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Why Everything You Think You Know About Money Is Wrong · Merryn Talks Money

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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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Speaker 2: Welcome to Meren Talks Money, the podcast in which people
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Speaker 2: who know the markets explain the markets. I'm Meren sums
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Speaker 2: that web. This week I'm joined by author David McWilliams
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Speaker 2: coming on to talk about his latest book, Money, A
0:21
Speaker 2: Story of Humanity. David is an economist and fellow podcaster.
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Speaker 2: He's worked both as a central banker and on the
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Speaker 2: financial markets in various ways, so he brings a unique
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Speaker 2: and I think very interesting perspective to the history of money,
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Speaker 2: which turns out to be the history of everything. In
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Speaker 2: the book, David walks readers through time from the day
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Speaker 2: the first gold coin was minted to the modern incarnation
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Speaker 2: of money, or maybe not as money, today's bitcoin. He
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Speaker 2: explores ideas on how society's fate is closely links to
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Speaker 2: the strength with its currency, and how you can destroy
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Speaker 2: a state by destroying its money. Welcome David to Merin
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Speaker 2: Talks Money, Maren.
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Speaker 1: It is an absolute pleasure to see you again. Has
1:01
Speaker 1: life all good?
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Speaker 2: All the better after reading your book?
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Speaker 1: Oh? Thank you David.
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Speaker 2: One of the first things I thought when I was
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Speaker 2: reading your book was that I have read and I'm
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Speaker 2: sure you have as well, so many books written by
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Speaker 2: someone with an obsession about something. They look at their
1:14
Speaker 2: obsession and suddenly they can explain the whole world, with
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Speaker 2: that obsession being the collapse of the Roman Empire, the
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Speaker 2: extinction of the Azteks, the French Revolution, Christianity, wealth of
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Speaker 2: medieval literally, whatever whatever it is. And then they say, well,
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Speaker 2: this was caused by my obsession, which could be salt
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Speaker 2: gut bacteria, the invention of stirrups, weatherhivemind, demographics, have many
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Speaker 2: young men there are in a population that sort of thing.
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Speaker 2: But your book, I think is actually correct. It is
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Speaker 2: maybe money that is the thing that explains everything.
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Speaker 1: Well, you're you know, wouldn't say it's an obsession, but
1:47
Speaker 1: you know, when you end up doing economics in university
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Speaker 1: and then you do a bit of an postgraduate because frankly,
1:52
Speaker 1: you don't know what to do. You've got a degrees,
1:54
Speaker 1: Oh my god, what I do now? And then you
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Speaker 1: kind of you find yourself working in a central bank
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Speaker 1: as a monetary cast, as a young flow, and then
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Speaker 1: you realize, okay, okay, so this is quite interesting. This
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Speaker 1: is the place where we kind of magic up this
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Speaker 1: thing called money. Okay, fine, and then I went to
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Speaker 1: investment banking and saw the way credit was being pushed
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Speaker 1: around the world and how the basically the private banks
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Speaker 1: were creating money out of fresh air. And I thought
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Speaker 1: to myself, Okay, this is interesting. And then in Ireland
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Speaker 1: we've had exactly a the UK, we've had our boom
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Speaker 1: bus cycles, you know, And I just thought to myself
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Speaker 1: that I've spent thirty years kind of observing the relationship
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Speaker 1: between humans, ourselves and this strange thing called money, and
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Speaker 1: that was the initial idea. And then the idea was like, well,
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Speaker 1: why not look at money as this miraculous technology that
2:45
Speaker 1: has enabled humans to do extraordinary things and see whether
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Speaker 1: or not if you go back to the beginning that
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Speaker 1: you can actually thread that particular argument convincingly to yourself
2:56
Speaker 1: first and then on the page. And yes, I think
2:58
Speaker 1: you're right. I think it was one of It wasn't
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Speaker 1: a Eureka moment, but it was like it was one
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Speaker 1: of those moments you just thought, actually, this is the thing,
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Speaker 1: this is the social technology that has really acted, as
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Speaker 1: as I say in the book, a sort of a
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Speaker 1: Promethean force for humanity, for good and hil and and
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Speaker 1: that I that as that argument becomes developed and becomes
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Speaker 1: a little more nuanced, are becomes a little more pronounced
3:23
Speaker 1: in certain for certain stages, you begin to think, yeah,
3:26
Speaker 1: this is this is the technology that humans invented to
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Speaker 1: cope with complexity. And where you see complex societies and
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Speaker 1: you see complex relations, you begin to see the coincidence
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Speaker 1: of money or a form of money emerging. And then
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Speaker 1: with that form of money, you also see what I
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Speaker 1: would describe as the coevolution of many other things that
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Speaker 1: I suppose we would regard as pillars of human civilization.
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Speaker 1: So numbers, empiricism, writing, legal systems, organized religions, all these
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Speaker 1: things all come at around the same time.
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Speaker 2: I mean, the key idea behind the book is that
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Speaker 2: money is a shortcut. It's the ultimate life pack. That
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Speaker 2: money allows you to have prices inside which all the
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Speaker 2: information you require to understand a lot of things.
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Speaker 1: Is available immediately exactly.
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Speaker 2: And so that shortcut allows innovation, allows social and economic flexibility,
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Speaker 2: and gives us every Every big change in the nature
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Speaker 2: of money or the understanding of money, or the way
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Speaker 2: that money is used can and often has led us
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Speaker 2: to a new level of prosperity or a new level
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Speaker 2: of innovation. That's the basic key, right, that's the basic idea.
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Speaker 1: And it doesn't seem like anything except common sense really
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Speaker 1: when you think about it. But I do think that
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Speaker 1: what has happened in our particular business, in the business
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Speaker 1: of economics, and again I speak as a former central banker,
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Speaker 1: which is the kind of holy holy grail of monetary
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Speaker 1: economics should be at least anyway, I kind of got
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Speaker 1: the impression that economists don't tell the story where not
5:02
Speaker 1: because they're unwilling, but maybe because they're unable. Now that
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Speaker 1: is a big charge. I mean, I teach more for
5:08
Speaker 1: economics at Trinity. I teach economics to postgraduates. And over
5:12
Speaker 1: the years I've thought, Lolo, there's more to this, you know.
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Speaker 1: And I think in a way economics has shied away
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Speaker 1: from these much bigger notions of money as this miraculous
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Speaker 1: what I say, wondrous technology, a product of human imagination.
5:27
Speaker 1: It's sat to see. Then you got into a little
5:29
Speaker 1: bit of evolution, a little bit of biology, a little
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Speaker 1: bit of history, and try and try and see the
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Speaker 1: creature that is money in its totality, and I just
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Speaker 1: I don't think our profession has done justice to what
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Speaker 1: is an extraordinary human creation.
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Speaker 2: Yeah, we haven't done enough to talk about, as you said,
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Speaker 2: the social aspect of it. All right, let's talk about
5:46
Speaker 2: some of these big turning points. Where do we begin.
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Speaker 1: The Sumerian civilization is where we see money emerging, not
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Speaker 1: particularly different actually conceptionally to what to to to what
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Speaker 1: we have now, which is kind of interesting. And I
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Speaker 1: think what you see there is the coevolution of money
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Speaker 1: and writing. For example, And I know it doesn't sound
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Speaker 1: very heroic, but writing started as an adjunct tool for accountancy. Again,
6:13
Speaker 1: you know, we would have thought that writing was some
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Speaker 1: great sort of hero some great poet, some great piece
6:20
Speaker 1: of literature. No. Actually, in fact, it was just basic
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Speaker 1: writing stuff down, who owed, who what and when were
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Speaker 1: they going to pay it back? And then of course
6:27
Speaker 1: you see when you go onto the Lydians that probably
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Speaker 1: the next big civilization, they really innovate with coins, and
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Speaker 1: they introduce gold coins and gold coins. I think coinages
6:39
Speaker 1: is very interesting because coinage is essentially a very democratic
6:42
Speaker 1: notion that if for example, think about it, you're in
6:45
Speaker 1: a very hierarchical structure in terms of the way in
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Speaker 1: which societies are organized. But with this bizarre thing coin
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Speaker 1: a prince's fiver and a pauper's fiver are worth the same.
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Speaker 1: So this is a very weird, weird idea that suddenly
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Speaker 1: you get almost a leveling out of social hierarchies with
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Speaker 1: this bizarre technology. And of course the other invention the
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Speaker 1: Lidians came up with was they introduced smaller and smaller coins.
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Speaker 1: You're allowing commerce to seep into the tentricles of society
7:19
Speaker 1: in a way in which previous of civilizations didn't do.
7:22
Speaker 1: And of course the Greeks then take that button and
7:26
Speaker 1: do what the Greeks did all across the across the world.
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Speaker 1: They make it better. And so the Greeks are the
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Speaker 1: first really heavily financialized society that we that we we
7:37
Speaker 1: we come across. And also, I don't know about you,
7:40
Speaker 1: but years ago, though you know you're doing this stuff
7:43
Speaker 1: in history and schooling things, why were these Greek fellows?
7:46
Speaker 1: What made them sort of smash the sort of intellectual
7:50
Speaker 1: glass ceiling when it came to philosophy and art and
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Speaker 1: democracy and republicanism and all these incredibly sophisticated notions. And
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Speaker 1: it strikes me that it's inconceivable these things would have
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Speaker 1: happened without a monetarized society, and the reason is because
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Speaker 1: money makes you count, it makes you think empirically, it
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Speaker 1: makes you think precisely. And if you see the shift
8:13
Speaker 1: even from the Homer to xenophone two hundred years like
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Speaker 1: big philosophers, Homer's talking all about myths and Xenophones talking
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Speaker 1: about logic. So the Greeks made this kind of intellectual
8:24
Speaker 1: leap in a very very quick period of time. It
8:26
Speaker 1: also happens to coincide with the mass circulized circulation of
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Speaker 1: the dragma, which, ironically or not ironically, I just think fascinating.
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Speaker 1: He was called the dragma then, and was the dragma
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Speaker 1: up until about eighteen years ago, which which means a
8:40
Speaker 1: handful in ancient Greek.
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Speaker 2: Yeah, look at that. Another thing. The EU destroyed the
8:46
Speaker 2: oldest current in the world.
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Speaker 1: So think, well, ye, why did for example, Christianity emerge?
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Speaker 2: Ah, yes, no, I'm really interested in this one, really
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Speaker 2: interested in this one. This is one of the bits
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Speaker 2: of the bit that I've an particularly compelling, this this
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Speaker 2: idea that Christianity was a result of this huge increase
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Speaker 2: inflows of billion and silver into Roman first century.
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Speaker 1: Yeah, no, it struck me that, you know, I've again
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Speaker 1: these things interest you in a sort of odd conceptual
9:14
Speaker 1: way between pints, if you're having a chat in the
9:16
Speaker 1: back of a bark. Why did Christianity start where it
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Speaker 1: did and when it did, and why did it catch
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Speaker 1: on so quickly? Because it's a really radical idea. You're
9:25
Speaker 1: talking about a world which was very macho and gods
9:29
Speaker 1: who were super alpha males and alpha females. Okay, this
9:33
Speaker 1: was a pre woke world. Let's just say right. And
9:36
Speaker 1: suddenly this skeezer comes along and says, no, no, I
9:38
Speaker 1: see those powerful people, they don't inherit the earth. You
9:41
Speaker 1: do the weak person. See that rich man, he's not virtuous.
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Speaker 1: You were virtuous. And it struck me that this is
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Speaker 1: such a radical idea that could it have been a
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Speaker 1: sort of ideological counterweight to the emergence of a meritocracy
9:56
Speaker 1: which were being forced by this technology money? And I
10:00
Speaker 1: think yes, because it is a very radically different philosophy,
10:05
Speaker 1: so it must have been incredibly attractive to people for
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Speaker 1: whom the monetary economy wasn't going their way. Okay, for
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Speaker 1: the losers in effect, which is I always think why
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Speaker 1: Christianity is quite interesting because it's it's a religion for losers.
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Speaker 1: It's quite an interesting you know, take it's the people
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Speaker 1: who lose out.
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Speaker 2: Yes, it gives you, It gives you some compensation for being.
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Speaker 1: The compensation you need. You need a countervailing narrative that says, well, look,
10:29
Speaker 1: it might be working out here, but in the next life,
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Speaker 1: I'm going to be sitting up beside Peter.
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Speaker 2: Everything's going to be fine. The next life.
10:35
Speaker 1: Yeah, Saint Peter, angels gonna be good. And I thought,
10:39
Speaker 1: I thought that that was an interesting observation to think, Wow,
10:42
Speaker 1: you know, could it have been a response to the
10:48
Speaker 1: commercialization of the ancient world? And is it any doubt
10:54
Speaker 1: or is it any coincidence that, you know, Christianity was
10:57
Speaker 1: an entirely urban phenomenon, as to it was commerce, as
11:00
Speaker 1: too is the marketplace. So these are these are the
11:02
Speaker 1: sort of things that I think are are interesting And
11:05
Speaker 1: once you begin to think about them again, they they
11:09
Speaker 1: I don't make these big claims. I just think it's
11:11
Speaker 1: it sounds plausible.
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Speaker 2: Yeah, And Rome comes up a lot in the book,
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Speaker 2: and a lot in the history of money in general.
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Speaker 2: And one thing that I hadn't read very much about
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Speaker 2: before was the story of the Tiberius's credit crunch.
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Speaker 1: It's a good one.
11:23
Speaker 2: That's a great story. Tell us a little bit about that,
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Speaker 2: because of course it's going to resonate with people today. Perhaps.
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Speaker 1: I mean again, you know, like you and I have
11:32
Speaker 1: been writing about money for many years, and I think
11:34
Speaker 1: you're always fascinated at our endemic repetitive stupidity when it
11:39
Speaker 1: comes to booms and busts. And this time is going
11:41
Speaker 1: to be different. And I'm gonna make money. I'm gonna
11:43
Speaker 1: get out first, La la la, Right, And so you
11:46
Speaker 1: go back to Tiberia. So it's a D thirty three
11:48
Speaker 1: and Tiberius is sitting in Capri. He's had a very
11:53
Speaker 1: good reign, reasonably peaceful. They've conquered Egypt, loads of flows
11:59
Speaker 1: of grains of floads of bullion in from Egypt. All
12:02
Speaker 1: is going well. Surprise surprise, interest rates fall as they
12:05
Speaker 1: would do in the modern world, and surprise surprise, you
12:07
Speaker 1: get a boom in assets. And the asset of choice
12:10
Speaker 1: is the property market, and in particular second homes in
12:13
Speaker 1: the provinces that were recently conquered. So it's basically the
12:17
Speaker 1: Roman equivalent of Irish people buying property in Bulgaria in
12:19
Speaker 1: the boom. Right, and our British people buying property in
12:23
Speaker 1: Fein Tener, et etcetera. And so what happens is like
12:29
Speaker 1: in all good Roman stories, there's a coup, there's a pretender.
12:33
Speaker 1: The pretender galvanizes some support. The emperor waits on the
12:36
Speaker 1: sidelines for a while, then comes back, then kills the pretender,
12:40
Speaker 1: and then rounds up the pretender's followers, and lo and behold,
12:42
Speaker 1: he realizes that a huge amount of the senatorial class
12:45
Speaker 1: were prepared to jump ship. Why because Rome was an
12:49
Speaker 1: empire of money, and if you back the right horse,
12:52
Speaker 1: you may well have been personally enriched phenomenally if this
12:55
Speaker 1: new emperor came in. So what he does is basically says,
12:57
Speaker 1: I'm going to hit them in their pockets, and he
13:00
Speaker 1: in effect Titan's monetary policy. What he says is you're
13:04
Speaker 1: going to have to set aside x amount of your
13:06
Speaker 1: property in cash, and as a result of that, you
13:08
Speaker 1: get a credit crunch. As a result of that, we
13:11
Speaker 1: know what happened in the UK to the credit crunches,
13:13
Speaker 1: which is amazing, is that money kind of disappears because
13:16
Speaker 1: it's hoarded. And once it's hoarded, as the prices fall
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Speaker 1: and as asset prices fell, Tiberius did what I suspect
13:25
Speaker 1: Ben Bernanke should have done eight maybe taken a slice
13:30
Speaker 1: of the action in return for the cash for trash
13:32
Speaker 1: scheme that he unveiled. But what I love about this
13:35
Speaker 1: baron is the fact that we're back to the same place.
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Speaker 1: You know, the Romans were dealing with credit crunches. We're
13:41
Speaker 1: dealing with credit crunches. The Romans were operating a monetary policy.
13:44
Speaker 1: We're operating the monetary policy. The Romans acid of choice
13:48
Speaker 1: was foreign property. Our asset of choice is far and property.
13:51
Speaker 1: So and fascinatingly, the contagion that we see in international
13:57
Speaker 1: markets now was evident. Then that also interested me because
14:02
Speaker 1: money is social, it's psychological and panic and hard behavior. So,
14:06
Speaker 1: as I say in the book, I think economists, when
14:08
Speaker 1: they see a price, they see a number. When most
14:12
Speaker 1: of the rest of the world sees a price, we
14:14
Speaker 1: get a feeling, and that feeling is what drives the
14:17
Speaker 1: animal spirits, and the animal spirits are what drives all
14:20
Speaker 1: the good stuff and the bank.
14:22
Speaker 2: When we talk about Rome, there is the general idea
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Speaker 2: that the Roman Empire fell in the end because of
14:28
Speaker 2: not treating its money with proper respect. Yes, the continual
14:32
Speaker 2: debasement of the currency in the end is what has
14:34
Speaker 2: destroyed the empire.
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Speaker 1: Yeah, and so much so that towards the end they
14:38
Speaker 1: could only print the emperor's head on one side of
14:40
Speaker 1: the coin. They were so thin and there was no
14:44
Speaker 1: proper hard metals in it are very very very little
14:47
Speaker 1: the ratio and again and that story were going to
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Speaker 1: Dante in the book we go to Renaissance, that story
14:52
Speaker 1: of debasement, counter debasement, all that sort of stuff is
14:55
Speaker 1: ever present. And I think it's a fair point. I
14:58
Speaker 1: look at the survey and I think it came up
15:00
Speaker 1: with it's in the book. I think two hundred and
15:03
Speaker 1: fourteen reasons were have been given over the years by
15:05
Speaker 1: historians for the fall of the Roman Empire. But ironically
15:09
Speaker 1: money isn't one of them. That is amazing, isn't it.
15:13
Speaker 1: I would have told the list I was thought to
15:15
Speaker 1: be central to understanding, you know, did the Roman Empire
15:20
Speaker 1: fall because they debased money or did they debase money
15:23
Speaker 1: because the empire was falling, you know, which which just
15:26
Speaker 1: happened at the same time. But I would have thought
15:28
Speaker 1: at least it should be on the list, you know,
15:30
Speaker 1: at least at least we should explore that because it's very,
15:33
Speaker 1: very evidently that the data on the debasement of the
15:36
Speaker 1: currencies is really ubiquitous, you know. So so those sort
15:40
Speaker 1: of things. Again, I suppose the book tries to take
15:43
Speaker 1: these stories and give them a little bit of historical
15:47
Speaker 1: flavoring and residents. You know, if you debase your currency,
15:52
Speaker 1: we started the book talking about Hitler trying to debase sterling.
15:55
Speaker 1: If you debase your currency, what you actually do is
15:58
Speaker 1: you mess with people's heads. It's more, which more than
16:00
Speaker 1: just prices going up and down, right, And as you
16:02
Speaker 1: said at the start, you know, the price is like
16:05
Speaker 1: an encyclopedia of knowledge, the greatest short could we have.
16:08
Speaker 1: It tells you enormous amount things. If you mess with that,
16:11
Speaker 1: you're messing with the very foundations of the way in
16:14
Speaker 1: which we see the world.
16:15
Speaker 2: Right about that when you talk about destroying money, So
16:17
Speaker 2: when money dies, trust, instability and society breakdown. So we
16:20
Speaker 2: take this organization organizational technology that we used to make
16:23
Speaker 2: sense of really an incredibly complicated world. But you know,
16:26
Speaker 2: you can go in nab shops and you can buy
16:28
Speaker 2: things because all the information you need is is contained
16:30
Speaker 2: in the price. So kick that away and everything becomes
16:35
Speaker 2: completely unmoored.
16:37
Speaker 1: People freak out.
16:38
Speaker 2: Yeah, And there's a lot, a lot of a lot
16:39
Speaker 2: in the book about the various stories around it. You know,
16:42
Speaker 2: you can use the way that money can destabilize society
16:44
Speaker 2: in wartime endlessly. So another story I didn't know seventeen
16:47
Speaker 2: ninety three William Playfair counterfeiting French money towards the end
16:51
Speaker 2: of the French Revolution to time destabilize things further. But
16:55
Speaker 2: let's go back. Let's go back to Italy, which pops
16:57
Speaker 2: up again and again and again and again, and the Renaissance,
17:01
Speaker 2: because one of the one of the really great connections
17:03
Speaker 2: that you that you draw in the book is that,
17:05
Speaker 2: you know, it's not just it's not just about economic
17:08
Speaker 2: innovation and economic change that comes as a result of
17:11
Speaker 2: changes in the money system or advances in the money system.
17:13
Speaker 2: It's artistic innovation and change that comes as well. In
17:17
Speaker 2: their inniscence is a classic example of that.
17:19
Speaker 1: Absolutely, and and and again. You know, there's there's a
17:21
Speaker 1: character in the book called Leonardo of Pisa, who's better
17:25
Speaker 1: known from mathematical students as Fibonacci. But I make the claim,
17:30
Speaker 1: or at least again suggestions these are these are these
17:32
Speaker 1: are polite nudges rather than sort of boisterous claims that
17:37
Speaker 1: you know, without Leonardo of Pisa, there's no Leonardo da Vinci.
17:42
Speaker 1: And the idea is that da Vinci comes at the
17:45
Speaker 1: tail end of an economic and financial revolution that was
17:50
Speaker 1: anchored in Florence by a currency, the Florin, the hardest
17:55
Speaker 1: currency of its time, in a way like the dollar
17:59
Speaker 1: would have been over the years. And there is a
18:03
Speaker 1: direct connection not only to Fibonacci, but ironically Leonardo da
18:08
Speaker 1: Vinci ended up going to a reckoning school, and the
18:11
Speaker 1: reckoning schools were schools that were involved in empirical analysis
18:16
Speaker 1: and accountancy, which were in effect the nbas of the day,
18:20
Speaker 1: and Da Vinci went there. So I thought, this is
18:22
Speaker 1: fascinating that Da Vinci's education was actually an economic education,
18:28
Speaker 1: an accounting education based on the numbers of sequencing of Fibonacci,
18:33
Speaker 1: who learned his mathematics from the Arabs in Sicily, who
18:37
Speaker 1: borrowed their mathematics from the Persians, who borrowed it from
18:42
Speaker 1: the Indians, and those things really fascinate me. And the
18:45
Speaker 1: fact that you know, the Westerners, and I mean the
18:49
Speaker 1: Christian West, referred to zero and algebra as Saracen magic,
18:56
Speaker 1: so they believed that somebody was whispering some magic, for one,
19:00
Speaker 1: was whispering inside the heads of Arabic merchants who were
19:03
Speaker 1: simply doing mental arithmetic, because they were much more sophisticated financially, mathematically,
19:09
Speaker 1: numerically than we were. And of course once you break
19:12
Speaker 1: that again glass ceiling, you open up a huge, huge
19:20
Speaker 1: amount of change. And also I think social change. That
19:23
Speaker 1: the emergence of merchants as a countervailing power to kings
19:29
Speaker 1: and warriors in and around this period, armed not with
19:33
Speaker 1: lances or spears but with money. It has a profound
19:36
Speaker 1: catalytic impact on things like the Enlightenment, which come later.
19:42
Speaker 1: But for me, there's a reasonably direct link between them all.
19:46
Speaker 1: And of course the Reformation pop that in there just
19:48
Speaker 1: for a good measure. Yeah, you know, an Irish person
19:50
Speaker 1: as Scott having a chat, we could not throw in
19:52
Speaker 1: the Reformation. So again these are as, I said, gentle
19:56
Speaker 1: nudges rather than boisterous claims.
19:58
Speaker 2: Well, I mean, I found all that that particularly interesting
20:00
Speaker 2: because I've always been very taken by research that suggested
20:03
Speaker 2: that wealth in that early period in Italy was a
20:09
Speaker 2: result of a more equal spread of wealth, a concentration
20:13
Speaker 2: of wealth that was less intense than much of the
20:15
Speaker 2: rest of the world, and that was one of the
20:17
Speaker 2: things that led to the ability for people to invest
20:20
Speaker 2: in the ability of people to get rich, etcetera, etcetera.
20:22
Speaker 2: Of course, back to your point, that couldn't have happened
20:26
Speaker 2: without the changes in the money system backing it up. Yeah,
20:30
Speaker 2: so it all comes back to your string that runs
20:32
Speaker 2: the whole way through.
20:33
Speaker 1: And the fascinating thing is if you look at Dante's
20:36
Speaker 1: Inferno right in the comedia, which is obviously the text
20:41
Speaker 1: of that shift from the dark ages into the light
20:44
Speaker 1: of the re nation, so from darkness into light. What
20:47
Speaker 1: really intrigued me. I was in Florence but three years ago,
20:49
Speaker 1: and I was doing your student tourist guide. I just
20:52
Speaker 1: paid up some guide and this guy came along and
20:54
Speaker 1: he was very interesting, and they asked me what it did,
20:56
Speaker 1: and I saw what I'm interested in economics. I'm into
21:00
Speaker 1: there's money in the florin And he said, that's interesting.
21:02
Speaker 1: He said, did you know that Dante reserved possibly the
21:07
Speaker 1: worst punishments for a counterfeiter? And I said no. He said,
21:13
Speaker 1: so strong was the Florentine political and economics establishment behind
21:22
Speaker 1: the hard currency. That an actual effact, a real counterfeiter.
21:25
Speaker 1: An English chap called Adam tried to actually debase the
21:29
Speaker 1: florin and was punished severely in real life for his efforts,
21:34
Speaker 1: and Dante placed him in the eighth circle of Hell,
21:38
Speaker 1: just one above Lucifer himself. So that's how they really
21:42
Speaker 1: thought about money. They thought, back to your point, if
21:45
Speaker 1: you destabilize the currency, the money, you destabilized the system,
21:49
Speaker 1: and the system is bringing us to a place, this
21:52
Speaker 1: Florentine enlightenment. So these things are fascinating. It's funny the
21:56
Speaker 1: things you pick up or when you're doing in the
21:58
Speaker 1: you know, a five euro tour of Florence in an
22:02
Speaker 1: r and then of course you got down your rabbit
22:04
Speaker 1: hole and you find out about all these things.
22:06
Speaker 2: Cheap tour, David five euros.
22:09
Speaker 1: It was probably twenty It was probably twenty euros. Probably.
22:13
Speaker 2: Let's move forward a little bit. QUI and the Great
22:16
Speaker 2: Financial Crisis? Is that a turning point in money? Does
22:18
Speaker 2: that change the nature of money in the worst I.
22:21
Speaker 1: Think it has changed a lot of things. I think
22:23
Speaker 1: it's changed the understanding of what can be done by
22:27
Speaker 1: central bankers. I don't think even in their more dreamlike states,
22:33
Speaker 1: they could have imagined that a cash for trash scheme
22:37
Speaker 1: of such a monumental phase could be introduced without totally
22:42
Speaker 1: debasing the system. But what it has done, of course,
22:46
Speaker 1: as you write about on a weekly basis, it has
22:49
Speaker 1: profoundly changed acid prices, and acid prices have profoundly changed,
22:54
Speaker 1: changed the sociology of money, who gets what, And it
22:58
Speaker 1: has led to the amplification of inequalities simply because people
23:02
Speaker 1: who depend on assets for their income as opposed to
23:07
Speaker 1: the vast majority of people who depend on wages for
23:09
Speaker 1: their income, those people are being rewarded and and a
23:14
Speaker 1: lot of social problems. You mentioned Brexit, We could we
23:16
Speaker 1: could argue that Brexit might not have happened had not
23:19
Speaker 1: been for Que. The Trump might have had not have
23:21
Speaker 1: happened to it not been for Qi. That very wedge
23:24
Speaker 1: that's driven between let's say the working man or the
23:26
Speaker 1: left behind, or whatever you want to describe them and
23:28
Speaker 1: the elite was certainly amplified by easy money. So I
23:32
Speaker 1: think that, you know, I think it was it was.
23:34
Speaker 1: It was. It was it some Chinese premiere who said,
23:37
Speaker 1: you know, what do you think of the French Revolution?
23:38
Speaker 1: He said, it's a bit too early, I think, with
23:41
Speaker 1: respect your question about QUE, I think it's possibly too
23:44
Speaker 1: early to really understand what it has done to the
23:48
Speaker 1: global financial system and also to global inequalities and the
23:54
Speaker 1: subsequent and evident political backlash.
23:57
Speaker 2: It's interesting, isn't it, Because it does it doesn't it
23:59
Speaker 2: should change the way central banks behave. I mean, I
24:02
Speaker 2: remember at the very beginning of QI, someone cleverer than
24:06
Speaker 2: me pointing out to me that Q is not really
24:07
Speaker 2: a monetary policy. It's a fiscal policy because it changes
24:10
Speaker 2: the distribution of wealth and that changes everything, and therefore
24:14
Speaker 2: central banks shouldn't be allowed to do it at all,
24:17
Speaker 2: because it uses the powers that a democratic government should
24:21
Speaker 2: be able to use, and that we've now been at
24:23
Speaker 2: it for you know, a decade and a half.
24:25
Speaker 1: Yeah, and there's no sign of it been consigned to
24:29
Speaker 1: the bottomshelf.
24:31
Speaker 2: And when you look at that, you might you might
24:33
Speaker 2: wonder whether we are treating money with the respect that
24:35
Speaker 2: it deserves. Going back to our earlier conversations about many
24:38
Speaker 2: different times in history of money has not been treated
24:40
Speaker 2: with respect. Are we doing it again?
24:43
Speaker 1: Yeah? I think that's a very very good point. I
24:46
Speaker 1: think that both of us are moving in a similar
24:49
Speaker 1: direction that you know, you're you're not so much of
24:53
Speaker 1: your debasing, but you are certainly taking away some of
24:57
Speaker 1: the steadiness. And steadiness is a strange words and a
25:00
Speaker 1: boring word. It's a very whiggish word, you know, It's
25:03
Speaker 1: like the sort of thing Edwin Burke would come up with, right,
25:06
Speaker 1: But it's a very important thing to be steady and
25:09
Speaker 1: to be transparent and to give people. I mean, one
25:12
Speaker 1: of the interest things about money, and I think you've
25:14
Speaker 1: probably written about it too, like money is one of
25:16
Speaker 1: these weird tools that allows us to live in the future,
25:18
Speaker 1: you know, like when people are taking out of mortgage,
25:20
Speaker 1: they're kind of envisaging who they might be in thirty
25:22
Speaker 1: years time and what they might No other there's nothing
25:25
Speaker 1: else we use on a daily basis that allows us
25:27
Speaker 1: to do this. And as you say, you know, if
25:30
Speaker 1: you go down the road of every time there is
25:33
Speaker 1: a an acid crash, which you and I know happened
25:38
Speaker 1: with extraordinary regularity, the way in which you will actually
25:41
Speaker 1: plug that particular gap is by a bribe in effect,
25:44
Speaker 1: to asset holders, and you debase, you debase this this
25:48
Speaker 1: brilliant technology, and as you say, you debase that your peril,
25:51
Speaker 1: you know, yeah, and you take a bit.
25:52
Speaker 2: Of trust away in it. So that's that's an excellent
25:54
Speaker 2: point for us to move out to bitcoin, which I
25:57
Speaker 2: say you kind of started the book because you talked
26:00
Speaker 2: about the Ashanga bone, which is effectively a type of
26:02
Speaker 2: ledger money. Right there, you can see it like that
26:06
Speaker 2: kind of ledg you of money, a bit like the
26:08
Speaker 2: thing you didn't write about it in the book that
26:09
Speaker 2: I simply cannot believe you didn't put in, which is
26:12
Speaker 2: the Ryse Stones of Yap, which is one of my
26:14
Speaker 2: you know, my favorite, my favorite money stories.
26:18
Speaker 1: The y App story was just told too many times, I know.
26:21
Speaker 2: But it's such a good story, right.
26:23
Speaker 1: This is a good story. It's a great story.
26:24
Speaker 2: And once you've read it, once you've read it, you
26:26
Speaker 2: can't stop going around the world looking for Rye Stones.
26:28
Speaker 2: I've just been in Tokyo. There's one in one of
26:30
Speaker 2: the parks in Tokyo, and a just looking for it.
26:32
Speaker 1: You know, I love it. I love it. So yeah,
26:35
Speaker 1: you're right. I mean the blockchain thing. When I hear
26:37
Speaker 1: the tech bros telling me the blockchain is new, right,
26:40
Speaker 1: that the ledger is a new idea and I'm looking
26:42
Speaker 1: at this, and I went to the Belgian last summer.
26:45
Speaker 1: I went. When I was just putting the finish in
26:46
Speaker 1: touches of the book, I decided to go over to
26:47
Speaker 1: Belgium and go to the Natural History Museum in Brussels.
26:51
Speaker 1: And like all museums in second rate cities, and I
26:55
Speaker 1: don't mean that in the sense of Brussels, but they
26:57
Speaker 1: don't really look after it. So basically it's a couple
26:59
Speaker 1: of weirdos and you know, like me looking at things,
27:03
Speaker 1: and hundreds of really bored school children right other blocking
27:09
Speaker 1: school tourg and oh my god, what are we doing here? Anyway?
27:12
Speaker 1: Point is this little baboons femur and it's very shrunken
27:17
Speaker 1: now because it's so old, little notches suggestive of basic accounting,
27:22
Speaker 1: of a basic ledgure. Don't tell me that the blockchain
27:26
Speaker 1: is anything more than a digital version of something that Africans,
27:30
Speaker 1: our ancestors were messing around with twenty thousand years ago.
27:34
Speaker 1: And it brings me to bitcoin. I suppose what fascinates
27:38
Speaker 1: me about money is its ubiquity, this very counterintuitive idea
27:43
Speaker 1: that although you can debase it in order for the
27:46
Speaker 1: technology to work, it can't be scarce either. It has
27:50
Speaker 1: to be bountiful and plentiful because it is a network technology,
27:54
Speaker 1: and the more of us who use it, the more
27:55
Speaker 1: of us coming to the network, and the more powerful
27:57
Speaker 1: money is. So it's got this slightly paradoxical element at
28:01
Speaker 1: its core, which is that scarcity, whether it be the
28:06
Speaker 1: gold standard or Bitcoin, is actually the characteristic that makes
28:13
Speaker 1: money less attractive and ubiquity, like in a language I
28:19
Speaker 1: compared to a language. So we're speaking the English language.
28:21
Speaker 1: We were talking about going to Barra before we came
28:24
Speaker 1: on in Scotland. Many people in Barra continue to speak Gaelic,
28:27
Speaker 1: many people in Irish speak Irish. But the usefulness of
28:31
Speaker 1: the English language is because the rest of the world
28:33
Speaker 1: uses it, and we use it to communicate on Bloomberg
28:36
Speaker 1: and we can talk to many people. Money is the same.
28:39
Speaker 1: A scarce money like a bitcoin is effectively the Esperanto
28:44
Speaker 1: of money, right.
28:45
Speaker 2: I love that I saw that phrase in the book.
28:47
Speaker 2: It's one of my favorite phrase. I'm going to use
28:48
Speaker 2: it all the time.
28:49
Speaker 1: But you know what I mean. It's like, if you
28:50
Speaker 1: meet anybody who speaks esperanto, it's incredibly important to them.
28:53
Speaker 1: They can't stop talking about it.
28:55
Speaker 2: But they can't talk it to anybody else because none
28:57
Speaker 2: of the rest exactly.
29:00
Speaker 1: You know, I'm the same carry on with bitcoin.
29:02
Speaker 2: One more thing before we end, is the other thing
29:05
Speaker 2: that a lot of cryptocurrency people like to think is
29:08
Speaker 2: new is this idea of a conflict between public money
29:10
Speaker 2: and private money. And of course that's not new at all,
29:13
Speaker 2: because you know, we think siege coins, corporate script I mean,
29:16
Speaker 2: all the many, many types of private money we've had
29:19
Speaker 2: in the past, and of course money is far too
29:20
Speaker 2: powerful for a government to give that power of the
29:23
Speaker 2: money away. So in the end, these private moneys, they
29:26
Speaker 2: do disappear, exactly.
29:27
Speaker 1: I mean the you know, look, one huge fact, and
29:32
Speaker 1: I call it a fact that comes out from researching
29:35
Speaker 1: thousands of years of the history of money, is that
29:40
Speaker 1: the state owns money, whether we like it or not.
29:44
Speaker 1: And they're not about to give that power away to
29:46
Speaker 1: a couple of tech bros. Right, Okay, no matter how
29:50
Speaker 1: much they lobby the sec. What I've said, bitcoin is
29:53
Speaker 1: just like it. It reminds me of a very very
29:55
Speaker 1: well financed residence committee. Only residence committee are always lobbying
29:58
Speaker 1: the government. You can't build here, you can't build it
30:01
Speaker 1: about right, to my view, bitcoin is like it's like
30:03
Speaker 1: a lobby group, right, and the more people who are
30:06
Speaker 1: in it, the more the wing to lobby, the sec
30:08
Speaker 1: to this and that. But my point is it's not
30:11
Speaker 1: money in any sense that I understand it. Like by
30:14
Speaker 1: all means, go and buy bit. I've bought bitcoin because
30:17
Speaker 1: for the crack, because I like to see this thing
30:18
Speaker 1: jumping up and down. But it ain't money, very very simple.
30:23
Speaker 2: So what if that's not money? What is the next
30:24
Speaker 2: big leap forward in money?
30:26
Speaker 1: What do you see? I think, I think what we're
30:28
Speaker 1: going to see. I think what the book all says
30:30
Speaker 1: that leap forwards we don't really do. We do gradual, iterative,
30:35
Speaker 1: almost evolutionary process. And I come back to language. You know,
30:39
Speaker 1: the English language is most useful primarily because it's most promiscuous.
30:43
Speaker 1: It has adopted and taken on board bits of French
30:46
Speaker 1: and bits of German and all that sort of stuff, right,
30:48
Speaker 1: And it's and it's comfortable with its promiscuity, right, and
30:52
Speaker 1: that's what gives us its richness. And exactly the same
30:54
Speaker 1: way in money that there's no great leap forward in
30:56
Speaker 1: the language, and there's no great leap forward in money.
30:59
Speaker 1: What there are little small iter of process, always marrin.
31:02
Speaker 1: And this is the key solving some problem. Right. Our
31:07
Speaker 1: problem with crypto is there ain't a problem big enough
31:10
Speaker 1: to be solved. The global financial system warts and all.
31:14
Speaker 1: Like the English language, it's not perfect, but it is
31:18
Speaker 1: and that's the key it is it exists. So I
31:22
Speaker 1: end the book as I started the book in the
31:25
Speaker 1: democacocratic republic of Congo, and I started the book in
31:29
Speaker 1: Congo twenty thousand years ago. And the emergence of a
31:34
Speaker 1: fascinating little monetary technology called empeeser in Africa which has
31:38
Speaker 1: really interested me. I was doing some work in Kenya
31:42
Speaker 1: and I was looking down the road and there were
31:44
Speaker 1: hundreds of people outside where was an effect a mobile
31:46
Speaker 1: phone hawking station. It wasn't even a shop, it was
31:48
Speaker 1: a lad telling it. Then I said to the person
31:51
Speaker 1: who was with me, I said, ye know, what's all this?
31:53
Speaker 1: And he said, oh, that's on pezer. I said, what's that?
31:55
Speaker 1: He said, it's our currency. I said, I mean it's
31:57
Speaker 1: your currency. I've got this shilling in my pocket. Says
31:59
Speaker 1: this is your current. Do we use that? Right? We
32:02
Speaker 1: use that for buying beer and things. But actually the
32:04
Speaker 1: currency we use to trade is mobile phone credit, Jesus,
32:09
Speaker 1: And they said, yeah, And who would have thought ten
32:13
Speaker 1: years ago that mobile phones would become banks and mobile
32:18
Speaker 1: phone credits would become money. And it solved a problem
32:23
Speaker 1: of a non financially sophisticated country. They leaped from non
32:30
Speaker 1: banking to banking. But their bank is their mobile phone,
32:34
Speaker 1: and that I find fascinating.
32:35
Speaker 2: It is amazing. I've used it myself in Kenya. It's
32:38
Speaker 2: amazing renovation. It doesn't solve a problem for me, It
32:40
Speaker 2: doesn't solve a problem for you, but it solves a
32:42
Speaker 2: problem for the majority of canyons, which is what's so interesting. Yeah, exactly, David.
32:47
Speaker 2: Last question, I can guess your answer, but I have
32:49
Speaker 2: to answer it. I have to ask you anyway, ten
32:51
Speaker 2: years one asset gold, a bitcoin, gold, any other asset
32:57
Speaker 2: you would definitely hold over ten year period.
33:00
Speaker 1: I think unfortunately, things like very boring things like everybody
33:04
Speaker 1: holds property, bricks and water. Basically it moves along. Our
33:10
Speaker 1: societies have made it so cheap, ironically to put money
33:14
Speaker 1: to property with also the tax scams you might call
33:17
Speaker 1: them that that is again a construct of society, and
33:22
Speaker 1: I would say, I mean the interesting. But bitcoin, it's fun,
33:25
Speaker 1: but it's not real.
33:28
Speaker 2: That's a great place to end it. Hate mail to
33:30
Speaker 2: the usual address, everybody. David, thank you so much. Thanks
33:36
Speaker 2: for listening to this week's Marin Talks Money. If you
33:39
Speaker 2: like us, show, rate, review, and subscribe wherever you listen
33:41
Speaker 2: to podcasts, and you can keep sending questions and comments
33:43
Speaker 2: to Merrin Money at Bloomberg dot net. You can also
33:46
Speaker 2: follow me and John on Twitter or x I'm at
33:48
Speaker 2: Mariness w and John is John Underscores Stepic. This episode
33:52
Speaker 2: was hosted by Me Maren Sunset Web. It was produced
33:54
Speaker 2: by Society and Isabella Ward. Production support and sound designed
33:58
Speaker 2: by Moses and and special thanks course to David McWilliams
34:01
Speaker 2: for that fascinating chat.