The Ambiguity of Money
Presently at any mall, convenience store, or place of business, one will rarely witness paper money transactions. Instead, credit and debit card transactions are the new norm as a swipe of a plastic is the trendy method to transfer funds. In fact, technology advanced so far that a customer just needs a smart phone to carry out a retail transaction. Similarly, 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” exhibits similar habits. The main difference between today’s American society and Yap lies in the method of payment; instead of swiping cards as use of currency, the people of Yap used large pieces of limestone, shaped and brought over by small bamboo boats hundreds of miles away. These large pieces of limestone changed hands maybe two or three times in a person’s life, because the people of Yap would not use these for everyday essentials like buying groceries; however, the they spent their limestones on wedding dowries for their daughters, and purchasing plots of land for construction of domestic dwellings. After building a dwelling or securing the dowry, the wealth was exchanged from person to person without moving a single stone. Like the swipe of a plastic card that lacks an actual physical transfer of money for goods or services, the people of Yap transferred wealth from one individual to another. After reviewing all the concepts from the article on the Yap society as well as the information on modern American society, one can conclude that the exchange of paper dollars is rather obsolete as compared to the “old days” when “cash was king.”
To understand the transition of paper money from something that previously had intrinsic value to something that has no value at all, one should understand the history of how paper dollars got their worth. Many years ago, when the United States had enough gold to back up the paper money, one could bring a dollar to the bank and get a dollar’s worth of gold. As the United States government continued to print paper money, the amount of gold one could get with that dollar declined because there were more bills in circulation than the gold that backed them. This concept is what we know as inflation. The island of Yap does not have this problem. As stated in Friedman’s essay, Yap does not have precious metals like gold and silver on their island, so there is no perceived value in material things like metals or even a piece of paper. What Yap sees value in is arduous task of making the Fei, the actual word for the stone money, and the long, dangerous journey involved with traveling to the limestone quarries hundreds of miles away.
The transition to a worthless dollar from the paper dollar that once had worth to people is truly fascinating. Talking to small business owners, Chuck and Maria Nucci, on the matter, they explained things from their point of view. The Nucci have prior business experience with money as they owned a retail establishment for over twenty years. The Nuccis were in the jewelry business for quite some time, so they witnessed firsthand the relationship between gold and paper money. Chuck Nucci explained to inner workings of the gold market and the relationship between the paper dollar and pure gold as a trading commodity. Nucci explained there was a time when gold was not regulated, one purchased gold bullion for about two hundred dollars an ounce. Once it started trading as a popular commodity and became a regulated market, the price of gold sky rocketed and its value doubled, bringing the price to about four hundred dollars an ounce in 1989 according to charts from onlygold.com. Accordingly, when the price of gold goes up, the price of the dollar goes down which makes money which had perceived value to just a piece pf paper.
After again speaking with the Nuccis about this assignment, Chuck Nucci posed an important question, “what exactly gives this big rock so much worth”? The information in the articles are thought provoking; realistically, the fei and the dollar bill in today’s society are exactly the same. If one has a one-dollar bill and a one-hundred-dollar bill, and puts them side-by-side, there is not much of a difference between the two except for a watermark, a picture, and a number. Today, there is not nearly enough gold in depositories like Fort Knox to back up the actual worth of American bills, so paper money is now essentially a piece of paper, just as Fei is a large piece of limestone. Both Fei and paper money rely on word of mouth and have the perception that an ordinary object such as a piece of paper or a rock have value. In contrast, they are both ordinary items that have no value at all. In conclusion, the Fei, and the dollar bill are very similar; both have value because of how they are used in their given societies.
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.