Since its inception, the company has faced a millennial problem. This is probably one of the oldest problems she has faced. Let's go back to when the first humans began to group together in order to ensure their survival. We suspect that it quickly became essential to determine an effective way of transacting goods and services between individuals. In this article, we will explore together the evolution of the methods and currencies used by humans to trade.
Beginnings — Barter
Basically, the simplest method of exchanging a good or service is, of course, barter. Barter is defined as an exchange system in which goods and services are exchanged for other goods and services without the use of an intermediary currency. Exchanging tools for livestock, grain for cloth are good examples of the type of exchanges that took place between our ancestors. This is a very efficient way to trade value because it eliminates any middleman. However, this method quickly becomes restrictive for several reasons. Here are a few :
- The coincidence of needs: For a barter to take place, each of the two parties involved in the exchange must need the good produced by the other party. For example, for a barter between the blacksmith and the farmer to take place, the blacksmith needs cattle and the farmer needs tools.
- The absence of a common unit of evaluation: The more the quantity of goods to be bargained increases, the more it becomes complex to carry out conversions between the various goods used for barter. At what rate do shoes trade for sheep on this date? Keeping exchange rates for a hundred items is extremely restrictive.
- Portability and storage of value: Sometimes certain goods are perishable and do not allow sufficient accumulation for an exchange to take place. If an apple grower wants to buy a house, it is very likely that the fruit he accumulates will rot long before he is able to amass enough of it to exchange for a house. And, what builder would accept a mountain of apples in exchange for building a house?
The solution to the millennial problem
To overcome the above problems, our ancestors began to use currencies as a transactional intermediary. Several currencies have been used over the course of the evolution of commerce, with varying degrees of effectiveness. Rai stones, Aggry pearls, shells, salt and precious metals to name a few. In addition to the precious metals, which will be the subject of their own analysis, each of its old currencies has undergone slow or rapid demonetization. The wealth that was stored in these ancient currencies was transferred to those who had a higher quality currency that was more likely to retain its value.
The Birth and Fall of a Motto — The Stones of Rai
On the island of Yap, the local people, the Yapais, have used Rai stones as currency for centuries and perhaps even millennia. These stones have played a vital role in the economy and culture of the Yape community. Rai stones were made of limestone or coral from other remote islands. The effort required to transport these exotic stones to the island of Yap was titanic, which made them very rare. They were stored and exhibited to the eyes of the entire population of the island who could contemplate them at will. Some stones were gigantic and could weigh several tons while others had more modest dimensions.
The way it worked was pretty simple. The stones were displayed in a place on the island where all members of the population had access. A public register was kept in which was recorded which stone belonged to which individual. When a stone was transferred from one individual to another, a public announcement was then made to the entire population and entered in the register. With this system, theft was impossible, because each person knew who owned the stones present on the island. These stones have been the main medium of exchange for the Yapaise population for centuries and perhaps even millennia.
The fall of the first currency
One day, a captain named David O'Keefe arrived on Yap Island. On learning about the place, he quickly realized that the island was very conducive to the cultivation of coconut trees. Knowing that he could make a good profit by selling these fruits to oil producers he knew, he asked the Yapais to work for him growing coconuts. The Yapais were not interested in his offer, because the Captain did not have any currency acceptable to them. Noting that the Yapais would only work in exchange for stones, the captain then set sail for the islands where the Yapais used to get them. Using modern technologies of the time, technologies to which the Yapais had no access, the captain was able to load several stones onto his ship very quickly and with very little effort.
He then returned to the island to buy coconuts in exchange for his stones as payment. However, rather than being greeted as a hero as he expected, the Yapais were rather coldly waiting for him. The leader of the Yapais then forbade his people to work in exchange for Captain O'Keefe's stones. He felt that they had been obtained too easily compared to the “real” stones, which had required a lot of effort and time from the Yapais workers.
Eventually, the population split into two camps. On one side, the workers who accepted the captain's stones as payment. On the other, the citizens who refused them. It was too easy for the captain to obtain these stones for them to preserve any monetary value. The island quickly found itself overwhelmed and the value of the stones was reduced to zero.
This is, to my knowledge, the best example of a falling currency. A system that worked for several hundred years was eradicated in a very short time. Some might think that the wealth of the Yapais, which was stored in their millennial stones, has evaporated. However, they would be wrong. The wealth of the Yapais was transferred to the wallet of Captain O'Keefe and his cronies. Possessing superior technology allowed them to confiscate the wealth of the Yapais with impunity. History shows us that it is not possible to insulate yourself from the consequences of others using better technology than your own.