Audio Transcript
Allison Schrager: Welcome to Risk Talking, a podcast about economics. I’m your host, Allison Schrager, and I’m delighted to be joined today by Perry Mehrling. Perry is a professor of international political economy at Boston University’s Pardee School of Global Studies and the author of several books and journal articles, including the forthcoming Money and Empire: Charles P. Kindleberger and the Dollar System. He’s taught for 30 years as an economics professor at Barnard College and he’s an advocate of what he calls the money view. It’s a way of explaining the monetary landscape and its central role in financial markets. And I’ve been wanting to speak to him for a long time. Really, just because, and I’ve got to be honest here, I don’t really understand anything about crypto. I don’t know why it exists, I keep waiting for it to go away, but it won’t. I’m not sure what value it serves, what purpose it has. And I can’t think of a better person to talk to about this than Perry, because he is an expert on what money means and its role in the financial system. And I’m glad I waited because this is a particularly good time to be speaking with him.
I would’ve expected, I was always told, that the role of crypto and why it’s so useful is that it was an alternative to the currency that we were debasing. Well, I mean, we just printed a lot of money to give everyone checks and now we have really high inflation. So you would think this would be crypto’s time to shine, but really the opposite is happening. So I can’t think of a better person to explain to us exactly why this thing exists and what’s going on and how it fits into this larger system. And if this is the end or just a blip in crypto’s trajectory and being a big part of our lives and part of the financial system.
So if nothing else, hopefully you’ll walk away having a better and deeper understanding of the global financial system, in addition to maybe now understanding what crypto is all about. So thank you so much for joining us, and welcome.
Perry Mehrling: Happy to be here, Allison.
Allison Schrager: So to get started, let’s just sort of explain to listeners your framework of how you think about the global financial system and money. I know that sounds like a lot, but you do have something I find very useful when I think about things: a very sort of neat logical framework that really sort of well explains everything. You call it the hierarchy of money. And we think of money as just something in our pockets, or even our credit cards now, but it’s really part of a much larger financial system. Can you please explain it to us?
Perry Mehrling: Yes. The hierarchy of money is a good place to start because it emphasizes the qualitative difference between money and credit. That credit is a promise to pay money, and money is a way to cancel credit or to cancel debt. So, money is better than credit. So the second piece of that is to appreciate that what you and I experience as money is actually the debt of banks, in typical. So it’s promises to pay other banks, but we use it as money to cancel our own debts.
So there’s the …….
Source: https://www.city-journal.org/to-understand-cryptocurrency-first-understand-money