The Island of "Stone Money"

It's a colorful tale with important lessons about precious metals, crypto, and even the paper money in your wallet ...

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Stock Picker's Corner (SPC)
September 24, 2025

Roughly 1,800 miles from Tokyo, in a remote area protected by Pacific coral reefs, sits an island and a settlement both called Yap.

Imperial Japan first occupied Yap during World War I. Thanks to that islands strategic position between the Philippines and Guam, Japan used it as a major military base during World War II, ultimately stationing more than 4,000 of its Army and Navy troops1 there, and fortifying it with bunkers and heavy guns.

Yap’s location meant it was directly on the key shipping and flight routes used by the Allied and Japanese militaries alike, making it a worry for U.S. Pacific forces.

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Instead of attacking every Japanese-occupied island, U.S. forces employed its famed “island-hopping” strategy — attacking and capturing key islands like Guam, Guadalcanal and Iwo Jima, while isolating and neutralizing others like Rabaul and Wake. This allowed the U.S. to advance across the Pacific Theater by securing launch points for its own operations, while bypassing heavily fortified Japanese strongholds.

In spite of Yap’s strategic location, the U.S. did not launch a full-scale invasion. Instead, the small island was repeatedly bombed by U.S. aircraft starting in 19442.

In 1945, the commanding officer of the Japanese garrison on Yap formally surrendered to the American atoll commander aboard a U.S. Navy vessel3.

Yap gained its formal independence in 1986 and is one of the four constituent states of the Federated States of Micronesia (FSM), alongside Chuuk, Pohnpei, and Kosrae. And though it’s part of the FSM, Yap has its own state government, including a governor and legislature.

While this wartime history is compelling and important, that tiny island is better known for another reason: It had a unique form of “money.”

For Wealth Builders like us, this other story is the crucial one: It’ll help us understand money’s future, by underscoring the power of belief, agreement, and trust as technology reshapes our view of currencies, assets, and buying and selling anything, in any marketplace.

Meet the Rai Stones on Yap Island

Today, the U.S. dollar is the everyday currency for Yap’s more than 11,000 residents. But large stone disks called Rai—carved with central holes and as small as your palm and as big as a compact car — are still culturally significant.

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These stones were used in inheritances, marriage dowries, compensation for deaths in battle, and more. Transactions were verbal, meaning the physical stones could remain in place even when passed from one owner to another.

In fact, the stones’ values were determined by factors like the difficulty in moving them, the size and craftsmanship and the history of the of the stone; if someone had died in transporting it, it was considered more valuable.

In 1903, American anthropologist William Henry Furness III lived for several months on Yap, carefully observing the island’s traditions and way of life. Captivated by the unique monetary system used by its people, Furness published the book The Island of Stone Money in 1910, which explored their customs in depth.

“After concluding a bargain which involves the price of a fei [dialect used in the Southern part of Yap for rei] too large to be conveniently moved, its new owner is quite content to accept the bare acknowledgment of ownership and without so much as a mark to indicate the exchange, the coin remains undisturbed on the former owner’s premises.”5

William Henry Furness III

This part of Yap’s story is more than a cultural curiosity. It’s a lens that lets us see and understand how “value” is created, agreed upon, and sustained.

From ancient stone disks to modern currencies, the connecting thread is belief. The people of Yap didn’t need to physically move their stones to transfer ownership; they simply agreed on who owned what. That shared understanding is what imbued those stones with their value and their power.

This idea caught the attention of Milton Friedman, one of the most influential economists of the 20th century and a Nobel laureate known for his work on monetary policy and free markets.

In his 1991 essay The Island of Stone Money, Friedman used Yap’s system to illustrate the profound point that money doesn’t need to be tangible or portable …

It just needs to be trusted.

With this lesson, we can see why gold and silver, Bitcoin (BTC), or fiat currencies are accepted and function as they do.

Take that trust concept one step further by incorporating “scarcity,” and you see that “alternative assets” like Bitcoin and precious metals have such devout believers. In theory, you can endlessly print money, but the Bitcoin supply is capped (the maximum that will ever exist is 21 million, with 94% of that supply already circulated).

Likewise, there’s only so much gold or silver you can dig out of the ground: Analyses released back in 2020 estimated there was only 20% more gold left to mine6; in 2024, it was estimated all silver will be mined by 2044.

But that’s a story for another time.

If you’re reading this today, start with this basic (but crucial) tenet: For an asset to have true value, everyone in the group has to see it the same way; and they have to agree on the process that reevaluates or resets that value over time.

Take a moment to think about the questions below. They’re designed to help the ideas from today resonate more deeply.