The Dollar Is Older Than America

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It is my pleasure to welcome to the podcast a contributing editor to the Financial Times, PhD candidate in financial history at Princeton, I wanna say.

That's correct.

And former Fed reporter for Bloomberg Businessweek, The Economist, and author of the brand new book, The Almighty Dollar: 500 Years of the World's Most Powerful Money, Brendan Greeley. Welcome, Brendan.

Thank you so much for having me on. I have to warn you that this is not my Roman paraphernalia behind me. I'm at the offices of the American Numismatic Society, and for some reason they have helmets and shields here in their library.

I just thought you were like the 80% of us that thought about the Roman Empire Roman Empire on a daily basis.

You thought I was a Roman Empire dad?

Just like the SNL skit says.

Yeah.

Well, congratulations on this book. I feel like you know more about the dollar than anyone else on Earth.

Man, I hope that's not true.

I feel like, I mean, you must be one of the authorities, right? Like, who else has written this book? Nobody, you.

People have written dollar histories before. None of them go back before the founding of the United States. And very few of them go back before the Fed. And that's actually one of the challenges of writing about the dollar or writing about money in general is that we tend to do it institutionally. So we think of the Fed and the Treasury as the institutions that create the dollar. So then they become political histories and institutional histories. And I think a lot of the history of money more broadly is actually not about institutions. It's about people making up money in their own markets with their own hands, trying to figure out how do we just make sure that we pay each other, and they'll hack together various forms of credit and tokens and precious metals, and we can talk about those, but the history of how normal people use money is actually much harder to write because it's not necessarily always captured in the laws. Um, it's not even necessarily always captured in banks. A lot of it's just private notes that people scribbled to each other and private ledgers that they kept at bars. Uh, so, um, I think that the way in which this history is different is that I tried really hard to make sure that we captured both the high finance of the dollar and the low finance of the dollar, just how normal people paid each other.

Yeah, it's one thing I appreciated. It reminds me a little bit of— there's like A People's History of the United States, uh, um, by Zinn that I read.

Yeah, Howard Zinn.

Yeah, and, uh, that's what your book reminded me of, um, somewhat.

Oh, interesting.

You kind of took it back to the Wayback Machine, um, said, hey, look, the, the dollar started before the United States of America, which would be very counterintuitive to many.

Yeah, of course, of course.

Yeah, but he—

but the clue's right there in the name. I mean, there's this assumption, uh, when you and I and any, anybody listening, uh, taking micro or macro in college, uh, we learned a, a history of money that sits on a couple of assumptions. One of those assumptions is monetary sovereignty. If there's a new country, that new country has the right to create its own new money. When you get to 1776, you have kind of a problem with America because we claimed political sovereignty, but, uh, our, our money is, is it's a Spanish coin that's made with Mexican and Bolivian silver that has a German name. There's a much richer history behind why we use that coin, why it was shaped the way it was, why it had a German name, why the Spanish Empire adopted it. We go into that, but I think the biggest challenge for me of the book is trying to say we're not always in charge of our own money. When we say the United States creates the dollar, which Americans? Who in America? What kinds of dollars? Those details really matter. And at the founding of America, We're subject to a foreign coin that we don't control from silver that we don't mine. And we, like everybody else in the world, is just trying to hack together a monetary system that kind of works with that silver coin. I really— like, I'm really trying to get people to resist the urge to say money is fiat. It's created by the government. We write laws. Those laws say this is what's money. And then we all just kind of agree to use that as money. That doesn't seem to be how it works. It seems to be lots and lots and lots of private acts of credit and commodity that together create a system that works.

Yeah, one of the most poignant illustrations in the book of many was Amanda Dollars, where there's a person at a hardware store who essentially is like, yeah, you know, you can owe me for next time if I know who you are. It was very kind of wholesome Americana vibe, you know. Yeah, that you kind of like imagine happens, that you hope would happen, that you, you know, you hope this is how businesses work.

I met Amanda, um, It was after a hurricane in Florida, and I was just trying to figure out how cash worked after a hurricane. I was just working as a reporter, and I went down and I talked to the Ace Hardware store owner down there, and he said, "You should really talk to Amanda." And she basically said the power was out after the hurricane. Her house hadn't been damaged, so she just went down to the store and said, "What can we do?" She was a manager there. And the power was out, so people couldn't use their credit cards, and they were reluctant to part with cash. The state of Florida tells you hold on to cash in the event of a hurricane so you can just use use it to pay people when all these systems are down. People wanted to hold on to their cash in case they needed it for food, something slightly more important than what they could get at the hardware store. So she stationed runners to go into the hardware store with flashlights to get whatever it is that people would need, and then she sat at the till and she took some dollars. But then what she started to notice was people were reluctant— they couldn't use their credit cards, they didn't want to use their, their physical Federal Reserve notes— so she started basically taking book credits. Short-term loans, basically saying, "I know you, I've seen you in here before, it's an emergency, I know you're good for it, make sure you come back." At the time, that seemed to me kind of exotic and cute almost. As I started working as a financial historian and reading a lot more about how people used to make money work for them and how ledgers used to work and looking at some of these ledgers from colonial America, what I realized is that's a very normal practice. So what Amanda was doing was just taking book credit on the account of the store. People used to have to do that. Money was much scarcer, physical money, and so we, a lot of stores used ledgers and engaged in small acts of credit every day to make sure that people were liquid enough to buy what they needed. You and I remember this from our childhood. Like, you could go to the store, I could go to the store in my hometown and buy something on my parents' account. A lot of that's been replaced now with ATM cards and credit cards. It's a little rarer now that a store has, keeps a ledger for customers, but this practice, which we can date back to— we can find examples of ledgers in 12th century Europe— is still within living memory in the United States. And so what Amanda was doing was not anything exotic, but actually something very traditional.

Yeah, it feels wholesome because there is familiarity and trust and community all baked in. And she only did it, frankly, with people that she recognized as a regular and was like, oh, I can trust you're going to come back. And it's not like a total stranger. I'm just going to start extending credit because that be a problem. I mean, you know, especially at the hardware store. Some of the most fascinating stories in the book to me were around, um, when things were much more fragile and delicate, um, I suppose. Like, you had these, like, state banks and state— and, like, different currencies, and it's like a real mess, kind of, um, kind of pre-FDIC. Yeah, you know, I mean, that one of the stories that really hit me was of this town in Iowa that started its own currency, and then you managed to unearth old scripts from some business. You were like, "What's the oldest business here?" Then they managed to find them. I was like, "Kudos to you." Thank you.

It helps to be a reporter as a historian. The tools you learn as a reporter to just walk in and start talking to somebody, those are really useful. It turns out people have archives all over of their own that they're willing to share with you if you just ask.

All right. So I just want to paint this picture because, you know, I think this is— and I've always had something of a fascination with the Great Depression. So a bank in Iowa fails. There is no bank insurance at that time. And so the people who— I shouldn't laugh, it must have been terrible. Yeah, they lose the majority of the money that they have saved. I think maybe they get half of it back over a 4-year period as the bank figures out what loans are actually going to get repaid. So if anyone listening to this can imagine their bank being like, well, you know, half your money's gone and then maybe you'll get some of it back or all your money's gone and maybe you'll get some of it back and then you're like, what the hell? And it was that kind of situation in most of the country at the time, pre-FDIC, which is, you know, the Federal Deposit Insurance Corporation that insures up to $250,000, which covers most Americans' money at this point because, you know, most people don't have millions of dollars. And if you do, you probably have multiple banks. So it's fairly secure at this point. But imagine actually having to worry. It's like, oh crap, my bank disappears. And then while that bank is disappearing and there's the shortage, one of these— and it was actually an enterprising crew. There was this whole group that was like, you know what, we're going to create our own currency here in Des Moines. I want to say it was like it was in Hayward in Iowa.

It was like the The way you're painting it is like a Mickey Rooney movie where we're like, "Hey kids, we're gonna put on our own currency. It's just gonna work." Yeah, the hayward.

There it is, the hayward.

Hayward. Let me, first of all, I have to say you are a fast and close reader. I gave you this book last week. So thank you for that. But let me step back just a second to understand how the system worked. Under the Constitution, the states could not print their own bills of credit. So before the Revolution, all the colonies had been in the habit of printing their own money, and it was on the balance sheet of the actual colony. It was a system that kind of worked. The finances behind it are interesting, but it's irrelevant now because the Constitution said states cannot print their own money. And so states turned around and said, okay, we're gonna charter banks and have the banks do it. So in America, very early on, there was an experiment in exclusively bank money. We let banks print their own banknotes and we let banks mark up their own deposits. So money in America is— since the Constitution has been basically, when a bank makes a loan, it's creating brand new money. Um, when it makes a loan in banknotes, it can hand out the notes, or it can just mark up your deposits. So that system, as you pointed out, is pretty fragile. Um, it's not fragile anymore, but it's not fragile anymore because, uh, it broke, uh, pretty regularly in the 19th and early 20th centuries. 1819, there's a bank failure. People don't really understand the bank failure. This is what's crazy. In 1819, we've got all these quotes from people saying, "The harvest has been great. Why aren't people buying anything?" We had to invent bank crises and then we had to invent figuring out how to solve them. So 1819, 1837, 1857, 1873, 1897, 1907, 1932, there's this run of pretty close together bank crises where bank assets fail, so their loans fail, which means the bank notes they're issuing don't have any meaning. So all of a sudden, you're holding a bunch of banknotes and their value drops in half. Pretty constant, pretty consistent problem. So our response to that as Americans is to slowly figure out how to do all the things now we take for granted as bank regulation. So we had to invent bank reporting. You can now download an Excel spreadsheet of all the call reports that banks are phoning in. Everything that they have on their balance sheets is now— we can see it. Bank regulators, you know, poke around in bank balance sheet. We have a Comptroller of the Currency in America who's responsible for all the the National Bank charters. We have a Federal Reserve in America, which is responsible for making sure that, you know, banks with good assets get cash in a crisis. All of these things had to be invented. They were— every single one of them was invented in response to a crisis. And so when you get to 1932, you get bank failures all over America because of things that are just beyond the bank's control. So some of these banks had written bad loans, but a lot of them were just in agricultural areas, and the Depression came earlier to those areas because International prices for commodities like wheat, corn, and hogs, and the kinds of things that Americans grow in the middle of the country, dropped, which meant that the farmers who sold those things, you know, the assets that were on the balance sheets of those banks in those communities suddenly were not very good, which meant their dollars weren't very good. In the 1920s, I've looked at banking magazines and regular consumer magazines in the 1920s. When banks advertised, they advertised their capital.

Banks—

look how much money I have, you're gonna be safe here.

Absolutely. They'd say reserves of X, right? We don't do that anymore. To be a consumer of banking in the 1920s meant you had to do credit analysis. You had to understand and believe that the bank's assets had value. We don't do that anymore. The reason we don't do that is, as you point out, this is incredibly important. In 1932, in the depths of this panic, or 1933, the United States passes national deposit insurance. So no matter where you are in America, it's a federal insurance program. Nobody else in the world has this. The eurozone doesn't have this. The euro— the countries of the eurozone still insure their own deposits. All of this is a framework for, as you point out, the citizens of this community in Haywarden, their first bank had failed in 1927, very early on. They were used to being frustrated with waking up one day, hearing there was a bank run, going to the bank, literally finding the doors locked, and a state receiver from Iowa shows up and types up a long report and says, "I'm sorry, your bank is insolvent. We're going to work through the assets, see what we can sell." As you pointed out, we might get back half. This is the framework. You know, you had a lot of experiments in America during the Depression on how— what do you do to make up for the lack of money? So all this money disappears, you cannot get at your deposits. So economic theory says, classic economic theory says, it's fine, prices will adjust. But they don't, and that's the problem. People don't like to watch their prices go down. It seems like deflation is a really good idea, but historically people have always kicked and screamed and fought against it. They don't like to do it, and so instead they make up their local experiments. What to me has been fascinating over the process of this book is to see just how often cities have had to step into the breach and make their own money. So New Orleans, after the Panic of 1837, all the banknotes disappear out of the economy. The city produces its own banknotes. The state can't do it because the Constitution says it can't. The city steps in. Hayward in Iowa, there's this incredibly enterprising Dutch immigrant named Charles Zoolstra who's been saying, look, we should print our own money because the city has the right to. The bank fails. Other banks begin to fail because of the Depression. And you start to actually get a movement in the town saying, well, this crazy guy from the Netherlands actually may have a point. We're going to need to print our own money. So they actually come up with a really sophisticated financial device to make sure the money has value. These aren't just tickets printed up.

What's so fun is that everyone takes it. I think you pay your power bill with it. Yeah. I mean, as soon as that made me think, it's like, OK, if everyone can pay their power bill, then You're going to be all right.

I have a rule. You know, I've been involved as a columnist for the FT in all these discussions over the last 10 years of crypto. What is money, really? My answer is, if you can pay your child's orthodontist in it, it's money.

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That's one test. Power Bill would be another. But this— continue. But this, I want to try and dig into—

to—

yeah, but go ahead. So cities are starting to issue, and then they all actually go to Iowa to be like, hey, look what these guys are doing.

Yeah, absolutely. But the finances are really important. Oh my God, they're so important that my voice just cracked because I want to get it right, right? The finances are important because because we're taught that money is fiat now. They just issue tokens into the economy and then tax them back out. It doesn't seem to be how it works. And in Haywarden, they understood that it couldn't just be straight fiat. And so what they did was, at the same time as they started paying out these bills, they paid them in the beginning just to have men pave a street in the city. They were just making work for them. But to spend the note, you had to buy a 3-cent stamp. By the time you've— and then you had to affix it to the back. So you had to buy— 38 stamps, 32 stamps. By the time you've bought all— no, it's 36 stamps. By the time you've bought all of them, you have enough money to buy back the bill as the city. So everybody's actually putting money into this fund and that fund eventually buys back the bills. It works is the crazy thing. So Irving Fisher is this famous economist. He actually visits. He takes a look at it. He says for the local paper, "Look, I think this is a good system." The local paper, the AP then picks up that quote from the local paper because Everything that Irving Fisher says is news. And then all of a sudden, you've got delegations from all over the country showing up in Hawarden, Iowa, this tiny town in the northwestern corner of Iowa, to figure out how they did this. And Charles Zulstra is a mercenary guy. He's actually selling for hard cash, for Federal Reserve notes, his plans, his notes, all of the things that he put together in order to make this plan work. There are very specific instructions. So he's actually an entrepreneur for creating money, and towns as far away Alabama copied this system and used Zollstra dollars in their own towns.

Yes. So this is one thing I want to dig into. So I had a couple of selfish motivations for having you on.

Listen, you're going to spell my name right, and this is a good conversation so far. So let's do it.

Yeah, no, no. So some friends of mine kicked up a local currency in Baltimore called B-notes, and it was taken by hundreds of small businesses. They're beautiful, too. They're very, very well designed. There was a monetary reserve behind them that was in the low six figures. Let's call it like a couple hundred thousand dollars. Um, and then it wound down a number of years ago, but the founder is still there and they're trying to kick it back up. Uh, and I'm trying to be helpful because I actually believe that these local currencies could be incredibly important in an era where AI is going to suck more and more of the value out of a lot of, uh, enterprises and people's labor. Uh, and so what you needed to do is you need to stimulate more means of exchange, uh, between neighbors, between small business owners, uh, and one way to do so, in my opinion, is like a localized currency. Yeah. And I want to also make mention of something that's like a variant of this idea called time banking, um, which is when, uh, people do favors for each other and then document that time they spent and earn a time dollar. So if I shovel your driveway, I get a time dollar, and then I can give it to someone else to pick me up at the airport, and then they can give to someone else. So it becomes a means of exchange. So these two ideas around a localized currency and time banking are things that I think that we would need a whole lot more of in the Amazonification, AI-ification era of the economy when More and more of the work is going to be done by robots and machines and the cloud. And so, one reason why I wanted to have you on and I'm digging into some of these localized currencies is because I think we need more of them.

Man, that is exciting. I have a lot of thoughts there. So, I grew up and still live today in Annapolis, Maryland, just around the corner. I love the idea of local currencies. It's a constant theme in America. Cloud Millon is a Swiss historian who's written about local currencies, and he says there are two reasons to do them, these local script currencies. One is when banks fail in a crisis. We haven't seen that in a while because we have the FDIC. And, you know, even when you get something like Silicon Valley Bank, the Fed, the Treasury, and the FDIC step in together and even guarantee the uninsured deposits. So, you know, the idea that your deposits might disappear at a bank, we're pretty good in America at making sure that doesn't happen. The other reason he said though, to do a local currency is to keep money local. And so in Haywarden, they still do this to this day. They still have this habit of scrip, and the local Chamber of Commerce produces what they call Christmas scrip every year, which is using a plan pretty similar to the old one. People will come in and they will— local businesses will agree to accept what ends up being 85 cents on the dollar through this plan to use local currency because it keeps all the holiday spend local. Local. And so the local hospital will give out these script dollars as a benefit over Christmas. Here are the challenges that I see for this system, and I really want to talk to your friends who are doing this in Baltimore because I, I'm excited about this. Um, monetary habits are very hard to create and very hard to break. And so, um, at the time of this Hay-Warden script, people still used physical dollars. You were still used to carrying around a pile of dollars to pay for something.

I remember, man, I'm old enough to remember when it's like cash was, uh, yeah. Yeah, as am I. I use remote most transactions.

Yeah, as am I. I was an exchange student in 1993 in Germany, and I was sent abroad with traveler's checks, because the idea that you might need to get money somewhere else was so exotic. We had this whole model just to get money somewhere else. The challenge now is we've gotten rid of this ledger system. We used to— again, your childhood, my childhood, there was cash, but there was also physical where you could just keep an account with your family at a grocery store or the shop. We are now all used to putting down cards for something. And so the challenge that I see is I don't think that we can print dollars anymore, not because it's financially infeasible. There are a lot of ways to make sure that these dollars, script dollars, have real financial meaning. And I'm very curious about the system that they're envisioning. I think it's got to be a card card. I think you have to pull a card out of your pocket and put it in a point of sale in order to make a system like this work. Otherwise, you're asking storekeepers to use a different system than the one they've all adopted. When you look at small stores, for example, exactly the places where you want to keep those dollars local, they've all got a card reader and an iPad. They barely have tills anymore.

You're saying even the Christmas script in Haywarden today uses a card?

It's been turned into checks. So you write a check. And even that, we're now even there, we're moving beyond checks. I think a successful system has to be frictionless at the point of purchase.

It's a lot to ask of shopkeepers, it's true, and cashiers and the rest of it. Interestingly, I think 85% is kind of the magic number because I've seen other, um, communities. Um, so for example, there are schools that, that do this where they give, uh, the parents money that, um, they can use at various stores. Um, and I think you get 85 cents on the dollar I— what it is, is you get 100 cents per dollar, but then the school gets 85 cents a dollar. Essentially, the retail establishment is willing to take a 15% hit to make sure that they got the, um, the customers. Um, and so I, I've seen that in communities. Keeping the money local is a big deal, trying to stimulate, um, involvement in, uh, in not just local businesses, though that's the primary utility. Like, you know, some of the things we're shooting for or the people in Baltimore are shooting for, um, are to also have money flowing through people and families' hands, uh, you know, community organizations, um, um, etc. I think your insight around a card is very smart though, uh, you know, like the B-notes are lovely. I mean, I, I will have to try and have you handle some of them, um, that they had Frederick Douglass on like one denomination. It's all really, really well done.. But I think you're right that a card would feel more behaviorally like, you know, like familiar to people. It might even make it seem more real in this day and age.

Yeah. I think also the other challenge to this is, first of all, I love this idea. I think these challenges can be overcome. I think you have to involve local banks. One of the challenges in Maryland is I looked recently because I'm curious about this sort of stuff. There are only 3 state-chartered banks in Maryland. We just don't have a huge system of state banks. You know, most of them are nationally chartered with, with, with local branches. But you can do a lot with a state bank charter. One challenge of making consumer money work so well in America, with some exceptions which we'll get into, but for any of us who have a bank account, money just kind of works. We don't have to think about it. Yeah, people in the past, you know, often financial history I've found can be kind of condescending. They'll look back and they'll say, "Well, why'd they do it this dumb way? It must have been because they hadn't figured out how to do it the right way yet." One of the things that's become clear to me looking at old ledgers, reading old laws, reading old newspapers is that people in the past knew less about physics than we do, but they knew way more about money because they had to make sure it had a financial basis because they had to understand the financial basis. So I spent a lot of time reading the Maryland Gazette from the 1760s, which is where one of the chapters of this book is set. And man, they had to look at discounting bills, bills of exchange with London. They were getting regular stock quotes on the value of the Bank of England, because a lot of financial devices were tied to the value of the Bank of England. Shopkeepers were taking discounts. This was really sophisticated stuff that they were doing that we've forgotten about today. And I think I really dislike the word fiat. And I'm going to say this again and again. And I hope I don't say it too much today. But when we say money is fiat, We absolve ourselves of the responsibility of understanding how it works, and understanding how money works is a tool, because then you can actually start to think structurally, "Okay, if we understand how our US dollars are actually manufactured by banks, and how various federal regulators make sure that they have meaning, and how they're not backed by magic, but they're backed by the assets on the balance sheets of banks, then we can start to do creative things like, if we want to keep money local in Baltimore, what is the financial basis for that? How do we work with banks to create a special class of dollar that stays local?" stays at home.

I, I know, I, I like your, um, uh, I, I like your direction here, your thought pattern, because it's true. Um, we, we probably evolved in a particular direction where we think that, you know, that there's like this dollar, U.S. government sovereign Fed, and like blah blah blah blah blah, and, uh, and it wasn't like this before. Um, and there are a lot of opportunities. Yeah, like as you can tell, like I'm really into some of the opportunities around currency innovation. One thing I also want to pose to you is that right now, there's a bit of a freakout around the national debt that we're up to. I think it's $39 trillion in debt. And folks are looking around being like, oh, man, what are we going to do? And here are some of the thoughts that have occurred to me, and your book touches on a lot of them. So, I mean, your book makes it seem like, look, at this point, imagining that the US sovereign is here and the dollar is subject to it at this point is probably the wrong direction at this point. It's sort of like a dollar world and we're all just living in it.

I think that's true. I think the dollar's in charge. That's a good way of putting it. In fact, I'm going to steal that.

Oh, please do. Yeah, yeah.

No, but this was a challenge that I had, which is the dollar is so powerful that it's very difficult not to turn the dollar into a character in this book, right? Of course, the dollar doesn't— you can't— you can't— it doesn't have agency. It's inert. It's something that we all create together. And yet it seems to have a lot of power. And the, the qualities of the dollar seem to drag it abroad and to drag us abroad chasing it down to try and control it in a way that, for me, has always made it seem like the dollar has its own power. It is the dollar's world. We are just living in it trying to figure out how we can contain it. Absolutely.

Oh wait, so check out. Um, let's imagine I'm another country. Okay. Uh, like, I, I mean, the— what I'm joking about is like, let's say I was Xi Jinping, like the head of China. They look like, curses, I'm living in this dollar-denominated world, it stinks. Um, and then they, they try and get people to use their currency, the, the renminbi. Um, there was a minute, I remember when I was younger, where the— to the extent there were alternate currencies out there in the universe, it was probably the yen or the British pound for, for a minute. Now, now, like, no one gives a crap about those currencies for the most part. Um, and then China has risen up, um, and then, you know, there, there were— they were— they're trying to have, um, their currency be the means of exchange, as far as I can tell, to no great success. I mean, I, like, I, I don't, I don't know if that perception is, uh, is right or wrong. But it does seem like through thick or thin, through management or mismanagement, the dollar just keeps on ticking.

Yeah, it does. Well, first of all, look, I don't think China wants the job. I think that there are certain aspects of settlements in yuan that they want to pursue. But this idea that they would be the hegemonic currency, it's kind of a pain. There's a lot that you have to do to maintain hegemony, and it's not necessarily good for everybody domestically in your own country. And it comes with a a lot of challenges. One of the things that happens is if you are the dominant currency, your currency becomes much more valuable, and that's a problem. It's a problem for China's export-driven model. It would be a problem for Germany's export-driven model if the euro became the dominant currency. Uh, we made that choice. I don't want to say that currency is the only challenge with manufacturing in the United States, but it's one of them. And when we decided in the '80s and then again in the '90s that we were going to pursue a high-debt, strong-dollar strategy, that comes at a cost. And one of those costs is the dollar is way more valuable than actual physical trade with America would suggest. And that's because it's valuable as an invoicing currency all over the world. People still wanna hold their assets in dollars. Banks abroad create their own dollars to make all these dollar invoices for products work. That means that anything that's an actual dollar in America becomes more valuable. There's just greater demand that there would be for American dollars because they've been monetized. Which means it is harder to export. And also, things become financialized in America. There's a reason why houses are expensive. Again, this is not the only problem. I do not want to present like a monocausal explanation for what's wrong in America. It is not just the dollar. However, the rise in asset prices, among them houses, is one of the things that is a consequence of a more expensive dollar. People want dollar-denominated assets.

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And it's a really good book.

Yeah, it's just sort of grown and grown. And I was like, oh yeah, this is a problem. And I spent a number of years running an organization that trained young entrepreneurs to head out to Detroit, Cleveland, New Orleans, Baltimore, to help build businesses that I thought was like the opposite of financialization is building, like starting companies that need workers and stuff like that. And so like, that make things, the number of you. Yeah, yeah, building. I wrote a book called Smart People Should Build Things, which is kind of like to me the antidote to financialization. Now obviously my shit ended up being a drop in the bucket relative to the wave of financialization despite my best efforts. But what you just said, it's like, hey, why are houses so expensive? It's because the financialization economy is a fascinating thought because our housing prices being so high is one of the primary things immiserating a lot of people, like a lot of folks who are trying to start families or whatnot.

Yeah. It's not the only thing, but it is one of the things, right? Permitting reform, a bunch of things have to happen, but the desire for dollar-denominated assets is part of it.

Yeah. And there's another experience I had relatively recently that also made me think about this dollar dominance is I went to Japan for the first time in 20-some-odd years with my family a year and a half ago, and it felt like the entire country was on sale. I was like, what is going on here? I can buy whatever I want and everything feels like it's 30% off. The same thing was true when I was in Canada this year where I was also like, wow, everything seems like it's on sale. It just made me feel like the dollar was so strong relative to the local currencies that it just seemed off.

Yeah. In the '50s and '60s, we had theories about how currencies worked. And those theories basically said a currency rises or drops in value relative to its usefulness to buy the products of that country. So, the theory predicted that as Germany began to sell more, the mark would have risen. It didn't. It took a long time for people to figure out why that practice was not behaving as theory would suggest. Even now, we're wrestling with this. It's called the Fleming-Mundell currency model. Gita Gopinath, who was the chief economist at the IMF, and now she's back at Harvard, among others, has been working on what we call a dominant currency paradigm. That's not actually how it works. People prefer to invoice and borrow and trade in a single currency because it means that you don't have to hedge your currency exposure. It means you can just price in one currency, that price is sticky. You can renegotiate this year the way you did last year without having to deal with some exogenous problem that has made your currency somehow suddenly more or less expensive. Note, though, that the theory is the dominant currency, not the dominant country. And I think we run into a problem in America of thinking of the value of a dollar as a referendum on America. Um, and I don't think that's what the value of the dollar rests on. Um, there are a lot of institutional things that make the dollar valuable. Um, I think of sort of like a three-legged stool, uh, that, that, that, that makes the dollar so valuable internationally. One is we talked about the value of the FDIC. I, I can't overemphasize it enough. Nobody else has this vast pool of insured deposits. Um, the financialization is part of that. So Americans over the last 30, 40 years have gotten really good We're really good at creating brand new dollar-denominated assets. If anyone else in the world, if they want to raise money, they come to America. We're really good at it. So, even if you're spending that money somewhere else, and your assets are somewhere else, you come to the capital markets in New York to raise that money in dollars, because we know how to do it. And the liquidity is there. People are there waiting to spend. The other one that's really important, though, is the Fed swap lines. So, the Federal Reserve offers sort of as a service to other central banks, they will do to short-term dollar-denominated loans to other central banks. Those other central— not all central banks, but other central banks for sort of responsible countries. Those central banks can then, in a crisis, lend those dollars short-term in turn to their own commercial banks to rescue out the dollar— sorry, to bail out the dollars they have on their own balance sheets. These swap lines are incredibly important. And so there's a political economist named Eric Helliner who's written a book called The Status Quo Crisis. It's a short book. I recommend that anybody read it, which basically He says, "Every time there's a financial crisis, we get together and we think, 'Ah, how do we restructure the IMF?' Or, 'What do we do with the G20 to make sure this doesn't happen again?'" And the answer is the Fed just bails everybody out with these swap lines. That's what happens. And then damned if it didn't happen again in the middle of writing this book in 2020 during the beginning of COVID I'm at the Fed covering this, and sure enough, once again, the Fed runs out these swap lines and it protects everybody. Nobody else offers a service anything like this. Their yuan-denominated swap lines, there's an understanding among countries that might take those swap lines that they come with a lot of political strings attached. The Fed doesn't tend to attach strings to its swap lines. So these things are real financial structures that keep the dollar valuable. And even if you're super annoyed at America, and even if you think America's gone to hell, it's very difficult to compete with a vast vast pool of insured dollars and Federal Reserve swap lines. Uh, and so I think we have to look at those— find the financial basis for the value of the dollar and forget about, I don't know, something vague and unmeasurable about the quality of American institutions.

Yeah, or the deficit of the U.S. government in a given year, or the trade deficit, like how much we're exporting versus importing. Um, you know, the— this discussion and your book actually have shifted my thinking, which was my goal, by the way. Oh, um, talking to you and reading this book. Um, it— and it goes back to the joke we just told. It's like, it's the dollar's world, we're all just living in it. Like, you'd think what you just said is not the case. You'd think that the strength of the dollar would be dependent upon American, uh, sound governance, like, you know, financial practices, you know, like us having our shit together, in essence. Um, and really, the dollar has a life of its own independent of that internationally, because even for other countries, they're like, you know what, this is convenient. Like, like, I actually really like this, you know. I even like having, uh, like my, my own currency, uh, you know, be a little weaker so I can sell some electric cars or whatever.

Yeah, absolutely. And you know, and historically lots of countries, uh, lots of kingdoms had two currencies, one for consumer purchases and one for wholesale purchases. This isn't novel, it's just we're basically the only country in history that hasn't had it. Um, that's not quite true, But, it's not at all that exotic historically to have— the Italian city-states maintained a slightly inflationary domestic silver coinage, and then an absolutely rigid, sound international gold coinage. And they fluctuated against each other. This is in Shakespeare. They're calling out the exchange rate, silver to gold, from the rialto in The Merchant of Venice. Other countries, as you point out, have the luxury of making international purchases in dollars, and yet keeping their domestic economy managed in a way that allows them to export, uh, or manage inflation, or do whatever their domestic foreign monetary policy goals are. Uniquely in America, we don't have that luxury. So we've got the global currency, which is super nice if you're the kind of person who goes to Europe for the summer, but it's kind of a challenge if you're trying to be a domestic manufacturer or buy a house. Tyler Reddick here from 23XI Racing and Bubba Wallace. You know what's the worst part of a race? A rain delay. Sitting around waiting for the track to dry is dull. But instead of waiting, we hang out with Chumba Casino. Social casino slots, bingo, solitaire, plenty of fun to keep us entertained. So why let a rain delay slow you down? Play now at chumbacasino.com. Let's chumba! Sponsored by Chumba Casino.

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Okay.

So people who know me know that, um, I think the answer is to put more dollars in people's hands, which, you know, I, for some reason, I think that would help. Um, you know, like, I, I imagine all of these families and communities that I met, um, along the way and thinking, oh, if they had a bit more money in their hands, I think that, um, things would probably be working a little bit better for them, both locally and, uh, institutionally. Um, though I, I am someone also who thinks that if communities had their own currencies, that would be better too. Um, because, uh, you know, I mean, it— I'm not angry if someone gets money and then ends up spending it with Amazon and the gang, um, but even better if they spend it at Amanda's Hardware Store in Key Biscayne, Florida, or whatever, whatever the town was, the local Ace Hardware.

Yeah.

Brendan, congratulations on this book and this achievement. Uh, how, how has How has the virtual book tour, the media book tour— you and I met in a TV green room, so I know you're definitely doing your fair share of press appearances. How has the journey been?

It's been great. I've been doing a bunch of podcasts. Most of them are about finance and macroeconomics. I love this opportunity because we seem to be talking about this in a way that's designed for normal people to listen to. I very much wrote the book book with a lot of actual human characters in it.

Yeah, you did a great job.

Thank you. As a way to try and explain, you know, how finance works for normal people. You know, it's— my sounding board is my wife, who is a physician and knows nothing about finance, except she's much better at household finance than I am. But I wrote this book for her and often would have her take a look at chapters to make sure that, like, somebody who's just curious could read it. So I'm trying to figure like how do I take this and then reach out to audiences like yours to just say, look, we— it is possible for all of us to understand how our money works. When you went to college and they said it's fiat and that didn't really make sense, but it didn't matter because it felt like magic. It was wrong. There's a reason why it felt like magic. There's a reason why it didn't make sense. We're capable of actually understanding how money works. You know, you've been talking a lot about UBI recently. I'm not sure whether I think that's a good or a bad idea. I'm on the fence about it. Not to, not to take that question up. Specifically, but I think there's a lot of things that we can do short of UBI that we know how to do now. Um, you know, uh, we let banks make our money in America and in most industrialized economies. Now, one challenge of that is if you're not in the banking system, you don't have access to our system. And lots of people are shut out of the banking system. You know, it's very hard for other people to understand that in America we still have check cashing places.

I want my dollars too. No, I'm just kidding. Um, yeah, no, there are check cashing In some dark places still, it's true.

Everybody should have access to a bank, and we don't force our— other countries force their banks to make low deposit accounts with low fees available and low transfer costs. We don't do that, and I feel like that's low-hanging fruit that somehow policy-wise falls in a hole. The Fed doesn't really pay attention to it. Treasury doesn't really pay attention to it. Congress sees it as kind of do-gooder work.

No, dude, we know it's way too expensive to be poor in this country. In this country, and check cashing is one example of it, but there are a lot of others. I mean, credit card balances would be another. It's like, I never pay that shit, but it's like—

Yeah, absolutely, and the Fed doesn't, so the Fed doesn't really think about, I actually pulled this up in case it came up. So the Fed actually is chartered by Congress. Congress can tell the Fed what to do. So Congress actually charged the Fed in an update of the law in 1978, the Fed's job— this is its charter— shall maintain long-run growth of the monetary and credit aggregates commensurate with the economy's long-run potential to increase production, right? They say that before they get into maximum employment and stable prices. What that means is the Fed's actual job is to make sure that all the different kinds of loans that we have, all the different credit aggregates— credit cards, car loans— that they sort of work in a way that makes our economy more productive. And, you know, everybody has a weird little dream. My weird little dream is to sort sort of whisper in the ears of senators, Republicans and Democrats, and say, hold the Fed's feet to the fire on that. What is a productive loan? What are you doing about credit card rates? If you need help from Congress, why aren't you asking? You know, why aren't you carrying out your job?

I was very eager to hear your dream, Brendan.

Um, oh man, you're like, hey, make the Fed actually like live up to its, uh, yeah, we don't have to change its charter, live up to the Wow.

I mean, my dreams are around giving everyone money, around localized currencies springing up, but yours is good too.

Your dreams are bolder than mine. I'm listening very carefully. I'm going to try and dream big. I love the idea of local currency. I want to follow up on that. I think it's doable. And I think we should understand money well enough to dream that we can keep money at home.

Yes. Yang Bucks on the way. Greeley Dollars. The almighty dollar, 500 years of the world's most powerful money. And man, is it even more powerful than I thought. Brendan Greeley, congratulations. Is there a place that people can go to follow you and your work?

Yeah, absolutely. I'm on Twitter @bhgreely, G-R-E-E-L-E-Y. Same on Bluesky. And if you Google me, it's not hard to find my email address at Princeton.

Yes. And it really is a very edifying book. So, congratulations on this. Thank you so much. And I recommend it to anyone who— his interest has been piqued by anything in this conversation. Brendan Greeley, thank you so much for joining us.

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