Do we even need to reinvent money?

In episode 7, Samantha Yap and Jacob Goldstein touched on money, control, and what that means for privacy. In episode 8, they explore this idea further. 

Who controls money? Do people value privacy or convenience more? How has crypto evolved over the years?

Jacob is a journalist who spent time at the Wall Street Journal. He then went on to host the popular Planet Money podcast by NPR. He is the Author of “A Book called Money: The True Story of a Made-Up Thing” and the current host of Pushkin’s “What’s Your Problem?” podcast.

Does a universal currency work?

Jacob’s book had a chapter on the European Union, as they created a new kind of money where everyone in this group of countries has a common currency. Is this the natural evolution of money – to have a universal currency? Jacob doesn’t think so. He shared how the Euro hasn’t been working as intended and has gone worse than people thought. He argues that different countries have different economies and the way basic monetary needs change with how their economy is doing. Sometimes people need more money. Sometimes people need less money. 

The current authoritarian monetary system works okay.

A single currency to cover a bunch of countries doesn’t work. But within one country, who should control the money? Jacob shares that in most developed countries, the government controls it. The other big piece he thinks people often overlook is that private banks also have much control over money. Fractional Reserve Banks create money and take them out of circulation when they make loans. The government and the private banks make up the current monetary system that Jacob thinks is working well enough. “I think it is basically functional. Yes, it’s bad that inflation is 8% right now, but if you look at the last whatever, 50 years, 70 years now, if you look at the monetary regime we have now, can date it to the early 70s, you can date it to 1945. But in either of those cases, it has basically worked. The economy has grown tremendously. There hasn’t been a monetary collapse. So, I think it works okay.”

What is money?

Bitcoin was born off the back of the 2008 financial crisis because of trust issues with centralised authorities. Can Bitcoin be the universal currency of the world? Jacob shared a story where he and his colleagues bought some bitcoins for $20 in 2011 after writing a story about it. They used it to buy lunch for 2 Bitcoins, which at the time of recording, makes it a $40,000 lunch. Now, Jacob believes the fact that people might lament over the opportunity cost of that lunch means it can’t be used to replace money. “It’s like the pizza story…If you’re a fool for spending it, it’s not money. So that, to me, is a big, important point, “

In earlier episodes, Jacob shares that the money is made up. Samantha challenged him to ask if money is made up, won’t Bitcoin be money to a few people too?

Jacob shared that he thinks a reasonable definition of money is it’s a thing you buy stuff with.

“It’s a store of value and a unit of account and a medium of exchange. Medium of exchange means it’s what you buy stuff with. A unit of account means it’s what you say. The value of other things is. So, you know, falafel used to be 2 Bitcoin, and now it’s 1/10,000th of a Bitcoin or something. So, it’s kind of absurd as a unit of account, right?”

The evolution from cryptocurrency to crypto

“You know, when I started covering it, it was cryptocurrency, and everybody talked about money because the word currency is right there. People have stopped saying cryptocurrency and started just saying crypto, which I think is meaningful. I think that’s not just because it’s shorter. I think it’s because the ideas have moved beyond money.” In this episode, Jacob shares his excitement about the crypto space as he sees new use cases from the technology behind cryptocurrencies, such as smart contracts and payment rails. He shares that he is eagerly rooting for a killer app to emerge. One that would onboard users to use it because of its utility and not just because it’s “crypto”.

Conclusion

Through speaking with Jacob Goldstein, it is evident that money is an idea that is simple yet complicated simultaneously. You could think of it as a thing you buy stuff with, or you could be very philosophical about it and think of money as a construct. Cryptocurrencies might start as a way to replace money, but their track record shows they still have a way to go before replacing Fiat currencies. However, the revolution kicked off with the invention of cryptocurrencies, leading to several innovations that have already made meaningful differences. Will cryptocurrencies replace money? Only time will tell.

Follow Jacob Goldstein on Twitter here

Buy “Money: The True Story of a Made Up Thing” here

Listen to Jacob’s Podcast – “What’s Your Problem” here