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Review: 'Money: The True Story of a Made-Up Thing'

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By Jacob Goldstein '04JRN (Hachette).

By Lorraine Glennon |Fall 2020

Beil

In the foreword of Money: The True Story of a Made-Up Thing 'Jacob Goldstein' 04JRN remembers the impetus for his new book: a conversation from 2008 with his aunt, a poet with an MBA. Money is fiction, she said when he asked where the trillions of dollars went that disappeared in the financial crisis this year. It was never there in the first place. Her words were a Eureka moment for Goldstein; not only did they spawn his journalistic niche (he's now co-host of NPRs Planetengeld ), but they also formed his basic beliefs on the subject. Far from existing on a separate, mathematical level, separated from human emotions, money - Goldstein points out - is essentially invariably social. It works because a society collectively agrees to view its money as money, to trust the reality of this made-up thing. Given this rather weak foundation, it's no surprise that money has taken us on some wild journeys over the centuries. in the money , Goldstein invites readers on these adventures and serves as a first-class tour guide throughout.

In early chapters, Goldstein rummages through the history of money, sharing whimsical facts (in the 1840s and 50s, images of Santa Claus adorned some of the 8,370 types of paper money in the United States) and fresh, informative stories of origin. The latter includes a compelling display of the economic sophistication of medieval China. Beginning in AD 105 when a eunuch invented a crude paper form to keep records in a busy bureaucracy, China developed into a widespread use of paper money over the next more than nine hundred years. The advent of money in China sparked not only a commercial boom but also a social revolution: after the government moved to levy taxes as legal tender, a population that had long been forced to weave and plant was because taxes were paid in fabric and grain, now free to pursue other professions. By 1200, Goldstein writes, China was possibly the richest and certainly the most technologically advanced civilization in the world.

Fast forward to the mid-14th century and the Chinese peasantry was paying taxes on cloth and grain again. What happened? Theories vary, but Goldstein fingers the Hongwu Emperor, who founded the 300-year-old Ming Dynasty in 1368 and promoted radical self-sufficiency based on China's elimination of trade and a return to an idealized agrarian past. That he succeeded is ( Hm ) a view of the impermanence of the greatness of a single nation. At the beginning of the 20th century, the country was one of the least developed in the world.

Goldstein's discussion of the Great Depression is another eye opener. It reveals how the theories of the relatively obscure economist Irving Fisher about deflation and the instability of the US dollar - problems that Fisher believes stem from the yoke of dollar value on the weight of gold - Franklin Roosevelt in the darkest days of 1933 managed the country's banks to shut down temporarily to stop rampant banking, FDR went on the radio and reassured citizens with an introductory lesson in banking. Then he passed an executive order confiscating gold bars and most gold coins owned by an American, and supported legislation separating the United States from the gold standard. (The book's elegant clarification of this concept is a gift to the readers.) While his budget director denounced the end of Western civilization, Roosevelt never wavered - and history has borne out. One country after another, economies began to improve after the government abandoned the gold standard, notes Goldstein.

The book offers three different scenarios for the future of money, perhaps the most striking of which is modern monetary theory (MMT). As advocated by economist Stephanie Kelton, MMT posits that government is easy
creates more of his own money does not need to be afraid of spending too much (another liberating effect of lowering the gold standard). In the unlikely event that the flooding of the economy with new money leads to hyperinflation, the antidote is just as simple: raise taxes to reduce the money supply. Kelton has attracted acolytes as diverse as Bernie Sanders and tax-shy tycoons.

Goldstein clearly believes that MMT may be an idea whose time has come, arguing that our current methods of collecting and distributing tax revenue are undemocratic. In an environment where the words taxes and deficits are infinitely more difficult than money, consensus on the long-term sustainability of Kelton's approach could be the greatest achievement of all. But MMT may have got its first real test run in March when Congress passed the $ 2 trillion CARES bill, which gave the book a very timely and thought-provoking ending.

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