00:00The dollar has been the world's reserve currency for decades, but its history goes back centuries
00:04to before the United States was the United States. In a new book called The Almighty Dollar,
00:09500 Years of the World's Most Powerful Money, Brendan Greeley chronicles the currency's history,
00:14explains its dominance in global finance, and looks ahead to the role it will play in a world
00:18in which cash may no longer be king. This week I sat down with Brendan and I started off by
00:23admitting my surprise that the dollar does in fact predate the U.S. And when I started working
00:28on this book, I was going to start it in 1971 when Nixon took the dollar off gold. And then
00:33I ended up in 1776, and there's a challenge at 1776 with a dollar, which is that we're taught
00:42to assume monetary sovereignty. We assume that a country has control over its money. And if that's
00:46true, then you get new country, new money. We declared political sovereignty in 1776, but we
00:52did not declare monetary sovereignty. We decided that our currency was going to be a big silver
00:59coin from the Spanish empire with a German name. And so that makes this question of new country,
01:06new money a little bit problematic. And sort of trying to figure that one out, I found this whole
01:11other story that starts in a silver mine in Bohemia in 1520. And we can talk about silver mines. I
01:19can talk
01:19to you for a very long time about silver mines. But I think more importantly, we have to recognize
01:26that the United States did not create the dollar. Monetary sovereignty is one very slowly and with a
01:32lot of difficulty over time. And it's constantly being eroded at the edges. And so the story for me
01:38of the dollar and America is two separate things. There's an American story. There is a dollar story.
01:43America won control over the dollar and may be in danger of losing it now. The history of a currency
01:49is not the history of a country. Let's talk about the uniqueness of the dollar. And you quote Robert
01:53Mundell, the economist who says, effectively, all money sort of start domestic and some become
01:59international. They become global currencies. The dollar, as you point out, kind of subverts that
02:03paradigm. This is a global currency first. See, this is what I love about David Gurrie. You read
02:07the book. I read the book, yeah. Aw. Yeah, this is, it's very hard to think of a currency as
02:13inherently
02:14global because our experience with currency is local. And then if we go abroad, maybe somebody
02:19else uses it. Robert Mundell, this is the, so I'm going to take a huge risk here. I, in
02:24the book, disagree with a Nobel Prize winning. Yes, exactly. Robert Mundell has a Nobel. I do
02:28not. But he wrote that great currencies are the children of great empires. The problem with
02:35that is I don't see that with the dollar. So the original silver, Yachim's dollar. So the word
02:40dollar comes from a valley in Bohemia that was settled by Saxon miners that produced silver. They
02:46made these big, very high quality silver coins that were not useful for sort of daily purchases,
02:53but were very useful for merchants in the Baltic. So those, Yachim's dollar became known as taller.
02:59And then we, that's how we get the dollar in English. This system was already in place by
03:02Shakespeare, who mentions the dollar twice. Once in the Scottish play, once in the Tempest.
03:07Um, okay. There was no empire pushing those coins out into the Baltic. There was no empire pushing
03:13those coins, uh, you know, through the low countries, uh, into England, uh, where a groundling
03:18at the Globe Theater would have known that a dollar was a big silver coin. Instead, they traveled
03:23because they were useful. Big coins worth about a week's labor, or I calculated 21 pounds of bacon
03:30at the time. Um, uh, and, uh, not really useful for daily purchases. Uh, they have a power on their
03:38own and they were copied all over. So as soon as you get those taller, very quickly within about two
03:43or three years, you start to get copies in Northern German cities, um, copies in the Netherlands. Uh,
03:48uh, and so this idea of a coin was inherently international from the start. And the Holy Roman
03:54Empire, neither Holy, no Roman nor an empire, but the Holy Roman Empire, which was sort of nominally
03:59in charge of that area at the time, for a lot of legal reasons, didn't like those silver dollars
04:05at all and resisted them as long as it could. Empire was actively fighting against this, but a certain
04:11kind of currency can be so useful to merchants and investors now and the wealthy that it has its own
04:17power and drags itself out of the world. It's not pushed by the empire. And we hear over and over
04:22again that the dollar's supremacy is at risk at this political moment. In any historical market that
04:29you look at, there were virtual promises and paper promises and silver and gold working together.
04:35Again, if we take the example of colonial America, a lot of commerce took place on the ledgers of
04:40shops. You would owe the shop money and then you would come back and you would clear it sometimes
04:44with money owed to another shop, right? A lot of this, this money they, so they, they, they were
04:50aware and they use these words in colonial America of real and imaginary money. That's not a value
04:55judgment. Imaginary money isn't bad. It just means it's credit held on the ledger of a shopkeeper,
05:00right? And that was every bit as useful to them as the very real money that they had in gold.
05:04And
05:04then sometimes in, uh, in, in bills of credit issued by the colonial governments. Okay. So we've
05:10always had virtual money. You know, almost all of our money has been held on the balance sheet of a
05:15bank. This is true in the 19th century. This is true in the 20th century. So the fact that we're
05:18moving beyond this physical note, um, is interesting, but I don't think it represents a fundamental change
05:24in what money is. When we look at the dollar system, I think it's important to point out that
05:30it's composed primarily internationally of deposits on offshore banks. The way we create dollars now,
05:38brand new dollars is commercial banks. When they lend you money through a mortgage or credit card
05:42loan, they just mark up your account with brand new dollars. They don't get those dollars from
05:45the fed. Nobody arrives with like a case of a hundred dollar bills to hand them to the bank,
05:49to hand to you. This is an, it's, it's accounting that the bank does on its own ledger. So when
05:54we
05:54look at the future of the dollar system, we have to see what protects those dollars. The federal
05:58reserve has made clear, um, that it will offer short-term loans to foreign central banks to bail
06:03these dollars out in a crisis. They've done it twice, 2009, again, in 2020. Um, American banking
06:08regulation is, uh, you know, you and I might have some issues with it, but it's pretty solid. We've
06:15had federal deposit insurance since the 1930s. Uh, no other country has this vast pool of insured,
06:21uh, deposits. Um, foreign governments come, or rather foreign investors come to rely on the
06:26reliability of domestic bank dollars in the United States. Um, the third thing that holds the dollar up
06:31is the basic institutional strength of the United States. When we look at those three legs of the
06:35stool, the fed domestic regulation and institutional strength, I don't think any of those is going away.
06:41None of those has disappeared. Um, offshore dollar deposits are still growing comma, but
06:49for the first time in our lifetimes, there's a question mark on each of them. There's a question
06:56mark on whether or not the fed will in fact rescue foreign commercial banks and their dollars in a
07:00crisis this time around. There wasn't a question mark the last crisis. There's a question mark
07:04about American institutions. There are several question marks about American institutions.
07:08And there is a push within the fed, uh, and within the federal government to, uh, loosen regulation on
07:14banks. We've already seen it with sort of the much lighter regulatory touch on stable coins, which are
07:18just a different form of dollar. So I don't think that stool is in danger of collapsing, but I do
07:24think
07:24that we're having this discussion and that's slightly troubling that for the first time we're having
07:28this discussion a year and a half ago, I don't think we'd be having this discussion.
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