Journey through Money, Law, and the Evolution of the Bank of Canada with Dan Rohde

Prepare to embark on a historical voyage through the intricate and fascinating relationship between money, law, and the Bank of Canada – all brought to life by our distinguished guest, Harvard SJD candidate, Dan Rohde. Dare yourself to venture beyond the borders of typical understanding as we dissect the complexities of monetary issuance during Canada's colonial era, the transition to the gold standard, and the implementation of the Canadian Currency Act. More than just a history lesson, this exploration will challenge your perceptions, highlighting the conservative stability of the Canadian banking system, and questioning the potential risks of unregulated, smaller banks.

The saga doesn't end there. A keen comparison between the early 20th-century banking systems of Canada and the USA will reveal the stark differences and intriguing similarities. We’ll guide you through the American monetary stability evolution, unveiling the underlying conflicts between the federal government and state banks, and the ripple effects these had on the American economy. Our discussion also reveals compelling insights into Dan Rohde's research on the People's Bank and its historical significance.

Finally, brace yourself as we dissect the role law plays in ensuring monetary stability, drawing parallels between the Canadian and American banking systems. Discover how a simple thing like money can help trigger historical change, through the intriguing perspective of law. We don’t stop there, but dive deeper into the autonomy of law, its societal impact, and the evolution of the Bank of Canada. Join us for an enlightening conversation that explores theories of money, the legal dimension of monetary policies, and the profound influences of class and power dynamics in policy formulation. This is not your ordinary finance podcast, but a journey to the heart of Canada's financial history and institutions. Don't just listen, come, learn and engage.

We refer to these articles:
https://moneyontheleft.org/2023/04/05/bank-of-the-people-history-for-moneys-future/

https://lpeproject.org/blog/six-reactions-to-the-silicon-valley-bank-debacle/

https://justmoney.org/central-bank-independence-commercial-bank-independence-are-we-asking-the-right-questions/

Musis by Bitterlake, Used with Permission, all rights to Bitterlake

Chapters

• 0:00 Money and Law in Canada
• 17:16 The Role of Banks and Regulations
• 22:00 Canadian Money in the Colonial Period
• 35:14 American and Canadian Monetary Systems Comparison
• 43:08 The Evolution of American Monetary Stability
• 54:12 Law's Role in Money and Stability
• 1:01:26 Law's Autonomy and Society's Impact
• 1:17:20 Differences and Similarities in Money Theories

Transcript

C Derick Varn: 0:47

Hello and welcome VarnBlog Blog. And today we are venturing into the history of law and money in Canada, and I am with Dan Rohde, a SJD candidate at Harvard, and we are talking about his field of research, which is a history of money and law, particularly In relationship to the Bank of Canada. But also we will dip in today about frameworks for maybe understanding the role of law and social and financial change, which you have also written on, and I think these two topics are kind of related. But One of the things that I wanted to really talk to you about is your research on the People's Bank, in the People's Bank, in the history of Canadian banking.

C Derick Varn: 1:45

So the, the the relationship of money and law, I think is very well understood by one school of neo-charta list and those are people around I think you, christine desa n who you've worked with and Kind of not understood by anybody else, which is a broad thing to say, but I think In this case it's fair. Other you know and this is an interesting rejoinder to stuff like law and economics, and which treated the Posner School for those who were legally Educated and and initiated into the dark guild of law, are those of us who even like looked at it from afar. But the Posner School, which really does see economics and laws to fundamentally separate but intersecting spheres, of which law is supposed to like get off the, the backup in some ways we have to include economic decisions and economic costs.

C Derick Varn: 2:56

So that was not an undue burden on the particularly case laws, not undue burden on on under development of the economy, and Kristen Dozen's work your own work Pretty much just Like Points out that that is a totally misguided Framework for even understanding how the intersection of money and law, the economy and law, works, because you can't separate them in spheres like at all. Would you like to talk about your research a little bit and specifically like why there's been a shift in this understanding of money and law?

Dan Rohde: 3:45

Sure, sure. Well, first off, thanks for having me on, happy to be here. Yeah, it's a really big first question. I think I'm gonna start by saying that, at least with me.

Dan Rohde: 3:55

I wasn't thinking about law and economics at all when I've done basically any of my research. I haven't been trained in it, I don't particularly study it. One of my doctoral supervisors is a Lonnie Kahn guy, rainer crackman. So I know a little bit, but it's not. It wasn't my target, it wasn't my focus. Honestly, I kind of couldn't care less and I don't think, honestly, christine Dizon cares that much about it either. I think she cares a little more than me, but not all that much. I think she much more focused on conventional views of money and economic analysis, broadly speaking, which to my mind, is quite distinct from law and economics. I actually see law and economics is very much a legal, academic mode. I don't think it has that much to do with economics, honestly, and I think Chris has Econ, more broadly speaking, in mind, much more than law and economics.

Dan Rohde: 4:43

Why this shift? Now, you know, I don't know. You know the canned answer, which I think is probably true for the most part, is that it has to do with the great financial crisis. I think there was this, this weird dark period I don't know how old you are, but I'm 40, so you know a board in 1983, my my like sort of political upbringing. I remember during like the, the first Bush years and the Clinton years, and there was this really, to my mind, just deeply depressing sense of Triumphalism, with sort of how we manage the economy, how we manage democracy, the American mode being More globally adopted. It was just this post Cold War sense of blind confidence, not even optimism, just kind of confidence. And I remember going to university and thinking just, you know God, is there any role for politics in this country going forward? Because it seems so stuck and depressing? And I think the and I think 9-11 and the great financial crisis really shook things up and totally, you know, divided our politics in a lot of ways and made a lot of things that people thought were off the table because there was so much Consensus about them in certain sectors, particularly economics in general, and it just Made them sort of up for grabs more.

Dan Rohde: 6:02

And I think it was a motivating factor for Chris. I think it was a motivating factor for a lot of scholars that she works with, a lot like Morgan Ricks, I know was, you know, working, I believe, for the New York Fed during the great financial crisis, maybe ministry, I forget which office he was working for. I think it was a really a real turning point for at least the scholars that I'm learning from and in our lives in a lot of Ways that were still living out from. And then, of course, the the COVID crisis has even magnified that. You know, central banks have become such an everyday news item that you almost can't help but think new scholarship and new approaches and revisiting old approaches and old scholarship is gonna Resurrect at this time. So I know it's sort of the cliche answer. Everyone's gonna say the great financial crisis, but I don't think it's probably true. So that's my answer for why this shift in thinking about money today.

C Derick Varn: 6:48

So one of the things I think that we always in In heterodox economic world, both in the MMT world and actually in the Marxist world, is the, the underlying assumption that the central bank, the, a creature removed from politics, but also in some ways, like removed from legal structure and legal review. Mm-hmm, you, you wrote a blog post For just money about two years ago on this very Idea and problem and I do see it related to the rest of your research.

C Derick Varn: 7:35

So so, in very brief, what do you think of the problems with, with viewing the central bank as a private, independent institution, both legally and socially?

Dan Rohde: 7:52

Okay, another very broad question, but a good one, so. So I was actually teaching about this somewhat recently. I had the the pleasure of teaching a workshop at Harvard Law School and I have a session on central bank independence and the way I structured it was we started out with sort of the consensus story of central bank independence as you read it today. We read a piece by Rose Alastra about it Excuse me, she's probably the preeminent scholar of it, legal scholar of it today, I would say. And and the story goes like this it says once upon a time central banks worked for governments. This ran the risk of governments, you know, exploiting their power to inflate the economy and get reelected. That's a bad set of incentives. So we removed central banks from government, from From the elected branches of government, made them independent, because then those incentives are gone and these economists who are independent Can run the central bank monetary policy with the best long-term interest of the economy as a whole rather than short-term political interest.

Dan Rohde: 8:53

And one of the things I find so disturbing about the story is that it's so divorced from the history of central banking. The whole push for independence is a very late 20th century thing. And if at least this version of independence and, if you look, there was another push for central bank creation and central bank independence in the interwar period, but it had a completely different framing. It was all about how we need to get back to certain fixed exchange rates following the gold standard, and it was all about how central banks shouldn't be independent and run by economists. They should be privately owned. So independent from government, but in a different way not a government institution run by economists or insulated from review, but privately owned institutions who will act in the best interests of business, specifically international business and British central bankers were a big part of this movement. Monahoe Norman traveled the world advocating for it, as did a bunch of other people who worked for him and others, and so it was a completely different, related but different view of central bank independence.

Dan Rohde: 9:51

And and it just threw me that the idea of central bank independence is very old. In fact, the idea of central banks being government agents is somewhat new, is sort of a World War two ish and afterwards era mode, and and you know, when you think about Things in some way, uh, things in such a narrow light historically, I think you miss the fact that, um, that there's really law behind this whole picture. There's law behind the central banks that are privately owned, law behind contemporary central independent central banks, and law laying the foundation for even private banks. And you know, at least my research in canada Shows that private banks, as they were first created, were very much understood as legal institutions, as state delegates, as serving a public purpose. The charter banks we've been called public banks. The contrast was, say, a private or a partnership based bank, or what was called the joints company, which had been a non chartered company, and uh and so if law is behind the whole thing, then the idea of central bank independence at least this is what I said in the blog post Really becomes an idea of monetary independence, real large.

Dan Rohde: 10:58

You know, if money is a public thing, if money has governance powers, governance role, then we need to think of it as a governance project and as a public project, not necessarily a state project, but a public project project generally. And central banks are a piece of that. They're not even the whole story. Um, I'm not even sure if that's where you're going with this question. I apologize, but that's that's where I got uh with my thinking on it and, um, a big driver for my work, uh, and the work I have in draft form currently is to emphasize the public nature of money, the public nature of banking, even private banking, the legal architecture on which it is all created and established so that it's open for democratic contestation, and that doesn't even mean this is something that I think gets confused a lot in the the twitterverse on this that doesn't even mean I'm an advocate of the state nationalizing all of this stuff, although in some ways I am.

Dan Rohde: 11:55

I'm actually a big advocate of public banking in some, in some sectors. But it's just recognizing the public role of these institutions, because that changes the whole discourse around how they should be managed, regulated, understood. I think it changes, um, how we look at bank regulation in terms of big banks versus little banks. I think it sort of ends the privileging of little banks. I think you look at all banks as public institutions and you should look at them all somewhat similarly. I know a lot of americans hate that idea, um, so I think it's not just about sort of this is public, therefore the state should own it. It's more this is public, so the state should own up to it and we should all own up to it and engage with it in that light.

C Derick Varn: 12:32

I think that's probably the main motivating force between behind all of my scholarship right now so you know, that answer is actually pretty clarifying and one of the things that I wanted to uh Kind of bring up with you specifically in the episode in, you know I'd be first came aware of you, of a guest interview Slash piece. You did foreign money on the left, on the, on the bank of the people in can, I believe it yet in canada. But there's an inclination which that story kind of plays against, which is the, the, you know, fear of two bid to fail banks and corporate, yes, bank malfeasance of, of which in the united states actually do think it's a problem, but it's not a problem because the banks are big, right, the s, the svb bank, which is, which was a small bank. And for those of you who are not watching but listening, that is me putting things in quotation marks.

Dan Rohde: 13:35

Yeah, quite large actually, about a regional bank, let's say not, not a national institution.

C Derick Varn: 13:41

Yeah, regional bank and regulated like a regional bank. Because one things that we have to to realize is, uh, large banks and small banks are regulated quite differently and there's a lot more oversight on the On the larger, the larger the national banks, um, even if they do get certain favor, like privileges and like debt resettlements or whatever, um, that make uh Regional banks very attractive for certain kinds of speculation, for certain kinds of investing, uh, for stuff that sketchy, just to be quite honest. Um, and so when you say, like you know, small banks are part of the problem, a lot of Americans, particularly after the the Great Recession and its relationship, like recoil at that because they're not thinking about the role of these regional banks, even though Regional bank failures were a big problem. I Mean there were a huge part of the of the Great Recession.

C Derick Varn: 14:58

I remember I lived in a state that had a ton of regional banks and they were going out of business like every other day. I live in a state that has them now that we're even after SBB, where, if it wasn't for Fed intervention, a lot of the regional banks here in Utah would also be out of business, like I saw five of the ones that they're worried about for them right here. So you know this is Because I tend to live in in red states with loose regulations. This is been something I've seen multiple times. What's that issue with With? With the regional banking that people kind of miss from the story of?

Dan Rohde: 15:45

Yeah, great, great. So, yes, funny, a lot of those regional banks actually got purchased by Canadian banks. After the Great Recession, the presence of Canadian banks in the States grew enormously as of that moment continues to grow, actually, although a deal recently. I believe they rolled back on after the contraction and banking in the States recently. So I want to be clear I'm not saying small banks are a problem. Small banks are great, you know. Local credit unions are great. What I'm trying to say is I think, in the States in particular, you have a certain fetishization of small institutions generally, and in some cases that might be great, I think in the banking sector can lead to some some thinking that I disagree with.

Dan Rohde: 16:29

For example, I think the Dodd-Frank regulatory array created after the great financial crisis is Built on a false idea and it's built on the idea that banks are private the private institutions not just privately owned, but private in terms of not that different from any other business, and and but. When banks get to a certain size, they can have systemic impacts, which makes them uniquely volatile and important to regulate a certain way. Therefore, there's a tiered system where banks get regulated more intensively higher up and certain international agreements, like the GATT agreements, which requires certain bank regulation, only apply to the bigger banks in the States, unlike in other jurisdictions like Canada, where they apply to all banks. I believe they apply to all banks in Canada. I should double check that. And what I don't like about this thinking is it doesn't think about banks Qualitatively, it thinks about about them quantitatively. So it thinks, you know, once a bank gets big enough, it's systemically important. Therefore we should Apply special regulations to it. It's, even though, if we won't say it out loud, it's gonna be too big to fail. Let's just admit that.

Dan Rohde: 17:37

And I don't like this way of thinking because a bank I think of as a piece of infrastructure. You know, access to money, access to payments, is something we all need to live our daily lives. So aren't all banks really too big to fail? You know, when a utility goes in solvent, it's not allowed to cut off its customers. Right, there's a whole insolvency and you know trustee ship procedures set up for utilities so that they customers don't cut off from power. That doesn't matter if utility services all of California or a county of 20,000 people. It's a utility. We don't want people cut off from power because it's fundamental to your daily life. Well, what? Why do we think that cutting people off from banks? I mean, maybe there's a, a weather incident or something and people get cut off from power until they fix it, sure, but we don't think people should be cut off from power because a utility has a bad business model right, or Bad planning.

Dan Rohde: 18:28

Like SVB didn't have that much sketchy shit going on, to quote you. It was just not very well run right. They were basically a services company who had cash a within a certain sector and Didn't really know what to do with all the deposits they got. So it's just a poorly run organization that faced a certain environment rising interest rates were a failed and why do we think that people should just be unplugged from the payment system and the monetary system because their provider had a bad business model? I think if we think of banks as utilities, we should think well then no one should be able to get, no customers should be able to get unplugged, not even business ones.

Dan Rohde: 19:03

I don't think and this is where I disagree with a lot of the discourse people said about deposit insurance and how a business interest can be disciplining for a bank or depositors can be disciplining for banks. I think that's unrealistic. So to my mind it's it's really it's understanding banks qualitatively, not quantitatively. And if we do that, then we should admit, I think, that banks, regardless of size, should probably face more or less the same regulations. Maybe not the same supervision you know, a bigger institution is going to require more supervision than a smaller one but at least the same basic rules Regarding how they handle the money, what kind of customer service the required to provide that kind of thing. And I think in the states we worry that once we do that, we're going to put the smaller banks out of business because they can't handle regulations compared to the big banks.

Dan Rohde: 19:50

And that's where I disagree with a lot of my and I'm originally American a lot of my American colleagues on this. I just think small banks are great, they're fantastic. But do you really need to take this love of small business quote-unquote, which is such a political goldmine in the States, and Privilege it this much? Should we understand banks qualitatively, by their role, not by their size, and shouldn't we think about regulation that way? So that's my whole thinking about it.

Dan Rohde: 20:14

You know, money is public, we need it. Payments are public, we need them, whether they're privately owned or not, and shouldn't that govern how we think about these things, regardless of the size of the institutions, that they're just public things they are. I think that that also marries a very intuitive everyday sense. You know people in my family Don't understand how when it is not like people with PhDs. Or you know people who worked in finance they don't understand how a bank could fail and someone just loses their money. It seems strange to them, like where did it go? You know they actually think of money in the bank, so I think it's I. So that's where where my disagreement is on that point so.

C Derick Varn: 20:53

So one of the things that I have gotten from some of your historical research is that one thing we should be concerned about is is Is this fetishization of small and regional banks and and also fetishizing their free character, as if they Remove from certain kinds of revelations and oversight, and that this could Not recreate? I don't think that's what you're arguing, but the deep can learn from the kind of disaster of North American Colonial and, in the case of the United States, post-colonial, until the Civil War money, where To say things are a mess is is Kind of Putting it lightly. So you wouldn't. Let's talk about the early Contexting. Your specialty is Canada. So let's right, sure, and I think maybe it's good to look at Canada, because a lot of people just assume these problems are so generously unique to the US.

C Derick Varn: 22:00

So right, which is yeah, what was the Canadian money like in the in the early 19th century Great?

Dan Rohde: 22:07

great. So money everywhere is a governance institution. You don't work unless someone pays you, because how could you, right, if you're in a monetized society, need money? So the people who control the issuance of money or credit Denominated in a certain money govern that society, or more specifically the kind of decide who governs that society. And and the colonial period is one where administrators and local politicians were very alive to this fact. And so the early the story of Canadian money in the in the, let's say, the colonial period, so before 1867, that's Confederation, that's when we say Canada as it is today, was first created. It's very much one over a contest over who gets to issue money and what the us and what the unit of that money is, because it decides sort of which imperial power you're tied to.

Dan Rohde: 23:02

So the, the, the colonies in this in Canada, the British North American colonies that became Canada, to be more specific. We're really caught in Between Iraq and a hard place. The colonial power said to them go, expand trade, conquer, do all the things that we want colonies to do and ship goods back here, expand our footprint, all of that at the same time. The colonial powers were very wary of the colonies issuing money to Marshall. The forces needed to do all of those things because the US had recently Revolved with the continental dollar. It was a big fight in the states about money, going all the way to the Civil War, which is around, when Canada was confederated as well. And so those strict limits on colonies being able to issue money. They would be allowed to during limited times, for limited reasons, like the war of 1812, but for the most part colonies were not allowed to issue their own money. The feeling was that would give them more independence, more autonomy, and we're worried about that. So the colonies really kind of stuck. They're told Extend to all these things and then they're told you're not allowed to print the money you need to do that. And so you know this period of sort of working around the rules, trying to get around the prohibition on monetary issuance. I'm creating a money and doing it in creative ways, so one way and these are all things that the American colonies, or the colonies that became the United States, also dealt with in an earlier period Massachusetts famously had a whole bunch of fights with the, the colonial powers, over its power-deachable money. It briefly had a mint. It issued famous bills of credit that you know. We're a model for future British colonies. So all the stuff had been done before.

Dan Rohde: 24:50

But the Canadian colonies. The first thing they did was they monetized foreign coin. So they would pass a law called the currency act usually, and it would actually say the unit of account in our colony is British because there was a British law as of 1825, this that they had to. And then it would say but all these other coins are still good money here, they're legal tender, they can abuse to pay taxes. French money, spanish money, british money, american money, on down the list, and it would say how much each coin was actually worth in British pounds. And British money, for example, was worth a British pound, for examples worth more than a pound in the Canadian colonies. So they would overrate foreign coin and monetize it by law in order to try to retain more money in their jurisdiction, because people were always short on money.

Dan Rohde: 25:37

And then they Briefly got the issued on bills of credit during the war between 12, which the colonists in Canada likes very much I'm not saying they like the war, but they liked the having the liquidity very much. And then, when that got wound up after war between 12, their next workaround was banks and the colonial power basically said okay, we'll look the other way while you charter banks that can issue money, so long as you're chartering banks to loyalists, because we don't want any dissension here. And so the lead up to my bank of the people paper is really the fight over Chartering of banks. You know we're charging banks to issue money. Everyone knew it was a public thing at that time, but they thought it should be privately owned. But more or less the government had to share in the biggest bank in the colony and it should Be limited in terms of who you're giving this power to, because we want to keep a lid on it. We just we don't want autonomy, we don't want American influence, we don't were a public and influence or reformer influence. We want to keep it tight and that's really the.

Dan Rohde: 26:36

That's how I like to divide Canadian money, the history of Canadian money, into four periods. The first one I call the colonial period or the settler period, and I think each one of these periods has a fight over a key piece of monetary architecture. And the settler period the fight really is over banking, who we should get a bank charter, how the banks should be governed. Is it fair to have money issued by privately owned organizations or ones associated with loyalists or not? Should we have Democratic input into how banks are run, how the issue money, how much the issue. That's really the fight I think in each of the Canadian colonies, the monetary fight during the colonial period, sort of the defining architecture of that period, and the bank of the people paper is basically about a small piece of that in the colony of Upper Canada in the 1830s.

C Derick Varn: 27:26

So let's talk about the bank of the people. What it, what was the bank of the people and why did it emerge?

Dan Rohde: 27:35

Great. Well, it emerged for very much the reason I just said the war of 1812. It happened all this money had been issued and then wound up after the war and colonists wanted more liquidity and the the colonies started chartering banks to provide it. And and there was a group at the time called reformers. They were for more Democratic reforms in the colony of Upper Canada and they were not necessarily American. Some of them were Fans of the United States, some were not. There was a quite a spectrum within them. But all of them were in favor of more direct Democratic input into the colonial administration by colonists.

Dan Rohde: 28:19

And they hated the Bank of Upper Canada, which was the first bank chartered in Upper Canada, saw it as a very pernicious Political institution and they had a. It became a huge part of the platform to oppose the bank and you set up some more democratically issued monetary institution sorry, more democratically accountable monetary institution. And so they tried a bunch of things. They tried to get public representatives on the Bank of Upper Canada board, some reformers on that board. They failed in that. They tried to get the, the colony to it. They would love, would love the idea of the colony directly issuing paper money again, like it did during the war of 1812, but that went nowhere. They tried to create a public land bank. That went nowhere. And then eventually, and of course none of the banks they proposed would get a corporate charter from the legislature.

Dan Rohde: 29:12

So eventually what they did was they started a privately owned bank and uncharted banks, so it didn't have limited liability. It was called the joint stock company, was the the corporate form, and they called it the Bank of the people and just ran it basically outside of the influence. Well, so within the influence, but tried to run it independently of the colonial government in order to sort of set an example of More Democratic. Money they would lend to people who were ousted by the, the big corporate banks, including William Lyon Mackenzie, to start a newspaper called the Constitution. He was one of the more radical reformers, not a core person behind the bank, but probably the core Political figure of that era. He led a rebellion in 1837 Against British rule. They give money to him to start a newspaper. They give money to, often, farmers outside of City core and who were often alienated from the Bank of Upper Canada, which typically landed a merchants and and Really tried to just offer liquidity to people pushed out from the political consensus at the time.

Dan Rohde: 30:21

You go ahead no, no, no, go ahead go ahead and your paper.

C Derick Varn: 30:23

You're pointing out that it was very well run. It was real run enough that, like it did not have to suspend payments during one of the the early banking panics in 1837. And one of the things about the 19th century they don't think modern North Americans in general appreciate is how unstable banking was. There are multiple banking panics, so we we tend to just know about the one that happened in the 20th century with the Great Depression but, but it was. It was well run enough that it, improper enough that it didn't.

Dan Rohde: 30:57

It could maintain payments even during a banking crisis and not just a banking crisis, but 1837, I think, probably second to the Great Depression in terms of size and severity for a financial panic in world history and I could be wrong but Just a huge monetary contraction, particularly across North America and in England, and to be the only bank that I know of in the Canadian colonies not to suspend payments is a pretty astounding feat when you think about it.

C Derick Varn: 31:31

So you know, the bank was Kind of subsumed into the bank. So we were Montreal in the 1940s In in your in your paper discussion, as you point out, this is, you know, part of this seems to be that it was associated with the rebellion that we just talked about right right. But what else could have been the reason why the, why the bank of the people couldn't stay Independent?

Dan Rohde: 32:06

yeah, well, in the paper I say there's probably a couple reasons. One is that it really after so the rebellion. In the rebellion, it lost a lot of its core members, who either fled to the states or faced exile, or or just ostracized from the financial community in Toronto and and At the same time, the great financial crisis not the great financial crisis, excuse me the panic of 1837 Led to a suspension of payments. So the law was passed saying banks can if they want suspend redeeming the notes for, for species, for coin and the.

Dan Rohde: 32:45

That, ironically, actually benefited not really ironically, actually somewhat deliberately Benefited the Bank of Upper Canada, because of a bank now needed reserves for some reason, maybe to expand its business, maybe to facilitate an international transaction. The place to get it was through through the Bill of Exchange Market callable on London and the Bank of Upper Canada, for historical reasons and you know, because of its influence, basically had a monopoly on that market in Upper Canada. So all of a sudden it could charge a premium for these bills of exchange on its competitors and it did, you know, without hesitation, particularly the Bank of the people, who's you know its political enemy. So they really had a hard time Attracting species, competing. They got, they got crunched essentially in this period, even though they were probably the best-run bank in the colony at the time, which is kind of amazing. And so eventually they sold to the Bank of Montreal. The Bank of Montreal and the Bank of Upper Canada had previously had a tacit agreement not to compete with each other and it ran out, basically expired, and they didn't renew it, and then the Bank of Montreal really wanted to expand into Upper Canada. Remember it was a different colony. It was in lower Canada, different colony, even though now they're all parts of Canada and the legislature didn't agree to give them a law saying they could. So then what they did was they just purchased the Bank of the people outright, that kind of run it as a branch. The two colonies later get put together under what's called the Union Act and then they just turn it into an actual branch called the Bank of Montreal. It's actually the site of the Bank of Montreal's main office in Toronto. Today is on the piece of land where they move the Bank of the people eventually and it was its motive in getting in.

Dan Rohde: 34:28

But really, I think the founders I think the founders they weren't, even though they ran the bank well, they didn't, I think, want to be bankers. I think there were politicians. They cared about money, they cared about democracy and they care. They cared about the stuff deeply, but they weren't looking to start a huge institution that was going to take over the world. I think they were trying to make a point, get a bit of autonomy, and they did that. So, even though they sold it to Bank of Montreal, also a very loyalist institution at the time, and there's a one of the founders of the bank has a defense in his newspaper of why we sold it to the medical Montreal. Why did I sell it to my political enemies? And he basically says that there wasn't a future for it. They were Constricted in terms of being able to attract new capital and so it wasn't going to go anywhere eventually. So they had to sell it. And then he stays, this Particular person very involved in money and public money advocates.

Dan Rohde: 35:21

They all stayed public money advocates but didn't really get into banking anymore after that. For them was more about financial regulation, banking regulation and the ability of Canadian colonies and later Canada to issue its own money directly, which they did eventually established Canada issued its own money from confederation until Creation of the central bank in 1934. So I think they just it was a combination of things. The business got stuck and they they were always more interested in public money than banking per se. I think they got pushed into banking because it was sort of their only place left to go after trying out public money and failing so much. So I think they also probably wanted to get more into public money in general. So I that's not something in the sources, that's me reading between the lines. But I think that those are sort of the main reasons why Failed, as a project didn't fail but phased out.

C Derick Varn: 36:13

So how can we contrast the bank of the people to like banks in Canada a Little later, let's say in the early 20th century?

Dan Rohde: 36:22

Hmm, early 20th century. Well, radically different. So Canada, so the Canadian monetary system, very different than the American in some ways, radically different, and in the early 20th century of a very different Monetary architecture than during the colonial period. So first off, it's gold standard era still so. To me that means Nations monetize a certain coin of gold, monometallism, assign a certain amount of gold to that coin and say that Somehow, through some means and lots of countries have different ways of doing this money will be exchanged, paper money will be exchangeable for Species money in that amount, and then there's no limits on import or export. So gold becomes kind of an international fixed exchange rate mechanism. That's how I understand the gold standard. So there's that system. So Canada has a currency act, still has, still monetizes foreign coin, american and British, so it's very little Canadian coin, most of that's gold and a little bit of silver, a little bit of American silver. And then there's a Directly issued government money called Dominion notes which are exchangeable for gold or silver. And then the banks take those Dominion notes and use them as reserves and issue their own paper money, which is Bank notes, which are the majority of the money people use, and and that's the setup the banks. There's nothing like the bank of the people anymore. The small banks have all been bought out by the big banks. We've had chartered, we've had not charter, we've had branch banking.

Dan Rohde: 37:59

And Canada, since the start, and From confederation, a big push was to have all banks chartered federally and able to operate in every province. So every bank is a national bank more or less. There's it's not really every bank, but for the most part and there's relatively few. As of the 30s, it was basically 10 Canadian banks. We have more than that today, but there's five that have about 80% of all financial assets between them. So they're massive. And so you know there's few banks. They're all big, they're all associated with the Conservative Party at that time and they are all national.

Dan Rohde: 38:38

It's a famously stable system, not necessarily the most democratic, but famously stable. There's a famous story that during the Great Depression, the zero Canadian banks failed, which is actually true, but of course, part of that's because they could protect their own bottom line at the expense of their customers. Right, there was huge monetary contraction in Canada because the banks had the power to protect themselves at the expense of others. So it's not all good to say that, but you have basically an incredibly stable, not very democratic Monetary system run by very few institutions, all of which are relatively similar, all running out of Montreal and all anchored to this global British imperial system that you might call the gold standard. So that's the early 20th century. It's a polar opposite from what bank of the people Advocates and organizers would have liked to be honest, even though one of them was behind establishing many pieces of that system.

C Derick Varn: 39:36

So it does seem Both important and interesting to contrast the American banking system, the Canadian banking system. One of the things that immediately Occurs me in terms of like conventional modern monetary theory is that the US had Something like fiscal sovereignty or monetary sovereignty. Let me bet, let me use that besides terms. That's not a term I like, by the way, but it is in the, the annuals of chartleism, so we have to use it. We talk about the stuff. The US had monetary sovereignty to some degree, much earlier than Canada. You mean like after the revolution. Yeah, yeah sure.

C Derick Varn: 40:29

The idea that we would that we would like legally take foreign money Like that. That seems a nap Americans. That's not really something that we talk about in our history, right? Although all the American colonies did that too, at least that I know of. I haven't researched all of them. When did they stop?

Dan Rohde: 40:48

I don't know. I doubt it was right after the revolution. In fact I know it wasn't Because I believe Spanish. The piece of eight was still legal tender in the United States, at least under the first mint act. But again, I don't research American money so I'd have to get into this. Yeah, but I'm sure it was a transition and it wasn't immediate that okay, foreign money is not good money anymore, it's only, you know, the eagle, the silver eagle or the gold eagle or whatever the first coin was. That's the, that's the good money. Now. I'm sure it was a transition period, I don't know.

C Derick Varn: 41:16

Well, one of the things that I remember from from my studying of American money was not so much that farm money, although I did know that there were a lot of colonies, even after the revolution that took Spanish currency. Now I think about it was.

Dan Rohde: 41:29

I think it's the basis for the first American dollar, which was silver and had the same amount, and I believe it's even where the word dollar comes from, because it was sort of a German word for the piece of Eight, but I think people actually debate that.

C Derick Varn: 41:40

So when we, when we talk about that in the United States there is there's also this period of Of extensive private money when you know banknotes were were, which, which was the first time that I've ever seen a banknote.

C Derick Varn: 42:05

Where you know banknotes were were which would be traded like money were. We're kind of everywhere, and when I say banknotes people, I mean like you know Doll, you know dollars are you like? No, these were, these were basically something like. I mean, the current would be like if you could use cash your checks to pay the government and that cashier check was not denominated in in exchange for an Interd in amount of the federal dollar, of which it will get a guaranteed return of said federal dollar. You have something like that which which means before the Civil War, we do have kind of financial chaos.

Dan Rohde: 42:55

Yeah, although I might, I'm gonna, I'm gonna disagree a bit with your characterization and maybe we actually agree. But so so you read this account a lot. In fact, I just picked up a book this somebody gave me the other day which is about this. You read this account a lot. I think of it as sort of the wig history of American money and this is this, says once we had this thing called the central bank.

Dan Rohde: 43:14

It was the bank of the United States. It was fantastic. Second bank of the United States, stabilizing force great. I mean. Forget that it actually wasn't a stabilizing force, but the story says it was. And then Jackson and all these metalists, backward thinking people didn't like banks, vetoed it, canned it. We had free reign in banks. You had the Wildcat era, unbridled capitalism, and it was productive but horribly volatile, complete monetary chaos. And you did a monetary chaos by the way, I'm not disagreeing with the empirical statement until Until, finally, the civil war happens, we get national banking and eventually the Federal Reserve. And here we are back on the path of enlightenment and progress. Isn't that fantastic? Capitalism is great, but it needs to have be checked. It's a very sort of middle left capitalist perspective.

C Derick Varn: 44:01

Right and what I was taught Frankly.

Dan Rohde: 44:05

Oh yeah, that's how it's taught and I disagree with it. I disagree with it for a lot of reasons. Number one the bank of the United States was not a central bank. It was a national bank. It was competed with all the private banks and it was the only bank allowed to branch in the United States. All the other banks were supposed to be unit banks, even up to national banking. Banks were supposed to be unit banks, and it's very hard to run a bank stably as a unit bank.

Dan Rohde: 44:28

Branching is a hugely stabilizing force but, by the way, I'm not saying it's necessarily good. Well, I think on the whole it is good. That's just saying it's a stabilizing thing for banks to be able to branch and have deposits in different regions. So you're not like SVB, one WhatsApp group, and everybody pulls out their their reserves and you're tanked in two days. Right, it's better to have people spread out. So having branches is inherently stabilizing for banks and no one was allowed to, except for the first and second bank of the United States.

Dan Rohde: 44:57

And you also have this very confusing document called the United States Constitution, which is just just a horribly confused and scattered and was mixed on money, right, like the articles of Confederation was even harder on money and a big motivation for the Constitution was to have monetary power Consolidated under the federal government. But it's but it didn't give the federal government exclusive power to charter banks. So all these state governments that can't issue bills of credit anymore Start chartering banks to basically issue money for them, kind of like the Canadian colonies did, and they're accepting these bank notes for public payments. Sometimes they're using them to fund school boards and infrastructure projects. So these banks are becoming sort of mini central banks all over the country and you have this huge contest between the governance power of states versus the federal government, and of whose banks? And that's a whole background picture of this. It's not just oh, there was this nice enlightened federal government that had a branched institution. It was competing with these state banks and they hated it for that.

Dan Rohde: 45:57

And Jackson knew very well where his political support was coming from. It wasn't just about hating banks, it was about hating this certain federal institution that was actually acting against him and I'm not a Jackson fan, by the way. I think it was a horrible person. It should be all for money, you know, genocidal. I'm just saying his supporters weren't all lying all the time. You know some of the things they were saying were true, and so I see all of that not as sort of we had monetary chaos and we figured it out, even though there's a certain point in which that's just true. You know, having banks issued, having all these unit banks issuing these notes they're getting discounted in various places, there's no way of anchoring their value nationally is a mess and it's confusing. And then you know there is stability later, or at least something like it.

Dan Rohde: 46:41

But I see that much more as sort of a fight over control of the country and and and the monetary instability is almost, um, an implication of that More than the driving force. So I see this is just a fight over what kind of country we're gonna be. Who's gonna run it. Are we gonna be a slave economy? You know where's our money gonna come from. Is it gonna come from banks or metal? You know Jackson supporters also owned the mines and ran the mint. So they had direct interest in getting rid of bank issued money because they wanted more coin Right, and they pioneered reforms to the mint during that same period. So I see this as much more of a contest over power than I do a just sort of our money was a mess and we got it more stable later. I mean, and it is true, money was a mess and it was more stable letter. But I don't think that's the driving narrative. At least that's not how I understand that piece of American monetary history.

C Derick Varn: 47:32

Is there a similar period in Canada, but art as the Canadian relationship to the British Empire kind of preclude that problem.

Dan Rohde: 47:41

It's less about the relationship to the British Empire then it is about, actually, one of the founders of the bank who was Canada's third minister of finance and sorry, after Right for a quick message to my spouse, so sorry. Sir Francis Hinks is one of the founders of the bank. He's the first cashier of the bank, he's the third minister of finance and he lays some of the architecture of Canadian finance that sets it on a radically different path than American and makes it inherently more stable and it's always been more stable. So he, as you know, is a big advocate of public money. He was part of the bank the people. So Canada's first government after confederation in 1867 is a conservative government. He feels like I'm on the way out. He was a big part of it was called the Union period and so he leaves. He becomes, I think, governor Barbados or something like that. So he's out of town.

Dan Rohde: 48:42

The new conservative government puts in a Minister of finance and the bank fails. The minister of finance wants the government to bail the bank. The prime minister actually has money in the bank and he thinks the bad politics, we bailed it out. So he doesn't bail it out. There's huge political fallout. People think they should have bailed out the bank. And the minister of finance is sort of a fall guy. So he, he resigns. Second minister of finance comes in and he says hey, I want a central bank Issues all the paper money. Banks shouldn't be able to issue any money. And he was a former banker. So people are kind of shocked by that, hugely unpopular with the banks. He gets kicked out, resigns, and so the the prime minister. First prime minister is thinking what am I gonna do? I need a minister of finance who knows money, can run this thing. And so he reaches across the aisle and asked the former reformer, old-school Reformer, left-wing guy. So Francis thinks we come back from verbatos and be my minister of finance so we can get a bank act established, so we can get a money, a monetary system established.

Dan Rohde: 49:41

And Hinks does. He's a big advocate of having the government issue all the money, but he knows it's a political no-go. So what he proposes is a compromise the government will issue these notes called the menu notes. The banks get to keep their power to issue their own notes. Okay, and and, and he also. What he does is he he proposes a bank act that's national, so every bank in the country is comes under it. So as the country grows, they were all assuming the country would grow, the monetary system will grow with it Stably. And what he does is he says the bank act Replaces the corporate charter of every existing bank. So to get a charter you appeal to the legislature, they give you a bank charter and and. But once you have your charter from the legislature, the bank act replaces your charter and becomes your charter.

Dan Rohde: 50:30

And then he did something I think brilliant. He made the bank act. He gave it a sunset clause, so it expires in 10 years. So the first bank act was 1871. So in 1881 the act was going to expire and all the banks were going to lose their corporate charter Unless they show up in Ottawa and negotiate with the government about having a new bank act. Thankfully, when they got a new bank act they kept the sunset clause in it and they eventually changed it. So now it's every five years. So for a while it was every 10 years, now it's every five.

Dan Rohde: 51:03

All the banks go to Ottawa and the government has sort of a stick, you know, has a carrot and a stick, and it's like come to Ottawa and negotiate a new financial system or a new financial rules, and we do this in Canada every 10 years, unlike in the States where maybe you have a financial crisis, money is in the political scene again. Everyone's scrambling to make a new law and then we're kind of kind of sit with that law until we have another financial crisis Not necessarily the best way to legislate. Instead, in Canada we have a system where our Constitution says all banks are chartered by the federal government, not the states or not the provinces. They're all chartered under this one system to come under this one statue called the bank act. It expires every 10 years, so all them have to show up in Ottawa and renegotiate the terms of their own. You know regulatory apparatus regularly it's it's got some problems.

Dan Rohde: 51:54

I have a critic of lots of aspects of it, but compared to the American system is just so radically different. Right, you have unified authority under a federal government and it's quite deliberately made that way. You know, the Canada Canadian Confederation happened during the Civil War. I think it was widely understood that that division of the money power between the federal government and the states was one of the causes leading up to the Civil War and they didn't want that. In Canada, right, they want a stability and unity, and so it was deliberately designed with this in mind. Right and, to a certain extent, quite effective, I think.

C Derick Varn: 52:30

Definitely a huge, at least a huge contrast from the American model so In your writing on SVB Bank, you pointed out that, like Canada, has actually had similar periods With these kind of regional bank volatility, particularly in the in the 80s, actually about the same time as our savings and loan crisis here.

Dan Rohde: 52:53

Oh, absolutely.

C Derick Varn: 52:54

Yeah, yeah. What has Canada done To To ensure that it doesn't have those problems now, because it hasn't had the same kind of volatility that we have right.

Dan Rohde: 53:11

Well, first off, the fact that from the start, every bank is branched to national is itself a stabilizing force. Second, but we have had these periods where there's perhaps People who are entrepreneurial in a certain area and I don't mean that just as a compliment, I mean in terms of just their motivation or you have an area that feels like it's being hard done by with the eastern banks, and putting that in quotes, you know, there was definitely a feeling in the 80s that Alberta, calgary, these areas were, you know, putting their deposits in banks that were run out of Toronto, montreal and weren't getting investments from those banks in return, and so there was a push to open up banks in those areas to cater to that Community right. So that those are the two community banks that not community banks. Regional banks have failed in the 80s and they failed relatively quickly. I think Both were bailed out by the federal government. All the depositors were funded by the federal government and there was political controversy Not compared to the SVB crisis, I think.

Dan Rohde: 54:13

You know, in Canada people accept that banks are too big to fail. I'm not sure it's explicit, but I think it's implicit in the system. You know, when you have five banks running 80 percent of your financial sector, I think it's just, it's almost just a fact of life that you don't even really challenge that much. You know you can. They've had it this way. We've had it this way for so long too that there've been a few institutions that ran the vast majority of the money for almost the entirety of the country's history. That is almost just an implicit mode in this country. There's very little Discussion of it, honestly, and there's some probably some good things to that and some bad things. But it's very different than the us. You know the us you had unit banks. They've always been volatile and you have this period in the great depression when there's a push for stability, primarily through deposit insurance, which predated the 30s. There were state deposit insurance schemes before them and deposit insurance is a pretty brilliant thing and I'm a big advocate of lifting the cap on deposit insurance, particularly in the states. I think in Canada it's maybe a little different because deposit insurance was rolled out here later and for different purposes. But you know we think of deposit insurance is really an equalizer between big banks and small banks. You know, one of the reasons it's so brilliant in the american system is because you have all these small banks. You have people who love them and advocate for them. So why not create a system that says that you know your money is as safe in a big bank or small bank Because they're all part of this insurance scheme? It's kind of brilliant In Canada.

Dan Rohde: 55:41

It's just a very different system. We have deposit insurance, but it was rolled out in the 60s for very different reasons Most different non-banks. It was a worry about shadow banks. Then they called them near banks, which are also part of the deposit insurance scheme here. So it's, it's it's. It's a radically different system. It's really designed with stability in mind, and I'm actually not sure how many components of the american monetary system Are actually designed with the stability in mind when you think about the amount of money that's being spent on the American monetary system in mind, when you think about it. Some are, but there's just so much politics and jacking and conflict and contestation in the american, in american monetary history um, that the whole history of the entire architecture is almost, almost opposite the canadian approach.

C Derick Varn: 56:34

So this leads us to Kind of the final point that I want to talk you on, and it is a shift um the the background of all these, all these specific bank arrangements that we've been dealing with, is Both fiscal arrangements but also legal arrangements, as, as Stated by the fact that you know, charters are legal entities. Money is a legal is is a legal issuance. It's. Its viability is based on the fact that.

C Derick Varn: 57:10

Not just that, you know private entities in the market take it, because private entities in the market can take whatever they like, really, and a lot of a lot of places, but not everywhere, but uh in the united states is most true, um, but that the government can, can, will take that form of currency as a receipt, and so this leads me to a Kind of key question. Um, you've also done work on frameworks of understanding law. And the the role of law in social change and social institution building um. You recently published a paper, uh, a long Exhausted paper, with uh uh, nicolas, uh uh.

Dan Rohde: 58:03

Yeah, Nico.

C Derick Varn: 58:07

And, um you, you talk about, uh, contingency and autonomy and and legal historiography. Those are Words that I will, you know, kind of translate, for I think most people know what, what, uh, contingency, autonomy are. I think Most of my audience does have an idea of what historiography is, because I'm really big on emphasizing hey, don't confuse historiography for history, do? Yeah, no, it's true, um so, but how is money? A window into understanding the relationship between law and social change, and a window that I think a lot of people ignore.

Dan Rohde: 58:53

Oh, my God, what a great question. I mean I think I want to answer your question backwards or in reverse. So I think it's so easy to it's easiest to ignore the things we use most often. I think that's just a fact of human experience. I think you can't possibly think about something that you do every minute as being. It's not that you can't. It's very hard to think about something you use regularly as something worth remarking on and focusing on and trying to tease apart Because you live with it, you know so it's just. You just be exhausted from the mental labor of it. So I think these everyday things are sometimes the hardest for us to think about and the easiest for us to ignore.

Dan Rohde: 59:37

Money is definitely one of those things you know. When you go about your day using money of various kinds, you know you don't think about the design behind it and what it means and we should, at least once in a while. And you know that paper is really about how does law enable historical change, not just reflect historical change, and I think money is a great example of this. If you think of money as a legal institution, as I do, as it sounds like you do, then it's a great example of this, because so many monetary innovations happened almost inadvertently. You know, the Bank of England happens to finance government during a period of monetary contraction and conflict and then suddenly this scheme, which was really just a scheme to give the government of England a loan, right and they didn't have enough liquidity for the loan and the government had terrible credit because it had, you know, basically taken people's money from them. They were like, you know, you investors will give us better terms if we give you this corporate charter or work out the scheme where you give us paper notes and have a reserve and you can run this bank on the side to make some money as well. It was just a scheme to get a big loan for the government. The notes were not legal tender, they were not meant to be accepted as taxes, but they were accepted as taxes very soon because there's a logic that if the government is going to spend these notes on things, then it should accept what it spends. So all of a sudden the exchequer is kind of stuck accepting these notes inadvertently and all of a sudden you have this new institution, the Bank of England, which over the subsequent, you know, 300 years has become enormously influential and important, globally emulated around the world, taken on various different roles. It's wild.

Dan Rohde: 1:01:27

So our whole paper is basically about how you have these moments of political contestation, which people are trying to pioneer a new legal device or institution of some kind, and then later on that device kind of runs away from them, it gets used in ways they didn't expect. And that's the autonomy of law. That's how law enables certain social or modes of social organization that weren't foreseen by its creators and that enable new structures of society. And money is filled with examples like this. You know, if you see money as a legal institution, you see money as something that can be designed and the designer has hardly ever know the impacts that their designs are going to have long term. I think this is definitely the case for bank issued money, and the Canadians get to it kind of late. You know, lots of other countries have been doing this for quite a while. By the time the Canadian colonies start chartering banks, and it's just. That's the story I like to tell. With legal history. You have the political fight over the new institution and then you have how the new institution is used and it's used in a certain way, and then later it's used in new ways and people are just like how did that? How did that happen?

Dan Rohde: 1:02:33

The Bank of Canada is a great example. A current draft I'm working on says that when it was founded, not only was it not meant to manage domestic price inflation, but the creators explicitly didn't want it tasked with inflation. They actually thought it was dangerous to task a central bank with inflation. It should manage exchange rates, advise government on its finances, print the money, regulate the financial system, do various things. It should not handle inflation. Not just, not just. We'll leave it open, but we're against this.

Dan Rohde: 1:03:07

And then there was a huge shift in the 60s and this new governor, the bank, just started using it for that.

Dan Rohde: 1:03:12

It was sort of an old idea that central banks should be used for that, that. It had gone out of fashion in the 30s and it came back with him and, all of a sudden, central banks around the world. You see similar things happening in the post war period. I just think it's really fascinating how these institutions that we use every day get used in new ways and have such a huge impact on our everyday life. It makes them both hard to pay attention to and so important, and I think the more we can make them explicit through these histories, the more we can think about designing a monetary system and a legal architecture for the future that represents the kind of society we'd like to live in. I think that's really the animating force of all my historical work is thinking about how we can equip ourselves to change these things for the future. I think it's very practically motivated, even though it's almost purely historical. Does that answer your question? I feel like I went on a bit of a digression there.

C Derick Varn: 1:04:09

No, I mean it is mildly digressive, but it's the kind of thing I'm actually interested in. One of the things I think we have to deal with when we deal with law is seeing it as definitely in feedback with all these other parts of society and government and social change. There's kind of two. You go into the various modalities in your paper classical legal thought law and society Marxism and what New Left post-Marxism?

C Derick Varn: 1:04:46

You know, and you guys the term, you guys own invention, millennial Consensus. But I do think that if I was going to radically and irresponsibly reduce those into two trends, you have the law as neutral arbitrator of society school and law as epiphenomenal to other relations of power school and I think that's the one, right, right, and what we're trying to say is neither of those two. Yeah, yeah, you're even getting both those things.

Dan Rohde: 1:05:21

Yeah, yeah yeah, yeah, no, I think that's right. I think that's right. It's definitely a harsh simplification of all the camps, but I don't think you're wrong. I don't think you're wrong. I see what you mean.

C Derick Varn: 1:05:34

Right, well, yeah, I mean, I do think each of these camps has different reasons why they conclude these two different things. There used to be of the Marxist school that, like well, law is just a reflection of currently existing power relations. Where I do? You know, I do think that currently existing power relations are very important to law, but there's a great of bylaw.

Dan Rohde: 1:05:59

Exactly, yeah, the legal architecture lays the foundation of these power relations, but then, within that, there's no question that certain interests get an outside voice in changing the laws. I mean, there's no better example of this than contemporary United States. You know, of all the history I've ever read, there's like no better example than contemporary US and the influence of, you know, established powers, the structure of American laws. When you have multiple elected representatives reading pieces of the same speech against Obamacare given to them by an insurance lobbyist Remember when that happened? This is I don't know.

C Derick Varn: 1:06:36

I do remember this. I'm just saying, you are just appalling.

Dan Rohde: 1:06:40

You know, yeah, so no question, you know the Marxist story and that's, I think, also, to be specific, that's probably one version of the Marxist story Definitely has some truth to it, there's no question.

Dan Rohde: 1:06:51

It's just you know where do the foundations of these things come from. You know how do you have a move towards peace work, and you know capitalist labor relations, as Marx would say, without the liquidity needed to pay people hourly instead of you know, laborers used to get paid every year, right, because money was so scarce in England. You get, you know, your two and a half pounds every year on your annual employment contract and in the meantime you'd be fed by your employer and get billed for that when you get paid at the end of the year too. You know how do you move from that system to a system of, you know, capitalist hourly labor structuring without liquidity, and all that liquidity is created through law. So there's clearly legal architecture behind the system, production in the base, even if within that there's lots of examples where the Marxist narrative very clearly plays out. So I think, I think what you described is exactly that's exactly the kind of approach we're showing in the paper, or trying to, yeah and I found the paper.

C Derick Varn: 1:07:52

Well, I'm going to be honest, I'm going to leak the paper in the show notes, but I detailedly read the first 10 pages, because I got this paper yesterday, and then I am the other 40.

Dan Rohde: 1:08:05

Yeah, I don't blame you, I don't blame you, it's big.

C Derick Varn: 1:08:09

But I will be reading this whole paper because I am. I think that there are two areas. Weirdly, marxism's thinking on money is anemic. Right Mostly goes back to capital. There are historical reasons for that. In capital there's stuff that you know, stuff that even me as a fairly orthodox well as a formerly fairly orthodox Marxist, has had to admit just aren't historically completely accurate.

C Derick Varn: 1:08:38

Although they are accurate to the readings of history of economic literature that Marx is working with to stop. The degree Although a friend of mine pointed out that Marx misread William Petty is pretty badly. That's not here and there, but one of the one of the things that that I have had to deal with is Marxism and modern money is not really properly developed. It's it's, I mean, in Marxist circles sometimes you still have debates about whether or not everything is still secretly somehow actually on a gold or some other commodity money standard that we just don't understand.

C Derick Varn: 1:09:22

Right, which is like no, I don't really know what else to say about that.

C Derick Varn: 1:09:31

And and then the other. The other thing that Marx has been late to Marxism. Marx didn't deal with it that much at all, In fact when he wrote about it in a journalistic writings and came to outsource this to Ingalls is is law. Why? Why, you know there are, there are Marxist schools of legal thinking. I think they kind of develop in the 1950s and 60s, but in general the old adage that will last just, you know, the ruling committee of capital. So you know we're not really going to think much about that. Is, is, is leads it to be anemic. And the only time you really deal with Marx thinking about law that rigorously at all is in his responses to Ferdinand LaSalle, who is a lawyer and views law as a as a like class, neutral arbiter, and so there's this big debate between them on that and.

C Derick Varn: 1:10:44

But beyond that, you don't get a whole lot of, like, you know, Marxist art maybe don't, but yeah, I know a few, I know a few. You know, we tend to be pretty pretty some, sometimes somewhat limited to like three or four texts of which we proof text or everything. So that's kind of a problem in our thinking and it's one that I have, for my own purposes, tried to change. What I see is that, like, what I see is going on a lot and basically, similarly, I think all the views as currently exist tend to be too reductivist as to what law is and what it is doing and how it serves, and the worst case of this and Marxist legal thinking is just to just view it as part of the irrelevant superstructure you know, which is a disaster.

Dan Rohde: 1:11:45

So I think even even not even a great reading of Marx. One of red people put that view in. So All right, a few thoughts. As someone who's neither a Marxist nor MMT at least I don't see myself as I think I really agree. So Marx, you know, I see I've been told that Dan, just pick up capital again, volume three. You know he's actually compatible with the stuff if you dig in. And I just don't think he is. And I could be wrong, but I just don't think. So I don't see myself as an empty, but I do see myself as a credit theorist of money. I see the constitutional approach and MMT is to credit theories of money, so sort of allied but somewhat distinct, and I just think Marx's approach is not compatible with the credit theory of money.

Dan Rohde: 1:12:30

Marx's approach to money at least, is not compatible with a credit theory of money. And I've dug through capital Again, kind of like you read 10 pages in my paper and skim the rest. You know I've read volume one pretty well and you know, skim the rest. But I have a really hard time finding Marx to be compatible. I think you really have to stretch. And that's somewhat deliberate, right, he was trying to outdo the classical political economists at their own game. Right, take their assumptions, think of this as scientific and try to show how there are some own assumptions lead to a contradictory outcome, you know. So it's part of his game to play their game and outdo them. So it's not really that surprising that he would be in conflict with a credit theory of money, given the theory of money that they start with thinking. Ricardo here in particular, but also Smith. I also think Marx is inconsistent with legal realism, which I think it was very foundational to my view, and I think he just he comes from a certain civil law, a German civil law tradition, which is not very compatible with legal realism in general, and I don't think Marx himself is his compatible with that. Generally speaking, I do think Marx has a somewhat more nuanced view of law than a lot of Marxists do, and I also want to say and here's so those are the two initial things I think he's incompatible with those things, both of which I embrace credit theories of money and legal realism in a big way.

Dan Rohde: 1:13:54

That, having been said, marxist scholarship is hugely diverse, has its own whole traditions. Nico and I, when you're writing this paper, said a couple times we thought the whole paper could be written from within Marxism. It would just be same introduction, same conclusion, only the debate in the middle, instead of being legal, formless and you know, critical legal studies, new left, all these people. It would just be various versions of Marxism. You know, marx and Engels, classical Marxism, you know, throw Pashukonis in there, throw Gramsky in there, you know, do this whole office air with the new left.

Dan Rohde: 1:14:29

But it would make it within Marxist debate and you could probably, I think you could arrive at more or less our position from within the Marxist tradition, just depending on who you listen to. Because Marxist tradition is rich and massive and so obsessed with theory and plenty of attention to law within it as well. You know, a lot of these Marxist historians ended up becoming more or less legal historians, even though I think they never meant to be so. So I completely agree with you. And yet I think there's actually room within the Marxist tradition for exactly this type of thinking. I'm not really sure how, given how I read Marx, but I think it's definitely there.

C Derick Varn: 1:15:05

One thing I will will say is we have to refer to Marxist tradition because even when people are, the creative reading of Marx to make Marx say things you say is become a hermeneutical tradition that now has a 150 year old pedigree. So it's, it's, and to some degree I, when I approach Marx, tend to be a decline in reading school, but I also tend to be okay, like we can agree with 80% of what he says, or we can be Marxian, socialists or whatever and just also go like, but this is wrong, or or yeah, like this is limited, or this was true in 1850, but it is not true now, etc.

C Derick Varn: 1:15:57

So you know, I think that's kind of a grown up way to approach it and I do I have also pointed out that, like I love you know, I do have a weird love affair with the Marx political tradition, but but I have pointed it out to people that, like well, you know, liberal political traditions Don't have these kinds of problems because it's faithful to one Version of what they are, as we are.

Dan Rohde: 1:16:31

Oh, totally, totally and this, and you see this going back and Marxist you know till. Basically, marx is just. It's been endemic to the tradition right fiddling over words.

C Derick Varn: 1:16:44

I did want to point out, though you you said something that I have Intuited and when I do a lot of interactions with MMT neo-chartelism, credit, school of Money Uh, state school, state theory of money, which which I'm going to to say that I started seeing as different things, and a lot of people in those schools don't see them as different things I'm not sure all credit theories of money are actually modern monetary theory and I'm sure that all forms of chartelism are state theory.

C Derick Varn: 1:17:21

Money are either. No interesting. So it's um what? Because one of the things is, credit theory of money and debt theory of money Are both state theories of money and they sound like they're the same, but they're not exactly so. These are, these are distinctions. So it actually it's just kind of heartening to know that I'm not the only person even though you probably wouldn't divide it the same way I do who does see that there are subtle distinctions in these schools, and I actually think that's a good thing.

Dan Rohde: 1:17:59

Oh, me too. Me too. Like I don't say I'm not MMT as a critique of MMT at all, I think it's just you know, I came into this as a lawyer. You know I read Chris's work before I read anything by an MMT person. So, like when I happened on MMT as part of my, my Prepping for my oral exam for my doctorate, my supervisor, christa's on, she was like you know, damn, we should read some Randall Ray. So we put it on the, the syllabus, we read, and it was like I had already accepted that, for example, the government can't run out of money, all this stuff, you know. So I wasn't.

Dan Rohde: 1:18:35

I didn't read MMT and be like, oh you know, government doesn't get money first with taxes. Because I had learned about the legal architecture of money in the legal history of money before I even read MMT. So when I came at MMT and I did learn a lot from it, I feel like I had already gotten there elsewhere, through a different tradition, maybe with different emphasis. So I'm not even critiquing MMT. If I was an economist I'd probably be in that camp and I think even within MMT there are people who are more sort of legal approach to money, people who have a pretty big presence on Twitter and there's probably more state approach to people or state approach to money people, or maybe less on Twitter. So even within MMT there might be a debate around these points. So I'm not saying I'm not MMT is some sort of a critique or disavowal of it. It's just kind of not where I come from, it's not the tradition I came up in or I learned about this from, and so I quite like MMT. I read all these people. A bunch of them are coming to our conference in two days, very excited to hear them and meet some of them in person for the first time.

Dan Rohde: 1:19:33

So, yeah, I'm with you. For me it's just about. It's just an empirical description really, of where I'm coming from and what my interests are and my focus is. You know, I don't like to say that money is a creature of the state. I do like to say that money is a unit of account, starts through relationships with a stakeholder A stakeholder can be a state or something else that money is a legal institution. I think these are somewhat different statements, even if they're both credit theories and they're very similar in a lot of ways, and so I think it's again, I, think it's great to have diversity within these camps and we can be allied and Different, and that doesn't mean we're attacking each other in any way.

Dan Rohde: 1:20:10

You know what I mean. I've learned a ton from these MMT folks, particularly on Twitter. It's incredible. I'm deeply indebted. So I'm not saying I'm not that as any sort of a negative thing, it's more just Kind of just trying to describe where I'm coming from more than anything. I don't know if that resonates with you.

C Derick Varn: 1:20:28

It does. I mean I I actually started off as a strong critic of MMT post-Kansey and and these people don't consider themselves in tears anymore, actually for the most part, but from its like left, post-kansey and minceki development and then, kind of concurrently to that, there is a different development of MMT in in like Randall Ray, and.

C Derick Varn: 1:20:59

Going back to Rohan Mosler, which which pulled back to the German historical school, and Charter was um, which also has a relationship to Keynesianism, through, through Keynes, importing the work of a knap into England, although they didn't do much with it, to be frank. But oh, as a Marxist, my concerns tend to be much, I think, broader than theirs and more. You know, like I tend to, when I critique him, tears, it's often not be. I've often come from the standpoint of agreeing with them on their, on, you know, their statements about money and their statements about law and just going like, though. But we do have to look at class relations and power relations when we, when we propose policy, because otherwise you're at a disadvantage for these policies that you want and you'll get part of them, but they'll be used perniciously, etc, etc, etc. But in doing that, have actually been somewhat worn over too many of their arguments.

C Derick Varn: 1:22:04

It's one of these cases where I went in like totally hostile and, through through a series of debates over ten years, became like oh no, I think we have, we share like 90% of the world view, and so the 10% that I don't share, we really don't share. But it's not that I'm like oh, you know, mmt must be destroyed. It is the worst thing that, and you know, and politicized and politicized political theory which that seems like a redundant statement, but I think you know what I mean versus like academic political theory, there tends to be like Unnecessary aggression over 10% and not focusing on the 90% that you actually share and could have common cause on.

Dan Rohde: 1:22:56

Oh, especially on Twitter. Twitter just seems to be like the place for Getting very mad about inane.

C Derick Varn: 1:23:04

Yeah, I'm in for words, Yep. Well, I know you have to go. I'm gonna link Five of your pieces in the show. Wow, people can have access to them because I have. I've Explicitly mentioned the piece you did with money on the left, but I've also kind of crypto, mentioned two pieces You've done with with just money and also that laws architecture, and then you have a kind of joint piece called with Christine Dossine, lev Menand, rowan Gray, hillary Jalen and Roe Carillo Carillo.

C Derick Varn: 1:23:45

Let me I doubt it's the Spanish On the reaction to the SBB bank. That I think is pretty helpful in relevance is conversation. So I like all those in the show notes anything you, you know. One of the weirdest things about being a socialist podcast is having to plug at the end but does anything you want to pull out.

Dan Rohde: 1:24:05

Sure, sure. I mean I think this podcast will probably go up after our conference, but we're having a conference called money as a democratic medium In Cambridge and remotely, june 15th to 17th. This will probably go up after it's done, but whoever listens in is interested should definitely check out the videos. Everybody we've discussed here and many more are gonna be there, so it'll be great. I think your listeners will be interested in it.

C Derick Varn: 1:24:29

Yeah, this will definitely go up after that, but I can find once that is up, I can find the videos or people can glue up themselves.

Dan Rohde: 1:24:36

But yeah, and I appreciate you plugging so many of my pieces, thanks you know.

C Derick Varn: 1:24:39

I think they are important to read. Thank you so much. I hope you have a good rest of your day. Thanks you too.