Episode 181 – Cloudmoney with Brett Scott

At first glance, HBO’s new documentary series The Anarchists looks like fun. It’s got the sexy circle-A symbol in the title and… Well, at second glance, that’s all it has going for it. The title. If you’re hoping to find the intellectual heirs of Emma Goldman and Bakunin, you’ll be disappointed. These aren’t even the scrappy anarchists of punk rock or the raucous groups waving black banners at demonstrations. HBO’s Anarchists are the one percent. They are tech billionaires and cryptocurrency hucksters. This is the 21st century, where left-wing rhetoric is gobbled up and regurgitated, having been scrubbed clean of its urgency.

Brett Scott is the perfect guest for someone confused by The Anarchists. He doesn’t refer to that show but, in a way, he’s been preparing us for it since his first appearance on this podcast in 2019. He has taken us through the history of fintech, explained the uses of blockchain, and dispelled the myths about cryptocurrency. He makes the case that the war on cash is a war on class.

This week, Brett talks about his new book, Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets. Just like the so-called anarchists of HBO’s series, in the unholy marriage of big finance and big tech the state is the enemy.

Digital financial transactions are being sold to us as liberating and convenient. Steve and Brett question the assumption that high speed “frictionlessness” is a virtue. They ask whose interests are served through these and other mainstream narratives.

“We’ll see these news stories that say something like, cashless society is an inevitability. We will all be moving towards this ever more digital future, and so on. Whenever I see that, all I see is the commercial interests of large corporations being presented as the general interest of all people.”

Brett brings his background in anthropology to look at some of the less obvious consequences of replacing state money – a public utility – with a massive global system that is almost impossible to track or understand. What happens when we have no interaction with the people we depend upon?

Brett Scott is an author, journalist, and activist, who explores the intersections between money systems, finance, and digital technology. He’s the author of The Heretics Guide to Global Finance: Hacking the Future of Money. His latest book is Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets. Find more of his work on brettscott.substack.com

@suitpossum on Twitter

Macro N Cheese – Episode 181
Cloudmoney with Brett Scott
July 16, 2022

[00:00:04.360] – Brett Scott [intro/music]

I think many people have intuited that we are increasingly stuck in a type of digital enclosure and that’s often sold to us as being something that’s highly convenient and even revolutionary. But many of us are starting to sense that actually is a deep kind of emptiness that lies in there.

[00:00:26.170] – Brett Scott [intro/music]

In libertarian thought, it’s often imagined that markets are a natural form that’s then parasited upon by some nefarious state. And then most analysis stems from that. You’ll then say the state is stealing my money, even though the state issues the money.

[00:01:35.110] – Geoff Ginter [intro/music]

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

[00:01:43.040] – Steve Grumbine

All right, folks, this is Steve with Macro N Cheese. Today’s guest is none other than Brett Scott. You know him on Twitter as @suitpossom. And this guy is just a fantastic brain. His Substack is absolutely epic. And Brett is an author, he’s a journalist, he’s an activist, and he’s exploring the intersections between money systems, finance and digital technology.

He’s the author of The Heretic’s Guide to Global Finance: Hacking the Future of Money, and the author of the book that we’re going to be discussing today, which is Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets. And without further ado, Brett Scott, welcome to the show, sir.

[00:02:26.160] – Brett Scott

Hey, Steve, great to be back.

[00:02:28.390] – Grumbine

Thank you so much, by the way, for doing this. I know we’ve been playing tag for a while now. This book has been part of the reason why I’m so glad that you finally got it out. I think last time we talk, you were in the midst of writing it. Then, we got hit with the pandemic.

[00:02:45.190] – Scott

Yeah, it was three years of pain that went into the writing of the book. There were three phases to the book, actually. There was the beginning part where I went through a terrible break up and had my heart broken. So, I was trying to write about the global monetary system in a state of heartbreak. Then, there was the second phase, which is when the pandemic hit, which is when I handed in the first version of the book.

And I had this pandemic phase, which was weirdly calm because I was waiting for the book to come back. And, then, there’s been the third phase where I’m now into the promotion of the book, but also I was suffering from lots of burnout and stuff. So it’s been a real tough ride. But I’m actually really glad to see it out on the shelves and really glad to see people enjoying it.

[00:03:28.950] – Grumbine

It’s a fantastic book. My eyes are horrific. So, when you sent me a forward copy and thank you for that, reading this stuff requires me to wear three times reader glasses just to be able to read the page. But the book is so fantastic and I think the most important part of this to me was we’ve already talked about fintech systems and the war on cash and mutual credit. But you tied this book to an evolution.

And you really were able to bake in some of the very important aspects of the behind the scenes stealth war that is going on for the future of digital exchange. Everything else that’s tied into this decentralized look and feel where we’re no longer shaking hands with people, looking them in the eye. We’re autonomous things, appendages to this digital system, and we’ve lost touch with one another, and our privacy has suffered as a result. And I don’t know that our lives have gotten better, maybe easier in some ways, but I’m not sure that they’ve gotten better.

[00:04:35.370] – Scott

Sure.

[00:04:35.370] – Grumbine

This seems to be the thrust of the book, and you got very specific on a lot of different technologies. But it really grabbed me because, during the pandemic in particular, I found myself trapped, bored, frequently surfing, reading, lots of reading, but also finding things that I never knew that I needed, that I suddenly needed, and this digital world took over.

So, this book is extremely timely. And the depression you spoke about, I think a lot of us felt that. I think it played into our adoption of these technologies over this pandemic as well.

[00:05:13.730] – Scott

Yeah.

[00:05:14.430] – Grumbine

Tell me about this book. What brought you to write this book?

[00:05:18.070] – Scott

Yeah, sure. So, the first book that I wrote was The Heretic’s Guide to Global Finance, and that came out back in 2013. And there was a book about how to understand the general financial system from a quite activist perspective. That was about hedge funds and private equity and all these different parts of finance. And then after I published that, I got involved in lots of alternative currency projects, alternative banking, many types of financial reform projects.

But I increasingly found myself drawn towards this intersection of big tech and big finance. And, interestingly, one of the reasons why I started getting drawn towards that was that my first book was all about how to challenge the financial system. And, actually, there were all these tech people who perceived themselves to be doing that. There were all these tech startups who said, hey, we’re doing that.

We’re trying to democratize finance. We’re trying to take on the financial system. So I started getting invited into a lot of these tech scenes by people who perceived themselves to, also, be rebellious against finance. And so this is how I got my initial in into a lot of this tech world. But I became increasingly skeptical about the story that was coming out of a fintech world.

And this was back in 2010, 2011, 2012, 2013, about this time, Fintech was quite new. And around 2008, when the financial crisis was happening, players like Google still had this warm glow about them. People still perceived google as a force for good in society. And when contrasted against the banking sector, it seemed like, okay, well, maybe these silicon valley models will somehow revamp finance and bring all this democratization and stuff.

And that was the very typical story we heard about fintech several years back. But I became increasingly skeptical of this, and I started to see what was going on, essentially, was the financial sector was being automated. The Fintech world, what it was really aiming to do was to try and take the existing financial system and to just make it faster, more digital, more automated. And as an aspect of this or one related topic, was the cash system.

So, the fact that, actually, in order to automate finance, these big players needed to get rid of cash because cash is an offline form of physical money and you can’t automate this. So, I was, sort of, bringing together this idea around looking at the monetary system and the decline of the cash system and the war on cash with this structural move towards automating finance and fusing together, big finance with big tech. And, so, large part of the book is about that.

But then I’ve also been looking, of course, at the cryptocurrency movements, many of whom perceive themselves to be a response to that fusion of big finance and big tech. So, in the book, I also look at how the crypto movements pitch themselves as an alternative to this type of tech finance vortex. But I’m also very critical about crypto. And that’s, I guess, what the book is about.

But maybe going back to your point about the pandemic, I think many people have intuited that we are increasingly stuck in a type of digital enclosure and that’s often sold to us as being something that’s highly convenient and even revolutionary and so on. But many of us are starting to sense it actually is a deep kind of emptiness that lies in there, even like an existential emptiness around this endless type of digital convenience.

And that this convenience comes paired with huge amounts of corporate power. And so the book is really set in that frame. And, yeah, that’s my general first take on it.

[00:09:05.170] – Grumbine

During that time period, I got COVID. Many people were very kind and supported me through that but it was a brutal thing. And I remember looking at all the different ads that were on, not only Facebook, Twitter, things just popping up randomly into my feed. And there’s all these happy people and I’m locked down. I can’t go anywhere.

It shook me out of a little bit of a stupor and made me realize this propaganda stuff is really damn good. They’re selling me on an idea that I’m going to be on an island somewhere wearing these flowy linen whites. The dichotomy between what was real and what was being sold through this digital medium, it was really powerful.

And through this time, the crypto bros trying to detach because the conspiracies that were so rampant, it was quite a challenging time. And insane inflation hits the bottoming out of the crypto markets. No one knows what’s happening.

[00:10:07.630] – Scott

Yeah, yeah.

[00:10:08.320] – Grumbine

Somebody does. Somebody’s benefiting from it. But most of us, we don’t have a clue. So, we latch on to anything that we can find that makes sense to us, and then that becomes the narrative. But there really is a narrative here. It’s not just the narrative that we perceive. There is a real underlying narrative. And that’s what I get the feeling that you were driving towards.

[00:10:29.200] – Scott

Yeah, yeah.

[00:10:30.050] – Grumbine

Talk to me a little bit about that dichotomy.

[00:10:33.610] – Scott

There’s a few things to say in response to your comments about digital enclosure. One thing I just sort of say at the outset is that for most of human history, people would first experience the world and then afterwards would experience representations of the world. You see a tree, and then maybe you see a picture of a tree after that.

So, we haven’t really ever had a generation that first experiences the world through some kind of representation. But this is increasingly the way that we’re moving. Right? We started to have many, many people who will first experience the world via digital mediums before they actually even experience things in the world. Does that make sense?

[00:11:19.090] – Grumbine

Absolutely. Yeah. Like a vacation.

[00:11:21.560] – Scott

Yeah, so, this is, I guess, a big aspect that’s happening. Extreme intermediation or the mediation of our world becoming a very big topic. And I guess the Pandemic really forcefully pushed us to reflect upon that because we’re pushing to this artificial situation where we were held captive to the digital world because we were told, you can’t go outside.

You can’t go and experience things directly. You’re going to have to experience everything vicariously via the digital infrastructure. And for many people, that was quite a wake up call, actually. Many things in the world really are only meaningful if you can experience them with your physical body. So, the Pandemic has highlighted quite a few interesting things about the digital world in some ways, to say, a lot of the digital rhetoric we hear about the digital future.

We’re often told that it’s something that we all desire and that we all want to move towards and that it represents vast progress and convenience and so on. And yet when push comes to shove, human beings are physical, biological cuddly creatures who want to interact socially, right? And no amount of telling us that we want to be connected in this vast digital web really, actually, makes us feel meaningful.

It’s not meaningful unless you can also have this physical component. And, so, I think that’s one thing I’m going to say about that is that one of the things the book is questioning is, who really wants the digital world? It’s true that we do experience some types of wellbeing that comes from digital technologies in certain situations.

But, really, if you zoom out and you ask yourself who really benefits from digital technologies, it’s often large corporations. And this sounds kind of blunt, but if you think about it, digital technology, it really enables huge scale systems. Digital technology is characterized by us interacting with far away data centers that we can’t see via a device. That action enables far bigger corporations to form.

And, so, my intuition, when I’m analyzing the economic systems, is to say, I’m very skeptical about these narratives that position us as ordinary human beings, as the ones who are driving this change to move towards this vast, inhuman scale digital infrastructure. My intuition is that often this is driven by very large, let’s say, inhuman players like Amazon, these huge corporations who are the ones that really benefit the most from us becoming dependent upon this technology.

And one last thing I’ll say about that, in terms of the manias that have been flying through society, the digital world is a perfect realm for unhinged views of reality to come to being. Precisely because you can’t really test it against anything. I come from an anthropology background. One of the things I find interesting about our current situations, if you look at old societies, predigital societies, let’s say, back in ancient times, you would have some quite wild ideas about the world far away, the cosmology, should we say.

You have the ideas about who creates the world and stuff, and it can be some quite wild mythology. But when it comes to immediate reality, what is around me? What do I survive on? What do I rely upon for my survival? People have got a very strong idea of how they survive. In the hunter-gatherer communities, people have a very strong intuitive idea about how they survive.

Whereas in our world, we’ve hit this very strange point where the global economy is now becoming so big that we don’t even really know how it is that we survive. We don’t have any interaction with people that we are dependent upon. And, in this context, these very unhinged theories start to develop about what’s going on in the world and who’s controlling it. So, there’s all this conspiracy theory stuff that starts to go rampant. This is a very long answer. Sorry.

[00:15:15.010] – Grumbine

No, it’s perfect, though. I love it. Keep going.

[00:15:17.390] – Scott

So, in some ways, I guess my book is one of a counter narrative against the desirability of a fully digital future. To say, actually, for many people, what we actually need is to balance the digital world with the physical world and monetary system. That’s about protecting the cash system, but also to allow us to believe in slowness and physicality, to say, actually, human beings are slow, physical beings.

And there’s nothing wrong with having slow, physical forms of money. And anybody who’s telling you that there’s something wrong with that is not actually channeling the will of ordinary people. They’re often channeling the will of corporations.

[00:16:01.690] – Grumbine

When I walk through that last 10 feet through the aisle at any store, impulse buys that are right there as you walk through, I swear I spend money every time I go through there. As people back in the day when they would have their piggy bank and save up money. Now it’s not like that. You can click a button and you’ve just spent $1,000 and if you are not very careful, you can hurt yourself very easily. It’s so neurally connected to the impulse to just click the button.

[00:16:35.910] – Scott

Yeah, yeah. A lot of these systems are designed to exploit our short term impulses to the detriment of our longer term well-being. When people are promoting frictionless commerce, if you think about what’s being promoted there, it’s this fast, low thought type of action. And I always find this term frictionless quite disturbing because you can reframe friction as texture, which has a much more positive connotation.

And as physical beings, we love the texture of the world. All of human society is built upon, actually, forms of friction. Relationships and obligations to each other and all this kind of stuff, if you think about it, is the actual fabric of human society.  And in many human societies, convenience has never been prioritized precisely because convenience often bypasses contact.

So, actually, if you think about the term contactless payment, it’s all about avoiding contact and friction is all about avoiding contact. Whereas a lot of our relationships are built upon contact and texture and touch and all this kind of stuff, right? So, there is a certain short-term part of ourselves that enjoys frictionless things, but it’s only a very small part of ourselves.

As a human being, I might, in a certain situation, want something to speed up but it’s really not something that’s actually a universal virtue in human life to speed everything up. For many of us, actually, we prefer to slow things down or experience things more. So, when you’re thinking about where did this idea that frictionlessness is a virtue, where did it come from?

And there’s only one place that it comes from. It comes from large scale commerce. So, for an entity like Amazon, for example, frictionless high speed commerce is a virtue because they’re trying to maximize transactions at scale. They really don’t care about your desire for slowness or interaction. So, when I see innovation stories which present frictionless comments as being a naturally good thing, my spidey senses are always set off.

So, I’m saying I don’t think we really find frictionless commerce a naturally good thing. It’s only big players that find that a naturally good thing. I always think about it when I go to Italy in places like this, where you’ll find all these old restaurants where there are old couples sit in a restaurant and they spend way too long in these places because often family owned restaurants and their cousins are in there and so on.

It’s a very communal atmosphere. And if you look at that institution of, like, an Italian restaurant in Milano or something like that, it’s a capitalist organization. They are making profit. They are trying to do transactions. But often it’s blended together with all these other elements, these other non capitalist elements like family structures and human relationships. Now, compare that to a McDonald’s, where the only objective is to push through transactions at the maximum possible speed.

And that’s what creates the difference in feeling in an economy between these highly commercialized spaces, which are all about processing high numbers of transactions versus far more human places. And when I’m seeing these narratives that say human beings naturally want ever more frictionless convenience, I just reject that. I just say human beings don’t naturally want that at all.

What human beings like is a range of different things. We’re holistic beings. We like different things at different times. Sometimes we really just like to hang out at my mate’s restaurant without being told to leave. So, a large part of what I’m doing is to say, look, what’s really going on in our systems that we’re stuck in these huge scale capitalist systems.

And the narratives that come out of that, the standard narratives, rarely are those narratives that support the profit impulses of large corporations. And we’re often told that we have to take these on. We’ll see it reported in the news. We’ll see these news stories that say something like, cashless society is an inevitability, and we will all be moving towards this ever more digital future, and so on. And whenever I see that, all I see is the commercial interests of large corporations being presented as the general interest of all people.

[00:21:06.430] – Grumbine

I work in an industry that collects tolls, a toll road. And the pandemic brought about an opportunity. Collecting tolls, you got to take cash. Well, you’re in the middle of a pandemic. You’re handling cash and you’re breathing COVID germs on your cash, you could be a super spreader through the tolling system. So, the toll workers were reassigned and let go and they switched to cashless tolling immediately, at least that was the rationale for making it in the time that it was made.

And there was a lot of pushback and there was a lot of concern. But you’re sitting there in a long line waiting to get across the bridge at a tall booth, and you’re waiting, and there’s a long line of cars. All you can think of is, wouldn’t it be great if I could just drive through here, automatically debit my card and get out of this line? But there’s a cost to that, and it goes back to slowing transactions down.

Who are we trying to speed up for? What is driving the speed of our lives? And you nailed it. It is big tech. And I guess that brings me to the next point. Your book goes through a lot of the technology that is being utilized behind the scenes as part of this web of connected digital disassociation. Talk to me about the technology that’s being used to enact this war on cash.

[00:22:33.370] – Scott

Sure. Well, I can talk about the two major forms of money we use because that might be a good way to lead into it.

[00:22:39.990] – Grumbine

Yeah.

[00:22:40.900] – Scott

Can I make a point about the toll?

[00:22:42.930] – Grumbine

Yes, please.

[00:22:43.910] – Scott

In some ways, you just captured that short term part of ourselves that I mentioned. Your sitting in this queue and you’re like, come on, hurry up. And that is a legitimate element of human society. You know we do have these short term part of ourselves that want that. And the question is, is it always good to maximize that or not?

So, the standard narrative is that it’s always good to maximize that short term impulse. Which I just think the whole point is that that comes with this major cost. You lose a bunch of things. We can go into all that stuff that you lose. But the other question that you ask, why do we often need to speed up? And one of the irony is I just want to point out about this concept of convenience, is that convenience is a relative property of a system.

It’s not an absolute thing. So, often, if you are stuck in a system that is accelerating and getting ever more complex, you will often find that if you don’t adopt certain technologies, you will start to get discriminated against or you will start to experience struggles. So, often what we’re saying when we’re saying we need convenience is we’re often saying we are stuck in a system that’s getting faster and if I don’t catch up, I’m going to be left behind.

And we kind of know this because, theoretically, if we were adopting ever more convenient technologies, we will be saving time, we would be getting ever more leisure. But we’re not getting ever more leisure. We’re becoming ever more busy. Despite the fact we’re surrounded by all this convenience technology, we’re getting ever more busy.

So, there’s no correlation between these technologies and an increase in our leisure time. This is because we’re stuck in these large scale capitalist systems. And what technology is used for is to expand production and expand the system. It’s not used to save time for you. When you’re stuck in that situation, you’ll feel yourself getting more stressed if you don’t have the technology.

So, that’s often what’s happening. Anyway. Let me just go on to the points about the monetary system, because one of the big things I’m covering in the book is the fact that what we call the U.S. Dollar is not a single currency. It’s actually at least two different currencies that are branded as the dollar. So, the first form that visually associate with money or mentally associated with money is cash, which is issued by the Federal Reserve and the treasury.

It’s issued by state institutions and it’s a primary form of money. It’s the core form of money. And I know you do a lot of stuff around MMT movements and you’ve been involved in a lot of that. And in many ways, the MMT movement looks a lot at the dynamics of the first tier of money. The state part of the monetary system, or the government part of the monetary system and how it works.

So, states issuing money into existence and pulling it back out. And the form that we experience as ordinary people experience that is actually physical cash. That’s the only form of government money we can hold. And while the banks can hold a digital form, but as individuals, we experience the cash system as it’s government money. But then there’s a second tier of money, which is issued by commercial banks.

And in the book, I’m using this metaphor of casino chips, because I’ve been involved in monetary circles for a long time, and I was always getting super frustrated. Whenever I do a talk on money, there’s always some guy in the back of the audience, often retired, and they spend a long time in some kind of technical discipline, often, like engineering or something.

And now they’ve decided they’ve worked out what’s wrong with the monetary system. And never to be dull, stand up and say, don’t you realize that the true problem in our monetary system is fractional reserve banking? Right? This is the cause of all our problems. And they’ll go into account a particular version of what’s called fractional reserve banking, but we’ll often use this very flawed model to do so.

And the flawed model that they will often use is what is sometimes called the one form of money problem. So, they imagine that there’s one form of money in society. They’ll say things like, you put your money in the bank, but the bank then takes it and gives it to somebody else, and it’s not actually there. You think your money is there, but it’s not there.

And the banks are doing this through this process. They’re lending your money up multiple times. And I started to realize this was a big source of confusion in monetary politics, because people often have an intuition of this dubious things happening in the monetary system, but they’re using this idea that there’s only one form of money.

So, I decided to come up with a different metaphor to help people see what’s happening. And I came up with this idea of using casinos to say, okay, look, imagine you go into a casino, and you’ve got a wad of cash with you, $100 in cash, and you go to the cashier, and you hand over that cash to the cashier, and they give you $100 worth of casino chips.

All right, what just happened there was that the casino took ownership of your cash, and they issued you with a new form of money. So, there’s now two forms of money present. There is the government cash and there is these casino chips which are privately issued form of money that can be used within the confines of the casino.

So, now there’s actually two separate forms of money that are now suddenly existing. And I use that as a metaphor to explain what’s happening in the banking sector, because often what’s happening is that they issue digital chips. They’re issuing you this digital form of money. You might go and deposit $100 in cash there, and they will issue you a new form of money, which is a type of digital chip.

And the big superpower that banks have is this ability to issue far more of these digital chips than they have an actual government money. Right? And that’s what’s called fractional reserve banking sometimes. But I was trying to rectify this idea, and the whole digital money system is really built out of these bank issued digital chips. So, all the technological infrastructure, the account systems, all the payments cards and the apps, they’re all basically systems for interacting with the underlying account system of the banking sector.

So, all the technological innovation is really about how do we message the banks to ask them to transfer digital chips from my account to somebody else’s account. And most payment innovation is about that. And what we call the cashless society is really the situation where we move away from the government money system to this privatized form of bank issued digital chips, which you can move around with your apps and so on.

[00:30:18.630] – Intermission

You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter, Twitch, Rokfin and Instagram.

[00:30:44.670] – Grumbine

Back in the great depression era, you had all these gangsters, and today crime looks so different. That whole exchange looks so different. And speaking of multiple forms of money, it was very visceral. You could see the big bag of money, and people were fearful then, but now a guy can be in his mom’s basement and break off the greatest robbery of all time from a keyboard on his computer.

And the fact that the physical nature of the original bank didn’t stop them from being robbed. It did slow it down and change the dynamics of it.

[00:31:27.240] – Scott

Yeah, limits it, yeah.

[00:31:29.790] – Grumbine

But the thing is, Bill Black talks about the fraud. He very particularly focuses on elite control fraud. And one of the key components to his fraud recipe is massive amounts of high speed transactions. You can’t do that with physical cash, but you can do that, clearly ,with this digital medium, and none of us see the fraud occur.

[00:31:52.810] – Scott

Yeah, sure.

[00:31:54.630] – Grumbine

So, from privacy to security to the physical nature of it, this is so fundamental. This is really key, especially as you brought up the fractional reserve banking. People are so skeptical of the banking system. But this particular dynamic, I think, is what people are most afraid of today as we enter into this digital world. Yes, there’s this mental break between what is fiat currency and what is a payment system and what are the hierarchies of that.

But I believe most people are genuinely terrified of what they can’t see. It’s like the creature under the bed. In this case, we have no idea what’s happening. I was looking at my credit card statement the other day and somebody had hacked my card. Somebody had gotten into my account. So, all these changes to security and privacy has broken people’s brains.

But is it really that much different in terms of form? It is in terms of speed but is it really any different in terms of all the things that people are imagining into this? Is this that different?

[00:33:01.410] – Scott

Just bear in mind, when we’re looking at what’s called a cashless society, it’s a euphemism. We might discuss it before, but it’s a euphemism. I always say it’s like calling whiskey beerless alcohol. Cashless society is not incorrect, but it’s a very evasive way of talking about what’s coming and what it is, it’s a bank dominated society because the entire mainstream digital money infrastructure is predicated upon bank accounts.

So, when I’m using the term digital money, I’m referring to all that stuff your credit card, online payments, app payments. And this is all, basically, these bank issued digital chips. Using that metaphor that I was speaking with earlier. This is what the cashless society is. It’s a society where you have an almost entirely privatized monetary system where you’re using the commercial bank money.

And one of the immediate things you can say about this situation is it concentrates ever more power into the banking sector. So, from an immediate political standpoint, ask yourself, is it a good thing to have us being ever more dependent upon the banking sector for even the smallest of transactions? Because the cash system and remember I was saying these different forms of money, the cash system, these bank issued system, but the cash system is a public utility.

You want to think about it like that. It’s the only state or government part of the monetary system that operates kind of like a public utility. You don’t need an account to use it. Anybody can use it. I sometimes call the cash system the public bicycle system of payments, in contrast to the private Uber system of payments.

So, when you’re talking about this move towards the digital systems, one of the immediate things you talk about is a privatization of payments and concentration of power into the private banking sector, which of course brings all these new things. And part of the ideology of the push against cash has, at least in the fintech scene and these digital payments companies, has all been to say, oh, cash is unsafe.

But as you rightly point out, cyberattacks, and this is becoming rife, but bear in mind, with any new industry, they try to demonize their competitor. So, cash is that competitor to digital payments. So, it gets hit with all these accusations, and it’s only when you become dependent upon the digital system that suddenly you’ll realize that the digital system not only doesn’t overcome all the things that it claims to overcome, but it’ll be subject to all sorts of risks in itself.

But, by that time, it’s too late. Now you depend on it. So, the payments industry still puts out all this stuff, saying cash is unsafe, even though there’s thousands of stories about cyber attacks and card skimming and fraud and all sorts of stuff that goes on online. And, as you’re saying, one of the dynamics about the cash system, it’s slow and physical, so, it has a certain limit to how much of it can be moved, how fast and where.

So, even if you’re involved in transnational crime syndicates, it’s actually pretty hard to transport cash and big suitcases across borders. It’s quite a highly risky activity. Whereas digital systems, you can find these ingenious ways of doing this much faster and much more convoluted fashion with digital systems. So, it’s a big, big issue. And I’m from South Africa, for example and, in South Africa, the digital payment industry says the same thing.

They’re like, cash, you can be mugged with cash, but it’s not like the criminals in South Africa are somehow going to stop robbing people if there’s no cash. What they’re going to do is they’re going to hold you up at gunpoint and demand that you empty out your entire online account. So, there’s a lot of issues that come with this cashless society; surveillance, censorship, exclusion, lack of resilience. There’s a whole bunch of them to elaborate upon.

[00:36:51.520] – Grumbine

Well, the alienation, I think, is the biggest one, just simply being separated from everyone. We’ve become focused on what I want and collective well being is lost. We don’t have the human touch and the left socialist circles and people that are trying to live beyond this capitalist paradigm that we’re stuck in.

It’s hard to bring people together and put their self short term desires to the side for the long term collective good. And I guess this brings me to a story that you tell in the book, which I think is really powerful. Aside from being South African, your parents are Zimbabwean, correct?

[00:37:32.570] – Scott

Yeah.

[00:37:33.190] – Grumbine

And you talk about how the Zimbabwean currency collapsed, then you broke into the Libra discussion. Tell us that story, because I think that is something that most listeners would probably find fascinating.

[00:37:47.670] – Scott

Sure. It’s quite a complex story in many ways, but it will probably reveal some of the dynamics. So, yeah, my parents are Zimbabwean. They’re part of what used to be called Rhodesia, because Zimbabwe used to be called Rhodesia. And Rhodesia was actually a country that broke away from the British Empire. It was originally controlled by the Brits and had the British pound.

And, then, a white minority government broke away and they saw that the UK was planning to decolonize. So, the white settler population in Rhodesia, basically, broke away and declared independence because they wanted to stop this process of becoming a decolonized country. So, my parents grew up in that context and one of the first things that that country did was to rebrand the monetary system as the Rhodesian pound.

And my dad was in the special forces in the country because there was a war that broke out and Robert Mugabe was one of the leaders who was fighting against my dad in that war. Robert Mugabe is this interesting character because he was a schoolteacher, then, he was imprisoned for eleven years for political activity. As a political dissident, he was thrown in prison. 

During that time, his son died and so on. There’s a bunch of stuff happened, but basically Mugabe, eventually, got out and he led a rebel movement and they, eventually, won power in 1980 and then they renamed the country Zimbabwe. And they threw out the currency into the announced the Zimbabwe dollar.

And so one of the first things I’m getting at around this is the politics of money that, actually, for many countries, having sovereignty of your currency is a very big thing. In the MMT community, this is a big theme, that having sovereignty over your monetary system as a tool of statecraft. If you can wield it well, it’s something that you can use to help your population.

Of course, Mugabe didn’t wield this well. He, basically, lapsed into dictatorial paranoia. And I remember I used to be in Zimbabwe at the time when this would happen and he basically drove the currency system into the ground. They thought that issuing loads and loads of money when production in the country was collapsing would somehow magic away the reality of the situation.

One of the big lessons in MMT circles is that you can issue money provided that the underlying conditions are right and it will be used to mobilize new production. But in Zimbabwe, they were issuing loads of money whilst the underlying production in the country was collapsing. So, it was a recipe for hyperinflation and destroyed the currency.

So, that was the Zimbabwe situation but fast forward to 2019 and Libra comes out, which is Facebook is claiming to build its own currency. And bear in mind Libra, what it actually was, was a system whereby it would be backed by multiple different national currencies, but most notably the US dollar. So, it was this new unit which was backed by multiple different national currencies.

And one of the big alluring lines that people like Zuckerberg were trying to say was, hey look, people in Zimbabwe will be able to use this to save themselves from their dodgy national currencies and we’ll be bringing all this liberation to the world’s unbanked. And this to me is a completely imperialistic line. It’s, basically, saying rather than seeking monetary autonomy for yourself, just depend upon this unit issued by an American corporation and that’s somehow it’s going to save you.

The actual Zimbabwean democracy activists would want their own currency. They would want to have the ability to control their own monetary policy and make their own decisions. They don’t want to be subject to Mark Zuckerberg. And what Mark Zuckerberg and these guys in Silicon Valley specialized in doing is creating this slick user experience. But, you know, concealed below the surface is always hidden politics.

You’re now going to be dependent upon this U.S. Dollar backed system and you’re going to lose autonomy in your own country, which caused lots of backlash against the Libra system. And it goes back to the politics of money. Money is not just about convenience. It’s not just about do you have a great app or not? It’s, like, a large part of it is do you control it? Do you have some democratic oversight of your currency? Who gets to issue it on what grounds? So, yeah, that’s what that story was intended to highlight.

[00:42:12.330] – Grumbine

And it did a great job. I think that plays into a lot of current activists in the MMT community who are looking to provide a more democratic view of the public utility. As you said, we have a public monopoly on currency and it’s not democratically controlled in any way. It is a tool of the elites for control. Which, I guess, brings me to another thing.

I know that you speak about crypto and a lot of the other private exchanges and the types of folks that charged after that. You even mentioned in the book, how Trump people had even come to you in desperation, who are fearful that are trying to understand what’s happening to the monetary system and the value of the dollar and the whole concept of debasing the currency.

But there’s this concept that somehow private is good, private is better, this belief that they’re free and independent, playing into that libertarian mindset that outright rejects the state, at least in terms of private property. But you see other countries in South America and Central America where they tried to adopt a cryptocurrency as one of the national currencies.

Some of the football players and other athletes that said, we want to take payment in crypto. What is it about this particular thing, politically speaking, that drives them to believe this?

[00:43:44.730] – Scott

There’s lots of things to unpack in that.

[00:43:49.350] – Grumbine

That’s a nice way of saying, Steve just went and did a lap around the world. Sorry about that.

[00:43:52.520] – Scott

A way to start with this would to say in libertarianism, there’s a bit of a problem. The first thing I say is I interact with libertarians over the years. In some ways, libertarian thought makes sense in the context of a large scale capitalist system. If you do find yourself in a transnational economy where it’s so huge you feel isolated.

It’s not surprising to me that you then develop an ideology that imagines that you’re this individual battling against the market because many people do experience markets almost like the weather. There’s this huge storm that hits you and you better figure out how to deal with it. That’s like a very libertarian mindset.

You’re out on your own in this big stormy economy and you better learn to get used to it or harden up, stop complaining. This is very libertarian thought, okay? And in some ways it makes sense. I can understand why you’ve come to this interpretation of your situation. One of the difficulties the left has, historically, is if you’re trying to show people that, actually, these, supposedly, natural storm that buffets you is an artificial creation.

It’s the result of the actions, these things that emerge in a capitalist market. And, actually, you can coordinate differently and collaborate a lot more to create a better alternative. But for many people just imagining yourself as a solo individual is often what you got to do. But one of the delusions that comes out of libertarian thought is that there’s a fundamental separation between states and markets.

So, this is where it gets very dubious in libertarian thought. It’s often imagined that markets are a natural form that’s, then, parasited upon by some nefarious state. And, then, most analysis stems from that. You’ll then say, ah, the state’s stealing my money. Even though the state issues the money. There will be all these things that get said which is about this imagined parasitic entity that’s parasiting upon the natural market.

Whereas if you come from the kind of background like me, which is an economic anthropology, and more people like Karl Polanyi and these people different theorists, you say actually the capitalist market or large scale capitalist markets are underpinned by state institutions. You don’t find large scale capitalism without large scale state institutions and especially large scale state money systems.

So, the whole libertarian imagination is predicated upon the state underpinning. And, so, I often think about libertarianism a bit like I imagine this teenager on their bed fuming away, pissed off at their parents saying I’m going to escape and leave home. Screw my parents. I’m going to seek out my own fortune out in the streets.

And this is very, like, libertarian thinking. It’s the sort of mentality to find yourself in a situation where you’re in this very large scale economy and you, then, feel oppressed by the state institutions that actually underpin that economy. It’s a little bit like a teenager who’s pissed off with their parents. So, a lot of libertarians thought ignores the state and pretends that it’s artificial parasite upon the market even when the state underpins the market.

And, then, all the fantasies of libertarianism come out of this thing saying we can escape to this non-state realm where these large scale markets will somehow exist but without a state foundation. And there’s a monetary part to this ideology because if you want to believe that the market is natural and the state is unnatural you got to also have an example of a natural form of non-state money that will hold the market together.

A lot of libertarians become obsessed with gold and these types of imaginations of some kind of apolitical money system. And Bitcoin happens to be one of the things that’s taken that at least partially captured that imagination in libertarian circles, this imagined apolitical money. And whenever I’m around Bitcoiners and stuff, I’ve been involved in that scene for quite a long time.

I’d always get this line fed to me, which is, hey, don’t you realize the fiat money system is based on violence and our money system isn’t and, therefore, it’s superior. And I’d say, well yeah, the whole global capitalism is based on violence, contract law, the underpinning of nation states upon which all your production is dependent. It’s not just the monetary system.

Everything’s based on violence. And if you can only selectively apply that viewpoint to the monetary system, you imagine the existence of transnational supply chains and yet you don’t see the violence in that. You imagine it’s going to exist without the state. So, there’s a very strange thing going on in libertarian thought about this imagined apolitical money form and also imagine that, somehow, it will work.

And what’s rarely happened in Bitcoin is that this apparently apolitical money form has been totally dominated and taken over by the actual monetary system, despite all the pretenses to things like bitcoin being this escape from the system. Really what it has become is a object traded in the normal US dollar system.

And, obviously, it’s a big political critique to be had here because in leftwing circle like say the MMT community, people don’t deny the violent underpinning of state foundations, but people will argue, say, what we got to do is we got to find ways to steer that and push it in a positive direction. We don’t engage in this fantasy that somehow you can have a society that has no governance processes and that’s somehow going to be a peaceful society.

Whereas in these Bitcoin circles that exist in this fantasy world, this imagined nonviolent apolitical thing somehow exists. And I guess maybe the last thing I’ll say is that, again, going back to the point I started with is, if you are stuck in this global economy, which feels like a storm that buffets you, there’s a certain kind of existential emptiness that accompanies that experience.

You just go to work every day. You’re supposed to buy stuff and you don’t really know why and so on. I often feel like the crypto movements are people within that situation seeking some kind of excitement and meaning in an economy that often doesn’t generate or allow for that meaning to exist. So, I often feel there’s a big fantasy element in crypto.

All these men imagining themselves on a crusade when, clearly, they’re just trading it for US dollars. This is very obvious. But the fantasy that goes along with it, this fantasy of liberation. And so there’s something, in a way, quite sad about it, but also can be kind of interesting.

[00:50:30.070] – Grumbine

I want to ask you a final question because we’ve been on here for a bit and I really appreciate the time.

[00:50:35.610] – Scott

Sorry, I was giving very long answers.

[00:50:37.160] – Grumbine

Well, they’re good answers and I got so many more things I want to ask you. I wanted to talk about a little bit of the political angle. Warren Mosler talked about if you can’t build a regulatory environment strong enough to handle the banking industry, don’t create the banking industry. And he was very emphatic about that. You must have the regulatory environment to be able to counter that leviathan.

[00:51:02.750] – Scott

Yeah, yeah.

[00:51:04.270] – Grumbine

But our Congress is clearly not trained in basic fiat, much less all the fintech, and they’re voting on bills in the future of digital society. Thank God we do have friends like Rohan Grey and the Modern Money Network and others like yourself who influence people and talk to people and help create the roadmap for tomorrow.

But there’s far more voices than what I call the good guys. And I see no regulatory environment capable at this point, and I see no real understanding of it without giving up our soul to the state where they can see every aspect of our lives, I don’t see any meaningful control apparatus. What are your thoughts on the structural deficiencies of not just surveillance, but actually audit and control?

[00:51:54.610] – Scott

Yeah, you probably have more insight in some of the regulatory stuff in the U.S. than I do. But some points that you’ve touched on there is going back to some of the early points we’re talking about, complexity and scale. Human beings, we’re small scale creatures, and I don’t say this in any derogatory way. This is how we actually are.

We’re very good at understanding our immediate environment, but not very good at understanding distant things that we can’t see. And a large part of what’s often being asked of regulators is to deal with some vast, complex system that really you struggle to understand at a scale that you can’t really experience. And, so, there’s a natural disjuncture between a small scale human being and a large scale complex system.

And, historically, in these battles between left and right, what the right will often say is, well, don’t even attempt to alter the system, just let it run. And touching back to that libertarian critique I just did, whilst doing that, they would pretend that the market was a natural construct that just emerged naturally out of the spontaneous actions of human beings rather than being underpinned by actual states.

Whereas in more left circles or people who believe that you can moderate markets in various ways, you’re saying, actually, the state brings the market to life and it can also, then, moderate the worst excesses of that market. But that becomes ever more difficult the larger that market gets and the more transnational it gets, of course.

There’s a strand of thought that I, sometimes, dabble in, should I say sometimes called accelerationism, which basically sees capitalist systems as being out of control. And more than out of control, not controllable, too big to control. And they are operating with principles that we can’t, actually, really override. And you get, sort of, right-wing and left-wing versions of this sort.

But if you’re watching films like The Matrix, you’ll see accelerationist type stuff there where it’s like the machines eventually took over and they created other machines and then control our reality. This is what happened when you let the system run away. And lots of science fiction has this feeling to it. Our systems get too big for us to control and, eventually, the dynamics of these artificial structures we’ve created come to haunt us.

And that’s often what’s happening in our economies is that these structures that we’ve created are haunting us and we can’t quite work out what’s happening. I don’t really have a way to overcome that but now certainly many movements, whether it be regulatory movements or attempts at building alternative economies and so on, often trying to pull against the natural emergent effects of complex systems.

So, you’ve been talking about regulation which is an attempt to clamp down or steer these forces that are unleashed by market societies. Of course there’s also attempts to build alternative banks, to build alternative currencies. And often these alternative economy movements, what they’re trying to do is to say, look, large scale capitalist society is just like out of control.

We need to try to get it down again and bring it back into human communities and tether it down more, right? Because it’s now detaching from us. It’s detaching from what we actually want. I’m just going to circle back to cash because one of the arguments are making in the book is that, actually, weirdly, the cash system right now in this stage of global capitalism is something that slows it down.

At one point in time, let’s say in the 1800s, the cash system was something that was used to expand market systems. It was the leading edge. At one point cash was this highly capitalist thing. But in any capitalist system, it’s always going through these iterations where it’s expanding and trying to shed old versions of itself. And, actually, in the current global economy, the cash system has become almost anti-capitalist.

It’s become part of the system that’s slowing down the expansion. And, in a way, this is what I’m trying to argue in the book, is that in a weird way asserting the right to use cash is asserting that you are a physical human being in a system that’s trying to detach and break away from you. And you’re demanding that you can remain a physical being in the physical world. And I don’t know if that fully makes sense. And I haven’t answered your regulator question either.

[00:56:14.890] – Grumbine

It’s okay. You made the point that human beings are disorganized. We kind of talked about that in the very beginning of this discussion. You, basically, said, the most rebellious thing we can do at this point, an act of rebellion, is to, actually, use cash and forget the fact that it’s dirty and imperfect and slow. This is a revolutionary act, an act of real resistance to use cash. Can you take us out on that? And I think it’s a great way to end it.

[00:56:46.630] – Scott

Yeah, well, let’s make one last point about cryptocurrency as well, because if you think about what I just said about in the world view of big tech and big finance and the global capital system more generally, the overwhelming drive is towards expansion. So, it’s about getting ever more scale, speed, and complexity.

Those are things that seem to be what you have to maximize to expand the system. And digital technology is often seen to be the thing which will enable more of that expansion than any physical system. So, all physical systems have to be shed in order to enable this thing to expand. I always think of like a snake shedding its skin. It has to expand.

So, weirdly, cryptocurrency doesn’t actually cut against that narrative. You’ll find that people find it easier to believe that the future world will be characterized by cryptocurrencies than the cash system. People can conceive of the idea that we’d have an alternative digital future, but imagining that you’d have a physical future is really, really hard because that cuts against the grain of what global capitalism is doing.

So in a way, this is why I find cash, in a sense, more revolutionary and more interesting than the crypto system, is that the crypto system doesn’t really challenge the underlying narrative of expansion. And I have an intuition that, actually, we’re currently in this phase of digital hype that everyone’s rah, rah, rah digital, rah, rah, rah digital all the time.

I suspect, in the next ten years, we are going to see some very big counter reactions to that as people start to, increasingly, experience the existential emptiness and disorientation that accompanies many digital systems. And the global economy is certainly moving in that direction, but I think we see a lot of counteractions.

I’m also encouraging that in the book saying, see if you can do it. See if you can actually stand up against those forces and, actually, continue to just use this thing that’s operating at a scale and speed that’s slower than these other systems. And, actually, seeing that simpler, slower technologies can be, in a sense, more advanced.

[00:58:54.970] – Grumbine

I’m telling you, folks, get this book. Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets by Brett Scott. I’ve read it once. I really think that there’s so many great metaphors in here. See, for me, as an activist, I want to be able to have the best stories, analogies, framing for being able to make these points as we move forward.

As I read through this book, a lot of this stuff, even though I talk about this with a lot of different people in different ways, it’s still a big black box. Or, to quote your book, there’s a cloud here that we can’t really see behind. So, to me, what you’re doing and the ability to put these things into words, I think it’s more important than just about any other subject because we’re all being dragged down this path with no idea how to really navigate it.

[00:59:46.840] – Scott

Yeah, yeah.

[00:59:47.830] – Grumbine

And you’re doing God’s work.

[00:59:49.620] – Scott

I don’t know all the answers, but hopefully the book will help people to have a slightly more illuminated path as they attempt to navigate this space. Thanks so much for the chat.

[01:00:01.930] – Grumbine

Absolutely. Folks, go out and get this book. I’m telling you, it’s worth your time. And with that, Brett, let’s not be a stranger. I’m really glad that I was able to get you back on. You are truly one of the smartest people I’ve ever been blessed to meet and also one of the best souls I’ve ever met.

[01:00:18.070] – Scott

Oh, thanks.

[01:00:18.070] – Grumbine

Thank you for your time, sir. Really appreciate it.

[01:00:20.990] – Scott

Well, hopefully, I’ll be coming to the U.S. soon, so, I’ll hit you up.

[01:00:25.210] – Grumbine

Thank you, sir. I appreciate it. All right. This is Steve Grumbine with Brett Scott. Go buy the book. Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets. with Macro N Cheese. We’re out of here.

[01:01:01.060] – End credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Andy Kennedy. 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.

Brett Scott  –  Podcast Guest 

Journalist, campaigner and the author of The Heretic’s Guide to Global Finance: Hacking the Future of Money (Pluto, 2013). He writes for publications such as the Guardian, New Scientist, Wired Magazine and CNN 

The Heretic’s Guide to Global Finance: Hacking the Future of Money 

Cloudmoney: Why the War for Our Wallets Is a War for Our World 

Substack 

Karyl Polaryi 

An Austro-Hungarian economic historian, economic anthropologist, economic sociologist, political economist, historical sociologist and social philosopher. 

Books

Rohan Grey 

A law professor at the Willamette University College of Law. He is the research director of the Digital Fiat Currency Institute, a consultant to the UN International Telecommunications Union’s Focus Group on Digital Currency, and a network manager with the FreedomBox Foundation, which develops privacy and freedom-respecting software for personal use. He is also the president of the Modern Money Network, a research fellow with the Global Institute of Sustainable Prosperity, a director of the National Jobs for All Network, and a member of ClassCrits and the Association for the Promotion of Political Economy and the Law (APPEAL).

Digitizing the Dollar: The Future of Public Money in the Age of Cryptocurrency

Modern Money Network 

Brings together students, scholars, professionals and members of the public to discuss, debate and refine ideas about money. Our work combines insights from a range of fields, including law, political economy, finance, history, sociology, anthropology, technology and systems theory. 

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