BOB GARFIELD: This is On The Media, I'm Bob Garfield. Yes, as Ren Weschler says, this money thing is an endless perplex or maybe as Matthew McConaughey maintains in the Wolf of Wall Street, it is merely an illusion.
MATTHEW MCCONAUGHEY AS MARK HANNA: Fugayzi, fugazi. It's a whazy. It's a woozie. It's fairy dust. it doesn't exist. It's never landed. It is no matter. It's not on the elemental chart. It's not fucking real.
BILL MAURER: The very first things that we see that we could call money like, really are sets of transactional records that emerge in the ancient Near East in Mesopotamia.
BOB GARFIELD: Bill Maurer is a cultural anthropologist and socio legal scholar at the University of California Irvine.
BILL MAURER: All of a sudden we have this kind of new thing, people, a lot of people living in a place, altogether needing some kind of system of coordination so that they can all continue to live together in a sort of settled community with a population size that's getting to the point where I can't keep track of who everyone is anymore. And we start to see centralized systems to help people keep track of what they owe to whom.
BOB GARFIELD: Wait, what? He's describing Legers a system of recording obligations and their payment. That's not what they taught us in school. We all learned that money was simply an advancement on the earlier barter system. Chicken for grain for ax blades and so on. Everybody knows that.
MALE CORRESPONDENT: In primitive days living with simple and each family produced whatever it needed. The first kind of business was barter. A good stonecutter, for instance, might make a few extra tools and simply trade them for furs and other things he wanted. It was easy. There was no need for money.
BOB GARFIELD: More from that delicious 1947 educational film we heard earlier.
FILM NARRATOR: Life today is too complex. People are too dependent upon each other. Jobs are too highly specialized for us to do business by barter. And that's why we depend on money as a quick and easy medium of exchange.
BOB GARFIELD: Only problem says Maurer, no matter what we learned in school, the anthropological record offers no evidence of simple barter, anywhere in history.
BILL MAURER: Yeah so, the barter story is an origin story for money that has a very long history. Aristotle actually used that story to try to understand himself where money came from and what the kind of good and bad functions of money could be. And in the 19th century as economics was becoming professionalized, economists picked up this barter origin story for money and kind of set it forth into the world. The thing is that, we just don't see that situation ever happening. If you go to New Guinea village in the Highlands and see people exchanging shells for pigs you might think 'a ha, there it is.'
MALE CORRESPONDENT: This is for instance a yettak, a plaited string decorated with cowries and other precious objects which was used by the Dani people in New Guinea to determine and to pay for the exact price of a pig. [END CLIP]
BILL MAURER: That's barter. But what you're really seeing is part of a much more complex series of relationships that people are engaged in that generally have to do with some pretty serious social concerns. Concerns over birth, over marriage, over death, over the continuation of a lineage or a tribe where, the pig in this case, isn't just any old pig being exchanged. And I always think of you know Charlotte's Web in this context.
ZUCKERMAN’S FAMOUS PIG SONG: Some terrific, radiant, humble pig. Yeah some pig. [END CLIP]
BILL MAURER: Some pig. It's a special pig that indicates a relationship between families. It's not just a commodity that's value can be set by the price mechanism the way that the barter story assumes.
BOB GARFIELD: So how did this barter mythology become so nearly universal. Why is this news to me?
BILL MAURER: Very often origin stories are serving contemporary interests. So if we want to believe that the market as it exists today and that money as it exists today is natural and normal inevitable then something like the barter origin story helps us justify its continued existence, helps us say well look you know this is a rational response to the problem of the double coincidence of wants, which is what economists call that problem when you know 'I've got fish and you've got apples and you don't want my fish and I don't want your apples.' So it's great to justify current conditions. But when you start kind of cracking it open and start sort of peeling back the layers and realizing that that's not really how it happened and that how it happened was you know actually a lot more interesting and a lot more complicated and involved things like recordkeeping, accounting, systems of measure, states and early state control and shaping of markets and so forth. Well then you're in a whole other realm.
BOB GARFIELD:The real story is told in Mesopotamian tablets and other artifacts for record keeping dating from the rise of agriculture and settled communities in the ancient Near East. Phenomena that demanded the invention of bookkeeping.
BILL MAURER: We're dealing now with people who aren't just hunting and gathering but are growing grain and are taking care of animals like sheep and goats. These commodities have seasonal cycles. Right? I plant the grain and it takes a while to turn into stuff that I can reap and turn into, you know, dough and bread. And sheep and goats only calve during certain parts of the year. You know, if I'm planting grain and I'm going to give some to you after a period of time and you're raising goats and you're going to give some to me after a period of time, we both have the built in seasonality of those plants and animals to deal with. And what we start to see in those situations is the emergence of central authorities.
BOB GARFIELD: Central clearinghouses which had some properties of temples, hubs of spiritual authority and some of banks.
BILL MAURER: So this is going to kind of oversimplify it but we basically write little contracts to each other that say things like 'OK look you're giving me this goat today. Thank you.' After a certain period of time after six months I will repay that debt that I now owe you with a certain number of bushels of grain.
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BOB GARFIELD: OK that isn't from the fertile crescent Three millennia ago, it's from a different Temple, The Chicago Board of Trade soybean trading floor from 2006. But you get the idea. And in both cases every promise was recorded.
BILL MAURER: We have scribe's in these temples, keep track of these contracts and that's where we start to see something like money. That's kind of a time deferred contract for the settlement of a debt recorded on that Clay. I like to joke that you know in the beginning was not the coin in the beginning was the receipt. And that's essentially what you've got in those clay tablets.
BOB GARFIELD: And other slightly less portable media.
BOB GARFIELD: Travel as the New York Times retro report did to the tiny Micronesian island of Yap. Home to money, the size of semi-truck wheels, made of stone.
MALE CORRESPONDENT: There are thousands of these stones all over the place here. They're actually an ancient form of currency [END CLIP].
BOB GARFIELD: Whose value resides partly in scarcity, The Stones had to be imported in canoes from neighboring islands, partly in the effort invested to quarry and mill them but mainly in the communal memory of who owned them and the consensus of their worth. MIT's Neha Nerula from her TED talk.
NEHA NERULA: Now the Yap don't actually move these rai stones around or exchange them, rai stones can get to be pretty massive. The largest is about four tons and 12 feet across. [END CLIP]
BOB GARFIELD: You can't feed the meter with them or melt them down or wire them abroad, you can only remember with them.
NEHA NERULA: So the yap just kind of keep track of who owns what part of what stone. [END CLIP].
BOB GARFIELD: Kindly hold that thought too, now in time the recording of obligations did give way to the shorthand of coin and currency and further to banking transactions and credit instruments and so on, to the cusp as we shall soon discuss of digital currency. Thus did money emerge. Not from the barter system, but from the need to keep track of an unwieldy number of transactions. Suddenly, it seems so obvious. Money is a mnemonic device, a proxy for a history, a memory stick or not. Remember, this is an endless perplex we're talking about. And if money is merely a record of obligations, why does its value fluctuate sometimes even gyrate based on factors that have zero to do with who owes what to whom. We all understand that inflation steadily erodes the face value of a dollar. A car that costs seven thousand dollars in 1970 costs thirty thousand dollars today and all that, but what else is at play in determining the value of a dollar.
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BOB GARFIELD: The first place there are two kinds of money based money, meaning all the world's currencies in circulation and the cash reserves in the global banking system, and credit money, which is all the money promised to be paid eventually. Now they would seem to be opposites, one an asset one a liability, but in the world of banking paradoxically they are all assets and traded accordingly.
MARK BLYTH: Money is central bank money. Money is based money.
BOB GARFIELD: Mark Blyth is the William R. Rhodes professor of international economics at Brown University.
MARK BLYTH: Money is credit and credit cards. Even money in the form of derivatives for example in these complex financial instruments, which have a kind of money like caracter.
BOB GARFIELD: You may think of money as a means of buying something you want like a BLT or a freight car of pork bellies six months from now. But money is also a commodity in itself which creates this weird Escher print effect of an image folded seamlessly into itself. People all over the world buying money with money and in so doing influencing the value of money. Kind of makes your head swim and it's complicated still more by the fact that Chinese money differs from European money which differs from American money because they have unique domestic conditions and economies and of course currencies reflecting them.
MARK BLYTH: Imagine different countries have different currencies which is obviously true. And imagine that you live in the United States. Well you have the one currency that everybody else wants to have. Why? Because it's 60 percent of everybody's foreign exchange reserves and also dominates 70 percent of everything in the world. So when you buy oil, it's in dollars. When you buy wheat, it's in dollars. Now if you had a country that doesn't get to print dollars, you don't have the advantage. So everybody's money is not the same.
BOB GARFIELD: No and the variables affecting the value of your dollar extend to everything under the sun from the weather.
FEMALE CORRESPONDENT: Wheat prices have been swinging wildly because of a drought in Russia [END CLIP].
BOB GARFIELD: To unilateral currency fluctuations.
FEMALE CORRESPONDENT: China unexpectedly devalue its currency by two percent leading to a drop in the U.S. stock market. [END CLIP]
BOB GARFIELD: To political events.
MALE CORRESPONDENT: Investors splurges on the stock market after the election of Donald Trump. [END CLIP]
BOB GARFIELD: And speaking of Donald Trump, there was a phenomenon he tweeted about the other day, misleadingly, that also enters into the mix. The time value of money. Thanks to presumed compounding interest, the value of any dollar today is deemed to reflect the value it will have in the future. But because the dollar in hand has that potential. Right now to economists and financiers
FEMALE CORRESPONDENT: One dollar now will be worth more than a dollar a year from now. [END CLIP]
BOB GARFIELD: In fact, much of banking and Wall Street and commodities markets hinge on later. The perceived value of something in the future. You could argue that money doesn't even exist in the moment. It's either a ledger of the past or a projection of the future. Mark Blyth calls it an insurance policy.
MARK BLYTH: Money is a hedge against the uncertainty of the future. So given that that's your insurance policy, your hedge, you really want the policy to pay out tomorrow, what you think is worth the day. Which is why we worry about inflation and all the rest of it.
BOB GARFIELD: Except wait aren't insurance policy supposed to offer peace of mind.
MARK BLYTH: Here's the funny thing about money as a commodity and not insurance form if you want to think about it, so if money is your insurance you want to have more insurance, so we spend our lives getting more and more and more insurance and the mark of someone who's successful is a big pile of cash. So they have more insurance than anyone. So what do they then do. Well the more money you have the more you worry about it. The more sensitive you have to become to changes in your money holdings. You become obsessed with money.
BOB GARFIELD: A prescription for madness. Because not only is our money at the mercy of countless unseen forces and actors and events, if you venture to the seller of the insurance company and open the vault it's like Geraldo Rivera seeking the hidden treasure of Al Capone.
GERALDO RIVERA: Don, all I found was an old stop sign and a couple of gin bottles. [END CLIP]
BOB GARFIELD: Thus Blyth says the most enduring myth about money.
MARK BLYTH: That somehow its box with something, there's no there, there.
BOB GARFIELD: When you contemplate the value of a dollar. Don't waste your time looking for underlying value because there is none. On this subject we turn once again to noted economist Matthew McConaughey this time portraying a prospector in the 2016 movie titled Gold.
MATTHEW MCCONAUGHEY AS KENNY WALLS: We got a goldmine! [END CLIP].
BOB GARFIELD: [00:26:33] Well, no wonder he was excited. Gold is secreted underground, universally treasured gleaming and portable and easily stored and therefore perfect for wedding rings and palaces and government reserves to guarantee value of their currency.
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BOB GARFIELD: But hold on, gold as natural resources go is actually quite plentiful. Its scarcity is so important why isn't Fort Knox filled with, I don't know, terbium or some other rare earth mineral.
BILL MAURER: Well there's a lot of things that are scarce that don't have that kind of same aura of value around them.
BOB GARFIELD: Anthropologist Bill Maurer.
BILL MAURER: In the case of something like gold or silver, you know we can point quite clearly to the historical evidence both in ancient times and modern times that its value was set by states who were determining what a standard would be that all debts and credits payable to the state would be measured in terms of, right? It's sort of a political decision not any kind of natural outcome of the rarity or intrinsic preciousness of anything that gives something intrinsic value.
BOB GARFIELD: A political decision that proved catastrophic during the Great Depression when the United States was unable to expand the money supply. Print money, as they say, to keep the economy functioning following the 1929 Wall Street crash. Herbert Hoover eyeing the ruinous hyperinflation in Weimar Germany and elsewhere from vast deficits spending, notoriously refused to budge from the gold standard.
HERBERT HOOVER: We find some who are maintaining that the world has outgrew the use of gold of the basis of currency of exchange. [END CLIP]
BOB GARFIELD: One of his critics was Hoover's 1932 opponent Franklin Delano Roosevelt, who offered a new deal which let government embrace Keynesian economics and spend its way out of unemployment and financial gridlock.
FRANKLIN D. ROOSEVELT: I propose that this leadership misunderstood the forces that were involved in the economic life of the country [END CLIP].
BOB GARFIELD: The US dollar wasn't officially untethered from gold until the Nixon administration, but FDR move was the effective end of the gold standard and the beginning of so-called fiat currency. A money supply backed by nothing more than the full faith and credit of the United States.
BOB GARFIELD: And faith is not a word lightly invoked. The story of money, Maurer says intertwines the twin themes of religion and sovereignty.
BILL MAURER: In the ancient world and you know up until the middle ages in Europe and you start to see things that are state-like that also are religion-like. Central authorities’ folks go to with their problems and when there are debts that need to be settled or when there some sort of redress that needs to be made.
BOB GARFIELD: Well someone has to make the rules and someone has to enforce them, which of course is the very essence of ecclesiastical and political authority. Money says Maurer is an expression of that authority, of sovereignty itself. Some argue that America is a superpower, not because of its military might or moral authority but because more than 80 percent of all the world's financial transactions are settled in U.S. dollars. One wonders then if for some reason the dollar were to lose its global primacy, where would that leave the US government. We may soon find out.
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BOB GARFIELD: Coming up, if indeed money is a story we tell ourselves, the plot is thickening. This is On the Media.