What is the relationship between money and things? Why do people so often get those two things confused? And what effects does that confusion have for those of us who have to navigate this world of money?

Okay.

Thanks very much, Tom, for having us.

Um, yeah, so we really kind of, uh, spend some time on this in the introduction.

Um, as you said, you know, there are these two worlds, um, the world of money and the world of things, and for a long time, the book was called Money and Things.

Uh, and the question that this book asks is: what's the relationship between those two worlds? And really, the dominant answer in economics for, you know, 250 years is that there's really only one world, the material one, and money is, as they say, just a veil over it.

You know, a kind of shorthand.

Uh, why is debt foundational? That is, why does it come first in, uh, our understanding of money?

What is the relationship between money and things? Why do people so often get those two things confused? And what effects does that confusion have for those of us who have to navigate this world of money?

Okay.

Thanks very much, Tom, for having us.

Um, yeah, so we really kind of, uh, spent some time on this in the introduction.

Um, as you said, you know, there are these two worlds, um, the world of money and the world of things.

And for a long time, the book was called Money and Things.

Uh, and the question that this book asks is, what's the relationship between those two worlds? And really, the dominant answer in economics for, you know, 250 years is that there's really only one world, the material one, and money is, as they say, just a veil over it, you know, a kind of shorthand.

Uh, why is debt foundational? That is, why does it come first in, uh, our understanding of money?

What is the relationship between money and things? Why do people so often get those two things confused? And what effects does that confusion have for those of us who have to navigate this world of money?

Okay, thanks very much, Tom, for having us.

Yes, we really kind of spent some time on this in the introduction.

As you said, you know, there are these two worlds, the world of money and the world of things.

And for a long time, the book was called Money and Things.

And the question that this book asks is, what's the relationship between those two worlds? And really, the dominant answer in economics for 250 years is that there's really only one world, the material one.

And money is, as they say, just a veil over it, a kind of shorthand.

Why is debt foundational? That is, why does it come first in our understanding of money? Well,

What is the relationship between money and things? Why do people so often get those two things confused? And what effects does that confusion have for those of us who have to navigate this world of money?

Okay, thanks very much, Tom, for having us.

Yeah, so we really kind of spent some time on this in the introduction.

As you said, there are these two worlds, the world of money and the world of things.

And for a long time, the book was called Money and Things.

And the question that this book asks is, what's the relationship between those two worlds? And really, the dominant answer in economics for 250 years is that there's really only one world, the material one.

And money is, as they say, just a veil over it, a kind of shorthand.

Why is debt foundational? That is, why does it come first in our understanding of money?

What is the relationship between money and things? Why do people so often get those two things confused? And what effects does that confusion have for those of us who have to navigate this world of money?

OK, thanks very much, Tom, for having us.

Yes, we really kind of spent some time on this in the introduction.

As you said, there are these two worlds, the world of money and the world of things.

And for a long time, the book was called Money and Things.

And the question that this book asks is, what's the relationship between those two worlds? And really, the dominant answer in economics for 250 years is that there's really only one world, the material one.

And money is, as they say, just a veil over it, a kind of shorthand.

Why is debt foundational? That is, why does it come first in our understanding of money?

Uh, why is debt foundational? That is, why does it come first in, uh, our understanding of money?

Well, um, I'm not sure it comes first.

Well, it's two things.

One is that we think of money very much in, in what we might call a credit theory of money.

So money is just an, a form of, of credit, and where the line between money and credit happens is actually a historical exercise.

Now, uh, chronologically in our book, we start with debt.

We could have started with something else, partly because that's where we started to actually do our own work on, on this particular topic, right? So, um, uh, when we were, when we were working, uh, in, you know, I think about 2010, 2012, the big question that was there in, um, the US economy was, you know, uh, the question of household debt and, you know, the consequences of the, the, the financial crisis, which was, which itself was predicated on this rise in, in household debt.

Um, how is it that we misunderstand capital, and how is it, if I understand correctly, a form of power?

What do you mean?

Yeah.

So maybe I can start, and Josh, you can jump in.

So one of the, uh, shall we say, myths of economics is that the system is planned such that money chases profits, chases, uh, returns, and, uh, it's, it's going to its best use.

People all over the, uh, financial system are trying to put it to its best use, given the underlying technologies and the underlying expectations of how profitable, you know, an, a firm is going to be or, or an industry is going to be.

But from our point of view, you know, it's often the case that money actually makes possible in a very fundamental way, those industries in the first place.

And just to give you an example, everyone's favorite current industry, AI, it's in no way currently profitable, and if you look at the unit cost, it's very hard to see how it would be possible.

But why are you skeptical of that use of the real?

And maybe Arjun, you want to talk about a little bit, because one of the ways we came into this was thinking about the rise of household debt in the United States, which has been a big story in the past 10 or 20 years.

Right.

So one of the things that we were really interested in is to Now, there's another version of that in which you could say the reason they were borrowing so much is because prices were high and their wages were low.

Exactly.

So you could say that it was because of inequality and you could have a much more, shall we say, sympathetic view to that.

Or you could have a view, let's say, more from the right that it was profligacy.

But in both cases, the commitment was to the idea that there was more borrowing than the means to support that borrowing.

But Why are you skeptical of that use of the real? Maybe I can start because

Mm-hmm.

All right? So this might seem like just extremely arcane stuff, but what does it turn out? It turns out that often it's not the question, the, the rise in debt to income ratios is not about borrowing.

It's not about profligacy.

It's simply about interest rates being very high relative to inflation.

So, you know, w- so and that, that can actually lead to much more impactful, um, changes in your debt to income ratio.

And that in fact, was really kind of central to the European story.

So if you want to say something where misunderstanding, you know, what causes changes and assuming that it's borrowing rather than, you know, just kind of changes, um, and evolution of, of monetary variables leads you to undertake really, really bad decisions, which is, you know, austerity, uh, through and through leads to a generation of people losing, you know, a- any capacity for, for increasing their wealth, and of course, all the political, uh, nastiness that follows.

People who oppose price regulation will almost always implicitly or explicitly say, "Well, you know, the price is just the cost of production, and if you limit the price, you're gonna get less stuff." But again, although that is true in some cases, we should really be conscious of the fact that it's much less true than, than the textbooks would have us believe.