Invention of Money-Taylor Brody

Debit cards, credit cards and checks: These are three common, yet relatively new forms of spending money. Instead of paying for a brand new SUV with $50,000 in cash, a customer can simply swipe a card or jot down a few amounts to pay such a large amount, despite not having a cent on hand. Certainly this is a modern technological wonder…or is it? Travel back about 500 years, when a tiny island called Yap unknowingly created the basis of the modern banking system. The similarities between the Yap’s currency and the way people spend money today has forced me to rethink how “advanced” the spending system is in the world today.

The currency of the Yap, known as “fei,” consisted of large stone discs. How much each disc was worth depended on size. The bigger the disc, the more it was worth. Some discs could be carried using a pole, but other discs could be too large to carry. Yap didn’t have access to wheeled vehicles, so these giant discs could travel no further than the front yard of their owners. This dilemma was, however, easily solved. The Yap would spend these giant discs on whatever goods or services they desired, but they wouldn’t move them. The ownership of the disc, or whatever part of the disc was spent, would be all that transferred. This way, if the next owner of the disc wanted to spend the same disc on something else, it would be taken for granted that he had ownership, despite possibly not having proof of owning the disc, as it still presides in the original owner’s front yard.

This method of spending money is comparable to the modern banking system. For example, when people use debit cards and checks, they are spending an implied amount of money, rather than physical cash, just like the Yap spent their fei. When someone uses a credit card, the money being spent might not even exist, but it is expected, and once again implied that the money will be there for an automatic transfer by the end of the month. The Yap would expect the people in their community to be honest about the amount of fei that they actually owned, despite not having any physical proof that the money existed.

So how different are our fancy VISA cards from the Yap’s 500 year old monetary system? Besides the stone disc part, not very much. At heart, the spending system we use today is simple and old. I used to think that the banking system was a brand new idea, but after learning about the Yap, I believe our own implied money, in the form of paper sheets and plastic cards, is no more advanced than the implied money that was spent on the island of Yap, half a century ago.

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4 Responses to Invention of Money-Taylor Brody

  1. tbrody92 says:

    Please provide me with feedback for this essay! Thank you!

  2. davidbdale says:

    Hey, Taylor! You know the drill. I will react to your writing as I read it, paragraph by paragraph.

    P1. This is a good tactic for opening: Name three very specific items and identify something intriguing about them. Be sure to keep things tangible as long as you can. Count out how many twenties it would take to buy with bills. Or put that money into a briefcase, like all the film directors do, so we can touch it. Why? Because “cash” buyers means something else. They don’t require financing, but they probably don’t bring in the briefcase either. In an essay about the abstractions of money, it’s never too early to be specific about what can be touched and what cannot.

    What does “jot down a few amounts to pay such a large amount” mean? Obviously something to do with borrowing and installments. But wait! This is another abstraction even more complex than the others. Now we’re not even spending money we currently have; we’re promising that we will someday have the money we will need to continue to pay for this big car we’re going to “possess” right away, although technically Citibank will actually hold the title and therefore possess it. We’re spending future cows and eating the chips today.

    P2. Compare the full or partial transfer of ownership of a gigantic fei to a “car title” loan. A dealer lets you drive off the lot a very expensive item in return for money from the bank. The bank lets you drive away too, and even use the item it owns for many years, in return for monthly installments, but reserves the right to repossess the vehicle in full or partial satisfaction for the balance due on the car. Once you pay it off, other companies might be willing to lend you money you can spend as you wish, again in return for installment payments, again with the newly acquired right to take “your” vehicle away from you should you fail to pay even a small portion of the now reduced value of the vehicle.

    P3. I’m delighted to see that you’ve anticipated my advice from P1, and incorporated an explanation of credit vs. debit! Is there not still an important difference between credit spending and the fei? Are you saying the Yap used possession of their big stones to borrow against future earnings? I’m not sure that’s accurate. The point you make about “implied” money is intriguing but still too vague to be clear.

    P4. Same comment at P3. Debt may be newer than Yap. Maybe the fei were always current assets. Or perhaps, for example, the presence of the gargantuan stone gave other Yap confidence that the owner of the stone would eventually pay them for stuff they gave them today. I don’t know.

  3. tbrody92 says:

    As always, your advice is incredibly helpful!

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