GM104: How the Dollar Quietly Took Over the World ft. Brendan Greeley

**Brendan Greeley** (0:01)
Kevin Warsh is right to say, what are we doing with this balance sheet? Why can't we ever shrink it ever again? Are we stuck forever with the ample reserves regime? Those are really good questions. And in the past, the recent past when the Fed has done these policy reviews, it has absolutely failed to ask really hard questions about what its tools are and whether they're working. I think it's important that we're having that process.

**Niels Kaastrup-Larsen** (0:24)
Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict.
In each episode, we go deep with some of the world's most thoughtful minds in investing, economics and beyond to understand how they think, how they prepare and how they decide and the experiences that shaped how they see the world. No noise, no shortcuts, just real conversations to help you think better and invest with confidence.

**Alan Dunne** (0:57)
Welcome back to Top Traders Unplugged. My name is Alan Dunne and today I'm delighted to be joined by Brendan Greeley.
Brendan is the author of a new book called The Almighty Dollar, 500 Years of the World's Most Powerful Money. He is currently completing a PhD at Princeton University, specializing in the history of money and finance. He was previously a financial journalist for 20 years at Bloomberg Business Week and The Economist, and he was US economics editor at the FT, and he continues to write a column for the FT. Brendan, great to see you. Great to have you on. How are you doing?

**Brendan Greeley** (1:29)
Good morning. I'm doing all right. Thanks for having me in.

**Alan Dunne** (1:31)
Well, I mentioned you've written a new book called The Almighty Dollar, which is really fascinating history of the dollar, and we'll definitely get into that. But we do like to get a sense of our guests' background and how they got interested in economics, finance, money, all of that. So how did you stumble into economics?

**Brendan Greeley** (1:50)
I did, in fact, stumble into it. That's the exact right verb. I was a German literature major in college, a completely useless degree, which prepared me to make very little money as a German translator. Then I became a journalist, and I was right after the financial crisis. I realized that there was a niche in my own publication at the time I was at Business Week where nobody was covering economic theory. There was a lot going on. There was a lot of things that had been missed, as we know, in the financial crisis by the economists who were in charge of America's economy. There's an absolute iron grip that economists have over policy in America. They were having a think, they were having a come to Jesus over what they had missed and what needed to be done.
That was a lot of fun reporting. I got to talk to people at the Fed about how you set up a macroprudential crisis facility, meaning how do you set up a group of people within the Fed that worry about a financial crisis that continues to be relevant when there has been no financial crisis in the last 10 years.
I talked to the Fed also about figuring out how to integrate money and banking back into economic models. This is something that I think is a real challenge right now for economists still today, which is they have these black box models of you put in employment and interest rates on one end and get inflation out the other or any of those three variables. There's lots of things that can go into that. We talk about forward guidance and various ways in which the Fed has of influencing that model. But the basic model doesn't really want to look about at money and banking. We know the money we have in a developed industrial economy comes from banks. When banks make new loans, those new loans create new deposits. Those new deposits are new dollars or new euros. That seems like a really important part of the economy, and particularly for the Fed, which is a bank which is in charge of our money to understand that and model that. They just don't. Since the early 1980s, they've really abandoned the approach of thinking about the production of money, different kinds of money. What's M1? What's M2? How many M's are there? They just don't think about that anyway. That's not the way economists think. They've really walked away from that approach. They walked away from that approach because they couldn't figure out how to create one big model of the entire economy using the money supply.