Episode 69 – A Legal Framework For a Digital Future with Rohan Grey

Macro N Cheese – Episode 69
A Legal Framework For a Digital Future with Rohan Grey

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Rohan Grey [intro/music] (00:00:00):

But one of the reasons why we didn’t focus on kind of means testing it or only giving it to only the most needy at this point is because in the middle of a crisis like this, the most important thing is to get it to everybody. Your car is one big computer. Your kettle is one big computer. We have a phone in our pocket. You know, we don’t need robots. The robot’s in our pocket. We just carry the robots around. [inaudible].

Geoff Ginter [intro/music] (00:00:40):

Now let’s see if we can avoid the apocalypse all together. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

Steve Grumbine (00:01:34):

This is Steve with Macro N Cheese. Our organization, Real Progressives, hosts a monthly national outreach call with an MMT economist, historian, lawyer, or scholar, who gives a presentation to the live audience. In March, our guest speaker was our great friend, Rohan Grey, founder and president of the Modern Money Network.

We invited him to talk to us about the politics of digital currency, what he calls the battle for the soul of public money. He also spoke about his work with Rashida Tlaib on an emergency relief bill that was designed to get financial assistance to those who most need it during the COVID-19 crisis. So the format of this episode is a bit of a departure because it’s not an interview, but the content is as interesting and important as you’ve come to expect from Macro N Cheese.

So with that, let me present to you the podcast. Enjoy! Rohan, thank you so much for joining us tonight. And I can’t say enough good things about you, man.

Rohan Grey (00:02:35):

Well, thanks, and thanks for having me. And, you know. Mutual. It’s always great to be here. Always happy to support Real Progressives. And once again, it’s been a ongoing partnership and really appreciated all of Real Progressives’ help, particularly the last conference. And thanks everyone for making the time on a Wednesday night.

So basically to start with, and there’s a bit of a preamble, this bill I’ve been working on with Rashida Tlaib came as a result of some other work. I’ve been working with her office on regulating stable coins, which are a form of digital currency. Basically the idea of the word stable coin there is that it’s supposed to be tied to a stable amount of government money.

So if you think about your bank account, one of the reasons why your bank account looks like regular government currency, like paper money or something, is because everybody knows that a dollar in your bank account is going to be worth a dollar that’s because of things like deposit insurance and the central bank supporting the banking system and all of those kinds of legal support to basically make bank money a sort of delegated form of public money or a franchised version of public money as my advisor, Robert Hockett, would say.

So I was working with her on that bill and I met the staffer from Rashida Tlaib’s office through working with Ayana Presley on some stuff related to job guarantee legislation, which should hopefully be coming down the pipeline, so watch that space. But when we started talking about sort of broader issues and just sort of brainstorming a little bit, they were mentioning they were working on a automatic fiscal stabilizer bill; that is to say something where if there is a recession or if unemployment goes up –that rather than waiting for Congress to pass an emergency bill and all of the kind of resultant rigamarol like we’re seeing right now– that something would just automatically kick in and stop that.

And they were working on cash relief. But I obviously said you should definitely consider a job guarantee as a key part of any automatic stabilizer. And one of the other things they said is one of the challenges that we’re having is how to get this money to people. You know, how to get money very quickly in an emergency to people.

What does that look like when roughly 20% of the population in America is unbanked? A lot of them site that one of the major reasons for being unbanked is that they don’t trust banks. So it’s not just they don’t have access to the banking system; they actually don’t want a bank account. And also a lot of people are undocumented or homeless or don’t have a regular address that they could receive a check. So it’s very difficult to get money to people in the middle of a crisis.

So we started brainstorming and what we came up with was this proposal called the Automatic Boost to Communities Act, which is a sort of development of another proposal that the Congresswoman had put together called the Boost Act, which was more about sort of regular income in normal times. And you know, anyone who knows me knows I’m not a huge fan of universal basic income.

I much prefer a combination of universal basic services and a job guarantee and a guaranteed income for people who can’t work or shouldn’t work or things like that. But in this context, in the middle of a crisis, we’re dealing with people who’ve lost their incomes, lost their jobs who are going to have all sorts of expenses they weren’t expecting to have. And part of dealing with that crisis means providing emergency cash support.

So the idea behind this bill is not to sort of become a backdoor, universal basic income but, you know, often MMTers say, you know, we don’t want to not give money to people who are poor. That’s not the point, but there is still, you know, deep substantive, structural reasons to oppose a UBI. But this is a great moment to say, look, we still have those concerns, but we are not heartless people who don’t want to give money to poor people.

And this is a moment where actually people really need support. And if we only focus on things like unemployment insurance or expanding existing welfare, there are going to be millions of people who are gonna fall through the cracks. And this is exactly the kind of crisis moment that we can’t afford to leave people behind. So we developed this proposal with an overriding goal of being universal, being emergency.

And when we say emergency, we don’t mean sort of one month and one initial payment and it’s over, like, you’re seeing a lot of the House Bills right now, or the Senate Bill proposing is a one-time payment. We’re proposing $2,000 a month to everybody. And that includes people who are not citizens. That includes people who are homeless, that includes children.

So families who’ve got expenses related to dealing with their kids at home and things will have additional support rather than saying $2,000 to adults and only a thousand dollars for kids. There’s actually sort of unique reasons why we want to be supporting kids as well at this point. And we designed it in such a way as to fund it through the idea of minting the coin, as people said earlier, you might have remembered the idea of the trillion dollar platinum coin was first proposed by a lawyer named Carlos Mucha.

He goes under the online name Beowulf, and he first proposed it online in his blog actually. And it was designed as a legal kind of work around to the debt ceiling, the debt ceiling crisis of the way of saying actually the government doesn’t have to default, even if the Republicans won’t agree to a budget bill, that the payments can continue to go out. Even with the existing silly budget laws that we have that say the treasury can’t run an overdraft on its account.

And MMT knows that those are just silly accounting rules. They’re not sort of some fundamental constraint. But the idea of the coin in that context was to provide a legal work-around so that the government didn’t have to either default or violate the constitution by ignoring the debt ceiling or anything like that. I actually wrote a long paper on it. It’s quite dense.

It’s a law review article called “Administering Money: Coinage Debt Crises and the Future of Fiscal Policy,” which is coming out and you can find it on SSRN if you’re interested. And when the time came to look at this proposal, one of the things that we saw was that Maxine Waters, the House Democratic Chairwoman of the House Financial Services Committee, which Representative Tlaib, Representative Ocasio-Cortez, Representative Pressley are all members of that committee.

And they do things like oversee the Federal reserve and deal with various forms of financial regulation. Maxine Waters had proposed a much larger relief bill that includes things like , you know, debt relief, expense relief, support for state and local governments, all of which are very important for this crisis.

But she had included the concept of money finance fiscal policy, and those words were sort of a big kind of opening for us because actually when they said money finance fiscal policy, what they really meant was that the government would issue Treasury debt like it normally does and the Fed would buy up that debt. And from my point of view, that’s regular kind of quote-unquote “debt-financed fiscal policy plus some QE quantitative easing.”

So what I said to the staffers was, you know, actually, if we wanted to do real money finance fiscal policy, the Treasury has the legal power right now to issue its own coins. And it can fund fiscal policy directly. It doesn’t need to rely on the Fed. It doesn’t need to sort of go begging with its hand out. Or we don’t need to say the Fed is supporting the Treasury or, you know, sort of lending its balance sheet to the Treasury; or that some people like to call cash transfers to people “helicopter drops” because they think of it as a monetary policy tool — something central bankers do rather than something the fiscal policy administrations do.

And so the idea of using the coin here was not because it’s sort of economically any different from regular deficit financing. Every MMTer knows it’s all the same thing, whether it’s government bonds or government cash, it has the same effect on the economy. They’re all net financial assets, but the effect is to make very clear to the public that we are not relying on the Fed. We are not going into debt to our grandchildren, and we are not going to deal with any of this bullshit, frankly, about how you’re going to pay for it.

And what we saw in 2008 was right after the crisis, right after the depths of the crisis, there was a big backlash. There was the Tea Party. There was the Simpson-Bowles Deficit Reduction Commission. And these were a kind of reactionary response to all of the spending that occurred in the crisis. And you saw these people talking about, you know, we’ve added trillions to the national debt and all of this kind of stuff.

And obviously as MMTers that stuff is stupid, but we didn’t want in this crisis moment for it to be more fuel for those reactionary right-wing movements. And while I would love for everybody in the whole country to suddenly understand the difference between debt and money it’s not that real. In reality, we haven’t won that fight completely yet. We haven’t sort of declared victory and move on. And what the coin does is provide a very simple, clear, publicly-understandable idea.

And it comes with a hashtag, you know, it comes with an online movement who can back it up to explain to people that this is real money finance. It’s not Fed-supported financing. It’s the Treasury using its own intrinsic money power, which the mint has had since the birth of the American Republic. The mint is the oldest monetary institution in the United States government. The Treasury financed itself long before the Federal Reserve ever came into existence.

So often people who don’t understand MMT will say that the Fed is the entity that creates money. But of course –at the very least — the Treasury and the Fed have always shared that authority and shared that power within the institutional structure of the US government. And the point is to make it as simple as possible. So in the same way, as we made it as universal as possible — when we say everyone, we meant everyone — we make this as simple as possible in terms of the finances.

And of course, it’s not like we’re talking about a 10-ton coin of platinum or anything like that. The metal is irrelevant. The token is irrelevant, but it’s very clear to people that this is not about borrowing from our grandchildren. This isn’t about some complicated institutional interplay between the Treasury and the Fed. This is about as simple as we can get.

And the idea of doing this was to kind of open the door to this larger discussion about other things: we could fund other things, as simply as we fund it this way. You know, MMT would say we already are funding it that way, but that doesn’t mean the institutional structure we have today is particularly well-designed. It’s very clear to people.

And if I sort of said the straightest way to get from point A to point B is a straight line and somebody said, well, actually, what if we kind of go around here and then back down and then over here and then up into this corner and then turn around a few times and close our eyes and jump into a hole, you’d say, well, that’s silly. Why don’t we just go from point A to point B?

And this is an example of trying to do that in a very simple way, without sort of making our enemies have more ammunition to say this is violating Federal Reserve independence or any of that, kind of, how the money is going to be distributed because that gets into the digital currency in a second. But before I do, I just want to make one more point is that this is designed as emergency cash flow, but this is not at all intended to be a one bullet to fit everything.

There are a huge number of additional support services we need. We need expanded unemployment insurance like Sen. Sanders has been fighting for. We need expanded welfare benefits in general. We need a moratorium on rent, on credit card payments, on student debt, on healthcare payments, all those kinds of things. We need national health care. We need a job guarantee, but as Pavlina Tcherneva has been arguing, we need a real kind of mass mobilization and restructuring of the whole economy on the other side of this crisis.

We can’t simply try to fix it with one policy or even just with the immediate response to the crisis. The other thing about that, and we put it in the bill, is that this should be accompanied by long term progressive tax reform so as to ensure that the rich, who don’t need these checks or these prepaid cards that we continue to talk about, don’t simply get more rich at the backend. But one of the reasons why we didn’t focus on kind of means testing it or only giving it to the most needy at this point is because in the middle of a crisis like this, the most important thing is to get it to everybody.

And the minute you start talking about giving it to some people and not others, you are going to cut some people out, some people who need it are going to fall through the cracks. And from our point of view, there is going to be a need for a massive reckoning on the other side of this crisis in terms of wealth and income inequality and in terms of the power structure over the economy.

The amount of free kind of support that’s going to banks and going to corporations and things like that right now, we need to deal with all of those in a comprehensive manner. So rather than try to say this one proposal is going to be inequality neutral, and then say well that’s fine, we’ve solved everything. What we’re trying to say is, look, maybe this policy is going to be over-inclusive because that’s what we need to do in a crisis. But on the backend, we need to fix this and any other thing that comes from this crisis to ensure that it doesn’t further induce inequalities of wealth, income, and power.

So very quickly, ’cause somebody asked a question, first of all there may be other laws on the books with Canada. I don’t know exactly what the law about the platinum coin is equivalent in Canada. I know that, for example, Canada has the Treasury. You’d be able to sell debt directly to the central bank, which as I said earlier is not my favorite way of doing this because it’s still too convoluted and confusing, but Canada could pass a law and say we can mint the coin there as well.

I mean, you know, if you’re going to pass new legislation you can definitely do it that way. So to be clear, when we talked about this, one of the things that came up in the past debate over the platinum coin was whether it was legal under existing law for the Treasury to do it in a crisis. And some people said, well, it would go far beyond what the point of that coinage law originally was.

That is not a problem in this context, because we are talking about passing new laws, saying that Congress will tell the Treasury to do this and tell the Fed to do this. So it’s not a situation where there’s any concern of a power grab or anything like that by Treasury. Congress has absolute power to do this and passing this law would make that extremely clear. So Canada could do this as well.

With regards to universal basic services, what I mean by that is right now, there’s a sort of marketization framework — a neoliberal framework — that says, you know, the best way to provide stuff to people is to give them cash and let them buy stuff in the market. Now, as an MMTer and as a Leftist, I’ve never believed that. I always think that compared to school vouchers, public schools are the right way to go.

Compared to a kind of health savings account, Medicare for All is the right way to go. Compared to, you know, Disneyland gift cards, public parks are the right way to go. So provisioning public services directly that are free and universal to people is always superior to giving them cash. Now in the middle of a crisis like this, it may not be possible to suddenly transform all of those things overnight, which is why we’re providing cash support.

And secondly, a lot of people are using this cash not just to make consumer payments but to pay down debts and financial expenses that, again, might not be canceled or put on hold immediately. So the point of providing cash here is not to give the impression that we only want to, you know, further market production because certainly Congresswoman Tlaib doesn’t believe that, and I don’t believe it.

But it is to recognize that in the middle of a crisis, people have financial outflows that need to be met, and that most of the existing distribution mechanisms do involve some degree of cash. And until we transform them, denying people their basic needs is going to be [inaudible]. And in terms of how to unwind from this, the bill itself has an explicit Sunset provision of one year after the crisis.

But more importantly than that, Representative Tlaib is a big supporter of the Green New Deal. She’s a big supporter of the Job Guarantee. And she’s a big supporter of a much larger transformation of the economy. So we are not talking about once we do this then it’ll suddenly be the robots and giving everybody cash, and everything’s fine. We’re not at all interested in dodging that neoliberal mess.

But even Martin Luther King — even when they were fighting for the job guarantee — they talked about a job guarantee for those who can work and a guaranteed annual income for those who can’t work to recognize that, while we are transforming the economy, we don’t want to deny the poorest from participation in basic services that other people enjoy. And that’s part of what this vision is. So I have been working with others and we’ll continue to work with others on job guarantee work.

I think the larger mobilization is critical. I think reducing people’s expenses, their outflows is just as important as giving them emergency support on the other side. And I continue to oppose the vision of the world that says let’s just give everyone cash and then they’ll have their problems are solved [inaudible]. So the context of this emergency cash program is definitely a needed way to support people who, especially, who would be falling under the cracks of these other proposals.

And what you’re seeing right now in the House Bill and in the Senate Bill and the President’s Bill is that it only includes citizens and lawful residents. There’s very little evidence that it can actually get to the people who are homeless or at risk. There was a New York Times article that just came out that said that even the House Democrats are saying right now that the checks that they’re going to mail out to people will take four months to get to people who don’t have a bank account.

And think about that: four months from now — if you’re struggling right now — and in four months time you know, you’re going to get a $1,200 check that’s supposed to be relief for you in the middle of this crisis? So one of the things that’s valuable about this is that it allows us to say very clearly that we aren’t hating giving people money, but there is a difference between that and UBI. And we have the moral high ground now. We are the ones who are providing the most generous emergency support right now.

And what we can do is say to people, we need to do this now, but when we get out of this crisis, we need something much more transformational. We need the Green New Deal. We need the Job Guarantee. We need universal basic services. And we have the moral authority at this point because we were there when it mattered in the process. So to go to the distribution mechanism, so in terms of how the proposal gets passed, I mean, let’s be realistic.

Donald Trump is probably not going to support something that comes from Representative Tlaib, of all people, unless the public pressure is overwhelming. So the way that we get this passed is the way that we push for everything is we mobilize, we demand, we force people to care, and we show that this is the only morally acceptable way to provide universal relief to everybody because otherwise we won’t be able to help everybody and people are going to fall through the cracks.

We’re actually working on a specific bill right now and we’re going to be in the next few days, it’ll probably come out. But this was a policy proposal, which is the first way you kind of go along the way to getting the specific bill, because there was a lot of like internal bills floating around from Maxine Waters, from Nancy Pelosi, from the Senate Democrats and things. So sometimes that stuff gets merged together. Other times they say we’re not going to go your direction, but if you want to propose your own bill you can and [inaudible].

So in terms of the way to distribute it, we looked at, for example, giving checks to people or using direct deposit. But the problem is that again, 20% of the population don’t have bank accounts. A lot of people don’t have permanent addresses. A lot of people don’t have a tax number, or even some people don’t have a Social Security number, particularly undocumented people. So if we started from any of those positions and tried to work our way outwards from there, we were going to leave a lot of people behind.

But the way that we thought that the easiest way to get money to people was to give everybody a prepaid debit card. These cards are administered by the Treasury’s Bureau of Fiscal Service. They’re currently use for things like EBT cards and SNAP cards, but you can design it with different rules. So this would have no restrictions on what it can be used to purchase from. It would be something that wouldn’t be monitoring what people were spending it on.

You could take it all out in cash. We included a provision saying there’d be no interchange fees. So the banks wouldn’t be sort of making a field day or charging a bunch of money on it. So a lot of the way that we designed it was to basically make it as close to cash as possible. So if you think about, you know, with SIM cards, with bank SIM cards, people can either get an account where they have to give a bunch of information or they can buy a prepaid card.

And if they get a prepaid card, they often don’t have to give as much personal information. So the idea here is for people to get these cards and to have the mechanism by which we distribute them to be as simple and as limited in information gathering as possible. So we decided to try to have a list of people who are eligible. That includes IRS data, Social Security data, but also every other relevant government agency including state DMV, with that database would only be used to monitor whether people had received the cards, not anything else, and would be destroyed at the end.

It wouldn’t be shared with any other government agency. So it wouldn’t be part of some big surveillance state machine. And that we would have three different distribution mechanisms. One would be the mail checks, then mail cards to people who had mailing addresses with certified mail. So they would have to acknowledge that they received it. The second would be to set up distribution centers at post offices, banks, schools, other government buildings.

And again, the idea would be to have as many of these as possible so that there wouldn’t be large gatherings of people. And if we get most of the people who have regular addresses, then hopefully the number of people that will need to go and pick them up in person will be relatively small. But if you think about the way it works with voting, for example, the more voting booths that you have, the less lines and queues there are.

So the more of these that we could have set up in almost every government or anyone that we could deputize to run one of these distribution centers, the better. And people would come in and say, okay, here’s my name, and you say, okay, we’ll put your name down. And if you say “I didn’t receive a card in the mail” and they say, well, it says we sent you one. Well, okay, we’ll assure a replacement, right? And if it turns out that there’s fraud and things we’ll deal with that on the back end.

We’re not interested in denying people in the middle of the crisis. There’s always going to be some grift. There’s always going to be some degree of abuse of a system like this. In the middle of a crisis that’s not our priority. And if you look at the amount of millions and billions that the people at the top are going to be wanting to save as a result of this crisis, it’s not our focus that maybe a few poor people will get an extra thousand dollars or something like that.

The third prong in addition to mailing and in addition to having pickup centers is to actually set up an emergency responder corps. And there are emergency corps around the country that could be, you know, sort of conscripted for this process to go out and give cards to at-risk communities who otherwise might not feel comfortable coming into banks or couldn’t come in or who don’t have a permanent address. So the homeless, undocumented, physically disabled, elderly, those kinds of people.

And in the process of giving them their cards to perform a wellness check on them, to see whether they need additional support. And we included that specifically because this system should be integrated with a broader emergency response system and to recognize that for a lot of people they are going need additional assistance. And we don’t actually even know all the reasons why people might need that assistance.

So setting up this kind of emergency network or solidarity network, where people who are sort of, you know, volunteer like the way that people in 9/11 volunteered to go pull people out of the building, you volunteer to go to your community and you get deputized. And again, maybe some people will sort of abuse that, but that’s not our priority. Most people are good people. Most people will do the right thing and help other people with this system. And if it turns out there are some bad people, we can deal with that on the backend.

Like we deal with the larger accountability that will come at the end of this crisis. But in the middle of this, the point is to stop people’s bleeding financially and to put the fire out. So what we need to think about here is to think about what the implications are in the long-term. And one of the implications in the long-term about this is what we tried to give the impression here is that this can function like the seed of a genuine government digital cash system.

So if you think about the discussion around Fed accounts or postal bank accounts for all which I strongly support, and we’ve been arguing in favor of that for over five years now, I believe the first time Raul wrote an op ed about postal banking was in 2014. And we held a conference in New York called Rethinking Economics in 2014, when we had a representative from the postal workers union advocating for postal bank accounts for all; and we had Mehrsa Baradaran who’s been a long-time postal banking advocate.

The person who came up with the idea of central bank accounts for all, Morgan Ricks, is a friend of mine. And he supports this proposal, and my advisor Robert Hockett has proposed citizen accounts for people as well, which is a similar version. So all of these are good ideas, but the part that I bring, the part that I bring to the table that those proposals haven’t is an emphasis on digital cash — on something that actually respects privacy in the same way that physical cash preserves people’s privacy.

The money is in your pocket. It’s anonymous. You can transfer it peer to peer to people offline. And if you think about the way that cash works today, you know, you might not want to keep your whole life savings in your pocket in case you misplace your wallet or in case you get robbed or something. So you might not keep all of your money in a digital cash wallet. You might keep a lot of it in a Fed account or postal bank, but you keep enough in your cash flow.

But if you do want to engage in some sort of transaction that you want to be private, then you have that option. And I’ll talk about that more in a second, but we explicitly put into the bill that in the long term, this should be transformed into a privacy respecting digital cash wallet. And, crucially, we said that this would be administered by the Treasury rather than the Federal Reserve.

So in the same way, as I said earlier, one of the big things we were trying to avoid when we made a coin [inaudible] is that this impression that the Treasury kind of needs the Fed and it’s the Fed’s money that the Treasury is using which reinforces this sort of neoliberal, central bank dominant paradigm. The idea that digital money is tantamount to bank accounts and that giving everyone digital government money is just basically your bank account but on steroids or without the exchange fees or anything like that.

We wanted to really think bigger and say to people: What we want to do is to imagine a world where we are actually building a brand new monetary system that goes much deeper than just your bank account, but slightly better; to actually think about what digital cash would look like in a digital economy and in society; and that this would be something that the Treasury should manage because the Treasury is the entity that is accountable to the President, which is accountable through elections.

And if you think about central bankers, who are central bankers? Central bankers are usually people who got a PhD in macroeconomics. And obviously I have a lot of friends who are macroeconomists. I love them dearly, but a lot of the training is in statistical modeling and data analysis and economic history. So it’s a very different kind of expertise.

And if you think about, you asked someone who makes hammers for a living and they say, you know, what does this look like? They say, it looks like a nail. Well, if you ask central bankers, what digital currency will look like, they’re gonna say, “Well, it should look like a bank account.” Why? Because they’re bankers. But really the potential for digital currency is so much more than just a bank account.

And to think about what it would look like to have digital cash means to try and imagine a new kind of infrastructure. And to give an example for that, I work with a nonprofit called the Freedom Box Foundation, and they designed privacy-respecting, free and open source software. Things like Linux that are very easy to use for average people.

And you can buy a little computer this big, the size of a credit card, costs about $35, run by a nonprofit foundation called the Raspberry Pi Foundation. And you can install all this software on a camera SD card — you know, the kind of thing you put in a camera. This SD card might cost $10, and you plug it into a wall. You can put it under your bed and it connects to your Wi Fi, or you can plug it into your router directly if you want to. And it uses maybe $5 of electricity a year. It’s a very cheap little thing.

And it’s not probably powerful enough to run a whole computer, although it’s getting pretty close, but it’s powerful enough to run one of these digital currency wallets. So if you’re the kind of person who doesn’t trust the government and you want to kind of keep your money under your mattress, you could run one of these digital cash wallets — literally under your mattress — and then connect to it securely from your mobile phone, through an app. That’s the vision.

They don’t have a wallet yet in their software. What they’re looking at are things like a chat system, a web site, a system for storing your files. This system, to have a what’s called a VPN — a virtual private network — that basically means you can, wherever you are in the world, you can tunnel into your home Wi Fi network. So if you’ve got a computer at home, you can access it from wherever you are in the world.

So if you don’t want to take your data on the plane to China or something, you know, if you don’t trust them to confiscate your laptop, you could take a laptop with nothing on it and then you could access it. So the idea with these digital cash wallets is to make it something that’s super cheap and you can put it under your mattress and you can access it anywhere. And it would be privacy respecting cash.

And this proposal is using the closest thing that we have to that technology today, which is these prepaid debit cards. And of course, prepaid debit cards are still in partnership with a bank. And they’re still basically, you know, using this sort of traditional banking system. But at least we are getting into people’s heads the idea that it’s different to receive direct deposit, you know, to receive a kind of tax refund in your bank account than it is to get digital cash with no questions asked.

And that’s really the model that we should be thinking about in the future. So that’s the vision for the digital currency proposal, and that’s why we made it funded by the Mint, even though, you know, as MMT would say, there’s not real economic difference. One of the things I mentioned about the coin is that, in addition to the sort of after-the-crisis reactionary fears about the national debt and austerity and how much we borrowed and all that stuff that we were trying to avoid.

A lot of people will say, well, the Federal Reserve, maybe in emergencies, can lend it’s support to the Treasury. But in normal times the point of emphasizing the coin was to say, actually, this is not Fed money. This is Treasury money. From a consolidated government perspective, it’s all the same. But from that perspective of someone that’s concerned about Treasury/Fed independence, this is an important distinction that allows us to say that the Treasury is financing this on its own terms.

And if there is a negative fallout from this program, which I don’t think there obviously will be, then it will be borne entirely by fiscal policy. It’s not the Fed supporting it. It’s not monetary helicopter drops. It’s none of that stuff. It’s fiscal policy finance by fiscal money. And to the extent that we have a problem with Fed independence, which, again, I don’t really believe in — I don’t think it’s very good but to the extent that people do have a problem — this proposal gives the Fed an asset.

The coin sits on its balance sheet as an asset permanently. So it isn’t, you know, using its money power, its balance sheet to support this program. It’s just buying an asset in the same way as if it bought government debt. And it’s the Treasury that’s doing that. So going into my work, I’ve got this book coming out called “Digitizing the Dollar: The Battle for the Soul of Public Money in the Age of Cryptocurrency,” and the idea here is to bring my insights and experience with MMT, which I obviously owe all the intellectual debt to the people who knew MMT long before I came along, with my understanding of law, as I’m a lawyer, and my understanding of technology, because my father was a scientist.

He actually spent some time writing legislation for the Australian Federal government for telecommunications in the 1980s when they were first developing cable television. And then when I went to law school, I was very interested in tech issues. And I wrote my Master’s, my legal Master’s thesis on “Copyright and an MMT Approach to Copyright in the Digital Economy.” But I came across a professor there named Devin Alavian at Columbia Law School, who was one of the most brilliant people I’ve ever met.

And he helped design one of the first email systems at the age of about 13 when he worked for IBM doing advanced programming language. He was sort of a wunderkind. He eventually went to law school and clerked for Thurgood Marshall on the Supreme Court. And then he became a professor of legal history. He does English and American Legal History. So he teaches about a thousand years of legal history.

Anyone who knows legal history knows it’s very dense. It’s very detail-oriented. And he has about a thousand years of that stuff in his head. But he also continued to be a kind of technologist and a futurist and worked with a guy named Phil Zimmerman in the early nineties. Phil Zimmerman was the first person who came up with a publicly-available version of what was called public key encryption.

Now you might not have heard of the term public key encryption, but you’ve definitely used it. It’s one of the major kinds of encryption that’s used to keep financial data safe online. It’s one of the ways that people send secure emails. It’s one of the ways that applications, mobile phone apps, and things can recognize you and say, oh, it’s this person making this connection to some, you know, database or something.

And the idea of public keys is… a good way to describe it is like a library deposit box. You know, that, you know, the old library deposit boxes on the outside of libraries, when you come to the time to return a library book and you would deposit it from the outside, and then the next day the librarian would come in and go on the inside and open the box from the inside.

So the idea is that we could do an outward facing address. Imagine it’s a digital address, like an email address. You could give an outward facing address where people would know to send stuff to you, but the only way you could access what’s inside or what’s encrypted is if you had the private key to go with it. So you give everyone your public key.

That’s like saying, “Hi, it’s me.” And you can send stuff to me, but the only person that can open in the back and actually access the stuff that sent in that encrypted way is the person who has the corresponding private key. So you tell everyone in the world, your public key. You keep the private key yourself. And that way you can let everybody send stuff to you that’s encrypted.

It could be like a package, but there’s a big padlock on it. And you’re the only person that can unlock the padlock. So everyone can see that there’s a package, but nobody knows what’s inside. And up until the 1990s, this technology was used a lot for the military because, of course, you know, going back to World War II, the ability to send secure communications was incredibly important.

You know, everybody’s probably seen those movies about the enigma code, which was the way that the British and things managed to crack . . . I think it was the name of code. It could have been on the other codes anyway, managed to crack the Nazi signals. And they knew that certain kind of planning was coming and they could preemptively fight against it. Whoever could listen in on other people’s communications had the upper hand when it came to military strategy.

And so the ability to encrypt your communications to say things on public radio that the other side couldn’t understand was incredibly powerful as a sort of source of intelligence-gathering and military intelligence strategy. So when this guy, Phil Zimmerman, who was a computer programmer, created a form of public key encryption — it’s just software, you know, it’s software — you plug in your name and it gives you a public key.

And then it sort of uses a very complicated mathematical process to come up with a very large number that’s a product of two prime numbers, you know, sort of like two plus two is four. Well, this is one trillion six four nine three seven eight two six five times, you know, seven, two, six, five, three, nine three four, whatever.

And the only entity that can really process the number that comes out and work out which two things it was a product of is a big computer, unless you know the secret key. So unless you sort of have a supercomputer sitting there for a week trying to crack it or something, you can’t work out what’s going on in the encryption.

When he decided to come up with this, considering he was a computer science guy, he just said, “OK, I’m going to give it to everybody.” And when this guy came up with it, this guy named Phil Zimmerman, he was prosecuted by the US government under the Arms Export Control Act because, they said: “What you have created here — this piece of software, just a few lines of code — is like military grade hardware.

It’s like you built a missile and put the schematic all up on the Internet. And you shared it with everybody, which means you shared it with our enemies. You know, you should’ve come to us at NASA or at the Defense Department, but instead you shared it with everybody. You’ve given everybody the kind of anarchist’s cookbook of how to make the bombs of the Internet age.”

And they prosecuted him under this act. And he would go around with a T-shirt that had the code because it was very simple code. And it said, “This T-shirt is a military munition.” It was a kind of joke, but the Department of State prosecuted him for years. And there was a big legal team of civil libertarians and people who thought that the right to have encrypted communications was an incredibly important part of free speech, incredibly important part of privacy.

My law professor at the time ended up becoming part of that legal team. And he had an email kind of send off that he used which became a kind of rallying cry for the cause, where he said, he said: the right to speak PGP, which was the name of the program, the right to speak encrypted, is like the right to speak Navajo.” Because actually in World War … I think it was World War II they actually used Navajo as an encrypted language because the only people that could speak Navajo were Americans.

So the Germans had no idea what the hell was being said. So he’d say the right to speak PGP is the right to speak Navajo. If you’re telling average people they can’t speak computer code, you’re telling them they can’t speak a language and that’s fundamentally violating their civil liberties. Eventually, the government actually sort of dropped that case after they decided they’d found, sort of, other ways to keep surveilling people and things like that.

But that got him into this world again of technology that he had grown up with and sort of taking a detour to become a constitutional legal historian. And through that, he actually met another sort of very famous computer programmer, a man named Richard Stallman. And anybody who has ever used Linux and ever used any kind of server, you know, Google for example, Apple has used Linux software even though it wasn’t called that.

And actually it’s called GNU. It’s not called Linux because the guy who came up with Linux is a guy named Linus Torvalds, and Linux is sort of the central command hub. It’s the one that sends the information out to the rest of the computer. But all the other stuff, the stuff called GNU, and GNU is like the animal, but he was a recursive acronym because these programmers like to have witty words like they’re hackers.

So it stood for GNUs, not Unix, G N U — GNUs, not Unix because Unix at the time was the big centralized software system. And they wanted to have one that could be used on any software program but that would be free to share. And Richard Stallman liked to joke that he was the last hacker because he grew up in the MIT media lab in the ’70s with the precursor of the MIT media lab and the artificial intelligence lab at MIT.

And back then they had these big hardware machines, you know, computers the size of whole rooms. And this was the kind of days when you would have punch cards, little holes in the card. So you would write your software in these cards, these paper cards, and you punch them in. And then the computer would send all the information through all the cards.

And we’re talking about stuff like doing, you know, sort of basic mathematics. You know, we’re not talking about nowadays your phone, your cell phone, probably has more computing power than the entire computer that sent Apollo 11 to the moon. But back then, you know, we’re talking about these big mainframes that had maybe 20 kilobytes of memory or something like that.

And back then, the thing that was scarce was the hardware. There’s been computers. There were only a few of them, you know, universities and other things like that. So when you had these big computers, you had to sort of basically share the time. There was a sort of, like, time share, and you would sort of say, okay, I’d like to use the computer from 1:00 PM till 2:00 PM to punch my code that I’d been working on for a week with these punch cards.

And someone else would say, okay, well, I’d like to use it from, you know, 1:00 AM til 3:00 AM or something. But because it was the hardware that was scarce, it was very common for people to share the software. Someone said, oh, I’ve come up with a program that does X, Y, Z, and someone else would say, oh, can I borrow that? Oh yeah, sure. I’m not using it. You can borrow it. Yeah. Not a problem.

Eventually what happened is that people, the computer started to get cheaper and cheaper. The big rooms got smaller and smaller until the point where we got to a kind of desktop computer. And then people like Bill Gates came along and Bill Gates said, you know, we’ve been developing all this software and people are just sharing it.

And he said, that sounds like communism to me. What about all the hard work that I put in? We should be able to make money off these programs. Otherwise it’s not fair. Anyway, this sort of big diatribe list serve in Seattle, I think it was the home brew society or something like that. There was this sort of hacker list, uh, and it became a kind of Clarion call for this movement to enclose, to privatized software.

So as the hardware got cheaper, suddenly it became important to not share the software. And of course, yeah, Steve Jobs, Apple was one of the first home computers that did this as well. And Bill Gates, you know, for very, very many years, was the richest man in the world before he decided he was a philanthropist and decided he would start messing with developing countries and public education in the United States in the name of helping people.

He made his money off basically criminalizing sharing. He waged huge lobbying campaigns to try to get Congress to extend intellectual property restrictions to software. And Richard Stallman thought this was the worst thing ever. He was a sort of, you know, unrepentant ’60s hippie who believed in sharing and that the hacker culture that he had grown up within the computer lab at MIT was, that, one of sharing.

And the idea that people wouldn’t be allowed to read other people’s code or use it or share it — especially when we were not talking about paper cards with holes cut out but we are talking about software that you could share to everybody from Control C to Control V — that’s all it took. You could give . . . one person who made software could give it to the whole world.

He made that basically the antithesis of the entire software. So everybody who grew up using a Microsoft computer grew up using his proprietary software so that he could charge a huge amount of money. And what Richard Stallman got so annoyed by that — and others who did that before — was that he basically did the work of maybe six or 12 programmers sort of relentlessly for many, many months and coordinated with other people who’ve contributed and eventually built basically a whole operating system. And that system was free and open source.

And back then he didn’t call it open source. That was a kind of commercialized bastardization. You know, some people like to take ideas and rebrand them to be less politically threatening. So a bunch of, kind of, pro-market people in the ’90s said free software, again, sounds too much like communism.

What we really mean is open source because businesses like open source. Whereas for Richard Stallman, “free” meant freedom. He would say not “free” as in free beer, although maybe that’ll be helpful too, but “free” as in freedom. We want software that respects the freedom of the user. It’s not a black box. It doesn’t tell your computer you can’t do something.

It’s software that you can use that works for you. And if you want to open the hood like a car, you can open the hood and tinker with it. You want to change something, you can change something. It’s yours, take it — it’s free. And freedom there was a driving animus because he saw the future. He saw that a world where software ruled everything.

Your car is one big computer. Your kettle is one big computer. We have a phone in our pocket, you know. We don’t need robots. The robots in our pockets, we just carry the robot around [inaudible].

Intermission (00:43:38):

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Grey (00:44:27):

So he saw that the future would be one defined by software. And if we didn’t have free software, then we would all be unfree. And that the people who control the software would be the people who control the lives that we live. They would control what we got to see. They would control how we got to use the devices around us. They would control when we got to share things with other people. And I sometimes use this because it’s just such a perfect example.

But about a year or two ago, Amazon sold a copy of 1984. You know, the classic dystopian totalitarian state novel, via Kindle. And then it turned out that there was a copyright dispute with a particular publisher of this version. And so they just recalled all of the 1984 copies that they sold. So people woke up on day and that the book that they’d bought on their Kindle was disappeared.

It just didn’t exist anymore. So imagine, imagine if one day you [inaudible] the library and one day you woke up and suddenly half the books just disappear because the publisher just decided you didn’t deserve to own those books. Well, you don’t need to burn books in a world like that because there’s no books left to burn.

So what he saw was a world where whoever controlled the switches, whoever controlled the software, whoever controlled the content, controlled people’s minds, controlled people’s freedom. And what Eben Moglen brought to that understanding — first of all, he was Richard Stallman’s legal counsel — and he sort of trace this back to a much larger history.

He said, you know, Richard, your history here that what you’re fighting for is the same history, is the same fight that Martin Luther had when he rebelled against the Catholic church, which is the right to think differently. And the right not to only think and understand and read the things that people tell you you’re allowed to. And the Catholic church says, and the books are in Latin because only the church gets to teach people how to speak Latin.

And when people started creating presses in Amsterdam and in France and in England, and they would publish subversive literature, you know, the king and the church would try to shut them down, and called them heretics and things like that. So the right to print books and write what you want and share what you wrote with people was considered fundamental to the enlightenment and the ability to think differently vs orthodoxy, which I think, you know, most people in the MMT community are there in part because they’re kind of not particularly orthodox thinkers.

And the other sort of example, where this started coming to the next forefront, after the rise of personal computers was the rise of the Internet. And, you know, you saw that in the late 1990s and the early 2000s with the rise of sharing and that stuff. I was probably a little bit young at that point, but only a few years younger.

And I remember the stories of even bands that I used to like, like Metallica, that would use copyright law to prosecute 13 year olds who had shared their music over Limewire or over the Napster. They said, you know, you’re stealing from us, you’re stealing what belongs to us. And what Eben Moglen said is no, this is information. This is voice. I wrote these numbers down with my computer.

I shared them to somebody, you know, you might’ve created the original thing, but once you share it with me, I can share it with somebody else. And what they develop, what Richard Stallman developed was a legal license called Copyleft. The technical name of it is the General Public License — the GPL. There’s been a couple of versions of it.

But the brilliant thing of the GPL was that it used copyright law and said, I own this, I made it, copyright law says it belongs to me. And what I’m going to do is mix tapes of the other classic one. I’m going to get into that one second. Mix tapes — Larry Lessig, who became famous for writing a book called The Remix Economy, makes this point as well.

When you start to own culture, own music, own books it’s very hard for people to write fan fiction, very hard for people to make mix tapes, or to do, you know, Hip Hop songs that have samples from 25 other different songs because you have to get approval from every one of those people. And it becomes this huge legal fight. Unless you have a legal team of a dozen lawyers, you simply can’t make that kind of music.

Anyway, to go back. So what they did with the legal license, the GPL, this Copyleft, is they said, because I own this stuff I can determine the conditions under which people use it. So here’s my condition. You can do anything you want with it. You can share it, you can modify it, you can use it, but anything you put it into has to be released to people under the same conditions.

So he built a virus of freedom and he said, look, anything you want use it, but it has to be as free as what you’ve been given. And that kind of inverted the logic of copyright. It was supposed to be something that created walls, but instead they use it to break down walls. It was very, very powerful and it created a whole movement called the free software movement. And then the open source software movement kind of spun off from it to be a more commercially-acceptable version.

And what that whole vision was, was a vision to give people as much control over the devices and the technologies that control their life. And when I came to law school, I didn’t really know that much about my computer. I use an Apple computer because it was sort of pretty and easy to use. And it made me feel like I was, you know, very kind of slick and aesthetically fun, but Apple computers take away all your choice.

They tell you, we’ve got this under control. You don’t have to think, just press this one button. You don’t have to have choices. Everything is just so perfect. You don’t have to think about it. And when I first started hearing about this technology and Eben would say, don’t use Facebook, Facebook steals all your data. They control you. You know, don’t use Google. They don’t care about you. They steal your data.

And yeah, it is elegant. Apple is extremely good at aesthetics that’s seductive. Eben likes to call Steve Jobs the King of the Undead because, like Dracula, he’s so seductive that you want him to bite your neck. And then you’re under his spell forever. And he uses his beauty in that he was a brilliant artist and a moral monster.

But basically when I first heard this stuff, I was very resistant to it. And I said, well, God, that sounds like a lot of work. You know, do I really have to learn about computers? Well, if people are taking all of my data, like, well, what have I got to hide? I guess, fine, fine. They know everything I know, you know. They can read all my texts. They can see all my phone calls. They can see all my emails. Well, I got nothing to hide who cares?

And he said, you’re wrong for two reasons. One, you do have things to hide. Everybody has things to hide. But more importantly, when you give up your email, you’re giving up everybody that sent email to you. When you give up your text messages, you’re giving up everyone that sent text messages to you. Privacy is not about you as an individual. That’s the neoliberal individual mindset.

Privacy is like the environment. When you pollute it, when you degrade it, you degrade everybody. And when we have a world where authorities, whether they’re massive corporations or governments, they can hear everything you hear, they can see everything you can see, they can know exactly how you think. Then you don’t have any freedom. They’ll use it to start selling you ads.

But whether you’re the Chinese Communist Party or the American government, the next thing they’ll do is start controlling how you think. And then if you start to think a little bit different, maybe you get deleted along with 1984. And it was very scary for me to come across this. And I resisted it and said, this is too much, you know, no, no, no. You’re just being extreme. You’re being hyperbolic.

And he said, I lost 37 members of my family in the Holocaust. And next time they come for the Jews in Europe, and they will, they’re going to get every single one, every single one, because they’re going to know where they are. They’re going to know who they are. They’re gonna know who they’re talking to. They gonna know where they meet. And they’re going to know every single transaction they make in their life.

And he said last time people used to keep lists of everybody everybody knew. The only responsible thing was to refuse and resist. Even if that meant you being tortured, you didn’t give up your friends. you didn’t give up your family. And that hit me like a ton of bricks. I mean, that really, that was like a gut punch. But I didn’t like to think I was the kind of person that was an unwitting tool of totalitarianism.

And I didn’t really know what to do with that for a long time, I spent a long time trying to learn how computers work. And I started learning how to code these little raspberry Pis. I started to try and get involved in these internet spaces and sort of get involved with them. Yeah. Pre-crime is the exact thing. They’ve already been cases right now where people have used people’s Google search history as prima facie evidence that they were going to commit a crime.

You know, if someone Googles how to make a bomb or something, and I say, look, there we are. Well, you were just asking a question. It’s like, if someone goes to the library and says, hi, I’d like to read a book and it’s okay, I’m going to report that to the secret police. Just put it in your file that you’ve read this book. And one thing I’ve actually found through this is that librarians is some of the most ardent defenders of privacy because they know how important it is not to keep lists of what people read and sharing with other people.

There’s a woman. I want to give a shout out to cause she’s fantastic. I named Alison Macrina. She runs the Library Freedom Project. She’s a real inspiring activist. And I highly recommend you become familiar with. And the “Minority Report” movie — you know, the Philip Dick novel Minority Report — it’s about pre-crime. The minute you can start to build a profile of people, of who they are, the kinds of things that they like, you know, whether their blood pressure goes up a little bit when you start to hear talk of certain things, then the next thing is to say, well, we don’t actually need to wait for them.

We have an algorithm that says they’re 98% statistically likely to commit a crime and that’s good enough for us. That’s reasonable doubt. You know, they haven’t committed it yet, but they will. And that’s the point at which, whoever controls those algorithms controls everybody. So when I started thinking about this, you know, I thought, well, I wasn’t a coder from the age of 13, you know, I can’t build whole computer systems like Richard Stallman.

I haven’t got the years and years of experience that the real guts of intellectual property law, how can I help? And I looked around, I thought, okay, well actually, there’s this move to digitize money. You know that it started with Bitcoin. And after the global financial crisis had actually started 30 years earlier with hackers who did care about privacy, because again, they saw the future and they wanted to build privacy, respecting cash.

But most of them are such libertarians or anarchists that they didn’t want to think about government money. You know, they hadn’t internalized the MMT point that money is always kind of public. So they were thinking if I can just build a digital, private cash instrument like Bitcoin, and as long as that’s private we’ll be fine. But once I realized that that was an important area, I realized that we need to combine that with MMT’s understanding of public.

We need to think about what public digital money would look like that actually respects people’s privacy. And I started focusing on this back in about 2013 because it came out, it started coming through countries in sub-Saharan Africa that didn’t have developed banking systems. They used people’s mobile phones as payment. And they originally did it with mobile phone airtime.

You know, like air minutes. If you think about the MMT story, the MMT story says that it’s taxes that drive the value of money. Well, if you have air minutes, well, your air minutes are like tax credits for your phone. And the value of those air minutes is because you can pay your phone tax with it. So the minute that they started giving people the option to send each other minutes, people in areas that didn’t have banking systems but did have mobile phones started trading mobile phone air time as money.

It was the closest thing they could get to digital cash. And the minute the telecom companies realized they were on to a good thing, they started edging into the banking system. They said, we love to collect people’s data. The data is the oil of our economy. The more data we get, the more we can sell ads and you can build profiles of people and all these bands, we can sell it to governments and security services and intelligence agencies.

So what happened is that the telecom companies came in to these places. And once again, Bill Gates was a big figure in this, the Bill Gates Foundation, under the guise of helping the poor and helping financial inclusion, he brought in, you know, giving people mobile phones. But what it’s really about is these telecom companies and these banking companies that say the minute we can get you plugged into the matrix.

The minute we get you jacked up with electricity so you’re not using physical cash you’re using our mobile phone cash system, then we can monitor what you’re buying. You can monitor where your money is. We can do these big maps of all the data for it. And that’s more information for us that, that makes our algorithms smarter.

And we can work out how to target microcredit to all kinds of products to you and [inaudible]. So what started as this sort of, you know, beware the first world philanthropists bearing gifts kind of thing eventually made its way to first world countries and we saw Bitcoin and then we saw, ah, things like Libra, which my colleague Raul Carrillo has been fighting now in D.C. with Americans for Financial Reform and [inaudible].

And I sort of saw, well, okay, it’s going to go through private companies. You know, it’s going to be Venmo and it’s going to be PayPal, but eventually it’s going to get to the government. The government’s going to realize that they want to control this. The private sector is always the tip of the spear, but then the rest of the spear is the government.

So when the moment comes and governments realize, hey, we don’t really need to let all these private actors run the payments. We can run it ourselves. So they’re going to have a question. And that question is, do we get to see everything all the time forever? Do we get to turn off people’s bank accounts when you’re a bad citizen?

Or do we get to take money out of your account when you have taxes you haven’t paid even if you don’t want to give it to us? Or are we going to have something that still works a little bit like cash? You can put it under your mattress, and if they want to come and take it from you, you get a bloody search warrant.

That question right now is a question that’s being answered behind closed doors by central bankers, because those central bankers are saying to themselves, well, what do we want? Well, we’re bankers so what do we digitize? Well, we’ll have digital banks. They don’t care about cash. Cash is for poor people. They care about financial accounts because that’s what the financial markets [inaudible].

And if you think that Jay Powell, the Chairman of the Fed, is going to be the civil liberties, you know, defender of last resort, he’s going to be the guy to stand up to the NSA and the CIA and the FBI and every other data collection company and Facebook and say, no, you can’t collect all of this data. Even if he’s the champion, I think we have a difference of view of powerful there.

What we need is to make this moment we’re living through — because we are going to be the last generation that’s going to remember what it was like before this new technology — and in the same way as the people living now are the last generation that’s going to remember the world before the Internet. We are going to be the last generation that remembers what it’s like to live without digital currency, government digital currency, directly [inaudible].

And either we’re going to think of that as something that’s private, or we going to think of it as something that’s constantly surveilled. And people will get used to it if it’s constantly surveilled, but it’ll just be that little bit less free. They just won’t say that thing out loud. They just want to think they’re free. So someone said, people think Gmail is free.

Yeah, well, you don’t pay any money, but what you pay for is spying all the time. That’s what you get. You get a free email account at the cost of spying all the time forever. [inaudible] likes to use this line: He said, imagine the KGB came to you and said, I’ll give you a free email account, but we get to see everything. Would you call that free? Probably not.

What if the Stasi said, hey, we’ll give you a mobile app that you can make payments like Venmo, and you don’t have to pay for it. You know, there’s no transaction fees or anything, but we get to see everything. We’ll see everything forever. I’ll put it in your private file. Would we call that free? I don’t think we would call that free.

So what we need to think about is a system where it’s not just a centralized database. I believe in, you know, public governance, I believe in collective governance, but we can’t build a single database forever that’s so big that the only thing standing between it and all the spies is trust. What we need to think about is a system where digital currency goes out, but like cash, you can put it under your mattress and the only entity that can use it as you.

So the word cryptocurrency doesn’t mean private currency. Screw those private currencies, screw Bitcoin, screw Libra. They’re all stupid. They’re a waste of time. I’m talking about public funds. So what cryptocurrency means is currency that is cryptographically secure and arguably all currency, digital currencies, are cryptographically secure because even your bank account has cryptography to ensure that it can’t be hacked.

Every time you go online and you see HTTPS, that S stands for cryptography. And without the S there, you probably couldn’t engage in your credit card payment. I don’t think blockchain is the future because blockchain is a single common ledger. It’s a single common record of all transactions. And the only question is who gets to add to those transactions.

But if you think about cash, the beautiful thing about cash is there is no common ledger. There is no common ledger of all cash transactions. If I give cash to you, you know, behind the school on a Friday afternoon in exchange for some weed or something that doesn’t go on any cash ledger ever. Cash is king. Cash rules everything around me, right?

So what we need to think about and demand is technology for digital currency that works the way that cash does. And that’s part of it. Obviously we need public bank accounts as well. We need to make sure that those are as private as possible. But in the event that we just can’t trust that to be enough, and I don’t think we can, we can’t put all of our eggs in that basket and then hope that that basket will never be broken.

We need to make sure that the infrastructure of digital money has cash available. And one of the ways that I make this point is you can create structurally, architecturally, a system of bank accounts on top of a system of digital tokens. So if you think about throughout history, there were two ways of having money.

You read Michael Hudson or Randy Wray, they’ll talk about, you know, governments having a ledger like ancient Mesopotamian temple palaces will have a ledger of who owes what. But the other way was a physical token. One of the people that Michael Hudson loves to cite is [inaudible]. [Inaudible] was an archeologist of ancient writing in ancient, near East, you know, 6-8,000 years ago, the earliest forms of recorded writing.

And what she observed was there were these physical tokens that were records of taxes. So if you, you know, you paid your cow in taxes, they would give you a little figurine of a cow or something. They’d give you a little square. That meant one cow or something. And then when the tax collector came around, you’d give them the token.

And that would be proof that you paid your cow, but then to make sure the tax collector didn’t steal the tax receipts and screw you over, they started putting them in a clay tube and they would seal the tube and they would put on the outside, you know, Rohan paid two cows and there would be two cows inside.

And then that way, they’d say, okay, if we break open this tube and there aren’t two cows inside, then we know that someone was dipping their hand into the pot between, you know, the central temple authority in the outskirts of the empire, where we [inaudible]. And after a while they realized, you know what, actually, we don’t need anything inside the tube at all. The tube itself is a record.

Those little markings we put on the outside, we can put someone’s signature, we’ll put something in that marking would serve as proof that they paid their tax. And then after a while they said, you know, we actually don’t need it to be a tube. We don’t need to be a cylinder. We can just roll it flat. And that was the earliest emergence of clay tablets.

And to be writing was an abstraction, all a physical token that served as a tax receipt. So even the earliest origins of writing, there was tokens and there was account. They existed in parallel. My friend, Brett Scott, who was at the MMT conference in 2016 wrote about the importance of cash and this sort of importance of thinking about tokens as well as account. But to go back to my point, you can have a system of accounts built out of a system of token, but you can’t have a system of token built out of a system of account.

What I mean by that is imagine I’ve got a bunch of paper money, I’ve got a bunch of, you know, a hundred dollar bills and I go to a bank and I put them inside a safety deposit box, physical safety deposit box, you know, like in the movies. And I then tell the bank branch manager, here’s a key, here’s one of my private keys.

And I authorize you when I call you up, you can take money out of that and put it in another safety deposit. Okay. He says, fine. Well, now we’ve got a system of intermediaries, right? The bank is my payments intermediary. But the way that he makes those payments is not his moving numbers up on his account like a bank does today but it’s deposit.

What he’s doing is taking stuff that belongs to me and giving it to someone else on my behalf. So once we start with a physical token you can create intermediaries. But if you start with an account, even blockchain, which is a common ledger, somebody has to be in charge of the whole ledger. Somebody has to be in charge of putting those numbers down who isn’t you.

And the minute it’s someone who isn’t you, that’s the person who’s the vulnerability of the whole system. That’s the person that the secret service or the data mining companies have got to try and focus on. That’s the layer that they’re going to control. So accounts are good and important, but when we build the infrastructure, which is the moment we’re in right now, when we digitize money, we need to build the infrastructure so that tokens are the baseline level.

And that way if we build accounts on top, fine. But at the very least the system can allow us to hold those tokens at home in our own digital wallet, regardless of whether we want to use a bank. And that actually, from a lawyer’s perspective, has a very different legal setup. So everybody talks about a bank deposit being an IOU of the bank.

But what is an IOU? An IOU is a contract. It’s a contractual debt. So a bank deposit is not money that you own. It’s a contractual debt that the bank has to pay you money when you want it. That’s why they call it a demand deposit, because you can demand them to give you your deposit back at any time. And they have to find the money in their money and give it to you.

But if you think about, for example, giving your coat to the dry cleaner, the dry cleaner can’t take your coat and wear it. It doesn’t give you a coat deposit. It actually has taken temporary ownership or temporary control over your property. And we call that, legally, bailment. And that’s under property law, not under contract law.

Now there’s a very funny Jerry Seinfeld episode where he takes his coat to the dry cleaner, and then he sees him out on the street wearing his coat. He’s like, you’re wearing my coat? You know what the hell? It was very funny because the idea of your dry cleaner kind of wearing your clothes on the weekend is such a bizarre thing to think about.

So if we have a world where, instead of thinking about bank accounts as deposits we thought about it as your property that they were holding under the principle of bailment, that’s a very different legal structure. Day-to- day it might look a lot the same, but legally it’s very important, and it’s very different because if that cash is in your safety deposit box, that banker doesn’t get access to that cash.

What if they need to lend it out? We’re MMTers. We know that’s stupid. But they don’t get to know what the hell is going on in that box unless you give them permission. The title of my book, The Battle for the Soul of Public Money in the Age of Cryptocurrency, well, the reason I’m calling it the battle of soul of public money is because this is the soul of the human rights. This is the soul of democracy. This is our soul.

We put our hopes and dreams and our personalities and our experiences into our computers, into our Google search boxes, into our Facebook accounts, into our bank Venmo history every time we use them. And either the net that holds those souls is one that respects our freedom and respects our privacy or it’s one that doesn’t.

It is either a tool of emancipation and freedom that connects us as equals, or it’s a tool of control and subjugation that turns us into lower than animals. And it connects the government digital currency because there are plenty of private currencies out there. Facebook’s Libra would love to take all of your data forever.

PayPal would love to take all your data forever, and they’re doing a pretty good job, right? But as long as there’s cash, as long as it’s government, they haven’t won the biggest war of all. But if we lose the war, if we lose the battle for public money, if the public monetary system, which is being digitized as we speak, becomes purely surveilled and purely in the service of the interests of the State against the interest of people…

I believe in a job guarantee because it’s an example of people saying, hey, I have rights that I can demand from the government. And I believe in Medicare for All because it’s saying, hey, we can’t be denied health care. But if it’s that the State gets to say, hey, we want law and order and national security and we don’t want anyone to create software that they put on a tee shirt and share with people unless we give them permission.

We don’t want you to speak Navajo unless we give you permission. Then that is the soul of public money for the next, I don’t know how many it is, but we’re in an inflection moment right now. And it’s hard enough to learn about money. It’s hard enough to learn about law, not to add on to everybody’s plates that they also have to learn about technology.

But, unfortunately, there isn’t another choice because those three worlds are all converging, if they haven’t already converged [inaudible]. And the fight that we have is the fight for a just public money system that works for public purpose. And that means not only getting enough money to people, but that when we get that money, that money isn’t a snitch, that money isn’t in our pockets as a traitor, that money isn’t reporting back to central command everything that we do.

The difference between money system and a payment system? Well, the answer is not much. One of the lawyers at the Federal Reserve, who I have a lot of respect for even though I disagree with some things, his name is Joseph Sommer, he has a great article called “Where Is a Bank Account? Because his point is that legally speaking, a bank account doesn’t exist in any one place.

It all depends on, you know, the legal jurisdiction of the bank or the bank branch, or maybe the server where the computers are held in Utah. There is no one place for a bank account to exist in this abstract space. But one of the things he says — there is money is what payment systems do. And that isn’t inconsistent with the MMT story, but it’s a little bit of a different emphasis.

Now, Hyman Minsky has that great line that MMTers love, “Anyone can create money; the challenge is to get it accepted.” Well, if you accept something in payment, then that becomes money, right? Anyone can create money, but until someone accepts it, it hasn’t sort of really become money. I can create a million dollars of Rohan dollars, and until someone starts accepting it in payments, it isn’t circulating like money.

So money is what payment systems do because whatever we accept in payment has some degree of moneyness. Even if the State’s money has the highest degree of moneyness, it’s the highest in the hierarchy of money. Anything that we accept in payment can form our money, our kind of money.

Grumbine (01:10:33):

I just want to interrupt real quickly. One of the things about moneyness — I know a lot of people have not read those papers about the hierarchy of money. And so some of this concept of moneyness… I want to stop you because it’s such an important point. A stamp has moneyness to it. A coupon at the grocery store has moneyness to it. So in that sense, there’s many forms of money. There’s very few forms of State currency. I just want to make that delineation, that’s all.

Grey (01:11:04):

Yeah, yeah, no, that’s an important one. Thank you. And some people would say, for example, MMT has a credit theory of money and a State theory of credit, you know? And so, if anything that functions as a credit can have money, but then MMT says of all of the kinds of credits out there, State credit, State debt — of course credit and debt being just two sides of the same thing — is the most superior as a unique place amongst all of them.

So anything, you know, I use the example which is also, you know, a little bit related to payment systems, Starbucks gift cards. And, you know, why does it have value? Because you can use it to pay your Starbucks debt. You know, you can use it to pay your Starbucks tax. If you need coffee every morning, cause you’re addicted like I am, then you need to pay your Starbucks tax every morning on the way to work.

Well, if you can pay your Starbucks tax with Starbucks gift cards, then it can function like a degree of money. And currently I believe — and someone fact-check me on this — I think it’s either 3 billion or 7 billion, it doesn’t really matter, the point is the same — but currently the amount of Starbucks gift cards in circulation is either 3 billion or 7 billion.

And do you know how much interest Starbucks pays on that? Zero. What that means is individual people have given Starbucks 3 billion to $7 billion of money on the promise that at some point in the future that they can convert into coffee. That’s a loan, right? That’s a loan and Starbucks has given them a Starbucks deposit basically.

And if you think about how much it costs to borrow corporate debt, you know, to go on the corporate debt markets, if Starbucks wanted to raise $7 billion in cash, it would probably pay 1%, 2%, maybe 3% depends on the day of the week. It’s paying 0% on those. And oh, great, it can take that money and invest it. Sure, but that is its cheapest source of financing out there.

So anytime you create a payment system that people put their money into and they keep their money in your payment system, they’re giving you maybe better quality money in terms of the hierarchy of money in exchange for maybe a better payment system. So I think about mobile money back to the air time minutes.

Well, you can’t pay your taxes with air time, at least not until after the telecom company did a deal with the bank and the bank did a deal with the government, but you can’t pay your air time minutes with air time. So it may not be as good a form of money, but it may be a better form of payment. And there has been this sort of back and forth between public sector law and public sector legal power and political authority and private sector technology for centuries, millennia.

And sometimes when the private sector gets the edge on the technology, it can shift the balance of power. Not that the State doesn’t have power, of course. But think about, for example, when Obama ended funding for NASA and said we’re not going to do NASA anymore basically. We’re not going to try to go to the moon and ending funding of the space mission, sorry for NASA.

We’re not going to try and do any more manned space missions. We’ll leave that to Elon Musk and to Richard Branson and all these private companies. That, to me, was one of the saddest moments of a pretty sad presidency because he basically gave up control over technology in space to private actors. And you can be damn sure that they’re not going to give it back without a fight.

When it comes to digital currency technology, this is a sort of Empire Strikes Back moment. Facebook’s Libra, when it said we’re going to build a Libra currency and it’s going to be available for 2 billion users of Facebook and WhatsApp, suddenly governments were really shit scared because they said, Oh my God, if we let them do this, we will lose so much control over the monetary system.

We’re not going to lose complete control because government money is still the highest kind of money on the hierarchy, but we’re going to lose a lot of power. Facebook is going to be able to call us up and we’re going to have to take that call. And then Facebook says to a small little country like a Caribbean country, you know, maybe we’ll just kick you out of the system.

Then you’re going to have a real problem. So when someone says Libra built on the existing government system, well, yes and no. So one of the things that a lot of stable coins — to go back to something I mentioned at the very beginning, when I was working on that bill with Representative Tlaib’s office on regulating stable coins — stable coins are using private payments technology, but backed with government money.

So you get all the benefits of stable government money, at least in theory, compared to, like, Bitcoin or something. But you get all of the benefits of private payments technology. That’s their supposed-to-be win-win moment. Facebook originally, when it first developed its proposal for Libra, it was proposing using its own unit of account that would be like a global digital currency where you would have your money stored in Facebook Libra dollars.

And then when the time came to paying your local currency, your national currency, you would get an exchange rate. And that’s basically been ripped to shreds now. Regulators around the world kind of flexed their muscles and said, you know, hell no. And what Facebook has retreated into now, as its sort of consolation prize, is that they said, okay, we’re going to create stable coins in every foreign country.

So we are going to still have this unified global payments network, but the money in your account will be much more like Venmo money, will be much more like PayPal money. You’ll think of it kind of like a bank deposit. You store your money in there and it’ll be worth exactly as many local dollars as when you put it in. But Facebook keeps the float, keeps all of the money you give it like the way that Starbucks keeps the float.

And of course, more importantly, they’re going to keep all your data. They’re going to control the thing in your pocket. How much bank-created money relative to State-created money? Well, it really depends, you know, commercial banks versus shadow banks versus the broader financial system. It’s multiple. Usually it’s for every a hundred billion of government money, you know, there’s probably a trillion of bank money.

You really have to look at each individual country. And it really depends on where you draw the line. As I said before, all money is a form of contract credit out in the private sector. And so do we call corporate debt money? Well, you don’t really use it to make payments, but you can convert it into something that makes payments. So maybe it’s a form of shadow money, et cetera. Someone just said, I feel like we’ve lost the battle for public currency.

Well, hopefully not yet. Edward Snowden, when he showed the world how much surveillance was going on that governments were lying about, he at least blew the whistle and opened the door to a different world. And you know, people can have problems with Julian Assange as a person, but he’s also been blowing on this whistle for a long time.

And very interestingly one of the people back when the platinum coin was first proposed in 2013, who was one of the original kind of big advocates for it, was Aaron Swartz, who was one of the creators of Reddit. He was one of the big founders of Creative Commons which used a similar Copyleft legal license to the general public license that Richard Stallman created. But he did it for the music and art and things, whereas Stallman was doing it for software.

The Creative Commons license, depending on which one you choose to use, it can be a Copyleft license. And he was the Executive Director of Demand Progress, one of the founders of Demand Progress, where Raul works right now are fighting Libra. And the very last Tweet that he published before he died was advocating for minting the coin, actually.

He died because he downloaded a bunch of JSTOR articles, he went to MIT where he was affiliated with, and downloaded a bunch of them, and he was [inaudible], downloaded a bunch of JSTOR articles. Then the FBI prosecuted him for violating copyrights because what started off as a private copyright, it was turned into a criminal law and eventually the government hounding him over that was so stressful to him that he committed suicide.

And it was a huge loss for Internet freedom. He was a trailblazer. He was doing a lot of incredible work at a very, very young age. So someone asks for the CC given by the government, the debit card, getting back to the government. It is a debit card, which means that there is a bank account, which means there is bank data. We don’t want that data to be used for any other purpose and one of the reasons we made it so that it can be converted to cash.

So people don’t trust it. We don’t have the digital anonymous public wallet infrastructure that I want yet. So otherwise I’d be proposing using that. But one of the things we put in the bill is that at the end of this crisis, we convert that prepaid network into a digital, privacy-respecting cash vault. And we explicitly put that in the bill. And I have been emphasizing that everywhere I’ve been going and talking to people about this bill, because it is really, really important.

And if this bill is just a backdoor way to do what they were doing in Sub-Saharan Africa and force everybody into the banking system so that they can be surveilled and monitored, then that will be a huge shame, and it’s hugely counter to what we’re trying to achieve. So from my perspective, the privacy respecting autonomy is really critical.

Grumbine (01:19:30):

Cool. Rohan. I want to thank you for taking this much time with us.

Grey (01:19:36):

Yeah, thanks for everything, Steve. Keep on keeping on. Stay safe, everyone.

Grumbine (01:19:40):

You got it.

End Credits [music] (01:19:47):

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Mindy Donham. Macro N Cheese is publicly-funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.