"Hard money" types tend to denigrate the dollar as little green pieces of paper, not a real thing that's actually worth something.  This seems to me like a version of the Marxist fallacy, the belief that value can be somehow intrinsic rather than relative.  Gold is pretty, of course, but not actually much more "useful" than a dollar bill.  It does have some industrial application, but the vast majority of the gold in the world is used for money or jewelry.

A dollar is a real thing:  a store of value and a medium of exchange.  These are extraordinary valuable uses.  Indeed, the need is so great that if currency is restricted or unavailable, people do not simply revert to barter; they turn something into a currency.

John Kenneth Galbraith amusingly recounts what happened in the American sector of occupied Germany, where the money supply was deliberately kept very tight by the economic planners.  People immediately turned to cigarettes, which were valuable to the Americans for smoking, but to the Germans both for smoking and for substitute currency.  The result was that the Germans scrounged even tiny cigarette butts, which were the equivalent of spare change.  Hence, when some Army sanitation engineer posted a sign in the men's room saying "Please do not throw your cigarette ends in the urinals", some wag scrawled underneath it, "it makes them soggy and hard to smoke."

Cigarettes, are, of course, also the traditional currency of prison.  However, in 2004, the Federal prison system banned smoking--as an aside, I ask if anyone knows whether this was officious health-nannying, or equally offensive gratuitous cruelty, or some combination of both (my guess).  At any rate, something had to emerge as a substitute.  I give you:  the mackeral economy.

There's been a mackerel economy in federal prisons since about 2004, former inmates and some prison consultants say. That's when federal prisons prohibited smoking and, by default, the cigarette pack, which was the earlier gold standard.

Prisoners need a proxy for the dollar because they're not allowed to possess cash. Money they get from prison jobs (which pay a maximum of 40 cents an hour, according to the Federal Bureau of Prisons) or family members goes into commissary accounts that let them buy things such as food and toiletries. After the smokes disappeared, inmates turned to other items on the commissary menu to use as currency...in much of the federal prison system mackerel has become the currency of choice.

What's fascinating is that it has apparently become the standard currency precisely because it has no intrinsic use, and therefore functions very well as a store of value:

...Mr. Muntz says he sold more than $1 million of mackerel for federal prison commissaries last year. It accounted for about half his commissary sales, he says, outstripping the canned tuna, crab, chicken and oysters he offers.

Unlike those more expensive delicacies, former prisoners say, the mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few -- other than weight-lifters craving protein -- want to eat it.

The only weirder currency I can think of offhand is the Yap, who used as currency stones so large that they couldn't really be moved; only ownership was transferred.  Indeed, when one was dropped into the sea while transporting it between islands, the Yap continued to recognize it as valid currency, and the family that owned it was viewed as having significant wealth on the basis of this thoroughly inaccessible stone.

(Hat tip Alex Tabarrok)


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