Upon first hearing of the concept of the Yap’s stone money, I had no idea what to think. How could money be paid to someone without the currency actually changing possession between the two people? After the idea had been explained to me in detail, the claim made by the Planet Money team at NPR that, “money is fiction”, suddenly made a lot of sense. The Yap’s money did not need to change possession, because the entire population recognized which person the money belonged to. Therefore, the insane notion that a rock at the bottom of the sea that only a select group of people had actually seen could be recognized as money was actually sensible. To the Yap, money was abstract, only in existence because they believed it existed. The moment that the Yap no longer believe in the value of their stone money, the moment it no longer has any value at all.
This same concept was used to fix the inflation crisis in Brazil; a group of economic experts solved the crisis by renewing Brazilians’ belief in their own money. Brazilians adopted many ways to handle the inflation crisis. Some people raced those that changed the daily price tags, trying to reach shops before the price officially rose for the day. Others removed the price tags and paid the original price. However, some people gave in to hopelessness and despair, so suicide was common. The irony of it all was the fact that it was the entire population’s lack of belief in their money that allowed the crisis to continue. To solve the crisis, the economic experts proposed that the entire country use a fake but standardized form of currency called URVs. Suddenly, the price of products did not change everyday; for example, one loaf of bread was valued at one URV every day. The economists made this work by changing the exchange value of cruzeros to URVs. One day, the loaf of bread worth one URV equaled fifteen cruzeros; the next it equaled twenty cruzeros, and so on. The end result was that Brazilians recognized URVs as currency for everything, and so it became the actual currency. Brazilians that experienced the change from cruzeros to URVs were astonished and considered it to be magical.
The United States Federal Reserve is fascinatingly similar to the Yap’s system. Instead of stones, we have banks. Money that seems to disappear from our banks in reality never existed in the first place as anything other than a number. The number has value because when a person checks his bank account, he considers that number to be representative of his wealth. The treasury of the U.S. does not treat its power with any manner of grandeur; instead, the people that work for the Federal Reserve downplay their powers to the extent of boredom. Pumping enormous sums of new money into the system is done with a few simple clicks on a computer. Click! A million dollars added to the economy.
The views of the French bank towards gold in 1932-33 actually mirror the Yap’s perception of their money. Because the Federal Reserve bank separated gold and labeled it as belonging to the French, the U.S. believed that it had lost that money. In reality, the money had never left the vault, yet both France and America recognized that there had been an exchange in currency. France considered itself to be financially superior, while the United States considered itself to be financially inferior. Many people feared for the economy over the loss of so much gold; so much gold that had never truly left the United States, but had left its economy.
Nothing clarifies the idea that “money is fiction” more than when the German government abruptly shut down the Yap’s monetary system with a few black X’s on their stones. Something about the marks on the stones caused the Yap to lose faith in their system, and because of that loss in faith, the stones became worthless. The Yaps readily complied with the German government’s wishes for better roads despite their previous hesitation. The roads were improved, and the X’s were erased. Just as suddenly as the Yaps’ system had frozen, it returned to its former state.
The Yaps believed that money could exist without physical or written proof. This differs only slightly from our own government’s idea of money; in the United States, our money is defined by a number. A statement displaying that number is proof of our monetary value. The Yaps’ concept of money was only more abstract because there was no document of their money, only a societal understanding of how much money belonged to who. In the United States, money is somewhat fluid; it does not usually vary much from day to day, but inflation can change its value significantly over time.
The article, “The Bubble Bursts on E-Currency Bitcoin” by Anne Renaut reaffirms the same concept that has been echoed in history across different monetary systems. Bitcoin, a type of electronic money, is similar both to the Yap’s money and to the currency of the United States. It is similar in that there is no visible, concrete substance to represent Bitcoin. Bitcoin is entirely electronic and thus can be electronically created, exchanged, and stored. None of the owners of Bitcoin will ever see their money, yet their belief in the system allows Bitcoin to exist as a legitimate form of currency, just like the Yap’s monetary system.
Although this concept that money is fake initially shocked me, it no longer surprises me. Time and again, it has been proven that money only has the value that we attach to it. For example, if an alien race seized Earth and imposed its rule on us, they may deem our money to be worthless. This would have the same effect as the X’s on the Yap’s money had; the entire global economy would freeze. If the rest of the solar system does not use U.S. dollars, than those dollars could suddenly become useless.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.
Renaut, A. (2013, April 13). The bubble bursts on e-currency Bitcoin. Retrieved February 07, 2018, from https://phys.org/news/2013-04-e-currency-bitcoin.html