AmeriServ Presents: Bank Chats

The Illusion of Money: What Currency Really Is

• AmeriServ Financial, Inc. • Episode 27

Share episode

Comment via Text Message

Money surrounds us every day, but how often do we stop to consider what it actually is? From the salt-based currencies of Ancient Rome to the digital cryptocurrencies of today, the concept of value has undergone remarkable transformations throughout human history.

We dive deep into the foundations of modern monetary systems, exploring how virtually all global currencies now operate as "fiat money" - valuable only because governments declare them so. Before 1971, American dollars were backed by gold reserves, allowing anyone to theoretically exchange their paper money for precious metal. When President Nixon severed this connection, it fundamentally altered how we perceive and use money, pushing many to seek value in tangible assets like real estate.

The consequences of purely government-backed currency can be devastating when trust collapses. In post-WWI Germany, hyperinflation reached such extremes that people spent wheelbarrows of cash to buy simple groceries, with one US dollar worth an astounding 4.2 trillion German marks. This historical context helps explain why Bitcoin's finite supply of 21 million coins appeals to those seeking alternatives to potentially unlimited government-issued currency.

But does cryptocurrency represent a return to a gold standard-like system, or is it something entirely different? We examine both perspectives, weighing Bitcoin's scarcity against its intangibility during crises like power outages, when physical gold would retain value while digital assets become inaccessible.

Whether you're curious about financial history, contemplating cryptocurrency investment, or simply want to understand the money in your wallet better, this episode offers clear, practical insights into what truly gives currency its value. Subscribe for more thought-provoking discussions that help demystify the complex world of finance and empower you to make more informed decisions with your money.

Credits:
An AmeriServ Financial, Inc. Production 
Music by SchneckMind
Hosted by Drew Thomas and Jeffrey Matevish

Thanks for listening! You can find out more about AmeriServ by visiting ameriserv.com. You can also find us on Facebook, Instagram, and Twitter.

DISCLAIMER
This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts, with the goal of helping to take some of the mystery out of financial and related topics; as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast, and any resources available for download from our website or other resources relating to Bank Chats is not intended, and should not be understood or interpreted to be, financial advice. The hosts, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The hosts of Bank Chats are not attorneys, accountants, or financial advisors, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation. AmeriServ Presents: Bank Chats is produced and distributed by AmeriServ Financial, Incorporated.

Drew Thomas:

Fast fact, early Romans used salt as a form of money. In fact, the word salary comes from "sal", which means salt in Latin. I'm Drew Thomas, and you're listening to Bank Chats. There we go. So, today we are going to discuss something interesting. We're a financial podcast, obviously, right?

Jeff Matevish:

We are.

Drew Thomas:

And so, we're going to discuss what currency actually is, right. And naturally, thinking about what currency actually is made me think of my high school English teacher, and I'm sure it did for you too.

Jeff Matevish:

Maybe we'll see where this is going. So, how, you know, how did it for you? Yeah.

Drew Thomas:

So, I was thinking about this because the conversation we're gonna have today could be interpreted by people to mean that we're trying to endorse one thing or another, and we have a standing policy on the podcast, and we have a disclaimer that is in the description that we put at the end of every podcast that basically says, listen, this is an educational podcast. It is not for, we're not trying to tell you what to do, right.

Jeff Matevish:

Not advice, right.

Drew Thomas:

It is not advice. It is just information that you can use, right? And it is one source of information, which made me think of my English teacher, because my English teacher in high school was one of the first people to say, you know, you have to have multiple sources of information for your research papers. You can't just, you know, pick one, yeah, and then, you know, present it as truth, right, right, right. So, I'm encouraging people today to think of this podcast, and particularly this episode, as one element that you should consider, not truth, per se. Okay, right? Yeah, so that's my introduction to this, to this conversation, because we're going to talk about currency, we're going to talk about Bitcoin, we're going to talk about crypto in general. And those are very sensitive topics.

Jeff Matevish:

They are, especially in banking, yeah.

Drew Thomas:

Yeah, as to whether or not people should be involved in cryptocurrency, using it. Obviously, there are some scam related things that go along with cryptocurrency right now, which are not good. You could argue there are a lot of scams that deal with regular currency as well. Yeah, right. So, and that doesn't stop people from using a $1 bill, right, so.

Jeff Matevish:

Yeah, we covered that a couple of episodes ago, yeah.

Drew Thomas:

We did. Yeah. So, I guess my thing is, take what we're saying, we're doing everything we can to make sure that what we're telling you is factual, yeah, but what you do with the information is completely up to you.

Jeff Matevish:

Very well said. All right, yeah.

Drew Thomas:

So, what started us down this road was an article that appeared in Forbes that I found and sent to Jeff as typical on a weekend.

Jeff Matevish:

Because that's what I want to do on the weekend, read.

Drew Thomas:

Yeah, I know this is really weird. Really your cup of tea. And so, I was reading through this article from Forbes, and the, the article is called, "Bitcoin Is Coming For The Housing Crisis." And it really kind of made me wonder why in the world, they were using the term Bitcoin and housing in the same headline. Because they didn't seem to marry without one another at all. No. And so at the, at the risk of literally reading the article to you, which I don't want to do, the, the article talks about the Case-Shiller Index of home prices, and this was started in the 1980s because he saw Massachusetts home prices zooming up like never before. In 1980 Massachusetts had put a permanent hard cap on local property taxes. It said they could go up by no more than two and a half percent per year. And inflation in 1980 was 14% which we talk about inflation now we were, we've been like, oh, my God, it was 4% I mean, which is not good. I mean, don't get me wrong, my grocery bills are out of control. But, yeah, not 14%.

Jeff Matevish:

No, no, definitely.

Drew Thomas:

And this meant that the local government lost out, right? Because money poured into property like never before. So, the thought was, well, if you cap taxes at a low level, the housing goes up, right? So, it was the, the home prices were generally flat, according to this, from the late 1800s up until the late 1960s. Home pricing was fairly stable, which probably accounts for a big reason why my grandfather could have a house in Geistown and three kids with a housewife and one income.

Jeff Matevish:

Yeah, and built it for like, $8,000, right?

Drew Thomas:

Right, you know.

Jeff Matevish:

I think it actually, wasn't the housing pricing going down a little bit during that time too?

Drew Thomas:

It was, it was, it was trending slightly, like, like, it was becoming more affordable for people to own a home, not less. And so, then all of a sudden, home prices go up by over 50% in the 1970s and this is all in real terms, adjusted for inflation. And so what the, what the, what the article is, is saying, basically, is that by going off the gold standard, by taking our monetary system off the gold standard, right, it made the currency more volatile. In other words, it could become more or less valuable more easily because it wasn't based on gold anymore, right, right. So, people turned to housing and real estate, gold, more tangible things because they held their value more. Okay, yeah, right, right. So, all of a sudden, housing, land, real estate, became more valuable, not because the land intrinsically became more valuable or the house cost more.

Jeff Matevish:

But because they are holding on to their land a little bit more.

Drew Thomas:

They were holding on and they were valued. They, they found value in it because they'd held its value like the land was going to be valuable no matter what the dollar did. Yeah, right. And so, the article basically says, you know, there is an argument to be made that potentially things like Bitcoin and cryptocurrency, because they are finite, you know, specifically, if it's

Jeff Matevish:

20 what, 21 million Bitcoin, that's the cap, right?

Drew Thomas:

Yeah, okay, yeah, which they expect to hit, what in the next 20 years, or something like that?

Jeff Matevish:

I think that's what John said, something like that.

Drew Thomas:

The idea that Bitcoin in particular is finite, that there's only so much of it, makes it akin to gold or silver, where there is a finite resource. It's not something that you can just make more of, right?

Jeff Matevish:

There's effort into getting that. There's effort into mining Bitcoin. There's effort into mining gold.

Drew Thomas:

Yes, yeah, yes. And there's effort into finding the mine to gold. Like, I mean, someday you can't just be like, oh, well, I'm gonna, I'm gonna get my spade out, I'm gonna go dig me up some gold, like it doesn't.

Jeff Matevish:

Unless you are in Alaska, that might be.

Drew Thomas:

Maybe, yeah, you've been there, so you would.

Jeff Matevish:

Actually we, yeah, I did that one time. Oh, years ago, the first time I went to Alaska. Me and my dad went, we did the whole, like, touristy gold panning thing. But with we thought, okay, we're going to do this on our own. So, we bought our own gold pan and went to a little stream out back of our hotel. It took us hours in the stream, but we got a fleck of gold.

Drew Thomas:

Oh, nice. It was real?

Jeff Matevish:

It was real. Yeah.

Drew Thomas:

That's nice. Yeah. They I remember my grandparents took a trip out west one time. They brought me back a bag of fool's gold.

Jeff Matevish:

Oh, and you thought you were rich, huh?

Drew Thomas:

I did for a minute there. You know, it's, I can't, what is it? Pyrite?

Jeff Matevish:

Pyrite.

Drew Thomas:

Yeah. So, that's interesting though, I've never been to Alaska. I'd love to go. I've heard it's fantastic. You've been there a couple times, yeah, I think. So, yeah, so, so that was where this, this whole thing, came from, was this, this article in Forbes saying, you know, is Bitcoin going to return us to a type of currency that is based on something finite, something, something not so much tangible, like gold or silver, tangible at all, right, but something that is limited in resource, okay. Right? And we as humans tend to find limited resources valuable because it's something I have that you don't.

Jeff Matevish:

Yeah, it's rare, right. We want something that we can't have or that someone else has.

Drew Thomas:

We, yeah, we definitely, definitely do. So, I think that what we really want to talk about, say, what we're going to focus on today is the concept of fiat money, right? What is currency? Well, currency across the globe now is what is known as fiat currency. And fiat currency does not belong to fiat the automaker, which...

Jeff Matevish:

So, my Fiat, my$500 is not Fiat 500.

Drew Thomas:

It is not a five, yeah. It's not for, yeah, no. Fiat currency is, the term fiat is actually a Latin term, which means, like, I can't remember exactly what it said it was.

Jeff Matevish:

Fiat means it shall be, or let it be done, yeah.

Drew Thomas:

So, it shall be, let it be done. In other words, fiat essentially means, it's valuable, because the government says it's valuable.

Jeff Matevish:

Okay, sure, I don't get that out of that, but that's yeah.

Drew Thomas:

Well, it's yeah, I don't know why that term, but that's really what currency is. You know, currency today, whether it's the US dollar, the British pound, which is now back in vogue because they exited the European Union, yeah, I think they still take euros over there. But the euro. Essentially any currency that you find issued by government around the world today, none of it, not one bit of it, is based on anything tangible anymore.

Jeff Matevish:

Since 1971.

Drew Thomas:

Yeah, it's all based on fiat, or it's all based on government, my word for it that, hey, this is worth something.

Jeff Matevish:

And that's representative currency, because is what fiat currency is, it represents, like, yeah, you can trade it in for a specific commodity too.

Drew Thomas:

Yeah, well, see so back in, so through the Great Depression, you could have theoretically, like, you know, Fort Knox, right, yeah. So, up until the Great Depression, and then through, like, you know, I guess there'll be through World War I, and almost up until World War II, you could have theoretically gone to the, to the, to the government, and said, hey, listen, I have $5 I want $5 worth of gold. Okay, yeah, right, yeah. And they could, they would have had to give you $5 worth of gold, right, as a direct exchange. In 1971 President Nixon nixed it.

Jeff Matevish:

Very good.

Drew Thomas:

I just, I just thought of that and said no, no, no, we're going, we're going away from that. So, at this point, you know, at the time, gold was worth like $35 like, like, an ounce of gold was worth like, $35.

Jeff Matevish:

Wow, I would have taken that back then, yeah, yeah, now it's over $3,000 like$3,600.

Drew Thomas:

Yeah, it's, it's crazy. I mean, it's crazy, and it does go up and down. I mean, the value of gold does go up and down, to be fair, but it's no longer able to do that, right? And, you know, people have been arguing about the validity of fiat currency for a lot longer than, what, a lot longer than 1971, right?

Jeff Matevish:

Okay, yeah.

Drew Thomas:

So, the question that I guess I have for you is, did you know that the currency that you have in your wallet is basically only backed by the US government, and nothing else?

Jeff Matevish:

I do now. Before this, no, I mean, and, yeah, I don't know why it's, I mean, the government says it's $1 bills worth dollar bill. But you know, why is my dollar bill in the US worth something today in, compared to Japan's yen, you know, yesterday, it was worth A, and now it's worth B today.

Drew Thomas:

Oh, right, right. As far as, like, an exchange, yeah, yeah, that goes into a lot of stuff that even I just don't quite get. I mean, I'm sure there's a calculation that goes into it to figure it out. It's probably based on the intrinsic value of what the Japanese government did dictates that one yen is worth versus what the US government says $1 is worth. And then they do some sort of calculation, yeah. But it's, yeah, it's the, I mean, US currency in particular, is cloth and paper, right? It's, it's, so why is that cloth material worth more than this cloth and paper? Right? It's just, and it's, it's basically because the government says, so, yeah. So, when people say things like, just getting back to the Bitcoin part of the, the Forbes article, when people say, well, why would you ever own cryptocurrency? It's not based on anything, right? I would argue, well, neither is the US dollar, right?

Jeff Matevish:

Right. And the US dollar is not finite, so that, that value could change. But I guess, yeah, Bitcoin value changes too, based on the supply and demand.

Drew Thomas:

Well, the exchange rate changes, if you really think about it.

Jeff Matevish:

Yeah. Of Bitcoin?

Drew Thomas:

Yeah, because everybody talks about Bitcoin in terms of what it's worth in US dollar, right? But one day nobody talks about the Bitcoin, nobody says, like, oh, the US dollar is now worth X, because the Japanese Yen is worth Y, yeah, right. So, that's true. You know.

Jeff Matevish:

That's a good way to put it.

Drew Thomas:

So, you know, Bitcoin is worth what it's worth in US dollars in exchange, yeah. But one bitcoin is still one Bitcoin, right? Yeah. So, the problem is the exchange rate. The problem is that nobody's using cryptocurrency in, to buy a cup of coffee, right? Because it's too volatile, right? By the time I, by the time that I go through the whole blockchain process and all that stuff, my cup of coffee changed value 85 times in three minutes.

Jeff Matevish:

Yeah, but wasn't that the whole reason why crypto came about was like, like, as a standard, so everyone was on the same playing field? Like it didn't, it didn't matter what currency you wanted to, you know, convert it to crypto was like the same value.

Drew Thomas:

No, I think, yeah, I think that was a big part of it. It's a, well, it's a private, it's a private currency now, right? So, it's not issued by a government, right? So, that was the, I guess, that was the appeal, it's decentralized and should be valuable to everybody, equally, you know, that kind of thing.

Jeff Matevish:

But it's not whenever you take it out of, out of the blockchain, you know, and, yeah, convert it into whatever currency you're trying to buy a pizza with, yeah.

Drew Thomas:

So, I guess that's going to be the thing is that cryptocurrency of any kind, whether it's Bitcoin or, or Ethereum or Dogecoin, or any of the other 5,000 cryptocurrencies that are currently out there, they're not going to be worth anything intrinsically until people start using them for trade. Yeah, right, and that's essentially what money is. Money is just a substitute for trade. Instead of me saying, hey, I'm going to trade you my, I don't know, my car for your horse, right? And we just straight up, do a trade, I mean, I give you my car, you give me your horse. Now, there's, there's, there's this thing in the middle that says, well, I'm going to give you X number of dollars for your horse. You're going to give that to me, and then you're going to give me X number of dollars for my car, and we give it to you. It just, I guess it's a way to bypass that barter system, because now you know, somebody, if you're doing a horse-car trade, well, then you're like, well, my horse is worth way more than that car. And the car.

Jeff Matevish:

Or I didn't even need a horse, you know?

Drew Thomas:

Right, I didn't need it at all. So, it was worth nothing to me, right? You know. So, the money, actually, I think, helps to sort of grease the wheels, in a way, by, by giving people the ability to assign a value to something and then use that in trade, as opposed to the direct trade of the yeah, the commodity, right, right. So, let's talk about, you said, you talked about the exchange rate. So, let's talk a little bit about inflation and the, and the exchange rate, and how, and how fiat currency can, can, can get out of control through, through hyperinflation.

Jeff Matevish:

Yeah, we've seen that. Well, we haven't seen that necessarily. I guess we have seen a couple of them, but there have been countries in the past that hyperinflation has ruined them, or is, they're still currently trying to recover from, yeah.

Drew Thomas:

Yeah. There are some, even today, that are having trouble, right? With hyperinflation.

Jeff Matevish:

Zimbabwe, yeah, that's currently yeah in recovery.

Drew Thomas:

Still trying to recover from that. I think that one of the biggest, most popular examples, or most common examples that people know is Germany post-World War I, yeah, do you know what the exchange rate was to US dollar, oh, in 1923 in Germany?

Jeff Matevish:

Well, if you could take a wheelbarrow of money to buy a loaf of bread in Germany, I'm gonna say something like one US dollar was worth 100,000 whatever.

Drew Thomas:

Oh, they would have killed for 100,000.

Jeff Matevish:

Okay, tell me, tell me.

Drew Thomas:

4.2 trillion German marks, wow, to $1. Wow. 4.2 trillion.

Jeff Matevish:

So, we could have lived like, like kings. I mean, we didn't win the, we didn't win the Powerball the other day. But, you know, back in the day, yeah, we would have been, yeah, kings.

Drew Thomas:

But, but I mean, you're right, though people were taking wheelbarrows full of money to, to buy a loaf of bread. I mean, it was, it was like 200,000 German marks for a loaf of bread. Well, it was, it was, no, I'm sorry. I'm sorry. That's not right. There's 200 billion, yeah, it was 200 billion marks for a loaf of bread. People were wallpapering their houses with, with Deutsche Marks, because it was actually cheaper than buying the wallpaper.

Jeff Matevish:

And burning it to stay warm, because it was cheaper than buying firewood. Yeah, yeah. 100% Yeah. Hungary was another one, same timeframe that was, I think, even worse than Germany.

Drew Thomas:

Yeah, I think they did get to a point where the conversion rate would have been worse.

Jeff Matevish:

Like it was all because they, they had to pay reparations, war reparations, and that decreased, yeah, the value of their monetary system?

Drew Thomas:

Yeah, I mean, it was the, the, so there's a whole thing that I can go into, but I won't, okay, but post-World War I, when all this happened in 1923 especially in Germany, when World War II broke out, after the war was over, there were discussions and treaties and stuff put in place that basically said that they limited some of those reparations and how they could be paid back, and how quickly they had to be paid back, and in what form they could be paid back to avoid this problem again, because you're right after World War I, these countries were just ruined. And it wasn't necessarily the population of those countries that, that were the cause of the war, but they were definitely the ones that paid the price. And quite literally, yeah, right, you know. So, why would you want something like fiat currency? That is the question. You know, if it's prone to hyperinflation and it's not based on anything tangible, why do we use it?

Jeff Matevish:

Well, it provides stability.

Drew Thomas:

Yeah, it totally does, I mean, it does.

Jeff Matevish:

Allowing the government to kind of regulate what, how much is printed, when it needs to be printed. Kind of is used to try to regulate that inflation a little bit more.

Drew Thomas:

Yeah, it's, it's, I think that for a lot of people, it's, it's, it's hard to sort of put the two together. But, and even for me, like you start thinking about, well, it's more stable because it's more flexible. Yeah, weird, right, right. But it's, it gives governments the ability, when they see inflation starting to creep up, to either add to or take money from the system. Yeah, right. So, you don't have this runaway inflation that can happen. The problem, the thing with runaway inflation is when the government, when people lose faith in the government's ability to back the money, right? And that's really what happened with the war reparations and things like that. Because these are, you'll notice none of this hyperinflation occurred in the winning countries, right? This hyper, this hyperinflation occurred in the losing countries for these wars. And the people lost faith in their government. The people lost faith that the money was worth anything, and so it just spiraled out of control. So, the advantage to fiat currency, and the reason why every government, literally every government of the world, uses fiat currency these days, is because of that ability to be flexible, to be able to say, hey, you know, we're going to take some money out, we're going to add some money in, we're going to try to keep things regulated. And you can't do that if it's based on gold.

Jeff Matevish:

Because it's finite, you would, you can't always mine gold. You can always find gold. So, right, you need to be able to regulate that by yourself a little bit.

Drew Thomas:

Yeah. So, you know, theoretically, the whenever they were doing, when it was, when it was based on the gold standard, right, they would either lock more gold up in Fort Knox to take money out of the system, okay, right or they would release gold, a, you know, back into the, you know, and it would, but it was still a finite resource. There came a point where you couldn't release anymore, yeah, because you didn't have it, yeah, yeah, right. And if you wanted to buy it back, the government had to buy it back from the from the people, yeah, right where. Now the government just says the dollar's worth a little less today.

Jeff Matevish:

You get to a point where, you know, you don't have as much gold in Fort Knox and everybody says, okay, well, I want to exchange my money for gold, and then they don't have enough money, or enough gold, right, to give out, yeah.

Drew Thomas:

Yeah. So, not to mention the fact that, you know, and we can get into this because I want to, sort of, I want to sort of bookend this conversation by talking about whether cryptocurrency is, is the, is the next gold, or whether it's, whether it's really different than what we, what we currently use today. But there was a movement for a while. Like I said, this, this, this argument goes back a long way as to whether or not you should use fiat currency or not. There was a, an argument in the 1800s to add silver to the monetary system. Okay. So, the idea was, you know, rather than just being on the gold standard, where you would have not oh, I don't have enough gold. I can't release it, I can't buy it. I can't whatever. It's too, it's too finite. As we all know, silver is, generally speaking, cheaper than gold. It's easier to find. It's, you know, but it's still a precious metal. It's still something that's not something you can just, generally speaking, go into your backyard and grab right, yeah, right. But it's easier to find than silver, it's easier to find than gold. So, there was an argument made, and I'm not again, I'm not going to bore you with the history, because I know how much you just love it when I go into history.

Jeff Matevish:

I do!

Drew Thomas:

But there was a, there was a congressman, and you can look him up. His name was William Jennings Bryan. And in the 18, late 1800s I'm going to 1890 he delivered what is famously known as the cross of gold speech, which was the idea that the, the richest people in our country at the time, the Andrew Carnegie's and all those, you know, people had too much access to the gold, and the, the poorer people, the farmers and so forth, had almost no access to the gold. And so, you know, he was sort of blaming the gold standard for the disparity between the richest of the rich and the poorest of the poor. And if that doesn't sound familiar to you...

Jeff Matevish:

Yeah, we might be going through something like that now.

Drew Thomas:

People think all this stuff has never come around before.

Jeff Matevish:

It comes full circle.

Drew Thomas:

Yeah, it's just, you know, it's, it's all been

Jeff Matevish:

But it gives the people that are a little less done well off the ability to kind of make up the difference with the silver?

Drew Thomas:

Yeah. So, so his argument was, you know, to not be strictly on the gold standard, but to add silver to the monetary system as a supplement. Okay. And there, there are people out there that, that argue, and you could argue whether, you can make the, could argue whether this was real or not, whether it was intentional or not, put it that way. But there are people that argue that the Wizard of Oz was a political allegory for this concept. Okay. Because, follow me now.

Jeff Matevish:

Okay, all right, I have to remember, this is one of my wife's favorite movies.

Drew Thomas:

Okay, so, so, so, in the book, okay, Dorothy's slippers were not ruby. In the book, Dorothy's slippers were silver. And you'll, you know, in the book, basically, you know, as everybody knows the story, right? The Kansas farmer girl, right, gets taken off into this wonderland where there is a golden road to an emerald city. In other words, you know, all the money is in the cities, yeah, that's the golden road that gets you there, right?

Jeff Matevish:

And, but she got there with her silver slippers.

Drew Thomas:

Right. So, she was given silver slippers, right, to get to, get to her destination, okay. And so that was the, the sort of the argument was that, oh, he was trying to talk about, you know, how the farmers need the silver and all this kind of stuff.

Drew and Jeff:

I could see that. It's possible I It's also possible that it was just a bedtime story he read to his daughter, but he wrote for his daughter, but it's an interesting concept. Yeah, right, yeah. And then, you know, when they made the movie, they changed them to ruby, because, you know, Technicolor. Technicolor, gotta make it look better, yeah. So, speaking of money, those slippers just sold for what, like millions of dollars, like, a few months ago or something, the original ones were, found again. I guess they were lost for years, and then they were found. And oh, really, yeah, they were auctioned off recently. Oh, that's cool. I, I knew, two million dollars, or something like that. Wow. I knew that, I knew there were two or three pairs, because every movie has three of everything, right. But I didn't know that the originals were finally found. That's, that's pretty cool. Not to divert too much, but did you see Darth Vader's lightsaber, what it went for? No, yeah, somebody released, they had it in a private collection. They had the original handle that was Darth Vader's lightsaber in all three of the original movies, I guess. It sold for, like, it sold for, I think, $3.2 million or something.

Jeff Matevish:

I can believe it. I know, yeah, anything Star Wars original goes for, big bucks, yeah.

Drew Thomas:

And, I mean, it's a Kodak flash handle for goodness sake, or flash, you know, it doesn't matter, but it's, it's, it's just that iconic. I mean, it's just amazing. Oh yeah. And again, you know, kind of goes back to the, to even to this conversation about currency, like, what's it worth to you, right, right? I mean, to some people...

Jeff Matevish:

It's worth nothing to me, I don't like Star Wars.

Drew Thomas:

To you, it's worth a Kodak flash handle, right? To other people, it's worth $3.2 million.

Jeff Matevish:

I guess, yeah.

Drew Thomas:

So, yeah, so, so we sort of discussed, I think, I think we've touched on the positives and negatives of fiat currency and why it exists the way that it does. I guess, the next question that you and I can sort of tackle, and, you know, and then everybody can, can comment, comment and tell us that we're wrong, yeah. Or better yet, we're just going to fix the world's economy and everything's going to be great.

Jeff Matevish:

That would be awesome, yeah.

Drew Thomas:

Sure we are, is whether there's really a

Jeff Matevish:

Very complex. difference then between fiat currency and crypto. Yeah, right. Because one of the things we've discussed with John Valkovci, some of the stuff we've, that I've talked about when I've tried to, you know, coach people on Bitcoin and what it is, and, trust me, it's, I think you would agree.

Drew Thomas:

It's, I mean, despite how much we've learned, I still feel like I'm a novice. Yeah, in truly understanding how this works. But basically, I think what it comes down to is, and what the original article from Forbes was saying was, if fiat currency is based on nothing but the government's word that it's worth something, and cryptocurrency, specifically, in this case, Bitcoin, it is also only worth something because someone else tells you that it's worth something, or the, or the people who value it think that it's worth something, right?

Jeff Matevish:

That the supply and demand is what makes it worth something. Yeah, yeah, right. It is, yeah, but the government isn't

Drew Thomas:

And is, is Bitcoin or cryptocurrency more like fiat currency, or is it more like gold in that it's finite? And if it is more like gold, would it actually put, would it actually be the thing that everybody's been asking, I shouldn't say everybody, a lot of people, are asking major governments to go back to something that is commodity based, to go back to a currency that is not fiat currency, because they feel that it is more stable. It's, it's built on something tangible, yes, something valuable, right, right, built on something finite. Bitcoin, outside of the tangible part of it, Bitcoin is essentially that. It is built on something finite. No, it's, it's, and they would, and some people would say that that's a good thing, because it's not one, any one government controlling it. It's a private currency that's available to everybody.

Jeff Matevish:

Yeah, that's different than our, our government and Fort Knox, you know, our government doesn't have a stash, I mean, but I guess, yeah, John had mentioned that there, they would be, they would have to have some sort of Bitcoin stash then.

Drew Thomas:

I think there was, I think there was some discussion with the current administration in Washington that they wanted to build a Bitcoin reserve, or crypto reserve of some sort. I don't know how far along that is. I'd have to, I'd have to do, he knew a lot more about the timing of that, but I think it was supposed to be sometime, it was a summer, yeah, in 2025, yeah, sometime this year that, that was supposed to happen, whether it did or whether it will. I

Jeff Matevish:

Well, but the one big selling point for gold is, don't know. Okay, I don't know. I just, I guess it's really an opinion at this point, because there's no, there's no right answer or wrong answer. It's, it's really just what you think is it is tangible. It's used for other things. It's used for crypto is going to become. Is it going to become another, just another, another currency that's based on someone's word for it? Or is it become, is it going to become a currency that becomes valuable? Because at some point it's going to run out, and the only way to get it is going to be to trade it with someone else who already has it, which means that it goes back to what you said. I only want it because someone else has it, but I can't get it. Yeah, right. jewelry. It's used for electronics.

Drew Thomas:

Ah, that's a good point.

Jeff Matevish:

If the power grid goes down, you lost your Bitcoin, you didn't lose your gold. Yeah. I mean, people still hoard gold, and, you know, for that apocalypse, you know, they figured, hey, I'm going to have to barter something gold's a good way to do that.

Drew Thomas:

That's a really good point that they did not make in any of these articles. But you make a very excellent point if, if the, the lack of it being tangible, could really play into this, you know, whereas, yes, it's finite. Okay, great. But if we have some sort of a, if there's a, if there's an electromagnetic storm from the Sun that knocks our You could have a physical wallet with Bitcoin on it, but you're electrical grids out for the next five years, Bitcoin, that's worthless, is worthless. Yeah, right, because you can't trade it. not gonna be able to do anything with it. Yeah, I mean, it's only worth something if you can trade it right for something else, right? And, you know, you and I briefly kind of touched on that earlier today, too this, this day, this, this, this concept that some people have where they just, they just hoard money, right? And we'll say money in terms of, like, any money, I'm not saying necessarily US dollars, like they'll, they'll hoard anything of value, right? Yeah. But whether you are hoarding euros or US dollars, or whatever, you know, there are people that have lost the concept that the money is for trade. They will live in a tiny apartment, refuse to turn the heat on, not buy any food, or buy or live on peanut butter and jelly sandwiches or something. And they got $3 million in the bank, yeah, right. And they say, like, well, I'm a millionaire. Okay, well, what good is it doing you, right? You're, you're...

Jeff Matevish:

There's a balance, we tell you to save, yeah, but you have to spend, yeah.

Drew Thomas:

I mean, yeah. I mean, there comes a point where saving becomes worthless, because if you never spend it, yeah, right, then what's it for? You might as well not have it.

Jeff Matevish:

Right. You can't take it with you, you know, yeah.

Drew Thomas:

Yeah, yeah. So, you make a good point, like you're right, we absolutely advocate that you save, you know, before you overspend. You know it's, it's usually better, I shouldn't say usually better, it's, it's almost always better to have the discipline to save up for something rather than buy it on credit and then pay it back later. And live within your means and all that. But at

Jeff Matevish:

And live within your means, right? the same time, money is a means to an end. It's not valuable in and of itself, right? So, being a millionaire, but living as though you have no money, and, you know, making your children wear sackcloth or something like that, that's, that's the other extreme. Yeah, you know, it's not worth having the money then, you might as well not have it at all, because, in and of itself, No. And this is another concept that's going to it doesn't, it's not worth anything, right? True. So, I don't know. I think this is a very, I think this is a concept be evolving as Bitcoin and crypto become more popular. that I don't that, that most people don't, don't think about.

Unknown:

Yeah, do you have any, I should ask, but do you have any crypto?

Jeff Matevish:

I do. Not much.

Drew Thomas:

You have a little bit. Yeah, I was, I certainly don't have a lot. Yeah.

Jeff Matevish:

And a lot of it is just fractional, yeah, like Bitcoin, I could never afford a Bitcoin.

Drew Thomas:

Yeah, no. I mean, I, you know, it's one of those things where I feel like Bitcoin, in a weird way, was my Yahoo moment. Yeah, like, there are a lot of people that 30 years ago would have said, oh my gosh, if I would have only known that Yahoo was going to be as valuable as it was. Yeah, it's less valuable now that it, less valuable now that it was then. But, you know, I would have bought Yahoo stock or Amazon. Amazon's another, yeah, right, you know, if I would only known in 1993 how valuable Amazon would be I would buy, I would have bought their stock at $5 a share, or whatever, and been a millionaire today. Right. You know, I do vaguely remember in 2010, 2012 something like that, you know, reading about Bitcoin and thinking to myself, oh, man, I should mine two or three of those, you know, because at the time, you could mine them on a personal computer.

Jeff Matevish:

Oh, you, they used to sell gimmicks like you could, you could get a flash drive that was a mining rig on a flash drive. Yeah, it would take you, you know, years to get a Bitcoin, even back then, when it was worth, you know, a fraction of yeah, what it is today, but yeah.

Drew Thomas:

And if I, if I would have, if I would have done that, you know, though I could probably retire today, if I had, I had 10 or 12 Bitcoin worth$100,000 a piece, a million dollars, you know. I mean, that's, you know. So, you know...

Jeff Matevish:

It's more of a hobby for me, I guess, you know, to see, see what you can do with, with a couple bucks, you know.

Drew Thomas:

Yeah, you know, it's kind of like the lottery.

Jeff Matevish:

Yeah, and I saw a joke yesterday or the day before. How do you, how do you get $1,000 in Bitcoin or in crypto? You invest $2,000. Yeah, it is too volatile to put a lot of money in for me, at least.

Drew Thomas:

Yeah, I'm the same way. I can't necessarily advocate it as a, as a monetary system at this point, which is kind of what they're saying is like, you know, like, would crypto become the new monetary system? But now, but do I have a fraction of Bitcoin just in case I'm lucky enough that it goes to a billion dollars? Yeah, I do. I do.

Jeff Matevish:

Now, they do have USD coins too. So, there's hope that, you know, and it's worth, you know, one coin is worth $1 so, I mean, there are some stable coins that like that could be the future of our currency system.

Drew Thomas:

Yeah. I mean, I would, I would imagine that the governments around the world would love nothing more than for all, monetary, all monetary systems to become digital, yeah, not necessarily crypto, per se, yeah, but digitally, to track, right? Because once it's digital, you can track anything, you can track every transaction, and you can tax the heck out of it. So, I'm sure that, that would be a dream for a lot of governments to avoid the, yeah, you know, the, the ability for people to do direct bartering, although you'd probably see, you'd probably see, you'd probably see a lot of people going back to direct barter then.

Jeff Matevish:

Oh yeah, definitely.

Drew Thomas:

You know. I'll give you my house, for my horse, for your car. You know, that kind of stuff.

Jeff Matevish:

People are going to find ways around, you know, having the government looking over their shoulders, I guess, yeah.

Drew Thomas:

Most likely, I would think, you know, it kind of reminds me, in a, in a, in a, an odd way, of what a lot of states are now doing with their, their turnpike systems, like going to these high-speed interchanges where you don't have a toll booth or anything. But I've also read that some of these states are then able to essentially calculate whether or

Jeff Matevish:

A certain amount of time, and it should have not they should send you a speeding ticket or not. Ah, because if you get on at, you know, Toll Booth A, and you get off at Toll Booth B. taken you longer, that's smart.

Drew Thomas:

Yeah, so the oh, they, they go, okay, well, those are 60 miles apart, and you got there in 25 minutes. Yeah, you're, you're, you're, you know, so that it's, it's, they're sneaky. Yeah, they're sneaking the way they get you, not trying to be a conspiracy theorist or nothing, but, like, you gotta think.

Jeff Matevish:

to charge you for the speeding ticket, yep.

Drew Thomas:

That's the thing. It's like, you know, it's like, well, there's, there's no legitimate way that you could argue that you weren't speeding if you, if you made it there in such amount of time. Now, you know, there are some people that say, well, okay, well, I can still, I can still speed if I stop at a rest stop and I get myself some gas and I stop and eat like some pizza or something, but you're not making any time up. It's, there's no point. So, you kind of have to, you know, obey the law, which, I mean, we would advocate you do anyway.

Jeff Matevish:

That would cut down on, on having police on those highways too. I mean, I'm sure, allocate the, that, you know, that money for police officers to a different area of the government, you know, yeah.

Drew Thomas:

So, yeah, there's, you know, the minute you put stuff like that digitally, where you can get all the data, you suddenly lose your privacy, yeah, you lose a lot of that, you know, and you know, and it's, and it's always sort of sold to you as, look how, look how convenient this is, right? It's so much easier. You don't have to slow down to 15 miles an hour to pass through that toll booth or anything. Yeah, okay, you know. But you know, not now you can track my every move while, you know, from the minute I get on to the minute I get off of that highway, you know. And you're, the monetary system so different, you know, if, if every transaction becomes digital, there's really no way for you to have a private transaction.

Jeff Matevish:

Yep, you know, increases in fraud too, and,

Drew Thomas:

Yeah. I mean, you can go into the whole fraud yeah. thing too. I mean, for sure. I mean, that's, that's definitely something that you know, as we, as we, anytime we talk about crypto, you just, you really have to be aware of the scams and the fraud and, and a lot of that, I think, comes from the, the, the lack of understanding about how it works, and that's why we're here. You know, we're not here just talking about financial literacy, because it's, I don't know, I understand, there are more, there are more entertaining podcasts out there that talk to celebrities and things like that, which we rarely get to do.

Jeff Matevish:

Hopefully you take away something that could help you, yeah.

Drew Thomas:

Yeah. I mean, I think that's really what we're, you know, that's why we're here. We're trying to, we're trying to make this stuff a little more accessible, a little more understandable, so that hopefully you know, you're, you're a little more well equipped to understand what's happening to you or to your family or to your friends, so you're not taking advantage of so you're not, you know, taken in by a scam or something. I mean, it's, it's, it's crazy. And the more, I'm a big fan of you know the whole knowledge is power thing, the more you understand about how your government works, how your money, how your money works, the more well equipped you are to hopefully you'll benefit from that knowledge. You know. I grew up an 80s kid, you know, GI Joe, you know, the more you know.

Jeff Matevish:

Knowledge is power.

Drew Thomas:

And knowing, yeah, and knowing is half the battle, all right, it's so anyway, yeah, I think this is, I think it's been a good conversation.

Jeff Matevish:

It has, yeah, I learned a lot too even just doing this research. So, it's helped me.

Drew Thomas:

Yeah, it's, I mean, it's helped me to, to be honest, anything that I, anything I missed, or that we skipped over, that I can before, before we, before we go.

Jeff Matevish:

I don't think so, I think that was enough information for one podcast. Yeah, if we need to make another one, we'll make another one.

Drew Thomas:

Everybody gets to listen to this a second time to try to, like, grab it in their brain.

Jeff Matevish:

Yeah.

Drew Thomas:

Okay, well, in that case, hey.

Jeff Matevish:

Have a good one, Drew.

Drew Thomas:

Yeah. Thank you. You too.

Jeff Matevish:

This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts with the goal of helping to take some of the mystery out of financial and related topics as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast and any resources available for download from our website or other resources relating to Bank Chats is not intended and should not be understood or interpreted to be financial advice. The hosts, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The hosts of Bank Chats are not attorneys, accountants, or financial advisors, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation.

Drew Thomas:

I think it's fascinating to look at money from such an objective perspective as what we've done today. Typically, even on this podcast, we focus on how to save, spend or earn money, but not really on what its function is in society. As we mentioned earlier, money really is simply a means to an end. It makes trade easier, but inherently has little actual value. The cost of printing a $1 bill, for example, currently sits at about seven and a half cents. The value is not in the paper, but in what the paper represents. If you enjoyed this episode of the podcast, please know that we find value in your likes and shares. It really helps the podcast to reach more listeners and viewers, so a quick thumbs up from you goes a long way. AmeriServ Presents Bank Chats as produced and distributed by AmeriServ Financial, Incorporated. Music by SchneckMind. Our executive producer is Jeffrey Matevish. Remember, we have two new episodes every month and lots of great ideas for new content, so be sure to subscribe. For now, I'm Drew Thomas, so long.

People on this episode

Head Shot

Drew Thomas

Host