The Ambiguity of Money
The Ambiguity of Money
As you enter any mall, convenience store, or place of business in today’s age, you will see a swipe of a card to transfer finds, and not the handing over of paper money. If we take a look at the economic structures about one hundred years ago on the small island called Yap, depicted in the essay by Milton Freidman entitled “The Island of Stone Money” we see very similar habits. The only catch is, instead of swiping cards as use of currency, they use large pieces of limestone, shaped and brought over by “small bamboo boats” hundreds of miles away. These large pieces of limestone would change hands maybe two or three times in ones life, because they would not use these for everyday things, like buying groceries, but for things such as a “dowry for their daughter’s weddings” and for buying a plot of land and having a house constructed on it. After the house was built, or the dowry was paid, the stone would not be moved, but the wealth would be exchanged from person to person. This could be compared to the swipe of said card, nothing physical exchanged, but the wealth was. After reviewing all of this material, one can conclude that the exchange of paper dollars is rather obsolete anymore, compared to the “old days” when “cash was king.”
To understand the transition of money, from something that went from having intrinsic value, to something that has none at all, let’s briefly dive into the history of how paper dollars got their worth. Way back when, when the United states had enough gold to back up the paper money, you could take a dollar to the bank, and get a dollars worth of gold. As the United States government kept printing money, the amount of gold you could get with that dollar declined, because there were more bills in circulation. This is what we know as inflation. On the island of Yap, they do not have this problem. As stated in Friedman’s essay, they do not have precious metals like gold and silver on their island, so they do not see value in material items like those metals, or a piece of paper. What they do see value in is the hard work to make the fei (the actual word for the stone money) and the long, dangerous journey involved with getting to the limestone quarries hundreds of miles away.
The transition from the dollar having worth, to people having to say and believe the dollar has worth is truly fascinating. Talking to my parents on the matter, they explained things from their point of view because they have had so much experience with money in their lives. They were in the jewelry business for quite some time, so they had a firsthand view on the relationship between gold and paper money. My father explained to me the gold market, and the relationship between the dollar bill and gold. He explained that back when gold was not regulated, you could get it for about two hundred dollars an ounce. Once it started to be traded like stocks, and was a regulated market, gold sky rocketed and the price doubled, bringing the price to about four hundred dollars an ounce in 1989 according to charts from onlygold.com. That is all well and good, but what really matters is when gold goes up, the price of the dollar goes down, making it from something that could have been valuable, to something that is a piece of paper.
After again speaking with my parents about this assignment, my dad posed such an important question. He asked “what exactly gives this big rock so much worth.” I looked in articles, and I thought about it long and hard. I came to the realization that realistically, the fei and the dollar bill in today’s society are exactly the same. If you get a one-dollar bill, and a one-hundred-dollar bill, and put them side to side, there is not much of a difference, except maybe a watermark, and the picture on the bill. Today, we don’t have nearly enough gold in depositories like Fort Knox to back up the actual worth of our bills, so they are basically pieces of paper, just like the fei is just a large piece of limesone. They both rely on word of mouth, and the thought that “this piece of paper is valuable”, where it really isn’t valuable at all.
In conclusion, the fei, and the dollar bill have a lot in common. Both, surprising invaluable in today’s society, but made valuable by word of mouth.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Nucci, Charles. Personal interview. 10 September 2017
Nucci Maria. Personal interview. 10 September 2017
“Historical Gold Prices Annual high and low Gold prices since 1972.” Historical spot gold prices, onlygold.com/Info/Gold-Price-History-Since-1972.asp. Accessed 10 Sept. 2017.