Ray Dalio: What is Money?

00:00:00.000 | - Again, maybe another dumb question, but--

00:00:05.000 | - There are no such things as dumb questions, Tony.

00:00:08.000 | - There you go.

00:00:08.840 | But what is money?

00:00:09.940 | So you've mentioned credit and money.

00:00:14.080 | Another thing that if I just zoom out

00:00:18.480 | from an alien perspective and look at human civilization,

00:00:21.440 | it's incredible that we've created a thing

00:00:24.760 | that's not, that only works because currency,

00:00:29.400 | because we all agree it has value.

00:00:32.500 | So I guess my question is,

00:00:36.360 | how do you think about money as this emergent phenomenon?

00:00:40.960 | And what do you think is the future of money?

00:00:43.760 | You've commented on Bitcoin, other forms.

00:00:46.500 | What do you think is its history and future?

00:00:50.600 | How do you think about money?

00:00:53.360 | - There are two things that money is for.

00:00:57.120 | It's a medium of exchange, and it's a storehold of wealth.

00:01:01.840 | - Yes.

00:01:02.680 | - That's, so money, so you could say something's

00:01:06.880 | a medium of exchange, and then you could say

00:01:09.560 | is it a storehold of wealth, okay?

00:01:12.320 | So those, and money is that vehicle that is those things,

00:01:17.320 | and can be used to pay off your debt.

00:01:22.840 | So when you have a debt and you provide it,

00:01:27.040 | it pays off your debt.

00:01:28.880 | So that's that process.

00:01:30.760 | - And it's, I apologize to interrupt,

00:01:33.240 | but it only can be a medium of exchange or store wealth

00:01:37.120 | when everybody recognizes it to be of value.

00:01:39.720 | - That's right. - Right.

00:01:40.680 | - And so you see in the history around the world,

00:01:43.440 | and you go to places, I was in an island in the Pacific

00:01:48.440 | in which they had as money these big stones,

00:01:55.680 | and literally they were taking a boat,

00:01:58.800 | this big carved stone, and they were taking it

00:02:02.160 | from one of the islands to the other,

00:02:03.560 | and it sank, the piece of this big stone piece of money

00:02:08.560 | that they had, and it went to the bottom,

00:02:12.120 | and they still perceived it as having value,

00:02:15.560 | so that it was, even though it was in the bottom,

00:02:17.960 | and it's this big hunk of rock,

00:02:19.840 | the fact that somebody owned it,

00:02:21.280 | they would say, oh, I'll own it for this and that.

00:02:23.920 | I've seen beads in different places,

00:02:27.440 | shells converted to this in mediums of exchange,

00:02:30.840 | and when we look at what we've got,

00:02:32.840 | you're exactly right, it is the notion that

00:02:35.840 | if I give it to you, I can then take it,

00:02:38.160 | and I can buy something with it,

00:02:39.880 | and that's, so it's a matter of perception, okay.

00:02:43.480 | And then we go through then the history of money,

00:02:47.000 | and the vulnerabilities of money,

00:02:49.480 | and what we have is, through history,

00:02:52.800 | there's been two types of money,

00:02:54.840 | those that are claims on something of value,

00:02:59.840 | like the connection to gold or something.

00:03:03.600 | - That's right.

00:03:04.440 | - That would be, or they just are money

00:03:07.640 | without any connection, and then we have a system now,

00:03:10.800 | which is a fiat monetary system.

00:03:12.900 | So that's what money is.

00:03:14.640 | Then it will last as long as it's kept a value,

00:03:19.640 | and it works that way.

00:03:22.000 | So let's say central banks, when they get in the position

00:03:25.760 | of like they owe a lot of money,

00:03:28.200 | like we have in the case, it's increasingly the case,

00:03:31.760 | and they also are a bond, and they have the printing press

00:03:35.680 | to print the money and get out of that,

00:03:38.680 | and you have a lot of people might be in that position,

00:03:41.480 | then you can print it, and then it could be devalued

00:03:44.440 | in there, and so history has shown, forget about today,

00:03:48.880 | history has shown that no currency has,

00:03:53.120 | every currency has either ended as being a currency,

00:03:58.120 | or devalued as a currency over periods of time,

00:04:01.920 | long periods of time.

00:04:03.440 | So it evolves, and it changes, but everybody needs

00:04:06.560 | that medium of exchange, and everybody needs

00:04:09.320 | that storehold of wealth, so it keeps changing

00:04:12.240 | what is money over a period of time.

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Ray Dalio: What is Money?

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