Lessons from Yap

An island in which currency was in the form of Rai stones also known as “Stone Money” had become of great significance for this economy. It started from 1899 to 1919 in the Caroline Islands where there was a German colony in Micronesia called the “Island of Yap”. In this civilization of five to six thousand, they had a medium of exchange they called “Fei” which were stones that were made from limestones found on an island some 400 miles distant and transported in canoes and rafts.

The German Government assumed ownership of the Caroline Islands in 1898, which led to many events. The roads and pathways were all in bad condition and needed to be fixed, the people were not involved or willing to fix the roads and with that, the government had to take action. It was decided to impose a fine for disobedience on the chiefs of the districts by simply marking a certain number of the most valuable ‘ ‘Fei” with a cross in black paint to show that the government was in control. This action sparked the turn which worked perfectly for the government and made the people begin to work on repairs and the government sent agents to erase the marks on the crosses.

The Bank of France feared that the U.S. would not stick to the gold standard at the traditional price of $20.67 so they had come up with a plan that would hit the U.S. in a way they didn’t expect. France had told the Federal Bank of New York that they should separate their gold from the U.S., they did by labeling and marking it indicating it was property of the French. This led to a headline in the newspaper that “the loss of gold” threatened the American Financial system and surprisingly the value of the gold had gone down and the French’s skyrocketed. All of this led to the banking panic of 1933, also known as the Era of the Great Depression; this was very similar to the situation within the German government. Both parties were very smart in their decisions, leading them to great success in getting the East they wanted. 

The similarities and differences between “Bitcoin’ and “in-game currencies” are simple because they are the same but slightly different. Even though they are both categorized as digital or virtual currencies designed for the virtual world they both serve a purpose. Bitcoin is used for many things for example an alternative investment, to make purchases from merchants or retailers, peer-to-peer transactions, etc. And it’s also determined by market demand and supply. In-game currencies are also digital or virtual currencies designed for the virtual world specifically designed for the virtual world and particular video games. Its value is based on and limited to the virtual environment. They are mainly based on game transactions such as buying and purchasing items, upgrades, or features in the game, not the real world. In the end, in both scenarios, if there were to be a crash in the Bitcoin industry and you had money in the system you have the possibility of losing everything. So as in “in-game currencies” if the game were to be deleted or go offline you also have the possibility of losing everything you have paid for.

The Brazilians have suffered from inflation for many periods which has led to an increase in the prices of everything around them. They had people that adjusted the prices and because there was so much inflation people would run and try to get in front of the person that changed the prices. They had to come up with something that would help so they came up with different solutions like higher pay but that would end up making things worse because as prices rose the value of the money would lessen. Cruzeiro was the official currency of Brazil but it was replaced with Brazilian real which is now the new currency after the many different periods of inflation. The Brazilian real was a way for the economy to stabilize and attack the inflation that was rising and it worked and it marked a turning point for the Brazilians and its economy. The Brazilians had trusted this plan in hoping that it would give them a change stabilize the economy and fix the hyperinflation.

The U.S. currencies differ tremendously from the Yaps’ because the U.S. is one the world’s largest and most developed economies with a diverse range of industries and the Yap has a lesser economy with limited resources and remote location. Our concept of money differs hugely because the Yaps have it as coins and we as paper so it all could have different meanings and so on but if you were to compare their values the U.S. would be leading because the demand for money is so high due to the number of people that live here. The Yap’s money is more abstract than ours due to the way it is made and valued they would deem it more valuable because of how it is portrayed but a benefit of U.S. currency is that if we were to mark an X on the paper it value is still there but for the Yap, the value of that would vanish until erased.

The question of should we be worried about serving the connection between money and nations? It’s a simple answer to me I do think that they should be worried because if a nation’s currency were to somehow deplete it would lose all its allies and resources because they would have a way of purchasing more and slowing but surely would lead to economic depression. And following would be another nation taking control over that nation.

References

Friedman, Milton. “The Island of Stone Money.” The Island of Stone Money(1991): 3-7. Web. 10 Sept. 2016

Glass, Ira, Chana Joffe-Walt, Alex Blumberg, and Dave Kestenbaum. “423: The Invention of Money.” This American Life. Prod. Planet Money. 7 Jan. 2011. This American Life. Web. 11 Sept. 2016.

Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

Renaut, Anne, “The bubble bursts on e-currency Bitcoin” AFP News, 13 April 2013