Speaker 1: Hello, Odd Lots listeners. I'm Jill Wisenthal and I'm Tracy Alloway. Tracy,
Speaker 1: we're doing another live show and it's right here in
Speaker 1: New York City.
Speaker 2: Yeah, this one should be our biggest yet, and we're
Speaker 2: going to have a bunch of Odd Lots favorites and
Speaker 2: do something maybe a little different to some of our
Speaker 2: previous live podcast recordings.
Speaker 1: When the guests are revealed, the show is going to
Speaker 1: sell out right away, so you should really just go
Speaker 1: get your ticket right now. It's June twenty sixth. It's
Speaker 1: at Record NYC, and you can find a ticket link
Speaker 1: at Bloomberg dot com slash odd Lots or Bloomberg Events
Speaker 1: dot com slash odd Lots Live and why.
Speaker 2: We hope to see you there.
Speaker 3: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to a special episode of the Odd
Speaker 2: Lots Podcast. I'm Tracy Alloway.
Speaker 1: And I'm Wishal Joe.
Speaker 2: This is special. I think this is the first time
Speaker 2: we've done this.
Speaker 1: We're not used to like, you know, we like to
Speaker 1: talk to academics certainly, but we've rarely ever done anything
Speaker 1: like in the proper academic setting, in the types of
Speaker 1: seminars where you know, academics are on their home turf.
Speaker 2: That's right. So we were invited by the Princeton Economic
Speaker 2: History Workshop to an event called how to Write the
Speaker 2: Biography of a Currency. I love that topic and that name.
Speaker 2: And we were invited to moderate a panel specifically on
Speaker 2: how to define a currency? How do we define what
Speaker 2: actually is money and what it does and all that
Speaker 2: good stuff. And we had an amazing panel.
Speaker 4: That's right.
Speaker 1: So we had three guests. We talked to Inyaqui al Dessoro,
Speaker 1: an economist at the Bank for International Sentiments, Rebecca Spang,
Speaker 1: a professor at the University of Indiana, Bloomington, and Stefan Ingves,
Speaker 1: the former head of the Sfeti Jerichsbank, the Central Bank
Speaker 1: of Sweden from two thousand six twenty twenty two. So
Speaker 1: take a listen to the three of them.
Speaker 5: So I mean solo, and I'm a principal economist at
Speaker 5: the banker International Settlements.
Speaker 6: Rebecca Spank, professor of history at Indiana University.
Speaker 4: Stefan Ingvest, a former governor of the Swedish Central Bank,
Speaker 4: the ricks Bank.
Speaker 2: Should we go down the line, Shall we start with
Speaker 2: Stefan how to.
Speaker 4: Write a biography of a currency, or actually maybe how
Speaker 4: to define a currency. And let me start by saying
Speaker 4: that it's a privilege to be here and discuss money,
Speaker 4: or actually I think in the course of the day
Speaker 4: money is using the plural. It just so happens that
Speaker 4: forty seven years ago, when I was visiting a graduate
Speaker 4: student here in Princeton, I took a course in monetary
Speaker 4: theory and I got hooked. And little did I back
Speaker 4: then know that with my finished background, I would end
Speaker 4: up leading the all of the central bank, the ricks Bank,
Speaker 4: and also became one of its longest serving governors. So
Speaker 4: quite a journey. And with that as a background, what
Speaker 4: a privilege to be back as a practitioner. That's my
Speaker 4: background when I'm talking about money today and what I
Speaker 4: have sort of experienced and concluded over the years. Let
Speaker 4: me start by saying that money is a social convention.
Speaker 4: Money is something about what we have in our heads.
Speaker 4: And this is also why we have moved over the
Speaker 4: centuries from seashells to something on a hard drive or
Speaker 4: nowadays maybe in the cloud. And then that of course
Speaker 4: begs the question in terms of changing technologies, what is next?
Speaker 4: Today money is an abstraction, but we still talk about
Speaker 4: money in terms of something that we can both see
Speaker 4: and touch. And it's remarkable that each and every time
Speaker 4: in my bank, when a new group of PONS politicians
Speaker 4: were appointed to the General Council, they always wanted to
Speaker 4: see the gold, not talk about the money as such.
Speaker 4: It was always can we get to see the gold?
Speaker 4: And that has something to do with this issue that,
Speaker 4: on the one hand, money is an abstraction, while on
Speaker 4: the other hand, we're sort of wired in our heads
Speaker 4: in such a way that we want to touch things.
Speaker 4: We can talk about money in many different ways, and
Speaker 4: we can talk about money at the micro level and
Speaker 4: kind of the monetary plumbing, or we can talk about
Speaker 4: money at the macro level, and at the macro level
Speaker 4: it's more sort of money tied to economic activity in
Speaker 4: one form or the other, and then it's actually economic
Speaker 4: activity in the aggregate. And you can also talk about
Speaker 4: money as something somewhere in between money as part of
Speaker 4: the financial plumbing. And that's kind of where I decided
Speaker 4: to say a few things today, and my remarks, I mean,
Speaker 4: they're really really given my background coming out of the
Speaker 4: FIAT money world. When we talk about money, I think
Speaker 4: a helpful distinction is also to try to make a
Speaker 4: distinction between public sectremoney versus private sectremoney. And also when
Speaker 4: it comes to monetary policy, which I'm not talking about today,
Speaker 4: Monetary policy is quite a lot about how to execute
Speaker 4: some kind of monetary control in this dual environment where
Speaker 4: we live today. One simple way of explaining that in
Speaker 4: order to maintain monetary control in one form or the
Speaker 4: other is basically to say that that requires an exchange
Speaker 4: rate which is one to one between public sector and
Speaker 4: private sectremoney, and if that is not the case, then
Speaker 4: the whole thing collapses. And countries of today where you
Speaker 4: can watch this is, for example, Zimbabwe and Venezuela, and
Speaker 4: you know what happened in those cases. Another way of
Speaker 4: describing this, and it's somewhat similar, and I do think
Speaker 4: it matters, but it's almost never described in this way
Speaker 4: is to talk about it in terms of front end money.
Speaker 4: That is kind of what we see and what we
Speaker 4: think that we are using, and today it's basically what
Speaker 4: you see on the screen of your computer and when
Speaker 4: you use an app, and that kind of means some
Speaker 4: vague sense represents money to us. And the other version
Speaker 4: of it is what I call backend money and ultimately
Speaker 4: back and money is central bank money in one form
Speaker 4: or the other. It's a height to the payment system.
Speaker 4: It could be a central bank digital currency, could be
Speaker 4: a deposit or something else. And it doesn't really matter
Speaker 4: if it's one ledger, if it's this due to ledger technology,
Speaker 4: it's a token or what. It's really the principle that
Speaker 4: I'm talking about. But also when technology is change, what
Speaker 4: happens is that all strategic issues come back. And many,
Speaker 4: many of you know what has happened over let's say
Speaker 4: a thousand years or something like that when it comes
Speaker 4: to money. And my conclusion from that is that since
Speaker 4: money is a convention, there is almost nothing new under
Speaker 4: the sun when it comes to money. But technologies do change,
Speaker 4: and that forces us to get back to all issues
Speaker 4: that others have grappled been in the past. A gross
Speaker 4: simplification is to say the following that back in the
Speaker 4: eighteen hundreds, and that's kind of the mindset that we
Speaker 4: have inherited today when we talk about money, everything was
Speaker 4: on paper, and in the late eighteen hundreds in a
Speaker 4: very large number of countries, the central bank ended up
Speaker 4: being the sole issue of a physical bank. In the future,
Speaker 4: we have to get used to the idea that nothing
Speaker 4: will be on paper, and that means that we have
Speaker 4: to get back to all issues and think hard about
Speaker 4: how do we reestablish the moneyness of monies in this
Speaker 4: new environment when we have to think about this, and
Speaker 4: at the same time, it's absolutely obvious that nowadays that
Speaker 4: money is also part of the state. Money is tied
Speaker 4: to a nation in one form or the other. Not
Speaker 4: necessarily every work, particularly not if you have destroyed the
Speaker 4: value of your own money. But at the same time
Speaker 4: you just have to accept the fact that parliaments and
Speaker 4: politicians have views on money, and that raises the issue
Speaker 4: going forward whether we should have a central bank digital
Speaker 4: currency or not, despite the fact that we cannot see
Speaker 4: what it should look like. Are we talking retail, Are
Speaker 4: we're talking wholesale? Ulish can talk at length about that
Speaker 4: because he is presently working on them, and this creates
Speaker 4: an interesting environment going forward when it's not about one
Speaker 4: currency dominating or not. But it's a fact that different
Speaker 4: nations come to different conclusions on this as of today,
Speaker 4: because look at what's going on in the US today.
Speaker 4: Basically more and more of it seems to be pushed
Speaker 4: to the private sector. In the EU they're working hard
Speaker 4: on a central bank digital currency. In India they have
Speaker 4: been extremely successful establishing their UPI framework, which kind of
Speaker 4: ties central bank money to the payment system and ties
Speaker 4: also front end to back end using my vocabulary in
Speaker 4: a very efficient way. Same thing is going on in
Speaker 4: Brazil and China is working hard on their project. And
Speaker 4: this projects actually will not be identical, and it's basically
Speaker 4: too early you tell which will work and which won't
Speaker 4: work and what it really does in various economies. And
Speaker 4: this means that one way you're looking at this is
Speaker 4: to call it the great game of our monetary future
Speaker 4: in a one hundred percent digital world, whatever that means
Speaker 4: going forward, and that means that in this environment we
Speaker 4: need to define or maybe redefine the role of the
Speaker 4: state in money space, and that will, of course, also
Speaker 4: in different countries, affect how we actually execute monetary policy
Speaker 4: in different different ways. What I do think matters here
Speaker 4: when it comes to money is that one is of
Speaker 4: course the stability today it's called inflation targeting, you can
Speaker 4: call it whatever you like in the old days. And
Speaker 4: the other one is what I call transactional efficiency, because
Speaker 4: if it's impossibly difficult to use your wonderful currency. No
Speaker 4: one will use it because it's just so hard to
Speaker 4: use use it. And what this really means is that
Speaker 4: new technologies bring old issues to the fore. And one
Speaker 4: extreme way of expressing this in a short form is
Speaker 4: to basically say that today, with a fairly high likelihood
Speaker 4: and old fashioned howallah transaction is probably executed in an
Speaker 4: it world in one form or another. It's also a
Speaker 4: fact when technology is changed. And this is really really
Speaker 4: what we see today that it people do not know
Speaker 4: a lot about money, and money people do not know
Speaker 4: a lot about it, and that creates a lot of
Speaker 4: confusion from time to time. And then in addition to this,
Speaker 4: when you do this, then somewhere in the middle you
Speaker 4: also have to have lawyers and a legal framework. So
Speaker 4: you have it. You have a legal framework, and you
Speaker 4: have economists and jointly this is actually what is going
Speaker 4: to define how we use money in the future and
Speaker 4: what this is all about. And then back to the
Speaker 4: holy you're writing a biography, so I do think that
Speaker 4: such a biography should also include something about where we
Speaker 4: are today and maybe speculate a bit where we are
Speaker 4: heading into the future. Thank you.
Speaker 6: So Stephan just said that money is a convention, and
Speaker 6: so there's really nothing new. Technologies just present the same
Speaker 6: questions in different guises. I would say that conventions are
Speaker 6: socially determined and societies change, and so the convention for
Speaker 6: issuing money, say in the ancient Mediterranean, is going to
Speaker 6: be different than the convention in the Middle Ages, and
Speaker 6: is going to be different again from the conventions under capitalism,
Speaker 6: as Chris was just talking about. I think another thing
Speaker 6: to think about is that money, like any technology, when
Speaker 6: it's working well, we don't really pay attention to it.
Speaker 6: It's only if the power goes out that we suddenly
Speaker 6: realize we're in a room that has electricity, and normally
Speaker 6: it's just sort of humming along in the background. So
Speaker 6: I think with currency, we and here I mean ordinary
Speaker 6: users of money, not in fact central bankers, but the
Speaker 6: great majority of people do not think of money as
Speaker 6: something that has a biography. It's not born, it doesn't
Speaker 6: go through adolescence, reach adulthood, then be an old age. Certainly,
Speaker 6: ordinary people don't imagine money as something that's going to die.
Speaker 6: If they are fortunate, if they are privileged, there comes
Speaker 6: a point in their lives when they start to think
Speaker 6: about what they are going to do with their money
Speaker 6: when they are dead. But implicit assumption there is that
Speaker 6: the money itself is immortal. After all, that's what makes
Speaker 6: it a store of value. So a fully functional currency
Speaker 6: in the mind of the people who use it seems
Speaker 6: in fact to be outside of history, all right, that
Speaker 6: it's not going to have a history or a biography.
Speaker 6: And on the other hand, I will say as a
Speaker 6: historian that even using the word currency to refer to
Speaker 6: the monies used one place and not another is in
Speaker 6: no way eternal or immortal. Locke John Locke, the famous philosopher,
Speaker 6: in his Some Considerations of the Consequences of the Lowering
Speaker 6: of Interest in Raising the Value of Money sixteen ninety two,
Speaker 6: uses the word current twenty eight times, but never the
Speaker 6: word currency. So the way we think about currency is
Speaker 6: itself the product. And this ties again to something Stephan
Speaker 6: just said of late eighteenth and nineteenth century revolutionary nationalism.
Speaker 6: So a rupture with the past. It's a revolution and
Speaker 6: the growing naturalization of the nation state. The assumption that, well,
Speaker 6: of course there are nations and they have states. This
Speaker 6: is a historically specific development. It wasn't a concept people
Speaker 6: had in the Middle Ages. It doesn't make sense if
Speaker 6: you think about the very long history of China before
Speaker 6: the Republic, and it may not be true in the future,
Speaker 6: but in the mid eighteen hundreds, having your own money
Speaker 6: was one of the things, along with a flag, a
Speaker 6: standardized language, an anthem, that established that some group of
Speaker 6: people got to be a nation. And as with so
Speaker 6: many features of nation thinking, a currency is part of
Speaker 6: how a bounded community is imagined and defined. Dollars on
Speaker 6: one side of the border, pesos on the other. I mean,
Speaker 6: that's the theory. In practice, of course, it's not always
Speaker 6: the reality. I grew up in Maine and there Canadian
Speaker 6: coin circulated on par with American and you didn't even
Speaker 6: notice whether they were Canadian dimes or US dimes. They
Speaker 6: were just all dimes. So, prior to the debates in
Speaker 6: Great Britain occasioned by the Bank of England's suspension of
Speaker 6: payments in seventeen ninety seven and then the eventual resumption
Speaker 6: decades later after the Napoleonic Wars, currency was a quality
Speaker 6: that a money object might have in some markets, and
Speaker 6: not having others currency meant that it was widely accepted
Speaker 6: as a means of exchange. And what's crucial here is
Speaker 6: that the coins are the bills that quote unquote past
Speaker 6: current or were discounted at a predictable rate in any
Speaker 6: given place, were not necessarily expected to be units of
Speaker 6: account or long term stories of value. Current, after all,
Speaker 6: is a reference to time as well as to the
Speaker 6: forces that move goods across the sea and actually lock
Speaker 6: in some considerations, makes lots of ponds on current in
Speaker 6: the sense of a money that passes current and current
Speaker 6: in terms of how you move things through the ocean.
Speaker 6: So think a little bit more about what it would
Speaker 6: mean for a mode of payment or a means of
Speaker 6: exchange not to be the unit of account. In early
Speaker 6: modern France, so seventeenth eighteenth century, before the Revolution, the
Speaker 6: common large denomination coin was an AQ, and it was
Speaker 6: called that because it depicted the aquson the shield of
Speaker 6: the French monarchy on one side of it. But accounts
Speaker 6: were kept in leave pounds. There was nothing circulated that
Speaker 6: was called a leave and no denomination indicated on the AQ,
Speaker 6: so the coin was called that because of what it
Speaker 6: looked like. Was it worth three leave four four and
Speaker 6: a half? It was up to the king to determine,
Speaker 6: and in fact, in periods of political disruption, often in
Speaker 6: periods of war, the king could revalue the circulating medium.
Speaker 6: Louis the fourteenth did it a lot in the final
Speaker 6: decades of his life. So there was a gap between
Speaker 6: what circulated and how people counted, and that's not just
Speaker 6: a weird French anomaly. No pennies and hardly any shillings
Speaker 6: were minted in eighteenth century Britain, but people went on
Speaker 6: keeping their accounts in pound shilling pence even if they
Speaker 6: had none of those things. Another distinctive feature of the
Speaker 6: early modern period is that it was up to the
Speaker 6: private sector to determine whether to bring gold and silver
Speaker 6: to the mint to be stamped as money or not,
Speaker 6: and that gold and silver being brought to the mint
Speaker 6: might be newly mined or from the Americas, or it
Speaker 6: could be coins stamped by some other sovereign. Economic growth
Speaker 6: in eighteenth century franch in Britain was largely made possible
Speaker 6: by private money, bills of exchange, promissory notes from one
Speaker 6: merchant to another, and all sorts of short term notes
Speaker 6: written by one government office to another, and that model
Speaker 6: of a private choice continued to inform debates during the
Speaker 6: French Revolution, as I suspect everybody knows, the National Assembly
Speaker 6: issued paper backed by the value of nationalized church properties.
Speaker 6: These are the assigna. But it didn't mandate that the
Speaker 6: assignac circulate on par or at any particular exchange rate
Speaker 6: for the coin still in circulation, and many people argued that, well,
Speaker 6: money is a merchandise like any other, and it was
Speaker 6: up to the money changers to say, well, I'll give
Speaker 6: you three AQ for your assign of twenty five leave,
Speaker 6: or I'll give you ten. That was up to the
Speaker 6: market to determine. So a century after this period, with
Speaker 6: the rising prominence of classical and neo classical economics, Europeans
Speaker 6: generally reacted to this sort of monetary variety and the
Speaker 6: tension between private and public issuers as a sign of
Speaker 6: backwardness and inefficiency, even though it had been the norm
Speaker 6: in Europe less than one hundred years earlier. So when
Speaker 6: they encountered it in the Qing Empire or in South Asia,
Speaker 6: they immediately denounced it. I think in part because they
Speaker 6: realized that as long as the sort of local knowledge
Speaker 6: was relevant, they were never going to be able to
Speaker 6: outcompete local users so they impose this new European model
Speaker 6: of one country won money, what some people have called
Speaker 6: the Westphalian logic, on the rest of the world. So
Speaker 6: there are other things that I can say. I think
Speaker 6: what I want to end on is that the common
Speaker 6: sense understanding of money as something without a history, something
Speaker 6: immortal or eternal, is of course a fantasy. But very
Speaker 6: often when histories of money get written, they nonetheless focus
Speaker 6: on those elements, the theories of economists, the intention of planners,
Speaker 6: that do themselves have some claim on immortality in that
Speaker 6: they're at least written down otherwise recorded, and can be
Speaker 6: found on the shelves of libraries or in the cartons
Speaker 6: of archives. What that history misses is the actual day
Speaker 6: to day practice of money, what ordinary people are doing
Speaker 6: with their money, and how they're thinking about it. That
Speaker 6: is a much more difficult history to write, but it's
Speaker 6: the one that I am committed to write it.
Speaker 5: Thank you, okay, So let me first start by by
Speaker 5: thanking Harold and Brendan for for inviting me, for giving
Speaker 5: me a chance of percent here. This fantastic event to me,
Speaker 5: it's a real honor to share the panel with with
Speaker 5: Rebeca Stephan the tower in fear of course, in the
Speaker 5: central banking community. And if I'm still your own phrase
Speaker 5: with the with the perfect moderators. So before I begin,
Speaker 5: let me start by reminding you that these are my
Speaker 5: views and not those of the of the Bank for
Speaker 5: International Settlements. I would like to start by saying something
Speaker 5: that is probably very uncontroversial, which I think money is
Speaker 5: one of the most, if not the most consequential and
Speaker 5: impactful social technology that was ever by humanity. And as
Speaker 5: a monetary economist, of course, I tend to think as
Speaker 5: this as the most fascinating as well. And I mentioned
Speaker 5: social because I think this is something that came up
Speaker 5: in the in both Stephan and Rebecca's comments that money
Speaker 5: is a social and institution that is sustained by a
Speaker 5: share expectation that money that is accepted in payments today
Speaker 5: is going to be accepted in payments tomorrow. And this
Speaker 5: requires trust in money. This requires trust in the stability
Speaker 5: of money, and also this requires trust in the ability
Speaker 5: of money to elastically scale to meet the needs of
Speaker 5: a growing economy. So I think two things then follow
Speaker 5: from this perspective. The first is the centrality of money.
Speaker 5: Many economies often conceive of money as a veil, that
Speaker 5: sort of mask and underlying real world of commodity production
Speaker 5: and exchange. I don't share this. I don't share this view,
Speaker 5: and I think, like probably like many people in the room,
Speaker 5: I conceive of money as the essence of a world
Speaker 5: of interlocking promises to pay. So Stephan also mentioned tokens,
Speaker 5: and then Michael, Yes, I mentioned organization quite prominently in
Speaker 5: the dinner speech, and I think it's actually possible to
Speaker 5: conceive of money as the primal or primore. Their original
Speaker 5: organization is the organization of the credit and that relationships
Speaker 5: that bind all of us together through the financial commitments
Speaker 5: that we make that we make to each other. So
Speaker 5: as the first element centrality of money's second element is
Speaker 5: the emphasis on payment. So money is, as far as
Speaker 5: I conceive it, first and foremost, means of payment, which
Speaker 5: which is meant to say, a means of certainment. And
Speaker 5: I think this is important because it gets me in
Speaker 5: some way, after dancing around the concept of what is money,
Speaker 5: to start to define money a bit because it points
Speaker 5: to a key qualitative distinction between money and credit, between
Speaker 5: a means of payment or a means of settlement and
Speaker 5: a promise to pay. So credit is a promise to
Speaker 5: pay money which effectively delays finance settlement, and money is
Speaker 5: a way to extinguish credit, to extinguish credit, sorry fulfilling
Speaker 5: that obligation when basically when settlement comes to and in
Speaker 5: this sense, money is better than credit, especially in crisis,
Speaker 5: which is something that goes along what you were mentioned
Speaker 5: in terms of how people use it. So people might
Speaker 5: not understand it in this terms, but they understand very
Speaker 5: intuitively that money is better than credit in crisis, and
Speaker 5: as coming from an emerging market, I can tell you
Speaker 5: this is very much the case. Now, this still makes
Speaker 5: the question what is money then? And I think my
Speaker 5: answer as an economy should not surprise anyone, and it's
Speaker 5: going to be underwhelming. It depends. It depends, because I
Speaker 5: really do think it depends. It depends on who issue
Speaker 5: the promise to pay. It depends on where that issue
Speaker 5: stands in the hierarchy of is to pay, and also
Speaker 5: who holds that claim. So I think perhaps it's better
Speaker 5: to talk about moneyiness of these various instruments, these various
Speaker 5: promises to pay, and the hierarchical arrangement of the promise
Speaker 5: is to pay, so bank reserves at the central bank
Speaker 5: and cash are the ultimate means of payment. They are
Speaker 5: money for banks, and in the case of cash, of
Speaker 5: course there are money for all of us. Bank the
Speaker 5: posits are in terms of form of credit because we
Speaker 5: have a promise to deliver cash, to pay cash, or
Speaker 5: to confer payment finality through ultimate settlement in the central bank. Yes,
Speaker 5: as we know from our everyday experience, they are money
Speaker 5: to us. Of course. Now I will not go through
Speaker 5: the rabbit hole of discussing lower level issues of a
Speaker 5: hierarchy of money, but I do want to highlight the
Speaker 5: centrality of the price that connects the two highest forms
Speaker 5: of money, and that is part which you discuss in
Speaker 5: the one to one relationship between front end and back
Speaker 5: end money, if you will. That's the price of the
Speaker 5: posits in terms of reserves and cash. This in the
Speaker 5: context of central current central banking discussions is usually referred
Speaker 5: to us as the singlens of money, following the expression
Speaker 5: by relate to mass. And it's the key to sustaining
Speaker 5: the trusting money that I was that I mentioned in
Speaker 5: my opening sentences, And of course in modern economies there
Speaker 5: are various institutional and legal mechanisms and arrangements that underpin
Speaker 5: trust and the credibility of all of these promises to pay,
Speaker 5: most notably underpin the underpinning power. But we should always
Speaker 5: bear in mind that we are always talking about promises
Speaker 5: to pay higher forms of money. And I think what
Speaker 5: this means is that as a matter, as a matter
Speaker 5: of modern modern practice, it's basically impossible to talk about
Speaker 5: money in full isolation from the government and the law.
Speaker 5: But I would also like to highlight that as a
Speaker 5: matter of both principle and past practice, this is not
Speaker 5: the case of this is also something that we should
Speaker 5: We should barry money even in more practice. As we
Speaker 5: all know, most money is dead, which means most money
Speaker 5: is promises to pay that are issued largely by private agents.
Speaker 5: And there is this famous phrase by by Minski right
Speaker 5: that one can create money and the problem is to
Speaker 5: get it to get it accepted. So the appeal of
Speaker 5: issuing of vision liabilities that can circulate us money that
Speaker 5: can circulate as a means of payment is we are
Speaker 5: kind of almost like a force of nature, and these
Speaker 5: issues materializes time and time again, historically mostly through private initiative.
Speaker 5: And the challenge then is after issuing this promised to
Speaker 5: pay and to borrow again from Minsky, is to obtain
Speaker 5: validation quote unquote from the for those emerging destructures that
Speaker 5: arise from these promises to pay. And this validation always
Speaker 5: comes from higher levels in monetariy hierarchies, and in the
Speaker 5: limit they come from the top of the MOUNTI hierarchy,
Speaker 5: meaning central banks. And we have seen this, for example
Speaker 5: developments along these lines in the context of offshore dollars
Speaker 5: or euro dollars. We have seen it with money market funds.
Speaker 5: We are seeing it to some extent as well these
Speaker 5: days with stable coins. And I think the example off
Speaker 5: shore dollars also allows me to close by answering and
Speaker 5: another of the questions that were posted by Brendan to
Speaker 5: get us started and thinking about these issues, which is
Speaker 5: the mapping between the currency usage and the boundaries of
Speaker 5: the sovereign that is responsible for that unit of account.
Speaker 5: And here what I would like to know that is
Speaker 5: more money is also global money. And here, of course
Speaker 5: there are hierarchies as well. And just ahead of coming here,
Speaker 5: I had a quick under to look at the the
Speaker 5: BS banking statistics and as oft the end of last year,
Speaker 5: there were thirteen point five trillion of dollar liabilities booked
Speaker 5: outside of the US. There were two point seven trillion
Speaker 5: euroe nominated the liabilities book outside of the Euro area
Speaker 5: six hundred and seventy billion or so for four pounds
Speaker 5: and yeah, and of course, yeah, this is lobal money
Speaker 5: that is arranged as well hierarchically, and it goes certainly
Speaker 5: beyond the boundaries of what the issuers expect.
Speaker 4: So let me stop there.
Speaker 1: Here's more from our conversation on how we define a
Speaker 1: currency at Princeton University.
Speaker 2: All right, so I hesitate to say this in front
Speaker 2: of a group of academics, but I asked chat Gpt
Speaker 2: what the traditional definition of money actually is according to economists,
Speaker 2: and it said the three functions that we've basically been
Speaker 2: talking about today, unit of account, transaction method, store of value.
Speaker 2: Does everyone here agree with that broad definition or if
Speaker 2: you had the option to tweak it and change it,
Speaker 2: what would you do.
Speaker 1: We're going to keep the silence in.
Speaker 2: Maybe we're already done. This is the episode we've defined it.
Speaker 6: I think it's important to keep the means of exchange,
Speaker 6: mode of payment differentiated, not to just collapse them together
Speaker 6: into transaction, because I think that ordinary people when they
Speaker 6: imagine a transaction. The default setting is still the fable
Speaker 6: of barter, and so they assume that any transaction is
Speaker 6: hap in the market. But what this whole conversation is
Speaker 6: highlighted is the role of the state in moneyness, and
Speaker 6: so you need that mode of payment distinguished from means
Speaker 6: of exchange, so that people recognize that some payment you
Speaker 6: don't quote unquote get anything back, say when you're paying
Speaker 6: a parking fine.
Speaker 4: I do think that there are instances when you actually
Speaker 4: can separate them despite the fact that this is sort
Speaker 4: of how we usually represent money, and apparently in an
Speaker 4: ai world that's also the way it is. And let
Speaker 4: me give you one example, particularly in cases where you
Speaker 4: have had a lot of inflation and then for various
Speaker 4: reasons you decide to reissue your money by taking out
Speaker 4: x number of zeros. In those instances, it takes years
Speaker 4: and years actually before you stop using the old nominal values.
Speaker 4: And a good example that I know of when I
Speaker 4: was a kid, that happened in the case of Finland,
Speaker 4: and when you started discussing what the value of a
Speaker 4: used car was, then you always reverted back to the
Speaker 4: old way of arguing about things and adding a few
Speaker 4: zeros because that was familiar to everybody. But of course
Speaker 4: in most cases that's not how you do it. But
Speaker 4: it's not absolutely necessary to tide history together.
Speaker 5: Yeah, I would share that a bit. I think that
Speaker 5: probably became clear to me. Means of payment or means
Speaker 5: of settlement, its central to me. This is the driving,
Speaker 5: the driving logic of everything that said. To be able
Speaker 5: to have an arrangement of what are we going to
Speaker 5: set alone, you need to have a unit of account, right,
Speaker 5: so that kind of logically preceeds precedes that. But in
Speaker 5: terms of store of value, I think these are kind
Speaker 5: of derivative things that follow from a minim of account
Speaker 5: or unit of account and means of settlement.
Speaker 2: Joe, I'm sure some people might be worried that store
Speaker 2: value seems to be the least least important aspect to money.
Speaker 1: Actually, this sort of fits in with where I was
Speaker 1: going next and stuff on. Obviously you talked about the
Speaker 1: politicians wanting to see the pile of gold, which is
Speaker 1: funny in a way but also still probably revealing. And
Speaker 1: obviously people are into gold again these days. Maybe we'll
Speaker 1: get back to that, but it occurs to me, like
Speaker 1: you know, we think it's dollars convention and back by
Speaker 1: various things, but also it's back by implicitly a promise
Speaker 1: to be able to buy a basket of goods that
Speaker 1: only gets two percent more expensive every year, this basket
Speaker 1: of goods and services. And I'm curious, like you know,
Speaker 1: in the broad history of like what people call money
Speaker 1: or what people call currency, obviously it's not always gold,
Speaker 1: and it's not always the specific basket that might be,
Speaker 1: you know, the PCE. But how common throughout history is
Speaker 1: this presumption that there will be an issuing authority that
Speaker 1: has some redemption, either directly in the form of taking
Speaker 1: it to the central bank and then getting a coinback,
Speaker 1: or being able to take it out into the marketplace,
Speaker 1: with the expectation that there's some stable stock of goods
Speaker 1: and services that can be redeemed for it.
Speaker 4: I think that when Rebecca sort of said that we
Speaker 4: think about money money forever, and we combine that with
Speaker 4: in akis reflection, the singleness of money, and that's sort
Speaker 4: of how we think about money in kind of our
Speaker 4: daily lives. But the fact of the matter is that
Speaker 4: history tells us that despite that assumption, when we buy
Speaker 4: things on a daily basis, once every thirty forty years
Speaker 4: or something like that. Things happen, and then we sort
Speaker 4: of try to recreate new money in one form or
Speaker 4: the other. So in a longer time perspective, there is
Speaker 4: maybe less stability than our perception of total stability in
Speaker 4: the near term.
Speaker 6: The idea that there's some stable stock of goods that
Speaker 6: you can buy with your money sound to me much
Speaker 6: more like an assumption of the moral economy than of
Speaker 6: the market economy. In a market economy, producers are going
Speaker 6: to compete, and some things may get cheaper, some things
Speaker 6: may get more expensive. Since we don't have perfect markets,
Speaker 6: we often have monopolies. And so it's curious to think
Speaker 6: about how that eighteenth century moral economy idea that there
Speaker 6: are certain goods that are so valuable to the functioning
Speaker 6: of society that they ought to have a constant price,
Speaker 6: and you ought to always be able to get bread
Speaker 6: for to sue a pound, that idea, which then so
Speaker 6: many economists have said no, no, Supply and demand will
Speaker 6: shape the cost of bread, and yet as consumers we
Speaker 6: still have moral economy gut reactions to changes in the
Speaker 6: price of eggs or gasoline.
Speaker 5: I would add, the store of values is kind of
Speaker 5: fundamental It's just the way I would understand how many works.
Speaker 5: It starts from the premise that it's a means of payment.
Speaker 5: But at the same time, because as I was saying,
Speaker 5: this is basically a way of promises to pay, and
Speaker 5: those promises to pay are sustained with trust. And if
Speaker 5: you don't have trust in the ability of that currency
Speaker 5: to basically maintain this purchase in power all the time,
Speaker 5: then the whole trust edifies collapses. I'd like to think
Speaker 5: I'm not that old, but I'm old enough to vividly
Speaker 5: remember my own experience with hyperinflation in Argentina, and then
Speaker 5: trust is broken and it's very hard to recover. And
Speaker 5: that's the complete underminey of the store of value function.
Speaker 5: So I think it is essential. That's why price stability
Speaker 5: is so important.
Speaker 2: Rebecca, I wanted to ask you this specifically, but since
Speaker 2: Joe brought up gold, both of us have been lucky
Speaker 2: enough to take some fuel trips recently, and we went
Speaker 2: to the Chicago FED and we saw their cash operations,
Speaker 2: so billions and billions of dollars stacked in their vaults.
Speaker 2: We went to a jewelry store in New York recently
Speaker 2: where we got to hold some not very tasteful pieces
Speaker 2: of jewelry, big necklaces and things like that, and we
Speaker 2: were all just fascinated by this. And I think there
Speaker 2: is something that's just different about seeing billions of dollars
Speaker 2: in cash or potentially gold versus seeing a line of
Speaker 2: zeros on a computer account or something like that, although
Speaker 2: I've never personally seen that either. Talk to us about
Speaker 2: how our relationship with money actually changes depending on the
Speaker 2: physicality of money, because I know governments have often consciously
Speaker 2: thought about this. They think about the metal content in
Speaker 2: their coins, or they think about are we going to
Speaker 2: print on.
Speaker 6: Silk or basic paper?
Speaker 2: So clearly this is in people's minds, right, This is.
Speaker 6: In people's minds. And it seems to me really important
Speaker 6: to remember that even in a world of if it
Speaker 6: ever existed, a world of completely digital money, there would
Speaker 6: nonetheless be material substrate that made that possible. So it
Speaker 6: is impossible to have cryptocurrency or central back digital currencies
Speaker 6: or anything else unless you have a way to generate electricity,
Speaker 6: you have a way to plug in your computer, you
Speaker 6: have semiconductors, you have chips. So we tend to think
Speaker 6: there's a fable that money used to be physical and
Speaker 6: it's become increasingly abstract, and some people think that's a
Speaker 6: story of progress, and other people think that's a story
Speaker 6: of decline. But the reality is that there's always an
Speaker 6: interaction of the material and the symbol making that goes
Speaker 6: into deciding that this is money and this isn't, and
Speaker 6: over time, in different places societies configure that differently, but
Speaker 6: it's not a linear movement in one direction or the other.
Speaker 2: Stephan, since you've seen the gold, you want to take
Speaker 2: that question as well.
Speaker 4: Yeah, I mean, one way to think about it is
Speaker 4: that as we all have sort of alluded to, is
Speaker 4: that we are wired to think about things in a
Speaker 4: physical sense, and that's why it sort of feels good
Speaker 4: to try to lift the gold in it and touch it,
Speaker 4: while it's harder actually when we think about and we
Speaker 4: talk about fiat money, because fiat money it's an abstraction
Speaker 4: you can't touch, necessarily touch it. It can be electronics
Speaker 4: strictly electronic, and that's basically about trust in those who
Speaker 4: run the system, because that's what it is. And either
Speaker 4: you sort of trust them because you say that they
Speaker 4: have done this for a long long time, and inflation
Speaker 4: seems to be pretty stable, so this probably works. Or
Speaker 4: to the contrary, in some countries they have the system
Speaker 4: many times over again, so it doesn't really matter who
Speaker 4: sits there. When it comes to the individuals, you just
Speaker 4: don't trust them. And then what you do instead is
Speaker 4: that you buy gold or you hold physical dollar bills
Speaker 4: or euro bills in the mattress, because that's your way
Speaker 4: of buying an element of insurance. And this is very,
Speaker 4: very difficult to deal with. But let's at the same
Speaker 4: time remind ourselves that also in the old days, gold
Speaker 4: wasn't always gold, and all old emperors and kings figured
Speaker 4: that out that went out a long long time ago
Speaker 4: by diluting the amount of gold that they claimed they held.
Speaker 4: So it's not that everything was better in the old
Speaker 4: days just because you held gold.
Speaker 6: I've been thinking about the metaphor of wiring and plumbing,
Speaker 6: which are frequently used in talking about money, and I
Speaker 6: just want to point out again that both why and
Speaker 6: plumbing are things made by humans. They are not naturally
Speaker 6: existing phenomena. So if we say we are wired to
Speaker 6: do this, or the monetary plumbing works in a particular way,
Speaker 6: what we're talking about is the sedimentation of social norms
Speaker 6: and cultural assumptions that we no longer recognize as such
Speaker 6: because they've been repeated so many times. But in a
Speaker 6: moment of dislocation, in a period of say, political revolution,
Speaker 6: then we suddenly see those for what they are. And
Speaker 6: then a bizarre thing happens, which I mean you just
Speaker 6: said people lose trust in the system and so they
Speaker 6: want an object. Like how weird is that if society
Speaker 6: is collapsing around you and you think, oh, that's okay,
Speaker 6: I'll just have some I have my shiny rock. I
Speaker 6: have my shiny rock. Like I don't know, I'd sort
Speaker 6: of rather have functioning society and no shiny rocks. Yeah.
Speaker 5: The problem is that quite often this individual users it's
Speaker 5: not a choice. You you react and I like your
Speaker 5: mattress example, because that's you know, I can't relate to that.
Speaker 5: And I think this becomes very clear right when when
Speaker 5: when you have the crisis goes back to what I
Speaker 5: mentioned that money is better than create and going to
Speaker 5: to your book. People have an intuitive understanding of this
Speaker 5: because in crisis they run away from creat and go
Speaker 5: for money. And it's not that when they take money
Speaker 5: out of the ATM say like, oh, I am converting
Speaker 5: a claim on my bank to a claim on the
Speaker 5: central They have no clue, but but they know. I
Speaker 5: mean when when when the going gets rough they take
Speaker 5: the money out of the bank in the case two
Speaker 5: thousand and one Tina, or or they just go and
Speaker 5: buy dollars if they if the bank is collapsing.
Speaker 2: H We are back and continuing a conversation on how
Speaker 2: to define a currency, recorded live at Princeton University.
Speaker 1: I've seen the gold at the New York Fed's bank vault,
Speaker 1: and Tracy, as you mentioned, we went to the jewelry
Speaker 1: store in the Diamond District, and obviously gold has this
Speaker 1: sort of effect on people still today. But something I'm
Speaker 1: curious about Tracy asked about the physicality of money. Basically,
Speaker 1: any form of currency around the world, the designers of
Speaker 1: the physical note or the coin usually has some like,
Speaker 1: you know, attempt to conjure up the sort of mystical
Speaker 1: and spiritual history of the country in question that's issuing it.
Speaker 1: And I'm just sort of curious, like from a design perspective,
Speaker 1: a like how much of that is this attempt on
Speaker 1: some levels sort of like rekindle that excitement that you
Speaker 1: feel when you see gold, but also thinking forward as
Speaker 1: money gets more and more digital. I'm curious the three
Speaker 1: of you, like, do you think design on some level
Speaker 1: something that like harkens back to the identity of the
Speaker 1: nation will always be an aspect of digital money, or
Speaker 1: always be an aspect of money, even as it gets
Speaker 1: more and more strictly digital.
Speaker 6: I think a really interesting example to think about in
Speaker 6: terms of design is the euro which specifically had to
Speaker 6: be non national, but nonetheless wanted Its designers wanted it
Speaker 6: to look more or less like money had looked, but
Speaker 6: it couldn't have the symbols of any particular nation. So
Speaker 6: the make believe bridges on the bills, which are not
Speaker 6: bridges in any particular place. One of them was then built,
Speaker 6: I think in Mastricht actually, and actually the European Central
Speaker 6: Bank put out a wonderful flyer document of other designs
Speaker 6: that were not chosen, including a whole series of euro
Speaker 6: notes that would have had cats on them.
Speaker 2: So they should have used those, Yeah, they really should have.
Speaker 6: They're incredibly cute. So I think the thing here is
Speaker 6: that again, this is a social convention, and much like oh,
Speaker 6: we're a new nation, we need a flag how about
Speaker 6: we have three stripes. Do you think they should be
Speaker 6: vertical or horizontal? Like that's the extent of your choice. Similarly,
Speaker 6: I think when designers think, oh, we're going to design
Speaker 6: some bills, let's put somebody's face maybe, And so I
Speaker 6: think that there is that artistic invention that we tend
Speaker 6: to keep using.
Speaker 4: Let me add to that, that is today, if you
Speaker 4: log on and you want to check on stable coin,
Speaker 4: this and that, and maybe they should be called unstable coin.
Speaker 4: Time will tell all of them have their own logos, yeah,
Speaker 4: and if you look at them, they have sort of
Speaker 4: copied old logos, so that in one way or the
Speaker 4: other they try to remind you of something that has
Speaker 4: existed in the passed and at more at the anecdotal level.
Speaker 4: When I was deputy governor in Sweden went through the
Speaker 4: agony of trying to decide whether to join the euro
Speaker 4: or not to join the Europe and you know the
Speaker 4: end result of that. There was one moment when trying
Speaker 4: to create the euro banknotes, about four or five different
Speaker 4: potential versions in terms of colors, motives and things like
Speaker 4: that were passed around. And all of these were sort
Speaker 4: of passed around among in the General Council, which is
Speaker 4: in my case essentially politicians, and there was absolute silence
Speaker 4: in the room, and it took a while. They were
Speaker 4: slowly passed around, and then while one politician broke the
Speaker 4: silence because there were no kings on these banknotes, and
Speaker 4: he said, but all of them are ugly. And then
Speaker 4: I sort of sensed that no euro in this country
Speaker 4: at least now.
Speaker 5: If I meant adults on the on the anecdotal and
Speaker 5: I mentioned and the need for this physicality. So in
Speaker 5: when the currency board in Argentina was in its death
Speaker 5: throws two thousand, two thousand and one, a lot of
Speaker 5: the promises were really cashtrapped and started issuing the quasi moneyes,
Speaker 5: which were legally they couldn't be money, so they legally
Speaker 5: had to be effectively they were a bond.
Speaker 4: But they look exactly like a bill, exactly like a bill.
Speaker 5: So to facilitate, you know, the familiarity with the with
Speaker 5: the with the users. And in terms of going forward,
Speaker 5: I mean, I think this aspect of identification and design
Speaker 5: and so on, I think most likely is going to
Speaker 5: be like a logo, like like Stephan was mentioning, and
Speaker 5: it could be a logo of a central bank that
Speaker 5: you check on it up. I think this is most
Speaker 5: likely where we're going.
Speaker 6: Can I make one more point that the first journalistic
Speaker 6: articles about bitcoin that started to appear in like twenty ten,
Speaker 6: twenty eleven are illustrated with diagrams and with sort of
Speaker 6: pictures of circuit boards. And it's only in I think
Speaker 6: twenty thirteen that somebody who had invested in bitcoin, which
Speaker 6: at that point had no value whatsoever, started to manufacture
Speaker 6: gold colored trading tokens with a bee with a slash
Speaker 6: through it. Then he had a pile of those, which
Speaker 6: he was sort of selling to other bitcoin enthusiasts. Somebody
Speaker 6: took a photo of a stack of those. I think
Speaker 6: it was the Bloomberg photo of the Year for twenty fourteen,
Speaker 6: and suddenly everybody started illustrating their articles about bitcoin with
Speaker 6: pictures of these, you know, basically hanaka gelt. And it's
Speaker 6: in the aftermath of that that people assume that, well,
Speaker 6: bitcoin must really be a thing, like what's that thing
Speaker 6: saying that you keep seeing photos of? And so when
Speaker 6: you tell people that you know, bitcoin is a spreadsheet,
Speaker 6: bitcoin is a computer program, they don't believe you because
Speaker 6: they've seen the pictures of the shiny gold candy wrappers.
Speaker 2: I actually remember this because I wrote a bitcoin article
Speaker 2: in twenty eleven back when I was at the FT,
Speaker 2: and I used a picture of the FED because the
Speaker 2: headline was I think digital money from real central bank distrust,
Speaker 2: because that was the narrative at that time. It was
Speaker 2: we don't trust the FED after the financial crisis, We're
Speaker 2: going to create this, and then we saw that narrative
Speaker 2: change so many times over the years. But just on
Speaker 2: this note, I want to ask one more question because
Speaker 2: I think it really encapsulates a lot of the discussion
Speaker 2: we're having, but on stable coins specifically. So at the moment,
Speaker 2: we have a bunch of stable coins from private issuers,
Speaker 2: so the tethers of the world and so on. Lots
Speaker 2: of central banks are talking about doing their own digital
Speaker 2: currencies for various reasons. But how much competition would central
Speaker 2: digital currencies be for the private issuers and how should
Speaker 2: we think about I guess the attraction of both those
Speaker 2: two camps.
Speaker 5: Well, I mean, I think if you hear people from
Speaker 5: the stable coin space talk about say, retail central bian
Speaker 5: digital currencies not so much holds, but retail, they would
Speaker 5: be very much opposed to this, and to me, this
Speaker 5: is an indication that they see as a challenge, right
Speaker 5: because they are very vocal about speaking speaking against this.
Speaker 5: So I think in a way that there will be
Speaker 5: competing and there will be competing payment instruments, but of
Speaker 5: course they are very different because they are promised to
Speaker 5: pay it should buy a sore membersus. The promise to
Speaker 5: pay it should buy by a private agent. And the
Speaker 5: problem we have plenty of promises to pay it should
Speaker 5: buy private agents. And we'll see, you know, like we'll
Speaker 5: see if they if they survive. I think it's very
Speaker 5: much an open question. Maybe they have a role to
Speaker 5: play as part of a payment ecosystem in the future.
Speaker 4: This is kind of a rerun of a conversation that
Speaker 4: took place in Many in the late eighteen hundreds, because
Speaker 4: back then, in a paper based world, private banks issue
Speaker 4: their own paper money and the central bank issued its
Speaker 4: paper money. And eventually, after a series and long and
Speaker 4: complicated for many years in my country, in parliament, it
Speaker 4: was eventually decided to say that it's only the central
Speaker 4: bank that issues physical banknotes, and the Banker's Association of
Speaker 4: that day basically claimed that the banks were going to
Speaker 4: go under if the state was that evil coming up
Speaker 4: with that kind of a system, and now it's a
Speaker 4: rerun of this thing coming back because the technology has changed.
Speaker 4: And ultimately, at the end of the day, as I've
Speaker 4: referred to, this is the political value judgment. Either the
Speaker 4: political conclusion is that for whatever reason you want the
Speaker 4: general public to be able to hold central bank money
Speaker 4: given the technology of that day, or you say that
Speaker 4: it is enough to sort of just deal with the
Speaker 4: back end, and then the back end of the system
Speaker 4: sort of backs up. Stable coins. Let me add to that,
Speaker 4: And I think that here's a lot of confusion because
Speaker 4: to me, I don't really see a major difference between
Speaker 4: let's say a stable coin of some sort and a
Speaker 4: money market fund. Essentially it's one and the same, And
Speaker 4: particularly if you sort of scratch on the surface and
Speaker 4: check the legal aspect of what actually has been constructed,
Speaker 4: what probably is different is the way you transact because
Speaker 4: the legacy system banks, the old banks, all of them
Speaker 4: have legacy systems, So you sort of engineer a transfer
Speaker 4: of ownership titles in one way in an IT world
Speaker 4: and probably a rather old fashioned IT world. And then
Speaker 4: you have these new startups and they sort of engineer
Speaker 4: those transfers of ownership titles with others and new technologies,
Speaker 4: but in terms of the legal setup it is roughly
Speaker 4: the same. But I do think that there is a
Speaker 4: major difference when you run a money market fund basically
Speaker 4: holds let's say, treasuries and deposits with the central bank,
Speaker 4: compared to something you call a stable coin. And when
Speaker 4: you scratch on the surface, you realize that all of
Speaker 4: it is deposited in a bank located in an offshore
Speaker 4: financial center.
Speaker 5: And there is even more intan twenty of that, but
Speaker 5: because some sailer coins have the reserve managed by money
Speaker 5: market funds.
Speaker 1: Right circle for example. But going back to gold, so
Speaker 1: obviously it has this magnetic effect on people, but also
Speaker 1: people value it, and people value it higher during certain
Speaker 1: times of uncertainty or perception of inflation, etc. And it's
Speaker 1: don't extraordinarily well this year amid a many headlines, what
Speaker 1: is it about gold that to this day people change
Speaker 1: what they're willing to pay for it in a sort
Speaker 1: of specific way that doesn't really you know, even silver
Speaker 1: not to the same degree, although it's volatile too, But
Speaker 1: what is it about gold? You think that in twenty
Speaker 1: twenty five people reach for it when other monetary instruments
Speaker 1: they have questions about, right.
Speaker 6: I mean, I think it's again a fairly simplified version
Speaker 6: of history that we'll say gold has always had value.
Speaker 6: And one of the first things I tell my students
Speaker 6: is that two words that are meaningless when writing about
Speaker 6: history are always and never. But nonetheless, people like they
Speaker 6: find comfort and being able to say this has always
Speaker 6: had value, and so they assume that what they think
Speaker 6: they know about the past will hold true in the
Speaker 6: imagined future. The way I think about it is da
Speaker 6: Vinci's Why do people want a work of art by
Speaker 6: da Vinci or Picasso, It's because other people have valued it.
Speaker 6: If at some point there's a seismic shift and works
Speaker 6: of art by European men are no longer valued, Oops,
Speaker 6: well that's the end of that.
Speaker 4: Let me mention two examples going back to nineteen thirty nine,
Speaker 4: and it's sort of a bit relevant to what happens
Speaker 4: in Ukraine. Presently, Finland was attacked by the Soviet Union
Speaker 4: and the gold was transported to Sweden back in nineteen
Speaker 4: thirty nine. Sweden, in turn sent some of its gold
Speaker 4: to the FED in New York, and the issue is
Speaker 4: to following that if you have this sort of idea
Speaker 4: that this is more stable than other things, then at
Speaker 4: the same time gold is nobody else's dead, and then
Speaker 4: you hope that it is more useful than other things
Speaker 4: when times are very difficult, and to be blunt, back
Speaker 4: in those days, the issue was that you needed the
Speaker 4: gold to buy guns, and you aren't so sure what
Speaker 4: other types of kind of assets you can monetize to
Speaker 4: such an extent that you can actually buy those guns.
Speaker 5: It's not a promise to pay that somehow establish itself
Speaker 5: as valuable over time through social convention.
Speaker 1: It's pretty crazy, and it's amazing that the idea that
Speaker 1: in a way, the gold held that New York fed
Speaker 1: is this obligation of the United States to return it
Speaker 1: on demand at some point. And the incredible trust implied
Speaker 1: in that that all these countries around the world are
Speaker 1: willing to have their gold or at least some of
Speaker 1: their gold in a locker in the basement of another
Speaker 1: country seems like an extraordinary like social achievement in its
Speaker 1: own right.
Speaker 2: But they still want to go check that it's there
Speaker 2: every once in a while. That was our special episode
Speaker 2: recorded live at Princeton University.
Speaker 1: Tracy a lot of fun. We should try the academic
Speaker 1: setting again sometimes.
Speaker 2: Oh yeah, And I gotta say Princeton was beautiful. Just
Speaker 2: the architecture was amazing.
Speaker 1: And we can tell, you know, everyone just heard enough.
Speaker 1: But it is very funny to me that there's one
Speaker 1: thing we take for granted, like the currency is actually
Speaker 1: subject to so much debate, and Nolan gets really that
Speaker 1: close to like a definitive answer, and that was sort
Speaker 1: of a fascinating example of it.
Speaker 2: Then always define your terms, Joe, that's right, all right.
Speaker 2: Shall we leave it there.
Speaker 1: Let's leave it there.
Speaker 2: This has been another episode of the Odd Thoughts podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 1: I'm Joe Wisenthal. You can follow me at the Stallwark.
Speaker 1: Follow our producers Carmen Rodriguez at Carmen armand dash Ol
Speaker 1: Bennett at Dashbot and kill Brooks and Kilbrooks. From more
Speaker 1: odd Laws content, go to bloomberg dot com slash odd Lots.
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