Money, by itself, is “stone” cold.

“Stone Money” is an abstract philosophy on the definition of currency that stems from history, but couldn’t be more pertinent to modern America and much of the world. The “stone”ness of the money is referencing accounts from the Island of Yap, whose money was at one point literally made of useless, extremely-heavy stone, but it also expresses the idea that what we know as money today has no value unless an authority says so. Money itself is devoid of meaning, of life; it is “stone” cold.

The Invention of Money is a podcast from NPR in which journalists explore this very idea of money having no meaning. Within the three sections of the podcast, the journalists discuss the context of the story at Yap, while also connecting this story to present-day events such as the Brazilian economy and the American 2008 real estate crisis. It’s notable to recognize the podcast is from 2011, and how we view the present & past economy is ever-changing. The point that struck me as the most compelling from The Invention of Money is the description of the 2008 financial crisis, and how the “Fed” stepped in, in order to prevent a recession of 1920s proportions. With large investment banks failing left and right, such as Lehman Brothers and Bear Sterns, the Federal Reserve Bank was forced to assist. With no other hope to save the economy, one day around a small conference table in New York a bunch of guys in suits simply created more money. And this “money” was then injected into the economy to save the day. While admittedly the mechanics do stump me, the philosophy of it all is fascinating. The “money” that the Fed created wasn’t earned or taken from an existing hoard of some sort, it had no backing or value yet in the world. But once the authorities recognized its existence, the value was given. 

In an essay written by Milton Friedman titled “The Island of Stone Money”, the details of the economics of Yap Island are deeply analyzed. The island uses giant stone “coins” as their universal currency. Most intriguing, Friedman brings up that once during a water transport of one of these coins, a storm forced the crew to abandon the stone and lose it to the depths of the ocean. Friedman explains in his essay “When they reached home, they all testified that the fei [coin] was of magnificent proportions and of extraordinary quality and that it was lost through no fault of the owner. Thereupon it was universally conceded in their simple faith that the mere accident of its loss overboard was too trifling to mention and that a few hundred feet of water offshore ought not to affect its marketable value”. The public trusted the sailors’ word and began to spend that money- even though they didn’t know for sure whether it even existed.

Moreover, all the Americans that went on to buy and sell things with the “new” money created by the Fed in 2008 were merely trusting the word of the authorities. To put it in Yap terms, this money is like that stone that floated to the bottom of the ocean. And those who testified that it was definitely there, and were trusted, are the authorities of the Federal Reserve Bank. Our current financial system is therefore founded on “Stone Money”. But unlike the giant stones on Yap which ARE tangible and exist in real-life, our money has no backing anymore. Our “stone” money consists ONLY of stones lost under the water. Are the stones actually there? The Fed says so, however, it doesn’t even matter because Americans will spend the money regardless. Money is an idea, a “Fiction” as the NPR journalist says, an imaginary glue that holds merely the entire world together. 

I’m reminded of a scene from one of my favorite films- the 1946 Christmas classic It’s a Wonderful Life. In it, the protagonist lending-house owner, Goerge Bailey, is speaking to a group of scared individuals all wishing to withdraw their funds from the bank. Quoted directly from the script “You’re thinking of this place all wrong. As if I had the money back in a safe. The money’s not here. Your money’s in Joe’s house . . . And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others. Why you’re lending them the money to build, and then they’re going to pay it back to you as best they can.” This is a brilliant expression of the mechanics of how lending works. The idea that the money in your savings account is technically earmarked as yours, its value is lended off to the masses in the form of credit. Your “money” becomes someone else’s “money”, and endlessly so on.

As a whole, the idea that money is meaningless is an infinitely explorable theory that boggles the mind. However, with that being said, money means success, prosperity, and comfort to us. And in turn, DOES have tangible value. While the fact that we are all simply taking a higher authority’s word for it is true, that dollar bill in your pocket can be exchanged for a candy bar- and that’s NOT fiction. Money is “stone” cold, fake, and breathless by itself. But thankfully, money never is “by itself”. 

References

The Invention of Money – This American Life. (2011, January 7). This American Life. https://www.thisamericanlife.org/423/the-invention-of-money

Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, 1991. 1991 Island Stone Money (hoover.org)

Frances Goodrich, Albert Hackett, Frank Capra – 1946 –  It’s a Wonderful Life