Today i was surprised to learn of that the Yap in Micronesia use limestone rocks called fei that they polish to a shine as a form of currency. These shiny rocks are only found on an island four-hundred miles away. The people of Yap own small pocket-sized fei for smaller purchases and large car-sized fei for larger purchases. I learned of a Yap man who had a group of miners, by makeshift raft to the island where the limestone money is mined. The miners retrieved a a fei unlike one they’ve seen before, remarkably large and shiny as if it were coated in a satin blanket. Unfortunately there was a treacherous storm and the fei had to be cut from the dainty raft. Unlike the glorious fei, the mines returned to Yap safely. The miners spoke of the tremendous fortune that had been harvested and they took his word for it. Without question, they believed the tale and he is considered to be inconceivably wealthy. Despite never actually seeing the enormous fei, the people of Yap are trusting in their system. It is remarkable that these people who live on such a small and underdeveloped island have such an effective and honest economic system. On Yap, if a fei, is too large to transport after a transaction, the people simply verbalize that the fei now belongs to someone else and all the people are comfortable and trusting in that system. This is incredibly refreshing because we live in a society where such trust would be inconceivable. In retrospect, the fei itself is just a rock. It is the idea of the fei that holds value amongst the people.
I came to the conclusion that money is worthless. When Germany held control of Yap, they requested that the natives construct roads for easier transportation. The people of Yap were happy with their unpaved gravel roads and did not meet the commands of the Germans. To retaliate, the Germans claimed the large fei in Yap by painting large black x’s on them. The Germans didn’t value the money they took from the Yap. They just knew that the natives were so honest and trusting in the system that the Germans were able to manipulate the people of Yap into doing what they wanted. When the people of Yap finally paved the roads, the Germans went around and scraped the black x’s.
The concept of worthless money is also similar to an experience we shared with the French. When the French were afraid that our bank wasn’t going to stick to the gold standard they requested that their money b exchanged for gold. Shipping mounds of gold back to France would be a very difficult, so France and United States decided the gold would stay in the Federal Reserve. The United States would just put a little name tag on the French gold drawer. Even though the French didn’t have the gold in their possession, they were perfectly fine believing the gold being theirs.
In Brazil, there was a point in time where the people stopped believing in their economic system. Inflation was so high that prices on goods were rising each day. They tricked the people by introducing a fake money system known as URVs. The URVs gave people the idea that they weren’t spending outrageous amount of money because the URVs always kept the same numerical value. They used conversion table to equate URVs to their actual money system known as a cruizeiro. The amount of cruzeiros changed but products remained the same amount of URVs. This gave the illusion that people weren’t spending more money. The people of Brazil just valued the idea that their money was worth more so they were able to save and spend better.
After listening to the radio broadcast “Weekend at Bernanke’s” I found out that the Federal Reserve is not actually part of the government. They are an independent institution that is given the task of withholding the nation’s money. I never realized that creating money is such a delicate balance. If we produce too much, money will lose its value but if we don’t produce enough it is also not a good thing. I didn’t realize that circulating the new money was such an extensive process. The Federal Reserve buys bonds from banks in order for the banks to lend out the newly created money. There is also a large amount of money in our system that isn’t physically present. In these days, people do a large amount of banking and bill paying online. Many times money doesn’t actually switch hands, numbers are just moved around in a computer system.
Bitcoin is an online currency system that is entirely new to me. Until recently reading articles on it, I had never heard of it. It’s exceptionally interesting because essentially, it has no value. According to the article there is not a central bank behind bitcoin so they have no monetary value. But according to another article there are some driving forces that will move the company forward this upcoming year.
In just two days my idea of those green pieces of paper has changed completely. After all the articles I’ve read and the broadcasts I listened to, money just isn’t the same. It just seems like an idea and not so much a physical asset anymore. Don’t get me wrong, I still appreciate carrying a bill with Andrew Jackson on it, but it’s still just a piece of paper with an idea attached to it. However, I really enjoy the concept that the people of Yap use when it comes to trusting their friends and neighbors when it comes to exchanging currency. Even though it’s not physically in their presence, they respect that it belongs to them. I’ve also learned that wealth is just a concept and that carrying a lot of money around doesn’t necessarily mean that you are wealthy.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Phillips, John. “Bitcoin: What to Expect in 2015.” CNBC. N.p., 15 Dec. 2014. Web. 04 Sept. 2015.
Reeves, Jeff. “Bitcoin Has No Place in Your- or Any-portfolio.” Market Watch. N.p., 31 Jan. 2015. Web. 4 Sept. 2015.
“The Invention of Money | This American Life.” This American Life. N.p., 7 Jan. 2011. Web. 04 Sept. 2015.