Yanis Varoufakis: Imagine that I am an expert
financial economist who has predicted every
single  ____ upswing and downswing
of the New York Stock Exchange.
Open a bracket here: This is a fictional person...
Ana Serano: Yeah.
[laughter]
YV: Like a unicorn.
No economist has ever predicted any economic
phenomenon ever.
Ever.
The 2008 crisis, I predicted it.
Yeah?
But you know why?
Because I'm a left winger who constantly foresees
the collapse of capitalism.
[laughter]
[music]
AS: Before we start, I thought what I'd do
is just ask a couple of questions from the
audience.
First, do a bit of a poll.
First of all, how many of you sitting in here
are economists, or academics learning about
the economy or capitalism or political economies
like that?
Can you raise your hand, please.
YV: Oh, my god.
AS: Okay. [laughter] How many of you are new
to the thoughts that might be written in this
book, the insights that Yanis Varoufakis have
sort of imparted across all his videos?
How many of you are just interested in this
topic but aren't, what you might call, experts?
Okay, I'm one of you.
[chuckle] I'm gonna try to channel that energy
as I speak with Yanis tonight.
And then we're also going to have some time
for most...
Well, not a lot of you, but at least some
of you to ask your questions.
I think without further ado, we can start.
YV: Absolutely.
[chuckle]
AS: I was drove here with my dad, who's also
not an economist.
And I was telling him, "So what should I ask
this guy?
What am I gonna ask him?
What's my first question?"
And he said, "You know...
YV: This is called subcontracting.
[laughter]
AS: I know it's called exactly like that.
He said, "Why don't you ask him...
" He goes, "What is this book that you just
read in the past whatever week or so?"
And I said, "It's this book that he wrote
for his daughter."
He said, "Why don't you ask him, 'Why did
you...
Felt compelled to write this book for your
daughter?'"
Because there's obviously all sorts of Coles
Notes on Marxism out there, or some kind of
socialism for dummies or capitalism for dummies.
Why this book?
Why did you feel compelled to write this for
your daughter right now?
What are the key insights that you think no
one else would have written about, that you
thought you needed to get down on paper that
you needed to share with her?
[laughter]
AS: See that's why I subcontract.
YV: Yes.
Well, look I...
What insights?
One can never know what his own or her own
insights are 'cause we all plagiarize, we
are all standing on the shoulders of greater
minds that have penetrated our own thinking
without even realizing it.
But allow me to answer your question as honestly
as I can.
What I think I bring to this book is a genuine
contempt for my profession...
[laughter]
[applause]
YV: Not for the individuals making the profession,
no, but for the profession, for the discipline
of economics.
You asked the question initially, "Who's an
expert on economics?"
Well, I think that the good people who put
their hand up effectively said that they have
suffered economics, they've studied it, they've
researched, they're teaching it.
So it was a kind of therapeutic, raising of
the arm saying, "Yeah, we are in this process
of suffering."
[laughter]
YV: But the reason why am saying that is because
there are no experts in economics.
There is a fundamental and profound difference
between engineering, and the natural sciences
on the one hand, and the social, so-called,
sciences on the other hand.
When it comes to building a bridge, there
are experts.
And if we don't consult them or actually subcontract
them or contract them to build the bridge,
and we try to build the bridge democratically,
all of us here deciding to build a bridge,
we are criminals 'cause we'll kill a lot of
people including ourselves, yeah?
[laughter]
YV: But when it comes to the economy, there
are no experts, and indeed, elaborating further
my response to your question, "What did I
bring to the book?"
I brought this genuine conviction that the
more steeped you are in economic theory, the
less capable you are of realizing...
Actually, recognizing really existing capitalism,
because the economic...
That of course, begs a lot of questions, I
know that, but...
So allow me to answer them as succinctly as
I can.
Take the difference between a real scientist,
a physicist or a meteorologist and an economist.
Ostensibly, the two disciplines look very,
very similar.
If you open a standard textbook of thermodynamics
or meteorology, you will find mathematical
models based on certain assumptions, then
move on to theorems, then they prove the theorems,
then they have lemmas.
And then beyond that, what they do is they
produce, from those theorems and the questions
of the theorems, they produce predictions
about the weather.
Then those mathematical models and predictions
go inside the computer.
The computer is connected to data-gathering
instruments like satellites and thermometers
and barometers and so on.
YV: So data is fed into this computer.
And then there is a statistical technique
for testing whether the prediction that came
out of the mathematical theory is confirmed
or disconfirmed by the data.
That's the meteorologist's little game.
What about the economists?
Similar.
You have mathematical models of the economy
that are identical in terms of the actual
mathematics to the ones that physicists use,
the reason is because the economists copied
them.
[chuckle] Yeah?
It's called physics envy.
[laughter]
YV: And we suffer from that in economics,
yeah?
There are mathematical models of economy,
there are assumptions, there are proofs, there
are theorems.
And then those theorems and mathematics go
inside computers that are then connected again
to data-gathering instruments like for instance,
the Bloomberg screen that all financiers look
at with data on bond prices, yields on prices,
on commodity prices, on interest rates.
And there is what is called econometrics,
which is a statistical method of testing to
see if the theory fits the facts or not.
So economists have convinced themselves that
they are the scientists of society, and that
there is no difference, really.
They think that their job is slightly more
difficult because we have to do with human
beings who are more unpredictable and facile
and have tendencies towards irrationality.
But on the other hand, nature also has...
AS: Butterflies.
[laughter]
YV: In biology, mutations.
You have random events, radiation coming suddenly
from a comet.
It's not true, the two are chalk and cheese,
even though they look exactly the same.
And let me tell you what the difference is
and why I'm saying there are no experts.
The difference is, that nature doesn't give
a damn about our theories about it.
[laughter]
YV: Suppose I'm the best meteorologist in
the world, and I predicted every twist and
turn of the weather and so on.
And tonight, with some of you, would go out
for dinner and I have a few too many beers
or whiskies or whatever and as I come home,
something gets into me, probably too little
blood in my alcohol and I tweet that tomorrow
there is going to be a major storm in Toronto,
and there will be a twister going through
the public library, the Reference Library
of Toronto.
Now is this going to change the probability
of there being a twister through Toronto tomorrow?
No.
Nature doesn't give a damn about what I'm
saying about it.
You see, this is the beauty in natural sciences;
nature is an objective judge of our theories.
And in the laboratory, you can have a system
where you can continually discard the lesser
theories.
And you have an evolutionary process, scientific
process that select for the theories that
make more sense, and which predict nature
better because nature doesn't give a damn
about it.
But, just for a moment, now, imagine that
I am an expert financial economist who has
predicted every single [09:23] ____ upswing
and downswing of the New York Stock Exchange.
Open a bracket here: This is a fictional person,
like a unicorn.
No economist has ever predicted any economic
phenomenon ever.
[laughter]
YV: Ever.
The 2008 crisis, I predicted it.
Yeah?
But you know why?
Because I'm a left winger who constantly foresees
the collapse of capitalism.
[laughter]
[applause]
YV: So I predicted it.
I did predict it like a stopped clock tells
the time correctly twice a day.
[laughter]
YV: Not because I'm a scientist.
Okay?
Close the parenthesis.
Okay?
AS: Yeah.
[laughter]
YV: But now imagine that I am indeed somebody
who has...
Science fiction, imagine that I have predicted
all the crashes and all the upswings and all
the fluctuations in the NASDAQ, FTSE and so
on.
And I go out with some of you tonight, then
have a few beers.
And completely, as a prank, I tweet that tomorrow
the stock exchange will crash.
Do you know what's gonna happen?
It will crash.
Why?
Because people believe me, because I have
a reputation even if I'm a complete fool or
drunk.
AS: Okay.
I want to press you on that because...
YV: But you see, the point is, there are no
experts and therefore, I'm closing my answer
to you by saying, if there are no experts
in economics and the economy penetrates every
dimension of our lives, is it not true to
say that the only way democracy can survive
is if each one of you learns how to speak
authoritatively about the economy and about
the things that determine your lives as part
of your active citizenship?
And that's why I wrote this book.
AS: Okay, that's very important.
[applause]
AS: I wanna talk about the fact that you,
instead of mathematical models, you use stories
to tell that story of the birth of capitalism
to your daughter.
But before I go to that question, I do have
this burning question...
YV: Please.
AS: And it's related to what you just relayed
to us.
In your book, you talk a lot about how you
can't predict...
There's this, people...
If the market is optimistic, then people will
behave, perhaps, in ways that you can quasi-predict.
And if the market is not optimistic, then
people will behave in another way.
You talk a lot about this notion of, "Will
people behave in a self-destructive manner
and go against what they are hearing about
the market?
Or will they actually behave in a way that
would prove that they understand what's going
on in terms of the products that they're trying
to sell or the labor that they're trying to
lower in terms of wages?"
You describe that in many different ways throughout
the book, but how do you know that people
actually behave in those ways?
That's what I didn't get when I was reading
this book, because you talked a lot about
how market optimism affects in a...
Counterintuitively, how people behaved.
YV: The beauty of statistics is that it can
actually inform you about these things, it
cannot confirm or disconfirm your theories.
But take the following fact: Since 2008, in
the global economy, we've had the largest
saving rate in the history of humanity.
We have saved as a species, humanity, China,
America, Europe and India, we have saved on
average 38% of global income.
This is the highest rate of savings in the
history of humanity.
And at the same time, we know that the rate
of investment into things that humanity needs.
Nope, I'm not talking about speculation, investing
in pieces of paper, in shares and derivatives,
these are actually things like schools, hospitals,
roads, railways, aeroplanes, machines, robots.
Our investment rate is the lowest as a percentage
of total income than it has been since 1950.
That's the answer to your question.
We have savings up to there, a mountain of
savings, and investment there.
Now that tells you that there's something
that matter here.
Why aren't the savers, the people who actually
have the money...
And it's usually corporation, Apple has 260
billion saved.
Billion.
260 billion saved.
Why?
Why does a corporation need to save money?
It's households that should be saving money.
YV: Why aren't the owners of this mountain
of savings investing it?
And the only genuine explanation, the only
sensible, the only thing that makes sense
is not that they don't want to invest.
Because if you have money and it's sitting
there doing nothing, that's a curse, because
it is not multiplying for you and it's not
doing good things.
There's no investor who doesn't want to save.
The reason why they don't save is they're
scared.
And what are they scared of?
Imagine you are an entrepreneur, an industrialist
and you're trying to work out whether you
should create a new production line, a new
product line, a new factory, to buy a new
set of aircraft if you're running an airline.
What stops you from doing?
The fear that if you do this, make this investment,
then there will not be enough demand, there
will not be enough customers who want what
you are producing and have the money to pay
for it.
Because if you make the investment, and then
there is not enough demand, you've lost the
money.
If you thought that there was going to be
the demand, then you would invest.
And then if you're a smart person you think,
"Okay, so what does it depend on?
Whether they are going to have the money and
the interest in purchasing my stuff."
Or it depends on the level of economic activity
generally.
YV: It depends on whether other people like
me invest.
Because if other people like me, investors
who have cash sitting there idly, if we all
invest, or a significant percentage of us
invests, jobs will be created, incomes will
be produced, and there will be demand for
what I am going to be producing.
It's like a situation where you will invest
if you think that others will invest, but
then each one of the others are in the same
situation.
They will invest if they think that you are
investing.
So you will invest if you think that they
think that you think that they think that
you think that they think...
[laughter]
YV: That we are all going to invest.
Okay?
Now, notice the indeterminacy here, the impossibility
of predicting what will happen.
And I will illustrate this by considering
two possible situations: One is that we are
optimistic, so I'm optimistic that you are
optimistic that I'm optimistic and therefore
that I will invest and you will invest.
And then what we do is invest.
And then demand is high, and then our investments
pay good returns, and then we say, "See, we
were right" smartly.
[laughter]
YV: Case number one.
Case number two, I'm pessimistic and you're
pessimistic.
I fear that you're not going to invest, and
therefore I decide that it's not right for
me to invest because there won't be enough
demand.
I don't invest, you don't invest.
There is not enough demand, "You see?
You see, I was right".
[chuckle]
YV: You have two possibilities here, one is
a capitalist economy that's doing well, and
one that's doing badly.
And all that it depends on is an equilibrium
of belief, faith, nothing else.
Now when you have the economy that we've been
having since 2008, after that Great Crash
in 2008, and investors see that the only reason
why the United States economy has been refloated
is that the Federal Reserve has been printing
money, giving it to people like me, the investor,
giving to the rich people, it's not giving
to the poor people.
It's giving to the bankers and the bankers
are giving it to Apple.
They're not giving it to those who can't repay
their mortgage, who have their house repossessed,
who can't find a job, who have to use to be
Uberized in their existence, to work 20 hours
a day without social security, without health
cover and so on.
They don't get a penny.
The rich people, of course, like it to be
the ones that...
But at the end, they get very concerned, because
in the middle of night, they hear that the
Federal Reserve or your central bank here
is printing even more money to give to me.
Should I rejoice?
No, because my concern is where is the demand
going to come for the things that my company
is going to produce?
YV: The news that the central bank is printing
more money and interest rates goes down is
good news because it means that you have more
money and also you pay less in order to borrow
or to invest.
But then it's extremely bad news because you
hear this in the middle of the night when
you're tossing and turning, wondering whether
you should invest and you think, "Oh, my God.
For the central bank to be reducing interest
rates again below zero, or to be printing
more money, things must be bad.
I'm not going to invest."
YV: So you see?
Unlike a farmers' market where if you have...
If there is a seller of potatoes, if you're
a potato producer, you take your potatoes
to a farmers' market and by one o'clock at
noon, you have not sold, you have not sold
out, you still have potatoes.
All you need to do is reduce the price of
the potatoes, and by two o'clock they will
have gone.
So price comes down, excess supply, excess
produce is eliminated.
It's purchased.
The same thing doesn't happen with two things,
labor and money, because if your employers
hear that all wages are coming down or stagnating,
they like the idea they will be paying less,
but that doesn't mean they will hire more
workers because they think, "Ah, yeah, but
who's going to buy the stuff?
Because all workers are getting less money,
demand is going to fall, even though my labor
costs are coming down, that is not a reason
to employ more people."
So you have a situation where the price of
labor is coming down and the quantity of labor
purchased, employed comes down, and that is
a case of recession of a stagnating labor
market.
It is what we've been experiencing in the
West since 2008 and the market mechanisms
cannot recover from that.
YV: I don't want to be misunderstood.
It's not that we can't understand capitalism.
It's not that we cannot even discern the pattern
that is unfolding in front of our eyes, what
I'm saying is that we cannot do this on the
basis of mathematical pseudo-scientific models
where the truth about capitalism resides inside
the equations.
AS: Great, which actually leads us back to
the storytelling inherent in the book, and
how you tell these stories.
And in fact, the story you just told started
with the 18th century enclosures in a way,
because that's how this whole problematic
that you just described to us began.
Maybe it's a good idea for these guys to know
a little bit about why that was.
It was certainly the first time I've ever
heard of sheep as being the cause for the
problems we have today.
[laughter]
AS: So...
YV: And the wonderful things that we have
today.
AS: Yes.
[chuckle]
YV: You see, this is the...
The thing about capitalism, it is producing
magnificent technologies.
It liberates us, has liberated us from feudal
bonds, from the superstition of the church,
from the authoritarianism of a king, and at
the same time, created new forms of slavery
for us.
So it's a contradictory story.
It's not...
I'm not trying to tell a black and white kind
of story.
AS: Yeah, yeah.
YV: So, no look, the point about the enclosures
is this that.
I was trying to think of how do I explain
to my daughter, who by the way is my worst
critic ever.
[laughter]
YV: And if I use the word capitalism, she
will just shut me out because to her it's
jargon, and she is completely right.
But how do I explain capitalism to her without
using a standard boring definition that means
nothing in the end to a young person.
And the major point I wanted to make is that
the kind of market society, capital...
Call it the market...
I prefer to call it the market society because
as a leftist I've had enough of hearing the
word capital and capitalism.
I mean it's nauseating after a while.
[laughter]
YV: So market society, a society that does
most things through markets.
How did they...
I wanted to convey to her this strong sense
that it is a mistake to think that we always
had it.
We always had markets, the Phoenicians were
traders, the Egyptians traded with the Cretans,
and the Cretans with the Athenians.
And I'm sure that the good people of Central
America were also trading at more or less
at the same time as were the Chinese and the
Africans and so on.
But those societies were not market societies.
Most of the activity in those societies had
nothing to do with the market.
The market was peripheral.
It was marginal.
So take for instance, Feudalism, take Europe
in the 17th and early 18th centuries.
Land was not a commodity.
It was valuable, but you could never buy it
or sell it.
Either you inherited it because you were the
lord of the land and you got it from your
dad.
And then of course, you would never imagine
selling it, selling your land, the land of
your ancestors was sinful.
It was frowned upon.
It just was never done.
The only way of acquiring new land was through
conquest, through raising an army amongst
your peasants, and occupying or grabbing,
expropriating somebody else's land.
And if you were a peasant, you never had land.
You belong to the land, you had your house,
your hut, you grew cauliflower or whatever
you grew on it, but you never owned land and
you could never imagine...
YV: There where no classified pages in newspapers
saying, three acres of land for sale or for
rent.
There was no land, land as a commodity, labor
was not a commodity.
There was a lot work, but nobody actually
sold their labor as such.
They produced work, they produced work.
They harvested the land, the cultivated and
they harvested the land, and then the sheriff
would come to you at an end of the harvest
cycle representing the lord and take a cut
for the lord.
You had production first, no labour market,
then you would have distribution between the
peasants who produced and the landlords that
sponged off them.
Then the landlords would take their cut.
And because they couldn't eat all this wheat
or corn whatever it was, they would sell it
in nearby markets.
There were markets but they were marginal.
They had nothing to do with production.
YV: And they would get some money for it,
and therefore they would be the monied ones,
and they would lend to others.
So finance came last.
You had this very simple procession, production,
distribution, finance.
And then something remarkable happened, which
ushered in markets society, capitalism.
The world as we now know it and take it for
granted, we are making the mistake of assuming
that it was always like this.
It wasn't.
And what was that event?
The eviction of the peasants from the lands
of England, Scotland, and Wales.
Why were they evicted?
And when I say evicted, I'm talking about
large scale evictions, 70% of the population
was evicted.
Can you imagine that?
That's something like a civil war, it's a
major calamity for 70% of the population to...
And they were forcefully evicted, violently,
brutally evicted, and most of them died of
starvation, of disease.
The ones who didn't die, turned the nearby
villages into slums, which then became the
great cities.
Manchester, Birmingham, London, Liverpool,
Glasgow and so on.
Now, but the question is, why were they evicted?
Now, technology explains it to some extent,
actually to a large extent, because what happened
was the techniques of shipping ship building
and navigation, improved sufficiently for
English traders and ship owners to be able
to circumnavigate the planet.
YV: They would take the only thing that...
What was the only thing that Britain produced
at the time, which could last a long journey
and had some value to people in India or in
Japan?
Wool.
AS: Wool.
YV: Because wool, you can store it in a wet
wooden ship, and it still maintains its properties
whereas cauliflower does not.
[laughter]
YV: It's useless.
It rots within a day.
They would carry large quantities of wool,
relatively large ones, go to India if they
survived, because half of them drowned on
the way, sunk.
And in India, where there was no wool, they
would swap the wool for silk and spices, things
that did not exist in Europe.
Then some of them even went further away to
Japan and swapped some of the spices and the
silk for Japanese swords and artifacts of
great technique in their production.
Because as you know, the Japanese are fantastic
at creating artifacts.
And then they would bring that ship to Southampton
in England and their cargo would be worth
a thousand times the quantity of wool that
they started with.
YV: These dirty pirate-like merchants suddenly
acquired huge power, money.
And for the first time in human history, you
had this dissection of the realm of power
before this, power was one thing.
You were the lord, you had military power,
because you had military power you had the
power over the peasants.
If they complained you'd slaughter them.
You took a large part of their harvest, that
gave you financial power.
See, it was all one.
Political power, military power, economic
power, discursive power, even the religious
power because you controlled the priest and
the bishop.
And if the priest or bishop disagreed with
you, you separated his head from his shoulders
[laughter] and you had in...
You even...
And on occasions, you consider yourself to
be the new Cardinal.
Right?
YV: But with this international trade system,
suddenly you have low-lives in the eyes of
the establishment, merchants, who would never
be allowed into their court.
They would never allow them in the modern
manor house, they were considered to be dirty
little merchants.
But suddenly these dirty little merchants,
had a lot more money than then they did.
So you have the separation of the political
sphere from the economics sphere.
And some of the Lords, in Britain in particular
were smart enough to say, "Well, if you can't
beat them, join them."
They started thinking, well, what is the point?
They would look outside their castle window
and they would look at the rolling hills of
Wales, of England with all these peasants,
grain cauliflower, [laughter] "What's the
point?
Get rid of them and replace them with white
fat sheep.
Because their wool now has an international
price and it can make me rich."
With the help of the King's army, 70% of the
peasants were thrown off the land and replaced
by sheep.
And look at what the effect that had in bringing
ushering in today's market society.
YV: The moment you throw the peasants out
of the land and you enclose them with barbed
wire, that's the enclosures.
Because before that, there were no enclosures,
there were no fences.
There was no need for fences before that.
And you put sheep in there.
Suddenly, land becomes commodified.
It acquires a price.
Before that, it had no price.
It had value, symbolic value.
It was the land of my ancestors and I am the
lord of the land, but it had no price because
there was no market for it.
If you don't buy and sell something, if this
is never bought and sold, it doesn't have
a price.
Same thing with the acres of land.
But suddenly, when you knew that every acre
of land could raise 20 sheep for 50...
I don't know, I have no idea.
X sheep.
You know how much wool each one of them produces.
You multiply by the number of sheep that you
can have in one acre of land, and you know
how much money each acre of land gives you.
So suddenly, that acre of land has a price.
This is associated with international trade
and wool.
Of course, lords didn't want to be entrepreneurs.
The last thing...
They've considered their divine right to laziness
to be unassailable.
But whether it's self thought, very cleverly
was, but not that cleverly.
It was quite obvious.
Take one of those peasants that they had thrown
out and say, "You're going to be an entrepreneur
now."
YV: They didn't use that word.
"But come here, I will lease these acres of
land to you, and you pay me a rent for that."
The poor ex-peasant will say, "But I have
no money."
"Don't worry, I will lend you the money."
So look at what happens.
First comes finance, the loan comes at the
beginning.
"I will lend you money to rent my land from
me, and you take the sheep in, and you shear
them, and you get the wool, and you sell it.
And after you pay wages to the shearers, and
so on...
Wages were subsistence wages, a loaf of bread
which was more than enough for the other ex-peasants
to survive.
And you will be the residual claimant, the
person who in the end, what is left over after
the sale of the wool, you keep the rest, that's
your profit.
And those poor ex-peasants were forced to
be entrepreneurs, to be capitalists.
They didn't want to, but they had no choice.
It was the only way of surviving.
And they lived in terror because they didn't
know they had to wait for six months, 12 months
to see if they would make enough money by
selling the wool in order to repay the landlord,
not only the principle of the land but also
the interest, and to pay the wages, and have
something left over for them, and their families.
It was a touch and go, whether they would
make it.
YV: So suddenly, you have the ideology of
profit maximization.
Profit maximization was equivalent of survival.
That had never happened in the history of
humanity before.
The concept of profit maximization never existed.
People wanted money, they wanted other things
as well.
They wanted kudos, status, big armies, but
the idea that you should live your life to
maximize profit did not exist before the enclosures.
AS: Okay.
Quick question though...
YV: So, that's the brave new world we live
in.
AS: Yes.
But at that time, you could argue that for
some of those peasants, the forced profit-maximizing
life that they found themselves in or forced
into was way better than the feudal slavery
that they were born into.
YV: No, no, no.
There's pure starvation because they were
out there.
If you gave them a choice between going back
to feudalism and living like their grandparents
did, or being an entrepreneurs, they would
have chosen the former.
They would have gone back to feudal...
The choice was between dying of starvation
in the slums of Manchester with no jobs, because...
Unfortunately, the factory came 100 years
afterwards, or 80 years afterwards, so they
could not even sell themselves as labourers
in the factory.
Their choice was between death and being entrepreneurs.
[chuckle]
AS: So, you argue that there were no happy
entrepreneur...
Well, 18th century entrepreneurs at that time
perhaps, because that...
Because part of...
Okay. [laughter]
YV: Well, define happiness.
AS: Well, part of the thing that I found interesting
in the book is that you seem to suggest that
this was the start of this now galloping pace
towards...
What we have right now.
YV: Yes.
AS: Okay?
YV: Absolutely.
AS: Was there any other alternative?
Like could it not have happened that these
things...
The enclosures happened, the forced entrepreneurship
happened, and then somehow, we were able to
make that be actually not such a bad evolution
of that particular first wave of capitalism.
That the first wave of capitalism would have
evolved into something more palatable than
what we have now.
Do you have any notion for...
YV: It's very difficult to see that.
AS: Okay.
YV: It's very difficult to see that.
You had very violent authoritarian feudal
societies.
It's very difficult to imagine how that kind
of world would generate a good society as
a result of enlightenment.
It's very difficult.
I wish...
Or maybe it was.
Look, I'm not a determinist, so don't believe...
I'm not saying that because history took that
trajectory, there was no other trajectory
it could have taken.
Because if you look at other countries for
instance, if you look at France at the same
time, there was no industrial revolution in
France.
It didn't take place in that way.
And it didn't take place in that way, if you
want me to speculate as to why it didn't,
because they did not have a powerful central
king, central government.
The London Government of the king, or in the
occasion of the Queen had effectively disarmed
the barons as result of a sequence of civil
wars and the barons were militarily weak.
The Central London Government was relatively
strong and the lords could not imagine that
they could maintain their power by military
means, whereas in the France, the royal family
was always weak, huh?
Always weak.
And the original fiefdoms were governed by
Lords that had maybe more power than the King
of Paris.
YV: So the incentive to participate in these
International Trade Routes in order to gather
more power was simply absent in France.
And also in Britain it was the King's army
that helped evict the peasants.
Military might of the central government,
the French government did not have that.
So if Britain was like France the world would
have been very different.
I don't know how it would have to...
This is a beauty about human history.
It is indeterminate.
We have no idea.
I mean as we speak today, there are infinite
trajectories that will take us to infinite
alternative futures and it depends on us which
one we're going to be on, and that was the
case back then as well.
But it is quite interesting how we ended up
on the trajectories that brought us to where
we are.
AS: Yeah.
I think another plot point for me in the stories
that you're telling, and I use the word stories
actually in an affectionate manner, not to
sort of use them in a way that somehow they're
not true or they're fiction, but stories because
this is the power of this book, is by telling
these histories, I, a lay person can understand
the kind of condition that I find myself in
now.
One of the other stories that really spoke
to me is actually...
Ended up turning on a light for me.
And my first experience of banks really could
be traced to my childhood as an immigrant,
first generation immigrant coming to Toronto
and watching it's a wonderful life for the
first time.
Right?
And so I always get teary-eyed when George
is in his bank and they have a bank run and
all his clients come into the savings and
loan and he goes, "You know, don't take out
$300.
I'm gonna give you $5.
I can give you guys that money."
And so when I read in your book that banks
can just basically decide to magically magic
money for you, I honestly felt like saying,
"That's impossible.
How could that possibly be true?"
But that is, I think, a fallacy, as you say,
that many people have.
YV: Yeah.
AS: Can you explain that to us?
YV: Well, the most difficult thing to explain
to young people and all the people is the
concept of money because it is so fickle as
a concept, so malleable, so magical.
It is completely intangible and it is designed
to be intangible.
And we all...
Many people, especially in North America,
would love to make it tangible.
They have these fantasies of going back to
the gold standard, to using something that
is tangible and independent of the political
system, the BitCoin, whatever, but what...
So this is why I think it is very important
to raise this point that you just made.
Allow me to...
Okay, let me start by the title of the chapter
in which I'm talking about banks and money.
AS: Yeah.
YV: I'm talking about...
I'm referring to it as black magic.
Now, most people have this concept in their
heads that when you go to the bank and get
a loan out, either to buy a car or to buy
a house or to invest in your restaurant or
whatever it is that you want to do with the
money, that somehow the bank is like a vault.
It's got money in there that other people
have deposited, savers, and that the banker
will give you some of those savings to do
your thing and the banker will make money
as a result of the difference in the rate
of interest that he charges you and that he
pays the depositors.
That is not what happens.
Please!
Listen to me.
[laughter]
YV: It is not what happens.
The money is not there already deposited by
somebody.
Do you know where the money comes from?
Nowhere.
Thin air.
It's black magic.
But it's not really black magic it's quite
straight forward.
What happens is this.
Okay, you go to the bank, they give a 100,000,
at the end of the day, you go to the ATM whereas
you had zero or let's say you had 5000, you
take the slip out of the ATM, it says 105,000.
"Oh, that's fantastic."
What happened was somebody typed a few zeros
in your account.
That one zero zero zero zero zero was just
typed, added into your account, but money
doesn't exist it was conjured up, like a sorcerer
conjures up stuff.
[laughter]
YV: Do you know how much of the money you
have in your pockets, as Canadians, is produced
by the Central Bank of Canada?
What percentage?
Three.
97% is produced out of thin air by commercial
banks just by typing those numbers.
And the hope of the banker is that you will
do good things with the money that has been
typed into your account, your...
So, you invest in your restaurant, let's say.
What does this mean?
It means you spruce your restaurant up, you
buy...
You pay higher wages to attract a good chef,
blah blah blah blah.
Effectively, what you're doing is you are
sitting behind your own terminal, and you
are transferring some of those digits onto
the bank accounts of other people, of the
chef, of the interior decorator, of the person
that supplies you the new dishes.
That's what happens, so the money simply...
It gets re-distributed within a set of accounting
books that are now digital, of course.
They don't...
Not even written on paper.
Yeah?
And the hope is, the banker's hope is that
you are going to make money out of this, your
restaurant is going to do well, you will repay
the 100,000, plus interest.
It is a little bit like this, what I say in
the book.
AS: Yeah.
YV: It's a bit like the banker operating like
a time traveller.
He has a long arm and he pushes it through
the timeline, and snatches value from the
future that has not been created yet, brings
into the present, gives it to you to you to
produce the value that will repay the future.
But if you do this, and every time you do
this you make money, why not do it much more
quickly?
[chuckle] There's no reason why you shouldn't.
You should do a lot...
That's what bankers do.
Okay?
And you end up with leverage ratios of 70:1.
For every dollar that they have, they have
created 70.
Okay?
Now, if they keep doing it, at some point,
they will have snatched so much value from
the future to bring it to the present, that
the present can simply not regenerate it and
repay the future.
And at that point, when this incongruity takes
place, some people who have borrowed money
cannot repay the bank.
If others who have put their money in the
bank, feel that the bank...
"My goodness, maybe the bank cannot give us
this money!"
They will go to the bank and they will ask
for the money, which is the scene that you
are describing.
AS: Yeah.
Yeah.
YV: And because only 3% of the money is printed,
the bank is facing a bank run.
The only thing that can stop the bank run
is the central bank, in other words the state,
that says, "Don't worry, if the bank cannot
not repay you, I will."
And that calms people's nerves.
But immediately you realize that money is
political.
If it's not political, we have a capitalism
that is going to fall flat on its face and
not be able to get up again, as we knew...
As we experienced after 1929.
It was only when the Federal Reserve played
the role of lender of last resort.
So money must always be political.
Now in Greek, the word...
We have some Greeks here tonight, how many
of you have a Greek affliction?
[laughter]
YV: Commiserations.
[laughter]
YV: And I'm a Greek economist, that's even
worse.
[laughter]
YV: The Greek word for coin, the original
currency, is nómisma, nómisma.
And comes from the word nómos, which means
two things in ancient Greek: One is the law,
and the other is to have faith, to believe.
This is where the value of money comes from,
from the law.
So your Canadian $20 note, do you know how
much it cost to produce?
Something like 12 cents.
So why do you think its got 20...
Its value is $20?
Only because the law says that it is $20,
and the state guarantees to accept that $20
bill as payment for taxes.
So the law determines the value of money,
one, and the second thing, [45:56] ____, the
ancient Greek verb, to believe, the fact that
you believe that it's worth 20, and that others
believe that it's worth 20, and you believe
that there are others who believe that there
are others who believe that it's worth 20.
So money is...
That's why I said it's fickle.
AS: Yeah.
YV: And any attempt to try to imagine that
it exists, like smartphones do...
This is a tangible thing, you hold it, it's
got physical properties.
It's not...
It's magic to me because I don't have no clue
how it works.
[chuckle]
YV: But to the people who've created it, who've
produced it, it's not magic at all.
It's just pure science.
It's like this.
But money can never be this.
It is a political construct, a construct of
community, a construct of a society, that
must be political.
And if we do not control this, by definition,
political force, because money is a force
and it makes the world go round, as we know,
even though it doesn't buy you love.
[laughter]
YV: If this political force is not controlled
democratically, then we don't live in a democracy.
AS: I think with that...
Gregory, would you tell that we have time
for questions?
Yes, okay.
I think with that we have time for questions.
YV: And we haven't said a word about Greece.
Isn't that something?
AS: I know.
I know.
[laughter]
AS: But while we're waiting for someone...
Great for you to have said that money is political.
Before we get this question, can you just
tell us, at the end of the book in the epilogue,
you tell your daughter, "Look, the biggest,
the momentous...
The biggest sort of battle you're gonna have
in your life is the momentous clash between
these two kind of proposals: One is democratize
everything, and the other one is commodify
everything.
How do you propose we go about taking the
steps to democratize money?
YV: A short preference, I find politics very
difficult and very trying, and particularly
boring.
[laughter]
YV: I would rather sit in my home with my
wife.
My daughter will not want to be with us, because
she can't stand us.
She's an adolescent now.
She needs her independence.
And read poetry, and read drama, and write
books.
That's what I'd love to do, but we don't have
this luxury.
Not just my wife and me, but none of us, because
capitalism is being undermined by...
Not the left, the left is useless.
[laughter]
YV: By capitalism.
[applause]
YV: Capitalism undermines itself.
It produces the technologies that undermines
itself.
We are shifting gradually towards a Matrix-like
economy, where we have produced all these
machines and we end up being their slaves.
And that includes the people who own them,
who are constantly in fear of losing ownership
of those machines and in the end, we all cry
ourselves to sleep at night.
And the market for antidepressants does magnificently,
including and mainly for the 0.1% that are
the oligarchy who deny the majority of their
rights.
So this is the stuff of genuine tragedy.
It's like watching Macbeth.
Every crime that he commits makes him more
desperate until, in the end, he wants to die.
He wants Macduff to stop him and says, "Lay
on Macduff."
And you are damned if you hold back and say,
"Enough!"
More or less.
[laughter]
YV: So democratizing our society is not an
option.
It is our duty to the next generation, to
ourselves, because if we don't do that, then
we will become slaves of our own artifacts,
very much like Frankenstein became a victim
of his own creation.
AS: Great.
