Money: The Origin Story
(https://www.youtube.com/watch?v=2sQaTpWE5BU
MMT economist L. Randall Wray gives an overview of the origins and functions of money. He explains that money can be used as a medium of exchange, a means of payment, a store of value, and a unit of account. He also discusses the concept of money as an IOU and the role of government in issuing and redeeming money. Wray mentions various historical examples of money, including clay tablets, tally sticks, and paper currency. He concludes by explaining the relationship between government spending, taxes, and the demand for money.
Chapters:
00:00 Money: The Origin Story
00:05 Introduction to Money and its Functions
01:11 Understanding Money as an IOU
02:19 Origins and Evolution of Money
07:19 The Concept of Debt and Redemption
11:05 Conclusion
Transkripzioa
0:00
[Music]
0:05
let’s begin the way that you usually do
0:07
in an economics course but it also makes
0:11
sense uh when we talk about what is
0:13
money uh generally you be in with the
0:15
functions what can you do with money
0:18
well you can spend it we call that
0:20
Medium of Exchange in our economics
0:22
classes you can pay bills with it we
0:25
call that means of payment and I’ve
0:28
highlighted here including your tax bill
0:31
because that is something that is very
0:33
important for mmt probably most of you
0:35
know uh the punchline on that which we
0:38
will get to uh you can save it but you
0:40
got to be careful if you save too much
0:43
take it too far then you’re a scrooge
0:45
which is not a good thing to be and
0:48
finally you can redeem it this is
0:50
another very important point that I’m
0:53
going to be talking about as we move
0:55
through
0:55
this okay but that doesn’t really tell
0:58
us what money is it tells us what money
1:00
does not really what it is it’s sort of
1:02
like saying human is something that sits
1:05
on the couch and munches potato chips
1:07
while they watch TV doesn’t really tell
1:09
us what a human is if you look at every
1:12
form of money it is always an
1:16
IOU the currency whether it’s paper money
1:19
or coins is the IOU of Uncle Sam
1:22
technically it could be the fed or it
1:24
could be the treasury but it’s a
1:25
government
1:27
IOU when you write a check to your
1:29
landlord that is your promise to pay
1:32
which is an
1:33
IOU now your bank backs you up they
1:37
endorse the check and they are going to
1:38
make the payment for you but it is your
1:42
IOU people say uh they made a big deal
1:46
about this that you know in the future
1:49
we’re GNA have electronic money well the
1:51
truth is almost all of our money already
1:54
is electronic almost all transactions
1:58
are electronic today day we may use
2:01
currency very occasionally unless we
2:03
happen to be in one of the illegal
2:06
trades and sometimes we write checks uh
2:09
younger people probably never write
2:12
checks don’t even know what they are and
2:14
so the payments really are electronic
2:16
already for the most part we can ask
2:20
where did money come from what are the
2:22
origins of money John Maynard KEYNES who is I
2:27
think the greatest Economist at at least
2:30
in the non-marxist tradition okay so I
2:32
will have that caveat uh he said well
2:36
you know the origins are lost in the
2:38
mids of time and he goes on to say it
2:42
was at least 4,000 years ago that money
2:44
was invented and most likely in
2:48
Babylonia uh David Graber has a great
2:50
book on the history of debt and we
2:53
probably can push that back a bit
2:55
further than what K’s uh thought we have
2:58
a lot more evidence now uh but probably
3:00
it was Babylonia maybe it was more like
3:02
6,000 years ago and it was created by
3:05
accountants who were keeping records on
3:08
clay shibati tablets and this was long
3:12
before there were coins long before
3:15
paper money uh in fact long before there
3:17
was
3:18
currency uh money first existed as uh
3:22
Records kept on Clay uh that didn’t
3:25
really change hands it was a form of
3:28
recordkeeping and purchases were mostly
3:33
in the form of credit that then would be
3:37
uh eventually settled so we’d like to
3:40
think that we’re much more advanced than
3:42
the Babylonians we have credits uh
3:45
credit and debt now but actually that’s
3:47
probably the way that money began and
3:50
it’s been very common for the past 6,000
3:52
years to buy things on credit if you’re
3:55
buying stuff on credit somebody’s got to
3:58
keep track so we got to keep records of
4:02
those debts and
4:04
credits so debts are denominated in a
4:08
money of account now we are used to
4:10
having measuring units and these are
4:12
probably as old as humans uh we have
4:15
measurements for volume uh cups
4:19
milliliters we have measurements for
4:22
weight pounds kilograms and we have
4:25
measurements for uh distance length uh
4:28
inches feet centimeters and so
4:32
on and then we keep a record of those
4:37
measurements now money was a conceptual
4:41
leap it’s pretty easy for a human to
4:43
come up with you know the notion of an
4:45
inch I got an inch right here I can
4:46
measure things with this I measure
4:49
things that have the characteristic of
4:50
length or I measure things that have the
4:53
characteristic of weight but money is a
4:56
strange measuring unit because we can
4:59
measure things things that have no
5:00
obvious physical characteristic in
5:03
common
5:04
whatsoever that was the leap that
5:07
probably was made by Mesopotamians okay
5:11
we can compare things that have nothing
5:13
obvious in common using this measuring
5:16
unit
5:18
money and so I show here the ale wife in
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Babylonian times who makes the beer and
5:25
sells the beer when you drink a few
5:27
beers she records your D on slate chalk
5:31
on slate behind the um bar and then once
5:35
a year or sometimes it could go a couple
5:37
of years you would settle your debts
5:40
that are denominated in Mina which was
5:43
the money of account by delivering
5:45
barley which she needs because she’s
5:47
going to make more beer okay so this
5:50
what I meant by most transactions took
5:52
the form of credits and
5:55
debits so what is money money is an IOU
5:58
denominated in the money of account who
6:00
can create money my professor Hyman
6:02
Minsky used to always say anyone can
6:04
create money all you have to do is write
6:06
I owe you five bucks you have created
6:09
money the problem is to get it accepted
6:12
you have to have somebody willing to
6:14
accept your IOU denominated in the money
6:18
of account um I talked about Babylonia
6:21
they use the clay shabat tablets there’s
6:23
a picture here of those in Europe
6:27
records were kept uh mostly on tally
6:30
sticks uh as far back as we know the
6:33
records of money and indebtedness was
6:36
recorded on sticks Hazelwood tally
6:40
sticks we still use the word tally for
6:42
tallying up your debts and what they
6:46
would do is Notch across the stick and
6:49
then split it in two so that you had a
6:51
stock and a stub so you have a record
6:55
that can be matched to make sure you
6:57
have not counterfeited by putting more
6:59
notches on the stick and then finally
7:02
the thicker notches were called scores
7:05
which we still use today as in a
7:09
baseball score which I’ll come back to
7:12
we also have the term raise a
7:14
tally when the king wants to spend which
7:17
I’ll come back to okay there is a very
7:21
uh a universal principle of debt and
7:25
that is that it must be redeemed so let
7:29
me give this is actually Eric too’s
7:31
example that I borrowed and that hesky
7:33
has drawn up of Joe’s Pizza Joint so he
7:37
starts up a a pizza joint and he wants
7:39
to drum up some business so he passes
7:42
free pizza coupons around the
7:45
neighborhood that Pizza coupon is Joe’s
7:49
debt if you get one of these pizza
7:52
coupons it is your asset okay now what
7:56
does Joe owe you this is not a money
7:58
debt it’s a pizza D he owes you a pizza
8:01
you bring the coupon in Joe Cooks the
8:05
pizza and you present your
8:08
coupon you have redeemed the coupon and
8:11
Joe has redeemed his debt there’s a
8:15
simultaneous Redemption both parties are
8:17
redeemed Joan no longer owes you a pizza
8:21
uh and you no longer have Joe’s debt now
8:25
what does Joe do with the Pizza coupon
8:29
well he tosses it in the pizza oven
8:31
because for him it’s just a piece of
8:33
paper it used to be his debt but now
8:35
it’s been redeemed he no longer owes a
8:37
pizza and so he’s just going to burn
8:39
that coupon let me give you another
8:42
example this comes from Farley grub
8:44
who’s one of the top experts on Colonial
8:48
American money what he found is if you
8:50
look at the 13 colonies all of them
8:54
issued paper money very unusual this was
8:57
the first example example of paper money
9:00
issue in the west Chinese had had paper
9:03
money for hundreds of years before but
9:05
in the west we did not have that the
9:07
American colonies could not issue coins
9:12
they had to use British coins they were
9:14
prohibited from issuing their own coins
9:16
and they were always short of coins to
9:18
fund the American Colonial expenses and
9:22
so they hit on the idea paper money
9:24
because there’s sort of a loophole in
9:25
the law there was no law said you can’t
9:27
create paper money because no one had
9:29
thought of doing that before so each uh
9:33
legislature so let’s just take the
9:35
example of Virginia would authorize the
9:39
printing and issuing of say 10,000
9:42
pounds of Virginia notes and at the same
9:46
time they would impose a new tax that
9:49
was expected to raise £10,000 over the
9:52
next several years they would then spend
9:56
those paper notes into existence uh you
9:59
would sell your mule and cart to the
10:03
colonial government and receive back
10:06
paper money now why on Earth would you
10:10
trade your mule which has obvious value
10:13
for a piece of paper that says 50
10:16
Shillings and the answer is well you had
10:18
to pay the tax once you pay the tax it
10:22
returns to the colonial government that
10:25
is redemption there’s a simultaneous
10:28
Redemption just like with Joe’s Pizza
10:30
coupon you no longer owe a tax debt and
10:34
the government no longer owes you in the
10:37
form of the paper
10:38
promise okay what does the government do
10:42
with the paper money just like Joe they
10:44
burn it and this is fact so the colonial
10:48
governments kept very careful records of
10:51
uh all the taxes received and they
10:54
wanted to demonstrate that all of those
10:57
paper notes were burned they were taken
10:59
out of circulation and burned when the
11:01
taxes were
11:06
[Music]
11:23
[Music]
11:25
paid
