What is Yap Stone?
Micronesia, an archipelago in the South Pacific, is a U.S. trust territory in which dollars pay for most purchases from outsiders, e.g., at local merchants that sell imported clothing, food, or cars. On the tiny Micronesian island of Yap, however, carved limestone wheels ranging in diameter from 31 inches to 12 feet have been used to consummate transactions for over 15 centuries. Exchanges involving such traditional things as dowry rights or land still turn on payments using these ancient stone sculptures.
Some of the larger stones have shared ownership, accounted for either mentally or by marking off the shares different families own. During World War I, Yap was briefly occupied by Germany. When the locals refused to pay "taxes," German officials painted parts of some stones to identify them as German property. Yapese "taxpayers" quickly ransomed these "coins" by surrendering parts of their harvests of coconuts, copra, and fish.
The stones have some advantages over conventional money. Most have long histories well known to all the locals and each is somewhat unique, so theft is rare. The Yap money supply is easily the most stable anywhere in the world---despite demands from foreign collectors and museums, about 6,600 of the stones remain on the island. But there are disadvantages. Conventional bankers are unwilling to deal with the stones, so stone money cannot earn interest.
Chipped or cracked stones that can be repaired are sculpted into smaller, less valuable pieces of money. An irreparably broken stone, however, loses all value, so most sit propped up alongside the owners' homes or in rows at the local "bank" for decades---or even centuries, although they can be moved when ownership changes hands by putting logs through their center holes and lifting or rolling them. Once, while being ported between islands, a giant stone slipped over the side of an outrigger canoe into deep water. Nevertheless, it continued to count in trades for decades, but at a discount. People knew its location and that it was intact; that they could not put their hands on it was almost irrelevant. Mental accounting kept track of its ownership, much as ownership of the gold bars formerly used by the United States in its international transactions was once transferred, unseen, while remaining deep in the vaults at Fort Knox.
Outsiders might view the Yapese as naively relying on a primitive system to keep track of money, but is our banking system really so different? After all, most Americans keep the bulk of our money in banks, stored as electronic blips in a computer. We never really see much of our money, nor does it truly exist in a physical sense.