by Vincent Guy
Yap Currency Photo: Eric Guinther
The Isles of Yap lie in the Mid Pacific, some 800 miles East of the Philippines. If both name and location suggest something out of Gulliver’s Travels, their financial system is even more exotic.
For several thousand years they have used stones for money. These vary in size from pebbles to hold in the hand, to huge rocks which a single person couldn’t shift. The Yap islanders bring them across the sea from Palau 300 miles away. Things can go wrong. A while ago, a huge money boulder representing the wealth of several people dropped to the sea bottom. You might think that would cancel its value, but no: it remains part of the currency system though no-one has seen it for years. Is this surprising?
In London’s Bloomsbury, just round the corner from the budget hotel I use when in town, stands an elegant house. It has a fine frontage, looks reasonably spacious and is handily located for travel in and out of London or strolling to the British Museum, the University or even the West End. It boasts a sign saying “Keep Clear. Entrance in frequent use”, but I’ve never seen anyone using it. Recently I spotted a youngish man sitting on the front step drinking a bottle of beer. I asked him:
“Do you live here?”
“No, no, I just like sitting here. I live round the corner.”
“So who does it belong to?”
“Not quite sure. No-one’s been here for years.”
“So it’s empty?”
“Well, it does belong to somebody.”
“How much is it worth? Do you have any idea?”
“Search me, mate.”
A glance in the window of a nearby estate agent indicates that a Bloomsbury bedsit would leave you some small change from a million pounds. So the house must represent something like 10 million sitting idle.
It’s far from unique. Empty high-value properties abound throughout central London. The most expensive of all is reputedly one in Rutland Gate near the Albert Hall in Kensington. You could buy it now if you have £200 million rattling around in your purse. The Guardian, under the headline “This is where people with staggering wealth end up”, reported that it’s on the market, with its 45 rooms in a rather dilapidated state, and has its own website. Again it’s not quite clear who the owner might be. Its story goes back to the time of Napoleon when the Duke of Rutland had a pile of spare loot from the slave trade, the East India Company and his feudal estates in, of course, Rutland. Rutland was then England’s smallest county, so his estates probably spread beyond the county borderlines. The Duke’s metropolitan pied-a-terre was rebuilt in the 1930s; subsequent owners have included politicians and business leaders from Saudi Arabia, Lebanon, Hongkong and mainland China. The agent appears to be B*** Estates, whose spokesperson describes their clients as “billionaires who buy private palaces and state-of-the-art mega-mansions and country estates”.
But London is more than a place for the super-rich to turn their gains into bricks and stucco. U.S. Secretary of State Dean Acheson observed in 1962 that “Great Britain has lost an empire but not yet found a role”. But it has: facilitating the planet’s wealthy in concealing assets, laundering money, evading tax. It is “Butler to the World”. In his book of that name, Oliver Bullough makes play with the role of Jeeves, butler to the fictional Bertie Wooster, who smooths out the consequences of Bertie’s pranks without asking awkward questions. But whereas the Jeeves/Wooster relationship is imaginary fun, the role London plays is serious, even deadly serious, covering up exploitation, rapacity and crime. The UK’s strict defamation laws and the high cost of going to court enable the fixers to quash most attempts at uncovering or criticising their manipulations. This role is hardly new; London played it as hub of the empire and, prior to that, of the Atlantic slave trade. I am choosing my words judiciously here to minimise the risk of a libel suit.
In Extraordinary Popular Delusions and the Madness of Crowds (1841) Charles Mackay wrote a convincing historical account of how money gets divorced from value. A best seller, the book is still in print. The first case he treats is the 1637 Dutch Tulip Mania. A by-product of the Netherlands’ economic boom, we read how tulip bulbs changed hands for more than the price of a house, a man was attacked for eating a bulb thinking it was an onion, and how the boom bust, leaving a heap of ruined speculators.In fact, Tulip Mania never happened, at least not on the ruinous scale Mackay described; it seems to be largely another of those historical myths.
However, another “madness”, the South Sea Bubble, was real enough. It was fuelled by the emerging prosperity of Britain as a mercantile nation in the early 1700s. Among the new company prospectuses, my personal favourite is one that promised "a company for carrying on an undertaking of great advantage, but nobody to know what it is". If it didn’t ruin many, it certainly humiliated them. Incautious punters ranged throughout the upper echelons of society, even King George I himself. Another was Lady Mary Wortley Montagu, who had first introduced smallpox inoculation to Britain, now hoping to grab some wonga to cover up an indiscreet romance. Most famous and perhaps most foolish was the great mathematician, Isaac Newton, who got his numbers wrong. He invested, got out in good time, but then re-entered the whirlpool, losing, in today’s money, several million pounds. "I can calculate the motions of the heavenly bodies", but not the madness of men" was his reported comment. But the Bubble’s lasting consequences were few. Britain went on merrily coining it in from trading and colonising for the next couple of centuries.
It’s worth mentioning a couple of other financial fantasies that did leave a lasting mark on the real world: the Spanish conquests in the Americas and the Darién Disaster.
Spain funded the journeys of the Genoese sailor Cristóforo Colombo who made landfall in the Caribbean in 1492. Within a few years, the Spanish had toppled the Inca and Aztec empires, melting down much of their imperial treasure and shipping the results home to Spain. A word-picture, painted by John Masefield, evokes the rich pickings in raw materials over the next 300 years:
Stately Spanish galleon coming from the Isthmus,
Dipping through the Tropics by the palm-green shores,
With a cargo of diamonds,
Topazes, and cinnamon, and gold moidores.
Masefield’s tally of the cargo is remarkably accurate: all those items come from Latin America (except those mysterious moidores which are gold coins minted in Portugal). But did those galleons bring prosperity to Spain? Quite the opposite. The Spanish treasury declared itself bankrupt at least three times in this period. Spanish society remained frozen in quasi-feudalism until the death of Franco in 1976.
An event in the same part of the world has reverberations down to our day. In the 1690s the Scots were keen to compete with the English in profiting from new opportunities in world trade. William Paterson, whose name also pops up in the South Sea Bubble affair, set up a scheme to establish a colony in Panama at the Darién Gap. His prospectus described riches for the taking, a benign climate and friendly natives. The Scots, both rich and poor, were invited to invest, which they did, in droves, digging themselves into debt. A couple of ships full of would-be colonists went out there. The Spanish, believing, with some justification, that the place belonged to them, harassed the colony. The English, for their own good reasons, declined to help. Local variants of tropical diseases killed off most of the survivors. Only the natives did a bit to fulfil the airy promises, offering a little fruit to the starving colonists. Not enough to make a difference. Back home in Scotland, everyone was ruined. At which point the English kindly stepped in saying something like: “Look, give up your independent parliament, come under ours in Westminster and we’ll pay off your debts.” Thus Scotland, instead of just sharing a monarch, became an integral part of the United Kingdom. Today the Scottish National Party hope to be well on their way to undoing that. Oddly, they seldom mention Darién.
“There is no Magic Money Tree”, said Theresa May as UK Prime Minister in 2017, when people were claiming that there should be no limits on government spending. On the political Left there’s a current mode of thinking known as Modern Monetary Theory which argues exactly that: government can spend as much as it chooses. The coincidence of initial letters, MMT, might make you wonder. Next PM but one Liz Truss, very much of the Right, went all out for a Britain of lower taxes and bigger debt. But by neglecting to consult the experts, ignoring numerical details and sacking some people who might have steadied the ship, she demonstrated that MMT of either kind was a dead duck.
A myriad more examples could be added, from the 1840s Railway Mania (which “Madness of Crowds” Mackay robustly assured his readers would never collapse), to the 2022 failure of FTX Bank. In a matter of months. its boss’s net worth slid from $26billion to zero. His name is strangely appropriate: Bankman-Fried.
Why do we chase money? In 1930 the economist J. M. Keynes wrote “Economic possibilities for our grandchildren”. He imagined a near future when people would have enough wealth for their comfort, choose a shorter working week and simply enjoy themselves. Have the French, rioting over a couple of retirement years, been reading Keynes? Or dipping into Marx’s early writings about the laid-back life after the revolution where a person might do a little fishing in the morning, write some criticism in the afternoon, and discuss philosophy in the evening? How unlike the home life of Soviet Russians or the Chinese today. How unlike ours in Britain.
The world is too much with us; late and soon,
Getting and spending, we lay waste our powers.
William Wordsworth, 1807