Book review: Money

In 1998, I went to Moscow for the first time to speak at a summer course sponsored by the Russian Academy. The week before I went, we were on vacation and one morning, I heard the NPR reporter say: “Today, the Ruble lost 100% of its value.” That, of course, would mean that the Russian currency was completely worthless. The next day, she apologized and explained that the Ruble had lost 50% of its value, not 100%, which was only slightly less alarming.

I went anyway, and had a good time. I brought a couple hundred dollars worth of Deutchmarks that I had lying around from a previous trip and were useless in America, and exchanged them for Rubles. The whole thing was an introduction to the fiction that is money.

This idea is imbedded in the title of Jacob Goldstein’s book “Money: The true story of a made-up thing.” The book is a rapid romp through the history of money in human society, from cowrie shells, through metal coins, to paper and digital currency, to Bitcoin. Goldstein is a breezy writer who doles out just enough detail to make his points without the esoteric argot of economics. Analogies and metaphors do much of the heavy lifting. Goldstein is good with history and personalizes it with names of people and places. There’s a lot of white space and some unnecessary figures that give this extended essay the heft of a book.

The idea that money is just a polite fiction is one that more people need to appreciate. Numerous economic crises throughout history testify to the consequences of reifying this abstract concept as tulips or precious metals. As I learned in 1998, money means what everyone says it means, until it doesn’t. As long as there’s general agreement, money can serve as a store of value. When that agreement fails, the assumptions that flow from that—debt payment, equities, contracts—fly out the window, fortunes disappear and chaos reigns. Yet we continue to trust and use money, because nobody has invented a better medium of exchange. Here in America, we take the dollar for granted, in part because it is the world’s reserve currency. But that global confidence rests of belief; the belief that the US government, which creates and destroys dollars every day with computer keystrokes, will have the fiscal discipline to ration dollars when necessary and to flood the marketplace with dollars when necessary. When that confidence fails, something else will fill the vacuum. The renminbi? Stay tuned.

Rebecca and Anna gave me this book for Christmas, and I’m glad they did. It isn’t a substitute for a course in economics or finance, but what it lacks in detail it makes up in lucidity. I recommend it.