different.

References

Friedman, Milton. The Island of Stone Money. Hoover Institution, Stanford University, 1991.

Planet Money Team. “The Invention of Money.” This American Life, NPR News, 7 Jan. 2011.

Renaut, Anne. “The Bubble Bursts on e-Currency Bitcoin.” Yahoo! News, AFP News, 13 Apr. 2013, sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html.

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