Believe it or not!
Not once in my life did I ever question the legitimacy or meaning of money. I mean, money are those credit or debit cards or those valuable paper bills and silver coins I give to the cashier at the food store in exchange for my goods, right? The NPR Broadcast, The Island of Stone Money, and Bitcoin has no place in your — or any — portfolio enlightened me that the concept of money and its substitutes’ legitimacy is all reliant on the belief and acceptance from the people where that money or substitute is commonly used. It was after I finished taking the time to honestly comprehend those sources when I came to realize how similar some of those stories I initially found unordinary and crazy are to the world and society we live in today.
It wasn’t too far into the NPR Broadcast where the concept of stocks was brought up to picture how worth can be commonly displayed and distributed without seeing the tangible wealth. What does it mean when it is said that the stock market plummeted and trillions of dollars were lost? Where did all of that money go? It’s similar to how paychecks work in today’s world. After a 40 hour work week during the summer, I saw my electronic bank account balance increase by a certain amount. I don’t have any more tangible wealth, such as more paper dollars or silver coins, than I did earlier in the week. Our system of wealth and how it’s transferable amongst everybody is no different than the stories about the Yap Islanders and the German government. The island of Yap is part of the Caroline Islands in Micronesia. From 1899 to 1919, these islands were a German colony. The Yap, which at the time had a population of five to six thousand, had an interesting way of transferring wealth amongst each other. Instead of money as we know it, they used literal rocks to represent wealth. I really began to understand how their whole economy worked and how the German government was able to assert their authority over the Yaps after digesting Milton Friedman’s paper The Island of Stone Money. It was after Germany took over the island when they tried inducing the inhabitants of the island to repair the footpaths. After it was clear the Yaps were not going to, the German government drew a cross on the stones that represent wealth on the island. The cross represented the seizing of the ownership of the stone, which in reality is essentially meaningless because it is just a drawing on a rock. Nevertheless, it worked and the Yap repaired to footpaths in exchange for the crosses to be removed. It is also a legend that one family that lived on the Island of Yap was notorious for their wealth, although their wealth was never seen. It was their ancestors who were known to have found a giant stone while at sea. They had to cut the stone off the raft from about 100 miles or so from shore and let it sink to save themselves from sinking (Freidman). Regardless, the stone was recognized by everybody as a symbol of wealth for the family, even if it has never been seen again. Similarly to how my electronic bank account, which is an intangible record of wealth, changed numbers after a full week of manual labor, a simple cross on one of the shaped stones or the symbolized distribution of a never-seen-before stone on the Island of Yap can shift the possession of the wealth to different people. If the belief of the stones representing wealth from people on the Island of Yap faded, there would be no value and the rocks would be seen for exactly what they are: rocks. Similarly, if the belief of the dollar in the world today faded, it would be seen for what it is: a paper dollar bill.
Listening to the NPR Broadcast opened my eyes to realize what money really is and always has been this whole time: fake! This ideology is nothing except counterintuitive, but the examples above are not the only events to back it up. If money wasn’t fake, it would need to be tangible in order to be used at exchanges, which is it’s purpose in the first place. Friedman’s piece, The Island of Stone Money, didn’t spare any information when it came down to supporting this argument. In the years of 1932 and 1933, France was worried that the United States would not obey the gold standard and value gold at the traditional price of $20.67 per ounce. Due to this worry, France requested that the Federal Reserve Bank of New York exchange its dollar assets into gold. Additionally, France asked the Bank to exclusively store the gold it owed on the Bank of France’s account. This was done by placing the owed gold in separate drawers in the gold vault with label that declared it to be the property of France. Does this situation sound familiar? What difference is placing a label on the gold as it is to placing a cross on the stones? The gold stayed the exact same as it did when it first arrived. The label on the drawers did not change the gold. The gold being reserved for the French is reliant on the belief of the handlers of the gold that the label declares possession to them. Gold’s value is also reliant on the world believing its value to be equal to $20.67 an ounce. If people started to believe that gold was worthless, it would be seen for what it is, a rock. Does that sound familiar? It should because that is exactly what the situation on the Island of Yap was like. Additionally, Bitcoin has no place in your — or any — portfolio displayed yet another example of a currency that is in a similar situation that the rest of these currencies are/were in. Bitcoin, a decentralized digital currency, can be sent from person to person without a intermediary. The second people lose faith in Bitcoin’s value, the price would plummet almost instantaneously. This is because the situation Bitcoin is in is known as the “greater fool” theory, which means that the value of Bitcoin is reliant on the cost somebody is willing to pay for it (Reeves). This theory, which relies on trying to find a person who is willing to pay more for it than you did, puts the currency on the same cliff that other forms of wealth are on. Bitcoin, money, stones, and gold are all tangible forms of wealth that are reliant on the belief of people that they are actually worth something.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Reeves, J. (2015, January 31). Opinion: Bitcoin has no place in your – or any – portfolio. MarketWatch. Retrieved September 30, 2021, from https://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28.
“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.