Picture a young couple in early 2021. They’ve been saving for years. Interest rates are at record lows, and the Reserve Bank has just said it doesn’t expect conditions for a rate rise to be met until 2024 at the earliest. So they stretch, borrow and buy their first home. Everyone around them is doing the same. In 2021, home values rise 22 per cent. The money behind that boom came from somewhere. In March 2020, as the pandemic hit, the Reserve Bank cut its cash rate to 0.25 per cent, targeted the same yield on three year government bonds and began buying bonds. In November it went further. The cash rate fell to 0.1 per cent, and it launched a formal bond buying program with newly created money. By February 2022, that program alone had bought $281 billion worth. The bank also lent banks $188 billion at ultra low rates. Few saw what came next. In November 2021, a survey of Australia’s top economists concluded there would be no prolonged high inflation and no rate hike in 2022. Six months later, rates began to rise. Inflation climbed to 7.8 per cent by the end of 2022, the highest in more than three decades. The Reserve Bank raised rates thirteen times, taking the cash rate to 4.35 per cent by November 2023. For our couple, and hundreds of thousands like them, repayments jumped month after month. They had done exactly what the central bank encouraged. What caused that inflation depends on who you ask. Mainstream economists point mostly to supply shocks, from pandemic shipping bottlenecks to the energy spike after Russia invaded Ukraine and floods that pushed up food prices. Austrian economists agree those shocks raised some prices, but argue they can’t create broad, lasting inflation on their own. That takes more money, and the pandemic delivered a lot of it. On 28 November 2022, Governor Philip Lowe sat before a Senate committee and was asked whether he owed Australians an apology. “I’m certainly sorry if people listened to what we’d said,” he replied. The bank’s own reviews didn’t hide the damage. It called its exit from the bond yield target “disorderly” and admitted it caused reputational damage. In the 2021–22 financial year it booked a $36.7 billion accounting loss on its bonds, leaving its equity in the red. It estimated the program would cost between $35 billion and $58 billion by 2033. To be fair, unemployment fell to 3.4 per cent in July 2022, its lowest in almost 50 years, and the bank argues its actions helped. But look at the shape of it. The same institution created the money, told people rates would stay low, then raised them to fight the inflation that followed. And this year, the cash rate has risen four more times, to 4.60 per cent. Who pays for the mistakes of the people who make the money? Tomorrow, the man who invented private digital cash in 1982, and why it failed. Follow and ring the 🔔 on our profile so you don’t miss a day.

On 7 August 2013, a BBC camera crew squeezed into a small cooperative bank in Wildenberg, a town in Lower Bavaria, Germany. The bank had eight full time staff. Two larger banks had already said no. In the room were the bank’s two directors, its credit officer Ludwig Keil, and an economist named Richard Werner, the same man widely credited with coining quantitative easing on Day 22. He was there to borrow €200,000. Werner wasn’t borrowing for the money. He wanted to settle an argument economists had been having for more than a century. When a bank makes a loan, where does the money come from? There were three competing answers. Banks only lend out your neighbour’s savings. Banks can’t create money individually, but the banking system does collectively. Or each bank simply creates new money when it lends. Werner designed his loan as a live test of all three. Keil processed the loan while the camera rolled and every screen was photographed. The moment the contract was signed, a new account appeared on the bank’s system with a balance of €200,000. Next to it sat a loan account showing minus €200,000. Werner then traced the bank’s records. No money had been moved from other customers or from any other bank. The bank simply typed it in. In 2014 he published the result in the International Review of Financial Analysis, under the title “Can banks individually create money out of nothing?” Only the third theory survived the test. The same year, the Bank of England published its own paper, “Money creation in the modern economy”, explaining that commercial banks create most of the money in circulation when they lend. Australia’s Reserve Bank followed in September 2018 with “Money in the Australian Economy”, confirming that when banks make loans, they create new deposits, and that the old reserve requirements had been removed. None of this was entirely new. Ludwig von Mises described banks creating unbacked money back in 1912. In 1961, the Federal Reserve Bank of Chicago published a booklet called “Modern Money Mechanics”, explaining how the banking system creates money, and kept revising it until 1994. But it told the story through the second theory, with reserves coming first and money multiplying through the system. The idea that each bank simply creates money the moment it lends stayed on the fringes. Some economists still argue the distinction matters less than it sounds, because banks are limited by capital rules, profits and demand for loans. Remember Day 16, though. In Australia, none of those limits is a cap on how much money gets created. So here is the question worth sitting with. If economists described this in 1912, why did it take a global financial crisis before most central banks explained it this plainly? Was it too technical to matter, or too uncomfortable to say out loud? Tomorrow, the day an entire nation voted on whether banks should keep this power. Follow and ring the 🔔 on our profile so you don’t miss a day.

On Saturday 16 March 2013, people in Cyprus woke to find they couldn’t move their money. Overnight, European finance ministers had agreed on a rescue for the island’s broken banks, and there was a catch. Every bank account would pay a levy. 9.9 per cent on deposits above €100,000. And 6.75 per cent on the rest, including the savings that were supposed to be guaranteed. Cyprus’s banks had grown far too big for such a small country, and had lent heavily to Greece, whose debt had just been written down. Now someone had to cover the hole. Europe’s answer was the depositors. Cypriots were furious. On 19 March, parliament voted the levy down. Not a single member voted for it. The banks stayed shut until 28 March. People queued at ATMs, and Laiki Bank limited withdrawals to €260 a day. On 25 March a new deal was struck. Laiki Bank was closed. At the Bank of Cyprus, 47.5 per cent of every deposit above €100,000 was turned into shares in the bank. Insured deposits under €100,000 were spared this time. Controls on moving money out of the country lasted until April 2015. Cyprus made one thing impossible to ignore. Remember the goldsmith’s receipt on Day 5. A bank deposit is not your money sitting in a vault. Legally, it is a loan you made to the bank, and in a crisis, lenders can be asked to share the losses. Economists call it a bail in. In Australia, deposits up to $250,000 per person per bank are guaranteed by the government, and the 2018 crisis laws target certain bank investment securities rather than ordinary savings. That is real protection. But it is still protection that depends on a government promise, which is exactly what Cypriots thought they had too. That is why this system is worth questioning. Cypriots didn’t do anything wrong. They saved, they trusted their banks, and they believed the guarantee. In one weekend, the people who wrote the rules tried to rewrite them, and only a parliament saying no stood between ordinary savers and a bill for a crisis they didn’t create. Your savings are years of your life, stored up. It is fair to ask who really controls them, and what their promises are worth when it counts. Tomorrow, the economist who walked into a small German bank and borrowed €200,000 for science. Follow and ring the 🔔 on our profile so you don’t miss a day.

On 21 November 2002, a US Federal Reserve governor named Ben Bernanke gave a speech in Washington about how to stop prices falling. The government, he explained, “has a technology, called a printing press (or, today, its electronic equivalent)”. It could produce as many dollars as it wished, at essentially no cost. The press nicknamed him Helicopter Ben. Six years later, as Chairman of the Fed, he got to use it. The tool is called quantitative easing. It sounds technical, but the idea is simple. The central bank creates brand new money and uses it to buy government bonds and other assets, mostly from banks and investors. Nothing is printed on paper. The money is created as entries on the central bank’s ledger, called reserves. The term is widely credited to economist Richard Werner, who used it in a Japanese newspaper article in 1995. Ironically, he meant something different. He wanted policies that got banks lending to businesses again, putting money into the productive economy rather than into bond markets. When central banks later adopted the name for buying bonds, he became an outspoken critic, and in 2013 said the UK’s version had failed. The Bank of Japan dismissed quantitative easing as ineffective as late as February 2001, then adopted it the following month. After 2008, it went global. The Fed began buying in November 2008, and the Bank of England followed in March 2009. In August 2007, the Fed’s balance sheet was around $870 billion. By early 2022, it was nearly $9 trillion. Australia’s turn came later. The Reserve Bank began buying government bonds in March 2020. In November that year it launched a $100 billion program, doubled it in February 2021, and kept buying until February 2022. It also lent banks $188 billion at ultra low rates. Between the two, its balance sheet grew from around $170 billion in early March 2020 to $623 billion by December 2021, more than triple. Where does all that money go? It pushes up the price of bonds, which pushes investors into shares, property and anything else that might still pay a return. Remember Cantillon on Day 18. The first receivers are banks and asset owners. Wage earners and savers come last, after prices have already moved. Defenders say quantitative easing stopped the 2008 crisis turning into another Great Depression, and they may be right. Austrian economists reply that it rescued asset prices rather than the economy, kept failing companies alive and rewarded the people who already owned the most. And once started, it is hard to stop. Today, the Fed still holds around $6.7 trillion. Tomorrow, the week a government came for people’s savings. Follow and ring the 🔔 on our profile so you don’t miss a day.

In 1719, Paris was in a frenzy. Shares in John Law’s Mississippi Company were soaring, fuelled by a flood of new paper money. An Irish banker named Richard Cantillon bought in early, sold near the top, and made a fortune, even though he believed the whole scheme was unsound. When the bubble burst, he walked away rich. Around 1730, Cantillon wrote down what he had learned. New money, he argued, does not raise all prices at once. It enters the economy at a particular point, and the people who receive it first can spend it before prices have adjusted. By the time it reaches everyone else, prices are already higher. The first receivers gain. The last receivers pay. His essay was so sensitive it was not published until 1755. By then Cantillon was long gone. In 1734 his London home burned down, and he is generally believed to have been murdered, though one biographer suspects he faked his death to escape the many people who blamed him for their losses. Economists now call his idea the Cantillon effect. Today the first receivers of new money are usually banks, governments and people who already own assets. The last are wage earners, savers and renters. Think back to 2020 and 2021, when the Reserve Bank created hundreds of billions of dollars. Home values rose 22 per cent in 2021, while wages grew 2.3 per cent. Those who already owned houses got richer. Those trying to buy one fell further behind. Defenders of that policy say it protected jobs during the pandemic, and unemployment did fall to a near 50 year low. Both things can be true. But money printing is never neutral. It always moves wealth from someone to someone else, and it is rarely the people at the back of the queue who gain. Tomorrow, how a modern country ended up printing a 100 trillion dollar note. Follow and ring the 🔔 on our profile so you don’t miss a day.

How much of your deposit does your bank have to keep in reserve? Most people guess something like 10 per cent. In Australia, the legal answer is zero. It was not always this way. For decades, banks had to lodge a share of their deposits with the central bank, money they could not lend out. In 1988 that was replaced by a lighter rule. Banks had to lodge up to 1 per cent of their liabilities with the Reserve Bank, earning interest about 5 percentage points below market rates. On 1 July 1999 that last remnant was abolished and the money was handed back to the banks. Since then, Australian banks have had no legal reserve requirement at all. Neither do the UK, Canada or New Zealand, and the US cut its requirement to zero in March 2020. So what stops banks lending without limit? APRA requires them to hold enough capital to absorb losses and enough easily sold assets to survive a rush of withdrawals. The Reserve Bank sets the cash rate, which makes borrowing cheaper or dearer. And someone has to want the loan. Look closely and you will notice these rules manage risk and price. None of them set a ceiling on how much money gets created. Every time a bank approves a loan, it creates a brand new deposit, and that is where most of our money comes from. Broad money in Australia now runs to around $3.5 trillion, while physical cash is around $100 billion. The goldsmiths at least had to worry about gold walking out the door. Today the vault does not need anything in it. It just needs you not to ask. Tomorrow, who measures inflation, and what they leave out. Follow and ring the 🔔 on our profile so you don’t miss a day.

In the 1970s, getting a home loan in Australia could mean months of waiting and years of saving with the same bank, just to prove you deserved one. The government capped the interest rates banks could pay and charge, and at times the Reserve Bank told them how much they could lend. Credit was rationed. Then the walls came down. Ceilings on deposit rates were removed in 1980. The Campbell Committee’s report in 1981 made the case for freeing up the whole system. In 1982 the Reserve Bank announced there would be no more direct lending controls, in 1985 sixteen foreign banks were invited in, and in 1986 the last ceiling on home loan rates was lifted. Credit flooded in. Banks competed hard to lend, and borrowers lined up to take it. Corporate high flyers like Alan Bond and Christopher Skase built empires on borrowed money, and commercial property boomed. To cool things down, rates were pushed higher, and home loan rates hit 17 per cent in 1989. The bust followed. Two state owned banks, the State Bank of Victoria and the State Bank of South Australia, collapsed under bad loans in 1990 and 1991, and taxpayers covered billions in losses. Keating called the downturn that followed the recession we had to have. Unemployment passed 10 per cent. Deregulation brought real benefits, from more competition to easier access to loans. But Austrian economists like Ludwig von Mises described this pattern long before it happened here. When banks can create credit freely, money pours into speculation and assets, creating a boom that looks like prosperity until it has to unwind. The lending limits came off. The anchor never went back on. Tomorrow, the year Australia dropped its last reserve rule. Follow and ring the 🔔 on our profile so you don’t miss a day.

On Sunday evening, 15 August 1971, President Richard Nixon interrupted prime time television. After a secret weekend with his advisers at Camp David, he told Americans he was suspending, temporarily, the right of foreign governments to swap their dollars for gold. He also froze wages and prices for 90 days and slapped a 10 per cent charge on imports. The reason was simple arithmetic. Foreign governments held far more dollars than the United States had gold to cover, and some had started asking for their gold. The vaults had been draining for years. Rather than devalue or stop printing, Washington simply closed the window. Temporary has now lasted 55 years. For the first time in history, every major currency on earth was backed by nothing but the promise of the government that issued it. Australia’s dollar, along with almost every other currency, was now anchored to other promises rather than to metal. Markets gave their verdict quickly. Gold, held at $35 an ounce since 1934, reached about $850 by January 1980. Over the same decade, US consumer prices roughly doubled. Gold did not become more valuable. The dollar became less trustworthy. Supporters of the decision argue the old system was already broken, and that floating currencies gave governments room to respond to recessions. Austrian economists see it differently. The last external limit on money creation was gone, and every government that followed has been free to expand its money supply without asking anyone’s permission. Tomorrow, why Australia let its dollar float. Follow and ring the 🔔 on our profile so you don’t miss a day.

In July 1944, with the war still raging, 730 delegates from 44 nations checked into the Mount Washington Hotel in Bretton Woods, New Hampshire. Their job was to design the money of the postwar world. Australia was in the room. Two men dominated the talks. Britain’s John Maynard Keynes wanted a new global bank issuing a brand new world currency he called the bancor. America’s Harry Dexter White wanted something smaller, built around the US dollar. White won, and not because his argument was better. Europe was broke, and the United States held the bulk of the world’s official gold. The deal was simple. Every currency was tied to the US dollar, and the dollar was tied to gold at $35 an ounce. Only foreign governments and central banks could swap their dollars for gold. Ordinary Americans had been banned from owning gold since 1933. The same conference created the International Monetary Fund and the World Bank, and Australia joined the IMF in 1947. Here is the catch. As world trade grew, everyone needed more dollars, and the United States supplied them by running deficits. Soon there were far more dollars overseas than there was gold in American vaults. Economist Robert Triffin warned in 1960 that the system could not last. France’s finance minister, Valéry Giscard d’Estaing, called America’s position an exorbitant privilege. It was the goldsmiths’ trick from Day 5 on a global scale. One issuer, writing more claims on gold than it could ever pay. Tomorrow, the Sunday night the dollar’s last link to gold was cut. Follow and ring the 🔔 on our profile so you don’t miss a day.

We released a special, bonus episode with @bayanimills, CEO of @AusBTCIndBody to discuss advocacy for a sound Bitcoin policy in Australia. We cover: 🟠 What Canberra really thinks of Bitcoin 🟠 The energy angle that gets politicians listening 🟠 Why Australia’s Bitcoin miners keep quiet 🟠 How regulators pushed investment overseas 🟠 Why showing up beats complaining 🟠 AML/KYC and who really controls access to money 🟠 A retail CBDC pitch within five years? 🟠 How you can get involved with ABIB And why the RBA says it has “no position” on Bitcoin, yet keeps writing about it. Listen to the full episode now, share it with someone who should hear it, and get involved with @AusBTCIndBody. Policy changes when people show up. 🧡 YouTube: youtu.be/a-QT5flYhfQ Fountain: fountain.fm/episode/TpXzJR8T… Spotify: open.spotify.com/episode/71u…

In November 1923, a loaf of bread in Germany cost 200 billion marks. Before the First World War, a US dollar bought 4.2 marks. On 20 November 1923, it bought 4.2 trillion. People were paid in the morning and rushed to spend their wages before lunch, because by the afternoon the money would buy less. The road there started in 1914. Germany paid for the war largely by borrowing and printing rather than taxing, expecting to win and make the losers pay. It lost instead, and in 1921 the victors set reparations at 132 billion gold marks. The mark kept sliding through 1922 as the government covered its bills with new money. Then, in January 1923, French and Belgian troops occupied the Ruhr, Germany’s industrial heartland, to seize coal and goods as payment. The government urged workers to resist by striking, and kept paying their wages with freshly printed money. Hundreds of paper mills and printing firms worked flat out just to keep up with the demand for banknotes. Savers lost everything. People who owed money, including large industrial borrowers, watched their debts melt away. The end came on 15 November 1923 with a new currency, the Rentenmark. One Rentenmark replaced a trillion old marks, and only 3.2 billion were issued. It worked because its supply was strictly limited, and people believed it would stay that way. Historians still debate how much blame belongs to reparations and how much to the government’s own choices. But the damage to trust was done. That same month, a failed coup in Munich put a little known agitator named Adolf Hitler on trial and into the headlines. Tomorrow, how the US dollar became the world’s money. Follow and ring the 🔔 on our profile so you don’t miss a day.

The Roman denarius began life as an honest coin. When Augustus came to power, it held close to 4 grams of almost pure silver, and a soldier, a merchant and a tax collector anywhere in the empire could trust what they were holding. Three centuries later, the coin that replaced it was mostly bronze with a silver wash, under 5 percent silver. Nobody announced the change. The emperors simply kept minting. The method was elegant in its simplicity. Rome's expenses kept growing, especially for the army, and taxes were unpopular and slow to collect. So the mint quietly cut the silver in each coin and stretched the same metal across more of them. Nero trimmed the denarius in AD 64. Later emperors went further, and in AD 215 Caracalla introduced a new coin officially worth two denarii that contained only about one and a half denarii worth of silver. Every round of debasement let the emperor pay today's bills with yesterday's trust. People noticed, as people always do. They held on to the older, purer coins and spent the new ones, which is one reason archaeologists keep digging up buried pots of early denarii. Prices rose, the army demanded more and the cycle sped up. By the late third century the coinage had collapsed, and in AD 301 Diocletian responded with an edict fixing maximum prices for more than a thousand goods, enforced with the death penalty. Goods vanished from markets anyway. You cannot legislate value back into a coin. Rome eventually found its way back. Around AD 309 Constantine introduced the gold solidus, and his successors in Constantinople held its weight steady for roughly seven centuries, long enough for it to be trusted from the Mediterranean to China. So who controlled Rome's ledger? Not nature. The emperor controlled the mint, and he used it. At least his debasement lived in the metal itself, where anyone who weighed, tested or melted a coin could eventually find out. Today the ledger is digital, and the debasement shows up in prices rather than in the coin, where far fewer people think to look. Tomorrow, how a goldsmith's receipt became money. Follow and ring the 🔔 on our profile so you don't miss a day.

On the island of Yap in Micronesia, the money was limestone. Rai stones were quarried on Palau, roughly 400 kilometres away, carved into discs and brought home by canoe, and the largest stand taller than a person. Most of them never moved again. When a stone changed hands, it stayed exactly where it was and the islanders simply agreed it now belonged to someone else. One famous stone sank to the bottom of the sea on the voyage home, and for generations its owner was still counted as wealthy. Nobody had seen it in decades. Everybody agreed it existed. That story sits right at the centre of yesterday's debate. Credit theorists love Yap because the money was clearly a shared record of who owned what, kept in the collective memory of the island. Milton Friedman wrote about it in 1991, comparing it to 1932, when gold in a New York vault became French simply by being relabelled. Commodity theorists see the opposite. A rai stone was valuable precisely because it was enormously costly to produce. Every disc represented a dangerous voyage, months of labour and centuries of accumulated supply that nobody could rush. Then, in the 1870s, an Irish American captain named David O'Keefe arrived with modern ships and began importing new stones in bulk. The islanders responded the way sound money advocates would predict. As new supply arrived faster, they valued the old stones more than the new ones, because the cost of making more had collapsed. Easy money had shown up in the Pacific, and the market discounted it. That is where the pure credit theory falls flat. If rai stones were only tokens in a shared record of who owed whom, a new stone should have worked exactly as well as an old one. It did not. The islanders cared about how hard each stone had been to bring home, and they marked down the ones that were easy to make. The ledger mattered, but so did what was being recorded. Credit can track wealth. It cannot conjure the scarcity that gives that wealth its value. Tomorrow, how Rome quietly shrank its money. Follow and ring the 🔔 on our profile so you don't miss a day.

Every economics textbook tells the same origin story. Before money, people bartered. The baker wanted shoes, the shoemaker wanted fish, and nobody could find a match, so humanity invented money to fix the inconvenience. Adam Smith popularised the story in 1776 and it has been repeated in classrooms ever since. How we actually got from swapping fish for shoes to money is far less certain, and that question has divided economists for more than a century. Carl Menger, founder of the Austrian school, offered the most convincing account in 1892. Money was never invented or decreed. People traded for goods that were easier to trade on, such as salt, cattle and metals, and over generations the most marketable good won. Nobody planned it. Gold and silver came out on top because they were scarce, durable, divisible and hard to fake. Money, in this view, is a market good that emerged from the bottom up, and it does not require a pure barter economy to have existed, only people looking for the easiest thing to swap. Two rival schools disagree. Credit theorists, from Alfred Mitchell-Innes in 1913 to anthropologist David Graeber in 2011, argue that money began as debt. They point to Mesopotamian temple scribes recording obligations on clay tablets around 3000 BC, and to anthropologist Caroline Humphrey's 1985 finding that no economy built purely on barter has ever been described. State theorists, following Georg Friedrich Knapp in 1905, go further and argue money is whatever the state declares it to be and demands in tax. That idea is the intellectual root of Modern Monetary Theory. The Austrian reply is hard to dodge. Those Mesopotamian debts were measured in barley and silver, which means a commodity was already doing the job of money before the scribe picked up his stylus. Credit between neighbours works in a village, but it does not scale to strangers, and that is exactly where a market good takes over. And the state theory explains how governments can impose a money, not why anyone valued it in the first place. History keeps showing that when a state's money fails, people return to whatever the market trusts. Tomorrow, a Pacific island where the money was too heavy to move. Follow and ring the 🔔 on our profile so you don't miss a day.