The Historical Evolution of Money and Debt

Sep 11, 2012


This seminar will explore the social structures that have historically underpinned debt and money systems, and apply insights gleamed from them to our contemporary economic problems.


  • ROHAN GREY: Seminar Introduction 0:00
  • WILLIAM V. HARRIS: Opening Moderator Remarks 3:07
  • L. RANDALL WRAY: Presentation: L. Randall Wray 4:45
    • L. RANDALL WRAY: Introductory “Quiz” on Sovereign Currency 5:10
    • L. RANDALL WRAY: Basics of Sovereign Currency 7:41
      • L. RANDALL WRAY: “The government can never run out of dollars. It can never be forced to default.” 7:57
      • L. RANDALL WRAY: Paul Samuelson on the “Old Time Religion” of Deficits 9:09
    • L. RANDALL WRAY: The Modern Money Framework 10: 15
      • L. RANDALL WRAY: Are these things money? – Ancient accounting systems 10: 38
      • L. RANDALL WRAY: Tally Sticks 11: 27
      • L. RANDALL WRAY: Contemporary money: records of credits and debits 12:01
      • L. RANDALL WRAY: “What is money? A social unit of account. And almost always a state unit of account.” 12:23
      • L. RANDALL WRAY: Minsky: Anybody can create money…The problem lies in getting it accepted. 13: 20
    • L. RANDALL WRAY: What Backs Up Money? 14: 07
      • L. RANDALL WRAY: “Use of currency and value of ‘M’ are based on the power of the issuing authority, not on intrinsic value.” 15:35
      • L. RANDALL WRAY: The purpose of creating a monetary system was to move resources to the public sector. 16: 10
      • L. RANDALL WRAY: Taxes Drive Money 16:45
      • L. RANDALL WRAY: The modern government spends through keystrokes. 17:31
      • L. RANDALL WRAY: Why does the government sell bonds? 18:40
      • L. RANDALL WRAY: Deficit spending net credits reserves. 19:19
      • L. RANDALL WRAY: Bonds drain excess reserves. 19:40
      • L. RANDALL WRAY: Bonds are monetary operations, not part of fiscal operations. 20:18
    • L. RANDALL WRAY: Central Bank Operations 20:18
      • L. RANDALL WRAY: Central banks always operate with an overnight interest rate target. 20:53
      • L. RANDALL WRAY: The central bank sets the interest rate through open market operations. 21:17
      • L. RANDALL WRAY: Non-sovereign currencies cannot set the interest rate. 21:48
    • L. RANDALL WRAY: Policy Implications 22:25
      • L. RANDALL WRAY: Abba Lerner and Functional Finance 22:26
      • L. RANDALL WRAY: Self imposed government spending restraints (budgeting process, debt limits) 23:40
      • L. RANDALL WRAY: Monetary operations cannot create net credits. They can only drive the interest rate to zero. 26:08
    • L. RANDALL WRAY: The Euro: A non-sovereign currency 27:19
    • L. RANDALL WRAY: Conclusions and Caveats 28:35
  • WILLIAM V. HARRIS: Audience Questions to L. Randall Wray 32:05
    • AUDIENCE: Question on the purpose of servicing national debt interest. 32:30
      • L. RANDALL WRAY: Answer: Currency is non interest paying debt. Bank reserves are central bank debt. 33: 27
      • L. RANDALL WRAY: The government offers interest bearing debt to hit the overnight interest rate target. 35: 50
      • L. RANDALL WRAY: “The government cannot sell those bonds unless you already have government debt to buy them. ” 35: 58
    • AUDIENCE: Question: Does interest bearing government debt redistribute wealth? 39:15
      • L. RANDALL WRAY: Policy implications depend on who holds the debt. 39:35
    • AUDIENCE: Question: Why does the government sell debt to foreigners? 40:25
      • L. RANDALL WRAY: Foreigners accumulate dollar denominated reserves. Offering them interest bearing assets is a policy choice. 40:50
  • MICHAEL HUDSON: Presentation: Michael Hudson 43:40
    • MICHAEL HUDSON: Introduction: Historical and Neoclassical Visions of Money 43:41
    • MICHAEL HUDSON: Roots of surplus, credit, and money in ancient Mesopotamia 47:30
      • MICHAEL HUDSON: Sumerian institutions as sources of employment, economic coordination, social insurance, and interest 50:00
      • MICHAEL HUDSON: Legally set exchange rates denominated in grain and silver 51:50
    • MICHAEL HUDSON: Debt annulment as an ancient economic necessity 54:00
      • MICHAEL HUDSON: “There was a general understanding that the debts tended to grow faster than the means to pay.” 54:55
      • MICHAEL HUDSON: Babylonian understanding of interest rates relative to agricultural yields 56:00
    • MICHAEL HUDSON: Roman economic oligarchy: violence to enforce debts 58:00
    • MICHAEL HUDSON: Medieval era and the emergence of public debts 59:00
    • MICHAEL HUDSON: The modern era and “debt oligarchy” 1:01:00
    • MICHAEL HUDSON: “Money is debt deflation” 1:02:25
    • MICHAEL HUDSON: “99% of money” is spent on asset purchases, not goods and services. 1:09:12
  • WILLIAM V. HARRIS: Audience/Moderator Questions 1:09:40
    • WILLIAM V. HARRIS: Question: Is there any difference between money and wealth? 1:11:50
    • MICHAEL HUDSON: Answer: Real wealth can be tangible means of production. Financial wealth is not real wealth. 1:12:00
    • AUDIENCE: Question: How and when will the Euro debt problem be resolved? 1:13:30
    • MICHAEL HUDSON: Answer: Debts that can’t be paid won’t be. The question is how to deflate the debts. 1:14:25
    • AUDIENCE: Question: Why doesn’t the political discourse acknowledge this understanding of public debt? Why are we worried about Chinese bond-holders? 1:16:30
    • MICHAEL HUDSON: Answer: The US has an interest in providing financial assets to foreign investors who help finance American military spending (the chief source of the deficit). 1:17:35
    • AUDIENCE: Question: Is a money and credit based system good? Could we base a global monetary system on carbon control? 1:20:50
    • L. RANDALL WRAY: Answer: We don’t claim sovereign currency is the ideal system. But it may be the best system now, given the difficulties of international coordination. 1:24:00
    • AUDIENCE: Question: Is China’s accumulation of dollar denominated assets rational? Why don’t they invest in raising their standard of living? 1:26:32
    • MICHAEL HUDSON: Answer: It is a security measure. And it gave the West financial incentive to provide China with a technological base for industrial development. 1:27:18
    • AUDIENCE: Question: How would you explain a currency crisis? How does power of the issuer determine currency value? 1:29:00
    • L. RANDALL WRAY: Answer: We confined our presentation today to free floating sovereign currencies. Currency pegs complicate this analysis. Fixed ex 1:29:40
    • L. RANDALL WRAY: Currency pegs reduce policy space. 1:30:45
    • AUDIENCE: Questions: Does a sovereign country need global cooperation to pull out of a recession? How does paying interest on reserves affect the need to sell bonds? What if banks don’t want to buy bonds? Who were the winners and losers of Nixon closing the gold window? 1:32:10
    • L. RANDALL WRAY: Answer: A sovereign nation can buy anything affordable in its own currency. You can certainly employ the unemployed. You could conceivable still have poverty or hunger. 1:32:20
    • L. RANDALL WRAY: Answer: It’s okay if banks don’t want to buy bonds. It means they’re happy to hold reserves. We in fact require certain banks to buy bonds when the government offers them. 1:32:50
    • MICHAEL HUDSON: Answer: We closed the gold window because of the Vietnam War. We devised a system to force people to use US Treasuries instead. It was imposed under the threat of military force. 1:34:56
    • L. RANDALL WRAY: Answer: Interest on reserves provides a floor to the overnight lending rate. 1:37:15
    • WILLIAM V. HARRIS: Closing Moderator Remarks 1:38:20


Michael Hudson
The Institute for the Study of Long-Term Economic Trends
L. Randall Wray
Professor of Economics and Research Director
Center for Full Employment and Price Stability at the University of Missouri-Kansas City
William Vernon Harris
Professor of History and Director of the Center for the Ancient Mediterranean
Columbia University
William Vernon Harris
Professor of History and Director of the Center for the Ancient Mediterranean
Columbia University

Core Reading

Money: An Alternative Story

Tymoigne, Eric, and Randall L. Wray Money: An Alternative Story. Kansas City, MO: Center for Full Employment and Price Stability, 2005.


Michael Hudson

A Short History Of Debt

Hudson, Michael A Short History of Debt., 2012.

MMT-MCT Fields Institute Seminar On The History Of Money

Hudson, Michael MMT-MCT Fields Institute Seminar on the History of Money., 2012.

Productivity, The Miracle Of Compound Interest And Poverty

Hudson, Michael Productivity, The Miracle of Compound Interest and Poverty., 2012.


Debts That Can’t Be Paid, Won’t Be

Hudson, Michael Debts that can’t be paid, won’t be., 2012.


Democracy And Debt

Hudson, Michael Democracy and Debt., 2011.


The Mathematical Economics Of Compound Rates Of Interest: A Four-Thousand Year Overview

Hudson, Michael The Mathematical Economics of Compound Rates of Interest: A Four-Thousand Year Overview., 2004.


The Lost Tradition Of Biblical Debt Cancellations

Hudson, Michael The Lost Tradition of Biblical Debt Cancellations. New York, NY: Henry George School of Social Science, 1993.


L. Randall Wray

Introduction To An Alternative History Of Money

L. Wray, Randall Introduction to an Alternative History of Money. Working Paper. Annandale-on-Hudson, NY: Levy Economics Institute of Bard College, 2012.


Money In Finance

L. Wray, Randall Money in Finance. Working Paper. Annandale-on-Hudson, NY: Levy Economics Institute of Bard College, 2011.


Banking, Finance, And Money: A Socioeconomics Approach

L. Wray, Randall Banking, Finance, and Money: A Socioeconomics Approach. Working Paper. Annandale-on-Hudson, NY: Levy Economics Institute of Bard College, 2006.


A Chartalist Critique Of John Locke’s Theory Of Property, Accumulation, And Money: Or, Is It Moral To Trade Your Nuts For Gold?

Bell, Stephanie A., John F. Henry, and Randall L. Wray A Chartalist Critique of John Locke’s Theory of Property, Accumulation, and Money: or, is it Moral to Trade Your Nuts for Gold? . Review of Social Economy, 2004.


The Neo-Chartalist Approach To Money

L. Wray, Randall The Neo-Chartalist Approach to Money. Center for Full Employment and Price Stability, 2000.


Related Materials

Posts On The Origins Of Money

Anon., aka Lord Keyne Posts on the Origins of Money., 2012.


Coin Reconsidered: The Political Alchemy Of Commodity Money

Desan, Christine. “Coin Reconsidered: The Political Alchemy of Commodity Money.” Theoretical Inquiries in Law. 11.1 (2010).


What Is Debt? – An Interview With Economic Anthropologist David Graeber

Pilkington, Philip, and David Graeber What is Debt? – An Interview with Economic Anthropologist David Graeber. Naked Capitalism, 2011.


The Two Concepts Of Money: Implications For The Analysis Of Optimal Currency Areas

Goodhart, Charles A. E.. “The two concepts of money: implications for the analysis of optimal currency areas.” European Journal of Political Economy. 14 (1998): 407-432.


Money As A Creature Of The State

Lerner, Abba P.. “Money as a Creature of the State.” The American Economic Review. 37.2 (1947): 312-317.


What Is Money?

Innes, Mitchell. “What is Money?” The Banking Law Journal (1913).


The Credit Theory Of Money

Innes, Mitchell. “The Credit Theory of Money.” The Banking Law Journal,. 31.Dec./Jan. (1914): 151-168.