The island of Yap is found among the archipelago of Caroline Islands in the Central Pacific, and is renowned for its stone money, which has remained in use up into modern times. 

Much of the limestone used to create this unique form of money was wrought from quarries on the islands of Palau hundreds of miles away, where it was carved into circular discs.  Traditionally, these were then transported on perilous overseas voyages in tribal canoes, after which they were introduced into the economy of Yap as a preferred and prestigious form of money.

Stone Money of YapCredit: Creative Commons photograph by Eric Guinther, licensed under CC BY-SA 3.0 Some of the money-stones are small and easily exchanged, while others are monolithic. Some of the largest are carved with holes in the center so they can be laboriously but effectively moved by groups of islanders using long wooden poles. But some of the giant specimens are never moved at all— instead, ownership is merely ascribed to the immobile monolithic stone, which remains functional as a unit of account and store of value, even if it cannot be moved. The largest specimen of giant stone money on the island is approximately 20 feet in diameter, weighing many tons.

The Creation & Valuation of the Stone Money 

According to one story, the stone money originated after a group of islanders was lost at sea during a fishing expedition, and accidentally discovered certain islands several hundred miles away from Yap. Stone Islands of PalauCredit: Creative commons photograph by Aquaimages, licensed under CC-BY-SA-2.5. Here the Yapese discovered remarkable natural limestone structures, and carved a piece of limestone shaped like a whale (known as "rai" in Yapese). Another stone shaped like a full moon with a hole in the middle was carved on a subsequent expedition to the quarries, which became the traditional shape of the "rai stone" money. The rai stones found favor during a period in which numerous rival chieftains of Yap were engaged in a struggle for power. An array of different currencies was already is use (including shells and turmeric), and the prospect of introducing a new high-valued form of money from outside the island apparently caught on as a means of augmenting the chieftains' prestige.

The quarrying and crafting of new stones was undertaken at the behest of the tribal chieftains— so in this limited sense, they had the authority to expand the money supply. Unlike central bankers under fiat money systems, however, the authorities' ability to create more money was sharply limited by the immense efforts and intensive manpower required to make the dangerous overseas canoe voyages to Palau to quarry and craft the stones, and then bring them safely back to Yap for use as money.

As might be expected, the value of many of the traditional stones increased along with its size and weight, as long as it was carved using authentic Yapese shell tools. The stones were also valued based on the unique history of each particular specimen. The quarrying, carving, and transportation of a large stone was a monumental undertaking, involving a great deal of effort and danger as the specimen was transported overseas in canoes.  In some cases lives were lost during battles between rival chieftains over the stones, or during the long overseas voyages, causing the economic value of each particular specimen involved to rise. Stone Money Brought by Ship to YapCredit: Creative commons image by F. Hernsheim (1883), in the public domain.

After being brought back to the island of Yap, the largest stones were rarely ever moved, even if they changed ownership. In at least one notable case, one of the large stones never even made it back to dry land on the island, but was still accounted for in the island's economy. According to this account, one of the canoes being used to transport a giant stone back to the island of Yap sank in the middle of the ocean, and the stone sank into the depths. However, the stone itself was still acknowledged as being deposited on the seafloor, and consequently remained eligible for a legal claim to ownership, and for active use as money on dry land.

The islanders have also used pearl shells, mats, and ginger as money, but the stones carry the greatest prestige as marks of high religious and cultural status, even if they are not the most commonly used currency. The limestone money was used by chieftains to buy lands, purchase alliances with other tribes, to redress grievances, and even to buy wives, among many other transactions. 

Rai Stone at the Bank of CanadaCredit: Creative commons photgraph by Beades, licensed under CC BY-SA 3.0 After Yap was discovered by foreign sea captains, the Yapese accepted imported stones that had been quarried with comparatively modern tools and delivered on modern ships. This increase in the money supply predictably caused devaluation, as the stones were no longer scarce or arduously wrought by traditional methods. These imbalances were corrected to some degree, however, when the the islanders used traditional methods of revaluation: Stones that were cut using indigenous shell tools and carried arduously by canoes in dangerous conditions were valued more highly by the islanders than stones quarried with Western tools or transported via Western ships, which traded at a discount. In modern times, the Yap islanders place even higher prices on the traditional pieces of money than they had in the past, in order to prevent the eldest stones from all being bought by foreign sea captains and exported as curios. One of the stones which was had already been exported from the island now stands in the courtyard of the Bank of Canada.

Stone Money as a Unit of Account & Store of Value

House with Rai StonesCredit: Creative Commons photograph by Dr. James P. McVey, NOAA Sea Grant Program, in the public domain. The stones of Yap retained their value over centuries, and proved to be an excellent long-term store of wealth for their owners. Other currencies or goods were more commonly used as units of account or media of exchange; prices were more commonly set by baskets of staple commodities, for example, while woven mats (one of the most commonly recognized forms of money throughout the South Pacific) were more commonly used as a medium of exchange. However, even the smallest pieces of stone money were notable for their high valuations, with a specimen as small as 25 inches in diameter reportedly being capable of purchasing either a full-sized pig or fifty baskets of food, while a man-sized stone might be capable of buying large amounts of valuable real estate on the island.

In some cases, valuable stones were used as a sort of security deposit. If, for example, an islander wanted to fish in someone else's waters, he could deposit a rai stone with the proprietor of the fishery in question. After the fisherman paid the proprietor a satisfactory percentage of the fish from his catch (to pay for the privilege of using the owner's waters), the stone money on deposit would be restored to the original owner's sole possession.

The giant stones (i.e., those that were so large that they weighed many tons, and were immovable without assembling a large amount of manpower) functioned similarly to gold held in a secured vault: Even if the giant stones were unavailable for regular exchange, the immobile stones functioned as a store of value and a unit of account (as well as measures of their owners' wealth and prestige). One islander could transfer ownership of his giant stone's monetary value in a large transactions with other islanders. But often, only the claim to ownership changed in such cases: The giant stones themselves almost always remained physically immobile, just as gold ownership sometimes changes hands without the physical gold ever leaving its vault.

Stone Money in the Modern Period

The very largest of the stones were apparently quarried by the islanders under the direction of a certain Captain David O'Keefe. After being shipwrecked on the island in 1871, O'Keefe became wealthy and powerful among the Yapese by creating more stone money using imported tools. He also succeeded in setting himself up as the islands largest trader, and enjoyed that position for thirty years until his death in a typhoon. By some accounts, O'Keefe had even used his stone money to purchase his own island, of which he was considered "king," and a dramatization of his life, "His Majesty O'Keefe," was made into a feature film starring Burt Lancaster. 

When Captain O'Keefe returned to the island after his initial adventure as a castaway, he brought a large number of stones to the island, seeking to profit in commodities. O'Keefe used the newly introduced stone money to buy copra— coconut kernels, from which oils can be extracted. The foreign specimens were accepted in trade, but ultimately ended up being discounted to distinguish them from the older stones acquired using traditional shell tools and long overseas voyages, which were valued at significant premiums. The stone money was consequently subject to less inflationary pressure on Yap than was often the case following foreign introduction of new supplies of money, such as the inflated supply of cowry shell currencies elsewhere in the world.

Stone MoneyCredit: Creative Commons photograph by Peter2pan, licensed under CC BY-SA 3.0The stone money was by no means secure against all types of foreign interference, however. According to a story told by anthropologist William Furness III, the German government bought Yap from Spain in 1898, and had great difficulty in inducing the natives to work for them in converting the coral pathways into roads. According to Furness' story, a frustrated government official resorted to travelling round the island and marking the most valuable pieces of stone money with a black cross, designating that the government had now claimed ownership of the stones. This measure reportedly worked, and many of the islanders — considering themselves suddenly impoverished by this newly asserted foreign claim to the stone money — immediately went to work building the roads. After the work was done, the government was evidently satisfied and chose to erase the black crosses from the stones, eliminating their claim to ownership. With the stone money back in their own possession, Furness writes that the happy and relieved islanders "resumed possession of their capital stock, and rolled in wealth."