SKZ - Episode 6 - Layered Money Review

Episode Date: May 13, 2023

Here I review Layered Money by Nik Bhatia, a book that released in 2021. I had the wrong expectations about this book going in, so I try to clarify that this book is mainly a history of money and central banking, which highlights how money has gotten more complicated over time. Though it is not primarily a bitcoin book, at the end it emphasizes how bitcoin can simplify and improve our monetary system by being a new, incorruptible Layer 1 that does not require centralization the way gold did.

Hey everybody, Joe here. This is the SKZ podcast. Today we're going to do another book review. I've read a lot of books recently on Bitcoin. This one is going to be for layered money by Nick Batia. This is a pretty popular book in the space. I've seen a lot of people talk about it. And I thought it's worth kind of explaining what the book actually is. So this book came out in 2021. And it was one of those books I was a little worried about reading because I was thinking, is this going to be one of those like, things that kind of goes over my head and it's like a little too complicated to understand right it's like oh there's all these layers to what money is currently will it talk about different layers of bitcoin or what layer of money you know a credit card transaction is different things like that and it does get into some of that stuff but like really what i would say is this is a history of economics book and you know there's a lot of other one of those out there that are really valuable but I think this one is really great and kind of explains, I guess, how I would summarize it, is it explains how money has gotten more complicated over time and less tied to reality.

You know, if we talk about gold being this physical thing that served as money for a long time, and in the last couple hundred years, things have just gotten more and more complicated as like layers on top of gold and now we don't even, we're not even on a gold standard, right, for the last 50 years. years. But it kind of just explains that process over the last few hundred years. And you'll actually learn a lot from it, I would say, in just that economic history vein. It talks about the way that money was used when trade and international trade just became, you know, a lot more prevalent in, you know, 14th, 15th, 16th century, things like that. So yeah, it's just like a really helpful read in that sense of just understanding like the history of money and how it's you know maybe

started with gold or gold was what money was considered for a long time but then things got added on top of that and you know the history of central banking in a lot of European countries that predates the United States central bank so yeah I mean it's it's a really interesting interesting read. One of the chapters that I found most interesting was chapter three, which talks about central banking. This is something I didn't know before reading this book, is that central banking actually started with the Dutch in the early 1600s. And it makes sense when it was kind of not just international, but even intercontinental

trade was becoming a lot more popular. It was useful to have kind of a central point where. there may have been all these different currencies or all these different gold denominations or coins, different things like that. It was helpful to have a place that was centralized to exchange all of these that would accept all of them and give back a common kind of currency that everyone could use, right? Because, of course, one of the main principles of a good currency is kind of the wideness of its use, right? if everyone's using the same currency, then it's more valuable than if there's 100 different currencies out there, and you always have to exchange between them. And I will say the kind of main figure or type of kind of diagram figure, if you will, in this book is a pyramid.

And it always show at the top, the kind of highest form of money or maybe the base form of money, and then kind of the different layers that are added onto that. So for example, in this chapter on the early Dutch central bank in the 1600s, there's a figure showing how gold and loans to the bank are basically kind of the basis of money. And then there's the Bank of Amsterdam that's controlling those. And then they give you a Bank of Amsterdam deposit, right? So it explains how kind of the layers are structured. And then, you know, from there, it explains how things got even more complicated when it came to, you know, the Bank of England.

And a couple figures later, it'll show how gold and bonds to the United Kingdom are on the top layer, which are controlled by the Bank of England. Then they give out deposits and notes to the private sector. And then the private sector will give out deposits and bills of exchange. So there's almost, it gets three layers, right? And throughout the book, you'll see how kind of throughout history, things got more and more complicated with banking. And of course, there's, you know, charts later on that show like U.S. treasuries at the top. And then there's three different things, three different institutions that are giving out three different types of notes in the middle. And then there's different institutions that are giving out more notes that are on top of those.

So it's hard to kind of explain in word form without looking at the book. reading it and kind of absorbing like what these different figures are and just how complex our money system has gotten. But yeah, I would say that's why this is a really valuable book to read. Again, just the summary of it is that it really is, it's not something that's this super complicated explanation of, you know, is a credit card layer three, layer two, layer four, whatever you want to call it. It's not like debating those type of semantic things.

It really is just giving you a his credit card. of money, which I think is really interesting and valuable. So I would recommend this book to someone who is interested in kind of the history of money. And again, if you're looking at it just as like a Bitcoin book, it does talk about Bitcoin towards the end, but it's really not like a Bitcoin specific book. Like I said, it is really a history of money book. And it talks about how Bitcoin has the potential to be a new first layer and kind of simplify the system in a long.

of ways. Whereas our current system has, it used to have gold as the top layer, now just has U.S. Treasuries as the top layer that all other layers kind of are downstream from. But it shows how with Bitcoin things could be much simpler. And if that is kind of the base layer one currency in the future, that things could be a lot simpler and less kind of room for corruption on the layers in between. So this is a little bit of a shorter episode, but I think really, I mean, I wouldn't do it just as just going through each chapter and explaining it's really helpful to look at the different figures throughout and to read kind of that economic history or history of currency, which I think is really valuable. And yeah, I would recommend it to someone who is interested in

Bitcoin. But again, if you're expecting like, oh, this is going to be a Bitcoin book, and it's all about Bitcoin, how Bitcoin fixes this, whatever. It's mostly just a history of money book and kind of mentions Bitcoin toward the end. So I think it's still a valuable read for someone who's interested in Bitcoin because, of course, a lot of the reason why we're interested in Bitcoin is because of how messed up the current monetary system is. But just wanted to give that kind of forewarning before you jump into this if you are someone who's really just looking for a Bitcoin book.

So anyways, let me know your thoughts on this and any of the other. the other recent book reviews. I hope you enjoy. And feel free to leave me a boost of grammar anything like that on Fountain. If you found this valuable, I hope you do. And if you have any recommendations for other books to review or other topics to cover, feel free to let me know that. I'd love to make content that you're interested in. So thank you so much for listening. Have a great rest of your day.