Lastyear, over 20,000 people joined the Body Electric Study to change their sedentary screen-filledlives.
And guesswhat? We saw amazingeffects!
Now you can try NBR's Body Electric Challengeyourself.
Listen to updated and new episodes wherever you get yourpodcasts.
Thank you for listening to PlanetMoney.
We wanted to check in with you to see what we're doing well and how we couldimprove.
If youcan, please take a short anonymous survey at npr.org slash pmsurvey.
That's all oneword. It takes less than 10 minutes and you do all of us at Planet Money a huge favor by filling itout.
We especially want to hear from people who haven't taken a survey before or are newlisteners.
That's npr.org slash pmsurvey.
Thankyou. This is Planet Money fromNPR.
It is finallysummer. A time torelax, touch somegrass, and think about nothing but the sun on yourface, the breeze in yourhair, and the entire economic history of theworld.
Welcome back everyone to Planet Money SummerSchool.
Whenever the temperature rises and naturebeckons, we show up with a new batch of stimulating lessons to make sure your brain has something to do on the long drive to thebeach.
Every Wednesday till LaborDay, we will tackle the biggest questions ineconomics.
In summer'spast, we've covered Econ101, investingskills, and businessstrategy.
Thissummer, we'll lookback.
Wayback. And how we got to the bewildering economy we havetoday.
Afterit, the world's easiest masters degree in economichistory.
I'm yourhost, RobertSmith.
Now I know you might be thinkingRobert, the past is dead andgone.
No grown up needs to know about the whiskey rebellion of 1794 or the smooth hollytariff.
True, you do not have to know thisstuff.
You want to know thisstuff.
Because everything we take for granted in the economy today had a startsomewhere.
When you hear about banks collapsing or inflationsurging, strange new forms of money andtariffs, you can be the one tosay, I know why this ishappening.
We have been herebefore.
Now, if you talk tohistorians, they will tell you you have to becareful.
The past never exactly repeatsitself.
You cannot step in the same timetwice.
That's RebeccaSpang, a professor at Indiana UniversityBloomington.
And she'll be our guide for this firstepisode.
The mistake that is often made in history is that people look to a past example and think theyknow,ah, this is what I should do now in thepresent.
So if history isn't a roadmap, why studyit?
History shows us examples over and over again of when thingschanged.
Things changed because people took certainactions.
And if you remember that nothing that's happened in history is actuallyinevitable.
It's not set instone. It's the product of actions that people make at particulartimes, in particularsituations.
I think that helps us to feel that we have a little bit of power to affect the world that we live intoday.
Empowerment. We will takeit.
On this season of summerschool, we'll bring you some classic yarns from economichistory.
We'll meet the rogues and murderers who created modernfinance.
We'll watch as the workers try to start a revolution against themachines.
We'll travel with the Vikings and fight mythical creatures for rare and valuablecinnamon.
On today'sshow, we will jump right in with a surprisingly hardquestion.
What ismoney? Money ismysterious.
Money worksbest, Ithink, if we don't actually think about why it'sworking.
If we pay too much attention to the things we do withmoney, Imean, howbizarre?
Or is it that I can go into a store and I can take all this food and I just give somebody a piece of plastic and theysay,okay,fine, then I walk away with all thefood.
Imean, it's reallyamazing.
But if I stopped and thought aboutit, if we all sort of stopped and thoughtabout, holdon, what are we doinghere?
The whole thing was just kind of crashing down around ourheads.
Allright,well, let's put on our hard hats then because we have two history stories today that will definitely make you think too hard aboutmoney.
And we'll have our professor along to offer lessons fortoday.
Let's start with a giant stone coinlost, but not forgotten at the bottom of the ocean after thebreak.
All that sitting andswiping, your body is adapting to yourtechnology.
Learn how and what you can do aboutit.
I really felt like the cloud in my brain kind ofdissipated.
Once I started realizing what a difference these little breaks weremaking, there's no turning back forme.
Take NPR's Body ElectricChallenge, listen to the series wherever you get yourpodcasts.
The Republican National Convention is happening this week and the NPR Politics Podcast takes youthere.
We're going to be around in Milwaukee withanalysis,recaps, and coverage of what happens every night of theRNC.
Listen to the NPR PoliticsPodcast.
Welcome back class to Planet Money SummerSchool.
In everylesson, we'll provide a few historical flashbacks and then bring our professor back to draw out the economic lessoninside.
We're going to start with the most basic question you can have in economichistory.
Who inventedmoney? Ourprofessor, RebeccaSpang, says the answer is not sosimple.
Because money is many differentthings, it doesn't have a singleinvention.
It happens lots of differenttimes, lots of differentplaces.
Four lots of differentreasons.
Around 5,000 years ago in ancientMesopotamia, money was written into clay tablets to keep track of deaths andpromises, and paper money shows up in China in the 11thcentury.
Sometimes money seems to arisenaturally.
Humans have something shiny that they value and becomes a tradable form ofwealth.
Other times it takes a king or ruler to create a form of money that can be used as a sort oftool.
Today in summerschool, we'll have both kinds of originstories.
Let's start with the shiny stuff and I don't mean gold orsilver.
I mean shinystones,very, very large shiny stones on a tropical island in thePacific, the island ofYap.
Now we don't have records of how long the people of Yap used stonemoney, but when explorers encountered the island hundreds of yearsago, they found that value was stored as giant stone discs with holes in thecenter.
Let's play some of the episode we did about Yap in 2010 with host David Kestinbaum and JacobGoldstein.
They were talking with Scott Fitzpatrick and anthropologist now at the University ofOregon.
Scott's has the stones probably began with a navigator from Yap who canoeed to another island and found somethingreally, reallynice.
Well, oral traditions talk about Yap's navigator named Anogamong who traveled from Yap toPolau.
Polau is about 250 milessouth, southwest ofYap.
They talk about this navigator going and finding this milky white crystalline stone which is limestone and Polau has an abundance ofthat.
Nogamong finds thisstrange, beautiful thing and it's not like his first thoughtis,hey, I'm going to inventmoney.
He's justthinking, I'm going to carve some beautiful fish out of thisstone.
Butremember, all he's got is this littlecanoe.
According to thestory, he looks up at the moon one night and he thinks tohimself, youknow, a big piece of stone in the shape of themoon, that would be a lot easier to bring back to Yap than a great big stonefish.
So he carves this big round disc out of stone and then he puts a hole in the middle ofit, probably so he can stick like a branch through it and maybe roll it back to hisboat.
So he brings the stone back to Yap and that people gocrazy.
They loveit. Pretty soon anybody who is anybody wants one of thesestones.
And youknow, money often starts out this way like gold coins before we had goldcoins.
Youknow, gold was just something that rich people and kings kept around and they madelike, I don'tknow, what do they make ofit?
A crown made of gold toking,right?
Youknow, but before it wasmoney, it was just something that people liked and that says you'rerich.
Right.Like,hey, I'm theking.
I gotgold. Soanyway, the people ofYap, they start sending lots of expeditions over to this otherisland.
People are going out in these little boats and bringing back these hugestones.
Some of the evidence that we've looked at and trying toestimate, youknow, how big of a stone could a bamboo raft actuallymove.
We're probably talkingabout, youknow, not in excess of twometers.
How have youbeen? How have youbeen?
Well, it's on the range of four to five metrictons.
So that's about the size of two smallcars.
It's prettybig. SoDavid, Ijust, let's pause to reflecthere.
You have this pre-industrialsociety.
You have these guys carving these giant stone disks that are taller than aman, putting them on these tiny little rafts and taking them hundreds of miles across the openocean.
But they dothis. They do it over and over againbecause, youknow, the stones are reallypretty.
They don't have gold or silver on theisland, but they do have thesenice, shinystones.
If you scrubthem, they're reallybeautiful.
It's just kind of thismelky, crystallinewhite.
They're almostblind.You, they're sobright.
So at somepoint, we don't knowwhen.
The people on Yap realize what almost all societiesrealize.
They need something to storevalue.
They need something that everyone in society agrees you can use to pay forstuff.
And like manysocieties, the people ofYap, they took the thing they had that was pretty and hard toget.
The thing that was their version of gold and they decided these giant stone disks were going to bemoney, even though they were giant andstone.
So, pieces of stonemoney, itwas, it was reallyvaluable.
It wasn't like you would roll one of the big ones down to the corner store and buy somefish.
Imean, it seems like for day to daystuff, they would maybe useshells.
But for bigstuff, specialoccasions, you would use stonemoney.
Imean, you could think of it like a $10,000bill.
In oraltraditions, they talkabout, forexample, a couple getting married and other family members or friends might give them a certain number of pieces of stonemoney.
If somebody was in real dire straits and theywere, youknow, something happened to their crop of food or they were running low on provisions and they had some stone money they might trade those for food or forhelp.
So, let's get back to this question of what is money and see how the stone money holdsup.
Now, economists actually have a three-part definition they use formoney.
Part one is money should be a store ofvalue.
So youcouldn't, forexample, use coconuts because coconuts willrot.
So stone money definitely meets thatone.
We can check thatone. The second is usually it has to be a unit ofaccount.
And here things get a little slippery for classifying these stones asmoney.
Unit of account means there's broad agreement that there's a specific value attached toit.
And it wasn't like people priced things in stoneslike,hey, you want to buy thatcanoe?
That's threestones. On the otherhand, some stones work clearly worth more thanothers.
There are bigger ones or some famous guy went and gotit.
It might be worthmore.So, I think you can give stone money sort of a half check mark on unit ofaccount.
So we got one and a half check sofar.
The third item on the list is money should be what economists call a medium ofexchange, which basically means something you can use to buystuff.
One economist who was writing about the stone moneysaid, you need something to bestoreable,recognizable,divisible, andportable.
So for storeable andrecognizable,yeah, giant stone discs are storeable and recognizable ashell,right?
Adivisible, thatone, it actually doesn'twork.
Youcannot, infact, break a giant stone disk in half and have like half as muchmoney.
That doesn'twork. And then we get toportable.
So, Imean,remember, one of these things can weigh as much as two small cars orsomething,right?
And this is where something really profoundhappens.
The people of the app decide that if you give somebody a piece of stonemoney, you don't actually have to give it tothem.
Here's ScottFitzpatrick.
They often talk about the stone themselves not changing hands atall.
Infact, most of the time they won just the sure amount of labor it would take to doit.
Youknow, it's so funny because on the onehand, like these are very concrete forms of sort ofmoney, youknow?
But also very quickly becomes abstract just because of theirsize.
So they don't actually move it in financialtransactions.
They justsay,okay, it's yoursnow.
Even though it's outside myhouse.
Right.Right. And the really interesting thing about this wholeprocess, I thinktoo, is that everybody knows who's itis.
Sookay. So you canimagine, youknow, everybody sees the stone and knows somebody ownsit.
Youknow, I know Kestonbound Stone is the one over there by thattree.
But as it turnsout, you don't even have to see a stone for it to havevalue.
There's this story that one time a crew of workers was bringing back this great big piece of stone money back to YAP on a littleboat.
And just before they got back toYAP, they ran into this big storm and the stone ended up on the bottom of theocean.
But thepeople, they get back to YAP and they tell the story and everybodysays, noproblem.
That's stonemoney. It's stillgood.
Even though it's sitting on the bottom of theocean.
So somebody owns this piece of stonemoney, even though nobody's ever seen it for over a hundred years ormore.
Doesn't that seem kind of amazing to youthough?
Yeah,yeah. I was a hugeone.
It was giant and more beautiful thananything, but I'm fortunate I don't have ithere.
Man, that's the definition of abstractmoney.
Yeah, it reallyis, isn'tit?
SoJacob, when you're reading thesestories, they seem kind offunny.
And then at some point yourealize,oh, youknow, I use stone money all thetime.
Imean, if I write you acheck,right, what actually changes in theworld?
In the physicalworld, essentiallynothing,right?
Like there are the numbers in your bankaccount, change alittle, and the numbers in my bankaccount, change alittle.
But it's essentially like there is some stone on the bottom of the ocean that you used toown, and now that stone belongs tome.
Even though we have this much more advanced financialsystem,money, it's basically faith in something that you can'tsee.
There's mutual agreement that there's something out there in the world that has a certainvalue.
It's like trust plus invisibility equalsmoney.
That was David Testonbaum and Jacob Goldstein from an episode we did in2010.
Joining us again is our professortoday, RebeccaSpeck.
Hello, I'm glad to behere.
SoRebecca, what is the modern day equivalent of these giant stone coins onyet?
Do we have things like ittoday?
In manyways, wedon't. So what you need to think about is the giant stone coins are not part of what we think of as the marketeconomy.
They're used in the prestige sphere for really important events like weddings or to cement a politicalalliance.
So there are things that you wouldnever, ever consider using as ordinarymoney.
In the same way that wetoday, some of us may have things that wevalue, but that we would actually feel really bad about cashingin.
So imagine if you have jewelry that you inherited from yourgreat-grandmother, you want to hold on to it instead of putting it intocirculation.
Economists love the story of YAP because it shows how money might arise naturally when a society needsit, youknow, when you need to store value or make transactionseasier.
But as ahistorian, I know that you focus on something else that gives rise tomoney, which ispower,governments,kings.
Why do they need money to exist and how do they make ithappen?
So thestate, agovernment, an administration uses money as a way of bringing people and communities into theirorbit.
So once you know that you use little shiny coins with owls onthem, then you feel like you're part of the owlcommunity,right?
You're a part of that sort of system ofbelief.
So it's actually one of the ways that communities recognizethemselves.
There's another reason why governments need to have something like money because governments in many parts of the world at many times have armies and armies areexpensive.
If you can pay your army in little shinythings, and then if your army can force other people to accept the little shiny things in exchange forfood, then you can keep your armyfed.
And as your army keepsadvancing, the territory where your little shiny things circulate and are accepted gets wider andwider.
And overtime, new forms of money keep poppingup.
After thebreak, we'll take money to the next level and hear what happens when oneman, a rogue and a murderer to beexact, tries to create a whole new financial system fromscratch.
On the inheritingpodcast, if you ask a Philippine American or Asian American who is PatrickSalver, they have noclue.
Pat Salver was a Filipino civil rightshero, but his activism came at acost.
The FBI labeled me as a criminalmaker.
Now his niece unearths hislegacy.
Listen to inheriting from LAAS Studios and the NPRNetwork, wherever you get yourpodcasts.
On the inheritingpodcast, one event can change a family forgenerations.
We call itha-e-goo. Did you ever realize when you were a child that you became anorphan?
Camp was such a hardtime.
How do you think you got throughit?
Listen toinheriting, our new podcast about Asian American and Pacific Islanderfamilies.
From LAAS Studios and the NPRNetwork, wherever you get yourpodcasts.
NPR Plus is a new way to support public media and get more from your favorite NPR podcasts like FreshAir.
Sometimes I'll actually preface the question with if it makes you uncomfortable to talk about if it's toopersonal, just tellme.
Here's thequestion. For behind-the-scenescontent, bonusepisodes, andmore, sign up atplus.npr.org.
We're going to set the summer school time machine to the 1700s now and across the globe from the Pacific Ocean toEurope.
It's the story of a giant leap forward in modernfinance, followed closely by finance collapsing and blowing up the entireworld.
You know how thatworks.
It's a cautionary tale for any economy that moves beyond stonecoins.
It starts with a Scotsman named JohnLaw.
L-A-W. JohnLaw. He's in his early20s, welloff, and living the high life inLondon.
He'sgambling, affairs withwomen.
We don't know the exactreasons, but John Law kills a man in aduel, a sword fightingduel.
He'sconvicted, sent toprison.
Then he escapes and heads to continentalEurope.
That's the personaldrama.
But now the economic dramabegins.
Jacob Goldstein and Mary Childs pick up the story around1714.
So John Law is on thelamb.
He's popping up in one city after another acrossEurope,Amsterdam,Venice,Paris, and he's always at the gamblingtables, playingcards.
And he's alwayswinning.
People are starting to notice this gambler who's gettingrich.
When he arrives inParis, the chief of police sends this warning letter to the foreignminister.
Hewrites,quote, a Scott namedLaw, gambler byprofession, and suspected of evil intentions toward theking, appears at Paris in highstyle, and has even bought an impressivehome, although no one knows of any resource except fortune ingambling, which is his wholeprofession.
But Law caught abreak. The minister wrote in the margin of thatletter, he is not suspect he may remain inpeace.
So John Law is living inParis, he'sgambling, makingmoney.
But he's also gotthis, I don'tknow, ahobby, a little side hustle he's been trying to getgoing.
He's trying to convinceFrance, the whole country ofFrance, to completely change the way it is running itseconomy.
So France has been fighting war afterwar, spending all thismoney, and now the country is basicallybroke.
Farmers can't borrow money to plantseeds.
At onepoint, the king had to melt down his silver and gold plates to pay hissoldiers, which was kind of emblematic of the whole biggerproblem.
The whole economy ran on gold andsilver, and there wasn't enough gold and silver to goaround.
John Law knew something about this problem inparticular.
His father was agoldsmith, and during John Law'slifetime, goldsmiths in Britain were kind of becomingbanks.
What happenedwas, goldsmiths had safes in theirshops, so people started storing the gold with thegoldsmiths.
Goldsmiths started giving people receipts for thegold, and after awhile, people started to use the receipts themselves to buy stuff or to settledebts.
The receipts were like proto-papermoney.
They were moneyadjacent.
This wasn't the first time people in the world had used papermoney.
China had actually used it hundreds of yearsearlier, but it's a new thing in WesternEurope.
Then the goldsmiths wentfurther.
They started makingloans.
Goldsmiths would give you a claim check for gold that you could go out and use asmoney, but you didn't have to deposit anygold.
Your claim check is for gold that kind of doesn'texist.
The goldsmith is creating money out of thinair.
If everybody with a claim check came back to the goldsmith and asked for their goldback, the goldsmith would not haveenough.
To beclear, this is basically how banks worktoday.
We call it fractional reservebanking.
Similarly, if everybody with a bank deposit came and asked for their money at the sametime, we call that a bankrun.
The bank doesn't have themoney.
That is just how bankswork.
But on the flipside, if your economy runs on silver andgold, and you are so low on silver and gold that you just melted down your very favoritechalice, fractional reserve banking is exactly what youneed.
So John Law is ready to pitch this idea inFrance.
Normally, kind of guyis, he would just go straight to thetop, pitch to theking, but the king of France at thismoment, Louis the15th, five yearsold, not super into finance orbanking.
And France at this time is being run by aregent, aduke, the duke ofOrleans, orLeon.
OrLeon.Okay. So the hobbies include working in his home chemistrylab, composingoperas, and staying up all night with nobles and opera singers and actresses who would all getdrunk, sleep with eachother, andsay,quote, vile things at the tops of theirvoices.
So I bet you know who the duke is going to love JohnLaw.
We talked about this with AnneMurphy.
She is ahistorian, but she also used to work as a derivativestrader.
So she knows a few things about finance bros like JohnLaw.
He's out therenetworking, getting to know the rightpeople, and he manages to convince them to allow him to set up a privatebank.
Abank. Owned and run by JohnLaw.
And France doesn't really have banks as we know them at thispoint,right?
It's not a thing in Francebanking, like we havebanks.
Notreally.No, there's a bit of a suspicion about what banks are and what they cando.
Okay, there's a suspicion of banks here andnow, but theyexist.
Yeah.Nevertheless.Yes.
And every country has to figure out how to make its peace with what banks are and what theydo.
So this is step one of John Law'sscheme.
In1716, he sets up the first real bank inFrance.
He's jumped from Card Game Banker to actual realbanker.
It's called theBonk-Jean-Archal, which is a fancyname, but it's run out of hishouse.
He prints paper money backed by gold andsilver, but everybody thinks his bank is kind of ajoke.
The next yearthough, John Law got anotherbreak.
His drinkingbuddy, theDuke, made a new rule thatsaid, everybody in Paris has to use the bank's paper bank notes to pay theirtaxes.
And youknow, a reasonable definition of money is it's the thing you pay your taxeswith.
Because once the government says you have to use this thing to pay yourtaxes, whether that thing is silver coins or cloth or dollars or paper money from theBonk-Jean-Archal, then everybody knows that at some point they're going to need to have that thing to pay theirtaxes.
When the Duke forced people to use John Law's paper money to pay theirtaxes, his paper bills became realmoney.
So France's economy is now running on the full faith and credit of JohnLaw.
So let's pause here for just a moment and go to Law's biographer Antoine Murphy for therecap.
He killed a man in ajewel.
He was sentenced to death and then he escaped fromprison.
So you wouldn't have expected a great monetary economist to develop from such afigure.
Depends on your views of monetaryeconomists.
I'm sure itis. I'm sure itis.
Yeah. Antoine Murphysays, John Law really believes that if you build an economyright, everybody can getricher, including but not limited to JohnLaw.
And so hethinks,okay, now that I have thebank, I'm going to go evenbigger.
I'm going to gointernational.
I'm going to create a company that will be bigger and better than any that has everexisted.
It will come to be called the Mississippi Company and log its the Duke to grant the company a monopoly on trade with all of France's territory in NorthAmerica.
It's literally half of the landmass of the current UnitedStates.
Not countingAlaska. AndLaw, once he gets to Mississippi Companymoving, he's sending ships over to North America and are coming in to a small little port in the Gulf ofMexico, which he says to theregion, we'll name afteryou.
And then we'll call it La Nouvelle Orchlear New Orleans and suddenly you have New Orleans named after theregion.
Now there is an important twisthere, atwist, atwist.
Then as now government debt was one of the most important parts of finance and of the economy as awhole.
England, France's rival had started this new kind ofbank, the bank of England that was helping it deal with governmentdebt.
And France also had this huge national debt from fighting all these wars againstEngland.
France had borrowed all thismoney, sold all these governmentbonds, and it's having a hard time making the interest payments on thebonds.
The national debt is just killing the Frencheconomy.
So law comes up with a plan to help the Duke to help France really solve its national debtproblem.
When he first sells stock in the MississippiCompany, law says to thepublic,okay, instead of paying for the stock withmoney, pay for it with governmentbonds.
You give me some of those bonds that the government isn't going to be able to pay back and I'll give you a share of mycompany, a share of all the riches in the newworld.
It is amazing how fast this ishappening.
This truly is one of those moments in the history of money when everything is happening all atonce.
Youknow, it's just17, 17 rightnow.
Not long ago France was a country where the king was melting down his forks to pay thebills.
Now inFrance, you can borrow papermoney, lend that to the government to get governmentdebt, and then trade that debt in to getshares.
In a multinational corporation that controls half of NorthAmerica.
And JohnLowe, by theway, gets a cut of all ofthis.
John Lowe's scheme isworking.
Paper money isworking.
It's easier for people to borrowmoney.
In thecountryside, farmers are growing morefood.
InParis, artisans are making more dishes andclothes.
And John Lowe in the Mississippi Company are taking over more andmore.
Essentially, all of France is foreigntrade, tobaccosales, the entire French nationaldebt, all flowing through John Lowe in the MississippiCompany.
If we can say that John Lowe created modernfinance, which he sort of did inways, then we can say that he also created the first modern financialcollapse.
The trouble started in Mississippi where the big plans were really not workingout.
As of1719, French settlers had built a total of four houses in NewOrleans.
Most of the people moving to the territory died of disease orstarvation.
The company does have tons of other businesses going by thispoint.
But the price of the company's stock is so high that all of the businesses put together are not enough to justifyit.
What ends up happening is lots of people sell their stock back to the company and laws bank prints more and more paper money to buy back thestock.
People start getting nervous now about lawscheme.
Only everybody wants to go to the bank and turn in their paper money for gold andsilver.
But once people started trying to convert their paper money into gold and silver problems arose because there wasn't enough gold and silver to paythem.
No,sorry, you can't havethat.
He had spent years promoting this dream of paper money and now it was allunraveling.
He starts kind of flailingaround, looking for ways to save hissystem, to save papermoney.
Because that by the end of theyear, paper money will no longer be redeemable for gold andsilver.
It will just bepaper.Oh, and by theway, the value of each paper bill will be half of what it isnow.
This was too much for the people ofFrance.
They flippedout. They took to thestreets.
They threw rocks through the windows of John Law'sBank.
The Duke Laws-Pow firedlaw, placed him under housearrest, and law fledFrance.
Just like he fled England decadesearlier.
The Duke and France gave up on paper moneyaltogether, went back to gold and silvercoins.
John Law is remembered as afailure, as aconman.
Modern economists don't think of him as one of the great forefathers of theirfield.
But our world today looks a lot like what he hadenvisioned.
Mary Childs and Jacob Goldstein from2020.
This story appeared in Jacob's bookMoney, The True Story of a Made UpThing.
After thebreak, how John Law's big idea stayed with us to thisday.
And how some of the flaws in his system gotfixed.
How does the brain processmemories?
Why is AI a solution and a problem for ourclimate?
What is leadership in 2025 andbeyond?
The Ted Radio Hour explores the biggest questions and the most complicated ideas of our time with the world's greatestthinkers.
Listen now to the Ted Radio Hour fromNPR.
Allright, allright,class.
Time for discussion andanalysis.
Returning to the whiteboard is ourprofessor, RebeccaSpang.
Hello.Rebecca, I love this story because John Law had all the pieces of a modern financial systemgoing.
He was juggling it allfor, I don'tknow, two or threeyears, and then it blewup.
And yet today we do the exact samethings,paper,money,government,debt, riskyinvestments.
But now it seems to actuallywork.
What's thedifference?
So the key word I want to underline there isseams,right?
It seems to work today until itdoesn't.
And we never know when it's not going towork.
And so we continue to operate on the assumption that itwill.
And that's because it's no longernew.
It'sfamiliar. It's taken for granted that there's a Federal Reserve Bank that governments havedebt.
These are normal parts of theworld.
When John Law introducedthem, they werenew.
They wereshocking. Some historians have argued they wererevolutionary.
And so many people who didn't like this change opposed it and called the attention toit.
It is different when you have aninstitution, a government creatingdebt, companies who are investing a central bank that is producing money rather than some guy that you see at the gamblingtable.
Right,right,right. Part of the problem for John Law is that he already had a reputation as a gambler and aforeigner.
That sort of international playboy thing doesn't necessarily go very well with the senior banker position that he tried to craft forhimself.
I know you've written entire books on this and of course taught year-longcourses.
But give us a take home message that we can bring withus, a principle of money and banking that will allow us to understand theworld.
I think people tend to assume that money has value because of where it's comingfrom, because of what it's quoteunquote, backedby.
So people get a little freaked out when they'relike, you mean there's nothing backing thedollar?
I think that what really gives money its value isn't where it's come from but where it'sgoing.
Money has value as long as there's somebody who's willing to accept it fromyou.
And it's when thattransaction, that transaction into the future becomes more and morerisky, more and moreuncertain.
That's when we get a financialpanic, a monetarycrisis.
Before we finish up our lessons on summerschool, we like to leave the listeners with a sort of study guide on the big ideas we've coveredtoday.
We have of course the three things that economists say is needed to make somethingmoney.
Money should beone, a store ofvalue, which means that itlasts.
It's worth something in thefuture.
Money should betwo, a unit ofaccount.
Like a measuring stick for what something isworth.
And money isthree, a medium ofexchange.
You can use it to getstuff.
And in the more anthropologicalsense,Rebecca, you brought up the term prestige good when talking about the yapsstones.
What does thatmean? There are goods that basically cannot be bought and sold for ordinarymoney, but that nonetheless might sometimes changehands.
RebeccaSpank, thank you so much for being ourprofessor.
Professor for thisepisode.
Thank you for theinvitation.
Andstudents, I hope you were taking goodnotes.
We'll have a quiz at the end of the season and a not quite legal diploma for you if youpass.
No need to cram though because this year we also havevideos.
Our crack of planet money TikTok team will be instilling one economic lesson each week into an entertaining fewminutes.
You can find it in our show notes or by searching TikTok andInstagram.
Next time our planet money history of the world makes a stop at the black death and the industrialrevolution.
So bring your mask and your pitchforks because the workers of the world are mad as hell and they are not going to take itanymore.
Before we endtoday, we'd like to ask a favor ofyou.
We want to hear what you think of the work we'redoing.
You can find a short anonymous survey at npr.org slash pmsurvey.
All oneword. It takes less than 10 minutes and you do all of us a huge favor by filling itout.
You especially want to hear from people who haven't taken a survey before or are newlisteners.
Welcome. That's npr.org slash pmsurvey.
Planet money summer school is produced by AudreyDilling.
Our project manager is DevonMiller.
This episode is fact checked by Sophia Schuchana and engineered by SinaLaFrada.
Planet money's executive producer and our editor today is AlexGoldmark.
We will be back with summer school every Wednesday until Labor Day and you can find your brand new episodes of regular Planet money onFridays.
I'm RobertSmith. This isnpr.
Thanks forlistening. In the1950s, paranoia gripped thenation.
Are there homosexuals in governmentagencies?
And do they pose a threat to nationalsecurity?
There was almost no one who stood up to object toit.
Onnpr.Throughline. The lavenderscare.
Findnpr. Throughline wherever you get yourpodcasts.
You can't bring every book you own with you to thebeach.
So how the heck are you going to choose what to read thissummer?
NPR's book The Day Podcast has got you covered with author interviews from across the NPRnetwork.
You can find the right book for your next summerread.
