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Speaker 1: Hello, Odd Lots listeners. I'm Jill Wisenthal and I'm Tracy Alloway. Tracy,

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Speaker 1: we're doing another live show and it's right here in

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Speaker 1: New York City.

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Speaker 2: Yeah, this one should be our biggest yet, and we're

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Speaker 2: going to have a bunch of Odd Lots favorites and

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Speaker 2: do something maybe a little different to some of our

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Speaker 2: previous live podcast recordings.

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Speaker 1: When the guests are revealed, the show is going to

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Speaker 1: sell out right away, so you should really just go

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Speaker 1: get your ticket right now. It's June twenty sixth. It's

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Speaker 1: at Record NYC, and you can find a ticket link

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Speaker 1: at Bloomberg dot com slash odd Lots or Bloomberg Events

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Speaker 1: dot com slash odd Lots Live and why.

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Speaker 2: We hope to see you there.

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Speaker 3: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to a special episode of the Odd

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Speaker 2: Lots Podcast. I'm Tracy Alloway.

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Speaker 1: And I'm Wishal Joe.

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Speaker 2: This is special. I think this is the first time

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Speaker 2: we've done this.

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Speaker 1: We're not used to like, you know, we like to

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Speaker 1: talk to academics certainly, but we've rarely ever done anything

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Speaker 1: like in the proper academic setting, in the types of

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Speaker 1: seminars where you know, academics are on their home turf.

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Speaker 2: That's right. So we were invited by the Princeton Economic

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Speaker 2: History Workshop to an event called how to Write the

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Speaker 2: Biography of a Currency. I love that topic and that name.

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Speaker 2: And we were invited to moderate a panel specifically on

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Speaker 2: how to define a currency? How do we define what

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Speaker 2: actually is money and what it does and all that

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Speaker 2: good stuff. And we had an amazing panel.

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Speaker 4: That's right.

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Speaker 1: So we had three guests. We talked to Inyaqui al Dessoro,

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Speaker 1: an economist at the Bank for International Sentiments, Rebecca Spang,

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Speaker 1: a professor at the University of Indiana, Bloomington, and Stefan Ingves,

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Speaker 1: the former head of the Sfeti Jerichsbank, the Central Bank

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Speaker 1: of Sweden from two thousand six twenty twenty two. So

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Speaker 1: take a listen to the three of them.

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Speaker 5: So I mean solo, and I'm a principal economist at

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Speaker 5: the banker International Settlements.

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Speaker 6: Rebecca Spank, professor of history at Indiana University.

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Speaker 4: Stefan Ingvest, a former governor of the Swedish Central Bank,

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Speaker 4: the ricks Bank.

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Speaker 2: Should we go down the line, Shall we start with

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Speaker 2: Stefan how to.

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Speaker 4: Write a biography of a currency, or actually maybe how

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Speaker 4: to define a currency. And let me start by saying

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Speaker 4: that it's a privilege to be here and discuss money,

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Speaker 4: or actually I think in the course of the day

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Speaker 4: money is using the plural. It just so happens that

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Speaker 4: forty seven years ago, when I was visiting a graduate

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Speaker 4: student here in Princeton, I took a course in monetary

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Speaker 4: theory and I got hooked. And little did I back

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Speaker 4: then know that with my finished background, I would end

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Speaker 4: up leading the all of the central bank, the ricks Bank,

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Speaker 4: and also became one of its longest serving governors. So

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Speaker 4: quite a journey. And with that as a background, what

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Speaker 4: a privilege to be back as a practitioner. That's my

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Speaker 4: background when I'm talking about money today and what I

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Speaker 4: have sort of experienced and concluded over the years. Let

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Speaker 4: me start by saying that money is a social convention.

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Speaker 4: Money is something about what we have in our heads.

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Speaker 4: And this is also why we have moved over the

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Speaker 4: centuries from seashells to something on a hard drive or

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Speaker 4: nowadays maybe in the cloud. And then that of course

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Speaker 4: begs the question in terms of changing technologies, what is next?

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Speaker 4: Today money is an abstraction, but we still talk about

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Speaker 4: money in terms of something that we can both see

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Speaker 4: and touch. And it's remarkable that each and every time

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Speaker 4: in my bank, when a new group of PONS politicians

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Speaker 4: were appointed to the General Council, they always wanted to

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Speaker 4: see the gold, not talk about the money as such.

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Speaker 4: It was always can we get to see the gold?

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Speaker 4: And that has something to do with this issue that,

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Speaker 4: on the one hand, money is an abstraction, while on

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Speaker 4: the other hand, we're sort of wired in our heads

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Speaker 4: in such a way that we want to touch things.

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Speaker 4: We can talk about money in many different ways, and

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Speaker 4: we can talk about money at the micro level and

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Speaker 4: kind of the monetary plumbing, or we can talk about

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Speaker 4: money at the macro level, and at the macro level

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Speaker 4: it's more sort of money tied to economic activity in

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Speaker 4: one form or the other, and then it's actually economic

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Speaker 4: activity in the aggregate. And you can also talk about

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Speaker 4: money as something somewhere in between money as part of

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Speaker 4: the financial plumbing. And that's kind of where I decided

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Speaker 4: to say a few things today, and my remarks, I mean,

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Speaker 4: they're really really given my background coming out of the

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Speaker 4: FIAT money world. When we talk about money, I think

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Speaker 4: a helpful distinction is also to try to make a

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Speaker 4: distinction between public sectremoney versus private sectremoney. And also when

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Speaker 4: it comes to monetary policy, which I'm not talking about today,

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Speaker 4: Monetary policy is quite a lot about how to execute

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Speaker 4: some kind of monetary control in this dual environment where

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Speaker 4: we live today. One simple way of explaining that in

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Speaker 4: order to maintain monetary control in one form or the

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Speaker 4: other is basically to say that that requires an exchange

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Speaker 4: rate which is one to one between public sector and

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Speaker 4: private sectremoney, and if that is not the case, then

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Speaker 4: the whole thing collapses. And countries of today where you

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Speaker 4: can watch this is, for example, Zimbabwe and Venezuela, and

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Speaker 4: you know what happened in those cases. Another way of

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Speaker 4: describing this, and it's somewhat similar, and I do think

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Speaker 4: it matters, but it's almost never described in this way

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Speaker 4: is to talk about it in terms of front end money.

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Speaker 4: That is kind of what we see and what we

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Speaker 4: think that we are using, and today it's basically what

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Speaker 4: you see on the screen of your computer and when

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Speaker 4: you use an app, and that kind of means some

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Speaker 4: vague sense represents money to us. And the other version

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Speaker 4: of it is what I call backend money and ultimately

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Speaker 4: back and money is central bank money in one form

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Speaker 4: or the other. It's a height to the payment system.

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Speaker 4: It could be a central bank digital currency, could be

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Speaker 4: a deposit or something else. And it doesn't really matter

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Speaker 4: if it's one ledger, if it's this due to ledger technology,

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Speaker 4: it's a token or what. It's really the principle that

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Speaker 4: I'm talking about. But also when technology is change, what

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Speaker 4: happens is that all strategic issues come back. And many,

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Speaker 4: many of you know what has happened over let's say

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Speaker 4: a thousand years or something like that when it comes

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Speaker 4: to money. And my conclusion from that is that since

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Speaker 4: money is a convention, there is almost nothing new under

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Speaker 4: the sun when it comes to money. But technologies do change,

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Speaker 4: and that forces us to get back to all issues

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Speaker 4: that others have grappled been in the past. A gross

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Speaker 4: simplification is to say the following that back in the

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Speaker 4: eighteen hundreds, and that's kind of the mindset that we

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Speaker 4: have inherited today when we talk about money, everything was

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Speaker 4: on paper, and in the late eighteen hundreds in a

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Speaker 4: very large number of countries, the central bank ended up

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Speaker 4: being the sole issue of a physical bank. In the future,

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Speaker 4: we have to get used to the idea that nothing

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Speaker 4: will be on paper, and that means that we have

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Speaker 4: to get back to all issues and think hard about

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Speaker 4: how do we reestablish the moneyness of monies in this

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Speaker 4: new environment when we have to think about this, and

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Speaker 4: at the same time, it's absolutely obvious that nowadays that

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Speaker 4: money is also part of the state. Money is tied

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Speaker 4: to a nation in one form or the other. Not

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Speaker 4: necessarily every work, particularly not if you have destroyed the

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Speaker 4: value of your own money. But at the same time

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Speaker 4: you just have to accept the fact that parliaments and

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Speaker 4: politicians have views on money, and that raises the issue

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Speaker 4: going forward whether we should have a central bank digital

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Speaker 4: currency or not, despite the fact that we cannot see

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Speaker 4: what it should look like. Are we talking retail, Are

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Speaker 4: we're talking wholesale? Ulish can talk at length about that

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Speaker 4: because he is presently working on them, and this creates

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Speaker 4: an interesting environment going forward when it's not about one

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Speaker 4: currency dominating or not. But it's a fact that different

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Speaker 4: nations come to different conclusions on this as of today,

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Speaker 4: because look at what's going on in the US today.

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Speaker 4: Basically more and more of it seems to be pushed

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Speaker 4: to the private sector. In the EU they're working hard

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Speaker 4: on a central bank digital currency. In India they have

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Speaker 4: been extremely successful establishing their UPI framework, which kind of

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Speaker 4: ties central bank money to the payment system and ties

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Speaker 4: also front end to back end using my vocabulary in

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Speaker 4: a very efficient way. Same thing is going on in

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Speaker 4: Brazil and China is working hard on their project. And

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Speaker 4: this projects actually will not be identical, and it's basically

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Speaker 4: too early you tell which will work and which won't

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Speaker 4: work and what it really does in various economies. And

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Speaker 4: this means that one way you're looking at this is

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Speaker 4: to call it the great game of our monetary future

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Speaker 4: in a one hundred percent digital world, whatever that means

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Speaker 4: going forward, and that means that in this environment we

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Speaker 4: need to define or maybe redefine the role of the

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Speaker 4: state in money space, and that will, of course, also

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Speaker 4: in different countries, affect how we actually execute monetary policy

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Speaker 4: in different different ways. What I do think matters here

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Speaker 4: when it comes to money is that one is of

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Speaker 4: course the stability today it's called inflation targeting, you can

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Speaker 4: call it whatever you like in the old days. And

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Speaker 4: the other one is what I call transactional efficiency, because

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Speaker 4: if it's impossibly difficult to use your wonderful currency. No

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Speaker 4: one will use it because it's just so hard to

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Speaker 4: use use it. And what this really means is that

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Speaker 4: new technologies bring old issues to the fore. And one

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Speaker 4: extreme way of expressing this in a short form is

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Speaker 4: to basically say that today, with a fairly high likelihood

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Speaker 4: and old fashioned howallah transaction is probably executed in an

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Speaker 4: it world in one form or another. It's also a

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Speaker 4: fact when technology is changed. And this is really really

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Speaker 4: what we see today that it people do not know

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Speaker 4: a lot about money, and money people do not know

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Speaker 4: a lot about it, and that creates a lot of

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Speaker 4: confusion from time to time. And then in addition to this,

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Speaker 4: when you do this, then somewhere in the middle you

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Speaker 4: also have to have lawyers and a legal framework. So

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Speaker 4: you have it. You have a legal framework, and you

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Speaker 4: have economists and jointly this is actually what is going

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Speaker 4: to define how we use money in the future and

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Speaker 4: what this is all about. And then back to the

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Speaker 4: holy you're writing a biography, so I do think that

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Speaker 4: such a biography should also include something about where we

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Speaker 4: are today and maybe speculate a bit where we are

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Speaker 4: heading into the future. Thank you.

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Speaker 6: So Stephan just said that money is a convention, and

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Speaker 6: so there's really nothing new. Technologies just present the same

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Speaker 6: questions in different guises. I would say that conventions are

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Speaker 6: socially determined and societies change, and so the convention for

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Speaker 6: issuing money, say in the ancient Mediterranean, is going to

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Speaker 6: be different than the convention in the Middle Ages, and

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Speaker 6: is going to be different again from the conventions under capitalism,

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Speaker 6: as Chris was just talking about. I think another thing

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Speaker 6: to think about is that money, like any technology, when

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Speaker 6: it's working well, we don't really pay attention to it.

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Speaker 6: It's only if the power goes out that we suddenly

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Speaker 6: realize we're in a room that has electricity, and normally

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Speaker 6: it's just sort of humming along in the background. So

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Speaker 6: I think with currency, we and here I mean ordinary

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Speaker 6: users of money, not in fact central bankers, but the

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Speaker 6: great majority of people do not think of money as

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Speaker 6: something that has a biography. It's not born, it doesn't

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Speaker 6: go through adolescence, reach adulthood, then be an old age. Certainly,

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Speaker 6: ordinary people don't imagine money as something that's going to die.

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Speaker 6: If they are fortunate, if they are privileged, there comes

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Speaker 6: a point in their lives when they start to think

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Speaker 6: about what they are going to do with their money

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Speaker 6: when they are dead. But implicit assumption there is that

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Speaker 6: the money itself is immortal. After all, that's what makes

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Speaker 6: it a store of value. So a fully functional currency

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Speaker 6: in the mind of the people who use it seems

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Speaker 6: in fact to be outside of history, all right, that

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Speaker 6: it's not going to have a history or a biography.

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Speaker 6: And on the other hand, I will say as a

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Speaker 6: historian that even using the word currency to refer to

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Speaker 6: the monies used one place and not another is in

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Speaker 6: no way eternal or immortal. Locke John Locke, the famous philosopher,

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Speaker 6: in his Some Considerations of the Consequences of the Lowering

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Speaker 6: of Interest in Raising the Value of Money sixteen ninety two,

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Speaker 6: uses the word current twenty eight times, but never the

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Speaker 6: word currency. So the way we think about currency is

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Speaker 6: itself the product. And this ties again to something Stephan

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Speaker 6: just said of late eighteenth and nineteenth century revolutionary nationalism.

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Speaker 6: So a rupture with the past. It's a revolution and

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Speaker 6: the growing naturalization of the nation state. The assumption that, well,

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Speaker 6: of course there are nations and they have states. This

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Speaker 6: is a historically specific development. It wasn't a concept people

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Speaker 6: had in the Middle Ages. It doesn't make sense if

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Speaker 6: you think about the very long history of China before

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Speaker 6: the Republic, and it may not be true in the future,

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Speaker 6: but in the mid eighteen hundreds, having your own money

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Speaker 6: was one of the things, along with a flag, a

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Speaker 6: standardized language, an anthem, that established that some group of

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Speaker 6: people got to be a nation. And as with so

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Speaker 6: many features of nation thinking, a currency is part of

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Speaker 6: how a bounded community is imagined and defined. Dollars on

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Speaker 6: one side of the border, pesos on the other. I mean,

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Speaker 6: that's the theory. In practice, of course, it's not always

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Speaker 6: the reality. I grew up in Maine and there Canadian

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Speaker 6: coin circulated on par with American and you didn't even

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Speaker 6: notice whether they were Canadian dimes or US dimes. They

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Speaker 6: were just all dimes. So, prior to the debates in

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Speaker 6: Great Britain occasioned by the Bank of England's suspension of

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Speaker 6: payments in seventeen ninety seven and then the eventual resumption

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Speaker 6: decades later after the Napoleonic Wars, currency was a quality

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Speaker 6: that a money object might have in some markets, and

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Speaker 6: not having others currency meant that it was widely accepted

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Speaker 6: as a means of exchange. And what's crucial here is

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Speaker 6: that the coins are the bills that quote unquote past

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Speaker 6: current or were discounted at a predictable rate in any

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Speaker 6: given place, were not necessarily expected to be units of

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Speaker 6: account or long term stories of value. Current, after all,

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Speaker 6: is a reference to time as well as to the

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Speaker 6: forces that move goods across the sea and actually lock

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Speaker 6: in some considerations, makes lots of ponds on current in

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Speaker 6: the sense of a money that passes current and current

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Speaker 6: in terms of how you move things through the ocean.

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Speaker 6: So think a little bit more about what it would

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Speaker 6: mean for a mode of payment or a means of

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Speaker 6: exchange not to be the unit of account. In early

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Speaker 6: modern France, so seventeenth eighteenth century, before the Revolution, the

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Speaker 6: common large denomination coin was an AQ, and it was

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Speaker 6: called that because it depicted the aquson the shield of

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Speaker 6: the French monarchy on one side of it. But accounts

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Speaker 6: were kept in leave pounds. There was nothing circulated that

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Speaker 6: was called a leave and no denomination indicated on the AQ,

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Speaker 6: so the coin was called that because of what it

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Speaker 6: looked like. Was it worth three leave four four and

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Speaker 6: a half? It was up to the king to determine,

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Speaker 6: and in fact, in periods of political disruption, often in

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Speaker 6: periods of war, the king could revalue the circulating medium.

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Speaker 6: Louis the fourteenth did it a lot in the final

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Speaker 6: decades of his life. So there was a gap between

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Speaker 6: what circulated and how people counted, and that's not just

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Speaker 6: a weird French anomaly. No pennies and hardly any shillings

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Speaker 6: were minted in eighteenth century Britain, but people went on

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Speaker 6: keeping their accounts in pound shilling pence even if they

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Speaker 6: had none of those things. Another distinctive feature of the

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Speaker 6: early modern period is that it was up to the

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Speaker 6: private sector to determine whether to bring gold and silver

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Speaker 6: to the mint to be stamped as money or not,

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Speaker 6: and that gold and silver being brought to the mint

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Speaker 6: might be newly mined or from the Americas, or it

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Speaker 6: could be coins stamped by some other sovereign. Economic growth

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Speaker 6: in eighteenth century franch in Britain was largely made possible

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Speaker 6: by private money, bills of exchange, promissory notes from one

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Speaker 6: merchant to another, and all sorts of short term notes

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Speaker 6: written by one government office to another, and that model

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Speaker 6: of a private choice continued to inform debates during the

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Speaker 6: French Revolution, as I suspect everybody knows, the National Assembly

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Speaker 6: issued paper backed by the value of nationalized church properties.

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Speaker 6: These are the assigna. But it didn't mandate that the

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Speaker 6: assignac circulate on par or at any particular exchange rate

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Speaker 6: for the coin still in circulation, and many people argued that, well,

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Speaker 6: money is a merchandise like any other, and it was

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Speaker 6: up to the money changers to say, well, I'll give

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Speaker 6: you three AQ for your assign of twenty five leave,

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Speaker 6: or I'll give you ten. That was up to the

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Speaker 6: market to determine. So a century after this period, with

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Speaker 6: the rising prominence of classical and neo classical economics, Europeans

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Speaker 6: generally reacted to this sort of monetary variety and the

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Speaker 6: tension between private and public issuers as a sign of

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Speaker 6: backwardness and inefficiency, even though it had been the norm

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Speaker 6: in Europe less than one hundred years earlier. So when

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Speaker 6: they encountered it in the Qing Empire or in South Asia,

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Speaker 6: they immediately denounced it. I think in part because they

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Speaker 6: realized that as long as the sort of local knowledge

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Speaker 6: was relevant, they were never going to be able to

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Speaker 6: outcompete local users so they impose this new European model

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Speaker 6: of one country won money, what some people have called

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Speaker 6: the Westphalian logic, on the rest of the world. So

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Speaker 6: there are other things that I can say. I think

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Speaker 6: what I want to end on is that the common

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Speaker 6: sense understanding of money as something without a history, something

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Speaker 6: immortal or eternal, is of course a fantasy. But very

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Speaker 6: often when histories of money get written, they nonetheless focus

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Speaker 6: on those elements, the theories of economists, the intention of planners,

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Speaker 6: that do themselves have some claim on immortality in that

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Speaker 6: they're at least written down otherwise recorded, and can be

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Speaker 6: found on the shelves of libraries or in the cartons

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Speaker 6: of archives. What that history misses is the actual day

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Speaker 6: to day practice of money, what ordinary people are doing

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Speaker 6: with their money, and how they're thinking about it. That

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Speaker 6: is a much more difficult history to write, but it's

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Speaker 6: the one that I am committed to write it.

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Speaker 5: Thank you, okay, So let me first start by by

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Speaker 5: thanking Harold and Brendan for for inviting me, for giving

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Speaker 5: me a chance of percent here. This fantastic event to me,

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Speaker 5: it's a real honor to share the panel with with

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Speaker 5: Rebeca Stephan the tower in fear of course, in the

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Speaker 5: central banking community. And if I'm still your own phrase

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Speaker 5: with the with the perfect moderators. So before I begin,

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Speaker 5: let me start by reminding you that these are my

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Speaker 5: views and not those of the of the Bank for

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Speaker 5: International Settlements. I would like to start by saying something

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Speaker 5: that is probably very uncontroversial, which I think money is

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Speaker 5: one of the most, if not the most consequential and

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Speaker 5: impactful social technology that was ever by humanity. And as

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Speaker 5: a monetary economist, of course, I tend to think as

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Speaker 5: this as the most fascinating as well. And I mentioned

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Speaker 5: social because I think this is something that came up

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Speaker 5: in the in both Stephan and Rebecca's comments that money

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Speaker 5: is a social and institution that is sustained by a

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Speaker 5: share expectation that money that is accepted in payments today

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Speaker 5: is going to be accepted in payments tomorrow. And this

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Speaker 5: requires trust in money. This requires trust in the stability

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Speaker 5: of money, and also this requires trust in the ability

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Speaker 5: of money to elastically scale to meet the needs of

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Speaker 5: a growing economy. So I think two things then follow

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Speaker 5: from this perspective. The first is the centrality of money.

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Speaker 5: Many economies often conceive of money as a veil, that

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Speaker 5: sort of mask and underlying real world of commodity production

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Speaker 5: and exchange. I don't share this. I don't share this view,

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Speaker 5: and I think, like probably like many people in the room,

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Speaker 5: I conceive of money as the essence of a world

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Speaker 5: of interlocking promises to pay. So Stephan also mentioned tokens,

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Speaker 5: and then Michael, Yes, I mentioned organization quite prominently in

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Speaker 5: the dinner speech, and I think it's actually possible to

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Speaker 5: conceive of money as the primal or primore. Their original

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Speaker 5: organization is the organization of the credit and that relationships

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Speaker 5: that bind all of us together through the financial commitments

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Speaker 5: that we make that we make to each other. So

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Speaker 5: as the first element centrality of money's second element is

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Speaker 5: the emphasis on payment. So money is, as far as

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Speaker 5: I conceive it, first and foremost, means of payment, which

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Speaker 5: which is meant to say, a means of certainment. And

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Speaker 5: I think this is important because it gets me in

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Speaker 5: some way, after dancing around the concept of what is money,

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Speaker 5: to start to define money a bit because it points

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Speaker 5: to a key qualitative distinction between money and credit, between

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Speaker 5: a means of payment or a means of settlement and

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Speaker 5: a promise to pay. So credit is a promise to

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Speaker 5: pay money which effectively delays finance settlement, and money is

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Speaker 5: a way to extinguish credit, to extinguish credit, sorry fulfilling

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Speaker 5: that obligation when basically when settlement comes to and in

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Speaker 5: this sense, money is better than credit, especially in crisis,

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Speaker 5: which is something that goes along what you were mentioned

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Speaker 5: in terms of how people use it. So people might

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Speaker 5: not understand it in this terms, but they understand very

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Speaker 5: intuitively that money is better than credit in crisis, and

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Speaker 5: as coming from an emerging market, I can tell you

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Speaker 5: this is very much the case. Now, this still makes

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Speaker 5: the question what is money then? And I think my

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Speaker 5: answer as an economy should not surprise anyone, and it's

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Speaker 5: going to be underwhelming. It depends. It depends, because I

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Speaker 5: really do think it depends. It depends on who issue

401
00:24:55,600 --> 00:24:58,679
Speaker 5: the promise to pay. It depends on where that issue

402
00:24:58,720 --> 00:25:01,280
Speaker 5: stands in the hierarchy of is to pay, and also

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Speaker 5: who holds that claim. So I think perhaps it's better

404
00:25:03,840 --> 00:25:07,639
Speaker 5: to talk about moneyiness of these various instruments, these various

405
00:25:07,680 --> 00:25:10,160
Speaker 5: promises to pay, and the hierarchical arrangement of the promise

406
00:25:10,240 --> 00:25:12,680
Speaker 5: is to pay, so bank reserves at the central bank

407
00:25:12,760 --> 00:25:17,080
Speaker 5: and cash are the ultimate means of payment. They are

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Speaker 5: money for banks, and in the case of cash, of

409
00:25:18,560 --> 00:25:20,840
Speaker 5: course there are money for all of us. Bank the

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00:25:20,880 --> 00:25:22,680
Speaker 5: posits are in terms of form of credit because we

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Speaker 5: have a promise to deliver cash, to pay cash, or

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Speaker 5: to confer payment finality through ultimate settlement in the central bank. Yes,

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Speaker 5: as we know from our everyday experience, they are money

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Speaker 5: to us. Of course. Now I will not go through

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Speaker 5: the rabbit hole of discussing lower level issues of a

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Speaker 5: hierarchy of money, but I do want to highlight the

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Speaker 5: centrality of the price that connects the two highest forms

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Speaker 5: of money, and that is part which you discuss in

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Speaker 5: the one to one relationship between front end and back

420
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Speaker 5: end money, if you will. That's the price of the

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00:25:54,320 --> 00:25:57,399
Speaker 5: posits in terms of reserves and cash. This in the

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Speaker 5: context of central current central banking discussions is usually referred

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Speaker 5: to us as the singlens of money, following the expression

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Speaker 5: by relate to mass. And it's the key to sustaining

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Speaker 5: the trusting money that I was that I mentioned in

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Speaker 5: my opening sentences, And of course in modern economies there

427
00:26:15,320 --> 00:26:19,600
Speaker 5: are various institutional and legal mechanisms and arrangements that underpin

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Speaker 5: trust and the credibility of all of these promises to pay,

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00:26:22,359 --> 00:26:26,440
Speaker 5: most notably underpin the underpinning power. But we should always

430
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Speaker 5: bear in mind that we are always talking about promises

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Speaker 5: to pay higher forms of money. And I think what

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Speaker 5: this means is that as a matter, as a matter

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Speaker 5: of modern modern practice, it's basically impossible to talk about

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Speaker 5: money in full isolation from the government and the law.

435
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Speaker 5: But I would also like to highlight that as a

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Speaker 5: matter of both principle and past practice, this is not

437
00:26:45,000 --> 00:26:47,879
Speaker 5: the case of this is also something that we should

438
00:26:48,200 --> 00:26:50,320
Speaker 5: We should barry money even in more practice. As we

439
00:26:50,359 --> 00:26:53,000
Speaker 5: all know, most money is dead, which means most money

440
00:26:53,040 --> 00:26:55,760
Speaker 5: is promises to pay that are issued largely by private agents.

441
00:26:57,000 --> 00:26:59,639
Speaker 5: And there is this famous phrase by by Minski right

442
00:26:59,680 --> 00:27:01,560
Speaker 5: that one can create money and the problem is to

443
00:27:01,600 --> 00:27:04,199
Speaker 5: get it to get it accepted. So the appeal of

444
00:27:04,280 --> 00:27:07,000
Speaker 5: issuing of vision liabilities that can circulate us money that

445
00:27:07,040 --> 00:27:10,080
Speaker 5: can circulate as a means of payment is we are

446
00:27:10,240 --> 00:27:12,840
Speaker 5: kind of almost like a force of nature, and these

447
00:27:12,920 --> 00:27:17,160
Speaker 5: issues materializes time and time again, historically mostly through private initiative.

448
00:27:17,760 --> 00:27:20,320
Speaker 5: And the challenge then is after issuing this promised to

449
00:27:20,320 --> 00:27:22,520
Speaker 5: pay and to borrow again from Minsky, is to obtain

450
00:27:22,640 --> 00:27:26,320
Speaker 5: validation quote unquote from the for those emerging destructures that

451
00:27:26,359 --> 00:27:29,840
Speaker 5: arise from these promises to pay. And this validation always

452
00:27:29,880 --> 00:27:33,040
Speaker 5: comes from higher levels in monetariy hierarchies, and in the

453
00:27:33,080 --> 00:27:35,480
Speaker 5: limit they come from the top of the MOUNTI hierarchy,

454
00:27:35,920 --> 00:27:38,320
Speaker 5: meaning central banks. And we have seen this, for example

455
00:27:38,720 --> 00:27:41,920
Speaker 5: developments along these lines in the context of offshore dollars

456
00:27:42,000 --> 00:27:44,560
Speaker 5: or euro dollars. We have seen it with money market funds.

457
00:27:44,880 --> 00:27:47,120
Speaker 5: We are seeing it to some extent as well these

458
00:27:47,200 --> 00:27:49,840
Speaker 5: days with stable coins. And I think the example off

459
00:27:49,840 --> 00:27:51,720
Speaker 5: shore dollars also allows me to close by answering and

460
00:27:51,720 --> 00:27:53,920
Speaker 5: another of the questions that were posted by Brendan to

461
00:27:54,080 --> 00:27:56,000
Speaker 5: get us started and thinking about these issues, which is

462
00:27:56,040 --> 00:27:59,920
Speaker 5: the mapping between the currency usage and the boundaries of

463
00:28:00,160 --> 00:28:03,760
Speaker 5: the sovereign that is responsible for that unit of account.

464
00:28:04,040 --> 00:28:05,320
Speaker 5: And here what I would like to know that is

465
00:28:05,560 --> 00:28:09,040
Speaker 5: more money is also global money. And here, of course

466
00:28:09,080 --> 00:28:12,400
Speaker 5: there are hierarchies as well. And just ahead of coming here,

467
00:28:12,640 --> 00:28:14,520
Speaker 5: I had a quick under to look at the the

468
00:28:14,600 --> 00:28:17,240
Speaker 5: BS banking statistics and as oft the end of last year,

469
00:28:17,240 --> 00:28:20,200
Speaker 5: there were thirteen point five trillion of dollar liabilities booked

470
00:28:20,240 --> 00:28:22,840
Speaker 5: outside of the US. There were two point seven trillion

471
00:28:23,400 --> 00:28:26,000
Speaker 5: euroe nominated the liabilities book outside of the Euro area

472
00:28:26,840 --> 00:28:30,040
Speaker 5: six hundred and seventy billion or so for four pounds

473
00:28:30,119 --> 00:28:33,320
Speaker 5: and yeah, and of course, yeah, this is lobal money

474
00:28:33,320 --> 00:28:36,320
Speaker 5: that is arranged as well hierarchically, and it goes certainly

475
00:28:36,359 --> 00:28:39,280
Speaker 5: beyond the boundaries of what the issuers expect.

476
00:28:39,720 --> 00:28:40,640
Speaker 4: So let me stop there.

477
00:28:56,240 --> 00:28:59,040
Speaker 1: Here's more from our conversation on how we define a

478
00:28:59,120 --> 00:29:01,560
Speaker 1: currency at Princeton University.

479
00:29:01,760 --> 00:29:04,360
Speaker 2: All right, so I hesitate to say this in front

480
00:29:04,400 --> 00:29:07,120
Speaker 2: of a group of academics, but I asked chat Gpt

481
00:29:08,080 --> 00:29:13,320
Speaker 2: what the traditional definition of money actually is according to economists,

482
00:29:13,480 --> 00:29:16,520
Speaker 2: and it said the three functions that we've basically been

483
00:29:16,520 --> 00:29:20,640
Speaker 2: talking about today, unit of account, transaction method, store of value.

484
00:29:20,920 --> 00:29:24,400
Speaker 2: Does everyone here agree with that broad definition or if

485
00:29:24,440 --> 00:29:26,840
Speaker 2: you had the option to tweak it and change it,

486
00:29:26,880 --> 00:29:27,560
Speaker 2: what would you do.

487
00:29:29,280 --> 00:29:30,600
Speaker 1: We're going to keep the silence in.

488
00:29:31,840 --> 00:29:35,200
Speaker 2: Maybe we're already done. This is the episode we've defined it.

489
00:29:36,560 --> 00:29:41,560
Speaker 6: I think it's important to keep the means of exchange,

490
00:29:41,600 --> 00:29:45,960
Speaker 6: mode of payment differentiated, not to just collapse them together

491
00:29:46,040 --> 00:29:50,920
Speaker 6: into transaction, because I think that ordinary people when they

492
00:29:50,960 --> 00:29:56,480
Speaker 6: imagine a transaction. The default setting is still the fable

493
00:29:56,680 --> 00:29:59,720
Speaker 6: of barter, and so they assume that any transaction is

494
00:29:59,720 --> 00:30:03,400
Speaker 6: hap in the market. But what this whole conversation is

495
00:30:03,480 --> 00:30:08,320
Speaker 6: highlighted is the role of the state in moneyness, and

496
00:30:08,360 --> 00:30:12,800
Speaker 6: so you need that mode of payment distinguished from means

497
00:30:12,840 --> 00:30:16,400
Speaker 6: of exchange, so that people recognize that some payment you

498
00:30:16,480 --> 00:30:20,360
Speaker 6: don't quote unquote get anything back, say when you're paying

499
00:30:20,360 --> 00:30:21,240
Speaker 6: a parking fine.

500
00:30:21,920 --> 00:30:24,560
Speaker 4: I do think that there are instances when you actually

501
00:30:24,640 --> 00:30:26,880
Speaker 4: can separate them despite the fact that this is sort

502
00:30:26,880 --> 00:30:30,280
Speaker 4: of how we usually represent money, and apparently in an

503
00:30:30,320 --> 00:30:33,480
Speaker 4: ai world that's also the way it is. And let

504
00:30:33,520 --> 00:30:37,480
Speaker 4: me give you one example, particularly in cases where you

505
00:30:37,560 --> 00:30:40,600
Speaker 4: have had a lot of inflation and then for various

506
00:30:40,640 --> 00:30:45,720
Speaker 4: reasons you decide to reissue your money by taking out

507
00:30:46,000 --> 00:30:50,600
Speaker 4: x number of zeros. In those instances, it takes years

508
00:30:50,640 --> 00:30:56,160
Speaker 4: and years actually before you stop using the old nominal values.

509
00:30:56,920 --> 00:30:59,160
Speaker 4: And a good example that I know of when I

510
00:30:59,240 --> 00:31:01,840
Speaker 4: was a kid, that happened in the case of Finland,

511
00:31:02,480 --> 00:31:07,400
Speaker 4: and when you started discussing what the value of a

512
00:31:07,560 --> 00:31:12,000
Speaker 4: used car was, then you always reverted back to the

513
00:31:12,080 --> 00:31:15,400
Speaker 4: old way of arguing about things and adding a few

514
00:31:15,520 --> 00:31:19,440
Speaker 4: zeros because that was familiar to everybody. But of course

515
00:31:19,480 --> 00:31:21,680
Speaker 4: in most cases that's not how you do it. But

516
00:31:22,240 --> 00:31:25,280
Speaker 4: it's not absolutely necessary to tide history together.

517
00:31:25,880 --> 00:31:27,680
Speaker 5: Yeah, I would share that a bit. I think that

518
00:31:28,120 --> 00:31:30,480
Speaker 5: probably became clear to me. Means of payment or means

519
00:31:30,520 --> 00:31:33,560
Speaker 5: of settlement, its central to me. This is the driving,

520
00:31:34,040 --> 00:31:37,280
Speaker 5: the driving logic of everything that said. To be able

521
00:31:37,320 --> 00:31:39,240
Speaker 5: to have an arrangement of what are we going to

522
00:31:39,280 --> 00:31:41,040
Speaker 5: set alone, you need to have a unit of account, right,

523
00:31:41,040 --> 00:31:44,640
Speaker 5: so that kind of logically preceeds precedes that. But in

524
00:31:44,760 --> 00:31:47,120
Speaker 5: terms of store of value, I think these are kind

525
00:31:47,120 --> 00:31:50,360
Speaker 5: of derivative things that follow from a minim of account

526
00:31:51,000 --> 00:31:53,520
Speaker 5: or unit of account and means of settlement.

527
00:31:53,960 --> 00:31:56,600
Speaker 2: Joe, I'm sure some people might be worried that store

528
00:31:56,720 --> 00:32:00,600
Speaker 2: value seems to be the least least important aspect to money.

529
00:32:00,760 --> 00:32:02,920
Speaker 1: Actually, this sort of fits in with where I was

530
00:32:02,920 --> 00:32:05,480
Speaker 1: going next and stuff on. Obviously you talked about the

531
00:32:05,560 --> 00:32:08,640
Speaker 1: politicians wanting to see the pile of gold, which is

532
00:32:08,680 --> 00:32:12,120
Speaker 1: funny in a way but also still probably revealing. And

533
00:32:12,200 --> 00:32:14,360
Speaker 1: obviously people are into gold again these days. Maybe we'll

534
00:32:14,400 --> 00:32:16,440
Speaker 1: get back to that, but it occurs to me, like

535
00:32:16,560 --> 00:32:19,920
Speaker 1: you know, we think it's dollars convention and back by

536
00:32:20,600 --> 00:32:24,280
Speaker 1: various things, but also it's back by implicitly a promise

537
00:32:24,320 --> 00:32:26,240
Speaker 1: to be able to buy a basket of goods that

538
00:32:26,320 --> 00:32:29,479
Speaker 1: only gets two percent more expensive every year, this basket

539
00:32:29,520 --> 00:32:32,800
Speaker 1: of goods and services. And I'm curious, like you know,

540
00:32:32,880 --> 00:32:35,200
Speaker 1: in the broad history of like what people call money

541
00:32:35,280 --> 00:32:39,120
Speaker 1: or what people call currency, obviously it's not always gold,

542
00:32:39,400 --> 00:32:42,040
Speaker 1: and it's not always the specific basket that might be,

543
00:32:42,120 --> 00:32:46,239
Speaker 1: you know, the PCE. But how common throughout history is

544
00:32:46,320 --> 00:32:50,120
Speaker 1: this presumption that there will be an issuing authority that

545
00:32:50,160 --> 00:32:53,120
Speaker 1: has some redemption, either directly in the form of taking

546
00:32:53,120 --> 00:32:55,400
Speaker 1: it to the central bank and then getting a coinback,

547
00:32:55,880 --> 00:32:58,120
Speaker 1: or being able to take it out into the marketplace,

548
00:32:58,440 --> 00:33:02,920
Speaker 1: with the expectation that there's some stable stock of goods

549
00:33:02,920 --> 00:33:05,000
Speaker 1: and services that can be redeemed for it.

550
00:33:05,840 --> 00:33:08,560
Speaker 4: I think that when Rebecca sort of said that we

551
00:33:08,720 --> 00:33:13,640
Speaker 4: think about money money forever, and we combine that with

552
00:33:13,800 --> 00:33:17,960
Speaker 4: in akis reflection, the singleness of money, and that's sort

553
00:33:17,960 --> 00:33:20,560
Speaker 4: of how we think about money in kind of our

554
00:33:20,840 --> 00:33:24,360
Speaker 4: daily lives. But the fact of the matter is that

555
00:33:24,520 --> 00:33:30,200
Speaker 4: history tells us that despite that assumption, when we buy

556
00:33:30,200 --> 00:33:34,000
Speaker 4: things on a daily basis, once every thirty forty years

557
00:33:34,080 --> 00:33:38,280
Speaker 4: or something like that. Things happen, and then we sort

558
00:33:38,280 --> 00:33:42,240
Speaker 4: of try to recreate new money in one form or

559
00:33:42,280 --> 00:33:46,280
Speaker 4: the other. So in a longer time perspective, there is

560
00:33:46,560 --> 00:33:52,720
Speaker 4: maybe less stability than our perception of total stability in

561
00:33:52,880 --> 00:33:53,920
Speaker 4: the near term.

562
00:33:54,600 --> 00:33:58,120
Speaker 6: The idea that there's some stable stock of goods that

563
00:33:58,160 --> 00:34:01,280
Speaker 6: you can buy with your money sound to me much

564
00:34:01,560 --> 00:34:07,880
Speaker 6: more like an assumption of the moral economy than of

565
00:34:07,920 --> 00:34:11,520
Speaker 6: the market economy. In a market economy, producers are going

566
00:34:11,560 --> 00:34:15,120
Speaker 6: to compete, and some things may get cheaper, some things

567
00:34:15,160 --> 00:34:18,080
Speaker 6: may get more expensive. Since we don't have perfect markets,

568
00:34:18,120 --> 00:34:21,520
Speaker 6: we often have monopolies. And so it's curious to think

569
00:34:21,840 --> 00:34:27,160
Speaker 6: about how that eighteenth century moral economy idea that there

570
00:34:27,160 --> 00:34:30,799
Speaker 6: are certain goods that are so valuable to the functioning

571
00:34:30,960 --> 00:34:35,920
Speaker 6: of society that they ought to have a constant price,

572
00:34:36,280 --> 00:34:39,520
Speaker 6: and you ought to always be able to get bread

573
00:34:40,000 --> 00:34:45,880
Speaker 6: for to sue a pound, that idea, which then so

574
00:34:46,000 --> 00:34:49,239
Speaker 6: many economists have said no, no, Supply and demand will

575
00:34:49,239 --> 00:34:53,160
Speaker 6: shape the cost of bread, and yet as consumers we

576
00:34:53,239 --> 00:34:57,560
Speaker 6: still have moral economy gut reactions to changes in the

577
00:34:57,600 --> 00:35:00,080
Speaker 6: price of eggs or gasoline.

578
00:35:00,480 --> 00:35:02,360
Speaker 5: I would add, the store of values is kind of

579
00:35:02,360 --> 00:35:06,000
Speaker 5: fundamental It's just the way I would understand how many works.

580
00:35:06,080 --> 00:35:08,200
Speaker 5: It starts from the premise that it's a means of payment.

581
00:35:08,760 --> 00:35:12,080
Speaker 5: But at the same time, because as I was saying,

582
00:35:12,080 --> 00:35:14,759
Speaker 5: this is basically a way of promises to pay, and

583
00:35:14,960 --> 00:35:18,440
Speaker 5: those promises to pay are sustained with trust. And if

584
00:35:18,440 --> 00:35:21,200
Speaker 5: you don't have trust in the ability of that currency

585
00:35:21,280 --> 00:35:23,879
Speaker 5: to basically maintain this purchase in power all the time,

586
00:35:24,400 --> 00:35:28,439
Speaker 5: then the whole trust edifies collapses. I'd like to think

587
00:35:28,480 --> 00:35:31,840
Speaker 5: I'm not that old, but I'm old enough to vividly

588
00:35:31,880 --> 00:35:35,160
Speaker 5: remember my own experience with hyperinflation in Argentina, and then

589
00:35:35,239 --> 00:35:38,640
Speaker 5: trust is broken and it's very hard to recover. And

590
00:35:38,680 --> 00:35:41,040
Speaker 5: that's the complete underminey of the store of value function.

591
00:35:41,440 --> 00:35:44,880
Speaker 5: So I think it is essential. That's why price stability

592
00:35:44,960 --> 00:35:45,600
Speaker 5: is so important.

593
00:35:46,400 --> 00:35:48,839
Speaker 2: Rebecca, I wanted to ask you this specifically, but since

594
00:35:48,920 --> 00:35:51,160
Speaker 2: Joe brought up gold, both of us have been lucky

595
00:35:51,239 --> 00:35:54,120
Speaker 2: enough to take some fuel trips recently, and we went

596
00:35:54,160 --> 00:35:57,279
Speaker 2: to the Chicago FED and we saw their cash operations,

597
00:35:57,320 --> 00:36:00,920
Speaker 2: so billions and billions of dollars stacked in their vaults.

598
00:36:01,120 --> 00:36:03,280
Speaker 2: We went to a jewelry store in New York recently

599
00:36:03,320 --> 00:36:06,480
Speaker 2: where we got to hold some not very tasteful pieces

600
00:36:06,520 --> 00:36:10,640
Speaker 2: of jewelry, big necklaces and things like that, and we

601
00:36:10,640 --> 00:36:13,520
Speaker 2: were all just fascinated by this. And I think there

602
00:36:13,560 --> 00:36:16,880
Speaker 2: is something that's just different about seeing billions of dollars

603
00:36:16,920 --> 00:36:19,960
Speaker 2: in cash or potentially gold versus seeing a line of

604
00:36:20,040 --> 00:36:23,120
Speaker 2: zeros on a computer account or something like that, although

605
00:36:23,120 --> 00:36:25,840
Speaker 2: I've never personally seen that either. Talk to us about

606
00:36:25,880 --> 00:36:29,200
Speaker 2: how our relationship with money actually changes depending on the

607
00:36:29,200 --> 00:36:33,360
Speaker 2: physicality of money, because I know governments have often consciously

608
00:36:33,400 --> 00:36:35,799
Speaker 2: thought about this. They think about the metal content in

609
00:36:35,840 --> 00:36:37,600
Speaker 2: their coins, or they think about are we going to

610
00:36:37,640 --> 00:36:38,080
Speaker 2: print on.

611
00:36:38,160 --> 00:36:39,920
Speaker 6: Silk or basic paper?

612
00:36:40,320 --> 00:36:43,239
Speaker 2: So clearly this is in people's minds, right, This is.

613
00:36:43,160 --> 00:36:48,320
Speaker 6: In people's minds. And it seems to me really important

614
00:36:48,400 --> 00:36:53,840
Speaker 6: to remember that even in a world of if it

615
00:36:53,880 --> 00:36:57,520
Speaker 6: ever existed, a world of completely digital money, there would

616
00:36:57,600 --> 00:37:03,880
Speaker 6: nonetheless be material substrate that made that possible. So it

617
00:37:03,960 --> 00:37:09,640
Speaker 6: is impossible to have cryptocurrency or central back digital currencies

618
00:37:09,760 --> 00:37:15,040
Speaker 6: or anything else unless you have a way to generate electricity,

619
00:37:15,360 --> 00:37:17,440
Speaker 6: you have a way to plug in your computer, you

620
00:37:17,520 --> 00:37:21,400
Speaker 6: have semiconductors, you have chips. So we tend to think

621
00:37:21,520 --> 00:37:26,440
Speaker 6: there's a fable that money used to be physical and

622
00:37:26,480 --> 00:37:31,040
Speaker 6: it's become increasingly abstract, and some people think that's a

623
00:37:31,080 --> 00:37:34,240
Speaker 6: story of progress, and other people think that's a story

624
00:37:34,239 --> 00:37:38,560
Speaker 6: of decline. But the reality is that there's always an

625
00:37:38,680 --> 00:37:45,040
Speaker 6: interaction of the material and the symbol making that goes

626
00:37:45,160 --> 00:37:49,560
Speaker 6: into deciding that this is money and this isn't, and

627
00:37:50,280 --> 00:37:56,200
Speaker 6: over time, in different places societies configure that differently, but

628
00:37:56,400 --> 00:38:00,520
Speaker 6: it's not a linear movement in one direction or the other.

629
00:38:01,200 --> 00:38:05,080
Speaker 2: Stephan, since you've seen the gold, you want to take

630
00:38:05,120 --> 00:38:05,959
Speaker 2: that question as well.

631
00:38:06,280 --> 00:38:09,640
Speaker 4: Yeah, I mean, one way to think about it is

632
00:38:09,719 --> 00:38:12,080
Speaker 4: that as we all have sort of alluded to, is

633
00:38:12,120 --> 00:38:15,080
Speaker 4: that we are wired to think about things in a

634
00:38:15,239 --> 00:38:19,120
Speaker 4: physical sense, and that's why it sort of feels good

635
00:38:19,239 --> 00:38:22,680
Speaker 4: to try to lift the gold in it and touch it,

636
00:38:23,640 --> 00:38:26,759
Speaker 4: while it's harder actually when we think about and we

637
00:38:26,880 --> 00:38:31,839
Speaker 4: talk about fiat money, because fiat money it's an abstraction

638
00:38:32,040 --> 00:38:35,399
Speaker 4: you can't touch, necessarily touch it. It can be electronics

639
00:38:35,440 --> 00:38:40,640
Speaker 4: strictly electronic, and that's basically about trust in those who

640
00:38:40,719 --> 00:38:45,840
Speaker 4: run the system, because that's what it is. And either

641
00:38:46,040 --> 00:38:49,399
Speaker 4: you sort of trust them because you say that they

642
00:38:49,400 --> 00:38:51,880
Speaker 4: have done this for a long long time, and inflation

643
00:38:51,960 --> 00:38:56,239
Speaker 4: seems to be pretty stable, so this probably works. Or

644
00:38:56,480 --> 00:39:01,200
Speaker 4: to the contrary, in some countries they have the system

645
00:39:01,400 --> 00:39:04,080
Speaker 4: many times over again, so it doesn't really matter who

646
00:39:04,160 --> 00:39:07,239
Speaker 4: sits there. When it comes to the individuals, you just

647
00:39:07,320 --> 00:39:11,080
Speaker 4: don't trust them. And then what you do instead is

648
00:39:11,120 --> 00:39:14,800
Speaker 4: that you buy gold or you hold physical dollar bills

649
00:39:14,920 --> 00:39:18,200
Speaker 4: or euro bills in the mattress, because that's your way

650
00:39:18,239 --> 00:39:22,920
Speaker 4: of buying an element of insurance. And this is very,

651
00:39:23,040 --> 00:39:25,160
Speaker 4: very difficult to deal with. But let's at the same

652
00:39:25,239 --> 00:39:30,200
Speaker 4: time remind ourselves that also in the old days, gold

653
00:39:30,440 --> 00:39:37,720
Speaker 4: wasn't always gold, and all old emperors and kings figured

654
00:39:37,760 --> 00:39:40,520
Speaker 4: that out that went out a long long time ago

655
00:39:40,680 --> 00:39:44,560
Speaker 4: by diluting the amount of gold that they claimed they held.

656
00:39:44,600 --> 00:39:47,319
Speaker 4: So it's not that everything was better in the old

657
00:39:47,400 --> 00:39:48,799
Speaker 4: days just because you held gold.

658
00:39:49,920 --> 00:39:54,360
Speaker 6: I've been thinking about the metaphor of wiring and plumbing,

659
00:39:55,000 --> 00:39:57,920
Speaker 6: which are frequently used in talking about money, and I

660
00:39:58,000 --> 00:40:00,400
Speaker 6: just want to point out again that both why and

661
00:40:00,440 --> 00:40:04,279
Speaker 6: plumbing are things made by humans. They are not naturally

662
00:40:04,320 --> 00:40:07,520
Speaker 6: existing phenomena. So if we say we are wired to

663
00:40:07,600 --> 00:40:10,600
Speaker 6: do this, or the monetary plumbing works in a particular way,

664
00:40:10,880 --> 00:40:17,120
Speaker 6: what we're talking about is the sedimentation of social norms

665
00:40:17,200 --> 00:40:21,840
Speaker 6: and cultural assumptions that we no longer recognize as such

666
00:40:21,960 --> 00:40:26,040
Speaker 6: because they've been repeated so many times. But in a

667
00:40:26,160 --> 00:40:31,200
Speaker 6: moment of dislocation, in a period of say, political revolution,

668
00:40:31,920 --> 00:40:35,400
Speaker 6: then we suddenly see those for what they are. And

669
00:40:35,400 --> 00:40:38,000
Speaker 6: then a bizarre thing happens, which I mean you just

670
00:40:38,120 --> 00:40:41,080
Speaker 6: said people lose trust in the system and so they

671
00:40:41,080 --> 00:40:45,440
Speaker 6: want an object. Like how weird is that if society

672
00:40:45,560 --> 00:40:49,000
Speaker 6: is collapsing around you and you think, oh, that's okay,

673
00:40:49,040 --> 00:40:51,360
Speaker 6: I'll just have some I have my shiny rock. I

674
00:40:51,400 --> 00:40:54,440
Speaker 6: have my shiny rock. Like I don't know, I'd sort

675
00:40:54,440 --> 00:40:57,919
Speaker 6: of rather have functioning society and no shiny rocks. Yeah.

676
00:40:58,480 --> 00:41:00,960
Speaker 5: The problem is that quite often this individual users it's

677
00:41:00,960 --> 00:41:04,680
Speaker 5: not a choice. You you react and I like your

678
00:41:04,760 --> 00:41:07,759
Speaker 5: mattress example, because that's you know, I can't relate to that.

679
00:41:08,520 --> 00:41:10,879
Speaker 5: And I think this becomes very clear right when when

680
00:41:10,920 --> 00:41:12,719
Speaker 5: when you have the crisis goes back to what I

681
00:41:12,800 --> 00:41:15,920
Speaker 5: mentioned that money is better than create and going to

682
00:41:15,920 --> 00:41:19,759
Speaker 5: to your book. People have an intuitive understanding of this

683
00:41:20,040 --> 00:41:22,279
Speaker 5: because in crisis they run away from creat and go

684
00:41:22,360 --> 00:41:24,680
Speaker 5: for money. And it's not that when they take money

685
00:41:24,680 --> 00:41:26,600
Speaker 5: out of the ATM say like, oh, I am converting

686
00:41:26,640 --> 00:41:28,160
Speaker 5: a claim on my bank to a claim on the

687
00:41:28,160 --> 00:41:32,360
Speaker 5: central They have no clue, but but they know. I

688
00:41:32,360 --> 00:41:35,200
Speaker 5: mean when when when the going gets rough they take

689
00:41:35,200 --> 00:41:37,880
Speaker 5: the money out of the bank in the case two

690
00:41:37,920 --> 00:41:40,600
Speaker 5: thousand and one Tina, or or they just go and

691
00:41:40,640 --> 00:41:42,800
Speaker 5: buy dollars if they if the bank is collapsing.

692
00:41:46,280 --> 00:42:01,479
Speaker 2: H We are back and continuing a conversation on how

693
00:42:01,520 --> 00:42:05,279
Speaker 2: to define a currency, recorded live at Princeton University.

694
00:42:05,640 --> 00:42:08,840
Speaker 1: I've seen the gold at the New York Fed's bank vault,

695
00:42:08,920 --> 00:42:11,600
Speaker 1: and Tracy, as you mentioned, we went to the jewelry

696
00:42:11,600 --> 00:42:14,360
Speaker 1: store in the Diamond District, and obviously gold has this

697
00:42:14,480 --> 00:42:17,759
Speaker 1: sort of effect on people still today. But something I'm

698
00:42:17,760 --> 00:42:21,600
Speaker 1: curious about Tracy asked about the physicality of money. Basically,

699
00:42:21,640 --> 00:42:25,400
Speaker 1: any form of currency around the world, the designers of

700
00:42:25,440 --> 00:42:28,640
Speaker 1: the physical note or the coin usually has some like,

701
00:42:29,440 --> 00:42:31,760
Speaker 1: you know, attempt to conjure up the sort of mystical

702
00:42:31,800 --> 00:42:36,160
Speaker 1: and spiritual history of the country in question that's issuing it.

703
00:42:36,280 --> 00:42:39,160
Speaker 1: And I'm just sort of curious, like from a design perspective,

704
00:42:39,800 --> 00:42:42,560
Speaker 1: a like how much of that is this attempt on

705
00:42:42,760 --> 00:42:46,160
Speaker 1: some levels sort of like rekindle that excitement that you

706
00:42:46,680 --> 00:42:49,839
Speaker 1: feel when you see gold, but also thinking forward as

707
00:42:49,880 --> 00:42:52,759
Speaker 1: money gets more and more digital. I'm curious the three

708
00:42:52,800 --> 00:42:55,440
Speaker 1: of you, like, do you think design on some level

709
00:42:55,520 --> 00:42:57,880
Speaker 1: something that like harkens back to the identity of the

710
00:42:57,960 --> 00:43:01,520
Speaker 1: nation will always be an aspect of digital money, or

711
00:43:01,560 --> 00:43:04,120
Speaker 1: always be an aspect of money, even as it gets

712
00:43:04,160 --> 00:43:05,640
Speaker 1: more and more strictly digital.

713
00:43:06,160 --> 00:43:08,960
Speaker 6: I think a really interesting example to think about in

714
00:43:09,040 --> 00:43:14,680
Speaker 6: terms of design is the euro which specifically had to

715
00:43:14,760 --> 00:43:22,680
Speaker 6: be non national, but nonetheless wanted Its designers wanted it

716
00:43:22,760 --> 00:43:27,719
Speaker 6: to look more or less like money had looked, but

717
00:43:27,840 --> 00:43:31,600
Speaker 6: it couldn't have the symbols of any particular nation. So

718
00:43:32,239 --> 00:43:35,840
Speaker 6: the make believe bridges on the bills, which are not

719
00:43:36,000 --> 00:43:40,360
Speaker 6: bridges in any particular place. One of them was then built,

720
00:43:42,200 --> 00:43:47,440
Speaker 6: I think in Mastricht actually, and actually the European Central

721
00:43:47,440 --> 00:43:53,680
Speaker 6: Bank put out a wonderful flyer document of other designs

722
00:43:53,719 --> 00:43:57,200
Speaker 6: that were not chosen, including a whole series of euro

723
00:43:57,360 --> 00:43:59,280
Speaker 6: notes that would have had cats on them.

724
00:43:59,440 --> 00:44:02,759
Speaker 2: So they should have used those, Yeah, they really should have.

725
00:44:02,800 --> 00:44:06,640
Speaker 6: They're incredibly cute. So I think the thing here is

726
00:44:06,719 --> 00:44:10,640
Speaker 6: that again, this is a social convention, and much like oh,

727
00:44:10,680 --> 00:44:12,680
Speaker 6: we're a new nation, we need a flag how about

728
00:44:12,719 --> 00:44:14,680
Speaker 6: we have three stripes. Do you think they should be

729
00:44:14,719 --> 00:44:18,680
Speaker 6: vertical or horizontal? Like that's the extent of your choice. Similarly,

730
00:44:18,719 --> 00:44:21,800
Speaker 6: I think when designers think, oh, we're going to design

731
00:44:21,840 --> 00:44:27,160
Speaker 6: some bills, let's put somebody's face maybe, And so I

732
00:44:27,200 --> 00:44:31,239
Speaker 6: think that there is that artistic invention that we tend

733
00:44:31,239 --> 00:44:32,080
Speaker 6: to keep using.

734
00:44:32,800 --> 00:44:34,719
Speaker 4: Let me add to that, that is today, if you

735
00:44:34,880 --> 00:44:38,680
Speaker 4: log on and you want to check on stable coin,

736
00:44:39,160 --> 00:44:42,280
Speaker 4: this and that, and maybe they should be called unstable coin.

737
00:44:42,920 --> 00:44:46,319
Speaker 4: Time will tell all of them have their own logos, yeah,

738
00:44:46,800 --> 00:44:49,400
Speaker 4: and if you look at them, they have sort of

739
00:44:49,600 --> 00:44:53,799
Speaker 4: copied old logos, so that in one way or the

740
00:44:53,880 --> 00:44:56,960
Speaker 4: other they try to remind you of something that has

741
00:44:57,040 --> 00:45:03,239
Speaker 4: existed in the passed and at more at the anecdotal level.

742
00:45:02,520 --> 00:45:06,839
Speaker 4: When I was deputy governor in Sweden went through the

743
00:45:06,880 --> 00:45:09,640
Speaker 4: agony of trying to decide whether to join the euro

744
00:45:09,920 --> 00:45:11,880
Speaker 4: or not to join the Europe and you know the

745
00:45:12,000 --> 00:45:16,080
Speaker 4: end result of that. There was one moment when trying

746
00:45:16,120 --> 00:45:20,840
Speaker 4: to create the euro banknotes, about four or five different

747
00:45:21,000 --> 00:45:25,960
Speaker 4: potential versions in terms of colors, motives and things like

748
00:45:26,040 --> 00:45:29,680
Speaker 4: that were passed around. And all of these were sort

749
00:45:29,719 --> 00:45:33,360
Speaker 4: of passed around among in the General Council, which is

750
00:45:33,400 --> 00:45:38,360
Speaker 4: in my case essentially politicians, and there was absolute silence

751
00:45:38,440 --> 00:45:41,640
Speaker 4: in the room, and it took a while. They were

752
00:45:41,680 --> 00:45:46,400
Speaker 4: slowly passed around, and then while one politician broke the

753
00:45:46,520 --> 00:45:50,719
Speaker 4: silence because there were no kings on these banknotes, and

754
00:45:50,920 --> 00:45:56,480
Speaker 4: he said, but all of them are ugly. And then

755
00:45:56,520 --> 00:45:59,480
Speaker 4: I sort of sensed that no euro in this country

756
00:45:59,560 --> 00:46:02,520
Speaker 4: at least now.

757
00:46:03,920 --> 00:46:06,440
Speaker 5: If I meant adults on the on the anecdotal and

758
00:46:06,440 --> 00:46:09,600
Speaker 5: I mentioned and the need for this physicality. So in

759
00:46:09,760 --> 00:46:11,799
Speaker 5: when the currency board in Argentina was in its death

760
00:46:11,840 --> 00:46:15,520
Speaker 5: throws two thousand, two thousand and one, a lot of

761
00:46:15,520 --> 00:46:18,760
Speaker 5: the promises were really cashtrapped and started issuing the quasi moneyes,

762
00:46:19,239 --> 00:46:21,840
Speaker 5: which were legally they couldn't be money, so they legally

763
00:46:21,880 --> 00:46:23,799
Speaker 5: had to be effectively they were a bond.

764
00:46:24,160 --> 00:46:27,319
Speaker 4: But they look exactly like a bill, exactly like a bill.

765
00:46:27,400 --> 00:46:30,600
Speaker 5: So to facilitate, you know, the familiarity with the with

766
00:46:30,640 --> 00:46:33,320
Speaker 5: the with the users. And in terms of going forward,

767
00:46:33,360 --> 00:46:38,760
Speaker 5: I mean, I think this aspect of identification and design

768
00:46:38,800 --> 00:46:40,759
Speaker 5: and so on, I think most likely is going to

769
00:46:40,800 --> 00:46:43,360
Speaker 5: be like a logo, like like Stephan was mentioning, and

770
00:46:43,400 --> 00:46:45,640
Speaker 5: it could be a logo of a central bank that

771
00:46:45,760 --> 00:46:48,040
Speaker 5: you check on it up. I think this is most

772
00:46:48,120 --> 00:46:49,200
Speaker 5: likely where we're going.

773
00:46:50,000 --> 00:46:54,160
Speaker 6: Can I make one more point that the first journalistic

774
00:46:54,280 --> 00:46:58,279
Speaker 6: articles about bitcoin that started to appear in like twenty ten,

775
00:46:58,320 --> 00:47:04,719
Speaker 6: twenty eleven are illustrated with diagrams and with sort of

776
00:47:04,800 --> 00:47:09,160
Speaker 6: pictures of circuit boards. And it's only in I think

777
00:47:09,160 --> 00:47:13,879
Speaker 6: twenty thirteen that somebody who had invested in bitcoin, which

778
00:47:13,880 --> 00:47:19,000
Speaker 6: at that point had no value whatsoever, started to manufacture

779
00:47:19,840 --> 00:47:25,760
Speaker 6: gold colored trading tokens with a bee with a slash

780
00:47:25,840 --> 00:47:29,000
Speaker 6: through it. Then he had a pile of those, which

781
00:47:29,040 --> 00:47:35,160
Speaker 6: he was sort of selling to other bitcoin enthusiasts. Somebody

782
00:47:35,280 --> 00:47:38,960
Speaker 6: took a photo of a stack of those. I think

783
00:47:38,960 --> 00:47:42,080
Speaker 6: it was the Bloomberg photo of the Year for twenty fourteen,

784
00:47:42,680 --> 00:47:48,400
Speaker 6: and suddenly everybody started illustrating their articles about bitcoin with

785
00:47:48,719 --> 00:47:55,239
Speaker 6: pictures of these, you know, basically hanaka gelt. And it's

786
00:47:55,280 --> 00:47:57,879
Speaker 6: in the aftermath of that that people assume that, well,

787
00:47:57,880 --> 00:47:59,960
Speaker 6: bitcoin must really be a thing, like what's that thing

788
00:48:00,000 --> 00:48:02,880
Speaker 6: saying that you keep seeing photos of? And so when

789
00:48:02,920 --> 00:48:06,160
Speaker 6: you tell people that you know, bitcoin is a spreadsheet,

790
00:48:06,360 --> 00:48:09,560
Speaker 6: bitcoin is a computer program, they don't believe you because

791
00:48:09,600 --> 00:48:15,080
Speaker 6: they've seen the pictures of the shiny gold candy wrappers.

792
00:48:15,719 --> 00:48:18,240
Speaker 2: I actually remember this because I wrote a bitcoin article

793
00:48:18,280 --> 00:48:20,480
Speaker 2: in twenty eleven back when I was at the FT,

794
00:48:21,080 --> 00:48:23,359
Speaker 2: and I used a picture of the FED because the

795
00:48:23,360 --> 00:48:27,880
Speaker 2: headline was I think digital money from real central bank distrust,

796
00:48:27,960 --> 00:48:31,279
Speaker 2: because that was the narrative at that time. It was

797
00:48:31,480 --> 00:48:33,799
Speaker 2: we don't trust the FED after the financial crisis, We're

798
00:48:33,800 --> 00:48:36,080
Speaker 2: going to create this, and then we saw that narrative

799
00:48:36,200 --> 00:48:38,960
Speaker 2: change so many times over the years. But just on

800
00:48:39,000 --> 00:48:40,680
Speaker 2: this note, I want to ask one more question because

801
00:48:40,680 --> 00:48:43,080
Speaker 2: I think it really encapsulates a lot of the discussion

802
00:48:43,080 --> 00:48:47,080
Speaker 2: we're having, but on stable coins specifically. So at the moment,

803
00:48:47,160 --> 00:48:49,760
Speaker 2: we have a bunch of stable coins from private issuers,

804
00:48:49,800 --> 00:48:52,160
Speaker 2: so the tethers of the world and so on. Lots

805
00:48:52,160 --> 00:48:54,640
Speaker 2: of central banks are talking about doing their own digital

806
00:48:54,680 --> 00:48:59,920
Speaker 2: currencies for various reasons. But how much competition would central

807
00:49:00,239 --> 00:49:04,120
Speaker 2: digital currencies be for the private issuers and how should

808
00:49:04,120 --> 00:49:07,360
Speaker 2: we think about I guess the attraction of both those

809
00:49:07,560 --> 00:49:08,520
Speaker 2: two camps.

810
00:49:09,040 --> 00:49:11,359
Speaker 5: Well, I mean, I think if you hear people from

811
00:49:11,400 --> 00:49:15,640
Speaker 5: the stable coin space talk about say, retail central bian

812
00:49:15,719 --> 00:49:19,279
Speaker 5: digital currencies not so much holds, but retail, they would

813
00:49:19,280 --> 00:49:22,640
Speaker 5: be very much opposed to this, and to me, this

814
00:49:22,719 --> 00:49:25,399
Speaker 5: is an indication that they see as a challenge, right

815
00:49:26,080 --> 00:49:29,160
Speaker 5: because they are very vocal about speaking speaking against this.

816
00:49:29,880 --> 00:49:32,239
Speaker 5: So I think in a way that there will be

817
00:49:32,280 --> 00:49:34,719
Speaker 5: competing and there will be competing payment instruments, but of

818
00:49:34,760 --> 00:49:37,000
Speaker 5: course they are very different because they are promised to

819
00:49:37,040 --> 00:49:38,960
Speaker 5: pay it should buy a sore membersus. The promise to

820
00:49:38,960 --> 00:49:42,040
Speaker 5: pay it should buy by a private agent. And the

821
00:49:42,120 --> 00:49:44,080
Speaker 5: problem we have plenty of promises to pay it should

822
00:49:44,080 --> 00:49:46,759
Speaker 5: buy private agents. And we'll see, you know, like we'll

823
00:49:46,800 --> 00:49:49,000
Speaker 5: see if they if they survive. I think it's very

824
00:49:49,040 --> 00:49:51,640
Speaker 5: much an open question. Maybe they have a role to

825
00:49:51,640 --> 00:49:54,520
Speaker 5: play as part of a payment ecosystem in the future.

826
00:49:55,040 --> 00:49:58,680
Speaker 4: This is kind of a rerun of a conversation that

827
00:49:58,719 --> 00:50:02,760
Speaker 4: took place in Many in the late eighteen hundreds, because

828
00:50:02,800 --> 00:50:07,240
Speaker 4: back then, in a paper based world, private banks issue

829
00:50:07,280 --> 00:50:10,160
Speaker 4: their own paper money and the central bank issued its

830
00:50:10,200 --> 00:50:13,839
Speaker 4: paper money. And eventually, after a series and long and

831
00:50:13,880 --> 00:50:17,960
Speaker 4: complicated for many years in my country, in parliament, it

832
00:50:18,080 --> 00:50:21,120
Speaker 4: was eventually decided to say that it's only the central

833
00:50:21,120 --> 00:50:25,160
Speaker 4: bank that issues physical banknotes, and the Banker's Association of

834
00:50:25,200 --> 00:50:28,719
Speaker 4: that day basically claimed that the banks were going to

835
00:50:28,719 --> 00:50:33,120
Speaker 4: go under if the state was that evil coming up

836
00:50:33,160 --> 00:50:35,640
Speaker 4: with that kind of a system, and now it's a

837
00:50:35,680 --> 00:50:39,600
Speaker 4: rerun of this thing coming back because the technology has changed.

838
00:50:40,200 --> 00:50:42,399
Speaker 4: And ultimately, at the end of the day, as I've

839
00:50:42,400 --> 00:50:46,400
Speaker 4: referred to, this is the political value judgment. Either the

840
00:50:46,440 --> 00:50:50,520
Speaker 4: political conclusion is that for whatever reason you want the

841
00:50:50,560 --> 00:50:54,000
Speaker 4: general public to be able to hold central bank money

842
00:50:54,600 --> 00:50:58,080
Speaker 4: given the technology of that day, or you say that

843
00:50:58,280 --> 00:51:01,239
Speaker 4: it is enough to sort of just deal with the

844
00:51:01,280 --> 00:51:04,520
Speaker 4: back end, and then the back end of the system

845
00:51:04,640 --> 00:51:08,960
Speaker 4: sort of backs up. Stable coins. Let me add to that,

846
00:51:09,080 --> 00:51:11,560
Speaker 4: And I think that here's a lot of confusion because

847
00:51:11,880 --> 00:51:15,960
Speaker 4: to me, I don't really see a major difference between

848
00:51:16,080 --> 00:51:19,560
Speaker 4: let's say a stable coin of some sort and a

849
00:51:19,640 --> 00:51:24,480
Speaker 4: money market fund. Essentially it's one and the same, And

850
00:51:24,560 --> 00:51:27,040
Speaker 4: particularly if you sort of scratch on the surface and

851
00:51:27,160 --> 00:51:30,480
Speaker 4: check the legal aspect of what actually has been constructed,

852
00:51:31,160 --> 00:51:36,640
Speaker 4: what probably is different is the way you transact because

853
00:51:36,760 --> 00:51:40,759
Speaker 4: the legacy system banks, the old banks, all of them

854
00:51:40,800 --> 00:51:45,879
Speaker 4: have legacy systems, So you sort of engineer a transfer

855
00:51:45,920 --> 00:51:50,560
Speaker 4: of ownership titles in one way in an IT world

856
00:51:50,719 --> 00:51:54,520
Speaker 4: and probably a rather old fashioned IT world. And then

857
00:51:54,560 --> 00:51:58,160
Speaker 4: you have these new startups and they sort of engineer

858
00:51:58,400 --> 00:52:02,960
Speaker 4: those transfers of ownership titles with others and new technologies,

859
00:52:03,000 --> 00:52:08,719
Speaker 4: but in terms of the legal setup it is roughly

860
00:52:08,840 --> 00:52:13,280
Speaker 4: the same. But I do think that there is a

861
00:52:13,640 --> 00:52:17,360
Speaker 4: major difference when you run a money market fund basically

862
00:52:17,440 --> 00:52:20,919
Speaker 4: holds let's say, treasuries and deposits with the central bank,

863
00:52:21,560 --> 00:52:25,560
Speaker 4: compared to something you call a stable coin. And when

864
00:52:25,600 --> 00:52:28,360
Speaker 4: you scratch on the surface, you realize that all of

865
00:52:28,400 --> 00:52:32,800
Speaker 4: it is deposited in a bank located in an offshore

866
00:52:32,880 --> 00:52:34,200
Speaker 4: financial center.

867
00:52:34,600 --> 00:52:36,400
Speaker 5: And there is even more intan twenty of that, but

868
00:52:36,520 --> 00:52:39,959
Speaker 5: because some sailer coins have the reserve managed by money

869
00:52:39,960 --> 00:52:40,879
Speaker 5: market funds.

870
00:52:40,640 --> 00:52:44,239
Speaker 1: Right circle for example. But going back to gold, so

871
00:52:44,320 --> 00:52:47,920
Speaker 1: obviously it has this magnetic effect on people, but also

872
00:52:48,760 --> 00:52:51,640
Speaker 1: people value it, and people value it higher during certain

873
00:52:51,680 --> 00:52:56,920
Speaker 1: times of uncertainty or perception of inflation, etc. And it's

874
00:52:56,920 --> 00:53:00,680
Speaker 1: don't extraordinarily well this year amid a many headlines, what

875
00:53:00,800 --> 00:53:04,040
Speaker 1: is it about gold that to this day people change

876
00:53:04,360 --> 00:53:06,399
Speaker 1: what they're willing to pay for it in a sort

877
00:53:06,400 --> 00:53:09,160
Speaker 1: of specific way that doesn't really you know, even silver

878
00:53:09,360 --> 00:53:11,759
Speaker 1: not to the same degree, although it's volatile too, But

879
00:53:12,120 --> 00:53:14,240
Speaker 1: what is it about gold? You think that in twenty

880
00:53:14,280 --> 00:53:19,239
Speaker 1: twenty five people reach for it when other monetary instruments

881
00:53:19,280 --> 00:53:21,160
Speaker 1: they have questions about, right.

882
00:53:21,000 --> 00:53:26,240
Speaker 6: I mean, I think it's again a fairly simplified version

883
00:53:26,280 --> 00:53:31,320
Speaker 6: of history that we'll say gold has always had value.

884
00:53:31,840 --> 00:53:34,200
Speaker 6: And one of the first things I tell my students

885
00:53:34,480 --> 00:53:37,720
Speaker 6: is that two words that are meaningless when writing about

886
00:53:37,760 --> 00:53:42,480
Speaker 6: history are always and never. But nonetheless, people like they

887
00:53:42,480 --> 00:53:46,319
Speaker 6: find comfort and being able to say this has always

888
00:53:46,480 --> 00:53:50,000
Speaker 6: had value, and so they assume that what they think

889
00:53:50,080 --> 00:53:54,799
Speaker 6: they know about the past will hold true in the

890
00:53:54,880 --> 00:53:58,440
Speaker 6: imagined future. The way I think about it is da

891
00:53:58,520 --> 00:54:02,359
Speaker 6: Vinci's Why do people want a work of art by

892
00:54:02,719 --> 00:54:07,359
Speaker 6: da Vinci or Picasso, It's because other people have valued it.

893
00:54:07,719 --> 00:54:12,000
Speaker 6: If at some point there's a seismic shift and works

894
00:54:12,040 --> 00:54:16,200
Speaker 6: of art by European men are no longer valued, Oops,

895
00:54:16,239 --> 00:54:17,759
Speaker 6: well that's the end of that.

896
00:54:18,440 --> 00:54:21,600
Speaker 4: Let me mention two examples going back to nineteen thirty nine,

897
00:54:22,280 --> 00:54:25,240
Speaker 4: and it's sort of a bit relevant to what happens

898
00:54:25,280 --> 00:54:29,080
Speaker 4: in Ukraine. Presently, Finland was attacked by the Soviet Union

899
00:54:29,880 --> 00:54:33,520
Speaker 4: and the gold was transported to Sweden back in nineteen

900
00:54:33,560 --> 00:54:37,000
Speaker 4: thirty nine. Sweden, in turn sent some of its gold

901
00:54:37,200 --> 00:54:40,160
Speaker 4: to the FED in New York, and the issue is

902
00:54:40,200 --> 00:54:43,520
Speaker 4: to following that if you have this sort of idea

903
00:54:43,840 --> 00:54:47,560
Speaker 4: that this is more stable than other things, then at

904
00:54:47,560 --> 00:54:52,120
Speaker 4: the same time gold is nobody else's dead, and then

905
00:54:52,200 --> 00:54:55,280
Speaker 4: you hope that it is more useful than other things

906
00:54:55,800 --> 00:54:59,879
Speaker 4: when times are very difficult, and to be blunt, back

907
00:55:00,040 --> 00:55:02,279
Speaker 4: in those days, the issue was that you needed the

908
00:55:02,320 --> 00:55:05,560
Speaker 4: gold to buy guns, and you aren't so sure what

909
00:55:05,760 --> 00:55:09,319
Speaker 4: other types of kind of assets you can monetize to

910
00:55:09,360 --> 00:55:12,400
Speaker 4: such an extent that you can actually buy those guns.

911
00:55:12,480 --> 00:55:14,840
Speaker 5: It's not a promise to pay that somehow establish itself

912
00:55:14,840 --> 00:55:17,640
Speaker 5: as valuable over time through social convention.

913
00:55:18,800 --> 00:55:21,839
Speaker 1: It's pretty crazy, and it's amazing that the idea that

914
00:55:22,080 --> 00:55:24,000
Speaker 1: in a way, the gold held that New York fed

915
00:55:24,160 --> 00:55:26,399
Speaker 1: is this obligation of the United States to return it

916
00:55:26,480 --> 00:55:29,840
Speaker 1: on demand at some point. And the incredible trust implied

917
00:55:30,080 --> 00:55:33,000
Speaker 1: in that that all these countries around the world are

918
00:55:33,040 --> 00:55:35,320
Speaker 1: willing to have their gold or at least some of

919
00:55:35,360 --> 00:55:37,680
Speaker 1: their gold in a locker in the basement of another

920
00:55:37,719 --> 00:55:41,879
Speaker 1: country seems like an extraordinary like social achievement in its

921
00:55:41,880 --> 00:55:42,399
Speaker 1: own right.

922
00:55:42,880 --> 00:55:44,479
Speaker 2: But they still want to go check that it's there

923
00:55:44,719 --> 00:56:03,600
Speaker 2: every once in a while. That was our special episode

924
00:56:03,640 --> 00:56:06,520
Speaker 2: recorded live at Princeton University.

925
00:56:06,200 --> 00:56:08,480
Speaker 1: Tracy a lot of fun. We should try the academic

926
00:56:08,520 --> 00:56:09,480
Speaker 1: setting again sometimes.

927
00:56:09,600 --> 00:56:12,239
Speaker 2: Oh yeah, And I gotta say Princeton was beautiful. Just

928
00:56:12,280 --> 00:56:14,160
Speaker 2: the architecture was amazing.

929
00:56:13,920 --> 00:56:16,120
Speaker 1: And we can tell, you know, everyone just heard enough.

930
00:56:16,160 --> 00:56:18,120
Speaker 1: But it is very funny to me that there's one

931
00:56:18,120 --> 00:56:20,680
Speaker 1: thing we take for granted, like the currency is actually

932
00:56:20,719 --> 00:56:23,600
Speaker 1: subject to so much debate, and Nolan gets really that

933
00:56:23,719 --> 00:56:26,560
Speaker 1: close to like a definitive answer, and that was sort

934
00:56:26,560 --> 00:56:27,960
Speaker 1: of a fascinating example of it.

935
00:56:28,000 --> 00:56:31,600
Speaker 2: Then always define your terms, Joe, that's right, all right.

936
00:56:31,840 --> 00:56:32,560
Speaker 2: Shall we leave it there.

937
00:56:32,640 --> 00:56:33,319
Speaker 1: Let's leave it there.

938
00:56:33,440 --> 00:56:35,760
Speaker 2: This has been another episode of the Odd Thoughts podcast.

939
00:56:35,880 --> 00:56:39,120
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway and.

940
00:56:39,080 --> 00:56:41,640
Speaker 1: I'm Joe Wisenthal. You can follow me at the Stallwark.

941
00:56:41,840 --> 00:56:45,120
Speaker 1: Follow our producers Carmen Rodriguez at Carmen armand dash Ol

942
00:56:45,120 --> 00:56:48,319
Speaker 1: Bennett at Dashbot and kill Brooks and Kilbrooks. From more

943
00:56:48,320 --> 00:56:51,200
Speaker 1: odd Laws content, go to bloomberg dot com slash odd Lots.

944
00:56:51,239 --> 00:56:54,000
Speaker 1: We're have a daily newsletter and all of our episodes

945
00:56:54,160 --> 00:56:56,080
Speaker 1: and you can chat about all of these topics. Twenty

946
00:56:56,080 --> 00:57:00,160
Speaker 1: four seven in our discord Discord dot gg slash odd laws.

947
00:57:00,160 --> 00:57:02,440
Speaker 2: And if you enjoy all bots. If you like it

948
00:57:02,480 --> 00:57:05,359
Speaker 2: when we try to define what a currency actually is,

949
00:57:05,400 --> 00:57:08,040
Speaker 2: then please leave us a positive review on your favorite

950
00:57:08,040 --> 00:57:11,759
Speaker 2: podcast platform. And remember, if you are a Bloomberg subscriber,

951
00:57:11,800 --> 00:57:15,120
Speaker 2: you can listen to all of our episodes absolutely ad free.

952
00:57:15,320 --> 00:57:17,520
Speaker 2: All you need to do is find the Bloomberg channel

953
00:57:17,560 --> 00:57:27,000
Speaker 2: on Apple Podcasts and follow the instructions there. Thanks for listening.