The Breakdown - A (Not Quite) Complete History of Money, Feat. Planet Money’s Jacob Goldstein

Episode Date: November 4, 2020

Jacob Goldstein is one of the hosts of NPR’s Planet Money. He is also the author of the new book, “Money: A True Story of a Made Up Thing.”  In this conversation, he and NLW discuss: How China invented paper money and then forgot about it for centuries Why the invention of the lightbulb was a pivotal money history moment  How money market funds set the stage for the Great Financial Crisis  Where bitcoin fits in the world that comes next: without cash, without banks and with government printing Find our guest online: Twitter: twitter.com/jacobgoldstein

surprising to me when I was working on the book was how many times money has changed so much. And I think there is this sort of classic myopia that people get about money where they assume that whatever is money now, whatever is money in the world where they have been to be living, is like the natural thing for money to be and that anything else would be ridiculous. And again and again, you see that that's wrong and money completely transforms. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by crypto.com and nexo.io and produced and distributed by CoinDes.

What's going on, guys? It is Tuesday, November 3rd, and today I am thrilled to bring you a conversation with Jacob Goldstein. First, however, just a little bit of housekeeping. It is, of course, election day in the United States, and my feeling is that many of you are going to be so absolutely fatigued with political debate and discourse and discussion that it might be good to, for this week, bring you some different conversations, things that aren't just me jaw-boning about whatever everyone else is talking about as it relates to the election. Now, on top of that suspicion, I'll also be traveling for the next few days, so I'm recording a few episodes in advance, and I think it'll be a nice change of pace, and maybe hopefully something that's just a little bit different than what everyone else is talking about. With that said, let's get back to today's conversation. Jacob Goldstein is one of the hosts of Planet Money, a show which launched during the financial crisis and has become one of the longest running and most beloved economics podcasts in the world. The way they describe, it on their website is this. Imagine you could call up a friend and say, meet me at the bar and tell me what's going on with the economy. Now imagine that's actually a fun evening. That's what we're going for at Planet Money. Jacob is also the author of a new book, Money, the true story of a made-up thing. And in this conversation, we breeze through more than a

millennium of money history in about 35 minutes. So buckle up and enjoy. All right, Jacob, welcome to The Breakdown. It's great to have you. Hi, thanks for having me. So I'm really looking forward to this conversation. I had a great time reading the book, Money, the true story of a made-up thing. And what I want to do today is kind of get into the origins of the book and then some of the stories from it. And then maybe kind of zoom forward into what we're likely to see next. So I guess let's start with the origins of the book, which I guess are almost more like the origins of your interest in the topic.

Because it's kind of all all wrapped up together, I would imagine. But how did this become your focus and your kind of main interest? So it really started in the financial crisis in 2008. I was a reporter at the Wall Street Journal at the time. But I wasn't covering finance. I was covering health care. I'd never taken an economics class. And suddenly we're in the middle of the financial crisis.

And like, you know, hundreds of billions of dollars of wealth, of money had sort of just disappeared, you know, the stock markets down, real estate's down. And I went out to dinner in Manhattan with my aunt, who is charming and smart and funny and also has an MBA and was a super successful businesswoman. And I asked her just like all that money, all those billions of dollars that disappeared, like, where did it go? You know, what happened to it? And she said, you know, look, money is fiction. Like that money was never there in the first place. And that was like my first big aha money moment.

moment. And so this is fascinating. So you basically have this very kind of an ethereal philosophical moment and that creates this impulse to go explore it, which obviously you've done with Planet Money and anything else. How did your thinking about money change if it did when you were doing the research for this book specifically? Well, one of the things that even after covering money for years at Planet Money was still, I think, surprising to me when I was working on the book was how many times money has changed so much, right? And I think there is this sort of classic myopia that people get about money where they assume that whatever is money now, whatever is money in the world where they have been to be living, is like the natural thing for money

to be, and that anything else would be ridiculous. And, you know, again and again, you see that that's wrong and money completely transforms. It's almost like, you know, a beloved commencement speech from David Foster Wallace that has been sort of subsequently named this is water where he starts off with this analogy about fish swimming around and an old fish comes up to the two fish who are younger and says, isn't the water beautiful? And they look at each other and say, what the hell is water? In some ways, that's the way that we interact with money.

It just, it's so is that we don't really contemplate. what it actually is unless we're sort of forced to in most cases. Yeah, exactly right. I mean, it's very easy to live your whole life and never stop to wonder what is money. And on a certain level, that's good, right? Like for stability, you know, you don't want everybody just like stonering out and being like, whoa, is money even real? You want people to do this to be like, yeah, it works.

It's real, even though it kind of isn't real, but it does work. You've got to just accept it for it to work. So let's actually go through just a couple of these different moments because this was the part of the book that I liked as well. And it's interesting that that was the theme that you brought out, the change in money. So one of the first chapters is called when we invented paper money, had an economic revolution, then tried to forget the whole thing ever happened. So I would love for you to just share a little bit about what that story was and what its significance was in sort of this larger narrative. Yeah, I found that story really interesting too. I'm so glad you liked it.

So this is a story that takes place in China. And it starts about a thousand years ago. It starts about 81,000. So by this point, people in Europe and Asia had been using metal coins for well over a thousand years. Metal coins were basically money. And, you know, this was still the era when the value of the coin was a function of the value of the metal, right?

So in a lot of China, they used bronze coins. But in this one part of China, in the province of Sichuan, they used iron. coins. And iron then is now wasn't worth very much. So the coins weren't worth very much. So you needed like, for example, you needed a pound and a half of iron coins to buy a pound of salt, right? It's a terrible thing to use for money. And this merchant at some point in this province has an idea. He says to people, look, leave your like hugely inconvenient iron coins with me. And I will give you like a receipt, basically like a claim check that says, you know, whatever. You left 5,000 iron coins with me. And then you can bring that claim check back. and get your coins. And you probably see where this is going. People started using the claim checks to buy stuff. It's just like, look, I got the claim check. I don't need to go get the

coins. Just take the claim check. So that is the invention of paper money. We can see it happen right there in that time, in that place. And, you know, this is really a technological breakthrough. This is a new technology when this happens, right? This is, obviously, there's no motorized transport. transporting huge quantities of coins is costly, is inefficient, right? So having paper instead of lots of coins is a massive productivity gain. It's an improvement in efficiency. And it spreads all over to China, spreads all over China, even to parts of the country where they use bronze, becomes very popular.

And it happens to occur at a moment and help drive this broader economic revolution. This really, it's like sort of a proto-industrial revolution that happened in China. hundreds of years before the Industrial Revolution would happen in Europe. And you see, you know, new technologies. They get better at growing rice. You have this flourishing of cities. You have a restaurant scene occur. You know, you have a city of a million people, which is like, you know, 10x the size of European cities at the time.

It's this really incredible economic revolution. And this new kind of money is part of that. You want to just keep going? I mean, I keep going. Yeah, I mean, yeah, no, I love this. I think this is, by the way, just for my, My listeners know, but I was a history major. So we were right down the pipe of interesting things,

especially when it's stories that I haven't heard before. So let's just round this one out. Yeah. I won't ask you to do this for every story in the book. Yeah, no, I love it. I just used to be on the other side of the microphone. Because we, you know, I get to do a podcast that's completely on my own term so we can ramble as long as we want.

Great. Okay. Well, we got a thousand years to cover. So let's go. So you got paper money spreading around China. You got an economic revolution. And next thing that happens, of course, the Mongols invade. It's around 12 something now, 1,200 something.

Kublai Khan becomes the great Khan. The Mongols love paper money. You know, they have this nomadic civilization that spans Asia at this point, right? And so if you're on horseback, paper instead of metal is great. And Kublai Khan actually at some moment goes even farther. He does this radical thing that's not going to happen basically till the 20th century-ish. Well, it's not going to happen for hundreds of years anyway. And that is, at some point he says, you know what?

Paper money is not going to be a claim check for metal anymore. It's just going to be paper. And sort of amazingly, it works. I mean, it works partly because, you know, he is the con and he can basically say, use paper money or I'll kill you. And no, I'm not going to give you any metal for it. Don't complain to me on the con. But I feel like it also works because, you know, by this point,

people in China had been using paper money for a couple hundred years. years, right, for a long time, longer than anybody could remember in their lived experience. And so, you know, I have to imagine that at least part of it was sort of the way money works and everybody's like, well, I don't know. I mean, it works. It works. The con says to do it. Okay, let's do it. Right. So that's this kind of amazing moment. And then the kind of end of the story is there is like a a counter revolution that the Mongols are driven back out of China. There is this new dynasty, the Ming dynasty comes in. And for one thing, there is some inflation, as sometimes happens with paper money,

but also this new dynasty is very skeptical of the broader economic revolution that has happened in China. They have this very kind of reactionary mindset where for the Ming rulers, the ideal is the like self-sufficient agricultural village. You know, all these cities and this technology and paper money and restaurants, this is not what they like. They want like a little village where everybody grows. grows their own stuff. So they wind up actually getting rid of paper money entirely. You know,

this amazing new technology and all this economic growth that had gone with it goes away. Paper money goes away. China gets poorer. And paper money doesn't come back to China for hundreds of years. It's fascinating how culture and society and sort of the perception of or what people aspire to create their society to look like ends up finding roots. in the way that we make these sort of technology decisions around finance and economics? Yes, yes. I mean, you know, we, well, I guess people listening to a crypto show probably do think of money as a technology. But, you know, I think the general public doesn't think of money as technology.

But it is, you know. I mean, technologies are basically ideas that allow us to be more productive, to be more efficient. So like just the very basic idea of money itself is a technology. you know, paper money is an innovation. And then you have all these sort of choices and tradeoffs to make. You know, banking is kind of the center of money in the modern world as much as governments. And that has a whole set of tradeoffs and efficiencies and problems. And so, yeah, there are lots of sort of structural things going on that are choices that often we don't even think are choices. There's a couple more sort of technology moments in this story. It feels like there's a pivot in the book

sort of right towards the middle, this set of chapters that you called more money or it was around that. And you talk about the invention of the light bulb as sort of, you know, both analogy and as a real context. I would love to hear a little bit more about kind of this shift into the modern era of money and this more money concept and what you meant by that. Yeah. So the underlying idea of that part of the book is this very basic economic idea that the pie can get bigger, that everybody can get richer. In fact, almost everybody in the world has gotten richer over the past couple hundred years. And, you know, I think people who sometimes people will say, yeah, I guess that's true.

Sometimes they just don't believe it. It doesn't feel true. I feel like that fact is not intuitive. You know, I feel like we're sort of wired to feel like the world is a zero-sum game and that if somebody is getting more, they're taking it from someone else. Someone else must have less. And so what I found, this was a while ago, actually, when I was, you know, I found it as a Planet Money Story initially was this beautiful economic history paper by an economist at Yale

named Bill Nordhaus. And what he did was he tracked the history of artificial light for thousands of years. And when I first did this as a story, we got him to sort of tweak the data so that we could have this basic metric, which goes like this. If a person, a typical worker, works all day and spends the day's wages to light up a room with artificial light for how long can they light up the room? Just like whatever, equivalent to a 60-watt incandescent bulb. And he tracks this all the way like he starts in ancient Babylon and he like gets an ancient oil lamp and like a light meter from the kind of facilities. And, you know, obviously ancient Babylon like a day's wage has got you like literally 10 minutes of light, basically nothing. But then it really gets going when you get to the Industrial Revolution, when you get to around 1800 in Europe.

by that time, a day's wages in 1800, still not much. You work all day, you buy at that point it's whale oil, sorry whales. You get like an hour of light. But then it starts to take off, right? This is the moment when you have technological change and industrial change starts to take off. And so you have this incredible, you know, compound growth, basically, so that, you know, 50 years later, you have kerosene and you've gone from one hour to five hours. And then, as you said, you get the light bulb and you get, you know, power grids. And then in the 20th century, you have lots of productivity gains and efficiency improvements. And by the end of the 20th century, Nordhaus wrote this paper in the 1990s, the typical worker works all day, spends a day's wages on light.

They can light up the room for 20,000 hours. So it's gone in 200 years from one hour to 20,000 hours. In essence, it's the same amount of work, a day's work now buys you 20,000 times as much light. And of course, you could do something like this for how far could you travel with the day's wages? How much food could you buy with the day's wages? How much clothes? Like, in material terms, we are profoundly, profoundly richer than we were 200 years ago. Almost everybody.

I think about this a lot. Like, again, as I was mentioning, I'm a history buff. But if you ever go to like the ruins of an old castle and you're like, I, you're like, I literally at my worst in my life have had it better than these guys who had to walk down a rampart if they had to go to the bathroom in the middle of the night. You know what I mean? And I, if the blister got infected. So there is this fun, like, kind of economic history parlor game people play of like,

would you rather be like one of the richest people in the world in whatever, pick a year, 1,800 or like you today? And it's an interesting question, right? because, like, I mean, in some ways, it might be kind of fun to be the richest person in the world in 1800. But on the other hand, like, it would be super easy to die. You'd probably be in pain a lot of the time, you know. You would be cold in the winter. You'd be hot in the summer.

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no minimum or maximum limits on funds deposited. Step three, sit back, relax, and earn up to 10% compounding interest paid out daily on your crypto and fiat. Your passive income made simple. Get started at nexo.io. We're moving on up through history. We're doing a very, not quite complete history of money in like 20 minutes, right? Almost both. Yeah. What is, you know, the 20th century is so dense. We start to get more dense, you know, as we get closer to now. But we have more information. Right. Right. Exactly. Part of it is just the way of writing history, too. But what did you, you know, if you had to sit back and pick the key money story or theme of the 20th century, what is it? Is it the U.S. order? Is it the end of the gold standard? Is it central banks? Is it something that's even more abstract than that? It's the end of the gold standard. It's 1933.

I mean, in the U.S. version of the story, it's like the spring of 1933, which is an incredibly momentous moment. So spring of 33 is the worst of the worst of the Great Depression. It's FDR has just been elected. He's taking office. It used to be the case that the new president wasn't inaugurated until a March. So you told me this is going to run on election day. So just imagine if, you know, we're having the election day. It's like, okay, we got an answer. And by the way, you'll get your new president if there's a new president in what, five months crazy. So anyway, so there has been, so it's March 1933, worse of the depression. And at that moment, like as FDR is, you know, in Washington going to do the inauguration, there's like the worst bank run in American history. One state after another, literally, on that day is declaring a bank holiday, which means closing all the banks in the state, which at that time, you know, nobody had a credit card.

There were no ATMs. Like, this was a profound, profound thing at the time, even more so than it would be today. There was no deposit insurance. So if you had your money in the bank and it went belly up, you didn't get your money. And so then Roosevelt comes in and he's the president. And he immediately just starts going bananas. You know, I mean, people talk about the hundred days. but the 100 days in terms of money itself is really amazing.

So the first thing he does that first day is he declares a national bank holiday. That first week, he gives his first, I think it was that first week. Very soon, he gives his first fireside chat, you know, his famous radio talks. And his fireside chat is this, it's just like banking 101. He goes on the radio and he's like, look, a bank doesn't have your money. A bank lends out your money. And if everybody gets scared and takes their money out of the bank, the banks will collapse. So I'm declaring that every bank in the country is going to close and we're going to inspect them.

And we're only going to let the ones that are okay open back up. And like weirdly, this very sort of calm, rational, little bit pedantic talk works. The banks open back up and there's like a bank run in reverse. People are lined up to put their money in the bank. And then the big one, the big thing he's about to do, what, month, a couple months later, is he's about to take the country off the gold standard. And I don't think we can really understand, like, how big of a deal that was, you know, since money had, since paper money had been invented in China, literally about a thousand years before then, it had been this claim check for metal, right? Silver or gold, usually.

In the U.S., you know, $20 in some sense got you an ounce of gold year and year out. That was the definition of the dollar, right? The meaning of a dollar was that it was this fixed amount of gold, $20 and change got you an ounce of gold. That was just was the law. It was the rule. It was just what a dollar meant. But we had this problem in the U.S., in the Depression, which was that prices were falling and falling and falling, wages were falling, workers were getting laid off. And it was this cycle where because prices were falling, people weren't buying stuff and they weren't buying stuff.

So prices fell more. It made debts harder to pay. You have this fixed debt and prices are falling. you can't pay your debts. People don't pay their debts. The banks are going belly up. So this is this vicious cycle. And the core problem was falling prices, right? And so what they needed, weirdly, to our mind, was inflation. And so the way you get inflation is by basically going off the gold standard, printing more money, devaluing the dollar in terms of gold. So that's what Roosevelt did. His own advisors told him, literally, this is a quote, it'll be the end of Western civilization.

But he did it anyway, and he was right. Like, things started to get better. Wild. It's so wild. I can't even imagine. Oh, he also ordered everybody in America to turn in their gold to the government. Their gold. Imagine if a president did that today. Like, I can't imagine. It's so dramatic. It is. It's also, it's a great, it's a hundred years doesn't feel like that long, but it's so long. And I think the, you know, in some ways, the further into this century we get, the more it feels distinctly like a, uh, a, you know, a century away versus recent history. Oh, that's interesting. I think you can feel this sort of thing, this kind of natural process of forgetting with war and conflict as well. But, you know, it's, it is hard to imagine this,

that sort of action in the context that we live in now. Yeah. And, you know, more generally, I mean, to speak more generally about money, we were talking before about, you know, you referenced the David Foster Wallace Fish and Water thing, and how whatever monetary sort of regime you're living and just feels like the natural world, I think that was maybe most true with the gold standard.

Like there's this famous economic history paper called the gold standard mentality. I think that's what it was called. They used that phrase anyways in it. And it's all about this idea that people, really smart people, people who studied money and maybe should have known better, just couldn't see the water that they were swimming in. They just couldn't imagine anything but the gold standard. And that was a big driver of the Great Depression. And it's very clear empirically that leaving the gold standard, you know, you see it in one

country after another, leaving the gold standard, things started to get better. Like obviously, the U.S. didn't get all the way out of the Depression until World War II, but the bottom unambiguously is 1933 and the turn is going off the gold standard. So let's make another big old leap in history and come up to. to this key inflection point, which feels to me as so many of the people who have made studying, working on being in the business of money and finance, the key inflection point was around the great financial crisis. And you take a slightly different look at that, or you kind of start the story in a different place in the chapter, how two guys in a room invented a new kind of money.

So let's talk about that for just a minute. Yeah. So as you alluded to, I mean, the standard story of the 2008 financial crisis is about subprime mortgages, the housing market, securitization of mortgages. And all of that is true and correct, right? I mean, whatever. The big short is an amazing book, and it's a true story. And all of that happened. But there's this other piece of the story that is less told.

you know, less often told, certainly in the sort of popular press, popular imagination. And that is about basically this new kind of sort of money that emerged and that funded the whole thing, the whole housing bubble. And that, it was, well, it was basically it was the shadow banking system. And there was a run on the shadow banking system. That was like a classic bank run, but nobody really knew it was happening because nobody knew the shadow banking system was really like a banking system. So how did that happen? The two guys in a room that you alluded to were Bruce Bent and his partner, Harry Brown. And they, back in the 70s, way back in the 70s, they invented the money market mutual fund,

which I imagine most of your listeners know what it is. But if you have money in a brokerage account and you have a little bit of it in cash, it's probably in a money market fund. It acts like a checking account, but it's not insured by the government. And this is an important difference. So they invent this thing, the money market mutual fund in the 70s, as basically a way for people to get a little more interest on their cash. At the time, the government capped interest rates on regular bank checking accounts. And of course, great, more interest on my cash, I'll take it.

So they take off and they become more like checking accounts. You can write checks against it. And, you know, like a regular bank, what they do is they take your money and they pay you a little bit of interest on it. And then they turn it around and they lend it out to somebody else. else. And when they started this money market mutual fund, they loaned it out the most safe way as possible. They loaned it to the government for, you know, T bills, short-term government debt, and they loaned it out to banks in the form of certificates of deposit, which were guaranteed by the government. So it's ironclad, you know, drop dead safe. There's a little bit of maturity

mismatch, right, because you can take your money out any time. And the T-bills last for a few weeks, the bank deposits maybe for a few months. So there's a little something going on there, but nothing too bad. But what happens is, as more and more people fall in love with these accounts, you know, hundreds of billions of dollars start to pour into these accounts. And the money market fund people need new places to lend out the money, right? Their whole business is, like, we'll pay you a little interest and then we'll lend it out for more. It's just classic bank business, banking business, even though they're not officially banks. They're not backed by the government. And so they start coming up with all these new kinds of short-term loans to make.

And these short-term loans, you know, cut to the early 21st century, start driving this massive finance and housing bubble. So, you know, you put your money in a money market mutual fund. They turn around and they lend it to an investment bank like Lehman Brothers that is heavily invested in all kinds of housing finance. Or they turn around and they turn around and they lend it to these conduits that banks have set up that are funding all of these non-bank lenders like countrywide mortgage that are, you know, doing the lending that's driving the housing boom. So you have this very boring-seeming thing, a money-market mutual fund, actually providing the money that is inflating the bubble. And then when Lehman Brothers goes bankrupt in September 2008, that's the part of the financial

crisis we all know, this original money market mutual fund that Bruce Bent, one of the founders, is still running. It turns out has loaned money to Lehman Brothers. And of course, Lehman Brothers is bankrupt, doesn't have it. When people find that out, they all rush to pull their money out of the money market mutual fund. This is just classic bank run. It's not insured by the government like a regular bank. The money market mutual fund doesn't have their money.

And it has to say, no, sorry, we don't have your money. And then there's a giant panic. And then the government rushes in it's like, okay, okay, we're going to guarantee the other money market mutual funds. Because it turns out they're basically banks and we didn't know it. I mean, this is a, it's interesting now to see. the emergence of a much bigger conversation around the shadow banking system and what it means. And it's interesting that it's happened, I think particularly this year, at least I've observed it increased this year, as people examine the growing sort of what Jeff Snyder would call

the myth of the money printer, right? And this sort of tidal wave of government stimulus or relief from around the world. And his sort of core thesis is that it doesn't have the ability to move markets the way that we think it does, that in fact, because of just how much bigger the shadow banking system is than in some ways what we know, it's really a perception game. It moves the markets by the kind of willing complicity of participants who see the Fed acting and then take that as a signal to behave differently. Well, I mean, the Fed is credible, right? The Fed can more or less lend money to anybody they want to.

And so, you know, one of the first things they did this spring when the pandemic hit, the U.S. was they started lending once again to money market mutual funds, right? I mean, to me, what's striking is, if you go back to the Depression, one of the things I didn't talk about was in the Depression, the U.S. basically made this bargain with banks, right? That was the first time the U.S. had national deposit insurance where the government stood by regular people's bank deposits up to a certain amount of money. And, you know, when that happens, bank deposits become fully money, right? When that happens, a bank deposit is as much money as a paper bill. Before that time, it's not quite, right? It's a loan to the bank that the bank might not pay you back. And so what you see happen with the shadow banks and with money market mutual funds in particular is,

Once the government in 2008 says, okay, okay, we're going to insure the money in a money market mutual fund right now. And they did that even though, you know, the money market mutual funds hadn't been paying into any insurance fund. Like they are making it much more like money, right? When the government is standing behind it and you can get a dollar anytime and you can write checks on it, it's money. And the government can say like, oh, we won't do it again. But nobody believes that. Like, of course they'll do it again. And so, you know, banks, I feel like we shouldn't think of banks as existing.

purely in the private sector, right? They're kind of like a public-private partnership. Like, they're very heavily regulated, and they do this public thing, right? They create money when they make loans, when they engage in fraction reserve banking. And yet the shadow banks, and money market mutual funds in particular, are less highly regulated than banks. They don't have capital requirements. They don't pay deposit insurance. But yet, at this point, they have the implicit and from the Fed now explicit guarantee that makes them much more money-like. And I feel like that seems like a not-great bargain. Like either their money, and they're backed by the government, or they're not, and you might lose your money if it's in there.

And if they're not, then let them fail. And if they are, then, like, really pull them, you know, into the fence of money. So this is interesting. And I think gets out one of the, maybe the one of the big questions that the book leaves on, which is what will money look like in the years to come. I mean, there's a in the sort of main part of the book, Bitcoin is the last section or part of the last section. And then the conclusion is looking at a world without cash, a world without banks, and an MMT world.

So I guess as you're looking forward, like I said, this is going out on Election Day. And, you know, the next president, whether it's the same president or a different one, is going to have to face some fundamental questions about money, regardless of who wins. How do you see those conversations happening right now? What are the kind of key inflection issues that we should be paying attention to? Well, I mean, I think the most straightforward one is the size of the deficit and the size of the national debt, right? I mean, one of the really interesting monetary things really over the past decade now, right, is how inflation has stayed super low, right? I mean, if you go back to before the pandemic hit, you know, a year ago, eight months, months ago, a long time ago now. We had very low unemployment, large government deficits,

and very low inflation, which like traditionally, you shouldn't be able to have that, right? When employment is under 4%, the government is running giant deficits, people should be worried about inflation, bond rates should be going up. So I think as a result of that combination, people became less worried about deficits than ever, than they have been in a long time. and arguably rightly so. I mean, you know, I'm not like, I don't necessarily agree with all of the MMT arguments, but I think certainly the last 10 years have been a time when the U.S. has clearly been able to run very large deficits without having to pay, you know, high interest rates on its debt. And so it will be interesting to see, you know, it depends not only on who wins the presidency,

but also who wins Congress. What will be the view of deficits going forward? I mean, certainly the economy is still very bad. Unemployment is. very high. I think there's a compelling macroeconomic argument, at least in the middle term, to continue running large deficits. I don't know how the politics of that is going to work out. Yeah, no, I think that you're right, too, that it's whatever one's personal feelings of the right answers or the right causal explanations, it's not hard to understand how this, how this sort of intellectual space for a theory like MMT, or in many ways it's kind of converting, the Austrian economics of Bitcoin arose, right? It's this sort of strange combination of things

and everyone trying to figure out what to do with it, you know? So in some ways, it feels like part of that, part of the battle is different groups trying to argue for their interpretation of events and predict what might happen next. Yeah, that's right. I mean, one thing I should point out, you know, we're talking just before Halloween, this will air just after Halloween. Halloween, 2008, was the day the Bitcoin white paper was published, right? They're just right in the teeth of the financial crisis. And, you know, there's that famous little newspaper snippet in the Genesis block, right? Or it's in the code.

That's about the bank bailout. Sorry, there's a siren going by. Should I just stop? Or maybe it'll add to the sense of crisis. So that little snippet, it's from a British business. paper about a bank bailout, right? So to your point, I mean, I think the origins of Bitcoin in the financial crisis were sort of optimal for Bitcoin, right? Because a big part of the sell of Bitcoin is about trust and who are you going to trust? Well, the financial intermediaries are falling

apart. The governments were clearly not competent to regulate the financial system. Maybe this beautiful technical system is more worthy of our trust, right? And I think sort of similarly, or at least analogously, the ultra-low inflation environment of the past 10 years has been a natural place for MMT ideas to flourish, right? If inflation were 6%, or 8%, far fewer people would find MMT compelling. Absolutely. I think this brings me back to the very title of the book, Money, the true story of a made-up thing, the fact that we could be all living through these same events and have such radically different interpretations of it, I think validates just how much of this is the way that we kind of construct the narrative to make it make sense.

Yeah. And, you know, I mean, the place where I left it in the book is like, I don't know what's going to happen. Like, I've never been that into prediction. And writing this book made me only more skeptical of my or anybody else's ability to predict. If you go back to, you know, 1930, even once you're in the Great Depression, like the notion that everybody was about to abandon the gold standard within just a couple years, you know, that there was about to be this fundamental thousand-year era transformation of what money is. Like, nobody knew that, you know? And so, like, I don't know what's going to happen.

But like in the medium term, in the long term, the thing I feel like I can say with a pretty high degree of confidence is money is going to work really differently. It's going to change. It's not going to work the way it works now in a pretty fundamental way. Well, that seems to be a perfect note to close this on. Jacob, thank you so much for spending some time with this today. I'll make sure the book is linked at the show notes and people can go read it. But where can people find you if they want to follow along with these ideas in real time? Twitter. I'm on Twitter, an embarrassing amount. I'm at Jacob Goldstein on Twitter. Easy. All right, Jacob, thank you so much and really enjoy this conversation. Oh, it was fun. Thanks for having me on the show.

The thing I keep reflecting on is this idea that we don't recognize money because it simply is whatever money is all around us. At the risk of making a very tired analogy, I can't help but think of the Matrix. Once we understand what it is that's all around us, that it is, in fact, a construction, we can act both within it and upon it differently. To put it more materially in the case of money, we can have a say in deciding what money is next if we wish to, if we recognize the construct around us. That is the attempt, I think, of Bitcoin and Bitcoiners in many ways, but we're far from the only ones. I hope that you enjoyed this brief little look at monetary history. You should definitely check out Jacob's book, Money. And until tomorrow, be safe and take care

of each other. Peace.