Episode Overview

Title: Money Is Made-Up
Podcast: Slate Money
Date: January 2, 2021
Host: Felix Salmon (Axios), with Emily Peck (HuffPost), Anna Szymanski (Breakingviews), and special guest Jacob Goldstein (Planet Money)
Main Theme:
The episode is a deep dive into the concept of money—what it truly is, its history, its connection to power and government, and how much of it is, as the title suggests, “made-up.” Special guest Jacob Goldstein (author of Money: The True Story of a Made-Up Thing) helps the panel explore everything from ancient systems of exchange to the fall of the gold standard, the function of central banks, fiat currencies, bitcoin and modern fintech, as well as the psychology of debt and mortgages.

Key Discussion Points & Insights

1. Money: A Collective Social Fiction

(00:49–03:07)

• Jacob Goldstein introduces his book title’s concept: money is a made-up thing—a fiction, much like law.
  • Quote [02:02] (Jacob Goldstein): "It's just fiction, like the law, which you also don't need to worry about."
• Money isn’t a naturally occurring substance; it's a social construct, remade throughout history.
  • Quote [02:26] (Jacob): "We often confuse money... with something that exists in nature... That is emphatically not true. Money is a thing that people made up... it's a collective social choice."
• The meaning: Money is foundational, but also malleable, and can change as society chooses.

2. The Myth of Barter and Origins of Money

(03:14–05:51)

• The long-told story that money grew out of barter (trading goods directly) is a myth; no pure barter society has been found.
• Early “money” rituals were deeply social and reciprocal, tied to maintaining relationships (e.g., bride price, compensation for wrongs, etc).
  • Quote [04:47] (Jacob): "Barter is this very kind of impersonal exchange. What anthropologists discovered instead... was this really complicated set of rules about giving and getting and reciprocity... those really seem to be the origins of money."
• This anthropological perspective means money should be viewed as fundamentally social rather than just economic.

3. Money as Debt, Memory, and Ledgers

(05:27–08:30)

• Historical systems like tally sticks in England were IOUs—physical representations of a debt relationship.
• Modern perspective: Money as memory or ledger—a record of transactions, not an object.
  • Quote [07:45] (Jacob): "If you want to be more boring about it, you could say money is a ledger... Your money in the bank is just a ledger. It's just a number on the bank's computer."

4. Money and Power: Gold Standard and FDR’s Revolution

(08:30–12:00)

• Money is power—always political, not just economic.
  • Quote [08:52] (Emily Peck): "Money is power and it's political. It's always political and it always has been."
• End of gold standard (FDR, 1933): Changed everything, shifting power from quasi-natural “rules” to political, human choices.
  • FDR faced immense skepticism (“the end of Western civilization”) when taking the US off gold, but was proved right.
  • Quote [09:23] (Jacob): “And they were wrong. And he was right... He knew... money was this set of political choices.”
• The gold standard illustrated the illusion that certain monetary systems are “natural,” showing instead they're contingent and subject to choice.

5. Trust and Faith in Government, and Money’s Political Nature

(12:00–14:22)

• Trust—not gold or law—is the foundation of modern money; governments’ capacity to command trust is key.
  • Transition from gold as an anchor for trust to the state itself.
  • Currency adoption often enforced by power (e.g., Kublai Khan’s “use it or else” policy).
• Historic examples reveal that power—when backed by state authority—can make (or break) monetary systems.

6. Money and Forms of Government: Democracy vs. Authoritarianism

(14:22–19:17)

• Is democracy essential for stable money?
  • Authoritarian states (e.g., the Inca empire) functioned without money via redistribution by the state.
  • Money emerges in societies too complex for barter, but not so centralized that rulers control all—e.g., ancient Greece (“proto-democracy”).
  • Quote [16:25] (Jacob): "If you have a very strong central ruler, you can actually get away without money. ... You need money... when individuals can exchange as they see fit... fundamentally democratic."
• The rise of the Bank of England (post-Glorious Revolution) illustrates how government structure shaped financial innovation—trust in institutions (not just monarchs) enabled complex money.
  • Parliament’s authority increased trustworthiness of state debt.

7. Central Bank Independence and Fiat Currency

(19:17–20:13)

• Central banks are designed as a check on democratic governments—to prevent monetary policy being manipulated for electoral or short-term gains.
  • Quote [19:42] (Jacob): "Classic worry... is when the president is up for reelection, [he’ll] print a bunch of money so that interest rates are low and businesses are hiring..."

8. Bitcoin, “True” Democracy, and Why Crypto Isn't Replacing Money

(20:13–24:52)

• Felix recounts a bet with venture capitalist Ben Horowitz on bitcoin adoption (“will 10% of people use bitcoin for purchases?”—they don’t).
• Discussion of bitcoin as “true democracy in money”—removing government control.
• Flaws in that logic: Governments control money and are unlikely to give up this power; most people aren’t looking for an alternative.
  • Quote [23:26] (Jacob): "Governments control money. That's the short answer."
  • Bitcoin is a clever technical innovation, but a solution to a problem most people don’t have; its value is a paradox.
  • Quote [24:52] (Jacob): "These two things... seem incompatible: nobody uses bitcoin to buy stuff [yet] people are willing to exchange more dollars for one bitcoin than ever."

9. Bitcoin, Government, and the Role of the State

(24:52–26:02)

• Gold standard shows the need for government flexibility to avoid “horrible things”; complete monetary hands-off isn’t feasible or safe.
• Bitcoin’s volatility (e.g., price doubling = theoretical deflation by 50%) makes it unworkable as everyday money: debts and wages would not adjust accordingly.

10. Historical Nightmares: The Free Banking Era in the US

(26:02–28:45)

• When US banks issued their own currency, it created chaos: thousands of notes, discounts for risky banks, logistical headaches.
• Some historians argue it functioned better than expected for a time, but wasn’t viable for a mobile, interconnected society.
  • Modern anecdote: Scottish banknotes still face acceptance problems outside Scotland.

11. Should I Worry About Bitcoin’s Value?

(28:45–30:16)

• Bitcoin is mostly harmless, used mainly for niche purposes (capital flight, ransomware), and not a threat to the existing monetary system.
  • It may aid fintech by reducing payment fees, but does not require a new currency for that.
  • Quote [29:51] (Jacob): "I don’t feel threatened by bitcoin... The people who dreamed it up wanted it to be a threat... That hasn’t happened."

12. The Mortgage Debate: Pay Down or Invest?

(30:37–36:49)

• Listener question: Should you aggressively pay down your mortgage?
  • Consensus: Max out retirement savings first (better return, tax-advantaged).
  • Behavioral reasons (emotional comfort with debt) can justify paying down mortgage.
  • Mortgage is “sticky”/illiquid—putting money into it makes it harder to access, which for some is an advantage.
  • American faith in equity returns plays a big role—less so in Europe.
  • Quote [32:13] (Jacob): "If it makes you really sad or scared to have debt, paying off debt seems not unreasonable."
  • Option: Refinance from a 30-year to a 15-year mortgage as a middle ground—only if it meaningfully reduces your interest rate and you’re staying in the home.

13. Numbers Round (Memorable & Lighthearted Facts)

(38:39–43:28)

• Anna: Spain is history’s biggest sovereign defaulter (13 times, all before 1882) [39:00–39:17].
• Felix: Reserve Bank of India = first central bank with 1 million Twitter followers; Jacob praises Jamaican Central Bank’s irreverent social media [39:26–40:04].
• Emily: Dr. Fauci takes only a single 20-minute break daily (work/life balance and money’s broader promise of “easier lives”—often unrealized) [40:17–41:11].
• Jacob: “2%” — the ratio of government interest payments to GDP, per Furman & Summers, matters more than total debt for assessing fiscal health; signals major thinking shift among economists [41:39–43:28].
  • Quote [41:47] (Jacob): "We have been thinking, we economists, about government debt all wrong... What we should care about is how much do we have to pay on that debt... If your total debt payments are under 2%... you're fine."

Notable Quotes & Memorable Moments

• "Money is a thing that people made up and have sort of remade up and remade up… a choice… something that has changed a lot over time and will continue to change." (Jacob, 02:27)
• “The barter story… is now called the myth of barter. Because it turns out, as far as historians, anthropologists have been able to figure out, that kind of pure barter society has never existed.” (Jacob, 04:01)
• "Money as memory is really elegant… If you want to be more boring about it, money is a ledger." (Jacob, 07:45)
• "Money is power and it's political. It's always political and it always has been." (Emily, 08:52)
• “Governments control money. That's the short answer.” (Jacob, 23:26)
• "Nobody buys anything with bitcoin. You won the bet. But bitcoin is still around, people are willing to exchange more dollars than ever for a bitcoin for reasons that are maybe somewhat mysterious..." (Jacob, 21:11)
• "The point of money is to be able to do things you want to do… if what you want to do is live in a house that you own and don't owe anybody any money on, do that with your money." (Jacob, 38:18)
• "We've had these years now of rising deficits but still low inflation and low interest rates. Maybe we should think about this differently." (Jacob, 43:16)

Timestamps for Key Segments

• [00:49] – Jacob introduces his book, Money: The True Story of a Made-Up Thing
• [03:14] – Myth of barter and early origins of money
• [05:27] – Tally sticks as IOUs and the connection between money and debt
• [07:45] – Money as memory/ledger; shift from physical to digital/record-based money
• [08:30] – Money as power, the politics of the gold standard, and FDR’s abolition of it
• [12:00] – Trust, faith, and government power in creating stable money; historical examples
• [14:47] – Democracy, authoritarianism, and money; ancient and modern perspectives
• [19:17] – Central banks, independence, and constraints on democratic monetary policy
• [20:13] – Bitcoin, Felix vs. Ben Horowitz bet, and limits of crypto as “people’s money”
• [24:52] – Gold standard vs. state-managed currency; bitcoin’s flaws as “real money”
• [26:02] – The chaos and lessons of America’s free banking era
• [28:45] – Is the value of bitcoin a threat? What does it actually do?
• [30:37] – Should you pay down your mortgage? Investment, psychology, and the American context
• [38:39] – Numbers Round: defaults, RBI Twitter, Fauci’s 20-minute break, and the debt interest/GDP threshold

Tone and Atmosphere

The conversation is witty, approachable, and lively, with the hosts and guest frequently poking fun at themselves, making complex ideas relatable, and using plain, clear language to draw listeners into what might otherwise be dry monetary theory. They punctuate the show with memorable historical anecdotes (tally sticks, the island of Yap, Kublai Khan’s threats about currency), making the abstract tangible and even amusing.

Summary Takeaways

• Money is a human invention—its forms, rules, and function have changed and will keep changing.
• It’s not “real” in a material sense, but has real consequences, precisely because of collective belief and the powers that enforce or uphold it.
• Government and power have always been at the core, from ancient despots to democratic institutions and independent central banks.
• Bitcoin and private currencies highlight the limits of escaping government power in money—innovation is possible, but social buy-in and state power remain crucial.
• The old debates around debt, saving, and investing persist, infused with cultural and psychological dimensions—from American optimism about equity returns to generational anxiety about debt.
• Modern economists are rethinking the real risks of government debt, focusing more on sustainability (interest payments as % of GDP) than scary gross debt numbers.

This episode is a sweeping, engaging crash course on what money really is—tangible, malleable, and always defined as much by politics and society as by economics or technology.