The stones in the picture were used as money on Yap island.
These stones were known as RAI.
A very interesting story from the past on money evolution.
1/🧵
These stones were known as RAI.
A very interesting story from the past on money evolution.
1/🧵
These were made up of limestones and limestone mines didn't exist on Yap island.
These stones were brought from neighboring islands that were 400 km away, the journey could take months and years to bring these stones to the island.
Many lives were also lost in the process.
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These stones were brought from neighboring islands that were 400 km away, the journey could take months and years to bring these stones to the island.
Many lives were also lost in the process.
2/
Stone was more valuable:
If it took more days to mine and transport.
If lives were lost while trying to mine it.
If there were storms on way back.
Depending upon the size of the stone. It could go up to 12 ft.
3/
If it took more days to mine and transport.
If lives were lost while trying to mine it.
If there were storms on way back.
Depending upon the size of the stone. It could go up to 12 ft.
3/
Residents of the island believed these stoned to be rare as:
It was not easy to procure.
Supply could not be increased substantially in the future. (Stock to flow ratio very high).
Everyone believed it to be valuable.
Not possible for an individual to mine.
4/
It was not easy to procure.
Supply could not be increased substantially in the future. (Stock to flow ratio very high).
Everyone believed it to be valuable.
Not possible for an individual to mine.
4/
The stones were fixed on the island and the ownership of the stone was orally declared to the tribe.
Everyone knew the owner of the stone. On every transfer, there was a verbal announcement.
The resident started using these stones for trade as money.
5/
Everyone knew the owner of the stone. On every transfer, there was a verbal announcement.
The resident started using these stones for trade as money.
5/
One day an Irish American was rescued by the residents as his ship was drowning.
He saw the arrangement and got impressed. Yap island had coconuts.
He proposed to buy bring buyers from other countries to buy their coconuts and give them money (not RAI stones).
6/
He saw the arrangement and got impressed. Yap island had coconuts.
He proposed to buy bring buyers from other countries to buy their coconuts and give them money (not RAI stones).
6/
The residents of Yap island said for them the only form of money is RAI stones and they won't accept other money.
Irishmen got angry and went back with a determination that he will come back and teach them a lesson.
7/
Irishmen got angry and went back with a determination that he will come back and teach them a lesson.
7/
Irishmen took a big boat, men, and modern mining equipment to mine RAI stones.
He mined tones of RAI stones and he straightaway went to YAP island.
And met the chief of YAP island and called a resident's meeting.
8/
He mined tones of RAI stones and he straightaway went to YAP island.
And met the chief of YAP island and called a resident's meeting.
8/
Residents were shocked to see the quantity of RAI stones with Irishmen. It was more than what the island had in total.
The tribal chief requested residents not to accept the RAI stones of Irishmen because it was not procured through (Blood & Sweat).
It's easy money!
9/
The tribal chief requested residents not to accept the RAI stones of Irishmen because it was not procured through (Blood & Sweat).
It's easy money!
9/
The residents were got divided into two and many started accepting new RAI stones.
Soon the supply of RAI stones went up so high that the value of other existing stones got debased.
There are stones all over and no one is asking for them now!
The value of money went to 0.
10/
Soon the supply of RAI stones went up so high that the value of other existing stones got debased.
There are stones all over and no one is asking for them now!
The value of money went to 0.
10/
At that time the CHIEF of the tribe was trying to make its tribe understand the difference between hard money and easy money but he failed.
11/
11/
A very important lesson to be learned from this simple story of the past about easy money, hard money, and stock to flow ratio.
This story was covered in the book The Bitcoin Standard by @saifedean in Chapter 2.
I made a video in Hindi in chapter 2:
12
This story was covered in the book The Bitcoin Standard by @saifedean in Chapter 2.
I made a video in Hindi in chapter 2:
12
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