"Hey, Jimmy, what do you have there? Oh, goodness, I haven't seen that shoebox since I was teenager. Were you in the back of my closet? Bring it here. Open it up and let's take a look. It's my box of old paper dollar bills. I thought they might be worth something someday. Boy! Was I wrong!
"When I was kid, back in 2014, people used to trade this paper for housing, food, gas, and cell phone service. Yes, believe it or not -- paper. I know, it's bizarre and still makes me chuckle. And they had these big machines called ATMs back then that were bolted to the sides of buildings we used to call 'banks.' These ATMs would spit out these green paper slips with pictures of dead presidents on them. And then, for whatever reason, other people would trade these slips of mostly green paper for things they wanted. Surprisingly, it worked. Sure, it seems archaic now, but people didn't think so at the time.
"What? Oh, banks? Yeah, they would store and track your money like your Samsung S27 Bitcoin wallet does now, only they had entire buildings staffed with real people. In fact, that social center down on Main Street where they have that little room with the ice cream machine and the big steel doors -- that was a bank. If memory serves, Bitcoin existed back then, but I guess it just took some time to adjust to the new way of storing and sending value.
"What happened to paper money? Oh, that's a long story. It started a long, long time ago in the early 1970s when President Nixon decided that paper money was accepted well enough that it didn't need to be backed by anything, so he just stopped allowing convertibility to gold. Looking back with 20/20 hindsight, it was a really stupid thing to do, but it worked for a while. Nobody thought much of it at the time.
"What happened next? Oh, not much at first, but in 2008 the first problems started. It wasn't so much because of Nixon's bone-headed decision, but because those 'banks' I was telling you about were allowed to loan out more money than they held in deposits. They created more money by making loans, and they could create as much as they wanted as long as they could find people willing to borrow. They started loaning to everybody, and I mean everybody. 'No job, no problem, here's your loan.' Sure, looking back, it seems insane, but I don't think people in that era really understood money.
"Then, the banks had this brilliant idea to insure against loan defaults and sell the loans as investment grade. The banks used some clever, but ultimately self-destructive methods to hide the bad loans and pretend they were investment worthy. Well, as you'll soon learn in your history class, and this should have been obvious at time, those without jobs couldn't pay their loans, so they didn't. There were so many of these bad loans that the insurance companies couldn't make good, so the whole system was at risk.
"Well, as you can imagine, this was a pretty scary time for those who benefitted from creating money out of nothing. What were they to do? What could they do? They figured they could make more money out of nothing and use it to try to save the system, so that's what they did. They just started creating money like crazy to buy treasury bonds. This helped the political class back then because they could spend this new money to create programs and buy votes. There were dozens of different programs to get the money out into the economy. It didn't matter how crazy the idea. We were even sending money to other countries to buy their cooperation.
"It worked for a while. They just kept pumping more 'free' money into the system, and people didn't seem to care. If you were poor, you got free stuff. Why complain? No job? Free money. If you were rich, you got even richer, since borrowing costs were super low, so you could borrow cheap and invest in the stock market. If you were a CEO, you couldn't lose because you could just borrow cheap, buy back your own stock and get rich. But, if you were a saver back then, you got crushed.
"Jimmy, would you hand Grandpa that drink of water? Thanks.
"It wasn't until 2017 that things turned bad for almost everyone. There weren't enough people working to keep the system going. The defaults started again, and surprisingly they hadn't learned anything the first time. They ramped up the printing presses again to buy even more treasury bonds. Only now, there was so much interest owed, it was like running on an accelerating treadmill. We could loan ourselves more money out of thin air and be the only buyers with an infinite imaginary bank account, or we could offer more interest to get other interested buyers, but only at our own peril because increasing interest rates on our massive debt was crippling. We were trapped.
"Even the Wall Street guys could see the writing on the wall and started looking for safe havens. What's Wall Street you ask? Ah, funny story. There was this guy from New York named Ben Lawsky. He started Wall Street's woes, but that's a story for another time. I'll take you to the Wall Street museum sometime.
"Anyway, they were desperate to get dollars into the economy, so dollars were easy to come by. If you had something that had real value, you could get lots and lots of dollars, but saving dollars was futile. Savers were again getting crushed. People wanted anything that couldn't be conjured out of thin air. It wasn't only bitcoin that people wanted. They also wanted food, gold, real estate, and farm land. Bitcoin was the easiest to store and transmit, so it worked best when trading for food and other daily needs.
"Once the ball was rolling, it picked up speed. Some say it made the Weimar Republic look tame by comparison. Since nobody wanted the green slips of paper, but wanted bitcoin instead, the transition happened very quickly. Thankfully, your grandma and I did fine because we already had some bitcoin before the rush started. I kept that shoebox full of dollars, partly as a reminder, and partly because I really thought they might be worth something someday.
"Well, off to bed."
The events depicted in this story are obviously fictitious. There is no way paper money can last 'til 2017. Similarities to any person, living or dead, is merely coincidental - except for Ben Lawsky. He is real and could not be reached for comment because he is too busy shooting New York in the foot.