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The true European origin of the US dollar _ The Story of Money · Economy & Finance

• 0:00
  Speaker 1: By the early 17th century, the word dollar shows up
• 0:03
  Speaker 1: in Shakespeare twice. This wasn't just for merchants. So as
• 0:07
  Speaker 1: commerce spreads to the American colonies, the dollar also becomes
• 0:11
  Speaker 1: a standard accepted unit of value and coin in the
• 0:14
  Speaker 1: United States as well, or rather in the colonies. But
• 0:17
  Speaker 1: then they choose for their currency a Spanish coin made
• 0:21
  Speaker 1: from Mexican silver with a German name.
• 0:25
  Speaker 2: Well, that shows the joys of multiculturalism. And immigrants, they
• 0:29
  Speaker 2: get the job done.
• 0:30
  Speaker 1: It's an immigrant coin. This is not the story of sovereignty.
• 0:33
  Speaker 2: So when is someone going to tell the American government
• 0:35
  Speaker 2: that they're using an immigrant coin?
• 0:45
  Speaker 3: Today on the story of money, the origins of the dollar.
• 0:51
  Speaker 2: Ugh. That's a topic which is super timely today because
• 0:55
  Speaker 2: I've been seeing central bank governors and finance ministers recently.
• 0:59
  Speaker 2: And what many of them are wondering is, can the
• 1:03
  Speaker 2: dominance of the dollar remain in place? And is there
• 1:07
  Speaker 2: anything which could possibly topple it? And of course, to
• 1:11
  Speaker 2: answer those questions about why the dollar is so dominant,
• 1:15
  Speaker 2: it actually pays to look not just to the future
• 1:17
  Speaker 2: but also to the past. And to understand exactly how
• 1:21
  Speaker 2: and where the dollar came from in the first place,
• 1:24
  Speaker 2: because people don't often ask that question, do they, Robin?
• 1:28
  Speaker 3: No, that's right. It may surprise some people to learn
• 1:31
  Speaker 3: that the dollar itself is actually a lot older than
• 1:35
  Speaker 3: the United States of America.
• 1:36
  Speaker 2: But the original inventor has been almost completely written out
• 1:40
  Speaker 2: of the history books. And that's partly because he was
• 1:44
  Speaker 2: something of an inept character. He wasn't a great hero.
• 1:47
  Speaker 2: He was a bit of a loser, as you might say,
• 1:50
  Speaker 2: in his time. And when he created the dollar, he
• 1:53
  Speaker 2: had no idea what was going to happen to it.
• 1:55
  Speaker 3: I've actually prepared a little thing here. I'm going to
• 1:58
  Speaker 3: make it. It's a bit of an experiment.
• 2:00
  Speaker 2: This is you getting creative in a way that you're
• 2:02
  Speaker 2: never allowed to do before when we're working together.
• 2:05
  Speaker 3: Exactly.
• 2:05
  Speaker 1: This is it.
• 2:06
  Speaker 3: This is finally breaking free. Yes, my revenge. So I'm
• 2:09
  Speaker 3: going to do a bit of a fairy tale rendering.
• 2:12
  Speaker 1: Okay, here goes.
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  Speaker 3: Once upon a time in a land far, far away,
• 2:18
  Speaker 3: a land in central Europe called Bohemia. It was a
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  Speaker 3: place that was full of mountains and valleys and untouched
• 2:25
  Speaker 3: forests and almost magical waters. And it was a period
• 2:29
  Speaker 3: of lords and counts and kings. And in one of
• 2:31
  Speaker 3: these valleys lay a vast fortune, hidden just beneath the surface,
• 2:37
  Speaker 3: a valley full of silver. And see, this mine had
• 2:41
  Speaker 3: actually been hidden for ages and ages until one day
• 2:45
  Speaker 3: a nobleman, the hero of our story, if you will,
• 2:49
  Speaker 3: hears about this fabled silver mine and decides to make
• 2:53
  Speaker 3: his fortune. Now, doesn't that sound like a fairytale start?
• 2:57
  Speaker 2: And it takes us to the point that the dollar
• 2:59
  Speaker 2: actually started not in any printing press or central bank,
• 3:03
  Speaker 2: but actually in a silver mine.
• 3:05
  Speaker 3: Yeah. So we're going to be going back 500 years
• 3:08
  Speaker 3: actually now to the beginning of the 16th century. We're
• 3:10
  Speaker 3: going to the silver mine in Central Europe. And we're
• 3:13
  Speaker 3: meeting this guy who played a key role in the
• 3:15
  Speaker 3: creation of the coin that was the forefather of the dollar,
• 3:20
  Speaker 3: the OG dollar, the granddaddy dollar, in other words. So
• 3:24
  Speaker 3: welcome to the story of money from the Financial Times, everybody.
• 3:26
  Speaker 2: I'm Gillian Tett.
• 3:28
  Speaker 3: And I'm Robin Wigglesworth.
• 3:34
  Speaker 4: So What happens next in the story of money? Nuveen
• 3:39
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• 3:43
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• 3:46
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• 3:50
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• 3:54
  Speaker 4: chapter of their own portfolio stories.
• 3:56
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• 3:57
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• 4:01
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• 4:11
  Speaker 3: So, the dollar has existed in various incarnations for almost
• 4:15
  Speaker 3: half a millennium. But Gillian, as you mentioned, perhaps the
• 4:19
  Speaker 3: dollar is reaching the end of the road, or maybe
• 4:22
  Speaker 3: it's past its peak, perhaps, maybe?
• 4:24
  Speaker 2: Well, what has certainly peaked is discussion about whether the
• 4:27
  Speaker 2: dollar regime that's dominated the global economy and financial system
• 4:32
  Speaker 2: for the last few decades might indeed be starting to
• 4:35
  Speaker 2: fracture a bit. as rivals like China start to challenge it.
• 4:40
  Speaker 2: And of course, cryptocurrencies provide a potential alternative. But if
• 4:44
  Speaker 2: we're going to start talking about the dollar and the
• 4:47
  Speaker 2: future of the dollar, we have to go back first
• 4:49
  Speaker 2: and look at how the dollar actually first came to life.
• 4:52
  Speaker 2: And to help us tell that extraordinary story, which most
• 4:56
  Speaker 2: people never talk about at all, we have Brendan Greeley. Now, Brendan,
• 5:01
  Speaker 2: a long time ago, was one of my colleagues at
• 5:03
  Speaker 2: the FT in New York. But he's the author of
• 5:06
  Speaker 2: a new book on the world's most powerful currency called
• 5:09
  Speaker 2: The Almighty Dollar. So, Brendan, great to have you back.
• 5:13
  Speaker 1: Hi, guys. Thank you for having me in.
• 5:15
  Speaker 3: I mean, you used to be cool when you worked
• 5:16
  Speaker 3: at the FT, so now you've sadly lost academia, but
• 5:19
  Speaker 3: it's good to.
• 5:19
  Speaker 1: Have you back. Yeah, and here I am, just like
• 5:21
  Speaker 1: in a grotty blazer, reading books and writing things down. Yes,
• 5:25
  Speaker 1: I was at the FT. I was a Fed watcher.
• 5:27
  Speaker 2: Well, you were a fabulous colleague, and you always challenged
• 5:30
  Speaker 2: me and taught me a lot of things I didn't know.
• 5:32
  Speaker 2: And now we're about to find out another thing I
• 5:35
  Speaker 2: didn't know, which is where the dollar came from.
• 5:37
  Speaker 1: Super exciting.
• 5:38
  Speaker 2: Yeah.
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  Speaker 3: So Brendan, you've actually visited the town where it all began.
• 5:42
  Speaker 3: And it's actually a real place, despite my Hans Christian
• 5:45
  Speaker 3: Andersen impression.
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  Speaker 1: It is.
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  Speaker 3: It's not just a fairy tale. It's called Yakimov, I.
• 5:51
  Speaker 1: Think, right? Yakimov in Czech. Yes, originally Jakomstal in the German. Oh, wow.
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  Speaker 1: So It's a valley that runs north-south in the north
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  Speaker 1: of what's now the Czech Republic, what was then Bohemia.
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  Speaker 1: It's a very narrow valley. You can easily see across it.
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  Speaker 1: I did the measurements once. You could shoot a crossbow
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  Speaker 1: bolt from one side to the other.
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  Speaker 3: Did you do that with a real crossbow, though?
• 6:12
  Speaker 1: Yes. No, I absolutely tested that out, Robin.
• 6:14
  Speaker 3: See, that's the kind of hands-on journalism experience that we
• 6:18
  Speaker 3: need to bring to academia a bit more.
• 6:19
  Speaker 1: I also learned what an embrasure is, which is an
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  Speaker 1: opening in a castle for a crossbow to shoot out. Anyway,
• 6:26
  Speaker 1: at the southern end of this valley, it's almost like
• 6:28
  Speaker 1: the Grand Budapest Hotel. It's a spa from the early
• 6:31
  Speaker 1: 20th century where you can get radium water treatments, because
• 6:35
  Speaker 1: radium water is leaking out of the mountains. And then
• 6:38
  Speaker 1: if you run up to the top of the valley,
• 6:40
  Speaker 1: you get the ridge, and on the other side is Germany.
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  Speaker 1: And that's really important. This story of being right on
• 6:45
  Speaker 1: the border between what was then Saxony, what is now Germany,
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  Speaker 1: and Bohemia is sort of part of the history of
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  Speaker 1: the valley. Germans came south to work the mines. This
• 6:55
  Speaker 1: is the area that we used to call the Sudetenland
• 6:58
  Speaker 1: of where Germans lived in Czechia.
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  Speaker 2: So how does this all relate to the dollar? Robin,
• 7:05
  Speaker 2: I think you know this story, don't you?
• 7:06
  Speaker 3: Yeah, it starts a little bit before. I mean, if
• 7:08
  Speaker 3: we rewind a little bit, I already sort of foreshadowed
• 7:12
  Speaker 3: him as the hero, maybe a bit of an antihero,
• 7:14
  Speaker 3: and I love his name, Stefan Schlich. Which really just
• 7:18
  Speaker 3: sounds like he definitely sounds like a financial pioneer, right?
• 7:21
  Speaker 3: Like an innovator in.
• 7:22
  Speaker 1: The world of money. Oh, man. The most perfectly named huckster.
• 7:25
  Speaker 3: Yes, exactly.
• 7:26
  Speaker 2: Far too schlick for his own good, I think.
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  Speaker 3: So, Brendan, tell us about Stefan Schlick and his role
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  Speaker 3: in the Genesis story of the dollar.
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  Speaker 1: You know, in this story that you told about him,
• 7:37
  Speaker 1: we assume that he was sovereign. We assume that he
• 7:39
  Speaker 1: was the count. He was, in fact, a Count Stefan Schlick.
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  Speaker 1: But it's a little tricky because the way Bohemia was
• 7:45
  Speaker 1: set up, they had an estates general. This is something
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  Speaker 1: like what we would have thought of as a medieval parliament, right?
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  Speaker 1: They didn't have a lot of power, but they could
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  Speaker 1: constrain the king in various ways. And they met irregularly.
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  Speaker 1: Most of them were Czech speaking. So Stefan Schlick was
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  Speaker 1: part of a German speaking family that had been elevated
• 8:01
  Speaker 1: to the nobility in the classic medieval way. His great-great-grandfather
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  Speaker 1: was useful to the king. And so the rest of
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  Speaker 1: the estates general didn't really regard them as legitimate. There's
• 8:11
  Speaker 1: another problem, which is that the way inheritance law was
• 8:15
  Speaker 1: set up, Stefan Schlick and his brothers and his cousins
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  Speaker 1: held this territory, this county in entirety. They all had
• 8:23
  Speaker 1: an equal claim to it. So when we talk about
• 8:26
  Speaker 1: Stefan Schlick was the count of this area of Bohemia,
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  Speaker 1: what we're really saying is that he was in control.
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  Speaker 1: It was his money, his money spread outside of his borders.
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  Speaker 1: And none of that is true because as the story starts,
• 8:38
  Speaker 1: he's not really in control of anything. He's sitting, taking
• 8:41
  Speaker 1: the baths at Karlsbad, which is now called Karlovy Vary.
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  Speaker 1: It's a spring that was available then and is available
• 8:48
  Speaker 1: now for recreation. And he heard that there was silver
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  Speaker 1: in the valley. Somebody had seen it. And the accounts
• 8:55
  Speaker 1: we have from the time is that it was literally
• 8:57
  Speaker 1: poking out from underneath the roots of the trees in
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  Speaker 1: the valley at the time. You could literally stumble across silver.
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  Speaker 1: So the first thing he does is he recognizes he's
• 9:07
  Speaker 1: going to have to start telling some lies. Silver in
• 9:10
  Speaker 1: the ground is not silver in your hand unless you
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  Speaker 1: put a lot of capital into it. It's very expensive
• 9:15
  Speaker 1: to get silver out of the ground. Even in the 1520s,
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  Speaker 1: you had to build machines underneath the earth. You had
• 9:21
  Speaker 1: to build machines on top of the earth. You had
• 9:23
  Speaker 1: to sort of put cap stands with horses or even
• 9:26
  Speaker 1: people dragging them around to pull ore or water out
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  Speaker 1: of the mines. Very capital intensive operations. And in fact,
• 9:32
  Speaker 1: Friedrich Engels says these silver mines in Bohemia and Germany
• 9:36
  Speaker 1: were one of the beginnings of capitalism, just assembling. This
• 9:38
  Speaker 1: is Friedrich Engels as in Engels and Marx. Friedrich Engels
• 9:42
  Speaker 1: as in Engels and Marx, yes. Stefan Schlick knows that
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  Speaker 1: he can't do this alone. He can't just get a
• 9:47
  Speaker 1: spade and start digging silver out of the ground. So
• 9:49
  Speaker 1: the first thing he does is he gets in touch
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  Speaker 1: with the Saxons. Saxons have silver mines. They also have
• 9:54
  Speaker 1: the capital and the understanding to figure out how to
• 9:56
  Speaker 1: finance the silver mines. So he brings some silver investors
• 9:59
  Speaker 1: and some silver miners. down to the valley. He has
• 10:03
  Speaker 1: them dress up as a hunting party. So nobody knows
• 10:05
  Speaker 1: what's going on. And he rides up into the valley.
• 10:08
  Speaker 1: They look at the silver. Sure enough, it looks like
• 10:10
  Speaker 1: there's a lot of silver there. Very quickly, they start digging. Crucially,
• 10:14
  Speaker 1: Nobody knows this is going on except the miners, the investors,
• 10:19
  Speaker 1: and Stefan Schlick. And the reason that's important is silver
• 10:22
  Speaker 1: mining was very tightly controlled by the kingdom. There were
• 10:25
  Speaker 1: other silver mines in Bohemia, and when silver comes up
• 10:28
  Speaker 1: out of the ground, it's got to be taxed immediately.
• 10:30
  Speaker 1: The king gets a cut, but everybody has an interest
• 10:33
  Speaker 1: in this because the king always owes money to the
• 10:35
  Speaker 1: estates general, always owes money to the other lords in Bohemia.
• 10:39
  Speaker 1: So they want to make sure that all the silver
• 10:42
  Speaker 1: that comes up gets properly taxed so he can immediately
• 10:44
  Speaker 1: pay them back. So there's this whole operation in a
• 10:47
  Speaker 1: silver mine called Kutnohoras closer to the center of Bohemia.
• 10:52
  Speaker 1: And what happens is silver comes up, it gets minted
• 10:56
  Speaker 1: immediately into coins and then taxed. And so this silver
• 11:01
  Speaker 1: mine is like a wildcat mine Outside of this entire
• 11:05
  Speaker 1: system means it's just producing silver. There's no tax to
• 11:08
  Speaker 1: the king. The estate lords aren't getting their cut. It's
• 11:11
  Speaker 1: just leaving the country immediately as part of this Saxon
• 11:14
  Speaker 1: mining operation. It's not sovereign. And in fact, it's all
• 11:16
  Speaker 1: breathtakingly illegal.
• 11:18
  Speaker 2: But so the mine actually starts production in 1516, as
• 11:21
  Speaker 2: I understand it, with these miners dressed up as a
• 11:24
  Speaker 2: hunting party. And once it actually starts production, what happens then?
• 11:30
  Speaker 2: Is he just producing this silver or getting this silver?
• 11:33
  Speaker 2: and smuggling it out? Or was he acting like a middleman?
• 11:37
  Speaker 2: Or how exactly did the whole thing work?
• 11:40
  Speaker 1: Yeah, he was also really bad at it. It's really
• 11:42
  Speaker 1: important to remember with Stefan Schlick that not only was
• 11:45
  Speaker 1: he not really the rightful lord of the valley, he
• 11:47
  Speaker 1: was like somebody's nephew who shouldn't even be in the company,
• 11:52
  Speaker 1: given a really important job. When you are the lord
• 11:55
  Speaker 1: of a mining operation, the most important thing you provide
• 11:58
  Speaker 1: is liquidity. So you have a bursar on the mountain
• 12:01
  Speaker 1: who works for you. You have what's called a captain
• 12:03
  Speaker 1: of the mine who works for you. But all of
• 12:06
  Speaker 1: the investment coming into the valley and all the payment
• 12:09
  Speaker 1: for the miners, that flows through your purse. Now, Stefan
• 12:12
  Speaker 1: Schlick has no experience mining silver and he has no money.
• 12:15
  Speaker 1: So the first thing he does is he goes to
• 12:17
  Speaker 1: Augsburg and he borrows a lot of money. What he
• 12:21
  Speaker 1: did have as the sort of made-up lord of the
• 12:24
  Speaker 1: valley was the monopsony right to buy all the silver
• 12:27
  Speaker 1: in the valley and then sell it into the wholesale market. Okay.
• 12:30
  Speaker 3: What does monopsony mean? Can you explain that?
• 12:32
  Speaker 1: Oh, come on. You know what monopsony means.
• 12:34
  Speaker 2: But not all our listeners will.
• 12:36
  Speaker 1: A monopsony means you're the only buyer. Okay. So he's
• 12:38
  Speaker 1: the only buyer of the silver in the valley. Again,
• 12:41
  Speaker 1: this is all illegal as well. You're not supposed to
• 12:43
  Speaker 1: mint silver into bars. and smuggle it out of the kingdom.
• 12:47
  Speaker 1: It's supposed to be coined so that everybody can get
• 12:49
  Speaker 1: their cut within the kingdom before it goes anywhere. So
• 12:52
  Speaker 1: this silver is very quickly leaving in bars to Nuremberg
• 12:55
  Speaker 1: to start to attempt to pay in small slivers down
• 12:58
  Speaker 1: the massive loan that Stefan Schlick took out. The challenge
• 13:02
  Speaker 1: with this is, again, you've got to do it under
• 13:04
  Speaker 1: cover of night. It doesn't really work very well, and
• 13:08
  Speaker 1: people start to find out.
• 13:09
  Speaker 3: So this whole mining operation, it wasn't sort of a
• 13:11
  Speaker 3: big elaborate legal... It was, you know, fly by night,
• 13:15
  Speaker 3: wildcat kind of silver mine done all illegally and furtively, essentially.
• 13:22
  Speaker 1: Yes, absolutely. And the real problem he had at the
• 13:24
  Speaker 1: mine was liquidity. Everything's supposed to run through him, which
• 13:27
  Speaker 1: means he's supposed to have on hand enough small change
• 13:30
  Speaker 1: to pay the miners. And he doesn't have it. And
• 13:33
  Speaker 1: the miners realized this. And in 1517, they strike. They
• 13:36
  Speaker 1: walk off the mine. So now nothing's going on. And
• 13:39
  Speaker 1: we have a sense of what they were complaining about
• 13:41
  Speaker 1: from the laws that were passed afterwards. And so a
• 13:44
  Speaker 1: couple of things happened. One is they decided to adopt
• 13:47
  Speaker 1: Saxon mining law. That seems like a detail. But what
• 13:49
  Speaker 1: it basically says is this little piece of Bohemia is
• 13:52
  Speaker 1: an outpost of Saxony. We're just going to do everything
• 13:54
  Speaker 1: exactly the way they do it up there to make
• 13:56
  Speaker 1: sure the mines work. The other thing they asked for,
• 13:58
  Speaker 1: and this is so hard to understand from our perspective now,
• 14:01
  Speaker 1: they asked for better money. So normally when we negotiate now,
• 14:04
  Speaker 1: we ask for more money. But what they recognized was
• 14:07
  Speaker 1: that the quality of the pennies that they were getting
• 14:09
  Speaker 1: paid in was very poor. It was adulterated with a
• 14:12
  Speaker 1: lot of copper. And they're sitting there in the mines,
• 14:14
  Speaker 1: which is insanely dangerous work. They're watching very high quality
• 14:17
  Speaker 1: silver leave the mines, and they're getting paid themselves in pennies,
• 14:22
  Speaker 1: very bad pennies. And so they strike. As a result
• 14:25
  Speaker 1: of the strike and the renegotiation, Stefan Schlick loses even
• 14:28
  Speaker 1: more power. He has to bring in a captain of
• 14:31
  Speaker 1: the mine from Saxony. And something really interesting happens. The
• 14:35
  Speaker 1: miners negotiate, and this seems to be important to them,
• 14:37
  Speaker 1: the right to rename the valley. So this is when
• 14:40
  Speaker 1: the valley becomes St. Joachimsthal.
• 14:43
  Speaker 2: And just for those who are listening, you know, we're
• 14:44
  Speaker 2: back in 1515 in this far-flung corner of Europe on
• 14:49
  Speaker 2: the edge of Germany and Bohemia. You just had the
• 14:52
  Speaker 2: miners go out on strike because they want to have
• 14:54
  Speaker 2: better money, not just more money, but better quality coins.
• 14:58
  Speaker 2: And Schlick, the creator, has essentially lost. But of course,
• 15:02
  Speaker 2: the question everyone's asking is, what on earth is this
• 15:04
  Speaker 2: doing in terms of being connected to the future of
• 15:07
  Speaker 2: the dollar?
• 15:08
  Speaker 1: So crucially, the mine doesn't yet have a mint. What
• 15:13
  Speaker 1: changes it, what actually puts a mint at the mine
• 15:15
  Speaker 1: itself is the recognition by the rest of the estates
• 15:19
  Speaker 1: general in Bohemia and the king of Bohemia that they're
• 15:23
  Speaker 1: going to have to bring this into the fold. It's
• 15:25
  Speaker 1: no longer acceptable that there's this wildcat mine on the
• 15:28
  Speaker 1: border with Saxony. Everybody wants their cut. Now, crucially, if
• 15:33
  Speaker 1: you were a Saxon mining investor, you expected to get
• 15:36
  Speaker 1: paid in billions. disks of high quality silver. We think
• 15:40
  Speaker 1: of them as coins now, but they weren't supposed to
• 15:43
  Speaker 1: be for payments. They were supposed to be a dividend payment.
• 15:46
  Speaker 1: So it was not the coin of the realm that
• 15:47
  Speaker 1: you were supposed to use to pay for things. It
• 15:50
  Speaker 1: was the dividend paid out to the investors in the mine.
• 15:52
  Speaker 1: So they start making these big, high-quality dividend coins. The
• 15:57
  Speaker 1: dividend coins in Saxony were always named after the mines.
• 16:00
  Speaker 1: There's a new mine at Jochemstal. They start to call
• 16:02
  Speaker 1: them Jochemstaler. And this is the origin of the word
• 16:05
  Speaker 1: for the dollar. But I also think that there's an
• 16:07
  Speaker 1: actual monetary connection to our dollar today. But the word
• 16:10
  Speaker 1: for the dollar, they start to call these coins. They
• 16:12
  Speaker 1: spread up into Leipzig and then out into the Baltic, Jochemstaler.
• 16:16
  Speaker 1: And then just taller. And then in Dutch, they become dolder.
• 16:19
  Speaker 1: And then in English, they become dollar. Already in the
• 16:22
  Speaker 1: 16th century, you have mentions of the word dollar in English.
• 16:26
  Speaker 1: This is a coin that is outside of the currency
• 16:28
  Speaker 1: system of the pounds, shillings, and pence that they had
• 16:32
  Speaker 1: in England.
• 16:33
  Speaker 5: Wow.
• 16:33
  Speaker 2: I mean, it's fascinating because, you know, I think most
• 16:35
  Speaker 2: people have never heard of the Jakobstaller. And the idea
• 16:38
  Speaker 2: that the word taller or dollar was floating around Europe
• 16:41
  Speaker 2: back in the 16th century is a real revelation. But yeah,
• 16:46
  Speaker 2: so this starts to emerge. And then, of course, we
• 16:48
  Speaker 2: have a second miners' strike, don't we, in 1525? I mean,
• 16:53
  Speaker 2: here's an example of industrial action or organized labor actually
• 16:58
  Speaker 2: creating monetary history probably for the first time.
• 17:01
  Speaker 1: You know, interestingly, a lot of what we know about
• 17:03
  Speaker 1: this mine comes from very good East German research. And
• 17:07
  Speaker 1: once you can read past the Marxist-Leninism that was mandatory
• 17:11
  Speaker 1: in the preamble to these papers, They really dig into
• 17:13
  Speaker 1: the capital structure of the mine and what happens in
• 17:15
  Speaker 1: the labor strikes. One of the things that was fascinating
• 17:18
  Speaker 1: is that the East German historians couldn't figure out whether
• 17:21
  Speaker 1: the miners were labor or capital because you could.
• 17:24
  Speaker 3: It's true. A crucial distinction, I imagine, for the East
• 17:28
  Speaker 3: German scientists at the time.
• 17:30
  Speaker 1: Yes, at the Humboldt University, very likely in Berlin. And
• 17:33
  Speaker 1: the reason is miners would come down from Saxony and
• 17:36
  Speaker 1: you could work the mine, but you could also stake
• 17:38
  Speaker 1: your own claim. And so Saxons were coming down as investors.
• 17:42
  Speaker 1: They were coming down as miners, but the miners were
• 17:44
  Speaker 1: getting rich. You get a silver rush. This town grows
• 17:47
  Speaker 1: overnight to, you know, from zero residents to several hundred
• 17:51
  Speaker 1: within about two years. And then into the thousands by
• 17:54
  Speaker 1: the 1520s. You know, there's this saying that sort of
• 17:57
  Speaker 1: still today they talk about in Joachimsthal where the Saxons
• 18:00
  Speaker 1: streamed over the mountain saying, it's tall, it's tall, mit muta,
• 18:03
  Speaker 1: mit all. And that translates to into the valley, into
• 18:06
  Speaker 1: the valley, take your mother, take everything.
• 18:09
  Speaker 2: So in terms of practical things, I mean, so they're
• 18:11
  Speaker 2: creating these quasi coins that aren't really coins called Jekumstala.
• 18:17
  Speaker 2: And why did the miners go on strike a second time?
• 18:20
  Speaker 2: And why does that matter so much for the dollar
• 18:22
  Speaker 2: or the tala?
• 18:24
  Speaker 5: Well.
• 18:25
  Speaker 1: Stefan Schlick, again, was really bad at his job. And
• 18:28
  Speaker 1: he didn't do a great job of managing the liquidity
• 18:32
  Speaker 1: of the mine. So his bursar that he hired actually
• 18:34
  Speaker 1: stole Joachim Stahler. So they had to figure out how
• 18:37
  Speaker 1: to pay the miners back. And they had to figure
• 18:38
  Speaker 1: out also how to pay the investors back. You begin
• 18:41
  Speaker 1: to realize, or at least it seems like they begin
• 18:43
  Speaker 1: to realize, that some very real money is coming out
• 18:45
  Speaker 1: of this mine. It's becoming important to a lot of people,
• 18:47
  Speaker 1: including the Holy Roman Empire. Everybody recognizes what's happening here.
• 18:51
  Speaker 1: They're getting this pure form of silver dividend coin. And,
• 18:54
  Speaker 1: you know, there's this amazing moment for any of us
• 18:56
  Speaker 1: who have covered Silicon Valley. You're going to recognize this
• 18:59
  Speaker 1: moment immediately, which is that they hold in early 1525
• 19:03
  Speaker 1: a shooting festival. They bring in all the Saxon of
• 19:06
  Speaker 1: the Saxon electors, the Dukes of Saxony. They they they
• 19:10
  Speaker 1: order special clothing from London. They hold a shooting festival.
• 19:15
  Speaker 1: All the investors come in from Augsburg, from Nuremberg, and
• 19:18
  Speaker 1: then they all get completely hammered. And so this to
• 19:22
  Speaker 1: me is sort of the moment of overreach, right? When
• 19:25
  Speaker 1: they throw the big elaborate party, that's when you begin
• 19:28
  Speaker 1: to think maybe this.com is sort of getting out over
• 19:31
  Speaker 1: its skis. And in fact, Philip Robinson Russner, who's a
• 19:34
  Speaker 1: historian of the area at the time, has said that
• 19:37
  Speaker 1: it was like a Silicon Valley. It was just capital
• 19:39
  Speaker 1: and labor moving up and down the valley and over
• 19:41
  Speaker 1: the border to Saxony to sort of put this all
• 19:44
  Speaker 1: together in sort of different mining companies that rearranged themselves.
• 19:47
  Speaker 1: But the real problem was he never solved the problem
• 19:51
  Speaker 1: of paying the miners. No matter what happened, he could
• 19:54
  Speaker 1: never stay liquid enough to pay the miners in the
• 19:56
  Speaker 1: good pennies they demanded. So in 1525, they didn't just strike,
• 20:00
  Speaker 1: they sacked the town. They burned Stefan Schlick's house. They
• 20:04
  Speaker 1: seem to have burned his fancy London clothes that he
• 20:07
  Speaker 1: had ordered for the shooting festival. Oh, poor thing. Poor thing. Exactly.
• 20:12
  Speaker 1: And then they really sit down to negotiate at the
• 20:16
  Speaker 1: end of this. Stefan Schlick, you know, goes back to
• 20:18
  Speaker 1: his hometown of Schlackenwerth and he wants to ride up
• 20:21
  Speaker 1: with an army and kill all the miners and. Cooler
• 20:24
  Speaker 1: heads prevail, and they say basically, like, this is not working.
• 20:27
  Speaker 1: You're bad at this. And they basically write him out
• 20:29
  Speaker 1: of the agreement. So he still exists. He has a
• 20:32
  Speaker 1: small mining company with his brothers. He seems to sort
• 20:35
  Speaker 1: of be barely recognized even in the capital structure of
• 20:38
  Speaker 1: all these mines. But after this, the miners start getting
• 20:41
  Speaker 1: paid in what they call good white coin. That means
• 20:44
  Speaker 1: pure silver straight from the mine.
• 20:47
  Speaker 3: Like these almost like the dividend disks.
• 20:50
  Speaker 1: Almost like the dividend disks, but smaller.
• 20:52
  Speaker 3: Exactly.
• 20:52
  Speaker 1: Exactly. And so what you get then is everybody's in agreement.
• 20:58
  Speaker 1: The miners are getting what they want. You have a
• 21:00
  Speaker 1: legal understanding they're going to use Saxon law in this
• 21:02
  Speaker 1: corner of Bohemia. But the king is getting what the
• 21:04
  Speaker 1: king wants. The estates general is getting what they want.
• 21:07
  Speaker 1: The Holy Roman Empire sort of seems to be getting
• 21:10
  Speaker 1: a cut and is making his own creditors in Augsburg
• 21:13
  Speaker 1: and Nuremberg happy. So this works for all the people
• 21:15
  Speaker 1: with actual power. And at the beginning of this, you
• 21:18
  Speaker 1: told your fairy tale, Robin, right? You have this sovereign
• 21:22
  Speaker 1: Lord making coins. Very quickly in this process, within seven years,
• 21:26
  Speaker 1: he doesn't matter at all. He disappears. And what you
• 21:29
  Speaker 1: have instead is this legal exception. Stefan Schlick, so far
• 21:33
  Speaker 1: as we know, dies in the Battle of Mohacs. This is,
• 21:36
  Speaker 1: you know, the Turks moving north, fight the Hungarian cavalry. Oh, yes.
• 21:42
  Speaker 3: This is a battle when Suleiman the Magnificent, right, invades
• 21:46
  Speaker 3: and he thrashes the European or the Hungarian army.
• 21:49
  Speaker 1: Exactly. Their heavy cavalry was not adapted to his tactics.
• 21:53
  Speaker 1: I'm so glad I gave you the chance to say that.
• 21:55
  Speaker 1: Suleiman the Magnificent.
• 21:56
  Speaker 3: I've been looking forward to it for a very long time.
• 21:58
  Speaker 2: That doesn't appear in a lot of economic courses and
• 22:00
  Speaker 2: people don't really learn about that.
• 22:01
  Speaker 3: No, no, no. And Stefan Schlick definitely wasn't a magnificent, right?
• 22:06
  Speaker 1: He was not magnificent. But so the king dies in
• 22:07
  Speaker 1: the battle. Stefan Schlick disappears in the battle. We're not
• 22:10
  Speaker 1: really sure what happened to him. The town seemed to
• 22:13
  Speaker 1: think that he was sold into slavery in Armenia. They
• 22:16
  Speaker 1: even sent a delegation with some silver to Constantinople to
• 22:20
  Speaker 1: try and figure out what had happened. We don't know.
• 22:22
  Speaker 1: He disappears from the record. But fascinatingly, he disappears from
• 22:25
  Speaker 1: the record and it doesn't matter. And in fact, it's
• 22:28
  Speaker 1: kind of better for everyone that he's gone because this
• 22:31
  Speaker 1: mint is cranking out huge volumes of pure silver dividend
• 22:36
  Speaker 1: coins to pay the investors.
• 22:37
  Speaker 2: And that's where basically the Joachim Stahler, if I pronounce
• 22:41
  Speaker 2: that right, starts to have a life of its own
• 22:44
  Speaker 2: that outlives its creator and goes into areas that no
• 22:48
  Speaker 2: one could have ever imagined and carries on for centuries.
• 22:51
  Speaker 2: So we'll get into that after the break. But thank you.
• 23:02
  Speaker 5: Investors today are most worried about three key factors, interest rates,
• 23:07
  Speaker 5: the corporate credit cycle and the impact of artificial intelligence.
• 23:11
  Speaker 5: Artificial intelligence is impacting the jobs market and corporate margins.
• 23:15
  Speaker 5: Interest rates are of concern because people are wondering when
• 23:17
  Speaker 5: will the Fed start to raise or lower interest rates again.
• 23:21
  Speaker 5: And finally, the corporate credit cycle. If the economy is
• 23:24
  Speaker 5: to weaken, what does that mean for the ability of
• 23:26
  Speaker 5: corporate credit to hold up? We are thinking about the
• 23:29
  Speaker 5: next generation and constantly adapting our portfolios to meet their needs.
• 23:40
  Speaker 2: So just before the break, we heard about the man
• 23:43
  Speaker 2: called Stefan Schlich. the hapless 16th century nobleman from Bohemia
• 23:49
  Speaker 2: who almost no one's ever heard of if you're studying
• 23:51
  Speaker 2: finance and money, but actually matters enormously because he went
• 23:55
  Speaker 2: around plundering the silver in the valley that he had
• 23:59
  Speaker 2: stumbled on, created mines. He then tries to build up
• 24:03
  Speaker 2: the mining business, but he's really bad at it. And
• 24:07
  Speaker 2: the miners keep striking and he ends up either dead
• 24:11
  Speaker 2: or disappeared, never to return. in one of those many
• 24:14
  Speaker 2: European wars that, again, litter the history books. But here's
• 24:19
  Speaker 2: a really interesting thing, because although Stefan Schlich vanishes from
• 24:24
  Speaker 2: history at this point, in fact, his creation, the Joachimsthaler,
• 24:29
  Speaker 2: isn't anything but dead. Far from it. It's about to
• 24:33
  Speaker 2: have a whole new life that goes on for many
• 24:36
  Speaker 2: centuries until today. So tell us, Brendan, What actually happens
• 24:42
  Speaker 2: to Schlick's silver and the Jochenstahler or the Thaler, the
• 24:47
  Speaker 2: forerunner of the dollar, that he birthed almost by accident?
• 24:51
  Speaker 1: So Carlo Cipolla is an Italian medieval historian from the
• 24:54
  Speaker 1: 20th century. And he had a framework for thinking about
• 24:58
  Speaker 1: money that I found very useful to think about this
• 25:01
  Speaker 1: and even now. He said that there were two types
• 25:04
  Speaker 1: of money broadly. There was big money and there was
• 25:06
  Speaker 1: little money. the big money were full-bodied coins, high value,
• 25:11
  Speaker 1: and they were useful for international trade and for merchants
• 25:13
  Speaker 1: and the wealthy. Little money was for retail payments. So
• 25:18
  Speaker 1: we now think of this as small change of a
• 25:21
  Speaker 1: larger note, right? We think of all of these things
• 25:24
  Speaker 1: as working together. We think of pennies as parts of dimes,
• 25:27
  Speaker 1: as parts of quarters, folding neatly into a dollar bill.
• 25:30
  Speaker 1: The system that he describes is different. And what you
• 25:32
  Speaker 1: have is different ways of paying people that don't necessarily
• 25:35
  Speaker 1: always work together. You have a small money system for
• 25:38
  Speaker 1: retail and you have a big money system for wholesale.
• 25:40
  Speaker 1: So these big silver coins fit perfectly into what we
• 25:45
  Speaker 1: think of as big money. They were very useful to merchants.
• 25:48
  Speaker 1: I went back and I looked at what things cost
• 25:49
  Speaker 1: in Saxony at the time. So one of these coins
• 25:52
  Speaker 1: would buy a whole week's labor or 21 pounds of bacon, right?
• 25:55
  Speaker 1: So it's not, it's not, it's not a penny that
• 25:57
  Speaker 1: jingles around in your pocket. I have a silver reproduction
• 26:00
  Speaker 1: of it. I wish I had it right now so
• 26:01
  Speaker 1: you could hear it when I drop it on the table.
• 26:03
  Speaker 1: But these coins, they clank. They don't jingle. They're large.
• 26:06
  Speaker 1: And so what starts to happen is as it moves
• 26:10
  Speaker 1: up into the Baltic, it becomes useful for trade. It
• 26:13
  Speaker 1: becomes useful for tours. One of the things that Carlo
• 26:15
  Speaker 1: Cipolla said about big money in particular is that there
• 26:19
  Speaker 1: tends to be one kind of big money that's more
• 26:21
  Speaker 1: generally accepted. And it inspires what he called more or
• 26:23
  Speaker 1: less faithful copies. This copying is incredibly important. Again, we're
• 26:28
  Speaker 1: used to a sovereign story of money where money is
• 26:31
  Speaker 1: produced inside the borders of a country. And then it
• 26:33
  Speaker 1: expands as the country expands and trade with the country expands.
• 26:36
  Speaker 1: What actually happened was very quickly you start to see
• 26:39
  Speaker 1: in the Baltic and in North Germany more or less
• 26:42
  Speaker 1: faithful copies of these dividend coins. So you have a
• 26:45
  Speaker 1: Danish dollar. You have a Swedish dollar. No Norwegian dollar yet, Robin,
• 26:50
  Speaker 1: but it's coming. It's coming in the next century.
• 26:53
  Speaker 2: I don't think Norway was much of an entity in
• 26:54
  Speaker 2: those days.
• 26:55
  Speaker 1: No, it was not. However, Shakespeare does actually mention in
• 26:59
  Speaker 1: the Scottish play that the King of Norway paid a
• 27:02
  Speaker 1: ransom in dollars.
• 27:03
  Speaker 5: Oh, wow.
• 27:04
  Speaker 1: Really? Yes, by the early 17th century. Oh, wow.
• 27:08
  Speaker 2: And were these coins, were these copycat coins all made
• 27:11
  Speaker 2: of silver as well?
• 27:12
  Speaker 1: They were all made of silver and they were all
• 27:14
  Speaker 1: roughly the same quality. Again, we're used to this story
• 27:17
  Speaker 1: where sovereigns produce terrible coins of poor quality. That's not
• 27:22
  Speaker 1: really what happens because there's a recognition, particularly with big money,
• 27:25
  Speaker 1: that merchants have high standards. They need high quality coins.
• 27:29
  Speaker 1: So when you get copies of the Jakobstaller in Hamburg,
• 27:34
  Speaker 1: in Lubeck, they kind of look like the dollar and
• 27:37
  Speaker 1: they resemble the dollar and they work the same way
• 27:39
  Speaker 1: as the dollar, as the Jakobstaller.
• 27:41
  Speaker 3: Well, so is standardization here the crucial aspect, that this
• 27:45
  Speaker 3: is something that has one size, one quality, and everybody
• 27:49
  Speaker 3: kind of accepts it, and therefore that becomes kind of
• 27:52
  Speaker 3: an unofficial reserve currency for large parts of Europe at
• 27:55
  Speaker 3: the time?
• 27:56
  Speaker 1: Yes, absolutely. But crucially, nobody's telling them to do it.
• 27:59
  Speaker 1: They're doing it because that's the best way to manage
• 28:01
  Speaker 1: their own money. And so if you were a town
• 28:05
  Speaker 1: and you had silver and you wanted it to sort
• 28:07
  Speaker 1: of enter into circulation, you had to mint it. in
• 28:09
  Speaker 1: the form of this toller. The copy was important. And
• 28:12
  Speaker 1: they were, in fact, as Chipola pointed out, more or
• 28:15
  Speaker 1: less faithful copies. And I think this copying process continued
• 28:19
  Speaker 1: until the present day. As a child in America in
• 28:21
  Speaker 1: the 70s and the 80s, on your birthday, you would
• 28:24
  Speaker 1: get a silver dollar. That silver dollar is a copy
• 28:26
  Speaker 1: of a copy of a copy of Stefan Schlick's terrible experiment.
• 28:31
  Speaker 2: In some senses, what we're seeing today has echoes of
• 28:34
  Speaker 2: what happened in the 16th century. It goes all the
• 28:36
  Speaker 2: way back And shows a continuity through history.
• 28:40
  Speaker 1: So a couple years ago, I was talking to a
• 28:42
  Speaker 1: friend in Germany about this whole story. And he said,
• 28:45
  Speaker 1: wait right there. I've got something for you. He went
• 28:47
  Speaker 1: and returned with a stack of Disney comics from the
• 28:52
  Speaker 1: 80s in German translation. In German translation, Scrooge McDuck, when
• 28:56
  Speaker 1: he dives into his vault of coins, he's diving into Taller.
• 29:01
  Speaker 1: So this idea of, you know, money sticks around forever.
• 29:04
  Speaker 1: It's very difficult to get rid of the idea of money.
• 29:07
  Speaker 1: It's exceptional when it gets replaced. And so the idea
• 29:10
  Speaker 1: of a dollar, you know, stuck around forever. It's still
• 29:12
  Speaker 1: with us today.
• 29:13
  Speaker 3: So the dollar has kind of become synonymous with money
• 29:16
  Speaker 3: long before the birth of the United States.
• 29:19
  Speaker 1: Yes, absolutely.
• 29:20
  Speaker 3: Broadly accepted, high quality, universally acknowledged and accepted form of
• 29:27
  Speaker 3: medium of exchange.
• 29:28
  Speaker 1: We have this record of Joachimsthaler by the 1630s that
• 29:33
  Speaker 1: are copied from all over Northern Europe.
• 29:36
  Speaker 3: But have you ever held one yourself, like a proper original?
• 29:40
  Speaker 3: OG Joachimsthaler in your hands?
• 29:42
  Speaker 2: I did.
• 29:43
  Speaker 1: A lot of this legal history comes from Peter Vorl.
• 29:46
  Speaker 1: He's a professor at the University of Pardubice in Czechia.
• 29:49
  Speaker 1: And I went to visit him to talk about this.
• 29:51
  Speaker 1: And he just sort of casually produced an original dollar,
• 29:55
  Speaker 1: an original Joachimstaller. And he just sort of set it
• 29:57
  Speaker 1: on the table. And I was super nervous watching it
• 29:59
  Speaker 1: rattling around as we were talking and looking over his notes.
• 30:03
  Speaker 1: The coin is fascinating to me because we think of
• 30:05
  Speaker 1: currency as the proud symbol of a nation. The original
• 30:08
  Speaker 1: Joachimstaller shows St. Joachim, old, bearded, cloaked, feeble, It was
• 30:15
  Speaker 1: a branding exercise for Joachimsthal. It was not about sort
• 30:18
  Speaker 1: of the proud currency of Stefan Schlick.
• 30:20
  Speaker 2: So why did it become so durable? Because, you know,
• 30:24
  Speaker 2: the point is that the dollar, the tala, has been
• 30:26
  Speaker 2: around for a very long time. These silver coins were
• 30:30
  Speaker 2: copied widely very, very quickly, and they stuck without sovereign backing.
• 30:35
  Speaker 2: What made them so durable and so trusted?
• 30:38
  Speaker 3: Yeah, because there must have been other currencies, right, that were,
• 30:41
  Speaker 3: in theory, could have been The Tala, like something that
• 30:44
  Speaker 3: was broadly accepted of gold or silver or whatever, right?
• 30:48
  Speaker 3: What's special about the Tala?
• 30:50
  Speaker 1: There were other big silver coins in Central Europe. It
• 30:53
  Speaker 1: was not the first sort of full-bodied silver coin. What
• 30:56
  Speaker 1: was different about the Tala was this unique legal arrangement
• 30:59
  Speaker 1: that happened with basically a Saxon colony in northern Bohemia
• 31:03
  Speaker 1: meant that the mint did not have to produce small coins. Usually,
• 31:07
  Speaker 1: mints are private companies, and the sovereign has an interest
• 31:10
  Speaker 1: in making sure that They make the little coins as well.
• 31:13
  Speaker 1: You don't get the same profit on the little coins
• 31:15
  Speaker 1: that you do on the big coins. So left to
• 31:17
  Speaker 1: their own devices, Mintz would prefer to make big coins.
• 31:20
  Speaker 1: Because this whole silver mine was just meant to serve
• 31:23
  Speaker 1: investors and the king, they did not produce any small
• 31:26
  Speaker 1: change whatsoever. So not only is it a rich load,
• 31:30
  Speaker 1: it's all going into big coins. So you get this
• 31:33
  Speaker 1: unprecedented flood of just big silver coins shooting out through
• 31:37
  Speaker 1: the silver markets in Leipzig and up into the Baltic.
• 31:40
  Speaker 1: I think once the dollar started to inspire copies and
• 31:44
  Speaker 1: took on a life of its own, the fact that
• 31:46
  Speaker 1: there was no sovereign in control of it was a feature,
• 31:49
  Speaker 1: not a bug. It became a standard that nobody could
• 31:51
  Speaker 1: stop because you couldn't go to that sovereign and say,
• 31:54
  Speaker 1: you can't do this anymore. Or you couldn't negotiate it
• 31:56
  Speaker 1: with a sovereign to make money slightly different. The sovereign
• 32:00
  Speaker 1: also never had the ability to sort of cheat on
• 32:03
  Speaker 1: the coin and produce a slightly less valuable one. It
• 32:06
  Speaker 1: was because everybody was copying the coin that was useful
• 32:09
  Speaker 1: for merchants The demand that merchants had for very high
• 32:12
  Speaker 1: quality silver had a power of its own. You know,
• 32:14
  Speaker 1: telling the story, I often want to assign like agency
• 32:18
  Speaker 1: to the dollar, which is of course ridiculous. It's a
• 32:20
  Speaker 1: piece of silver. It has no agency. But the merchants
• 32:23
  Speaker 1: who want high quality payment money have incredible power. And
• 32:26
  Speaker 1: I think that's more powerful than sovereignty over money.
• 32:29
  Speaker 2: So it's a bit like in some ways, dare I say,
• 32:31
  Speaker 2: Bitcoin or the alternative non-fiat currencies today, which sit outside
• 32:36
  Speaker 2: any government control. but people trust because they think it's
• 32:40
  Speaker 2: got real underlying scarcity value.
• 32:43
  Speaker 5: Yeah.
• 32:43
  Speaker 3: I can almost hear to my horror the Bitcoin bros
• 32:45
  Speaker 3: punching the air as they hear this.
• 32:49
  Speaker 2: But of course, the irony today is the dollar is
• 32:52
  Speaker 2: controlled by the US government, isn't it?
• 32:54
  Speaker 1: Sure. But the dollar did get brought into the fold
• 32:56
  Speaker 1: for various empires, including the United States. I think of
• 33:01
  Speaker 1: it more like euro dollars. So euro dollars are basically
• 33:05
  Speaker 1: copies of American bank dollars. Banks offshore are allowed to
• 33:10
  Speaker 1: mark up their books with their own new dollar denominated loans.
• 33:14
  Speaker 1: They didn't ask permission of the United States Treasury, the
• 33:16
  Speaker 1: United States Federal Reserve to do that. They just do it.
• 33:19
  Speaker 1: And they do it precisely the same reason that there
• 33:21
  Speaker 1: were lots and lots of copies of this original silver dollar,
• 33:24
  Speaker 1: because it's useful for merchants. People want high quality payment money.
• 33:28
  Speaker 1: And so The United States has some ability to support
• 33:31
  Speaker 1: these dollars and control them, but we don't have nearly
• 33:35
  Speaker 1: the regulatory apparatus that we do over our own bank
• 33:38
  Speaker 1: dollars at home. These are offshore copies of the dollar.
• 33:40
  Speaker 1: And I think when we look at how the dollar
• 33:42
  Speaker 1: itself spread, we're looking at offshore copies of offshore copies
• 33:45
  Speaker 1: of offshore copies.
• 33:46
  Speaker 2: So when the U.S. dollar was first created, and as
• 33:50
  Speaker 2: you said, the founding fathers sometimes joked about it being
• 33:53
  Speaker 2: an ancient currency. When they took over that word to
• 33:56
  Speaker 2: describe their own currencies later on, the U.S. dollar, did
• 34:00
  Speaker 2: they realize about the link to the past, about the
• 34:04
  Speaker 2: 16th century history? How did the word dollar even come
• 34:06
  Speaker 2: to be used in America at all?
• 34:08
  Speaker 1: I don't know whether they knew who Stefan Schlick was.
• 34:10
  Speaker 1: It's very clear when you look at 17th century English
• 34:14
  Speaker 1: that there was a consistent understanding of what a dollar was.
• 34:17
  Speaker 1: One thing that changed was the Spanish Empire built its
• 34:21
  Speaker 1: viceroyalties in Latin America and And there was silver in
• 34:25
  Speaker 1: what is now Bolivia and Mexico. And they figured out
• 34:29
  Speaker 1: a brutal Mita system. This is forced labor in the
• 34:32
  Speaker 1: Andes to get silver out of the ground. We don't
• 34:34
  Speaker 1: have to go into the details of that, but you
• 34:36
  Speaker 1: get Spain producing lots of silver as well. Crucially, Charles V,
• 34:41
  Speaker 1: Holy Roman Empire, king of Castile, possessor of new vice royalties,
• 34:46
  Speaker 1: has to follow this merchant standard of the dollar. He
• 34:50
  Speaker 1: knows he's got silver. It starts to come out of
• 34:52
  Speaker 1: Mexico very early in the 1530s. And he's got to
• 34:55
  Speaker 1: get his silver onto the same desk of the same
• 34:58
  Speaker 1: money changers selling silver to the Portuguese in Antwerp. He
• 35:02
  Speaker 1: copies the dollar. So what we think of now is
• 35:04
  Speaker 1: the Spanish piece of eight. was kind of shoehorned into
• 35:07
  Speaker 1: an existing Castilian monetary system precisely to create a Spanish
• 35:12
  Speaker 1: silver copy of the dollar. This coin circulates widely. It
• 35:16
  Speaker 1: circulates in the Pacific. The Spanish figure out how to
• 35:19
  Speaker 1: get silver on galleons directly to Manila and the Philippines
• 35:22
  Speaker 1: and from there to China. Massive demand for silver in
• 35:25
  Speaker 1: China at the time. Dollars also circulate in the The
• 35:30
  Speaker 1: United States is very difficult to sort of get Americans
• 35:33
  Speaker 1: to understand how unimportant the colonies were. They're this backwater.
• 35:37
  Speaker 1: They're selling shingles and hogs and wheat to the sugar
• 35:42
  Speaker 1: islands of the Caribbean, and they're not participating in the
• 35:46
  Speaker 1: economy in in many other ways. And so they could
• 35:50
  Speaker 1: get dollars and they got dollars by selling things to
• 35:52
  Speaker 1: the Caribbean. And so the dollar circulated widely in colonial America. Again,
• 35:57
  Speaker 1: this was not a surprise to anyone. They knew exactly
• 35:59
  Speaker 1: what it was. They knew what it was called. And
• 36:01
  Speaker 1: to go back, you know, by the early 17th century,
• 36:05
  Speaker 1: the word dollar shows up in Shakespeare twice. To me,
• 36:08
  Speaker 1: what that says is the groundlings in the Globe Theater
• 36:11
  Speaker 1: knew what it was. This wasn't just for merchants. This
• 36:13
  Speaker 1: was a coin that everybody knew came from the low
• 36:16
  Speaker 1: countries for cloth. So as commerce spreads to the American colonies,
• 36:20
  Speaker 1: as they're able to sell things to the sugar islands
• 36:22
  Speaker 1: and in turn get some silver coins, the dollar also
• 36:25
  Speaker 1: becomes a standard accepted unit of value and coin in
• 36:29
  Speaker 1: the United States as well, or rather in the colonies.
• 36:32
  Speaker 1: So And Jefferson said when they're trying to figure out
• 36:35
  Speaker 1: what's going to be the currency of this new country,
• 36:36
  Speaker 1: he said it should be something that's familiar to them.
• 36:39
  Speaker 1: It was universally recognized. They already knew what it was.
• 36:42
  Speaker 1: I started thinking about this as the 1776 problem. If
• 36:46
  Speaker 1: we assume that monetary sovereignty exists, a new country, new money,
• 36:51
  Speaker 1: you have a problem in 1776 because they claim political sovereignty.
• 36:55
  Speaker 1: But then they choose for their currency a Spanish coin
• 36:59
  Speaker 1: made from Mexican silver with a German name.
• 37:03
  Speaker 2: Well, that shows the joys of multiculturalism and immigrants. They
• 37:07
  Speaker 2: get the job done.
• 37:07
  Speaker 3: Yes, absolutely.
• 37:09
  Speaker 1: But absolutely, this is not an immigrant coin. This is
• 37:12
  Speaker 1: not the story of sovereignty. The United States succumbed to
• 37:16
  Speaker 1: an existing dollar zone. They did not create their own
• 37:19
  Speaker 1: new dollar zone.
• 37:20
  Speaker 2: So when is someone going to tell the American government
• 37:22
  Speaker 2: that they're using an immigrant coin? an interloper.
• 37:26
  Speaker 1: Well, it's not going to be me. And actually, sadly,
• 37:28
  Speaker 1: it is me. I'm literally going on book tour telling
• 37:30
  Speaker 1: the United States it's an immigrant coin. But this coin,
• 37:32
  Speaker 1: this copy of a copy of a copy of the
• 37:34
  Speaker 1: original Joachimstaller is accepted as legal tender and is a
• 37:37
  Speaker 1: current currency in America until the 1850s.
• 37:40
  Speaker 2: So one of the questions I have is that, you know,
• 37:42
  Speaker 2: you're talking about a copy of a copy of coin.
• 37:44
  Speaker 2: I mean, in a sense, you've had that with the
• 37:46
  Speaker 2: fact you now today have a US dollar, you have
• 37:49
  Speaker 2: a Canadian dollar, you've got a New Zealand dollar, Australian dollar.
• 37:53
  Speaker 2: So in some ways, what you're saying is the modern
• 37:55
  Speaker 2: monetary system is busy copying just like 16th century Europe.
• 38:00
  Speaker 1: Yes, absolutely. And to add a twist to what you
• 38:02
  Speaker 1: just said, the Hong Kong dollar and the Canadian dollar
• 38:06
  Speaker 1: are not copies of the American dollar. They're copies of
• 38:08
  Speaker 1: that silver coin. So they were pegging their currencies to
• 38:14
  Speaker 1: this coin. This coin was incredibly important in commerce in
• 38:18
  Speaker 1: southern China as well by the end of the 18th century.
• 38:20
  Speaker 3: So these countries all independently at various times all essentially
• 38:26
  Speaker 3: hitched their monetary sovereignty or adopted a supranational currency that
• 38:32
  Speaker 3: existed hundreds of years long before these countries ever existed, essentially.
• 38:36
  Speaker 3: Because it was pre-existing and established and widely acknowledged and
• 38:40
  Speaker 3: used around the world.
• 38:42
  Speaker 1: Yes, absolutely. The word for currency, yuan, comes from round.
• 38:46
  Speaker 1: It's referring to these coins. Yen, same thing. Ringgit, the
• 38:50
  Speaker 1: Malaysian currency, actually refers to the milling on the edge
• 38:53
  Speaker 1: of the Spanish dollars when they improved the quality in
• 38:57
  Speaker 1: the 18th century. The Bourbon Kings of Spain actually went
• 39:00
  Speaker 1: through and did a currency reform and made sure that
• 39:01
  Speaker 1: the coins were uniform quality. They had been having trouble
• 39:04
  Speaker 1: with the mints. And they, of course, put their own
• 39:07
  Speaker 1: double-chinned faces on the coins themselves. When they arrived in
• 39:12
  Speaker 1: the port cities of southern China, they were referred to
• 39:14
  Speaker 1: as Buddha head coins. After Mexican independence from the Spanish empire,
• 39:21
  Speaker 1: the mints in Mexico City, they keep same quality of silver,
• 39:25
  Speaker 1: same size, same weight. Absolutely everything is the same. They
• 39:28
  Speaker 1: changed the design on the coin. They put a Mexican
• 39:30
  Speaker 1: eagle on it. Those coins arrive in China. The merchants
• 39:34
  Speaker 1: won't accept them. They call them batwing coins. They don't
• 39:36
  Speaker 1: know them. They don't trust them. And so you actually
• 39:38
  Speaker 1: have a problem. They're so not sovereign that when a
• 39:42
  Speaker 1: new sovereign emerges to produce a new coin, It takes
• 39:45
  Speaker 1: a period of adoption for them to trust the new coin.
• 39:48
  Speaker 1: There's frustration from the East India Company saying, look, we
• 39:51
  Speaker 1: can't get enough of these old coins. They don't make
• 39:53
  Speaker 1: them anymore, but that's what they're demanding as payment.
• 39:56
  Speaker 2: So in some ways, the coin had almost become a
• 39:58
  Speaker 2: meme by then or a financial meme in terms of
• 40:01
  Speaker 2: representing or symbolizing in short form the idea of a
• 40:04
  Speaker 2: monetary token of value.
• 40:06
  Speaker 1: I think a meme is a good metaphor for this.
• 40:08
  Speaker 2: So I guess one of the key questions is that
• 40:10
  Speaker 2: the dollar pre-existed America. America copied it. It's an immigrant
• 40:16
  Speaker 2: phenomena in America. Other variants have been copied elsewhere. Will
• 40:21
  Speaker 2: it outlive America?
• 40:24
  Speaker 1: I have been wondering about this. There's this old joke
• 40:28
  Speaker 1: that what's a historian's joke. So it's pretty poor by
• 40:31
  Speaker 1: the standard of jokes. But, you know, Rome disappeared and
• 40:34
  Speaker 1: all that was left was a church. The British Empire
• 40:37
  Speaker 1: disappeared and all that was left was a bank. I
• 40:40
  Speaker 1: think it's possible that the American empire could change and
• 40:43
  Speaker 1: what would be left is the global dollar system. Right now,
• 40:48
  Speaker 1: the way the United States supports the global dollar system
• 40:50
  Speaker 1: without getting too deep into the weeds is that the
• 40:52
  Speaker 1: Federal Reserve will offer short-term loans through other central banks
• 40:56
  Speaker 1: to commercial banks that happen to have dollars that are questionable.
• 40:59
  Speaker 1: We call these swap lines. So the Fed supports these
• 41:03
  Speaker 1: as a way of supporting the global dollar system because
• 41:05
  Speaker 1: if the global dollar system were to collapse, then it
• 41:08
  Speaker 1: would be bad for America too. I have been wondering
• 41:11
  Speaker 1: if these swap lines were ever called into question.
• 41:14
  Speaker 3: As they are being now, right?
• 41:16
  Speaker 2: Yes.
• 41:17
  Speaker 1: Could the Europeans offer swap lines in dollars to each other?
• 41:20
  Speaker 1: There's nothing stopping them from doing that.
• 41:23
  Speaker 2: It's very interesting because I've been meeting with central bankers
• 41:25
  Speaker 2: in the last few days. That kind of discussion is
• 41:28
  Speaker 2: definitely happening right now, partly because the authorities in Washington
• 41:33
  Speaker 2: have indicated that they might try and use those swap
• 41:36
  Speaker 2: lines as a tool in geopolitical negotiations. And if, say,
• 41:42
  Speaker 2: Washington fell out big time with Brussels, maybe they wouldn't
• 41:46
  Speaker 2: be as keen to offer those dollar swap lines in
• 41:48
  Speaker 2: the future. And in which case, the Europeans might have
• 41:51
  Speaker 2: to club together and try and provide support to each
• 41:55
  Speaker 2: other and provide dollars. And I actually heard a central
• 41:58
  Speaker 2: bank governor of an unnamed country, which I won't disclose, saying,
• 42:02
  Speaker 2: we at our central bank are actually increasing our holdings
• 42:04
  Speaker 2: of dollars right now. We're not diversifying away from it.
• 42:07
  Speaker 2: We're doubling down just to make sure we have that
• 42:09
  Speaker 2: buffer zone. And again, if you look at the Gulf
• 42:12
  Speaker 2: states right now, you know, the reality is that big
• 42:15
  Speaker 2: central banks like Saudi Arabia have a lot of dollars
• 42:17
  Speaker 2: and are potentially in a position to help other people
• 42:20
  Speaker 2: in the region if they start to run out. Your
• 42:22
  Speaker 2: point about the dollar having a life of its own
• 42:25
  Speaker 2: even outside America is really very relevant.
• 42:28
  Speaker 1: Gillian, that is amazing. That was just a theory I
• 42:30
  Speaker 1: had of something they might be able to do. They're
• 42:32
  Speaker 1: actively discussing it. That's crazy.
• 42:33
  Speaker 2: Well, they're discussing it discreetly and really just as a
• 42:36
  Speaker 2: last case scenario and simply as part of prudent risk management.
• 42:40
  Speaker 2: But we're in a world where prudent risk management is
• 42:42
  Speaker 2: a very good idea.
• 42:43
  Speaker 1: But this brings up for me the same question we've
• 42:46
  Speaker 1: had for this whole conversation, which is that If we
• 42:50
  Speaker 1: allow banks offshore to copy the dollar, us meaning the Americans,
• 42:55
  Speaker 1: is America sovereign over the dollar? We assume that it is.
• 42:59
  Speaker 1: We have some sovereignty, a good deal of sovereignty over
• 43:01
  Speaker 1: banks in the United States. But if this thing is
• 43:03
  Speaker 1: happening offshore, that to me really calls into question these
• 43:06
  Speaker 1: assumptions that we have about monetary sovereignty.
• 43:09
  Speaker 2: It also refers to stable coins as well, though, because
• 43:12
  Speaker 2: in some ways that's a partly state-sanctioned effort now by
• 43:17
  Speaker 2: the U.S. Treasury to... popularize the dollar's usage, have forms
• 43:22
  Speaker 2: of dollars used all over the world, but in a
• 43:24
  Speaker 2: vehicle that's not actually directly controlled by the Fed anymore.
• 43:28
  Speaker 1: And that's because it's useful for the United States to
• 43:31
  Speaker 1: continue to encourage this dollar system so long as we
• 43:34
  Speaker 1: have the best and only reserves.
• 43:36
  Speaker 2: So I have one last burning question from my part,
• 43:38
  Speaker 2: and I'm sure Robin may have another one, but has
• 43:41
  Speaker 2: anyone ever tried to create a dollar coin, a silver
• 43:45
  Speaker 2: dollar coin with Schlick's face on it?
• 43:48
  Speaker 1: Yes. There is one. It's the only reason we know
• 43:53
  Speaker 1: what he looked like. Oh, wow. When he disappeared, there
• 43:57
  Speaker 1: was a tradition in Central Europe of what we would
• 44:01
  Speaker 1: think of today as commemorative coins. But they, you know,
• 44:04
  Speaker 1: you could wear it, a coin, you would drill a
• 44:06
  Speaker 1: hole in it and wear it on a chain around
• 44:08
  Speaker 1: your neck. And so there was like, there were anti-Pope coins.
• 44:11
  Speaker 1: There were sort of silver dollars that had like anti-papist
• 44:15
  Speaker 1: messages on them. There were anti-plague coins. It was sort of,
• 44:18
  Speaker 1: you had the anti-plague silver dollar around your neck, you
• 44:21
  Speaker 1: wouldn't get sick.
• 44:22
  Speaker 3: Yeah, because there wouldn't have been any pro-plague coins, I'm guessing.
• 44:25
  Speaker 1: Yes, that's exactly right. That's exactly right. So Stefan Schlich's
• 44:29
  Speaker 1: widow had a coin commissioned of his bust. Crucially, he's
• 44:34
  Speaker 1: depicted as a merchant with a big ruff and not
• 44:37
  Speaker 1: as a warrior.
• 44:38
  Speaker 3: Okay.
• 44:40
  Speaker 1: I wandered into his house. Crazily enough, in Joachimsthal. So
• 44:44
  Speaker 1: I went down to the bottom of this silver mine
• 44:46
  Speaker 1: to tour it and I got back up and I
• 44:47
  Speaker 1: had some extra time before I needed to leave. And
• 44:50
  Speaker 1: I just started wandering around the town. And there's a
• 44:53
  Speaker 1: little sign that said this was Stefan Schlick's house. It's empty.
• 44:57
  Speaker 1: It has not been occupied since the Second World War.
• 45:00
  Speaker 1: The rooms are empty. The windows are destroyed. And I
• 45:03
  Speaker 1: sort of like poked my head in. And I did
• 45:05
  Speaker 1: not go up to the second floor because nobody knew
• 45:07
  Speaker 1: I was there. It seemed like a really bad idea
• 45:09
  Speaker 1: to fall through a joist when nobody knows that you're
• 45:11
  Speaker 1: in Stefan Schlick's house. You know, but that's it. He
• 45:14
  Speaker 1: was not really wealthy. It's not the biggest house in town.
• 45:18
  Speaker 1: And he only lived in it for about two years.
• 45:21
  Speaker 2: Well, someone should tell President Trump if he's going to
• 45:23
  Speaker 2: put his face on the next commemorative coin on the
• 45:28
  Speaker 2: dollar-linked coin in America that there's been a very long
• 45:31
  Speaker 2: antecedent And it's not always the best of moments, but
• 45:34
  Speaker 2: there we go.
• 45:34
  Speaker 5: Yeah.
• 45:35
  Speaker 3: But it is fascinating that this silver mine in Bohemia
• 45:39
  Speaker 3: in 1515 essentially kind of births this super currency that
• 45:44
  Speaker 3: transcends sovereignty. And you talked about how it was a feature,
• 45:47
  Speaker 3: not a bug, but it seems it's actually the killer USP.
• 45:50
  Speaker 3: Like what is actually the selling point for the dollar
• 45:53
  Speaker 3: that becomes a dollar? is that it is outside of
• 45:56
  Speaker 3: any sovereign control, that it is not the Gilda that's
• 45:59
  Speaker 3: tied to the Dutch or the Florentine Ducat or the Sterling,
• 46:04
  Speaker 3: which its fate is somehow entwined into the waxing and
• 46:08
  Speaker 3: waning of the great powers. It transcends all that. And
• 46:11
  Speaker 3: that's why the dollar is so powerful. It actually indicates
• 46:14
  Speaker 3: that even if the US were to decline, actually the
• 46:17
  Speaker 3: dollar can shrug all that off anyway, because There is
• 46:21
  Speaker 3: a kind of, I guess, use the economist phrase, a
• 46:24
  Speaker 3: reveal preference from the entire world to have something that
• 46:27
  Speaker 3: we all agree is money and we can exchange it,
• 46:31
  Speaker 3: whether we're talking some bank transfers, trade, financial securities, whatever, really.
• 46:37
  Speaker 1: When we look back at theories of currency dominance, they
• 46:40
  Speaker 1: often hang on empire. So Robert Mundell, the economist who
• 46:44
  Speaker 1: won a Nobel Prize for his work on sort of
• 46:46
  Speaker 1: figuring out how the Eurozone might work, said that currency,
• 46:50
  Speaker 1: great currencies are the children of great empires. And his
• 46:52
  Speaker 1: assumption was if you have an empire that's got a
• 46:56
  Speaker 1: big domestic market and it's more or less stable, so
• 46:59
  Speaker 1: it produces stable coins and it trades with states outside
• 47:02
  Speaker 1: of its own borders, then its own domestic currency will
• 47:05
  Speaker 1: spread outside of its borders and become dominant. With all
• 47:08
  Speaker 1: due respect to Robert Mundell, who has a Nobel Prize
• 47:10
  Speaker 1: and I do not, I don't see that story. I
• 47:13
  Speaker 1: see the story that Robin just described. And when you
• 47:15
  Speaker 1: look at the beginning of the dollar, at the very least,
• 47:18
  Speaker 1: You do not see a story of empire or sovereignty.
• 47:21
  Speaker 1: The Holy Roman Empire, for a lot of complicated reasons,
• 47:24
  Speaker 1: actually hated the dollar coins. They were trying to come
• 47:26
  Speaker 1: up with some standard for the empire, and they were
• 47:30
  Speaker 1: settling on something called a reinflorin. It was a gold
• 47:34
  Speaker 1: coin that was a depreciated version of the florins that
• 47:37
  Speaker 1: came up from Florence. They struggled with the dollar precisely because,
• 47:42
  Speaker 1: as Robin points out, it was useful for merchants. And
• 47:45
  Speaker 1: it's very difficult to tell a merchant, don't buy or
• 47:48
  Speaker 1: sell this way. They know what they want.
• 47:50
  Speaker 2: So will the dollar prove to be more long lasting
• 47:53
  Speaker 2: than sterling, say?
• 47:55
  Speaker 1: I think it's possible that something called the dollar will
• 47:57
  Speaker 1: outlive the current American dominated dollar system. I think that's
• 48:01
  Speaker 1: very likely.
• 48:03
  Speaker 2: Well, that's a fantastic cliffhanger to end on, because most
• 48:06
  Speaker 2: of us won't be alive to actually see whether that's
• 48:08
  Speaker 2: true or not. But it's certainly very thought provoking. So
• 48:11
  Speaker 2: thank you so much, Brendan, for joining us.
• 48:13
  Speaker 1: Thank you, guys.
• 48:14
  Speaker 2: I'm sure we'll come back to talk about the dollar
• 48:17
  Speaker 2: again in future episodes. But unfortunately, that's it from this
• 48:21
  Speaker 2: episode of The Story of Money from The Financial Times.
• 48:25
  Speaker 2: I'm Gillian Tett.
• 48:26
  Speaker 3: And I'm Robin Wigglesworth.
• 48:28
  Speaker 2: And we'll see you back here again next week.