Yap has been mentioned derisively recently as the home of stone money, by Ambrose Evans-Pritchard in the Telegraph for example, and by Citi’s chief economist Willem Buiter. So I think this is a good time to retell the Yap story.
A few years ago my wife and I found our way to Yap. It is one of the sovereign States which form part of the Federated States of Micronesia, and is nearly as far west in the Pacific as you can get without bumping into Asia. Even the main island of Yap is very isolated from the world although it is beginning to be seen as a popular dive destination. The outer islands get almost no visitors except the odd yacht, but all in all the people of Yap and its islands seem remarkably content. In the remoter parts the men usually wear loin cloths and the women only lava-lava skirts. They are not averse to modern ideas, just comfortable with their old ones. The outer islands have maintained the traditions of ocean navigation for millenia, and even now build canoes the old way and make very long voyages. I was lucky enough to go sailling on one and was very impressed by the sailing skills of the crew. However, money is the main reason the principle island of Yap is famous. It is the home of ‘Stone Money’, and this little country can certainly teach us a thing or two about the meaning of money.
No-one knows exactly when the Stone Money was first used. Local folklore says a long time ago, some western commentators say only a few centuries. In my opinion, since the money was quarried in Palau 250 miles away it must have originated at a time when inter-island voyages ages were common, which allows a very long history.
Yap has very little good natural stone, but Palau certainly does. So the men of Yap evolved the tradition of sailing to Palau, and setting up quarries in an area little used by the Palauans. They would stay there months at a time using basic hand-tools to hew out big discs of slightly lustrous stone with a hole in the middle for ease of carrying. These discs, the biggest of which might be 10 feet across and weigh tons, were then loaded onto rafts and towed the 250 miles upwind back to Yap where they were used to settle debts and obligations, buy land, for bride money and in all matters of significant trade. For the small stuff bead, shells and barter still worked, but it was the stone discs which really denoted wealth.
Interestingly, once they were installed in Yap the bigger discs were never moved again, but were established in public areas where everyone could see them and where everyone knew exactly who owned what, called, guess – ‘Money Banks’. Money Banks are to be found everywhere on the island, and medium sized discs also sit proudly outside many a home, especially a chiefly house or that of a family with status. In most cases the ownership might change with time but the location does not. The ‘records’ were the common knowledge of everyone and for the older discs the older men kept track of things. Small discs could be moved of course, but the location and ownership of the disc remained common knowledge. How’s that for transparency in banking?
How do you value a stone disc? Size, Uniformity, colour, lustre and so on all play a part, but the real value was how hard it had been to acquire. Sailing ocean canoes is a dangerous occupation, as is quarrying stone in a remote land. Towing the discs home again was especially dangerous. The main value came from the venture, did people die making the disc and bringing it home? Did the voyagers survive hardship and deprivation, arriving to acclaim and applause? Each disc therefore carries a story, the story of its creators and its owners, its origins, its adventures and its banking and cultural history. These stories are the stuff that really give the discs value.
Into this steady picture steps David Deane O’Keefe, an Irish American who was ship-wrecked there in about 1870. He stayed on the island long enough to learn the customs, and after being rescued he came back with a trading schooner, some Chinese labour and steel tools. He then quarried new discs in Palau, brought them to Yap where he traded them for copra and beche-de-mer which he then took to Hong-Kong. He became rich and famous in the orient and in the Pacific, living mostly in Yap. The new wealth of Stone Money that O’Keefe brought to the country made him the hero of Yap, popular throughout the island. Now everyone could have stone money, not just the rich and powerful.
My first thought on hearing this story was that it would be a perfect inflation analogy, with the flooding of new money into the market, the debasement of the currency until the system collapses. In reality it is much more complicated than that. To some extent the currency was debased, the new money did devalue the old, and the use of Stone Money did change. However, some of this change was likely to have happened anyway, this was after all the time of great European expansion into the Pacific. Beyond this, though, the Yapese were wiser than one might imagine. Remember, it is not the discs which are valuable but their history, their stories. The new discs might have been lovely, their size perfect, their lustre wonderful, but they brought with them no glory. Like Monopoly money they were nice to have but don’t confuse them with the real thing. In other words, the Yapese could use and enjoy the new discs but could also see through the inflation problem and still hold onto what counts, things of real and enduringl value.
Now I like a gold coin as much as anyone, but compared to Stone Money gold is lifeless. True, there is labour, and some rarity and risk associated with the production of a gold coin, but nothing which compares to a quest which Ulysses would have been proud to join. The more I think about Yap Stone Money the more I like it. For example, what’s the point of stealing it? It’s not the disc which has value but its aura, and that can’t be stolen. In fact the opposite might be true. If you were to steal a disc it would eventually be recovered and returned to its rightful place with its aura of value probably increased. Consider also the young men of Yap. As my wife likes to remind me, most societies have trouble with their bored and over-active youth. What better way to keep them busy and stop them making war and trouble than to send them off on a voyage to hunt for risk and strive for treasure?
Think too what it is that binds a society together through time. What better way to combine legends, history, social relations, marriage, property law, contract, obligations, commerce and all aspects of daily life? Can you think how it would be to sit around a fire at night and tell the stories of ancient daring and risk, link them to the wealth of today, and then point across the garden to the artifacts which everyone admires? How better to inspire your son to become a man.
O’Keefe died in 1901, lost on a voyage from Hong-Kong back to Yap. By then he was a revered old man, with his own island and a large house in Yap. His legend lives on and he is still widely respected by today’s citizens. These days, the greenback suffices for day to day affairs, buying groceries, gasoline, and the big ticket items which come in from overseas. However, Stone Money continues to play an important role in legend and culture, and many of the bigger social matters, land, marriage and so on, are still settled with Stone Money as the true currency of Yap island.
In 100 years the Euro, the Yen and the Greenback will be but a chapter in the history of human avarice. In 100 years Stone Money will still be in use and still doing what money should, transmitting value from one generation to the next. I’ll tell you another thing about Yap. Like most countries the states of Micronesia suffer from some corruption and let’s say ‘financial irregularities’, some more than others though Yap almost not at all. If you live in Micronesia and want a manager who can run your business well while keeping his hands out of the till you’ll hire a Yapese. Throughout the area they are the ones with a reputation for integrity. It may be that this sense of honesty is what led them to create their enduring stone money in the first place. I like to think it is also what maintains it.
Apart from clinging to their own religion of Keynesianism, what Buiter & Evans-Pritchard seem to forget is that money is nothing if it cannot be trusted. The Central Banks of the world have certainly forgotten this, but even today, years after the stone discs were mined, the Yapese have not. I’d love to have a 10 foot disc of Yap money. Since I can’t, I’ll stick to gold.