Brendan Greeley on the Real 500-Year History of the Dollar

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Hello and welcome to another episode of the Authoughts podcast.

I'm Tracy Alloway and I'm Joe Wisenthal.

Joe.

We enjoy talking about money, Yeah, in all its flavors.

I love money.

We all love money.

Someone's podcast, Someone's gonna clip that out, Joe saying, I love money. You know, I love money talking about it, in particular, having it's good to talk about. It's nice.

Finding it is even better.

What you can do with it, where you can allocate it to all very interesting questions. But I have to admit I am a sucker for like a where does a good old fashioned two in the morning? Where does money come from? Discussion? You know what I'm saying.

I've never been invited to any of your two am in the morning. Where does money come from? Discussion?

Like which came first? The money? You know? I love like I love philosophy of money. That's sort of like history of money. Yeah, all that stuff. It's a great topic.

There are a lot of social implications tied up with the idea of money, which I think you know, have been explored at various times, but they're always so interesting to me. Because I think even today, if you think about money, and if you think about the dollars specifically, you know, we're used to talking about like the dollar is doing this, the dollar is doing that. But there's more than one flavor of the dollar, right, So there's clearly cash at a simplistic level. So the stuff that we keep in our wallets or whatever. There are bank dollars, yeah, that are created by a bank and live in the bank and which you never tangibly see, but you can do a lot of stuff with If you have them, you.

Can convert them to dollar to cash dollars at a one to one ratio.

That's right.

They traded a one to one to the other dollar.

That's the important thing. But there are also things like euro dollar, which you and I will never see, being a non foreign depository institution.

And they are reserves held at the central Bank, which is arguably is its own thing. Right. There are also stable coins which are dollar also often aspire to trade a one to one ratio to the dollar, etc. What is the dollar is a you know, what's an interesting question. So one of the topics that comes up law is like the future of the dollar, et cetera. Right, we don't talk much about like, well, where did it come from in the beginning, and like what was Like, you know, if we're going to talk about the future of the dollar, don't we need to know how we got here and how the dollar was born and all that stuff. That seems like an important question to answer before we talk about the future.

Yes, and also just in terms of social and political economy terms, like who actually controls the dollar, right, because there's this idea that it belongs to the US Treasury and they control the supply and all of that. But as I just mentioned, there are all these flavors of dollars that kind of sit outside the US's direct control.

And so if you think about the dollar being you know, the both an exorbitant privilege of America, it's also in many respects of burden. Right.

Yeah, So they say, I mean, I don't know, it seems pretty good as a as a currency, but I've heard that and it is very interesting to think about, Like, you know, you know, there's this interesting I think it was I think it was Mark Karne when he was Bank of England governor. He gave a Jackson Whole speech talking about America's declining role as a share of global GDP and the dollars increasing role as the currency of trade, and this weird misingation, and you know, there's all this stuff where it's like the central Bank, the FED sets rates based on American conditions and so forth, but then that transmits globally because so many entities you use the dollar.

You know, we could go on and on.

This interest is just going to be a Forest Gump style list of all the different types of dollars. But no, I mean we should talk about all the different types of dollars, but also where the all came from and what all their different purposes actually are, and what the upsides are for each of them and the downsides. And we do, in fact have the perfect guest, Yes, someone who's been one of our colleagues at various places. We're going to be speaking with Brendan Greeley. He's the author of the new book The Almighty Dollar, five hundred Years of the World's Most Powerful Money, and you might have a question immediately about that five hundred years subtitle. He's also contributing editor of the Financial Times, and we're very

excited to have him on all thoughts. So Brendan welcome to the show.

Thank you. I've been waiting so long to be the perfect guest.

Oh did I say you were? I did?

I didn't was the perfect guest. I was waiting.

I was hoping, parenoid that I'm not going to say it, and people read into it like, oh, guest, no embarrassing, You are truly the perfect guest. Why didn't I jump in with that subtitle? So a lot of people are going to see five hundred years of the dollar, the world's most powerful currency and our most powerful mone, and they're going to go, what what do you mean by five hundred years?

So this book was a rabbit hole. An editor suggested I read a book about the history of the dollar, and as you know, as a journalist, when somebody asked you to do something, you just say, yeah, i'll figure that.

What's the deadline?

Oh yeah, I've got I've got a phone. I can call people. And I thought I would started in nineteen seventy one when we closed the gold window, and then I sort of started unraveling the sweater a little bit, pulling on the thread, and I got to nineteen thirteen with the chartering of the FED, and then you end up with a problem when you chase the history of the dollar back to seventeen eighty nine or seventeen seventy six, which is, there's this assumption when we talk about money of monetary sovereignty. This is just the ability. It's very poorly defined. It's super hand weighty by the way monetary sovereignty, but generally it's the ability to the country that a country has to control its own currency. So under that assumption,

we had political independence, political sovereignty in seventeen seventy six seventeen eighty nine. However you wanted to find it, we should have also had monetary sovereignty under the assumptions that we use about money. Unfortunately, we're stuck with this problem, which is that our currency is called the dollar. That is a name that's derived from the German and it referred to a Spanish coin that came from Bolivian silver or Mexican silver.

Really, I didn't know this.

So this is complicated, right. We did not have this moment of sovereignty. We did not have a new country. We did not call our currency the Washington. We called it the dollar, which means we're borrowing something else, we're basing our we are pegging our currency as Americans at the origin of the country, to an existing currency. You know, it's hard for Americans to sort of conceive of how insignificant the colonies were at the founding, and so we didn't have any domestic source of gold, we didn't have any domestic source of silver. We're taking a global currency that's circulating between the Andes and China and through Europe, and sometimes it washes up on the shores of the colonies.

We're so desperate to get it that we then peg our currency to this silver coin with a German name that comes from Spain's empire. That's really problematic if you believe in monetary sovereignty and if you believe that the country creates the denominator. So now you have a problem, or at least I had a problem, which is I had to explain what was this coin, why was it universal, why was it called the toller or the dollar, why was Spain in charge, and why were the colonies powerless to do anything about this coin? Then you end up with a different story. Alexander Hamilton called that coin the ancient dollar. It was already something that he knew existed, that he took for granted as two hundred and fifty

years old at the time. That's when I fell down the rabbit hole, and that's when I ended up literally at one point at the bottom of a Czech silver mine. Because what we think of as the dollar starts in fifteen twenty. And this ends up being a problem because all of the the way economists talk about money, there's this break between metal and paper, So it's very difficult to talk about this metal coin when we live in a paper and digital money world. Now I think there's a connection, and I think the moment of transition between that coin and American bank money is really important. The details matter. The coin circulated in America as currency until the eighteen fifties, the silver coin from the Spanish Empire,

and so to tell the story of the dollar, what I realized is you cannot tell the story of the country. This is not the story of the Treasury Department or the fed or of Alexander Hamilton, or of America. This is the story of the currency, which is only sometimes a part of.

Emeric I'm already rivetted by this. I already have a million questions. Just to back up a little bit or contextualize that. That was just last summer. We were at Princeton. You're getting your PhD there, and you invited us to be on a panel, and we actually turned it into a podcast episode where we talked to a few other academics and so forth. And I think the conference, that little mini conference, was about writing the biography of the Dollar, which you have. I guess you've done it. I hope so, but tell us a little bit about like what you've been up to. This is you're getting a PhD.

I like, it's so cool.

Like sometimes in my mind, I'm like, if I could have done something else, maybe it would have been go get a history PhD. And you actually did it.

I actually doing it. Yeah. So you know I got this offer to write the book about the Dollar as a journalist. I said yes. And then I kind of got into trouble because I started doing archival work and I didn't really feel like I knew how to do archival work, and I started reading a lot of secondary sources, and then I began to have ideas. That's a problem because when you are a person alone in an office behind your garage with a dog for years and you start to.

Have that kind of dog.

Oh, he's these are the important question.

He's an awful dog. We'll talk about it. He's famous on the internet. Really, yes, an internet mob made me get a dog because my daughter did something cute. She was begging for a dog. And then I woke up the next morning and I put it on Twitter. I made the mistake of putting this on Twitter seven years ago.

I woke up the next morning and JK.

Rown Ye, now you have a dog.

Oh my god.

Yeah. So the dog's name is JK Growling. So I'm in this room alone with JK Growling the dog sitting on the floor, and I begin to have ideas. The problem is, if you have ideas alone in a room, one of two things is true. You're onto something or you're insane. And I got worried that I didn't know what I was doing. And around the same time, I got invited by Seth Rockman, he's a historian of early America Brown to a conference about the history of money.

I literally did not know that there were historians who studied money, and I loved what they did. They were reading all the same things that I was reading. They were worried and they were curious about all the same things that I was curious about. They were dealing with the same questions. And I told a bunch of PhDs, this is amazing. I want to go get a PhD in the history of money. And they all said, no, do not do that. That's a terrible idea, as PhDs generally do. But I applied to the program at Princeton because Harold James is there's a legendary financial historian, and I love the way he works because he takes finance seriously.

Sometimes it's difficult to study the history of money because he does end up sounding like this two am dorum conversation that frustrates me. I actually don't think money is that hard to understand. It's just finance. And so Harold James takes the final of money seriously. And I was able to, you know, while I was taking classes there think about this book and also make myself feel a little more comfortable that the book is in fact, it rests on solid ground. The people that I found as secondary sources, they are known to other people, right, and I am this book is written within a tradition of thinking about money as credit and that. But also to your point, like, yeah, it's great. I love going back

and getting a peg. There was a moment early on where I was doing a project another grad student and they're all in their twenties and I make no sense to them because I was like forty seven when I started it, and I had four children and everything about me was a mystery. They had a pool going for a while and whether or not I was on Instagram.

But one of the graduate students said, can you believe you're doing homework? And I said, I can't believe I get to do homework. This is amazing. I've had jobs. Jobs are the worst.

Yeah, I'm sorry, I've gone down a rabbit hole and just looking at pictures of JK growling. But you're absolutely right. It went viral. There's like Fox News articles about it. Okay, A serious question. Now, we're not just going to talk about dogs, although I did learn from your book that there were in fact dog dollars. Dollars, yes, yes, so serious question though, Like why does it matter how we think about money? Is it the case that like if you if you think of money as like inevitably this like fiat currency that's issued by a state, that you're always going to think that the state is about to do something terrible with it, or like something nefarious, versus if you think about it as a social construct, it

implies something different about the world and human behavior. Why does this matter?

I get really frustrated with a philosophy of money, and I get really frustrated with a phrase fiat or the idea of Fiat money, because Fiat, to me, is a veil. It just says it's magic. The state says, poof, that's money, and they wave their hands, they say Fiat, and then you have something in that's money. And how it worked doesn't really matter. I think it really matters how we manufacture money. Banks manufacture our money. The FED manufactures a different kind of money. I love that list you came up with of all the dollars. I keep trying to list all the dollars I can come up with. I have not completed the list yet.

I was going to ask you how long you mentioned this in the book, Like, how long is your list?

I think once, man, I'm going to embarrass myself. I try to recreate it, but I got up to like fifteen different kinds of dollars. Wow, you know you've got money market dollars now you've got stable coins euro dollars. Of course, you know, if you get a check from your employer, you don't have a bank account. You got to go to a check casher all of a sudden, that's a different kind of dollar because it doesn't clear it par because you've got to do a disc You've got to take a discount at the check casher. Okay, but my frustration with this idea of fiat is that it robs us of the power of analysis. We can understand money, We really can. For almost all of our money sits, as you guys already pointed out, on the

ledger of a commercial bank. It has value for two reasons. One, the assets on the other side of that ledger have value as well, and we can look at them. We can tell you know, are those good assets? Are those bad assets? And the reason we know what the assets are is because America has this two hundred and fifty year tradition of bank failure, and after every systemic bank failure, we introduced new regulations, new way of reporting what's on the bank ledgers. The idea of a control or the currency followed the Panic of eighteen thirty seven. We slowly figured out how to make sure that banks don't blow up the FDICE after the Panic of nineteen thirty two.

You know, I really honestly believe that of the great things that America has produced, it's you know, the great American songbook, country music, barbecue, and a vast pool of federally insured dollars. We had several look at jo Joe's on board.

We need to put the federally insured dollars an FDIC.

I need an FDIC, country music barbecue, federally insured.

Good good name for a song.

Actually, the problem with saying that it's FIAT means that we failed to understand how important all these regulations are. Before federally insured Federal deposit insurance in the nineteen twenties, the or about two hundred bank failures a year. After that, there are usually no bank failures a year, And if there are bank failures, we're so surprised by them that it becomes a thing in the financial media that we got to talk about how did this happen? That used to be normal banks used to just fail. And the reason they don't fail, and the reason your dollars don't fail is because we have slowly figured out what the best practices are for making sure that banks don't blow up.

If we wave our hands and say doesn't matter, it's fiat, probably comes from the FED, doesn't really matter, then we lose the ability to say our dollars have meaning because there's assets on the other side of that balance sheet. We can look at those assets. And if we start to deregulate, we run into trouble because all of a sudden we run the risk that our dollars might not have meaning anymore.

I want to get into how we can establish the velt why a dollar has value in the first place, and the balance sheet liabilities of the bank and so forth. Before we get into that, let's just do a little bit more history. What were the conditions such that in seventeen ninety one or whatever, Alexander Hamilton was talking about something called an ancient dollar that was sort of something Spanish and German at the same time. Give us, like, give us those two hundred and fifty years prior to the founding of America or what however many years such that a global dollar had it was already long emerging.

Right, Let's see if I could do this in a way that I don't run out of time. Okay, the dollar wasn't supposed to be money. Okay, there is a story. It is told in histories of the dollar that there was account in Bohemia's name was Stefan Schlick. He had a lot of silver. Because he had a lot of silver, his money became global money. None of that is true.

I mean, it's all true, but that's not how any of it worked. So Stefan Schlick was a count. The problem is he didn't actually hold any of the territory that he claimed in Bohemia. He sort of held it in entirety with all of his cousins and all of his brothers. Somebody discovered silver in this valley in Bohemia.

The problem with silver in the ground is that you need a lot of money and a lot of expertise. It's a lot of capital, even in the fifteen twenties to mine silver. The very complex machines already getting silver out of the ground, draining water out of the mines. And so he realized that just having the silver didn't mean anything. So first thing he did was he said, this is mine, breathtaking lee illegal. Then he went over the border to Saxony and he got Saxon mining investors and Saxon miners, and they started pulling silver out of the ground. So this is already outside of a long established process of what you do with silver and how it becomes money. In the rest of Europe and in the rest of Bohemia, if you found silver, first of all,

you had to pay a tax to the king. After that it had to go to a centralized mint. That mint had an understanding that they had to create money for everybody, so not just big coins for merchants, but the whole range of big and little coins that worked for wholesale purchases and retail purchases. This is really crucial.

I think this distinction still exists today, but it definitely existed in early modern Europe, which is that Carlo chippola Is, an Italian historian, wrote this beautiful book where he drew a distinction between big money and the little money. Big money are large, high value coins and therefore international trade and merchants and the wealthy. Little money is for low value trade, and it's for purchases of meat and bread and labor.

So like little copper coins.

Yeah, little copper coins. Okay, the challenge of big money and little money. I think we still have it today with banks, is that you're going to love this shoe. The brisage on small coins is higher. What that means is to make a coin is an industrial process. You've got to put one die on a stump, and then the metal goes in the middle, and then another die on top of it, and then you whack the whole thing with a hammer. I've seen it done. It's very loud.

It's an industrial process. It takes one whack of the hammer to make every coin, whether it's a big coin or a little coin, which means that per unit of value, the labor costs, the brisage, the production costs are much higher for little coins. So this is a consistent problem throughout the history of coinage. Constant complaints that mints, which are actually private companies, prefer to make the big coins because the profit is the margins are better on the big coins, they're smaller on the small coins.

This is partly why the US phased out the penny recently.

Right, yes, absolutely. What you have then in this Bohemian valley is Saxon investors coming south, Saxon miners coming south. Bohemian count who doesn't really have title, and what they do is they start getting silver out of the ground. All of the silver goes into a single form, which is what the Saxon investors would have expected to get a large silver dividend coin. This was not local money, This was not money for a valley in Bohevia. This was paying back silver investors.

It went a dividend in silver form.

Dividend in silver form what they expected. So this is an early form of a joint stock company. Friedrich Engels actually believed that this was the origin of the joint stock company. These silver mines are's just really expensive to get money out of the ground, So Saxon investors would put together in this form, and what they got out of this was a big silver coin. It wasn't money, it was a dividend. It was a stamped pure form of silver. So you have this exception where because the mine is illegal, what's coming out of it is big high value silver coins. No pennies, no little money, nothing, just big money. So all of this work, by the way, I should credit Peter Vorrel as a trek historian who sort of pulled all of this out of the archives.

But what you then end up with is this exceptional circumstance where it's not that there was a lot of silver in the valley. It was a big silver mine, but you know it wasn't wildly out of proportion with other silver mines in Europe. It'said it was only producing big coins, and it was so hell bent on producing just the big dividend coins for Saxon silver investors that the miners revolted. Actually, so they struck twice and then they finally sacked the town because and their chief complaint was that they weren't getting paid in the same quality money that was leaving for Saxony. You have this big money, little money problem, right, so that eventually to make the miners happy, they have to solve this and sort of

make sure that they're minting little pennies as well. Anyway, this coin then becomes a standard for trade in the Baltic and you start to see copies of the coin. Right. This is in a sovereign story, you create your own money to your own standards. What actually happened is you get little city states and kingdoms all over the Baltic in northern Germany creating copies of copies of copies of this original coin from Yaham's tall All these coins come to be referred to as Yacham's taller coins from Yoachham's tall and.

Then that exactly roll off the tongue, does.

It doesn't, so that gets shortened to taller. And then in Dutch they also starts, yes, yes, from some.

Times I'm watching, Joe's head is exploding in real time.

Listen, we should mint wisen taller. See what happens. Yeah, yeah, tall is German for valley, right, so then you get taller all over northern Europe. So this then becomes an English dollar. The first there's a mention of dollar in Shakespeare in the Tempest, and again in the Scottish play they talk about dollars. It's not in the domestic British currency system of pounds, shilling pence. To them, they know exactly what it is, the big silver coin that comes from the low countries in exchange for Britain wool and British cloth. So already this story of sovereignty and this story of the fungibility of money starts to break apart.

You've got this coin that's copied again and again. Okay, so the Spanish have silver in what is now Bolivia and Mexico. They figure out this unbelievable brutal regime. The meta to using forced labor to actually get this silver out of the ground. They've got the mercury from somewhere else, to the amalgamation process that actually then turns the silver it turns or into silver. The thing is Charles the fifth of Castile, Holy Roman Emperor, Lord of all he surveys, has to follow the pattern of silver production that already exists in northern Germany. He's selling his silver into the same silver markets in Antwerp as everybody else, which means that he does not have the sovereign right or the sovereign ability to create his own silver. So they sort

of hack an existing coin in the Spanish currency system. The real if you multiply it by eight, there's a happy accident, which is that it's almost exactly the same weight and size as the Yachams taller. So Spain starts.

Bits, Yes, that's exactly why.

Yeah, so pieces of eight you know from pirate movies, right' that's what that was the Pirate movies. Piece of eight is named because the Yakham's taller with the dominant form of silver and Spain had had to copy it. So all you have this global flow of silver. Already, the Spanish in the late fifteen seventies develop a way to sent galleons straight from the Mexican coast to Manila. So you've got this flow of silver that's going straight to China.

It's going through Seville and into Europe. It's also making its way to China. To China's is sort of absorbing all the silver in the world. Eventually it all takes the form of this dollar. In English, it's known as the dollar. Unambiguous, very clear what it is. So the colonies are also stuck on the edge of this flow, and what you get is actually weird currency evaluations among the colonies. So to get to the Alexander Hamilton point, I think I'm gonna wrap this up. I think I maybe did it in seven minutes. You you end up with the colonies have got their own forms of shilling based book credits. They're separate currencies from what the British have.

It's not sterling, it's Pennsylvania shillings or Maryland shillings. What starts to happen is they start to devalue their own shillings so to attract silver, sometimes literally from pirates of the Caribbean into their own ports, because that makes the if the silver then can buy more in that port, which means the port can attract more silver. This is a problem that the British Empire eventually recognizes. But this coin, you see it in newspapers, referred to as dollars. People are awful rewards and one ads for dollars. Colonies are fighting each other with currency devaluations to try and a track the dollar onto their shores. So this is by far the dominant form of money, not just in the colonies but globally.

That was great, That was fantastic. If I could fast forward a few decades at least six No, no, no, not that far. I asked this question partly out of personal interest, because, as Joe knows, for some reason, my dad keeps giving me parts of his collection of silver coins.

Oh yeah, that's what dads do.

Yeah, I know. Well, it's the most bad thing ever. And every birthday I'm like, thank you for my silver coin, but it's lost some of the surprise value. But anyway, how did we get from the dollars slash dollars to the silver dollar that became I guess dominant in I want to say the eighteen hundreds.

It's just a copy we didn't get to. It's the same thing. So you have copies of copies of copies. Anybody who has silver or can get some through trade is turning them into something that looks like a dollar and is immediately recognized as a dollar. So when you look at colonial legislation, you've got catalogs of different kinds of dollars. You've got a civil dollar, which meant it was minted a very high quality in Seville. You've got what they called a ricks dollar, which is produced by the Holy Roman Empire, exact same thing. They were waited the same way. And then it goes all the way down to as you mentioned, dog dollars. So there's this Dutch dollar, dog dollars, dog dollars. So there's this Dutch

dollar with a recumbent lion on the obverse. The recumbent lion, once it gets worn down, looks like a dog begging for.

Scraps, sort of sitting up in second.

Yeah, exactly, so the dog dollar. When Benjamin Franklin arrived in Philadelphia, wet and an exhausted as a teenager, he had in his pocket a few shillings and a dog dollar. So there were different types of dollars, but it was always it was always very clear what a dollar was. It was so in the in the eighteenth century and even into the nineteenth century. So these silver dollars again, I'm gonna say this again and again, I'm sort of very skeptical of the idea of monetary sovereignty. I think it you cannot assume that it happens. It has to be fought for over time. It's always fraught and you're gonna lose it if you don't pay attention to it. Well, but just to finish that thought, that the silver dollar

that comes from Mexico is current in America as money until the eighteen fifties.

Okay, this is sort of what I was getting at with the question. But like, how did we get to the point where the silver dollars that we recognized today in the collections that our parents bequeathed to us. I think just your parents, okay, No, not yours.

Okay, my dad gives me life lessons, but not silver.

Oh my dad doesn't give me many of those actually, Okay, but like the silver, dollars become a more dominant form of currency around the world in the eighteen hundreds. Yes, what are the conditions that allow those dollars to start to replace previous or other existing forms of dollars.

One thing that happens is you get high quality mints in Mexico City and in put A Sea. This is the mountain where the silver is in what is now Bolivia, and so early on the Spanish Empire produced what they called cobs. These are just little divots of silver stamped and weighed, and they circulated as cobs. You could get them in the colonies. There's fraud at the mint, there's a problem with the weight of the silver, and so this is in the man It's in the early eighteenth century.

The Spanish figure this out and they make sure that colonial mints are as reliable, are producing coins that are as reliable as the mint at Seville. So now all of a sudden, every piece of silver that leaves those mines is in the form of this dollar. This is when you start to see dollars show up in hordes in China. So cobbs had been showing up in China for the you know, the Chinese again again, are absorbing all the silver in the world, no matter where it's coming from, it is headed for China because it's buying porcelain and silk. This is China. They weren't interested in any products other than silver that came from Europe.

Are you saying that China has a history of not buying things from around the world except accumulating financial assets. Well, the world biased things from China. I'm doing that, Trump, I'm hearing this for the first time.

I'm saying that while writing this book, I anticipated this conversation, and I am so happy you took the bait.

All right, keep gug.

So now to Tracy's question, what you start to see in China is, you know, not just cobs showing up in hordes. These are you know, every once in a while during construction, some will find a box of coins that tells us a little bit about what people used at the time. So when you date the coins to the eighteenth century, you actually start to see these really nice, high quality, round milled coin. And this is when so the word you want refers to this coin, yen, refers to this coin, the Malaysian ring. It actually means jagged, which refers to the milling on the edge of this coin.

This coin becomes a global standard. The Hong Kong dollar is not derived from the American dollar. It's derived from this very specifically shaped and trustworthy piece of silver in the eighteenth century that began to circulate not just intercontinentally but domestically within China. It starts to move north from the trading ports in the south. So it's the quality of the MIT's answer your questions, sort of, Spain empires are hard to manage. It's prett difficult to like figure out how to get silver out of a hole on the ground on the other side of an ocean and then turn it into a high quality coin. Over time they figure this out, and as they figure this out, you've got one empire, one silver, one coin. It's going everywhere.

Super interesting. You say a dollar has some value because there are assets on the other side of the bank that have value. But like, so, first of all, I agree with your premise that this idea that there is some like bright line difference between like fiat versus back money or something that I like that that's sort of nonsense, sort of I've come around. I used to believe it. Now, I think I agree with you. To my mind. If someone asks me why does the dollar have value, I would say it's because we have a central bank that promises this dollar can be redeemed for a basket of goods and services that will only get two percent more expensive every year. That there is this sort of hard assets backing the US dollar, and you can go look

what it does, everything that's in the CPI or PCE basket, and we promise that we're going to keep the ratio so that they only get two percent more expensive every year. We're not going to violate that promise over time. Isn't it that ability to actually extract some share of the of the national output of America? That is why someone would want to hold dollars, And like if the US like could no longer produce anything productive, the central bank couldn't uphold that two percent and claim and then the dollar value.

Yeah, absolutely, okay, But the mechanics in the detail matter.

Okay.

So Argentina also is blessed with natural resources, and yet the details of how it produces money are not working out as well as they are in the United States. So I'm not a big fan of FIAT. As I've said, well, I'm not a big fan of the idea of full faith and credit because that again just says it doesn't really matter how it works, eventually the country will back it. Well, how it works is really important, and I think it's important because it allows us to then talk about the mechanics of how the FED actually works in the story that we all got in our textbooks. I will not profess to know when you guys went to college, but I went back and looked at my textbook and we had mank you at Julane University in nineteen ninety five.

It hasn't changed from recent versions of the Nanky textbook. And the history of money is just kind of glossed over. It's there used to be coins, and then the paper represented the coins. And then now we've got a central bank and it's Fiat, and the central bank produces M zero. It's really that simple. And then he says, this drives me crazy. Now money is just a social convention? Oh is it greg a social convention? Are we all of a sudden talking about social morase in this economics textbook?

Like the bond market is a social convention? And yet we analyze it with some you know, with some rigor your mortgage is a social convention and somehow when the subject comes to money, we're back in a dorm room with Joe at two o'clock in the morning, going.

Come a wrong.

Like what I'm saying is like I believe that we might agree, we might agree.

I'm saying like, I think it's sort of like, why does a dollar have a value because of the United States, there's a lot of productivity of goods and services, and I can redeem them at a fairly stable price from this year or the next. I'll hold dollars for ten years, and that basket of goods will get more expensive over ten years. Yeah, but roughly I'll be able to redeem it again at some point for real physical thing.

I think we one hundred percent agree. Okay, great, But the details of that system, I think we should we should not be scared of those details.

Yeah, okay.

And I think you also run into a problem. You know, I would say this because I'm training as a historian now, But you run it in a problem when you think of the FED as the origin and the protector of dollars, which is that we had dollars in the nineteenth century before we had a FED and they kind of worked, they blew up every once in a while. It's better to have a central bank. But it's not as if dollars were completely valueless. And I think historically we run into a problem because we're not precise about what backing is.

I think we think now that backing is just gold or silver, and that's not the way they thought about it at the time. There is backing, which are the assets that sit on the other side of this ledger, and then there's redemption, which is can you redeem it for gold and silver. So when we stopped redeeming financial dollars for gold and silver, the backing didn't go away.

All of these assets, which to your point are productive assets in the real economy, they still existed. We just got better at managing the system so that we no longer needed the edge case of occasional redemption for gold and silver. And so what you see over the course of the nineteenth century history of American banks is slowly, over time getting better at managing what assets are on the bank's balance sheet. How do we make sure the bank has what we says it has. How do we make sure the bank has the right mix of safe assets and risky assets. That took a while to figure out.

You know, America had a unique banking system. There were dollars in shillings produced by colonial governments and then state governments right after the revolution that were white clean by the constitution. Constitution says states may not issue bills of credit that expressly took money out of the job of the states. I don't think they had to, by the way.

You know, we tend to assume that this was a good thing, that they were disaster, that they were inflationary, some were, some weren't consistently in the colonial period, and then again after the Revolutionary War, the only truly inflationary money was Rhde Island. RhoD Island seems to be the reason why we can't have nice things. Oh man, you guys are gonna get emails. But we didn't. We didn't have to end that experiment. It kind of worked. Colonies came up with best practices to make sure why financially, that colonial pay money had value. What we did was with a constitution, we took we wiped all that clean, and we handed it to the banks. I was with a group of historians. We're having dinner, and we ended

up talking about Hamilton the play as one does, as one does, and I said, I was frustrated because I don't think that we should take it for granted that Alexander Hamilton's financial system was the one that had to happen, or that it was necessarily the best one for everyone. And one of the historians said, You're literally the only person I know who finds that problematic because of the financial plan.

Just going back to the full like a non crank hard money guy.

Oh sorry, no, sorry, I don't want.

A right, I'm a credit money guy, all right, right, Well, okay, like I don't I mean I okay, no.

I didn't mean I Tracy sorted asking question, and I threw that I want to come back to that.

I there because you and I have the same history of like encountering m MT at the same time and wrestling with it and trying to figure out like does it make sense? Does it not make sense? And this where I am right now is at the end of that long process of wrest with that.

We'll get to that, just going back to the full faith and credit part of the conversation and the idea of the dollar as both you know, a source of privilege and at times a potential burden on the US or at least something that can be mismanaged in various ways. Can I ask something that's going on right now? So just bringing it up to twenty twenty six, talk to us about, like I guess, the impositions that the dollars role in the global financial system actually put on the central bank such that we see headlines where it's like, you know, the Federal Reserve has to provide dollar of liquidity for allies.

So once you let go of the assumption of monetary sovereignty, all of a sudden you understand what your dollars are. It's very hard to explain to people what your dollars are. But once you say, look, anybody can create a dollar. This is the old time and Minsky quote, like anybody can make money, and except Chount is getting it accepted. Well.

It turns out that over the course of the late twentieth century, starting quietly in the fifties and then it becomes this system. By the seventies, banks in Europe were marking up their own ledgers with dollars. They were just manufacturing dollars the same way American banks do it. You guys know this story. My point is, once you recognize that the banks just do it on their own and the country's trying to catch up, you end up with this system. I think far more important than aircraft carriers are swap lines to the dollar. I don't think that the dollar is a product of packs Americana. I think it is the product of If you have dollars abroad on your balance sheet and you're not an American bank,

you're not subject to American regulation, you're not subject to American charters. We've got no control over you whatsoever. However, in a panic, you guys know this. I just want to make the point clear. The Federal Reserve will step in and swap dollars with your central banks, so your central bank can swap them temporarily for you. That liquidity is, you know, sitting on your balance sheet, and you can make your own dollars hole again with with dollar with American dollars from the Federal Reserve. That to me doesn't say the Fed is the origin of dollars. That to me says anybody can create a dollar, and if you're important enough to the FED. They'll say, you know what, it is a dollar. We're going to make sure that

that doesn't blow up. And they always say it for domestic reasons. You know, it affects Americans when the when the global system collapses. But yeah, I think the wop lines are the most important diplomacy we do. And you can see that at Jackson Hole, Like every Jackson Hole, you know that picture they take where the chair of the FED and then whichever central banker happens to be there, they go for this walk and the photographers know that it's coming and they're like like yeah, yes, So I think of that as the Badget pageant, righty, Like they're there to prove that they all know each other, the system works, it's stable, and in the next panic, the dollars are coming.

I should just say we're recording this on April twenty second. I don't know what's going to happen with various swap lines, but I did see another come out today from the Council on Foreign Relations saying that they have both updated and upgraded their swap lines tracker, So take that as you will.

Wow, I love that map.

Okay, but here's like, okay, I guess what I'm trying to understand is, like, all right, monetary sovereignty, kind of ambiguous term. Dollars they precede the FED. I get all that, sure, convinced me, et cetera. But when those other banks or countries are in a panic, they've come to our FED from our dollars. Right, So what is it about the dollars that we create? What is it about American made dollars that seem to be special? If you know, I would take.

Your point from earlier. It is an incredibly productive economy. Still, Okay, We've got lots of real things in this economy. I also think we've got pretty good bank regulation. Okay, I could ask for better, but we've got pretty decent. We've got stable banks. Nobody else has the pool of federally insured dollars that we have. Europe has got okay banking regulation, but they do not share a common deposit insurance. We have that. So I think that the combination of yeah, a responsible FED, reasonable financial regulation, and a massive productive economy means that yes, of course the dollars we create here are going to have more meaning I don't want.

This is the key.

So this is I think the key thing, which is that what's happening on the most sort of abstract level when there's a swap or something like that, or a currency swap, is that there is a transaction happening from foreign mallion dollars to American maid dollars. And the reason that American maid dollars are pretty good, yeah, or maybe a little bit better.

Than other dollars is because they're what they sit on, this regulatory regime, which which was still there despite constant attempts to ship it away. I also think that it's impossible to compare any other asset in the world to a treasury. Okay, almost everything that's on the asset side of the Fed's balance sheet is a treasury. And you know, the American economy is productive, and the American federal government is going to continue to have the ability to take in taxes of in bank dollars, which then give treasuries.

Meaning that's just like, there's nothing else comparable to the volume of treasuries, and there's almost nothing else comparable to the security of treasuries. I don't think the FED is irrelevant. I don't think America is irrelevant. What I'm pointing out is one of the reasons that the dollar is global is because Americans, over the course of the sixties and seventies said, go ahead, make your own dollars abroad. We're not going to stop you. They sort of allowed this system to bloom all over the world, and then and only then was the Fed made responsible for those dollars.

I'm trying to invert the production of money. The economists started at the FED. It starts everywhere. And I think that central banks. We have central banks because we need them, because banks are so important. We need our own big bank to do a job for us. The original goal that the charter of the Bank of England, its original purpose was to carry on the war against France I was supposed to do. So central bank is just a big bank that does what we need it to do.

And so in this case, the Federal Reserve is doing a thing that we think is diplomatically important.

Do you think is there anything to the part of the MMT story in your view, in which taxes helped create the demand for a currency and thus give it some element of money in US, here's where that falls.

Apart from me, we have so many forms of dollars that we have to be specific about what we're actually taxing and what we're actually spending, and what the United States is actually spending out of the Treasury General Account is bank dollars. Those dollars were created in commercial banks, they were taxed in, or they were they were bought in.

I can hear mmts right now, just the heads exploding everywhere. But I really believe this. When you look at the accounting, it's very clear. The Treasury, the Treasury General Account of the FED, you know, takes in money through taxes, and it takes in money when it sells treasuries, and then it spends it back out of the economy. So it's specifically bank dollars that have meaning. So yeah, it has meaning that you have to pay your American taxes and American bank dollars. But those bank dollars don't just have meaning because they're taxing in bank dollars. They have meaning for all the other reasons that we've talked about, all the bank regulations, the Federal Deposit insurance, country music, all

of it, like are what give the dollar value? So I think this idea that you're just and this, by the way, so people who believe in this theory of money. Really like to point to colonial moneyes. So you know, all most of the colonies, eventually all of them had their own forms of paper money, and they did in fact print them up, and they did in fact tax them back out. However, they also all had a sinking fund, which was basically it was a promise to take in silver and gold in tolls in port duties at their various ports, and then from time to time sink those dollars buy them back with silver and gold. There was a coin sitting on the edge of this. This was true in New York. This is true New Jersey. That's

true Defence Vania, this is true in Maryland. And so to just say, they printed these dollars up, and they made sure they were counterfeitable, and they wrote on the back tis death to Counterfeit came from the Benjamin Franklin schellings. If I ever get a tattoo, that's the tattoo, and then tax them back in. You know, there's a lot of work being done. And the dominant theory of that among historians is it was given money, it was given value because you had to tax it back in. The problem is you had in order to believe that you have to ignore the infrastructure that they put in place of the sinking fund to make that money have value, and you have to assume they didn't know what they were doing. Then my frustration with economic history but often

assumes that people in the past didn't know what they were doing with.

Money, right, they sort of stumbled into it.

They knew way more than we know. Like I've spent a lot of time reading the Maryland Gazette from the eighteenth century. They were talking about discount rates, they were talking about bills of exchange on London. They were talking about you would regularly get the value of stock in the Bank of England, Like it was like reading an analyst.

Often they were really sophisticated. They really understood how money work.

How fun was it to write this book, because you know, we sort of touched on it earlier, but like you got to go to all these archives, you got to go in I think you said, a Czechoslovakian cave, or so I think I did.

I'm going to tell you how much fun it was, and then I'm going to hope that my wife never hears this, because I think I complained constantly over the writing of this book. I love being in archives and I love being in libraries. And one thing that I learned how to do that I'm going to do for the rest of my career is read ledgers's history. And they often get ignored. You know, people write like to read letters, but people kept their financial documents, and I think that you actually have less of a reliable narrator problem when you're looking at financial records because they had to keep them accurately. You can lie in a letter in a way that you cannot lie on a ledger, and so you can read ledgers from the nineteenth century.

I have this sort of full history of the career of a man who moved from New Jersey in the eighteen thirties to New Orleans and he sold carriages, and sort of we know how money worked because he sold, and then we sort of know how we I think he had advanced notice of the Panic of eighteen thirty seven, because he seems to have cashed in. You've pulled a lot of cash out right before the panic, like he knew what was going on, and then you know, and then you can see how he decided that he wanted to be a sugar planner and how he made that financial trend transition, and then exactly how money worked for him.

Once he was on a sugar plantation, no cash at all, everything was on paper. He sold sugar to his factor. You can read all these documents in New Orleans. The factor kept run account with him. If you wanted to buy something in New Orleans, he would write a letter of the factor, and the factor would send something back up and just subtract it from his account. He didn't have any physical cash, and when he wanted to do something, actually in Saint James, Paris, where he was, he would write promisory notes. Those promisory notes would circle. We've got all the signats on the back. So for me, what I now love to do weirdly is read old letters because like watching a movie, it's like running the tape

back of exactly what somebody did sometimes hour by hour by hour during their day. When you get a sense of their commercial life, you can also get a sense of their life and you can see these actions they're taking point by point that I mean, and there are amazing stories. I chased a story about this guy. He had a promissory note go bad, so he had to take it to New Orleans notary, and then the notary had to go find the guy who had written the promissory note. It turns out he wasn't at his house anymore because his wife had kicked him out and he was living in a stable, and they tracked him down at the stables. This is all in the notarial records while they're trying to like and then it turns out

that he eventually stole a horse and left New.

Orleans and then he had to go on a massive road trip and track him down. Right.

No, unfortunately, that then that then I'd have a movie script.

Unfortunately, that would be amazing.

Is this what you learn in school, like when you study to be a historian? No? But do you learn like the techniques of archival research? Because I wouldn't know the first thing of like how do you even like find I mean these days I would just probably google or tragic bet what what archival library might have this information?

Maybe I'd start my search there or anything like that. But when they when they talk in the academics setting about training to be a historian, uh, these like sort of like the the craft of the trade that you learn, Like how do you learn how to I thought that i'd identify the library and get to you know, nowhere in the library to look and which stacks to look into.

So that's a really important question. And the answer is not what you think it is. Okay, they do not teach you how to do that. I just assume you read a lot of secondary literature, you read a lot of theory, you do a lot of historiography, so you know, you'll take a course as a graduate student and you'll sort of you'll look at all the different ways that people have seen the same period. The archives. It's a little weird. It's like, you know, the cliche of some societies where you know, when a child is ready to be an adult, they send them out into the woods.

They got to live on their own and they just got to figure it out. Good luck to you kid. Try to kill a wolf and then come home. That's a little bit what it's like in the archives. I kept on asking like how do I do this? And they're like, go figure it out, really, and so you do kind of figure it out. I have ways of going into the archives now and recording things. I'm much better at it than I used to be. There are a couple of things I know, like I now always bring food in the bag to the archive because an archive is often sort of not near a good source of food, so you have to have some sort of protein bar in your bag.

Wait. But one thing I know about the archives, they don't let you eat.

But you have to figure it out on your own, you know. I looked a lot of bank records in New Orleans, and the records of the Citizens Bank in New Orleans were literally underwater during Katrina Jones Hall at Chilean University flooded, and so they did this amazing thing where very quickly they recovered them, they got them out of the water, and they irradiated them to kill anything.

But I've talked to other people who've looked in those those archives, and you get sick flipping through them. You feel gross after two days of doing that because I think there's bad stuff in those pages, and the pages are stuck together. So you know, the archive itself is this living thing, you know, which and also there are lots of theories about what gets kept and what doesn't.

When you're in an archive, you have this idea that like this is a record of what happened. Nope, it's the record of what that's exactly right, and so often, you know, I looked at I sort of constructed sort of a brief story about an enslaved woman in Saint James Parrish based on some promisory notes that sent her around the parish, from from one plantation to another. You can sort of you have to. Nobody kept those records on purpose so that we could get her story. But it's possible to read. They call it, you know, reading between the archives, so you have to do a lot of that work. I really think that I almost don't want to say it out loud. I think that ledgers are an incredibly underused resource. They give us a picture.

I was in London last month and I found the complete financial records of John Locke. It wasn't this big archival discovery. They're there, they're in the catalog, but nobody looks at them. I can tell you exactly how he paid for everything. And for a man who didn't believe that credit was a good form of money, he sure seemed to use a lot of credit.

All right.

Brendan Greeley, thank you so much for coming on a blots. The book is The Almighty Dollar five hundred Years of the world's most powerful money.

Thank you, Joe.

That was a lot of fun. It was such a good obviously, and the book is really really interesting and it's full of that like archival detail that really comes through. One thing that stood out for me from that conversation again, it's sort of going back to that point of like the dollar is not fully under the US government control, right, and there are times when there are other entities out there who can create their own dollars, as Brendan was describing, at which point, like it does become an obligation on the United States to support those dollars, and it can become another political tool, but it's still like a constraint in many ways.

Okay, so you know I have because we've done several episodes, including our series on the history of euro dollars, like the idea that foreign banks can manufacture dollars that I sort of can understand, Yeah, but it actually really deepens my understanding of it further to get the idea that well, actually, long before there was a United States, there was the decentralized manufacturing of dollars, right, which I hadn't really thought about that or even like really known about that. Aspect before, but that dollars, this thing that had decentralized manufacturing for a long time. I guess the one thing that like I had sort of understood, you know, so William Jennings Bryan gave the famous Cross of gold Speed in which

he argued that we should have buy metal. I think it was a bi medallist or that we should have silver. And I remember there being like, you know, my my understanding of historical monetary is not that strong, but I knew this thing that was like independent mints could like mint silver dollars at times because there was a lot of silver, more more inflationary, the farmers wanted it or something like that. So I guess I sort did know that the production, the literal production of dollars had always been this sort of decentralized thing, but I had not quite appreciated like how far that went bad.

Yeah, the urge to make dollars is uh is inescapably human. I think everyone wants to make their own money in some form or another, whether it's like just a simple barter system or like a ledger of credit that you keep trying.

It's just so interesting that there was this thing called dollars. You know, I guess it's like a standard, right, Like It's like it was almost like the dollar was a sort of common standard that anyone could, you know, It's like anyone could maybe a SID that fits in a CD player.

A good user interface and a network effect and a.

Good Yeah, it could be the one day like US global hegemony has like long gone and people to talk about America is just like this thing in the history books. There used to be a great power and blah blah blah. Yeah, and everyone's still using yeah, pretty good totally currency.

Okay, all right, shall we leave it there.

Let's leave it there.

Okay. This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

And I'm Joe Wisenthal. You can follow me at the Stalwart. Follow our guest Brendan Greeley. He's at b H Greeley. Follow our producers Carmen Rodriguez at Carmen Arman, dash Old Bennet at Dashbot, cal Brooks at kel Brooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lives content, go to bloomber dot com slash od Lots with the daily newsletter and all of our episodes, and you can chat about all these topics twenty four seven in our discord discord dot gg slash odlines.

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Brendan Greeley on the Real 500-Year History of the Dollar

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