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At The Money: Paul Vigna Explains "What is Money?" · Masters in Business

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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 2: Money it's a driving factor in our lives. But how
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Speaker 2: often have you thought about those little green pieces of
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Speaker 2: paper in your wallet and the idea that created it,
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Speaker 2: or the digital zeros and ones in our banks and
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Speaker 2: brokerage accounts that represent your money. Is it real or
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Speaker 2: is money simply a collective delusion. I'm Barry Ridoltson on
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Speaker 2: today's edition of At the Money. We're going to chat
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Speaker 2: about the concept of what exactly money is. To help
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Speaker 2: us unpack all of this and what it means to you.
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Speaker 2: Let's bring in Paul Vinya of The Wall Street Journal.
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Speaker 2: He's published numerous books on money, crypto. His latest book,
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Speaker 2: The Almightier How Money became God, greed became virtue, and
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Speaker 2: debt became Sin. It's out July twenty twenty five. So Paul,
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Speaker 2: let's start with the basics. You define money as a
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Speaker 2: belief system. Explain what that means, sure.
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Speaker 3: Briefly, So, I mean this is Look, this is something
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Speaker 3: that I never thought about for the majority of my life.
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Speaker 3: To me, money was just what was in my wallet,
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Speaker 3: what was in my bank account. I could use it,
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Speaker 3: I could buy things I didn't worry about what it was.
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Speaker 3: It wasn't important to me. That changed over the last
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Speaker 3: ten years or so and I started thinking to my
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Speaker 3: you know, sort of thinking about this question what is money?
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Speaker 3: And that sent me down this rabbit hole and where
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Speaker 3: I have, where I've come out on that is that
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Speaker 3: money is not a real thing. You hold money in
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Speaker 3: your hand, you hold paper dollars, your whole coins, and
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Speaker 3: you think it's real. You think that's money. That isn't money.
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Speaker 3: That's a thing that represents money, dollar, bills, coins, money
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Speaker 3: itself is It's a system. It's a system we made up.
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Speaker 3: It's a system human beings invented as a way to
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Speaker 3: help us keep track of resources of all our stuff.
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Speaker 3: You look at the point of a society, and really
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Speaker 3: the point of a large scale society is to get
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Speaker 3: a group of people together to combine their efforts and
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Speaker 3: their resources to take care of each other. The way
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Speaker 3: as societies got much larger and larger, they found an
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Speaker 3: efficient way to do that, and it was basically to
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Speaker 3: have everything represented by money. And then if you have money,
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Speaker 3: you have a claim on the group's resources. And what
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Speaker 3: has happened over the last five thousand years or so
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Speaker 3: is that we have mythologized money into this real thing,
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Speaker 3: and we have convinced ourselves, we have hypnotized ourselves into
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Speaker 3: believing that it is a real thing, to the point
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Speaker 3: where the pursuit of it on its own has taken
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Speaker 3: over most of what we think of as the point
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Speaker 3: of economics in society. But it's not a real thing,
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Speaker 3: is not a thing that exists on its own. It
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Speaker 3: is a thing that we created. It's a system that
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Speaker 3: we created, and it has become for us a belief system.
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Speaker 2: So I want to stay with that because it's fascinating.
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Speaker 2: In the book, you write, money isn't real, It has
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Speaker 2: no objective existence of its own. Explain how money is
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Speaker 2: really just this agreed upon collective system that everybody accepts,
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Speaker 2: even though it's an abstract concept that is created by people.
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Speaker 3: And the whole point of the book is that not
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Speaker 3: the whole point, but a main point of the book
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Speaker 3: is that money is a product of religion. So I'll
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Speaker 3: explain it say that again.
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Speaker 2: Money is a product of religion.
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Speaker 3: Money is a product of religion, and I'll explain it
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Speaker 3: in terms of that, because that's how this all becomes
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Speaker 3: very Germane. When money first appears in the historical record.
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Speaker 3: It is in these ancient messages Potamian temples. Temple officials
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Speaker 3: developed money, bab They developed money and writing actually as
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Speaker 3: a way to keep track of the temple's possessions. And
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Speaker 3: that is where it starts. And what emerged from that.
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Speaker 3: The realization of that actually was that this was an
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Speaker 3: incredibly efficient system. Money is actually a really good product.
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Speaker 3: If you think of terms of things we've invented over
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Speaker 3: our history. We invent fire, but you know how to
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Speaker 3: use fire, the wheel, bridges, boats, anything I could sit
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Speaker 3: here all day and do it right. Money is one
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Speaker 3: of those things we invented. Money was an incredibly efficient
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Speaker 3: way to keep track of resources. And what I find
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Speaker 3: interesting is that as soon as money emerges, that is
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Speaker 3: when you start to see what we really think of
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Speaker 3: as modern quote unquote human beings. Society takes off. It
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Speaker 3: flourishes because money is a valuable product. It's a useful product.
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Speaker 3: The problem has become that money is such a good
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Speaker 3: product that we've started to think of it on it
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Speaker 3: as this thing on its own, with its own values
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Speaker 3: and its own existence. And a lot of that is
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Speaker 3: tied up in our beliefs in religion, because, as I said,
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Speaker 3: more of its history was it directly a product of
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Speaker 3: religion than it was an independent thing that existed on
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Speaker 3: its own. So our beliefs in religion and gods and
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Speaker 3: supernatural beings that control what we do and how we
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Speaker 3: live is tied up very very closely with how we
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Speaker 3: feel about money.
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Speaker 2: Let me stay with the concept of Mesopotamia. You write
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Speaker 2: about a city, and in the so there's fifty thousand
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Speaker 2: plus people living within the confines of this walled city,
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Speaker 2: with tens of thousands more working in the field, working
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Speaker 2: in the farms and suburbs. But what's fascinating about the
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Speaker 2: description of the city is the single biggest building in
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Speaker 2: the city and perhaps in the world, is the temple,
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Speaker 2: which can be seen for miles and miles around, even
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Speaker 2: from outside of the walls of the city. And the
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Speaker 2: first writing is keeping track of here's how much barley
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Speaker 2: has come into the temple, Here's how much people owe
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Speaker 2: on this. Here's how we create a system of assets
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Speaker 2: and liabilities, of credit and debt. It all stems from
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Speaker 2: the fact that the entire city was driven by religion.
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Speaker 2: Plus people had to work to survive, and the powers
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Speaker 2: that be had to come up with a methodology of
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Speaker 2: keeping track of all this. Is that the genesis of
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Speaker 2: the close relationship between money and religion or is it
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Speaker 2: something else?
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Speaker 3: No, it's that exact. And what I tried to do
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Speaker 3: in talking about Europe was compare it to a modern city,
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Speaker 3: New York City. That's what Europe was like back five
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Speaker 3: thousand years ago. Is this great messa, cosmopolitan, metropolitan city.
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Speaker 3: And you're right, the temple was the largest. This whole
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Speaker 3: city literally revolved around the temple. And I think what's
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Speaker 3: important when we talk about modern and ancient cities is
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Speaker 3: to realize there were a lot of things that were similar,
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Speaker 3: but there was one thing that was massively different, and
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Speaker 3: it is that the city revolved around the temple in
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Speaker 3: those ancient societies, and I found this very fascinating myself.
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Speaker 3: In these ancient societies, the entire point of life actually
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Speaker 3: was geared around one goal, and that goal was to
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Speaker 3: please the gods. People in these cities believed that the gods,
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Speaker 3: multiple gods, were real, They existed, and they controlled everything,
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Speaker 3: and whether you lived or died, or how well you
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Speaker 3: lived and then died, and where you went after you died,
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Speaker 3: all of that was determined by these gods, and you
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Speaker 3: wanted to please the gods. There was no separation of
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Speaker 3: church and state. The church was the state, and the
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Speaker 3: state's entire existence was built around trying to please these gods.
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Speaker 3: And that framework is what money emerges from, and that framework,
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Speaker 3: I think is incredibly important to our understanding of how
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Speaker 3: we feel about money today. Wealth was seen as a
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Speaker 3: sign of the God's favor. If the God liked the city,
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Speaker 3: if the God liked the ruler, if the God liked
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Speaker 3: the people, they flourished, they had wealth. Money was a
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Speaker 3: representation of that. So money was a representation of the
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Speaker 3: God's favor, and you wanted more of it. Of course,
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Speaker 3: I really think that colors a lot about what we
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Speaker 3: think about money today and how we feel about it.
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Speaker 3: But it's something that has just been kind of buried
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Speaker 3: in our collective subconscious and we just don't see it.
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Speaker 2: So let's talk about confidence and faith, which you emphasized
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Speaker 2: throughout the book. What role did trust play in institutions,
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Speaker 2: be they government or banks, or even various religions in
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Speaker 2: shaping the public's belief about money over time.
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Speaker 3: Trust is a huge part of how we value money,
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Speaker 3: and I'll give you the good. A good example of
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Speaker 3: this is what I opened the book with nineteen thirty three,
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Speaker 3: The Great Depression. The United States is in just the
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Speaker 3: worst economic shape it's ever been in. The system has
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Speaker 3: largely failed, the banking system has collapsed, the government is
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Speaker 3: barely operating. And the government back then was not nearly
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Speaker 3: as large as it is now. It didn't have as
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Speaker 3: much of a direct impact in people's lives, and I
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Speaker 3: think in large parts of the country the government just
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Speaker 3: wasn't there, and I think there were real fears that
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Speaker 3: the entire American experiment was going to collapse over what
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Speaker 3: had happened in nineteen twenty nine. In the years after
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Speaker 3: so FDR comes in, he gets elected, he starts doing
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Speaker 3: It's a pretty fascinating thing at the time. He utilizes
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Speaker 3: a modern technology called radio. He does these fireside chats.
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Speaker 3: He just talks into the radio and he explains things
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Speaker 3: to people, and they were tremendously successful. They really worked.
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Speaker 3: What's the first fireside chat about money and banking? FDR?
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Speaker 3: The president gets on the radio and just explains to
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Speaker 3: people how the banking system works, how money works, what
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Speaker 3: they plan to do, how it's going to work, and
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Speaker 3: what he says to them is he says, you have
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Speaker 3: to have faith, you have to have belief in the banks,
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Speaker 3: in the money, and all these things, and collectively, if
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Speaker 3: we all have faith, we will succeed. It's amazing to
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Speaker 3: think that faith and trust were the things he was
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Speaker 3: really talking about. But if you turn it around and look,
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Speaker 3: every single time you have one of these incidents where
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Speaker 3: a currency fails and a government fails, and you have
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Speaker 3: hyperinflation and everything falls apart to come a denominator and
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Speaker 3: all those examples, people lose faith in the money, which,
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Speaker 3: if you think about what I was just saying, is
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Speaker 3: kind of weird. Why should faith in money matter at all?
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Speaker 3: If money was real, if money had its own existence,
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Speaker 3: if the intrinsic value of a dollar bill was something
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Speaker 3: that was tangible. For instance, a tree has intrinsic value, Copper, oil, commodity,
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Speaker 3: all these things have intrinsic values, intrinsic uses. They are real.
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Speaker 3: Your faith in them does not matter one bit whether
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Speaker 3: or not you believe in copper. Copper is still there
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Speaker 3: and everything you can use it for is still there.
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Speaker 3: Money is different. If you don't have faith in money,
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Speaker 3: and this one I'm telling you, look about Zimbabwe, Why
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Speaker 3: am Our, Germany, Argentina, all these examples. If you don't
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Speaker 3: have faith in money, money is useless. Why why should
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Speaker 3: faith matter? And the reason is because money isn't real
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Speaker 3: on money is just the system we agreed upon. As
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Speaker 3: long as people agree to use the system, the system works.
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Speaker 3: As soon as people stop believing in the value of
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Speaker 3: the system, they distrust it, it collapses. That is the core,
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Speaker 3: core part of everything I'm talking about.
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Speaker 2: So you mentioned in the book that one of the
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Speaker 2: first fireside chats that FDR did over the radio was
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Speaker 2: to discuss the quote loss of confidence in the soundness
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Speaker 2: of banks and his plan to restore faith. To restore confidence,
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Speaker 2: including things like the creation of the Securities and Exchange
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Speaker 2: Commission so we don't have problems on Wall Street and
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Speaker 2: the Federal Deposit Insurance Corporation so we don't have these
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Speaker 2: various runs on banks, and on and on the list goes.
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Speaker 2: All of this sounds like it was just an attempt
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Speaker 2: to shore up the belief system, the faith in the
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Speaker 2: banking system. Is that what you're saying, Oh, yeah, absolutely,
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Speaker 2: I mean that's what it was.
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Speaker 3: I'm not accusing FDR of being underhanded, but in a way.
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Speaker 3: He was being a little underhanded. He was trying to
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Speaker 3: hypnotize people into believing in money again in US dollars
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Speaker 3: and using them, and he had to go on the
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Speaker 3: radio and he had to talk to them, and he
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Speaker 3: was an incredibly persuasive speaker. So he used that as
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Speaker 3: a tool. All the things you're talking about, though, the
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Speaker 3: regulatory structures he put in, those were tools to convince
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Speaker 3: people that these assets that they had previously believed in
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Speaker 3: and did not anymore believe in, still had some kind
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Speaker 3: of fundamental value that could be useful to society.
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Speaker 2: Huh. So one of the things FDR did was take
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Speaker 2: us off the gold standard, and gold had long been
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Speaker 2: thought of as, if not money, well certainly money. Like
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Speaker 2: how did the removal of the United States Treasury Department
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Speaker 2: in Central Bank from a gold standard impact our concept
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Speaker 2: of money?
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Speaker 3: Gold had been used and for you know, everyone knows
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Speaker 3: gold has been used throughout history as money, but gold
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Speaker 3: isn't actually money. Gold is a representation of money. Anything
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Speaker 3: can be a representation of money, gold, dollar bills, coins,
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Speaker 3: cawerie sheells, digits, bitcoin, you know, I mean you can
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Speaker 3: have a digital ledger that represents money. All of those
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Speaker 3: things can be used as money. None of them are money.
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Speaker 3: Money is the system. So in the thirties you have
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Speaker 3: the gold standard, the economy starts collapsing, people start hoarding gold.
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Speaker 3: There's no longer enough circulating currency for the government and
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Speaker 3: for FDR to do anything that he wants to do.
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Speaker 3: So he has to convince people to have faith in
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Speaker 3: the system. And what he does is, you can see this,
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Speaker 3: he maneuvers people over to believing in the system, and
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Speaker 3: he maneuvers them away from the faith in gold. That
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Speaker 3: isn't what matters. What matters is the soundness of the banks.
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Speaker 3: What matters is the soundness of the government. Believe in
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Speaker 3: those things, have confidence, have faith in all those things.
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Speaker 3: And when he did that, once he did that, he
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Speaker 3: got people kind of believing again. Then he went and
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Speaker 3: got rid of the gold standard.
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Speaker 2: So is money a store of value or is it
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Speaker 2: a medium of exchange?
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Speaker 3: Money is both of those things. Money is a store
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Speaker 3: of value, It is a medium of exchange. Is a
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Speaker 3: unit of account. Anything can really be a store of value.
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Speaker 3: Most of what you know the market's trade in are
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Speaker 3: stores of value. Anything can really be a unit of account.
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Speaker 3: It just so happens that it's dollars. But any currency
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Speaker 3: will work just as well as long as the people
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Speaker 3: who are using it all agree upon it, and all
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Speaker 3: of them can work as a means of exchange. Anything
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Speaker 3: can work as a means of exchange. Barter can work
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Speaker 3: as a means of exchange. Those are just functions. Those
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Speaker 3: are not the thing itself. The thing itself is nothing
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Speaker 3: more than a shared collective belief in this cety.
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Speaker 2: So to wrap up, I guess money is a collective delusion.
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Speaker 2: It's an abstract thing that would not exist without human beings,
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Speaker 2: unlike trees or copper or gold for that matter, but
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Speaker 2: it is part of a collective system of belief. It
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Speaker 2: relies on confidence, It relies on faith. If the system
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Speaker 2: is doubted, it begins to creak, and it begins to crack,
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Speaker 2: and we end up with circumstances like the Weimar Republic
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Speaker 2: or Zimbabwe. Which is why it's so important for a
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Speaker 2: society to maintain a belief that their systems and this
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Speaker 2: includes banks, debt, and credit are sounds and will continue
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Speaker 2: to work. I'm barry Redults. This is Bloomberg's at the
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Speaker 2: Money