Odd Lots How A New Type Of Money Helped Cause The Great Financial Crisis
Sep 7, 2020
Jacob Goldstein, co-host of Planet Money and author of "Money: The True Story Of A Made-Up Thing," dives deep into the intriguing evolution of money. He explains how money market mutual funds emerged as a new form of money and their unexpected role in triggering the Great Financial Crisis. The discussion also covers the fragile balance between perceived safety and actual risk in finance, unraveling the complexities of shadow banking. Goldstein's insights illuminate the chaotic relationship society has with money and its implications for future economic stability.
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Reserve Fund Origins
- Bruce Bent, co-founder of the Reserve Fund, aimed to bypass banking regulations.
- He created money market mutual funds, offering interest on demand checking accounts.
MMF Impact
- Money market mutual funds' success drove financial system changes.
- They became major commercial paper buyers, impacting banks' lending.
Defining Moneyness
- "Moneyness" involves accepting assets with varied risks as equal.
- Pegging diverse assets to the dollar creates a sense of uniform value.
