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The following is a conversation with Safety Namus, one of the central and most impactful economists, philosophers, and educators in the world of Bitcoin.
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He s an Austrian economist, an anarchist, and the author of The Bitcoin Standard and the new book, The Fiat Standard.
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Safetine does not mince words in his criticism of economists and humans in general with whom he disagrees.
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For example, Paul Krugman, who is a Neolakensian economist and a previous guest of this podcast.
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Safetine s opinions are strong and often controversial.
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I do push back in this conversation, playing devil s advocate or trying to steal man each side.
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But as always, I do so in the service of exploring the rich space of ideas that Safetine has about human nature and human civilization.
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I trust the intelligence of you, the listener, to come to your own conclusions.
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That is the burden of being a free-thinking human.
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It is on each of us individually to dive into this chaos of ideas, and from that chaos, discover long-lasting universal wisdom to live by.
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And now, a quick few second mention of each sponsor.
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Check them out in the description.
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It s the best way to support this podcast.
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We got GiveWell for charity, Scale for machine learning, Uncruise for adventure, Buy, Optimizers for health, and Athletic Greens for performance.
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Choose wisely, my friends.
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And now onto the full latteries.
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As always, no ads in the middle.
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I try to make these interesting, but if you skip them, please still check out our sponsors.
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I enjoy their stuff.
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Maybe you will too.
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Again, that s givewell.org.
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This episode is also brought to you by Scale, the machine learning assisted data labeling platform.
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I would like to go to those places now.
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I ve never been to Alaska.
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I ve been to Hawaii a long, long time ago.
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I feel like I m afraid to go to Hawaii because if I go there, I may just stay there forever.
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I feel the same way about Alaska, actually.
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I m not afraid of the cold.
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I don t love the cold, but I m not afraid of it.
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And there s something about the isolation, the honesty and the beauty of nature that is Alaska is just...
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It humbles the mind.
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That s uncruise.com slash pages slash Lex.
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The next sponsor is BiOptimizers, B-I-Optimizers.
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They have a new magnesium supplement.
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When I fast or I m doing keto or carnivore, sodium, potassium, and magnesium are essential.
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Magnesium, I think, is a tricky one to get right.
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Of that, of the sodium, potassium, magnesium, magnesium is the hardest.
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That s magbreakthrough.com slash lex.
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This show is also brought to you by Athletic Greens and its newly renamed AG1 Drink, which is an all-in-one daily drink to support better health and peak performance.
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It replaced the multivitamin for me and went far beyond that with 75 vitamins and minerals.
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It s the first thing I drink every day.
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I drink it twice a day now.
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It s a source of joy.
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It s a source of contentment because I know whatever the crazy diets I do, whatever the crazy work hours I put in, the stress, the lack of sleep, the madness, the beauty, whatever I do in my life, I can always count on having a nutritional basis for my all too short existence on this earth if I take a flood of greens every day.
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Also, perhaps as important as it s just delicious.
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It s refreshing, it s delicious, I love it.
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When you sign up on athleticgreens.com slash lex, that s athleticgreens.com slash lex.
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This is the Lex Friedman Podcast, and here is my conversation with safety in a moose.
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you
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Let s start with a big question.
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What is money?
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And what is the role of money in the history of human civilization?
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Money is a medium of exchange.
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The thing that defines money is that it is a good that you don t buy for its own sake, because you want to consume it itself, or because you want to employ it in the production of other goods, which is what capital goods are.
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So we have consumption goods, we have capital goods.
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Money is distinct from those two because it is a good that is acquired purely to be exchanged later on for other goods.
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It s not something that you acquire for its own sake.
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You acquire it so that you can then later on exchange it.
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And that s a market good.
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That s a market good like all other goods.
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You acquire food because you eat it.
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You acquire a car to move you around.
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You acquire money so that you can exchange it for other goods.
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And that s something that many people have a hard time grasping, the concept of money as a market good.
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But it is a market good, just like all others.
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And the importance of it is that it allows us to trade, it allows us to develop a business.
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to develop the division of labor, which would not be possible at any kind of sophisticated level without money.
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So if we live in a small society of 10 people, then think about all the things that we can make, all the things that we can produce.
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If we re only 10 people isolated from the world, there s only very few things that we can make.
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And therefore, we can exchange those things directly with one another.
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But as if we get in contact with other societies that have more people, then the opportunities for specialization increase.
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If there s 10 people, the only thing that you can make is the very basics you need for your survival.
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But if you re part of an economy of 10 million people, there s much more room for specialization.
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You can make a car, you can make a house that s very sophisticated.
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And that relies on the division of labor.
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That relies on you specializing in doing one tiny little thing, which is not what you consume.
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And you trade that thing for all the things that you consume.
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So as the economy becomes more sophisticated and involves more people, and currently we re all part of an economy of almost 8 billion people, each one of us produces one tiny little thing, and they exchange that thing
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for all the things that they want.
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And so, because we specialize, we become more productive in doing the thing that we re good at.
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So, you know, there s people out there who are engineers who are designing windshields in cars.
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It s a very specialized thing.
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They sell windshield design to Mercedes-Benz.
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And then from that, that windshield design is added on to millions of cars around the world.
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And from that, they re able to get enough money to meet all of their needs.
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So the division of labor is enhanced enormously with money because without money,
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It s very difficult to be able to exchange a large number of goods.
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It s very difficult to have a sophisticated economy with a large degree of specialization because it s very difficult to find people who want the thing that you have and have the thing that you want.
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We call this the coincidence of wants.
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And that s really the problem that money solves.
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So you make apples and I make oranges.
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I d like to have some of your apples, but you don t want my oranges.
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And that s, we have a problem of coincidence of one.
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So what do I do?
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You want bananas.
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I need to find somebody who has bananas, give them my oranges, take their bananas, give you their bananas, and then I take the apples.
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In that case, bananas are a medium of exchange.
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So it s natural that a medium of exchange will evolve and will emerge in an economy as an economy becomes more sophisticated.
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As we move beyond 10 people and 10 goods, it s inevitable that we re going to come to a situation where we have the problem of coincidence of wants.
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And the way to solve that is to use a medium of exchange.
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And it can be anything.
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It can be a banana.
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It can be food stuff.
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It can be any kind of good.
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As long as I acquire the good with the purpose of it passing it on to you, not for the purpose of me consuming it or using it,
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then that s a medium of exchange.
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So when we look at the entirety of human society of millions of billions of people, you think of them just a bunch of individuals running around.
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I love the term coincidence of ones.
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So each one of them, it s like a stochastic system.
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They have desires.
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It s like a random collection of desires, somehow rooted in our evolutionary history, but mostly random in terms of preference of banana or apple, that kind of thing.
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And then they also have the capacity for competence and excellence in particular kind of labor.
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So like specialization, they re able to be like incredible at a particular set of tasks.
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So there s a bunch of ants running around with consciousness and intelligence and
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they have desires and they have capabilities.
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And then there s a coincidence of both the wants they have and the capabilities they have, and you wanted to create a system that kind of exchanges those things.
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So when you imagine what is a good, what is markets?
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When you imagine a market as a hierarchical system, what do you imagine?
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What is a market?
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A market is just the name for the naturally emergent phenomena of people voluntarily exchanging things.
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At any scale.
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At any scale, yeah.
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It could be a market of two people on an island on their own.
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It could be eight billion people across the planet.
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Naturally emerging.
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Yes, this is the thing I think that is very hard for many people who don t have a good understanding of economics to grasp that capitalism and markets are not something that you need a central planner or a government officer to make happen.
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Capitalism is just what happens when people are left to their own devices.
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It s just our cognitive capacity allows us to develop tools that we can use for production.
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And that s what we do.
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That s what humans have been doing since they started, you know, making spears to hunt.
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That s the first capital good, probably.
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So we re constantly accumulating capital.
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We re constantly trading with one another.
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We find an opportunity.
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You know, you ve got a lot of oranges.
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I ve got a lot of apples.
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Then I ll take some of yours.
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You ll take some of mine.
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We re both better off.
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This is just a naturally emergent thing and money is what makes it enormously powerful.
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Money is what allows it to scale really.
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Money is what allows it to go beyond small societies into just something that is global.
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Because with money, again, as I was saying earlier, you know, all you need to do is specialize in doing one thing, the thing that you do best, and then you exchange that for money and you don t have to worry about whether the other people involved in this want what you have and have what you want.
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You just sell it for money to whoever wants it.
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and you buy whatever you want from whoever has it.
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And that s an enormous reduction in the mental burden of how a market economy functions.
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So the first thing that I would say about money is that it allows for the division of labor and it allows for the market system to grow.
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And the second thing is that money is a mechanism for storing value into the future.
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So again, as humans, we develop the capacity to think for the future.
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We make a spear so that we can hunt, and then we see that it works, and then we take it out of the animal that we hunted with, and we keep it for the next day s hunt.
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And then we start making a better spear, and we make a better fishing rod, and then we make a fishing net, and then we make a fishing boat.
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And that s our ability to think of the future.
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And as we start building durable goods, we start thinking more and more of the future, we start becoming more and more future oriented.
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And that s really the process of civilization, the process of denying our needs now in order to think for the future.
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So instead of spending all of our day on the beach, enjoying ourselves,
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we take time off from leisure on the beach and spend some time making a spear or making a fishing rod so that our productivity in hunting or fishing tomorrow is gonna be higher.
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And so that ability to think for the future is enhanced by our ability to provide for the future.
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And we do that with durable goods.
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But then money ends up being the best mechanism for providing for the future because the future is uncertain.
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So you can save your apples and oranges, you can save the spears, you can save the animal that you hunted.
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But these things, first they rot, they re not very good at holding on to their value over time, but even if they were, even if you have objects that are durable, the problem with them is that you don t know if you need them tomorrow or next month or next year.
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You re not sure if you re going to be needing them.
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and you might end up not needing them and you might end up not finding anybody who needs them or finding somebody who needs them but doesn t value them much and won t give you much in exchange.
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Money allows you the optionality of saving the most liquid good, the most saleable good.
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So it s something that you can sell tomorrow with the least uncertainty.
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It has the most liquidity, the most ability to be sold without a loss in its value.
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So money is our most advanced technology and our best technology for moving value into the future.
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And so I think history really, I argue.
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argue this in all my books, is that really history we see, we can think of it as a process of our money gets harder and so our money gets better at holding on to its value for the future.
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And by harder I mean harder to produce.
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We find things that are hard to produce that are
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better at holding on to their value.
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So they hold on to their value better for the future.
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And that allows us to plot and plan for the future, that makes the future less uncertain.
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And that makes us more future oriented.
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In other words, it lowers our time preference.
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And the harder the money is, the better it is at allowing us to think of the future.
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So people should know that you ve written the book Bitcoin Standard from 2018, I believe.
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And then a new book called Fiat Standard.
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The Bitcoin Standard is considered kind of the Bible in the cryptocurrency space and the Bitcoin space of just a very rigorous systematic explanation of why Bitcoin, what is it,
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Why should it be, why is it good?
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So you re describing in that book and in the new book different implementations of the technology of money.
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In the new book you talk about fiat money, which is another way to do money.
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So obviously there s a lot of different ways to do money.
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And maybe you haven t discovered the best way to do money yet.
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Our conversation today is how to do money better.
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Maybe we ll go back to bananas eventually, right?
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Very good reasons why we won t.
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Well, we can disagree.
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We can agree to disagree on this.
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I m open-minded to the bananas.
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One of the biggest source of joy to me when I first came to this country is eating bananas.
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And so maybe money,
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happiness, perishable happiness will eventually become the best medium of exchange.
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I don t know.
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Open-minded.
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Anyway, so you mentioned hard money and soft money.
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So there s different ways to do money.
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What is hard money?
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What is soft money?
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In the Bitcoin standard, I present the argument that money is always whatever is the hardest thing to make.
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Historically, I think we see many examples of that.
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So for instance, in prison, people use cigarettes as money because nobody can make cigarettes in prison.
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In societies, we have the example of Yap Island, for instance.
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It s an island that doesn t have any limestone, but there s a nearby island that has a lot of limestone.
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and it s very expensive obviously with primitive technology to move limestone from Palau to Yap.
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So on Yap, limestones were money.
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Seashells, rare seashells that are not easy to find end up serving as money in places where they re rare.
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Glass beads were money in West Africa where there was no glass making technology because they were imported from abroad and they were very hard to make.
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And I think there s a conscious effort of some people might recognize the hardness and the scarcity and choose this as money.
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But I think what s more important is just a natural evolutionary process whereby people choose all kinds of random things as money, bananas maybe even.
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But then the people who end up making these bad choices don t end up with any wealth left.
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Whereas the people who store their wealth in the things that are hard to make,
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end up acquiring, end up maintaining their wealth and maybe even increasing it over time.
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And of course, this culminated in the 19th century, in the end of the 19th century, by basically the entire planet being on a gold standard.
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And that- What is a gold standard?
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The gold standard is basically when money is gold, or at least government currencies backed by gold.
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But the reason gold became money and not copper, not nickel, not bananas, is that gold is the hardest metal.
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in the world and it is the hardest metal to increase the supply of.
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And the reason for that is based in chemistry.
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So gold is indestructible.
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You can t destroy gold in any meaningful sense.
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It s been accumulating stockpiles for thousands of years.
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The gold that was worn by Nefertiti back in ancient Egypt,
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is today probably in somebody s necklace or in somebody s gold coin.
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It s still there.
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So for thousands of years, humans have been digging for gold.
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They dig it out of the ground, they refine it, and then they put it in a jewelry or a coin, and then it just stays there.
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It gets melted down into new other forms, you know, the jewelry gets turned into coins or coins get turned into bars.
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But it s just stockpiles that are accumulating.
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On the other hand, every year we get better at our technology of looking for gold.
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There s more people all over the world, the population increases, the technology improves.
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So we keep finding more and more gold, and we keep making the stockpiles bigger.
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However, because we re constantly adding to a stockpile that is not being devalued, sorry, that is not being consumed, because there s no way of consuming gold,
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eat it, you can t burn it, it doesn t rust.
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Because of that, we re constantly adding to a constantly growing stockpile.
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So if you look at the numbers.
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you see over the last 100 years, we ve got pretty reliable data on gold production worldwide.
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We see that pretty much gold stockpiles increase at around one and a half to 2% per year, every year.
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So yes, we re making more every year, but we re making more so we re adding to the stockpile, the stockpile grows more.
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So every year we re adding only around one and a half to 2%.
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Compare that to the second hardest metal historically was silver, and that increased historically at around maybe 5% per year or so.
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Now it probably increases at something like closer to 30% because it s now getting used extensively in industrial uses.
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So when you use it in industry,
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When you put silver in a laptop or in a camera or in a machine, effectively, you are consuming the stockpile because it s not used as money.
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It s taken out of the monetary stockpile.
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So over the last 150 years, since 1870 in particular, and I discussed this in detail in the Bitcoin Standard,
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What happened in 1870 was Germany won the Franco-Prussian War and Germany was on a silver standard but the value of silver was declining so Germany did something very smart which is they took their indemnity from France in gold and used that big chunk of gold to switch to going on a gold standard.
1
SPEAKER_01
And since then, silver has been collapsing in value next to gold.
1
SPEAKER_01
So back then, the price of an ounce of gold was around 15 ounces of silver.
1
SPEAKER_01
Today, it s closer to 100.
1
SPEAKER_01
It s just been declining for the last 150 years.
1
SPEAKER_01
And so because of that, because of the fact that it s lost its monetary role as people shifted toward gold,
1
SPEAKER_01
The value of silver went down, and so it became economical to use it in more and more industrial applications.
1
SPEAKER_01
So the stockpile declines, and then as a result, that weakens its monetary properties more and more and more.
1
SPEAKER_01
So that s why by the end of the 19th century, I mean, at the beginning of the 19th century, gold and silver were money by the end.
1
SPEAKER_01
It was basically only gold and the countries that were still on a silver standard, China and India in particular, suffered enormously from it because their money was devaluing very quickly next to gold and so Europeans who would come to China or India were able to buy things at practically a big discount.
1
SPEAKER_00
So I hope it s okay if I ask very simple, very basic questions.
1
SPEAKER_00
There s few people in this world that are as good as you are at answering very basic, almost ridiculously basic questions, because I think exploring questions like what is money is a really great way to think from first principles, to really think deeply about this world.
1
SPEAKER_00
So I really appreciate you doing that.
1
SPEAKER_00
When you say standard, what does it mean?
1
SPEAKER_00
When you say silver standard, gold standard, again, with the basic question.
1
SPEAKER_01
The term really I think was based out of gold.
1
SPEAKER_01
The first time this came out was the gold standard because so I said gold was money at the end of the 19th century but it wasn t just that everybody was using gold coins and trading with gold coins because that s got a problem of divisibility.
1
SPEAKER_01
So a lot of things are worth less than one gold coin.
1
SPEAKER_01
So how do you buy that thing?
1
SPEAKER_01
The answer was that you created the monetary instruments that were backed by gold and so currencies, national currencies under the gold standard were specific units of gold and that s how a gold standard functioned.
1
SPEAKER_01
Money was gold but you had pieces of paper.
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SPEAKER_01
that were redeemable in gold.
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SPEAKER_01
So you could go to the central bank, you could give them the piece of paper, the $100 bill or the $10 bill, and they ll give you gold in exchange.
1
SPEAKER_01
They give you a specific quantity of gold in exchange.
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SPEAKER_01
Effectively, the paper was just a receipt for gold.
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SPEAKER_01
So the paper exactly represented the amount of gold.
1
SPEAKER_01
Exactly, that was the plan.
1
SPEAKER_01
That was what it s supposed to do, but arguably we never had a pure gold standard because the nature of gold means that the people who are in charge of the gold
1
SPEAKER_01
they have an enormous amount of power because the gold is concentrated with them.
1
SPEAKER_01
And as long as not everybody shows up at the same time asking for their gold, then you can make more receipts than you have gold.
1
SPEAKER_00
And this has been- So there s always shady stuff going on, but at least that s the stated goal, is the receipts should exactly represent the amount of gold there.
1
SPEAKER_00
And also when you say standard, it means that governments
1
SPEAKER_00
sort of publicly stated that this is the approved, the main way of making transactions that are monetary.
1
SPEAKER_00
So this is the money, this is the official money that you should be using if you live in this country.
1
SPEAKER_01
Yes, although I would say it s more like the other way around.
1
SPEAKER_01
It s not that the governments established gold as money, it s more like the, it s more like gold gave the governments the credibility for their currencies.
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SPEAKER_01
So governments were not,
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SPEAKER_01
The ones that made gold money.
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SPEAKER_01
Gold has been money before states were invented.
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SPEAKER_01
States, if you have a government and you d like to have some legitimacy and you d like to be able to deal with other governments on an equal footing, you have to go by the gold standard.
1
SPEAKER_01
You have to have a currency that was redeemable in gold.
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SPEAKER_01
so that you could trade with the rest of the world, so that people could, in your country, use that currency.
1
SPEAKER_01
So it s not that governments were choosing gold, it s more like they were having to adapt their own currencies to gold in order to give their currencies credibility.
1
SPEAKER_00
So there s a dance there though, because if they had to, then why did they switch away from it after?
1
SPEAKER_00
So there is a dance where the governments, you know, the people pressure.
1
SPEAKER_00
So first of all, the basic characteristics of the hard money pressures the governments and the people in terms of what should be used.
1
SPEAKER_00
Then the people, based on their community, the network effects, the way they, the narratives they tell each other, all that kind of stuff, they pressure the governments to take on a particular money.
1
SPEAKER_00
And then the governments,
1
SPEAKER_00
They like power, they like control, all those kinds of things.
1
SPEAKER_00
They pressure the people and tell different kinds of narratives.
1
SPEAKER_00
So there s a dance going on in this evolution of what technology to use for a monetary system.
1
SPEAKER_00
The reason I don t know if governments had to, because they clearly didn t have to because they eventually moved away from it.
1
SPEAKER_00
But there was pressure probably.
1
SPEAKER_01
Yeah, but I mean, even after they moved away from it, you know, central banks until today, they still hold a lot of gold reserves.
1
SPEAKER_01
In fact, if you look at 1914, when the world really went off the gold standard, the amount of gold reserves held by central banks was a tiny fraction of what it was.
1
SPEAKER_01
As time went on, central banks accumulated more and more gold.
1
SPEAKER_01
What ended up happening is they prevented their citizens from using the gold, but they continued to use it.
1
SPEAKER_01
So gold continued to be money up until 1971, because,
1
SPEAKER_01
Effectively, the world was on a dollar standard and the dollars were backed by gold.
1
SPEAKER_01
But then after 1971, even then, you know, central banks continue to accumulate gold because why would you as a central bank want to accumulate pieces of paper effectively or credit liabilities of another central bank that can produce them infinitely?
1
SPEAKER_01
And it s a lesson that s becoming more and more obvious to governments today, you know, as we see U.S.
1
SPEAKER_01
sanctions taking, say, Russian reserves or Afghanistan reserves.
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SPEAKER_01
And this is why, you know, we see China and Russia have accumulated a lot of gold over the last 10, 20 years.
1
SPEAKER_00
So just to return to the question of definitions, so what is hard money versus soft money?
1
SPEAKER_00
Yes.
1
SPEAKER_01
So hard, I mean, it s a relative thing, but the hardness refers to the difficulty of producing more units of the money supply.
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SPEAKER_01
And easy money would be a money that is relatively easy to make.
1
SPEAKER_01
So you can increase the supply by 10, 20, 30, 40, 50% or something like that.
1
SPEAKER_01
So pretty much all commodities, all market commodities, other than gold and silver, they re easy money and they re not suitable as a monetary medium because they re being consumed.
1
SPEAKER_01
So if you look at, and in the Bitcoin standard, I mentioned this metric called the stock to flow ratio, which is the ratio of the annual production, the flow,
1
SPEAKER_01
to the stockpile, the existing stockpile.
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SPEAKER_01
If you look at all the other metals, they re easy money because they re being consumed.
1
SPEAKER_01
So think about how much stockpiles of copper there are in the world today.
1
SPEAKER_01
So copper companies obviously have some stockpiles of copper.
1
SPEAKER_01
Major copper consumers will have stockpiles of copper.
1
SPEAKER_01
But the vast majority of copper is essentially on a conveyor belt of production.
1
SPEAKER_01
from the mine straight to the consumer good that it s being used for.
1
SPEAKER_01
So the existing stockpiles are roughly in the range of one year s production.
1
SPEAKER_01
If you take all of the companies, I don t have exact statistics, it s very difficult to get these, but it s roughly in the same range.
1
SPEAKER_01
Like if copper production were to stop completely today,
1
SPEAKER_01
We ll have about a year s production stored in various places.
1
SPEAKER_01
So that makes copper terrible money because if you started using copper as money, and this is why, you know, a lot of people say, well, money is a collective illusion.
1
SPEAKER_01
Money is a social construct.
1
SPEAKER_01
If we all agree that something is money then something is money.
1
SPEAKER_01
I think this is completely clueless and it s usually Marxists who believe this so obviously no understanding of economics.
1
SPEAKER_01
It s completely clueless because even if everybody in society decided we wanted to make copper as money, even if we all decided to collectively
1
SPEAKER_01
take part in this hallucination or illusion, it would not make copper money, it would just make everybody who decides to take part in this hallucination poor, that s it.
1
SPEAKER_01
It would make copper miners rich, it would make all of the people who chose copper as money poor, and copper would not be money.
1
SPEAKER_01
It can t work, because what happens is, because of the fact that the stockpiles are so small, if you buy, even if you get the 1,000 richest people in the world, all of the world s billionaires,
1
SPEAKER_01
and they get together and they all dump all of the money that they have, all the stocks, all the bonds, all the gold, all of the Bitcoin, everything that they own, they dump it and they buy copper with it.
1
SPEAKER_01
What s gonna happen?
1
SPEAKER_01
Price of copper is gonna go up a lot, but what s gonna stop copper miners from flooding the market with even more copper than what the billionaires bought?
1
SPEAKER_01
Nothing.
1
SPEAKER_01
They re gonna dump all of that extra copper production.
1
SPEAKER_01
If the price of copper is gonna go up, so you know, there will be a lot more copper mining than all the other metals.
1
SPEAKER_01
A lot of, you know, nickel companies and gold miners are gonna switch to focusing on copper.
1
SPEAKER_01
and then we re gonna dump an enormous amount of copper on the market.
1
SPEAKER_01
The value of copper is gonna crash and the people who you chose copper as money are just gonna end up with large warehouses of very cheap rusting metal.
1
SPEAKER_00
So that s a brilliant description and that kind of pushes towards gold where the stock to flow ratio I guess you would say is 1.5 to 2% like you mentioned earlier.
1
SPEAKER_01
That would be like the inverse of the stock-to-flow.
1
SPEAKER_01
That s the supply growth rate.
1
SPEAKER_01
So the stock-to-flow is the inverse.
1
SPEAKER_01
It s around 60.
1
SPEAKER_01
60, got it.
1
SPEAKER_00
But let me push back on, as somebody who likes human psychology, let me push back on the collective hallucination and the illusion.
1
SPEAKER_00
So that s for copper.
1
SPEAKER_00
But what about paper money?
1
SPEAKER_00
that s not, you can t smoke it, you can t eat it, it s supposed to represent, it s supposed to just be the medium of exchange.
1
SPEAKER_00
In that sense, what role does collective hallucination play in the effectiveness of money?
1
SPEAKER_00
Exactly zero.
1
SPEAKER_01
Because all of the paper money, first of all, there s never been an instance, and again,
1
SPEAKER_01
This flies in the face of a lot of what a lot of people like to think about money.
1
SPEAKER_01
There s never been an instance where a government came out and said, all right, we re printing out these pieces of paper, use them as money.
1
SPEAKER_01
This one is worth 10 apples or use it for buying things.
1
SPEAKER_01
And here s the piece of paper.
1
SPEAKER_01
This has never happened.
1
SPEAKER_01
They ve always taken,
2
SPEAKER_01
Fiat money, paper money, all of these things were always born out of fraud.
2
SPEAKER_01
Initially, it was a receipt for gold and then they told you, well, you don t need the gold anyway and you have to use this and then if you don t use it, we throw you in jail.
2
SPEAKER_01
And then, so first of all, it doesn t, you can t enforce this thing, so it s never really just happened, and it s never been hallucinated into existence.
2
SPEAKER_01
People can hallucinate this kind of nonsense in writing textbooks and books and in academia, but in the real world, people don t hallucinate money.
2
SPEAKER_01
People are very careful about what they put their money in.
2
SPEAKER_00
For people listening, we re gonna have fun in this conversation, because you re like, you already said Marxist,
2
SPEAKER_00
fraud, hallucination, just because we use these words doesn t mean they re true, but they re fun to talk about.
2
SPEAKER_00
So you have a strong certainty about the way you talk, which I think is fun.
2
SPEAKER_00
But allow me in my dumb self to push back, to play devil s advocate, and I ll actually ask you sometimes to play devil s advocate if possible, because you re smarter than me on all this stuff, so we want the smartest devil s advocate possible.
2
SPEAKER_00
And I m certainly not that.
2
SPEAKER_00
But nevertheless, we are currently on a fiat standard.
2
SPEAKER_00
So money does have value, paper money.
2
SPEAKER_00
And the reason it has value is because we believe it has value.
2
SPEAKER_00
To what degree, if we put the hallucination word aside, the belief that something is worth value is actually value and is the thing that helps money work.
2
SPEAKER_00
Because you re saying it s fraud and the belief that something is worth value
2
SPEAKER_00
is almost valueless.
2
SPEAKER_00
But how much value, can we quantify the value of the belief, the collective belief?
2
SPEAKER_01
I should say, like, all economics is subjective.
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SPEAKER_01
I consider myself an Austrian school economist, and the starting point of all Austrian economics is that all value is subjective.
2
SPEAKER_01
So, obviously, you know, value only exists because humans choose to make the valuation.
2
SPEAKER_01
However, the economic reality of the way that money works means that it s just a technology like all others.
2
SPEAKER_01
And so, for me, when people say, well, if we hallucinate that this thing can be money, then it ll be money.
2
SPEAKER_01
If we can hallucinate bananas to be money, then it ll be money.
2
SPEAKER_01
For me, it s like saying, well, if we hallucinate that bananas can be spaceships, they ll be spaceships.
2
SPEAKER_01
I mean, you can call them spaceships if you want, but a banana is not going to get you to the moon.
2
SPEAKER_00
But nevertheless, that s true.
2
SPEAKER_00
So you re drawing a big distinction between physical reality and the space of belief.
2
SPEAKER_00
But it seems like so much power of human civilization, so much destruction, so much creativity, creation happens in our minds.
2
SPEAKER_01
Absolutely, everything does happen in the mind.
2
SPEAKER_00
You re not gonna get to the moon, but you might still have a significant impact on human civilization if a lot of people believe a thing.
2
SPEAKER_01
True, but economic reality exists in a way in which your beliefs are rewarded when they match up with economic reality.
2
SPEAKER_00
Physical reality.
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SPEAKER_01
And they re punished when they don t.
2
SPEAKER_01
So if you ride a banana, jump off a cliff thinking you re gonna get to the moon,
2
SPEAKER_01
And that solves the problem of people thinking that bananas are spaceships by killing people who think that bananas are spaceships.
2
SPEAKER_01
And I think to go back to your question in terms of paper monies, so yes, even though ignoring the original sin of the creation of fiat money,
2
SPEAKER_01
and ignoring everything that happened before 1971.
2
SPEAKER_01
All right, well, here we are.
2
SPEAKER_01
People are using, well, it s not really paper money.
2
SPEAKER_01
We should say like fiat money is predominantly credit.
2
SPEAKER_01
So like it s also digital currency.
2
SPEAKER_01
So more than 90% of dollars.
2
SPEAKER_01
are digital, less than 10% of dollars are physical.
2
SPEAKER_01
So it is a digital currency and all over the world, all these governments are using digital currencies effectively with some physical manifestations in paper.
2
SPEAKER_01
But yet, even within these currencies, it s still the same analysis.
2
SPEAKER_01
And I discussed this in chapter four of the Bitcoin Standard.
2
SPEAKER_01
You look at government monies, you see that the currencies that have held on to their value, the ones that have the biggest value, the ones that play the biggest role in global trade, the ones that are used as currency reserves all over the world,
2
SPEAKER_01
are the ones that have the lowest supply growth rate, the ones whose central banks are the least inflationary.
2
SPEAKER_01
On the other hand, the ones whose supply is more inflationary, similar to copper, end up failing.
2
SPEAKER_01
You look at Lebanon, Venezuela, Zimbabwe.
2
SPEAKER_01
These are currencies whose supply increases very quickly.
2
SPEAKER_01
and therefore their value collapses, whereas the dollar, the Swiss franc, the euro, the British pound, the Japanese yen, they increase at a much lower rate in general than these terrible currencies.
2
SPEAKER_01
And that s why all over the world you see people are looking to get more dollars and more of these harder currencies than the easier ones.
2
SPEAKER_01
So I think this analysis of the hardness of the money and the ease of money is
2
SPEAKER_00
pretty well supported empirically.
2
SPEAKER_00
So like you said, you re at least in part or in whole, consider yourself an Austrian economist.
2
SPEAKER_00
So you re perhaps a great person to ask about the basics.
2
SPEAKER_00
What is Austrian economics?
2
SPEAKER_00
What is Keynesian economics?
2
SPEAKER_00
How do you compare the two?
2
SPEAKER_00
What should people know?
2
SPEAKER_00
Some interesting, what is,
2
SPEAKER_00
interesting, defining characteristics to you about these schools of thought.
2
SPEAKER_01
So Austrian economics, the way that I say it, Austrian economics is economics.
2
SPEAKER_01
We call it Austrian economics because economics has been hijacked by a bunch of frauds, really.
2
SPEAKER_01
By people who are wrong, okay.
2
SPEAKER_01
Well, it s much worse than wrong, by people who are just essentially propagandists for inflation.
2
SPEAKER_01
Right.
2
SPEAKER_01
It s like your opinion, man.
2
SPEAKER_01
Right.
2
SPEAKER_01
Well, that s also like your opinion, man.
2
SPEAKER_00
But you asked.
2
SPEAKER_00
That s true.
2
SPEAKER_00
Well, I also talked to Paul Krugman on this podcast, so he s, the O speaks enough, but he s one of the people that is perhaps most harshly criticized by folks in Austrian economics perspective and vice versa, which is a fascinating tension.
2
SPEAKER_01
Yeah, he s done a great job as an actor who plays an economist on TV and the internet.
2
SPEAKER_00
So anyway, now tell me what you really think.
2
SPEAKER_00
So the basics of what is Austrian economics?
2
SPEAKER_00
What perspective does it take on the world?
2
SPEAKER_00
So I mean, Austrian economics really is...
2
SPEAKER_01
The continuation of a tradition that it goes back to the ancient Greeks of studying economics.
2
SPEAKER_01
Historically, it s really just economics that has evolved over time and the establishment of the Austrian school per se came in 1871, 150 years ago, when Karl Menger, the father of the school, wrote a book called Principles of Economics and essentially invented marginal analysis, which is a big deal in economics.
2
SPEAKER_01
Marginal analysis is the idea that in economics, individuals carry out decisions at the margin.
2
SPEAKER_01
When you make a choice, you re not making it, for instance, if you re making a choice between what should I spend my money on, you re not making a choice whether it is, this thing is object A or B, which one is more valuable for me in general, which one is more valuable for me for the rest of my life.
2
SPEAKER_01
You re choosing about the next unit right now.
2
SPEAKER_01
at this point, at this stage.
2
SPEAKER_01
And if you analyze economic decision-making at the margin, it makes a lot more sense and you can understand why people decide and make the decisions that they do.
2
SPEAKER_01
Whereas if you don t apply marginal analysis, things don t make sense.
2
SPEAKER_01
The key thing that marginal analysis helps us solve is what is called the water diamond paradox.
2
SPEAKER_01
So you will die without water.
2
SPEAKER_01
We all need water.
2
SPEAKER_01
And yet water is dirt cheap.
2
SPEAKER_01
whereas diamonds are extremely superfluous, nobody needs them, nobody s gonna live or die because they have a diamond, and yet they re extremely expensive.
2
SPEAKER_01
So why is it that as human beings we pay maybe say a dollar a liter for water, whereas we pay thousands of dollars for a few grams of diamonds?
2
SPEAKER_01
Why is this the case?
2
SPEAKER_01
Do we value water less than diamond?
2
SPEAKER_01
The answer is no, but at the margin,
2
SPEAKER_01
where we are right now.
2
SPEAKER_01
You live in a place where water is very abundant because cities are only built in places where water is abundant.
2
SPEAKER_01
And you re only making a choice about the next unit of water.
2
SPEAKER_01
And so water is extremely abundant, and you re choosing about whether to spend the next unit of money on water.
2
SPEAKER_01
The valuation that you give to water, given that you have a lot of water at home,
2
SPEAKER_01
and that you live in a place that has abundant water, is pretty low to the marginal unit.
2
SPEAKER_01
But it s very high for water overall.
2
SPEAKER_01
So if I asked you, how much would you spend for water in general?
2
SPEAKER_01
How much would you pay for water for all of your life?
2
SPEAKER_01
It would be a lot higher than diamonds.
2
SPEAKER_01
If I told you you can only have water or diamonds for the rest of your life, you d choose water, obviously.
2
SPEAKER_01
But nobody s ever had to make that choice.
2
SPEAKER_01
You only make your choices at the margin.
2
SPEAKER_01
So at the margin, where we are, modern civilization, we have an abundance of water, that s why we have civilization, and diamonds are very rare and scarce.
2
SPEAKER_01
And people are only buying, you know, you buy your first diamond when you re gonna get married, you give it to your wife.
2
SPEAKER_01
and that s gonna be the first few grams of diamond that she s ever gonna own.
2
SPEAKER_01
I m giving my wife water.
2
SPEAKER_01
Smart move, you should definitely give her Bitcoin instead of diamonds.
2
SPEAKER_01
I tell my wife, I occasionally remind her of how many Bitcoin we could have had if I bought her Bitcoin with the price of the diamond ring.
2
SPEAKER_00
What s the downside of, by the way, diamonds from the analysis of like gold and so on?
2
SPEAKER_00
Ah, that s a great question.
2
SPEAKER_00
Arguably diamonds are a scam.
2
SPEAKER_01
Because they became popular as a thing in marriage after gold was banned, after gold ownership was banned in the US in the 1930s and in many places around the world.
2
SPEAKER_01
So before that you d give gold and the reason you d give gold in a dowry, in a wedding,
2
SPEAKER_01
is because it wasn t just that it s pretty and shiny, it s because it s money.
2
SPEAKER_01
So if you die, your wife can take the gold and she can live off of it.
2
SPEAKER_01
It s a demonstration that you re giving her something valuable.
2
SPEAKER_01
And that s because nobody can make a lot more gold that has the high stock to flow ratio.
2
SPEAKER_01
But then they banned gold ownership, or they allowed people to only own very tiny quantities of gold.
2
SPEAKER_01
And that s when the diamond industry stepped in and marketed diamonds as,
2
SPEAKER_01
you know, the thing that you need to give.
2
SPEAKER_01
But the problem with it is, of course, that diamonds aren t like gold.
2
SPEAKER_01
They re not very hard to make more of.
2
SPEAKER_01
And the reason we have scarcity in diamonds is really artificial.
2
SPEAKER_01
There s effectively a monopoly of diamond producers.
2
SPEAKER_01
They restrict the supply.
2
SPEAKER_01
And it s a pretty dirty business.
2
SPEAKER_01
And the way that they do it is, you know, all of the talk about blood diamonds is a way for them to ensure their monopoly.
2
SPEAKER_01
So if you re part of the monopoly of diamond producers, then it doesn t matter how many people get killed producing your diamonds.
2
SPEAKER_01
If you re out of the monopoly, then human rights organizations descend on you and call for shutting you down.
2
SPEAKER_01
for selling blood diamonds, and they re also restricting the production of artificial diamonds.
2
SPEAKER_01
This is the other thing.
2
SPEAKER_01
You can make artificial diamond, you can t make artificial gold.
2
SPEAKER_01
So they restrict the production of artificial diamond, and they try and insist that you shouldn t take artificial diamonds, but they re indistinguishable from real diamonds.
2
SPEAKER_01
So it s an artificial scarcity, and I think there s gonna come a point at some point that this monopoly is gonna break, and a lot of people are gonna be left with
2
SPEAKER_01
essentially highly devalued jewelry.
2
SPEAKER_00
I m gonna take this segment of the podcast, when I m getting married, I m gonna send it, and then instead you re getting water or Bitcoin.
2
SPEAKER_00
Yes, water and Bitcoin is all you need.
2
SPEAKER_00
So marginal analysis, focusing on the margin is the thing that allows you to most accurately capture human nature, the actual day-to-day decisions that we humans make.
2
SPEAKER_01
Yeah, that s really revolutionized economics, so 1870.
2
SPEAKER_01
And that was Menger s work.
2
SPEAKER_01
And then he had a student, Eugen Bomberg, who developed capital theory.
2
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And then he had a student, Ludwig von Mises, who is arguably the most important economist ever.
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And he developed a theory of money, and he wrote a book in 1912 called The Theory of Money and Credit.
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And then in the 40s, he wrote Human Action, which is a big treatise on economics.
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And I think this is the correct tradition of economics.
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And before World War I, this was just known as economics.
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And then after what happened in World War I, and I discussed this in detail in the Fiat Standard, is that the Bank of England essentially went off gold.
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and tried to pass off their own credit as being as good as gold in order to finance the war.
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And incidentally here, this is part of the history that is not discussed often.
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This is presented as an innovation.
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Later on, they needed essentially a propaganda school that would justify what they did.
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And later on it s presented as, oh, hey, we realized that gold was not good and now look, we ve built this thing.
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that is better than gold where now the government can just print money whenever it wants and now gold money is not an issue anymore, which is extremely idiotic because the whole point of money is that it s not easy to make.
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If it s easy to make, it s not money anymore.
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It s just destroying the entire function of money and we ve seen that happen extensively in the 20th century after countries went off the gold standard.
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So essentially Keynesian economics is just inflation apologia.
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It s just propaganda to justify inflationism.
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And it s profoundly nonsensical.
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It s built on the idea that if you just make more money, you can stimulate economic production.
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And of course, this is very self-serving to the central banks and to the banks and to the governments who promote this nonsense.
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And this is also very pervasive.
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If you ve had the misfortune of studying at a university over the last century, you were taught Keynesian garbage economics.
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You were taught that if there s a problem in the economy, the way to fix it is that the government prints money, the government lowers the interest rate, and then that leads to more economic production, which is completely nonsensical.
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So...
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So you re, again for the listener, you re using strong words and I ll push back just to find, to please devil s advocate to hopefully one day arrive at a truth.
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So, just because it s in the interest of the central banks and the government,
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the interests and the models of Keynesian economics and the government are aligned doesn t mean they re wrong.
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So let s give them a chance.
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So the conventional wisdom, perhaps economics wisdom, is that inflation is good,
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in moderation as it encourages spending.
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But too much is bad because it completely devalues, destroys people s savings.
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So a little bit of inflation is good to stimulate spending.
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And I mean, I suppose this is one of the things that s supported by Keynesian economics.
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Why is that wrong?
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This is basically the whole point of Keynesian economics, is to try and find an endless array of explanations to explain why inflation is a good thing.
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SPEAKER_00
Well, the chicken and the egg.
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So that s the cynical take.
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This is a propaganda machine to sell the government s narrative.
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SPEAKER_00
The less cynical take is there s a bunch of economists who are telling, who... Who figured out this thing and it happens to be good for banks and governments.
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And just because it s good for them doesn t mean... And it justifies the existence of government.
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I don t think it s your basic assumption, but a foundational principle of your thought is that a lot of government is not a good thing.
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Your first gut instinct, government bad.
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Like I mentioned, I live next door to Michael Malice, who probably beats you on the intensity and how quickly he says government bad.
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But there s a potential argument for government good.
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some government is good, maybe a lot of government is good, maybe we need a lot of centralized management for resource allocation and so on, because we humans specialize, we re too busy, and so on.
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So there s an argument for that, that exists.
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You probably disagree with any possible argument on that side.
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But anyway, so why is that idea of Keynesian economics wrong?
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I m gonna focus for this on the money idea, the idea that a little bit of inflation is good.
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The idea here, I mean the criticism is that
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Without inflation, people wouldn t spend and then the economy would come to a grinding halt.
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And that s nonsensical because people spend not because they wanna keep this magical monster called the economy going.
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People spend because they need to consume because that s how we live, that s how we survive.
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You need to eat, you need shelter, you need clothes to keep you warm.
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And as technology advances, the capabilities of the things that we can do with our
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with our time increases and so we wanna buy more things.
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So people buy things because people want to consume.
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There s a limitless desire to consume.
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There s no shortage of reasons for people to consume, whether it s food or Ferraris or private jets.
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People just always wanna buy more.
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Can I interrupt just really quick?
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What about the fear about the uncertainty of the future?
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might want to, they might want to buy things, but they re really afraid because it seems like there s a lot like a pandemic going on or whatever it is.
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That s good.
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So, so fear of uncertainty is, you have too much fear.
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Here s the thing.
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What I was saying is I was making the point that
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we don t need to be motivated to consume.
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We have the insatiable desire to consume.
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Everybody would like to have more of all kinds of things.
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Everybody would like to have a bigger house.
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Well, not everybody, some people have a big enough house, but everybody would like a house, everybody would like a car, jet, all kinds of things, electronics, machines.
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So we don t need a desire to consume.
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But of course, the limit on how much we consume is,
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Opportunity cost.
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Why don t you buy a Ferrari?
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Well, because that s really expensive and it would mean that, you know, well, maybe you do have a Ferrari, but I mean, most people don t buy a Ferrari because it s too expensive.
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They don t, they can t afford it.
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They d have to work too hard to get it.
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And if they do get it, that might mean that, you know, they can t afford their house anymore.
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So we have to economize.
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That s a good thing.
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And we have to also think of the future.
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And so humans consume, we don t need more motivation to consume.
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We have to deal with the economic reality of the things that limit us from consuming more.
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So what Keynesians present is that when there is a problem in the economy, like there was after World War I,
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The problem is always caused by the inflation.
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And what the Keynesian hucksters do is that they look at the inflation, at the consequences of inflation, and blame it on people not spending enough.
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When people are doing the rational thing, you know, the money is
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So there was inflation, caused an unsustainable boom, it caused a recession, and now a lot of people lost their jobs, and they don t have enough money to go out and spend frivolously, so they save for the future.
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The future is uncertain.
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That s a good thing.
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That s how you fix things.
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You begin the recovery by, well, you lost some wealth, so you spend less.
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If your business goes bust, if you lose your job,
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It s natural and smart that you stop spending money on the frivolous things that you used to spend, and you save it for the future, you invest in something else, you get a new job, and then once you ve recovered, you start spending more.
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This is very sane and very good, and it s the way to recovery.
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But essentially, the Keynesians have used this as a justification for more inflation.
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Because inflation is an addiction.
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Once the government gets down the path of spending money to solve its problems, then every problem looks like it can be solved by more inflation.
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And so this is where Keynesian economics comes in.
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And of course, Keynesian economics is based on the work of Keynes, which came in the 1930s.
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And this is the key point.
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It s portrayed in the textbook as if it s just this scientific breakthrough, that somebody in the 1930s, this genius, came about and realized that, oh, we don t actually need gold.
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We don t need hard money.
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We can actually just print all the money.
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And in reality, of course, it was just the very thin, flimsy, idiotic justification for what governments were already doing for 20 years.
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They d already gone off the gold standard, and they d gone through 20 years in which they were lying to their population, telling their population, we re still on a gold standard, but you know.
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that are problems caused by various random things, but don t worry, we re gonna be going back on the gold standard.
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20 years later, after they went off the gold standard, they come up with this justification for why, oh, actually, the gold standard was bad, and this is a really pernicious thing about it is, the problems that were caused by us going off the gold standard were caused by the gold standard, and we re going to fix them by going off the gold standard even more.
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Just because government is lying and it s shady and it does these kinds of things doesn t mean Keynesian economics is wrong.
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So just because I wanted to separate a few things you said.
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It could very well be very wrong and they could indeed be hucksters.
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All of these colorful, such colorful language.
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I love you deeply for this.
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This is fun.
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Yeah, but I mean, you know, it s not like somebody like Krugman doesn t use this kind of language when discussing Austrians.
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It s just that when actors like him use it, it s presented as if it is legitimate because he s, you know, he s part of the major shows.
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So the case they make and the criticism Keynesians make of Austrian economics and the case they make for Keynesian economics is it s based on empirical evidence.
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So Austrian economists are pie-in-the-sky theorists about how human nature works, and it s just all theory.
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And just like you said, Keynesian economists kind of sell it as a science, data-driven science.
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So where s the data, bro?
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So one way of saying it is,
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How do you know if we get rid of inflation?
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How do you know if we get rid of central banks?
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If we push towards that direction, we will have a better world, a better functioning economy, better functioning markets, better functioning society.
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This is another inaccurate way in which they present the economics.
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They present it as if it s just theory and the data doesn t matter, but that s not the case.
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What the Austrians say is that without guiding theory, data is mute, data is dumb, data can t say anything.
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So theory first, and then you have to have models.
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to provide context for interpretation of the data.
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And it s a sign of just how little self-awareness they have that they think that they re just being led by the data when they re being led by Keynes  moronic theories.
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And they use the data to justify those theories and to stick by them.
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And in fact, they are the ones whose theories cannot be refuted, because it s just government-mandated religion.
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So according to Keynes s nonsense,
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So the way that the whole thing is, the way that they justify the inflationism is this, and I m just using this to give an example of what you re talking about in terms of theory, the way they justify the inflationism, to tie it back to the original point, they justify, all right, we need money to spend, and then the level of spending in the economy is what determines the state of the economy.
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And I ve taught macroeconomics at university level for a while, so I know this, I know Keynesian nonsense better than
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Most Keynesians know Austrians, if not all of them, I guarantee you.
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And so the way they see it is the level of spending in the economy is what determines the state of the economy.
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There s a level of output and there s a level of spending.
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So there s like the factories on the one side that are churning out goods, and those goods have a certain quantity and value, market value.
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And it s completely nonsensical, of course, because how can the value of the goods produced be different from the value of the spending?
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But let s put that aside for a second.
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So the amount of spending that happens in the economy determines the state of the economy.
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If the value of the production, which they call Y, is higher than the aggregate expenditure, so this is the production and the aggregate expenditure is lower, then we don t have enough spending to buy all the goods.
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and then that causes a recession, the factories start laying off workers, and then the laid off workers start spending less, and then that leads to aggregate expenditure dropping even further, and so it s a vicious cycle where the economy gets into recession, and the only way out is for Keynes  bankster buddies and government buddies to print a lot of money to give to themselves.
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and then that will.
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That s one interpretation.
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So to print more money, to increase the expenditure, to match the supply.
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To match the level of output.
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Sounds pretty good to me, I m sold.
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SPEAKER_01
All right.
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Even though you re saying Huckster, so.
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Yes.
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I just, you know, the way, I love you very much, but like, just for people who are listening, I think it s, I love the way you talk, and it s great, and keep doing it, but just for context,
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I don t know anything that involves human nature deserves this level of certainty.
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At least my position is that we don t know what the hell we re doing on basically anything.
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And there s a lot, like certainty can get us in trouble is my worry.
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I don t know much about economics.
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I don t even know financial systems, monetary systems.
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But I just seen us get in trouble with human psychology, certainty, certainty of ideologies in general.
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You mentioned Marxism and so on.
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I came from the Soviet Union.
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There s a lot of people that are very certain throughout the history of the 20th century that communism
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is the utopia that humanity should strive for.
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So I m nervous around certain people.
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SPEAKER_00
I could be wrong, but you ask me for my opinion.
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SPEAKER_00
Yes, yes.
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SPEAKER_00
Sorry, so it s that little bit of a caveat.
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So to go back to the idea, then on the other hand, you have the level of, the other situation is when the level of spending is higher than the amount of aggregate output.
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Yes.
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In that situation, you have too much spending, so therefore what ends up happening is inflation.
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SPEAKER_00
So according to the Keynesian worldview, this is really important because this is a way that I m gonna get to your point about empirical data and to show you why they re not correct.
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SPEAKER_00
Yeah, they re not correct about what they say about empirical data.
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So then what this means is that there s a level of output and there s a level of aggregate expenditure.
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The aggregate expenditure can either be higher or lower than the output or equal to it.
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If it s higher, we get inflation.
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If it s lower, we get
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recessions, okay?
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So is there any universe in this model?
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Is there any potential universe in which you can have both inflation and a recession?
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SPEAKER_00
According to the Keynesian model, you can t, right?
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Because aggregate expenditure cannot be both higher and lower than output.
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SPEAKER_00
So therefore, if you were truly being an empirical person, if you were looking at evidence and trying to analyze data, you d look at this and say, one example, you just need one example of high inflation and high unemployment to refute this entire model, right?
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And of course, the world is full of examples of high inflation and high unemployment.
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And that s what happened in the 90s.
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And of course, you know, they ignored it.
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And when it happens in poor countries, because you know, poor countries don t really matter.
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But then in the 1970s, that happened in the US and in the Western economies in the most advanced industrial economies.
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So historically, before then, you had all these Keynesian central bankers talking about this model and saying, you know, well, aggregate expenditure is too low now, and that s why we have unemployment, so we need to print more money.
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And then they print more money, inflation goes up, but also unemployment goes up.
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because this model is broken.
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That s not how the world works.
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SPEAKER_00
The level of aggregate spending in the economy is not a lever with which you can control inflation and unemployment.
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SPEAKER_00
So what would a scientist do?
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What would a non-huckster do in this case?
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SPEAKER_00
Admit the theory is wrong and find another way to reformulate it.
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SPEAKER_00
Have the Keynesians done that?
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SPEAKER_00
No.
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SPEAKER_00
Still the same garbage in the textbook that is being taught until today.
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SPEAKER_01
So is it possible to have a non-Keynesian model or one that still supports moderate amount of inflation is good for the economy?
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SPEAKER_00
I mean, since the 1970s, since this has happened, yeah, this is what basically most
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Fiat economists, as I like to call them, essentially anybody at a university financed by governments, which is financed by central banks, which is financed by fiat.
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SPEAKER_01
I will talk about that.
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The effect of fiat money on our life, as you write about in your book, Fiat Standard, one of them is education.
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I m sure we ll disagree there too.
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SPEAKER_01
I m not smart enough to disagree, but I ll disagree anyway.
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SPEAKER_00
So yeah, so a whole bunch of other models came up, but basically it s, I mean, it s such an example of motivated reasoning.
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SPEAKER_00
Like anybody who s got a familiarity with the scientific method or who s got an engineering background who comes into economics immediately has a lot of red flags.
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SPEAKER_00
And I remember when I used to teach macroeconomics, I used to teach introductory macroeconomics, and it s a course that would be taken by econ majors as well as engineers.
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A lot of engineers would take it as an elective.
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SPEAKER_00
And every time I d explain, and I would just teach the Keynesian basic stuff, and every time I d explain it, there s always that smart engineering kid who just looks at me and says, sir, this doesn t make any sense because this and this and that.
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And I m always like, you get it.
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SPEAKER_00
Exactly, you re correct.
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SPEAKER_00
Because if you have any kind of shred of scientific thinking, you see that this is all motivated reasoning.
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SPEAKER_00
Like the answer is government needs to print money.
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SPEAKER_00
And here s a whole bunch of models brought up by people for why government printing money is good.
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SPEAKER_00
And the reason they re coming up to this conclusion is that you only get funded if you come up with this conclusion.
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SPEAKER_00
If you come up with a conclusion that we need to shut down the central bank, you don t get funded by the central bank.
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SPEAKER_00
You don t get published in the journals.
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You don t get a job at the prestigious universities.
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SPEAKER_00
You don t get quoted by fiat publications like the New York Times and CNN.
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SPEAKER_00
They don t invite you on as an expert.
3
SPEAKER_01
Well, that s a fundamental flaw with a lot of institutions we have today and throughout human history.
3
SPEAKER_01
Let me zoom out for just a second to the big question.
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SPEAKER_01
What is economics in general?
3
SPEAKER_01
What s the goal?
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SPEAKER_01
You said there s a bunch of models.
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SPEAKER_01
Is any economist basically trying to throw a bunch of models about human behavior on the table?
3
SPEAKER_01
and try to generalize it to the global scale so both dance between micro and macro somehow in order to determine public policy and explain the past, predict the future, prescribe policies that can control the future, those kinds of things.
3
SPEAKER_01
That s the big, basic, ridiculous question of what is economics.
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SPEAKER_00
Economics is the study, the way the Austrians define it, is the study of how humans make choices under the condition of scarcity.
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SPEAKER_00
We begin with the starting point of economics as the fact that scarcity exists.
3
SPEAKER_00
And why does scarcity exist?
3
SPEAKER_00
Well, because it s easier to want things than it is to make them.
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It s much easier to want a Ferrari than it is to make one.
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SPEAKER_00
And so because we have wants and we have limited means to meet those wants, we need to economize.
3
SPEAKER_00
It s a permanent marker of the human condition.
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SPEAKER_00
We are always economizing at all times.
3
SPEAKER_00
And so,
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SPEAKER_00
How people make those decisions under the conditions of scarcity is what economists study.
3
SPEAKER_00
So to go back to your point on empiricism in Austrian school, so it isn t that the Austrians don t believe in data.
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SPEAKER_00
On the contrary, it s that theory has to inform data.
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SPEAKER_00
And in fact, if you think about it, as the example of the stagflation of the 1970s shows,
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If you have stagflation, that just completely refutes the Keynesian model.
3
SPEAKER_00
The Austrian way of thinking, which is think from first principles, understand how the world actually works, think about how humans act, and understand that economics is really all about human action, so it s not about aggregates of goods.
3
SPEAKER_00
This is really the key distinction in terms of methodology.
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SPEAKER_00
For the Keynesians, it s physics envy.
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SPEAKER_00
They look at the market economy, they look at individuals in the market economy,
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SPEAKER_00
and they think that they can understand the market economy by looking at aggregates.
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SPEAKER_00
This is really the key point of what I think makes the certain branch of economics pseudoscientific, is the introduction of aggregates.
3
SPEAKER_00
When you introduce those aggregates, you know, how much production takes place, how many people are unemployed, the percentage of the inflation rate, and then you think that you can establish scientific relationship between those aggregates,
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SPEAKER_00
It s purely physics envy, you know, in physics.
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SPEAKER_01
For instance, or in chemistry, you put, let s say, a container which contains a gas, and you have the ideal gas law PV equals to nRT.
4
SPEAKER_01
Calculate the pressure, calculate the volume, and then the temperature.
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SPEAKER_01
If you have the pressure and the volume, you can calculate the temperature because you have the NR constants.
4
SPEAKER_01
So there s a clear relationship that has been demonstrated in the laboratory and that we can do it right now.
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SPEAKER_01
We can measure it and we can see it and it continues to hold.
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SPEAKER_01
And all it takes is one scientist to show that this relationship does not hold, to do an experiment that shows this does not hold, and it stops being a law of
4
SPEAKER_01
chemistry and it s broken.
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SPEAKER_01
Whereas in economics what they ve done is they ve copied the superficial shape of this without any of the scientific rigor that was used to build it.
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SPEAKER_01
There s no experiments.
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SPEAKER_01
You can t experiment on economies
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SPEAKER_01
We don t have the ability to establish laws and all the laws that we establish are just models that get people published and get them on the media to say my model says we need to print more money but it s never subject to actual scientific scrutiny.
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SPEAKER_01
If it were, they would all be rejected in 15 minutes because the world is full of examples that contradict them.
4
SPEAKER_00
Or is it possible to do scientific scrutiny when it s human nature, when you can t, when there s a nearly infinite number of variables and you can t control them?
4
SPEAKER_00
So what s the best thing you could possibly do?
4
SPEAKER_00
You do thought experiments.
4
SPEAKER_00
But the problem with thought experiments, you know, Freud thinks everybody wants to have sex with their mother.
4
SPEAKER_00
Is he right?
4
SPEAKER_00
That s the problem with Freud.
4
SPEAKER_00
I don t know, maybe he s right.
4
SPEAKER_00
Well, obviously, I m joking on that front, but the- Freud is probably under the canes.
4
SPEAKER_00
Well, no, I think there s power to the thought experiment.
4
SPEAKER_00
Just like Einstein, you know, a lot of general relativity, special relativity, that,
4
SPEAKER_00
That s a thought experiment.
4
SPEAKER_00
It originates in a thought experiment.
4
SPEAKER_00
Now is it true?
4
SPEAKER_00
You know, nice thing about physics, you can eventually have experimental validation.
4
SPEAKER_00
The downside of economics is you really can t have experimental, like definitive experimental scientific rigor of validation of a theory.
4
SPEAKER_00
So a thought experiment is just a thought experiment using your intuition.
4
SPEAKER_00
It s the power of reasoning together about human nature.
4
SPEAKER_01
And that s why economics cannot make the claims that physics can make.
4
SPEAKER_01
So with physics, you can predict that if you get this gas at this pressure at this volume, the temperature will be that much.
4
SPEAKER_01
And you can make that prediction
4
SPEAKER_01
and test it a million times and you ll always get the precisely correct answer.
4
SPEAKER_01
With economics we can t make quantitative predictions.
4
SPEAKER_00
But still, on Twitter, and even today, you re very certain about the statements you re making.
4
SPEAKER_01
Yeah, but I don t make quantitatively certain statements.
4
SPEAKER_01
That s the thing.
4
SPEAKER_01
In economics we don t make quantitative predictions.
4
SPEAKER_01
We cannot do that because we don t have experiments.
4
SPEAKER_01
But we can understand how the world actually works with humility.
4
SPEAKER_01
This is really the key difference that the Keynesians think they just want to copy the methods of physics and then that s just, you know, going to give them the certainty of the results of physics, which is like me saying I m just going to put a red
4
SPEAKER_01
on my back and jump from the fourth floor because I m Superman.
4
SPEAKER_01
Well, it s not the red blanket that s gonna make me Superman.
4
SPEAKER_01
There s a lot more to it.
4
SPEAKER_00
So humility manifests itself in economics as the belief in a free market.
4
SPEAKER_00
Meaning like I can t centralize, I can t do centralized control on this thing.
4
SPEAKER_00
We re going to minimize the friction of the free exchange of goods.
4
SPEAKER_00
So Austrian economics puts priority in the market.
4
SPEAKER_01
Yes, and you could arrive at it through two paths.
4
SPEAKER_01
The more practical path, which most scientific-minded people arrive at.
4
SPEAKER_01
I came from an engineering background, so I initially had this idea that what is lacking in economics is mathematization.
4
SPEAKER_01
We need to have better math models.
4
SPEAKER_01
We need to get all of those tools from engineering, apply them to economics, and then we ll be able to plan the world economy and make it work better.
4
SPEAKER_01
And then you start actually trying to solve problems, trying to actually calculate them.
4
SPEAKER_01
And you realize nobody can have that ability because the difference ultimately comes down to the fact we can t have experiments.
4
SPEAKER_01
And the reason we can t have experiments is that you can experiment on particles of a gas.
4
SPEAKER_01
You can t experiment on human beings and entire economies.
4
SPEAKER_01
And because
4
SPEAKER_01
Particles of a gas are just dumb matter.
4
SPEAKER_01
And so you know, you, you kick matter in a certain way, you can calculate exactly how much is going to fly.
4
SPEAKER_01
Human beings are much more complex, they have a will inside them.
4
SPEAKER_01
And this is really, this is the humility to understand that you are a human being and other people are also human being just like you.
4
SPEAKER_01
And that the, you know, every person wakes up every morning and they have a million things in their mind, a million things they care about, a million things they want to do.
4
SPEAKER_01
And you will never be able to make the decisions for somebody else, let alone for millions of other people.
4
SPEAKER_01
So this is one path by which you arrive at the conclusion that free markets are better because you realize that all of the people that think that they can centrally plan markets can t actually do that and that there s really nothing scientific about them except essentially the rituals they ape of the scientific process.
4
SPEAKER_01
And the other path, I think, that makes you arrive at the Austrian perspective or the libertarian perspective, I should say, is simply the notion of individuals as having their own inalienable right to decide what they want to do with themselves.
4
SPEAKER_01
If you, I mean, the only way that you can give yourself the idea that you get to be planner is ultimately you think you re better than other people.
4
SPEAKER_01
You think your choice, your judgment overrides mine.
4
SPEAKER_01
And I don t think that s a defensible position.
4
SPEAKER_01
I think I m in no position to want to force anybody ever.
4
SPEAKER_01
I will never want to force anybody to do anything they don t want.
4
SPEAKER_01
The Keynesian perspective, the central planning perspective is unlike physics, you know, which is let s force a bunch of particles to sit in a lab so that we can study them.
4
SPEAKER_01
In economics, you re forcing people to do things.
4
SPEAKER_01
Let s stop these people from doing this job because it s bad for the economy and let s get them to do that job.
4
SPEAKER_01
Let s force them to pay this price.
4
SPEAKER_01
Let s tax them this much.
4
SPEAKER_01
Let s prevent them from using gold as money and force them to use our credit as money.
4
SPEAKER_01
So it has to rely on coercion.
4
SPEAKER_01
There s no central planning without coercion.
4
SPEAKER_01
And coercion is a crime, in my opinion.
4
SPEAKER_01
There s no way that it is justifiable morally or ethically.
4
SPEAKER_00
So from a politics, from an ethical perspective,
4
SPEAKER_00
Your view is, I mean perhaps broadly speaking the libertarian view is coercion is unethical, freedom is essential.
4
SPEAKER_00
What are the pros and cons of government intervention in the economy?
4
SPEAKER_00
So can you provide pros?
4
SPEAKER_00
You just kind of provided arguments against
4
SPEAKER_00
Is there any arguments to be made for government intervention, for the role of government in society?
4
SPEAKER_00
Speaking from a political or from an economics perspective, what is a positive role of government that you can imagine you can speak to?
4
SPEAKER_01
I can repeat many other cases, but I don t find any of them compelling for the reason that I mentioned, which is that ultimately they all rely on putting a gun to somebody s head and using the threat of force.
4
SPEAKER_01
So that s for me, it can never be justifiable.
4
SPEAKER_01
Whatever the ends are,
4
SPEAKER_01
If the means are violence and the threat of violence, then the ends aren t justified.
4
SPEAKER_01
Everything that s good, governments will use as an excuse to justify coercion.
4
SPEAKER_01
So, you know, what do you like?
4
SPEAKER_01
You like motherhood and apple pie.
4
SPEAKER_01
Well, government needs to ensure that motherhood works well and we need government central planning of
4
SPEAKER_01
We need regulations on birth, for instance.
4
SPEAKER_01
We need regulations on how people give birth.
4
SPEAKER_01
We need to ban people from giving birth in traditional ways that have been tried for thousands of years.
4
SPEAKER_01
We need to force people to do things in the modern scientific way.
4
SPEAKER_00
that all of us use, so infrastructure, for example, or education, or, well, the economy, too, right?
4
SPEAKER_00
Can you make a case for the role of some large-scale centralized systems, whether it s government or not, that do this kind of management?
4
SPEAKER_01
I guess perhaps you could say there s the economies of scale argument that some things must exist at a very large scale and therefore you would want political accountability of the people who manage them.
4
SPEAKER_01
This is kind of the argument that s given for infrastructure monopolies.
4
SPEAKER_01
For instance, roads or electricity.
4
SPEAKER_01
Let s say we live in a country, we need one power plant.
4
SPEAKER_01
The bigger the power plant, the better off we will all be.
4
SPEAKER_01
and there s a natural monopoly in the power plant business.
4
SPEAKER_01
So we re gonna have to have one power plant.
4
SPEAKER_01
And since it s only one power plant, then we can t just let anybody own it because then they re gonna make it too expensive.
4
SPEAKER_01
So we need to have the government own it so it can make it too expensive.
4
SPEAKER_01
And you don t find that case compelling?
4
SPEAKER_01
Not at all.
4
SPEAKER_01
I used to believe in it.
4
SPEAKER_01
I was pretty much a Keynesian when I first started my graduate studies at Columbia.
4
SPEAKER_01
And no, I don t find that compelling at all because I think all these examples that they mentioned of natural monopolies or economies of scale that can only fit at a scale of government, it s always, you know, government bans people from opening power plants.
4
SPEAKER_01
And then there s only one power plant and they need to be in charge of it.
4
SPEAKER_01
But in reality, no, in reality, power plants can exist at all kinds of manners of scales of operation.
4
SPEAKER_01
And yes, of course, there are benefits to centralization in power plants in particular, because there s efficiency in generation.
4
SPEAKER_01
One big power plant is more efficient than 10 equivalent smaller power plants.
4
SPEAKER_01
But there s also inefficiencies in centralization, because the more centralized and the bigger the plant is,
4
SPEAKER_01
the further away a lot of the population is going to be, so you re gonna be losing a lot of the electricity and transmission.
4
SPEAKER_01
And you believe the free market is best in managing that dance, that balance of centralization.
4
SPEAKER_01
Exactly.
4
SPEAKER_01
And if we do end up in a situation where there s one power plant for an area, then if the markets ends up centralizing all of it into one power plant,
4
SPEAKER_01
I don t see that as a problem.
4
SPEAKER_01
There are places, you know, there s a small town with only one barbershop.
4
SPEAKER_01
Is that a catastrophe?
4
SPEAKER_01
No, because they don t need two barbershops.
4
SPEAKER_01
Now, if that barbershop started to take advantage of people, started to charge higher price, well, then that s just an opportunity for others to step in and put them in their place.
4
SPEAKER_01
And that s the same thing with power plants.
4
SPEAKER_01
It s the same thing with everything.
4
SPEAKER_01
Ultimately, I think the key thing is this.
4
SPEAKER_01
From the central planning perspective,
4
SPEAKER_01
they ll present you the problem as it is, and they ll tell you, well, this is bad.
4
SPEAKER_01
So the fix, you know, and what we can do is better.
4
SPEAKER_01
So let s stop what s bad and do what is better.
4
SPEAKER_01
Two problems here, usually the reason that the thing is bad in the first place is because it is a government monopoly, it s because of government intervention.
4
SPEAKER_01
But the second thing is that this notion that we could just pass a law and fix what s wrong and make it better,
4
SPEAKER_01
It ignores the fundamental underlying reality which is that what you re doing is you re offering only one way for this problem to be solved and making all other solutions practically illegal.
4
SPEAKER_01
You re taking taxpayer money, you re putting guns to people s heads to take their money to use it to build say this one solution for a power plant.
4
SPEAKER_01
but you re preventing the free market process from providing us with other alternatives.
4
SPEAKER_00
Well, so you phrased it sort of from that perspective, but in theory, there is a feedback accountability mechanism for the solution that you propose and enforce by, as you re saying, placing a gun to people s head.
4
SPEAKER_00
You re accountable for that choice, for the quality of that solution by being voted out.
4
SPEAKER_00
if the solution is actually bad.
4
SPEAKER_00
So it s just a different selection mechanism.
4
SPEAKER_00
And I think, I personally believe it is a selection mechanism that has worked in the past, it just often does not work nearly as well as a free market.
4
SPEAKER_00
And the question is, are there domains in which the free market gets itself into trouble?
4
SPEAKER_00
So this theoretical view is that, that s the point of a free market, is it doesn t, if there s trouble,
4
SPEAKER_00
That s a signal, and it will respond to that signal, and it will respond appropriately to try to maximize happiness.
4
SPEAKER_00
The question is, is there a local optima that free markets get stuck in and you need governments to represent the broader scale of the people to get outside of that?
4
SPEAKER_01
I think the fundamental problem here is the idea that there is a feedback mechanism when there is coercion in one party, when one party can employ coercion and the other one cannot.
4
SPEAKER_01
So in other words, I m going to put a gun to your head, I m going to take your money, and I m going to use it to buy more guns for me to put against your head.
4
SPEAKER_01
But somehow, you re going to put a paper in a box and that s going to deactivate my guns.
4
SPEAKER_00
Well, love requires a push and pull, a little bit of tension, a little spice in a relationship, I think.
4
SPEAKER_01
Yeah, I mean.
4
SPEAKER_00
A little gun to the head.
4
SPEAKER_00
Good luck to anybody who s gonna be dating you if you think putting a gun to people s head is comparable to a relationship.
4
SPEAKER_00
All jokes, but yes, I mean, people don t often think of it as gun to the head, as government and the military as gun to the head.
4
SPEAKER_00
but that is sort of a libertarian perspective because ultimately when you, you know, turtles all the way down and at the bottom there s guns.
4
SPEAKER_01
Yeah, so at the bottom if you don t wanna pay, if you don t wanna, you know, all right, I don t wanna be part of your power plant, I wanna get my own generator, I don t wanna do it, and I don t wanna pay for it, you go to jail, you can t not pay for it.
4
SPEAKER_01
That s really the asymmetry which the market doesn t have, which is why, in my opinion, it s not as if, you know, I m being stubborn and stuck on the idea that I want a market.
4
SPEAKER_01
And that the government can t work.
4
SPEAKER_01
It s presented as if we re choosing between two different machines.
4
SPEAKER_01
Should we use an Apple or a PC?
4
SPEAKER_01
And I m just constantly choosing one of them and saying that the other one can t work.
4
SPEAKER_01
It s not equivalent.
4
SPEAKER_01
It s not two machines.
4
SPEAKER_01
We re comparing between...
4
SPEAKER_01
a machine and a gun to the head.
4
SPEAKER_01
We re comparing between a situation in which anybody, anywhere is free to provide the service or the good, and anybody anywhere is free to buy it from them or reject to buy it from them.
4
SPEAKER_01
So anyone can build a power plant.
4
SPEAKER_01
Anyone can succeed at it.
4
SPEAKER_01
Anybody can fail at it.
4
SPEAKER_01
Anybody can build it in a way that I can choose to take part in or not take part in.
4
SPEAKER_01
I can build my own.
4
SPEAKER_01
So we have a situation in which 10 million people, let s say, they each can freely choose
4
SPEAKER_01
to provide the good or to buy the good.
4
SPEAKER_01
That cannot be considered an alternative on an equal footing to a situation where one person or one entity gets to decide for everybody and those who disagree go to jail.
4
SPEAKER_00
So the problem is that the alternative to governments is other large successful entities that have humans in them and human nature is such that there s corruption, manipulation and so on.
4
SPEAKER_00
I think free market depends on the honest communication of information as widely as possible so people can make great rational decisions.
4
SPEAKER_00
But sort of my fear is I d like to propose is that in general, there s manipulation, whether it s government, whether it s companies.
4
SPEAKER_00
They re going to try to do propaganda.
4
SPEAKER_00
They re going to try to manipulate you, deceive you, shut down competition by playing games, human games of different kinds.
4
SPEAKER_00
And sometimes even meaning well.
4
SPEAKER_00
It s not like everybody thinks they re doing good and they re actually doing evil.
4
SPEAKER_00
So how do we prevent the worst of human nature coming out in a free market as well?
4
SPEAKER_01
by not giving the worst of human nature a monopoly on violence in the institution of government.
4
SPEAKER_00
That little inkling of coercion, that little bit of asymmetry creates a gigantic ripple effect of asymmetry in your view.
4
SPEAKER_01
Yes, and it ends up just being the place where corporations, individuals, free markets, they can t coerce without the resort to government.
4
SPEAKER_01
So you think about all the examples of corrupt corporations doing bad things.
4
SPEAKER_01
it s always because they have certain privileges from governments because as it exists, Coca-Cola, McDonald s, all of these giant corporations, they can t do anything to me without government.
4
SPEAKER_01
They can t take any of my money and they can t force me to buy their stuff.
4
SPEAKER_01
And so it doesn t matter to me.
4
SPEAKER_01
So if Coca-Cola is corrupted, that s a problem for Coca-Cola customers, that s a problem for Coca-Cola shareholders, that s a problem for anybody who deals with
6
SPEAKER_01
Neal Ferguson is a historian who gets in quite a bit of trouble basically, well he s a Brit, suggesting that if Britain stayed out of World War I, there would be no Hitler, there would be no World War II.
6
SPEAKER_00
Yep, I agree entirely.
6
SPEAKER_00
But fiat money.
6
SPEAKER_00
Yeah, so how fiat money was born.
6
SPEAKER_00
Yeah, let s get back to that.
6
SPEAKER_00
So they financed the war with that money.
6
SPEAKER_00
So what could go wrong?
6
SPEAKER_00
That s where we left off.
6
SPEAKER_00
Well, what could go wrong when you ve just printed an enormous amount of credit and used it to buy bonds?
6
SPEAKER_00
What goes wrong is that the value of the currency is going to go down or in other words prices of things are going to go up.
6
SPEAKER_00
So during the war prices keep going up and this is of course is going to sound very familiar to victims of the 20th century.
6
SPEAKER_00
A government tells you it s because of the war, it s not our fault, it s because of the Germans, it s because of the foreigners, it s because of Putin, it s because of this, it s because of that.
6
SPEAKER_00
This has always been the case.
6
SPEAKER_00
There s always... war is a very good cover for inflation which is caused by monetary phenomena.
6
SPEAKER_00
So then the war ends.
6
SPEAKER_00
and inflation prices have more than doubled over the past four years over the four years of a world war one prices more than doubled and then the british economy is in bad trouble obviously you know it s lost a lot of the labor force for four years that was out there fighting now those workers come back
6
SPEAKER_00
Prices are up and so people are demanding that the government control prices and the government is trying to fix the problem of inflation by doing price controls, which is what they always do, which is catastrophic because it makes things worse.
6
SPEAKER_00
Implement price controls.
6
SPEAKER_00
When you say, all right, well, bread can t be sold for more than X price.
6
SPEAKER_00
Well, that s just preventing bread producers from producing a lot of bread, and that s just making the problem worse.
6
SPEAKER_00
If you let the price rise, the extra price, first of all, it makes people economize, so people will only buy what they need.
6
SPEAKER_00
And it provides the money for the bread producers to acquire the capital and the resources they need to produce more bread, which then brings the price of bread down.
6
SPEAKER_00
But price controls destroy that.
6
SPEAKER_00
And then they also implement wage controls.
6
SPEAKER_00
So you want to also make sure that people have high wages.
6
SPEAKER_00
So you raise people s wages artificially, you lower prices artificially, and you cause an economic problem.
6
SPEAKER_00
And this is basically, I use this historical example because it s the birth of fiat, because the Bank of England was the most important monetary system in the world at that time.
6
SPEAKER_00
And because it s the prototype that basically the entire planet copied over the last 100 years.
6
SPEAKER_00
We ve had this same thing happen.
6
SPEAKER_00
The government prints money because of a stupid reason, because somebody in power decided this was worth destroying everybody s livelihood and savings for.
6
SPEAKER_00
And then the consequences come in, and then they start covering up with price controls, wage controls, and then that makes things worse.
6
SPEAKER_00
And then they, and of course, throughout all of that, they re promising that we re going to go, oh, and oh, so the other thing that they did, which I mentioned in the chapter, is they stopped people from using physical gold, and they confiscated the, well, they didn t confiscate it, but they took the physical gold and they gave people paper.
6
SPEAKER_00
So I call it the fiat white paper.
6
SPEAKER_00
You know, in Bitcoin, we have the white paper.
6
SPEAKER_00
The Fiat White Paper was that the Bank of England announced to all of its banks and post offices that from now on you should not make payment in gold and you should take payment in gold and you should encourage all your customers to turn in all their gold and give them paper instead.
6
SPEAKER_01
Is there an actual document?
6
SPEAKER_00
Oh, yeah, yeah, yeah.
6
SPEAKER_01
Nice.
6
SPEAKER_00
Yeah, this is all new stuff.
6
SPEAKER_00
Obviously, nobody really likes to talk about this stuff because they re fiat economists, so they don t wanna talk about the original sin.
6
SPEAKER_00
Well, you should republish it as the fiat white paper or something like that.
6
SPEAKER_00
There s a fascinating book by a guy called John Osborne.
6
SPEAKER_00
So in the 1920s, I think his name was Montagu.
6
SPEAKER_00
He was the chief of the Bank of England.
6
SPEAKER_00
He commissioned one of his secretaries
6
SPEAKER_00
John Osborne to study what the bank did during World War I, and it was a study that was kept under wraps, confidential, in the Bank of England, only released in 2017, almost a century later.
6
SPEAKER_01
And- What was special about 2017, by the way?
6
SPEAKER_01
It s a year.
6
SPEAKER_01
It was a year in which some of this information was released.
6
SPEAKER_00
Yeah, a bunch of people got into parts of the basements of the Bank of England and found this and published it, and now you can download it as a PDF and find all of the amazing details.
6
SPEAKER_00
So they confiscated the gold, and they forced people to use the paper, and they promised people that as soon as the war is going to be over, this is temporary, we re going to be back to using gold.
6
SPEAKER_00
And of course, you know,
6
SPEAKER_00
If you told people in Britain, this is the real scam about fiat.
6
SPEAKER_00
If you told people in Britain in 1914, hey, we re gonna go off the gold standard because it s better.
6
SPEAKER_00
I mean, there might ve been lynchings of government officials because the British pound at that point, it had been the global currency of the whole world.
6
SPEAKER_00
And the fact that they d managed, the Bank of England had kept the British pound at a fixed rate next to gold
6
SPEAKER_00
Since Newton, the exchange rate, the value of the British pound was set by Isaac Newton himself.
6
SPEAKER_00
He was the warden of the mint and he made the pound specific amount of gold and since then, up until World War I, it was
6
SPEAKER_00
4.25 pounds per ounce of gold.
6
SPEAKER_00
I think I might be wrong, but I have it in the book.
6
SPEAKER_00
So he d set that price and it was a matter of national pride for people in England.
6
SPEAKER_00
The sterling is as good as gold because for two centuries it has been stuck to gold.
6
SPEAKER_00
There was the exception of the Napoleonic Wars, but for two centuries mostly it was stuck to that.
6
SPEAKER_00
And so they went off that.
6
SPEAKER_00
And then they couldn t go back because they wanted to go back.
6
SPEAKER_00
They didn t have enough gold.
6
SPEAKER_00
They shipped their gold to the US to finance the war and they had printed a whole bunch of money that was out there.
6
SPEAKER_00
So this begins the problem for England and that begins the end of England as the world s superpower.
6
SPEAKER_00
And the way they tried to fight that was to get more and more countries around the world to establish central banks and have unhold British pounds.
6
SPEAKER_00
So they d hold, basically dumping their bags, like just any other shit coin.
6
SPEAKER_00
If you get people to buy your shit coin, that raises the value of your shit coin.
6
SPEAKER_00
So- Can you define shit coin?
6
SPEAKER_00
Shit coin is, my definition of a shit coin is that it s any form of money where somebody can produce it.
6
SPEAKER_00
So soft money.
6
SPEAKER_00
Not necessarily, I guess.
6
SPEAKER_00
I think the difference, so there s easy money, but the shitcoin is something that someone can produce at a cost that is different from the market cost.
6
SPEAKER_00
So gold, nobody can make gold except that they dig for it, and the cost of mining gold is generally in the range of the price of gold.
6
SPEAKER_00
Seems true for Bitcoin.
6
SPEAKER_00
Gold is not a shitcoin.
6
SPEAKER_00
Gold is not a shitcoin.
6
SPEAKER_00
Copper is.
6
SPEAKER_00
I m not so sure.
6
SPEAKER_00
I wouldn t call copper a shitcoin as much as it is easy money, but I think government currencies and other altcoins I think are shitcoins because somebody could click a button and make 10 times the supply.
6
SPEAKER_01
Would it be fair to say that this began with the will for war in World War I?
6
SPEAKER_01
So the march towards fiat began with a global desire for war.
6
SPEAKER_01
in the 20th century.
6
SPEAKER_01
Did war start this or was war a result?
6
SPEAKER_00
It s difficult to say really.
6
SPEAKER_00
I think it goes both ways.
6
SPEAKER_00
I think you can t have permanent war without fiat.
6
SPEAKER_00
And I also think
6
SPEAKER_00
There s a case to be made that you can t really have fiat without war.
6
SPEAKER_01
So it s some kind of weird dynamical system with a chicken and egg situation, and they build on top of each other, and there s a few individuals that figured out there s a way to manipulate this, to play this kind of game, and it escalates.
6
SPEAKER_00
And nothing gives you the ability to manipulate money quite like war.
6
SPEAKER_00
When you have a war, you can declare an emergency, you can call all the people who oppose you traitors, you can
6
SPEAKER_00
you can get people to support you, not because what you re doing is good, but because you play on their sense of tribalism.
6
SPEAKER_01
In your book, you do cost-benefit analysis, so you do acknowledge or think about the pros of fiat currency.
6
SPEAKER_01
Can you do just that, look at the benefit and look at the cost just broadly at the highest level?
6
SPEAKER_00
So the way that I write the fiat standard is that I try and
6
SPEAKER_00
analyze it as an engineering system in the same way that I wrote the Bitcoin standard.
6
SPEAKER_00
So with the Bitcoin standard, I looked at Bitcoin from first principles and tried to explain how it works for a reader that doesn t really have much of a background in computer science, networks, or economics.
6
SPEAKER_00
And I thought I ll do the same with the fiat.
6
SPEAKER_00
You know, let s just ignore the official stories and look at how this thing actually works.
6
SPEAKER_00
And I think it does have value in the fact that it, you know, the reason that it was, that they were able to pull it off is because it was not possible for people who don t want to be part of it to use gold independently of governments.
6
SPEAKER_00
This is really the key thing.
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SPEAKER_00
Gold is just very expensive to move around.
6
SPEAKER_00
And the fact that it is expensive to move around means that there s,
6
SPEAKER_00
there s inevitably going to emerge institutions where it is centralized in physical location, and then these institutions trade liabilities for the gold.
6
SPEAKER_00
So really, the gold standard intrinsically must involve credit as becoming part of the monetary system.
6
SPEAKER_00
It has to be the credit, and because it gets centralized, it can easily be captured by the government.
6
SPEAKER_00
So to be fair,
6
SPEAKER_00
The benefit of the fiat system is that it saves us on the cost of moving gold around, which is pretty significant.
6
SPEAKER_00
Generally, you know, moving a bar of gold across the Atlantic is going to cost somewhere between 0.1 to 1% of the cost of the gold bar.
6
SPEAKER_00
So you move it 100 times back and forth between the Atlantic, you need to pay the whole gold bar.
6
SPEAKER_00
the cost of the whole gold bar to move it 100 times across.
6
SPEAKER_00
Well, with fiat money, it s essentially government credit, and so it s just sending a message from one central bank to another, and you can move it halfway around the world.
6
SPEAKER_01
Is there also something to be said about the cost in time?
6
SPEAKER_01
So you re saving, you re reducing the friction of the communication as well.
6
SPEAKER_01
Exactly.
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SPEAKER_01
Of the transactions as well.
6
SPEAKER_01
Exactly, it s faster.
6
SPEAKER_01
how big is that benefit?
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SPEAKER_01
Because wouldn t you argue that that potential is the thing that enables modern economy?
6
SPEAKER_01
Both the speed and the low cost, so increasing the scale and the frequency, the speed of the transactions.
6
SPEAKER_00
Yeah, arguably it does help in that regard.
6
SPEAKER_00
However, it isn t as if you couldn t have fast transactions built on top of gold.
6
SPEAKER_00
So you could have gold being used for final settlement, and you could have banks settling with one another, essentially using credit settlement.
6
SPEAKER_01
Can you define settlement just for people who are outside this world?
6
SPEAKER_01
Because we ll mention that word quite a bit probably.
6
SPEAKER_00
Good question.
6
SPEAKER_00
So the way that it works is let s say right now I m gonna pay you $10 over PayPal or credit card.
6
SPEAKER_00
So it shows up in your PayPal or credit card within a few seconds that I ve sent you the money and then that s yours.
6
SPEAKER_00
But it didn t also happen in those 10 seconds that my bank, which could be in another country, sent the money to your bank into your account.
6
SPEAKER_00
It s, there s a lot of infrastructure underneath that.
6
SPEAKER_00
So what actually happened is that I have an account with my bank and you have an account with your bank.
6
SPEAKER_00
And when the message is communicated from my app to yours, my bank crosses out the money and your bank credits you with the money.
6
SPEAKER_00
And then at the end of the day, week, or month, banks in the same city will settle with one another, banks in the same country will settle with one another, and banks from different countries will settle with one another.
6
SPEAKER_00
So they won t move the $10 from my account to yours at the end of the day, or week, or month.
6
SPEAKER_00
they ll tally all of the money that was sent from one bank to the other and then just settle the difference.
6
SPEAKER_00
So it turns out at the end of the month, my bank had sent $15 million to your bank and your bank had sent $14 million to my bank.
6
SPEAKER_00
So they give them $1 million and that settles it, that finalizes the transaction.
6
SPEAKER_00
So final settlement really is like the, you can think about it as the infrastructure of the system.
6
SPEAKER_00
And then you can think of these things as being the higher layer levels.
6
SPEAKER_00
And you had a wonderful discussion about that with Michael Saylor.
6
SPEAKER_01
So the final settlement is like the moment when you paper an idea s connect to physical reality.
6
SPEAKER_01
Or to some representation of physical reality.
6
SPEAKER_00
Yeah, and under gold,
6
SPEAKER_00
everything was tethered to physical reality because there was a market commodity at the bottom of all of this.
6
SPEAKER_00
And nobody could print that market commodity.
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SPEAKER_00
And so at the end of the month, if your bank made too many payments, if you made too many payments, there was a reckoning.
6
SPEAKER_00
If you were reckless, if you were insolvent, you went out of business.
6
SPEAKER_00
So there was no way to fool that.
6
SPEAKER_00
But then we moved to the fiat century and
6
SPEAKER_00
Everything is credit.
6
SPEAKER_00
At the end of the day, the final layer is government credit.
6
SPEAKER_00
And so as long as you re friends with the government, basically you never go bankrupt.
6
SPEAKER_00
So all kinds of hucksters manage to find their way into getting into position where they don t get bankrupt.
6
SPEAKER_01
So in part two of the fiat standard called fiat life, you describe the effects of fiat money on a bunch of things like life, food, science, education.
6
SPEAKER_01
what is the most pernicious effect of fiat money on our world, on our life?
6
SPEAKER_01
So it s taking a step outside of the monetary system, actually like how that affects our life from this book.
6
SPEAKER_00
I mean, there s a whole bunch of things and I won t be able to go over them and I highly recommend reading the book.
6
SPEAKER_00
But if I were to pick one,
6
SPEAKER_00
I would say it s the impact that it has on our time preference, on our valuation of the future.
6
SPEAKER_00
So remember when we started the discussion, I said that a key function of money is that it serves as a store of value.
6
SPEAKER_00
And the harder the money is, the better it is at providing us with a way for providing for our future.
6
SPEAKER_00
And so the harder the money is, the less we discount the future.
6
SPEAKER_00
We always discount the future compared to the present.
6
SPEAKER_00
So if I told you I m going to give you something today versus giving it to you 10 years from now, the same thing, you would prefer to take it now because then you d get to enjoy it over the next 10 years.
6
SPEAKER_00
So we always prefer the present to the future.
6
SPEAKER_00
there s always a discount on the future.
6
SPEAKER_00
And that discount is called time preference.
6
SPEAKER_00
The degree to which we prefer the present to the future is called our time preference.
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SPEAKER_00
So the higher our time preference, the less we care about the future.
6
SPEAKER_00
And the process of civilization is the process of lowering our time preference, where we start caring more for the future, we start prioritizing the present less and less.
6
SPEAKER_00
So we start being able to not consume everything that we have and store it.
6
SPEAKER_00
And so money is essential for that.
6
SPEAKER_00
And under the gold standard, everyone in the world had the ability to provide for their future by simply using the same money that they use.
6
SPEAKER_00
You know, you would work a day and you would get paid in a gold coin and you could take that gold coin and keep it safe for 10 years and know that at the end of those 10 years, that gold coin would buy you slightly more than what it bought you the day that you earned it.
6
SPEAKER_00
So anybody could provide for their future and anybody could have very high degree of certainty that whatever they re saving is going to be there when they want it in the future.
6
SPEAKER_00
Because the money supply was only increasing at one and a half percent, whereas the production of goods and services was increasing for most cases.
6
SPEAKER_00
for most periods at a higher rate than that.
6
SPEAKER_00
So you could buy more apples and oranges and houses and cars at the end of the 10 years than you could at the beginning of the 10 years.
6
SPEAKER_00
So everybody had a way of providing for the future.
6
SPEAKER_00
And with that, people lower their time preference.
6
SPEAKER_00
And that is reflected across all aspects of life.
6
SPEAKER_00
I think it s not just the economic thing.
6
SPEAKER_00
You see it in the savings rate, the ability to deny yourself gratification today.
6
SPEAKER_00
I could take the money that I have
6
SPEAKER_00
throw a giant party, buy a sports car, buy a yacht, and yet you decided I m not gonna do that, I m gonna keep it so that tomorrow I can throw a bigger party or buy a better yacht or have a better life or give my children a better life.
6
SPEAKER_00
So all of human civilization really is the process of us lowering our time preference and finding harder monies that allow us to provide better for the future is how we really technologically
7
SPEAKER_00
we do that.
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SPEAKER_00
I think of the hardness of money as being the control knob for our time preference.
7
SPEAKER_00
And you can see this reflected in the 20th century where we go from the money supply increases at around 1.5% under gold to this current situation where over the last 16 years I ran the numbers on money supply and fiat.
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SPEAKER_00
the global fiat supply has increased at around 14% per year.
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SPEAKER_00
So we ve done a 10X in the increase in the supply of money annually.
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SPEAKER_00
And 14% is a weighted average.
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SPEAKER_00
So if you take a basic numerical average for all fiat currencies, you get something like 30%.
7
SPEAKER_00
The average fiat currency increases by 30%.
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SPEAKER_00
But if you value it by the volume of each currency so that you re not giving equal weight
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SPEAKER_00
to the Venezuelan Bolivar increasing at 500% a year and the dollar increasing at 8% a year.
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SPEAKER_00
If you do it by value of the currencies so that you get the total supply fiat, it s something like 14%.
7
SPEAKER_00
Unweighted is 30%, you said?
7
SPEAKER_01
Yeah, 30%.
7
SPEAKER_01
Wow.
7
SPEAKER_01
It s insane.
7
SPEAKER_01
I d like to see the worst ones, the people that are tracking that average up.
7
SPEAKER_00
Yeah.
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SPEAKER_01
But 14% is still an incredibly high, high number.
7
SPEAKER_01
And so you re saying that, sorry, that s the average over the century or the past 100 years?
7
SPEAKER_00
Over the past 60 years, 1960 to 2020, we get World Bank data on that, pretty reliable data on World Bank and European Union OECD data.
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SPEAKER_00
I ran the numbers on that, weighted average, something like 14%.
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SPEAKER_00
And what effect that has on time preference?
7
SPEAKER_00
The effect is now it s much, much, much harder for everybody to provide for their future.
7
SPEAKER_00
Everywhere in the world it s much harder.
7
SPEAKER_00
So how do I...
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SPEAKER_00
get the equivalent of the old gold coin that I could just put under my mattress and expect it to be there ten years from now.
7
SPEAKER_00
While gold itself isn t cutting it, gold can t keep up with inflation, and the reason for that is that gold is not being used as a money anymore in that you can t send it internationally, you can t use it to settle trade internationally, which therefore means
7
SPEAKER_00
Demand for it monetarily is limited, and so it s becoming more and more an industrial metal, and as a result of the fact that its value doesn t keep up with inflation, it becomes economical to use it in industry, and so we re seeing gold become like silver, in that it gets used in industry, so the stockpile declines, and so the stock-to-flow ratio declines as well, and it becomes more and more of an industrial metal, and it can t protect your wealth over time very well.
7
SPEAKER_00
So what do you do?
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SPEAKER_00
Well, you could invest and this is kind of the obvious answer that Keynesians will give you is, well, you just put your money in an investment.
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SPEAKER_00
But investment is different from saving.
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SPEAKER_00
Saving, the whole point of saving is that the thing is liquid and that the thing carries little uncertainty.
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SPEAKER_00
You know, you just held the gold coin and it just sat there.
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SPEAKER_00
It did nothing.
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SPEAKER_00
It didn t take risk.
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SPEAKER_00
You knew that it was going to be there in 10 years.
7
SPEAKER_00
Investment means you give the gold coin to somebody to go and do something with it and it could work, it could not work.
7
SPEAKER_00
If it works, you get a positive return, you get more gold back.
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SPEAKER_00
If it fails, you might not get any of your gold back.
7
SPEAKER_00
So, taking on risk is something very different from saving.
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SPEAKER_00
Saving is just a way of buying the future.
7
SPEAKER_00
Investing is taking on a risk and you could lose everything with it.
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SPEAKER_00
So, what ends up happening, and this is, you know, the Keynesian objection I think is very wrong and bad because, you know,
7
SPEAKER_00
investment is a job in itself.
7
SPEAKER_00
To figure out what to do with your money in order to beat inflation is something that, you know, there are professionals out there on Wall Street that have PhDs in finance, that have enormous computers, and they have enormous staffs of PhDs and master s degrees and math nerds that are crunching numbers and figuring out how to allocate your portfolio so that you can beat inflation.
7
SPEAKER_00
And guess what?
7
SPEAKER_00
The majority of them don t beat inflation.
7
SPEAKER_00
The majority of them can t beat inflation.
7
SPEAKER_00
not as measured by CPI, which is completely fraudulent, but if you remember- 14%.
7
SPEAKER_00
Yeah, that 14%, or even the 7%, like if you look at just the increase in the money supply, which I think is a much better metric, and this is what s reflected on the desirable goods.
7
SPEAKER_00
Like if you look at the price of real estate in Miami Beach, as Michael Saylor mentioned in your example, it goes up at around 6, 7% per year on average over the last century.
7
SPEAKER_00
So that s, you know, if you want to live in a nice area, that s what happening to real estate.
7
SPEAKER_00
If you want to go to the good universities, that s what s going on.
7
SPEAKER_00
It s going up at a rate that s similar to the increase in the money supply.
7
SPEAKER_00
And you can beat CPI, but you know, CPI is designed so you can beat it, but you can t really beat
7
SPEAKER_00
the appreciation in the things that you actually want to buy and the price of good food, the price of good real estate.
7
SPEAKER_00
So, and you know, most investment professionals fail at doing that.
7
SPEAKER_00
So what hope does a doctor or an engineer or a scientist or an athlete have in doing those things?
7
SPEAKER_00
Investment is hard and saving should be easy.
7
SPEAKER_00
Exactly, saving is essential for us as a civilization and what fiat did is it took that away from us and then it forced everybody to become an investor or more accurately a gambler because you re not just even, because the money itself is broken, because the money itself is constantly changing in value, investing is becoming more of a crapshoot.
7
SPEAKER_00
I mean value investing is completely underperforming compared to market analysis.
7
SPEAKER_00
You listen to the Fed and what matters to the price of individual companies is monetary policy much more than it is their own performance.
7
SPEAKER_00
So basically you need to be a junkie watching the Fed and following all of the world s central banks and you need to learn macroeconomics and you need to learn what all the central banks are doing and you need to understand how commodity markets work and you need to understand how equity markets work and bond markets and real estate markets.
7
SPEAKER_00
You need to do all of those things just in order to be able to save and earn and keep the money that you ve already earned.
7
SPEAKER_00
That s the criminal thing about it.
7
SPEAKER_00
I ve already earned that money being a doctor, being a dentist, being an athlete, being an engineer.
7
SPEAKER_00
I ve built a house for somebody and I got that money and all I wanna do is just make sure that I can have it 10 years from now.
7
SPEAKER_00
The only way to do so is to become a crappy engineer because you have to spend half your time not doing engineering and instead spend half of that time learning about Japanese central bank monetary policy and commodity markets and what s gonna happen to copper and what s gonna happen to oil.
7
SPEAKER_00
what s happening in the wars and what s happening with foreign policy and Russia and the US and all of those things.
7
SPEAKER_00
Under the gold standard, you didn t care about any of that stuff.
7
SPEAKER_00
Your gold coin worked regardless of all of those things.
7
SPEAKER_00
So what this means is the future.
7
SPEAKER_00
So first of all, we have all of the problems I mentioned but also
7
SPEAKER_00
it means that the future becomes much more uncertain.
7
SPEAKER_00
So you re far less likely to provide for yourself 10 years from now, far less likely to find an easy way to give yourself value 10 years from now, and so you become more short termist.
7
SPEAKER_00
And that is reflected economically in a lower savings rate, and we see savings rates decline, but it is also reflected in all manners of decision making.
7
SPEAKER_00
And I think if you really wanna see what it is, take a look at a society that goes through hyperinflation,
7
SPEAKER_00
And look at what happens there.
7
SPEAKER_00
How do people change under hyperinflation?
7
SPEAKER_00
And compare that to essentially what we see in the 20th century all over under, not hyperinflation, but under low inflation.
7
SPEAKER_00
10, 15% that you see across the board most of the time is just slow motion hyperinflation.
7
SPEAKER_00
So what happens in hyperinflation?
7
SPEAKER_00
Everybody gets their paychecks.
7
SPEAKER_00
They run straight to the supermarket.
7
SPEAKER_00
They spend all of their money.
7
SPEAKER_00
Nobody thinks about savings.
7
SPEAKER_00
Nobody thinks about the future.
7
SPEAKER_00
Survival until the end of this month is highly uncertain.
7
SPEAKER_00
How likely are you to be planning for what you re going to be doing five years from now?
7
SPEAKER_00
very unlikely, but also it s reflected not just economically, it s also reflected in all aspects of morality and all the way in which we deal with each other as human beings.
7
SPEAKER_00
When your survival is precarious, how much are you invested in the notion of being a good citizen, on caring about your reputation, on caring about not getting caught in a crime?
7
SPEAKER_00
all of these things become harder to value.
7
SPEAKER_00
So people start committing crime, people start caring less and less about the future.
7
SPEAKER_00
And we see it reflected in everything.
7
SPEAKER_00
And I argue, you see it reflected in architecture.
7
SPEAKER_00
You know, we used to build houses in the 19th century that last until today.
7
SPEAKER_00
And then in the 20th century, we build essentially disposable cardboard boxes that get scrapped in 20 years.
7
SPEAKER_01
So what can you say about potential positive effects of lower time preferences?
7
SPEAKER_01
I mean, it s a balance.
7
SPEAKER_01
Basically, you re talking about an average kind of time preference, but there s some things in life where low time preference can be a negative thing.
7
SPEAKER_01
So if I want to take on risk, not for investment, for a kind of investment, but say I want to start a business,
7
SPEAKER_01
I wanna take something crazy, take a leap into the unknown, be an entrepreneur.
7
SPEAKER_01
What can you say about that kind of leap?
7
SPEAKER_01
Taking on debt, what s the value of that within the current system?
7
SPEAKER_01
What s the right approach to that within the current system?
7
SPEAKER_01
What s the right approach overall from an economics perspective?
7
SPEAKER_01
So it s not saving for the future.
7
SPEAKER_01
It s doing something wild, taking the money from your mattress, taking on debt, and having a dream in your heart that you somehow just want to do.
7
SPEAKER_01
Maybe it s not the wisest investment decision, but it s something, you know, it s being human.
7
SPEAKER_01
It s taking a leap into the unknown, because something in your heart says to do it.
7
SPEAKER_00
I think you re more likely to be taking the leap in the unknown when you have a little bit of gold in the mattress than when you don t.
7
SPEAKER_00
I think this is the thing.
7
SPEAKER_00
If you look at the late 19th century, and I discussed this in the Bitcoin Standard, that was arguably the most innovative period in human history.
7
SPEAKER_00
There s qualitative evidence.
7
SPEAKER_00
Look at the world around you today.
7
SPEAKER_00
Pretty much everything that we use was invented in that period.
7
SPEAKER_00
The car, the airplane, the telegraph, the telephone, the camera.
7
SPEAKER_00
Pretty much modern life as late 19th century.
7
SPEAKER_00
The period between 1870 and 1914, because the whole world was practically on a gold standard,
7
SPEAKER_00
the whole world was using the same money and the whole world could save in the same currency that meant that a bicycle shop owner two bicycle shop owning brothers in north carolina could go and try and fly even as all the scientific experts in 1903 were confirming that
7
SPEAKER_00
the possibility of flight has been debunked as unscientific.
7
SPEAKER_00
Lord Kelvin said, not in a million years we re going to be flying.
7
SPEAKER_00
Thomas Edison said it s never gonna happen.
7
SPEAKER_00
No, I think it was Edison who said a million years, but Kelvin also said it s never gonna happen.
7
SPEAKER_00
The New York Times said it s never gonna happen the same month in which the Wright brothers did it.
7
SPEAKER_00
And they continued to deny that it was gonna happen even two years after they did it.
7
SPEAKER_00
But that s, why could they do that?
7
SPEAKER_00
Because they had savings in gold.
7
SPEAKER_00
They had the security with something that you know is gonna be there.
7
SPEAKER_00
And then you can take a risk with the stuff that is extra.
7
SPEAKER_00
I have say three years expenditures in gold under my mattress.
7
SPEAKER_00
And I know that I could take a risk with everything else because whatever bad things happen with all of my dreams, like even flying, think about how insane that is.
7
SPEAKER_00
I still can go back to the three years of gold that I have saved.
7
SPEAKER_00
It s still okay to take on debt given the stuff, the gold under the mattress?
7
SPEAKER_00
Well, this is the thing.
7
SPEAKER_00
Under the gold standard, the way that people finance things was predominantly with capital, with equity.
7
SPEAKER_00
Because you had gold savings, I had gold savings, everybody had gold savings,
7
SPEAKER_00
When you wanted to start a business, you could use your own savings or somebody else s savings.
7
SPEAKER_00
So you didn t need to get into debt.
7
SPEAKER_00
Well, you could get equity from others and you could also get debt from others.
7
SPEAKER_00
So there was- But it s directly mapped to physical reality.
7
SPEAKER_00
Yeah, it s directly mapped to economic reality and that there s a hard money out there that what you re spending money, you wanna build your airplane factory.
7
SPEAKER_00
you need to get actual resources, so you get actual gold, either yours or somebody else s.
7
SPEAKER_00
You borrow it or you give them equity, but there s real resources.
7
SPEAKER_00
Now, what happened with the fiat system, and this is the first part of the book where I d look at it from an engineering kind of perspective, is essentially, and I think this is like the breakthrough insight of the book, what fiat does is that it replaces gold mining with credit creation.
7
SPEAKER_00
The way that we make fiat money, the way that fiat is mined into existence is through credit creation.
7
SPEAKER_00
Most people think of fiat money as being something that happens when government prints money.
7
SPEAKER_00
And we still use the term government s printing money, but the vast majority of fiat is not physical.
7
SPEAKER_00
And in fact, fiat is not created when it is printed physically, it s created when it is lent.
7
SPEAKER_00
So when you go to a bank to get a $1 million loan to buy a house, that bank is not gonna give you a million dollars from their own money or from their depositors  money.
7
SPEAKER_00
They re going to make a fresh new million dollars.
7
SPEAKER_00
When you walk out of that bank, the money supply has increased by one million dollars to finance your home.
7
SPEAKER_00
So what fiat does is, I mean, it was basically born out of government credit and the credit of banks that are backed by the central bank and the government.
7
SPEAKER_00
So if you re part of the institutions that are allowed fiat privilege, where you can just issue loans backed by the central bank, backed by the currency, you are effectively creating new currency, new money every time you issue the loan.
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That s fiat mining is credit creation, I love it.
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SPEAKER_01
So can you say something, I mean, you can t really have credit without a demand for credit.
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You can t really have an increase in supply without a demand for it.
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Is there any value you place
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in the humans wanting it?
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Basically, people wanting to do something with that credit, wanting to take big leaps, big risks, big entrepreneurial decisions.
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SPEAKER_01
So is it all credit bad?
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SPEAKER_00
No, I think what s bad is, you know, anything in my opinion, anything that is consensual, you know, I want to borrow money from you and we agree the terms, I can t object to that.
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As long as you and I both agree, I can t object to that.
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But in the case of the fiat system, it s not just you and the bank who come to an agreement.
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everybody who uses the currency is forced to be part of that agreement.
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Because if you default, you know, effectively what s protecting the bank from you is the fact that the government can just print a bunch of money and make the bank whole.
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So effectively... So that little agreement between
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the bank and you is actually an agreement between the bank, you, and the entire populace that s using the currency.
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Exactly, they re forced to provide the safety net for you and me to go and make that loan.
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And that safety net is the devaluation of the currency.
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That s how the whole thing actually works.
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So this is why, you know, I wrote the Bitcoin Standard, explaining Bitcoin, and basically the takeaway message of the Bitcoin Standard is you need to stack as much Bitcoin as you can, because this is the best money that has ever been invented.
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And we ll talk about that, why Bitcoin is the hardest money.
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But with fiat, the conclusion of the fiat standard, and again, this is not financial advice, I m a lowly academic, you shouldn t listen to me on issues of money, but I think theoretically and intellectually, the conclusion of the fiat system is you need to be short fiat as much as you can.
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That s the smart winning move.
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So human wisdom over thousands of years is to save, try and not borrow as much as you can, try and accumulate as much savings as you can.
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That s reversed under fiat.
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If you re saving money, you re just subsidizing everybody else taking on loans.
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If you re taking on loans, you re benefiting from all the people that are borrowing.
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So the winning move under the fiat system, and this is what rich people do, is you borrow.
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Rich people under the fiat monetary system, they don t hold assets.
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If you re worth a billion dollars today, you don t have a billion dollars in a checking account.
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You ve got maybe a hundred thousand, a million, five million or something like that.
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A tiny fraction of your money is held in cash.
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The majority is going to be held
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in all kinds of other hard assets, and you re gonna be borrowing.
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The richest people in the world are the biggest borrowers in the world.
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The most powerful entities in the world, the governments, are the biggest borrowers in the world.
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And that s how they are the richest and the most powerful, because every time you re borrowing, you re giving the bank an excuse to print new money.
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So you re devaluing everybody else s money and you re getting a bit of the cut.
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If you were going to buy a house with your savings, you re accumulating the savings and they re losing value,
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And if I were to go to buy the same house with credit, I m getting the bank to print money for me.
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So obviously they can cut me in on that deal.
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And that s why it s much cheaper for everybody to buy with credit.
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That s why everybody buys everything on credit.
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So when we look at the global monetary system, the thing you want to do as a government is be the sexiest
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currency out there.
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So the main currency, like the dollar currently is, is the one that has the most power in that kind of context.
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So you have, if you were to try to summarize what is the global monetary system as it is today, it s a bunch of fiat currencies battling for position, for use outside their nation,
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and in so doing, trying to gain power in the geopolitical sense?
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Is that, if we just zoom out, what is the global monetary system?
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SPEAKER_00
Like how, what is it currently, so outside of the United States, the whole thing?
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SPEAKER_01
Yeah, you could say that, but I think it s more realistic looking at how it has actually evolved over the past few decades.
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It s really a dollar system.
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It s not a system of currencies, of buying with one another.
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It s a dollar system, and all other currencies are just basically, I like to call them dollar plus country risk.
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So each- It always returns home to the dollar.
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Yeah, there is no competition.
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There is no second best, as Michael Saylor would say.
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And money is like that.
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Gold was a winner-take-all by the end of the 19th century.
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The global monetary market is effectively a winner-take-all for the dollar.
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And if we get it to Bitcoin, you ll know I also think digital currencies are also going to be a winner-take-all situation.
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So Mark, money wants to be won.
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In fact, there is no such thing as multiple currencies.
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Multiple currencies is just a step back to barter.
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Money is won.
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If you go back to a system of several currencies, you re just reinventing barter.
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So in the case of the dollar system, the global dollar system is built around the dollar.
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because all central banks have dollar reserves and because all central banks use the dollars clearing mechanisms so that s why you re basically playing in the dollar system this seems to have changed over the last couple of months with the sanctions on russia and the confiscation of russian reserves
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It remains to be seen what that s going to do and how that s going to change, but it is looking like this dollar system is clearly unsustainable.
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SPEAKER_01
It s not sustainable for the US, it s not sustainable for anybody.
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SPEAKER_00
Speaking of which, so you...
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do an amazing podcast called the Bitcoin Standard Podcast.
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SPEAKER_00
So episode 108 of that podcast is about the very thing you just mentioned and allow me please to read the description of that and then ask you a couple questions about your thoughts in general.
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The description reads, after the Russian invasion of Ukraine, the US confiscated the Russian Central Bank s significant monetary reserves and banned some Russian banks from the SWIFT network.
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Serious questions are being asked about the survival of the post-war dollar
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based world monetary order.
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Will Russia, China, and other countries actually build an alternative international settlement system after years of threatening to do so?
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Will global central banks stop accumulating U.S.
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Treasury bonds and replace them with gold and commodities?
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Will we witness the birth of a new commodity gold-based monetary order?
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In this seminar, we use the insights from the Bitcoin standard and the fiat standard on temporal and spatial salability to explain why reports of the death of the dollar and the emergence of a new gold standard may be exaggerated.
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SPEAKER_00
So, I would love to get your analysis on this situation.
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What are the fundamentals of it?
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What is SWIFT?
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What are the possible future evolutions of the global monetary system?
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SPEAKER_01
Yeah, so SWIFT is the network that the US Federal Reserve uses for moving money around the world.
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So basically, the US government can sanction you off of SWIFT, as they ve done with Russian banks, as they ve done with Iran, and as they ve done with Afghanistan.
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So effectively, I mean, this is really the catastrophe of the current monetary system is that in order to be able to trade as a member, as a citizen of your country, you need your monopoly local central bank to be on good terms with the US government so that they would let them operate it.
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And this is really like on top of the aspects of the hardness of money, this is the other really powerful thing about Bitcoin,
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which is that it s just purely a technological thing.
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It doesn t matter if you re Russian, if you re Iranian, if you re American, if you re Chinese, it s a technology.
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And so it s like a spoon or a knife or a car, you operate it properly and it works.
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And so with Bitcoin, it s the same thing.
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It doesn t care about your passport.
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If you have the private key, you click send and the money goes, well, it doesn t really go, but effectively it does go.
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anywhere at once and the money can move without having to abide by political situations.
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And the point here is not to bash U.S.
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foreign policy much as that might be deserved.
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I m just going to discuss it from a kind of technical perspective.
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It has to be a political system with fiat because ultimately it relies on credit and then the government is the one that has the guns and the government is going to decide who gets to pay their loans anyway and the government s
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going to have to make its own rules about who gets to play and who doesn t.
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And so it has to be political as this kind of fiat system.
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And, you know, when I wrote the Bitcoin standard, initially I used to be much more of a gold bug.
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And in my mind, you know, gold bugs have spent the last 50 years saying the global monetary system is gonna collapse next week and we re gonna go back to a gold standard.
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And writing the fiat standard gave me a very good appreciation for why this hasn t happened and why it s not very likely to happen.
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I think the reason is, as I said earlier, it s just gold is very expensive to move around.
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And perhaps more importantly, it s very expensive to verify.
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That s really the problem with it.
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It s very expensive to verify that the gold that you re receiving is original gold.
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So the only way to do this properly is to melt the gold bars down and recast them, which is pretty expensive.
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So we have this situation now where Russia, which is one of the biggest economies in the world, has been kicked off to varying degrees off the global monetary system and the US has confiscated their reserves.
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I don t have political opinions about the war.
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It s not something I m very familiar with.
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It s outside of my area of expertise.
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I m just analyzing the monetary aspects of it.
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It is on the one hand whether you think the war is justified or the sanctions are justified is not something I can opine on but the implication of this is that effectively the US might be shooting itself in the foot because it s telling everybody in the world.
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Your money in our system is not really your money.
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It s just a token to play in our arcade.
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At any point in time, if you misbehave, we kick you away out of the arcade and we take your tokens.
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And so, I mean, this is something that China, Russia, Iran, and many countries have made a lot of noise about over the past decades.
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It got real this year.
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But it s been decades of China, Iran, and Russia to some extent saying that we wanna build an alternative to the US dollar-based system.
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And yet they haven t.
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And I think there s very good reasons they haven t.
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And the reason is, what do you do with it based on?
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How do you build it?
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So you can do a credit-based system based on, but then who s going to be the big boss?
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Is it gonna be China?
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Is it gonna be Russia?
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Is it gonna be Iran?
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Is it gonna be India?
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None of these countries wants to be – they don t want to jump out of the US-based system to get into somebody else s base system.
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So China doesn t want to use a Russian system.
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Russia doesn t want to use a Chinese system and so therefore you can t use their own central banks currencies.
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SPEAKER_00
Don t you think they have enough leverage?
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SPEAKER_00
India, China, Russia combined with several other nations have enough leverage and incentive to create their own system.
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SPEAKER_00
So any one player, yes, but if they collaborate.
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SPEAKER_01
Yeah, but then, okay, so what are you based on?
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Who s going to be the boss?
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Who s going to be the one who can?
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SPEAKER_00
In this case, China, right?
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SPEAKER_00
Because China is becoming increasingly an economic power in the world that s hard to deny.
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SPEAKER_00
Yes, it s true.
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And it s the most likely scenario, perhaps, if we were to witness something like this, is going to be a Chinese-based system.
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So is it possible to have like a split in what is the driving currency of the world?
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SPEAKER_01
It s possible, but I don t think it s sustainable.
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Again, money wants to be won.
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And that s the kind of thing that I argue in that seminar.
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So we could see this emerge based around the yuan.
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And, you know, likely, I mean, Russia is obviously going to hurt economically from what happened from the confiscation of the reserves and from the sanctions.
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So it s not going to be in a position.
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And of course, because it s outside of the US based system, it s not in the strongest negotiating position with the Chinese.
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So the Chinese might be able to get them to join their yuan based system.
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But I don t think that s sustainable in the long run because these governments can issue their laws and make their designs and then make their monetary systems, but ultimately,
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SPEAKER_01
there are billions of Chinese people and billions of dollar-based people and they re going to want to trade with one another and the power to want to trade with one another is too strong that we can t just split the world economy into two monetary systems that don t trade with one another so then they re going to want to trade with one another or the dark
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SPEAKER_00
possibility is it, the inability to trade, as opposed to being a forcing function for trade, it become a forcing function for conflict in cyberspace and potentially hot war.
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SPEAKER_01
Yes, this is the scary part of it.
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And this is basically how World War II happened, you know, because there s an old historian who used to say when, I think his name is Otto Mallory, and I quote him in the Bitcoin Standard, if goods don t cross borders, then bombs will.
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If people trade with one another, they have an incentive for each other s well-being and then they have less of an incentive to fight.
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And it was the death of global trade in the 1930s because of the failure of the fiat system that brought about the rise of the populism and the rise of all those leaders that hated each other and helped finance the war and bring it about.
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So that is the scary possibility.
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And of course, you can t discount that with all of the escalation that you see, that is a possibility that it could turn into a real war.
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But then even so, I think ultimately, you can t fight wars forever.
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It s going to end at some point.
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And we re gonna be back at square one, or well, not square one, we re gonna be back at the same dilemma of who s going to have the global monetary system.
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And so one alternative is that what the Chinese and the Russians could do is they could base it on a commodity.
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SPEAKER_01
So a lot of people are now saying, well, they re gonna base it on copper and corn and agricultural commodities.
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And that s the analysis of salability that we discuss in the Bitcoin standard and the fiat standard.
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SPEAKER_01
I don t think that s workable.
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SPEAKER_01
If you end up basing the monetary system on copper, as we said earlier, doesn t matter how many governments say that we re gonna make a new monetary system based on copper grains and nickel and iron and so on, doesn t matter.
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You re gonna have to stockpile those things in order to make a market in them.
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And then if you stockpile those things, you re just raising their value, inviting the producers to make more, flood the market.
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SPEAKER_01
I hope they don t try this because it s going to be a devastating, devastating impact on the world economy.
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You re gonna have central banks bidding up the price of essential commodities that people need for real uses in order to back their currencies with them.
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And then just incentivizing the producers to make more and more and more of it.
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and then bringing the price back down.
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So it s gonna be a very expensive mistake where we raise the price of copper, destroy a lot of industries dependent on copper, and it s not just copper, but also food, and then increase the supply beyond what we need.
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And the end result is copper miners make out well, governments go broke, and we end up with a lot of rusting copper in government warehouses.
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That s why I don t think it works for the,
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to use commodities that are not monetary commodities.
8
SPEAKER_01
Then the question is maybe gold.
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Can we go back on another gold standard?
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And I mean, Russia seems to have done that.
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SPEAKER_01
I m not so sure.
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It s very difficult to get reliable information.
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I m trying to look into this more.
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But they seem to have said that they re fixing the price of gold in rubles.
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So they will buy and sell gold at a fixed ruble rate, which effectively means you re on a gold standard.
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SPEAKER_01
Now, I m not sure how serious this is, how they ve managed to stick to it, but it seems to have stabilized
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SPEAKER_01
and in fact brought it back to its pre-war level, which I found absolutely astonishing, you know, considering all the sanctions going on.
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SPEAKER_01
But in the short run, it s obviously much better than having your currency pegged to nothing.
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SPEAKER_01
But in the long run, I also don t think gold is gonna cut it in the 21st century.
8
SPEAKER_00
Do you think there s any chance they go full gangster move and go into the digital space on the blockchain and go with Bitcoin?
8
SPEAKER_01
I think the point of this discussion is that we run through all these other options, a Chinese-based system, why it probably won t work, a commodity-based system, why it won t work, and a gold-based system, why it won t work.
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SPEAKER_01
I think they might have to learn this the wrong way, I mean, the hard way.
8
SPEAKER_01
But eventually, I don t see them doing it now, but eventually I think the winning move is going to be to go on a Bitcoin-based monetary system.
8
SPEAKER_00
Well, I don t know if everything always has to be the hard way.
8
SPEAKER_01
I d love it not to be, but I mean, it doesn t look like there is any kind of desire in China or in Russia to switch to a Bitcoin-based system.
8
SPEAKER_00
To leap to Bitcoin.
8
SPEAKER_01
So unfortunately, I think we re gonna go through a few years, maybe many years,
8
SPEAKER_01
learning the lesson the hard way of trying to accumulate these commodities and seeing the limitations that make them unsuitable as money today.
8
SPEAKER_00
One of the things I m really concerned about is the tension, the amount.
8
SPEAKER_00
The increasing amount of hate in the world.
8
SPEAKER_00
Yes.
8
SPEAKER_00
And the increasing amount of power centers in the world between which hate is making a regular appearance and because the weapons of war are becoming more and more powerful as they have been in the past.
8
SPEAKER_00
many decades, I m really concerned about nuclear war.
8
SPEAKER_00
So let us see if Bitcoin can fix this.
8
SPEAKER_00
Yes, Bitcoin fixes all of this.
8
SPEAKER_01
First rule of Bitcoin is if it s a problem, Bitcoin fixes it.
8
SPEAKER_00
All right, well I have some personal questions for Bitcoin then, because I have some, my life is pretty fucked up, so I ll have to try to see.
8
SPEAKER_00
Quick pause for a bathroom break, you need anything?
8
SPEAKER_00
Sure.
8
SPEAKER_00
Let s return to the basics.
8
SPEAKER_00
What is Bitcoin?
8
SPEAKER_00
We started with what is money, what is Bitcoin?
8
SPEAKER_00
We talked about hard money, inflation, fiat, the history of money, the history of war in the 20th century, and that takes us into the 21st century.
8
SPEAKER_00
What is Bitcoin?
8
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Bitcoin is a software, and it s a distributed software, to operate a peer-to-peer network between members who are all equal on the network, they re all peers.
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SPEAKER_01
And what this software does is that it allows you to operate a payment network between those peers, and that payment network has its own currency.
8
SPEAKER_01
And that seems like, you know, just a simple software game.
8
SPEAKER_01
But the reason this is such a big deal is I believe Bitcoin is the most advanced form of money ever invented.
8
SPEAKER_01
And the reason for that comes from two properties that this network has.
8
SPEAKER_01
The first one is that the currency is the hardest money ever invented.
8
SPEAKER_01
It s the money whose supply...
8
SPEAKER_01
It s the most resistant to inflation.
8
SPEAKER_01
It s the first monetary asset that we ve ever invented that is guaranteed to be fixed in its supply that cannot be increased beyond a certain number.
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SPEAKER_01
So there s only ever going to be 21 million bitcoins and that s a qualitative leap forward in our technologies of money.
8
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leak, essentially, because people can always make more and more and more of them.
8
SPEAKER_01
The best money is the one that leaks the least, which is gold, because it only leaks 1.5%.
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SPEAKER_01
In other words, your share of the gold stock is diluted by 1.5% every year.
8
SPEAKER_01
Ideally, you d like it to be zero.
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SPEAKER_01
Bitcoin is currently at around 1.8%, headed towards zero.
8
SPEAKER_01
So it s the first money that we ve ever had that goes to zero in terms of terminal supply.
8
SPEAKER_01
there ll never be more than 21 million Bitcoin.
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SPEAKER_01
And I think that s a huge deal because, as I said earlier, money is always whatever is the hardest to make, and now Bitcoin is the hardest thing to make.
8
SPEAKER_01
And then the second property, which is extremely important as well, is the fact that it operates without the need to trust in anybody.
8
SPEAKER_01
It doesn t have a party that is in charge of it.
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SPEAKER_01
It doesn t have a central authority that can, as I said,
9
SPEAKER_01
It s peer-to-peer, so it only has users.
9
SPEAKER_01
It doesn t have any admins.
9
SPEAKER_01
There s no authority in charge of Bitcoin that can take your Bitcoin, that can stop you from using Bitcoin, that can change the rules of Bitcoin.
9
SPEAKER_01
They can t make more of it.
9
SPEAKER_01
So it s fixed.
9
SPEAKER_01
It s available for anybody in the world.
9
SPEAKER_01
It s the hardest money ever invented.
9
SPEAKER_01
And it is absolutely, I think, an enormously, enormously significant invention because if you read the fiat standard and the Bitcoin standard as well, you ll see my perspective for why I think a very large number of problems in the world are caused by easy money, are caused by inflation.
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SPEAKER_01
and caused by government having access to essentially an infinite recourse to people s wealth.
9
SPEAKER_01
And I think Bitcoin fixes this because it allows us to have money that has the salability of gold across time, meaning it holds its value across time like gold, but much better than gold.
9
SPEAKER_01
But also it is similar to fiat in that fiat can travel quickly, but Bitcoin can travel even faster than fiat.
9
SPEAKER_01
It combines gold s salability across time with fiat s salability across space in one immutable package that nobody can change and nobody can control.
9
SPEAKER_01
Can you define the word salability?
9
SPEAKER_01
Salability is the essential property of money.
9
SPEAKER_01
It s the ability of
9
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a good to be sold easily on the market, specifically to be sold without much loss in its value.
9
SPEAKER_01
So houses are great for living in, but they re not very saleable.
9
SPEAKER_01
If you want to sell a house, you can just click a button and sell a house and have a giant market of people buying houses from you.
9
SPEAKER_01
You need to find somebody who wants the exact house that you have with the exact specifications that you have.
9
SPEAKER_01
And because, you know, houses are not identical, there s no liquid giant market for people to just buy and sell identical houses from.
9
SPEAKER_01
So gold, for instance, has good salability as money.
9
SPEAKER_01
because it s a liquid good, it s uniform, and people are always buying it.
9
SPEAKER_01
Fiat dollars have great salability because everybody s always buying and exchanging dollars for other goods.
9
SPEAKER_01
So if you have $100 bill, you can easily get rid of it, and you ll get $100 worth of stuff for it.
9
SPEAKER_01
If you have $100 worth of stuff, it s harder to get rid of it.
9
SPEAKER_01
If you have $100 worth of phone, it s not as easy to spend it as $100 bill.
9
SPEAKER_01
That s salability.
9
SPEAKER_00
What do you mean that Bitcoin, I understand that Bitcoin has the salability of gold across time.
9
SPEAKER_00
Better even, yeah.
9
SPEAKER_00
Better, yes, like on the order or whatever.
9
SPEAKER_00
And then it has the salability of fiat across space, what does that mean?
9
SPEAKER_01
So if you remember when you asked me what is the advantage of fiat, what is the advantage it offers us, it s cheaper to move fiat across space than it is to move gold.
9
SPEAKER_01
with the current fiat monetary system for all of its flaws, you know, you can send money, you know, I could send money from my bank account in the US to a bank account in China in a couple of days or in Britain, in France in a day or two, which is, you know, much faster than you could do with gold and much cheaper than you could do with gold.
9
SPEAKER_01
But in reality with fiat, you know, the reason Bitcoin improves on that is that with Bitcoin, you re actually selling, you re sending final settlement in a couple of hours.
9
SPEAKER_01
So you send the Bitcoin transaction, you get six confirmations in an hour, you get about 12 confirmations in two hours on average.
9
SPEAKER_01
With 12 confirmations, you know, you re pretty definitely clearly safe on this.
9
SPEAKER_01
So within a couple of hours, you could send a billion dollars across the ocean and have final settlement on them.
9
SPEAKER_01
It s not just that you ve sent a credit obligation that s gonna need weeks and months to settle, which is the case with fiat.
9
SPEAKER_01
So it is faster than fiat, effectively.
9
SPEAKER_01
So it s harder than gold and faster than fiat.
9
SPEAKER_01
That s a good way of putting it.
9
SPEAKER_00
One other aspect of Bitcoin, I have to ask, to me on a human level, it s fascinating, is it was founded by Satoshi Nakamoto, an anonymous founder, there s no leader.
9
SPEAKER_00
So that s another aspect of the decentralization, it s leaderless.
9
SPEAKER_00
Yeah.
9
SPEAKER_00
So, unfortunately, it s not a monarchy?
9
SPEAKER_00
Fortunately.
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SPEAKER_00
Or fortunately, yes.
9
SPEAKER_00
Who is Satoshi Nakamoto, do you think?
9
SPEAKER_00
And first of all, is it you?
9
SPEAKER_01
It definitely is not me.
9
SPEAKER_01
I don t know who it is.
9
SPEAKER_01
If it was, would you tell me?
9
SPEAKER_01
It s a trick question.
9
SPEAKER_01
I know, trick question.
9
SPEAKER_01
But I mean, everybody who knows me knows I can t really code.
9
SPEAKER_01
So you would say that even if you could.
9
SPEAKER_00
That s true.
9
SPEAKER_00
Do you think it s one person?
9
SPEAKER_00
Do you think it s multiple people?
9
SPEAKER_00
Is it interesting to you?
9
SPEAKER_00
Do you think it s fundamental to the coin itself, to not the coin, the entirety of the concept, that it s founders and animus?
9
SPEAKER_00
And how much guts do you think it takes if it s one person to just walk away from so much money?
9
SPEAKER_01
I ve considered all these questions many times.
9
SPEAKER_01
It s very hard to formulate a definitive answer to all of them.
9
SPEAKER_01
I don t know who it is and I don t know why he or them or she are not spending the coins that they most likely have.
9
SPEAKER_01
I think what really matters in Bitcoin about Satoshi is the fact that he s not there.
9
SPEAKER_01
And this is what s truly astonishing about it.
9
SPEAKER_01
The most important fact in Bitcoin is the fact that the creator has disappeared and the thing has continued to operate now for almost 12 years without him being there, or 11 years I think it s been since he s left.
9
SPEAKER_01
And this is really the most important thing.
9
SPEAKER_01
And maybe he died or she died or they got into an accident on a road trip or whatever, and that s why they haven t accessed their coins.
9
SPEAKER_01
Maybe they re incapacitated for some reason.
9
SPEAKER_01
But whatever reason it is, I really think it s fate or serendipity that is giving us this very vital, very, very, very vital building ingredient in Bitcoin, which no other digital currency would ever recreate, which is that because it was the first,
9
SPEAKER_01
It was the one that was able to establish the first mover advantage and get all of the people who are interested in the technology to get into it.
9
SPEAKER_01
And so that s an enormous advantage, but the cherry on top or what made the whole thing really function well is the fact that the guy who made it disappeared.
9
SPEAKER_01
and that it continued to operate, which is just a clear illustration that this is a network with no admins.
9
SPEAKER_01
And I m tempted to think that they re incapacitated in some way, probably dead or gone, because I can t believe the, I don t believe any human being would have this level of self-control to not get into, not want to meddle with their invention so much.
9
SPEAKER_01
They might have had the self-control to mine the first million coins to get the network going and then throw away the coins or send them to an address that they don t have the key to because they really just wanted the network to take off.
9
SPEAKER_01
They may have no access to the coins and that s why they can t move them.
9
SPEAKER_01
I could see that happening.
9
SPEAKER_01
But I find it harder to believe that they would resist the temptation to mess with the network.
9
SPEAKER_00
You know, it s funny.
9
SPEAKER_00
I find that the founders of ideas are often
9
SPEAKER_00
principled and have the integrity that the eventual users of those ideas don t fully have.
9
SPEAKER_00
I tend to, you know, we have a kind of cynical view, power corrupts, absolute power corrupts absolutely, and we tend to, in our mind, generalize that all humans are corruptible.
9
SPEAKER_00
And perhaps that s true to some degree, but I think that some people are more corruptible than others.
9
SPEAKER_00
And I find that there is, I mean, I like to think that Satoshi Nakamoto is out there, and just like George Washington chose to walk away.
9
SPEAKER_00
And it s the principle, and the principle is more powerful than the financial reward or any of those kinds of things.
9
SPEAKER_00
It s a principle that stands for freedom.
9
SPEAKER_00
And there s a lot of people throughout history, even recent history, that are willing to die for these principles or live a life.
9
SPEAKER_00
full of suffering and sacrifice because they re still living a life of principle and choosing that day after day after day.
9
SPEAKER_00
So, I mean, there s power to that.
9
SPEAKER_00
Money, what s the worth of money in the end?
9
SPEAKER_00
In terms of just personal financial gain versus knowing how much positive impact there is.
9
SPEAKER_00
So the person that chooses to walk away like that, I think is the same kind of person that chooses to live
9
SPEAKER_00
live by that principle.
9
SPEAKER_00
You have people like that, you know, in Grigori, Grisha Perlman in mathematics who turned down the Fields Medal because he was... Yeah, that s a medal, not $50 billion of Bitcoin.
9
SPEAKER_01
Well, that s... I know, I know, I know, I m joking.
9
SPEAKER_00
Well, that s actually an interesting, just a brief comment.
9
SPEAKER_00
You know, when people talk about Bitcoin in the cryptocurrency space, it s often mixed up financial interest and ideas.
9
SPEAKER_00
And I think those are often correlated, but that good feeling you get when you win, or a number go up, or you just, just somebody, you know, I found 20 bucks on the street the other day, and just that feeling of just like,
9
SPEAKER_00
ooh, like more money, that positive feeling, that s correlated, but it is distinct from the power of the idea to change a world, to change the world for the better, to alleviate, it s like Alex Gladstein in the case of Bitcoin, that decreased the amount of suffering in the world because of the authoritarian regimes, and just because your number goes up, like that gambling feeling of like, yes, yes, this is good, and I mean short-term,
9
SPEAKER_00
number go up.
9
SPEAKER_00
If there s a long-term number go up, that s more like investment and so on, and there s a short-term number go up, it s just a good feeling, that you can t, you have to, in your mind, keep those distinct from the power of the idea to transform the world.
9
SPEAKER_00
And if you focus on the power of the idea,
9
SPEAKER_00
maybe a billion or billions of dollars don t matter as much.
9
SPEAKER_00
At least that s what I would like to believe.
9
SPEAKER_01
Perhaps, but what matters ultimately is that the thing works without him.
9
SPEAKER_01
The thing s worked for 11 years without him.
9
SPEAKER_01
And I think this is the really important thing.
9
SPEAKER_01
If they had stuck around for whatever reason, and they had continued to meddle with it, it s not clear to me how decentralized it could have been.
9
SPEAKER_01
This is the problem with the other currencies.
9
SPEAKER_01
It s like, how do you lose control of the Frankenstein that you ve created?
9
SPEAKER_01
The only way that this Frankenstein continues to survive is if the person in charge of it continues to feed it.
9
SPEAKER_01
And so it continues to be yours.
9
SPEAKER_01
And that s the problem with all the other digital currencies.
9
SPEAKER_01
If you ve heard about any of the other 16,000 digital currencies out there,
9
SPEAKER_01
You ve only heard about it because there s a small group of people behind it that are working on it, that are promoting it.
9
SPEAKER_01
And that s why I think Michael Saylor s discussion with you was a magnificent illustration of the difference between Bitcoin and altcoins in that they are securities.
9
SPEAKER_01
And I think he makes a very compelling, brilliant case for why this makes them categorically different from Bitcoin.
9
SPEAKER_01
Bitcoin, you re buying property.
9
SPEAKER_00
I think he mentioned he s a huge fan of Dogecoin, but I might be misremembering.
9
SPEAKER_00
You are misremembering.
9
SPEAKER_00
Okay, me too.
9
SPEAKER_00
Maybe I m quoting him out of context.
9
SPEAKER_01
Yes.
9
SPEAKER_00
Okay.
9
SPEAKER_00
Let me just ask you about some possible criticisms of Bitcoin.
9
SPEAKER_00
So on centralization, so there s a criticism on the mining and on the node side, or the node is not really the criticism,
9
SPEAKER_00
Bitcoin mining is not fully decentralized because a small number of miners control a majority of the hashing power.
9
SPEAKER_00
I looked it up, there s 10,000, 15,000, whatever the number is of computers that are full nodes, that are actively connected to the network.
9
SPEAKER_00
So you could argue that s decentralized, because it s global, it s all across the world, but the miners, they re still,
9
SPEAKER_00
it s more centralized.
9
SPEAKER_00
So if you re thinking of making a case for Bitcoin being decentralized, do you worry about the miners being somewhat centralized?
9
SPEAKER_00
Is the nodes the important thing to think about?
9
SPEAKER_00
And what number of nodes counts as centralized and not?
9
SPEAKER_01
The nodes are what matters because the nodes are what determines Bitcoin s consensus parameters.
9
SPEAKER_01
I think the best way to think about it is that miners simply sell a commodity to the nodes and that commodity is Bitcoin blocks.
9
SPEAKER_01
So what a miner does is they solve the proof of work problem.
9
SPEAKER_01
So they keep operating their computers until they can get a solution to the problem.
9
SPEAKER_01
And then they attach that to a bunch of transactions and present it to the nodes for the nodes to ratify and approve it.
9
SPEAKER_01
So therefore, I strongly recommend people learn about the 2017 Block Size War to understand why miners don t control Bitcoin.
9
SPEAKER_01
I discussed this briefly in my Bitcoin Standard, but there s a recent book that discusses this in detail called the Block Size War by Jonathan Beer.
9
SPEAKER_01
It s a great description of
9
SPEAKER_01
In 2017, essentially the miners thought that they could control Bitcoin.
9
SPEAKER_01
There was one mining company that produced the majority of the machines that were on the network, and their allies had control of the machines that were out there, and they controlled the majority of the hash rate, and they thought that they could change Bitcoin s supply.
9
SPEAKER_01
not supply, sorry, they could change Bitcoin s block size, which is a tiny little detail, technical parameter, and it s not even all that big of a deal for the economics of it.
9
SPEAKER_01
But they thought that they could pass this change, they could force this change on the network.
9
SPEAKER_01
And the members of the network rejected it, and they weren t able to do it.
9
SPEAKER_01
So the nodes are what is sovereign.
9
SPEAKER_01
The nodes are what determine the rules of the game.
9
SPEAKER_01
The miners,
9
SPEAKER_01
are a service provider.
9
SPEAKER_01
The miners invest capital upfront.
9
SPEAKER_01
They buy the machines, they buy the electricity, they buy the storage, they buy the locations, they pay the rent, and they invest all of that money based on the idea that if they behave according to what the nodes want, the nodes will reward them with Bitcoin.
9
SPEAKER_01
So the miners are in no position to dictate terms for anyone.
9
SPEAKER_01
They ve put up their capital upfront and they will only recoup it if they do what the nodes want.
9
SPEAKER_01
So therefore, what really matters is the decentralization of the nodes.
9
SPEAKER_01
So you wanna have as many nodes as possible.
9
SPEAKER_01
You wanna have a system where there s a large number of nodes.
9
SPEAKER_01
And this is of course the biggest problem with other digital currencies is that because basically Bitcoin has cornered the market on a digital currency, the only way that you can really get fraction is to generate a whole bunch of buzzwords about we re doing this and we re doing that.
9
SPEAKER_01
and so other digital currencies are optimized for bells and whistles and buzzwords, and that means adding computational load, which makes the nodes bigger, harder to operate, and therefore you have a very small number of nodes.
9
SPEAKER_01
In fact, very few digital currencies are keen to publicize how many nodes there are, and they don t have full nodes in the true sense, and it doesn t even matter how many nodes they have because
9
SPEAKER_01
De facto, you can spin up a million nodes tomorrow on AWS, doesn t really matter.
9
SPEAKER_01
What matters is de facto, do the nodes dictate the rules of consensus?
9
SPEAKER_01
And the fact that with most digital currencies, you can have hard forks very frequently and they can change the supply all the time, means that there s a small group of people who agree amongst themselves how to move forward.
9
SPEAKER_00
Yeah, so you threw in a few criticisms of all coins there.
9
SPEAKER_00
So one is the small group.
9
SPEAKER_00
That one we could talk about.
9
SPEAKER_00
It s a tricky one.
9
SPEAKER_00
We talked about that with Satoshi Nakamoto.
9
SPEAKER_00
But the other one is small number of nodes to push back on that.
9
SPEAKER_00
As computational power increases, you can argue that
9
SPEAKER_00
that enables more and more cheap computers to serve as nodes.
9
SPEAKER_00
So at least it paints a future where nodes are always increasing because computational power is always increasing and getting cheaper and cheaper and cheaper.
9
SPEAKER_00
So at least there s a hope for the future for greater and greater decentralization on the node front.
9
SPEAKER_01
Yeah, but I mean, ultimately, again, it doesn t really matter how many nodes you have if you have a, if the way that the currency is run is that you re gonna have a hard fork every few months, which is the case with most other currencies.
9
SPEAKER_01
Bitcoin is the only one that s not have a hard fork.
9
SPEAKER_01
Basically, the unique thing about Bitcoin in a technical sense is that you could get the original software that Satoshi himself ran in 2009 to start the network, and you could,
10
SPEAKER_00
run it today and it would sync with the blockchain.
10
SPEAKER_00
There s one bug you need to fix, one mistake that would have only appeared I think in around 2013 or 14 or something like that, that he wasn t aware of back then.
10
SPEAKER_00
So you just need to fix this one tiny little bug and then the consensus parameters are still the same so you re able to sync to it.
10
SPEAKER_00
This is not true for most other digital currencies, I d say probably all of them, because they ve all had many hard forces, which they think of as upgrades.
10
SPEAKER_00
And they market this thing as, well, Bitcoin can t upgrade, but we upgrade all the time.
10
SPEAKER_00
Well, yeah, you know what else upgrades all the time?
10
SPEAKER_00
Facebook, Apple, Amazon.
10
SPEAKER_00
Anything that s centralized is very easy to upgrade.
10
SPEAKER_00
And that s precisely why, as Michael Saylor says, these things are somebody s liability.
10
SPEAKER_00
They are security.
10
SPEAKER_00
You re carrying on somebody s technical and economic liability.
10
SPEAKER_00
They can hard fork, they can 10X the supply tomorrow.
10
SPEAKER_01
that they can fall victim to the same corrupting forces that governments fall victim to.
10
SPEAKER_01
Sure, and for people who don t know, yeah, hard fork is a reverse incompatible change to the underlying function of a cryptocurrency.
10
SPEAKER_01
Of course, there is hard forks of Bitcoin as well.
10
SPEAKER_01
I m sure all of which you love dearly.
10
SPEAKER_01
Anyway, but that doesn t matter.
10
SPEAKER_01
The original Bitcoin, for the most part, has not undergone any changes.
10
SPEAKER_00
And that s one of its... I mean, it has undergone changes, but none in the important parameters of the network.
10
SPEAKER_00
So another criticism is about energy.
10
SPEAKER_01
So the proof-of-work consensus mechanism uses a lot of energy.
10
SPEAKER_01
What s the response to that criticism of Bitcoin?
10
SPEAKER_00
Yes, because it s worth it.
10
SPEAKER_00
Okay.
10
SPEAKER_00
The airplane uses a lot more energy than a kayak.
10
SPEAKER_00
You know, when you re gonna cross the Atlantic next time, what are you gonna take, a kayak that is environmentally friendly, according to this insane definition, or are you gonna take an airplane that consumes a lot of energy?
10
SPEAKER_01
So the cost-benefit analysis here, essentially you have to consider both the cost and the benefit.
10
SPEAKER_00
Exactly, and I think it s an astonishing testament to just how far backward people s scientific and technological thinking has devolved to the point where we think of energy consumption as a bad thing.
10
SPEAKER_00
I think it s just, and in the fiat standard I discussed the whole hysteria around energy and I think it s a product of fiat inflation because it s a way of trying to covering up the fact that energy fuels
10
SPEAKER_00
that are reliable and necessary for the current world are becoming more and more expensive because of inflation.
10
SPEAKER_00
And so governments are always looking for excuses for why you should not be using those things.
10
SPEAKER_00
And so they promote all kinds of stupid pseudosciences to tell you about why these things are bad.
10
SPEAKER_00
But really, you know, all technology is, well, not all, but the vast majority of technological innovations involve
10
SPEAKER_00
Economizing on human time and judgment and replacing it with machines, with reliable machines that spend a lot of energy.
10
SPEAKER_00
So that s what a telephone does.
10
SPEAKER_00
Instead of having to send somebody across the world to tell somebody something else or send a letter, a telephone allows you to do it.
10
SPEAKER_00
The car is like that.
10
SPEAKER_00
You could walk, but a car consumes a lot more energy, but it allows you to travel much faster and safer and more reliably.
10
SPEAKER_00
An airplane is like that.
10
SPEAKER_00
Modern telecommunication,
10
SPEAKER_00
Human prosperity is an increase in the consumption of energy.
10
SPEAKER_00
And I think it is an absolutely criminal thing.
10
SPEAKER_00
And I genuinely mean the word criminal to portray energy consumption as a bad thing, because it is truly depriving people of the chance to live a life that makes life better.
10
SPEAKER_00
It s truly criminal to tell poor countries that they should not consume the same energy sources that are being used in rich countries.
10
SPEAKER_00
on which our modern infrastructure and modern life relies.
10
SPEAKER_00
That s what life is.
10
SPEAKER_00
If you reduce the consumption of energy in the US to the levels that you have in poor countries today, the US would become desperately poor.
10
SPEAKER_00
A lot of people would die.
10
SPEAKER_00
Cities would collapse.
10
SPEAKER_01
The quality of life would decrease significantly.
10
SPEAKER_01
A high quality of life often requires
10
SPEAKER_01
given the current technology, high expenditure of energy.
10
SPEAKER_00
Yeah, and I should be clear, you know, it s not a quality of life in the sense that many people think of this as, oh yeah, well, you know, taking needless flights for vacations.
10
SPEAKER_00
No, no, these are the cherries on top of the cake, but the substance of the cake and the real benefits of energy is the fact that
10
SPEAKER_00
children, premature babies survive in countries that have reliable 24-hour cheap electricity.
10
SPEAKER_00
If your child is born premature, that you put him in an incubator or her, they re highly likely to survive.
10
SPEAKER_00
If you don t have 24-hour electricity, that child is not gonna make it.
10
SPEAKER_00
and you see it, the level of energy consumption per capita is highly correlated not just to income but also to health outcomes, to infant mortality, to all of the things that you care about and Bitcoin is just another technology.
10
SPEAKER_00
It does consume a lot more energy than central banks.
10
SPEAKER_00
A lot of Bitcoiners like to
10
SPEAKER_00
They can cop out of this by saying, well, you know, central banks consume money and ATMs consume energy.
10
SPEAKER_00
And I think if you calculate how much central banks and banks consume, I think it s a rounding error next to what Bitcoin consumes.
10
SPEAKER_00
Maybe not a rounding error, but it s still, Bitcoin, I think, is going to consume a lot more, and that s a good thing.
10
SPEAKER_01
You know, what s humbling is to look, because even just looking into this forces me to look at the energy expenditures for many of the things we take for granted.
10
SPEAKER_01
Obviously, computers and our digital lives, Bitcoin becomes a rounding error.
10
SPEAKER_01
relative to how much energy is spent on all the computers in our world, but also things like home appliances, microwaves, and hair dryers and stuff.
10
SPEAKER_01
It starts being hilarious.
10
SPEAKER_01
It s like, oh, these things that are just part of our modern life, they re either the same order, at least the same order of magnitude as Bitcoin, and they seem like trivial parts of life.
10
SPEAKER_00
Yeah, and this is the thing.
10
SPEAKER_00
All of the people that complain about Bitcoin s energy consumption, I presume they use washing machines.
10
SPEAKER_00
Now, why should their desire for clean and dry clothes get to consume energy?
10
SPEAKER_00
And I mean, I used to live in Lebanon.
10
SPEAKER_00
Lebanon had hyperinflation.
10
SPEAKER_00
I escaped from hyperinflation.
10
SPEAKER_00
I escaped.
10
SPEAKER_00
It prevented
10
SPEAKER_00
My life could have been ruined by hyperinflation and the reason that it wasn t ruined is because I have Bitcoin.
10
SPEAKER_00
So I don t know, am I allowed to swear on your podcast?
10
SPEAKER_01
Yes, please.
10
SPEAKER_00
So fuck your washing machine.
10
SPEAKER_00
Given a choice between my washing machine and my Bitcoin, I ll choose Bitcoin.
10
SPEAKER_00
It s a technology that has already saved my life and I think it s gonna save the lives of many, many, many, many more people.
10
SPEAKER_00
But of course, I don t have to choose between my Bitcoin and my washing machine because this is, you know, we re just constantly consuming more energy and we re gonna continue to consume more energy in this world.
10
SPEAKER_00
And that s just what progress is.
10
SPEAKER_00
And a small remark, so in principle, I don t think this is a problem.
10
SPEAKER_00
But the other thing about Bitcoin, where it is different from washing machines,
10
SPEAKER_00
Bitcoin is truly unique in this.
10
SPEAKER_00
It s the only thing whose energy consumption can be produced absolutely anywhere.
10
SPEAKER_00
Your washing machine needs to be in your house where you live, and you live in a city surrounded by 10 million people, and they all have their washing machines, and they re all connected to the grid, and they generally tend to do their laundry around the same time, and so you have to put the load of the washing machine on the grid,
10
SPEAKER_00
at the same time.
10
SPEAKER_00
There s needs to be one power plant and all the infrastructure needs to work at the same time.
10
SPEAKER_00
And the electricity is pretty expensive because it s being done in a place with high demand.
10
SPEAKER_00
Bitcoin is does not need to buy electricity from places where it has high demand because it can buy electricity from anywhere.
10
SPEAKER_00
This is what s truly mind blowing about it.
10
SPEAKER_00
You can buy, you know, what you need to the electricity you need for mining can be done anywhere.
10
SPEAKER_00
So you can mine, you know, you can have a
10
SPEAKER_00
a waterfall in the north of Canada, 300 miles away from any population center.
10
SPEAKER_00
There s water falling, there s energy.
10
SPEAKER_00
You can put a hydroelectric dam there, and then you can use that energy to operate the miners.
10
SPEAKER_00
And then the miners just need a satellite internet connection.
10
SPEAKER_00
And effectively, you re selling that energy that is isolated to the grid.
10
SPEAKER_00
And because of the way the Bitcoin functions, because of the difficulty adjustment, the only profitable miners are the ones who can get cheap electricity.
10
SPEAKER_00
Basically, if you re mining at grid cost, if you re mining at around, the average electricity price in the world is around 14 cents.
10
SPEAKER_00
If you re mining at 14 cents in Bitcoin, you re most likely not gonna make it.
10
SPEAKER_00
If you re running your miners at 14 cents, because everybody could mine at 14 cents.
10
SPEAKER_00
And so what happens is if everybody s mining at 14 cents,
10
SPEAKER_00
14 cents stops being profitable, and then only the people mining at a lower price are profitable.
10
SPEAKER_00
So that s why Bitcoin mining is not competing with your washing machine.
10
SPEAKER_00
This is the absurd thing about this kind of energy scarcity viewpoint where, oh no, it s a catastrophe, Bitcoin is taking all the electricity, as if the electricity is just one fixed pie that we all have to share and fight over.
10
SPEAKER_00
And this is how I keep making fun of these stupid headlines they put out where Bitcoin s consuming more electricity than Portugal.
10
SPEAKER_00
All right, well, maybe we should shut down Portugal then.
10
SPEAKER_00
What the hell has Portugal given us?
10
SPEAKER_00
Obviously, it s not competing.
10
SPEAKER_01
He doesn t mean that.
10
SPEAKER_01
I ve gotten so much criticism for saying Cristiano Ronaldo s not in the top five.
10
SPEAKER_01
I apologize.
10
SPEAKER_00
I love Portugal.
10
SPEAKER_01
That s another discussion we should get into at some point.
10
SPEAKER_01
What we should do, because you posted a few soccer things.
10
SPEAKER_01
I realize how passionate people are about this.
10
SPEAKER_01
Listen, it was a joke, all right?
10
SPEAKER_00
He deserves to be a potential in the top five.
10
SPEAKER_00
Yeah, I love Portugal.
10
SPEAKER_00
And even though I m a Liverpool fan, I still respect Cristiano Ronaldo a lot.
10
SPEAKER_00
In fact, I hold a very unpopular opinion where I think Cristiano Ronaldo s the greatest football player ever.
10
SPEAKER_01
Number one, over Pelé and Maradona, Messi, better than Messi.
10
SPEAKER_00
Yes, he s been doing it for 20 years at the top.
10
SPEAKER_00
Nobody s ever done that.
10
SPEAKER_00
He s won everything everywhere.
10
SPEAKER_00
Everywhere he goes, at the top, at the Champions League.
10
SPEAKER_00
Really strong argument to be made for him.
10
SPEAKER_00
And Messi s never done anything outside of Barcelona, that s the thing.
10
SPEAKER_01
So you appreciate performance long-term versus the genius of the actual play on the field.
10
SPEAKER_01
I mean, the geniuses, Ronaldo s the top scorer of all time.
10
SPEAKER_00
He scored more goals.
10
SPEAKER_01
So the genius is in the scoring, not the actual dance of the play, the creativity.
10
SPEAKER_00
Well, I mean, I don t know, Messi s been absolutely mediocre since he s left Barcelona.
10
SPEAKER_00
Those are strong words.
10
SPEAKER_00
He scored, what, two goals in PSG s season this year?
10
SPEAKER_00
They re out of the Champions League.
10
SPEAKER_01
What about Mohammed Saleh?
10
SPEAKER_01
You ve posted about him.
10
SPEAKER_00
Is he climbing up to be someone?
10
SPEAKER_00
I think he should win the Ballon d Or this year.
10
SPEAKER_00
He probably should have won it last year as well.
10
SPEAKER_00
He s been absolutely outstanding, but I mean, just people are so crazy about Messi.
10
SPEAKER_00
They keep giving him accolades.
10
SPEAKER_00
He hasn t deserved, I think, Messi in the last couple of Ballon d Ors that he got.
10
SPEAKER_00
I mean, he s a great player and everything, but no, he did not deserve it last year.
10
SPEAKER_00
We can agree to disagree.
10
SPEAKER_00
There s something.
10
SPEAKER_00
You re a Barca fan or a Messi fan?
10
SPEAKER_01
I would say, no, I m not, I wouldn t say I m a Barca fan, but a Barca fan because of Messi, and I just, I think it s like, there s certain things.
10
SPEAKER_01
So when I was growing up in the Soviet Union, Russia, I remember Maradona, he was the first person I saw that I was like, oh wow, this could be, you know,
10
SPEAKER_01
this is greatness in sport, not just football and sport, right?
10
SPEAKER_01
And for some reason, I mean, it s something about like Diego Armando Maradona, like the way they were commentating, the genius of his play, the mix of ego, and again, the performance, but being able to carry a team on his shoulders, that I just fell in love with whatever he represented, and then by that, Argentina.
10
SPEAKER_01
And then Messi I saw when he was like 16, 17, when he was just like in the early days.
10
SPEAKER_01
And when you first see a person and you see the genius and you notice that, and then it turns out to be actually a great player, for some reason you re invested.
10
SPEAKER_01
You re emotionally invested, you re, I don t know.
10
SPEAKER_01
So you kind of just fall in love and then you pick sides.
10
SPEAKER_01
I mean, that s the thing about football.
10
SPEAKER_01
Part of the fun things about football and soccer is like,
10
SPEAKER_01
You pick a guy, you pick a team, and fuck everyone else, and you just have fun talking shit.
10
SPEAKER_01
I mean, there s part of it, you know?
10
SPEAKER_00
It s great, it s great because I think, you know, obviously it s a very stupid thing to do, but I think if you don t do it in football, you re gonna do it in real life.
10
SPEAKER_00
Elsewhere, that s right.
10
SPEAKER_00
That s why it s very good.
10
SPEAKER_00
Instead of hating people for their religion and for their skin color, hate them because they support Manchester United.
10
SPEAKER_01
Exactly.
10
SPEAKER_00
So you re a Liverpool fan.
10
SPEAKER_00
Yes, yes, hardcore, long-term.
10
SPEAKER_00
But yeah, so to go back to the original point on Portugal.
10
SPEAKER_00
Energy.
10
SPEAKER_00
Yeah, energy.
10
SPEAKER_00
Bitcoin is not competing with Portugal because Bitcoin is buying energy from places where we can t buy it.
10
SPEAKER_00
Because all the places where we can buy energy for our washing machines, we re bidding up the price enough to make it non-viable for Bitcoin.
10
SPEAKER_00
That s why, you know, you ll see those headlines about Bitcoin consuming more energy than Portugal.
10
SPEAKER_00
Well, if you look at Portugal, I mean,
10
SPEAKER_00
They ve got giant power plants in Portugal, they ve got millions of people, and they ve got enormous amounts of infrastructure.
10
SPEAKER_00
Where are all of these infrastructure for Bitcoin mining?
10
SPEAKER_00
You don t see it in the cities.
10
SPEAKER_00
It s all isolated, it s all out away from the cities, or it s connected to grids that have serious overcapacity.
10
SPEAKER_00
So Bitcoin is not out there buying the expensive energy, taking energy away from people who can t afford it.
10
SPEAKER_00
it s out there buying its own energy because it doesn t need to buy the expensive energy that people really need.
10
SPEAKER_01
So one other criticism from an investment perspective, from a gambling perspective that people see is the volatility of Bitcoin.
10
SPEAKER_01
Of course, that s been somewhat decreasing over time, but what s your answer to the sort of criticism that Bitcoin is too volatile, I wanna stay away, it doesn t seem like a safe place for me to invest either short term or long term?
10
SPEAKER_00
There s no denying there s a volatility and there s a high oscillation in the value in the short term, so I think the safe way to approach that is in terms of position sizing.
10
SPEAKER_00
If the volatility bothers you, then you re over-invested perhaps, so maybe you should
10
SPEAKER_00
maybe you should reduce the size of your position so that the volatility doesn t bother you.
10
SPEAKER_00
This is the short answer that, you know, like stack as much as your conviction will allow you to tolerate the volatility.
10
SPEAKER_00
And of course, the reason you should try and consider tolerating the volatility more is
10
SPEAKER_00
The options are you hold fiat assets which only go down stable, relatively stable, not a lot of volatility day to day, value of your dollar doesn t change 40% overnight, 20% overnight or something like that.
10
SPEAKER_00
But it does go down reliably.
10
SPEAKER_00
It s going to go down 40%.
10
SPEAKER_00
You can count on it.
10
SPEAKER_00
It might take a year, two years, five years, ten years.
10
SPEAKER_00
Compared to the things that you want to buy, it s going to go down by 40%.
10
SPEAKER_00
And it s not going to come back.
10
SPEAKER_00
And it s going to go down another 40%, and then another 40%, and then another 40%.
10
SPEAKER_00
So the option really is,
10
SPEAKER_00
relatively short-term stability with long-term decline, or short-term volatility with long-term rise.
10
SPEAKER_00
And so that s another way in which Bitcoin teaches people to have a low time preference and think about the long-term.
10
SPEAKER_00
So stack, accumulate, and think of it in the long-term.
10
SPEAKER_00
It s a function of the fact that Bitcoin is new.
10
SPEAKER_00
Bitcoin is currently less than 1% of the global money market.
10
SPEAKER_00
So there s about $100 trillion of money out there in the world.
10
SPEAKER_00
$100 trillion roughly of fiat and about $10 trillion of gold.
10
SPEAKER_00
And Bitcoin is less than $1 trillion.
10
SPEAKER_00
So one rich guy decides to get into Bitcoin, that s gonna show up on the Bitcoin chart.
10
SPEAKER_00
You look at it, Elon Musk decides to buy Bitcoin, you see the buy.
10
SPEAKER_00
You see the news and it happens and you see the pump.
10
SPEAKER_00
Elon Musk decides that he doesn t like Bitcoin, you see the drop.
10
SPEAKER_00
But a few years ago, it used to be that one random millionaire would cause that pump.
10
SPEAKER_00
Now you have to be the richest guy in the world to do that.
10
SPEAKER_00
In a few years, you re gonna have to be the richest country in the world to be able to do that to the Bitcoin price, maybe many years, maybe not a few years.
10
SPEAKER_00
But as Bitcoin grows, think about it as a liquid pool of money,
10
SPEAKER_00
Currently, it s a small pool next to a much larger ocean, which is the entire money market.
10
SPEAKER_00
One person jumps from that to this small pool, they can make a big splash.
10
SPEAKER_00
As the pool grows, essentially the salability increases and the likelihood of one individual purchase affecting the price so violently increases.
11
SPEAKER_00
And so over time, as the size of the market increases, I think we re going to see the volatility decline more and more.
11
SPEAKER_00
Ultimately, if you look at gold, historically gold has been very, very stable.
11
SPEAKER_00
It did not achieve its stability because the central bank was in charge of gold supply or because there was a gold committee that decided how much gold gets produced.
11
SPEAKER_00
It achieved that stability because it became the most salable good and so therefore became the good that contains the most cash balances in the world and the end of the 19th century, everybody held cash balances in gold and new production was a tiny little addition to global production to the supply.
11
SPEAKER_00
So that s what made gold the most relatively, I shouldn t say stable because nothing is stable in economics, but relatively it holds on to its value and it s much less volatile than digital currency, than national currencies.
11
SPEAKER_00
That s because...
11
SPEAKER_00
It has the highest stock-to-flow ratio, and that s because its supply is a tiny fraction of the liquid market.
11
SPEAKER_00
And as the liquid market grows, as the size of cash balances grows and trades in Bitcoin cancel each other out, you get only slight changes in value.
11
SPEAKER_00
So I think as Bitcoin matures,
11
SPEAKER_00
that s going to decline.
11
SPEAKER_00
So effectively, I think, you know, the end game is Bitcoin is huge.
11
SPEAKER_00
You know, Bitcoin is worth something like, I think the total addressable market for Bitcoin is not just national currencies and gold s addressable market, but also government bonds.
11
SPEAKER_00
That s the really big one.
11
SPEAKER_01
So how do banks compare to gold?
11
SPEAKER_01
So you re saying it ll surpass gold with the 10 trillion?
11
SPEAKER_00
Yeah.
11
SPEAKER_01
What s bonds?
11
SPEAKER_01
Where s bonds stand?
11
SPEAKER_00
So then there s also national currencies which are about 100 trillion and there s government bonds which are around 120 billion dollars.
11
SPEAKER_00
And, sorry, trillion dollars, trillion.
11
SPEAKER_01
So trillion, sorry.
11
SPEAKER_01
If we were saying billion, we meant trillion.
11
SPEAKER_00
Yeah.
11
SPEAKER_01
So you think bonds can move to Bitcoin?
11
SPEAKER_00
I ve always held this is the prize, this is the main dish, and the gold is the appetizer.
11
SPEAKER_00
Bonds are the main dish because bonds have replaced gold.
11
SPEAKER_00
I mean bonds have replaced gold in people s portfolio.
11
SPEAKER_00
People remember when we were saying gold was you d hold it as a saving as the secure part of your portfolio and then you take risk with the equity.
11
SPEAKER_00
Currently, people do that by holding a part of their portfolio in bonds.
11
SPEAKER_00
That s the part that they treat as their saving account.
11
SPEAKER_00
And then the rest they use for speculation, not speculation, for investment in which they take risk.
11
SPEAKER_00
Yeah, speculation.
11
SPEAKER_00
And that s stocks and equity and other high-risk assets.
11
SPEAKER_00
I think Bitcoin is not gonna replace equity.
11
SPEAKER_00
There will always be equity.
11
SPEAKER_00
There will always be companies and people who wanna have equity.
11
SPEAKER_00
But it ll probably replace a big chunk of current equity markets because right now if you want to save, it used to be that you hold bonds.
11
SPEAKER_00
Now if you want to save, you go into stock indexes.
11
SPEAKER_00
So I think Bitcoin likely eats a big chunk of equity markets because currently,
11
SPEAKER_00
people are using it as saving, and I think it eats all the bonds.
11
SPEAKER_00
That s my most ambitious statement.
11
SPEAKER_01
The question is the scale of time that happens across, but the most important statement you re making is about trend.
11
SPEAKER_00
Yeah, and also, let s also remember, currently bonds nominally don t beat inflation, and in real terms, they don t come close to beating inflation.
11
SPEAKER_00
Currently, you know, with bonds, you re taking on credit default risk to buy a bond and also getting less money back in real terms.
11
SPEAKER_00
Well, Bitcoin doesn t offer you returns, but in real terms, it appreciates much more and it has, I believe, a lot less risk associated with it than any company or government.
11
SPEAKER_01
So let s make things spicy and ask if Bitcoin fails in the long-term future.
11
SPEAKER_01
As Alt, you just said, economics, volatility, things happen in this world.
11
SPEAKER_01
The human civilization might end in this century.
11
SPEAKER_01
I hope it doesn t, but it might.
11
SPEAKER_01
There could be catastrophic events.
11
SPEAKER_01
If Bitcoin fails, it goes to zero, loses its number one spot, what would be the reason?
11
SPEAKER_01
If you re an alien visiting Earth 100 years from now and just were to analyze the situation, Bitcoin is a pretty new thing.
11
SPEAKER_01
So the possible trajectories of how the world evolves together with this new monetary technology is nearly infinite.
11
SPEAKER_01
So if it fails, one of those trajectories surely involves Bitcoin failing.
11
SPEAKER_01
What would be the reason?
11
SPEAKER_00
I think the most likely reason that it could fail, I don t think this is likely in general, but I think it is the most likely of all the unlikely things that could destroy Bitcoin, is governments go back on a gold standard.
11
SPEAKER_01
So they make, in your view, a better decision than the current system, just not the best decision.
11
SPEAKER_01
I thought you would go much darker.
11
SPEAKER_01
Okay, interesting.
11
SPEAKER_01
So maybe because of Russia, because of China and so on, because of the current war, they might reconsider the power that America holds because of the monetary, because it being the primary currency, and they ll start thinking about going on a gold standard.
11
SPEAKER_00
Yeah, but it would also require the US and the Europeans and everybody to want to join in this system and sing Kumbaya and play nice with each other around the gold standard.
11
SPEAKER_00
I think, you know, given that gold already is about 10 times larger than Bitcoin, so it has a first mover advantage.
11
SPEAKER_00
Yes.
11
SPEAKER_00
If governments were to go and peg their currencies to gold again, the price of gold would shoot up five, 10X, and it would rise in value a lot more.
11
SPEAKER_01
Of course, that doesn t necessarily kill Bitcoin.
11
SPEAKER_00
No, again, I m not saying it s likely to happen.
11
SPEAKER_00
I m saying it s, I imagine, less unlikely than all the other unlikely scenarios.
11
SPEAKER_00
Because even with a nuclear war, or 90% of the planet is destroyed, the 10% continue to run Bitcoin.
11
SPEAKER_00
There s a quote.
11
SPEAKER_01
Okay, there s a movement, a community of people referred to as Bitcoin maximalists.
11
SPEAKER_01
I ve seen you referred, at least in the past, as the leader of the Bitcoin maximalists, probably because of your book, you know, Bitcoin Standard, Consider the Bible.
11
SPEAKER_01
In general, you re one of the leaders in this space.
11
SPEAKER_01
Do you regret any of the toxicity and derision that often, or perhaps sometimes, originates from this community?
11
you
11
SPEAKER_00
Definitely not.
11
SPEAKER_00
I m not in the position to regret other people s actions, so let s just be clear.
11
SPEAKER_00
I think the rhetoric of community is, I reject this rhetoric because I think it s a way for kind of political manipulation and subversion to try and portray people as part of a community and hold people responsible for other people s actions, which I think is ridiculous.
11
SPEAKER_00
So if some guy on the internet said something mean to somebody,
11
SPEAKER_00
And then this is very common and I always try and not get involved in these things.
11
SPEAKER_00
So some guy who identifies as a Bitcoiner says something to somebody that s very wrong.
11
SPEAKER_00
Of course it happens.
11
SPEAKER_00
Tens of millions of people use Bitcoin around the world.
11
SPEAKER_00
And a lot of these, I d say parasites, people who don t have anything productive to do with their life.
11
SPEAKER_00
you know, outrage merchants, they ll come out and say something along the lines of, you know, the Bitcoin maximalists are toxic, they re holding Bitcoin back, and they need, and of course it s manipulative, the point behind it is they wanna get to you, they wanna get people who are, you know, not that nobody with 300 followers who said something silly, they wanna get the notable people to basically change their message.
11
SPEAKER_00
So the idea is,
11
SPEAKER_00
I m supposed to apologize because somebody with 300 followers I ve never met in my life who calls himself a Bitcoiner said a mean word and then I need to apologize and I also need to cut down on my rhetoric about other digital currencies and I need to do that.
11
SPEAKER_00
So I m only responsible for my own actions and I don t recall regretting anything.
11
SPEAKER_01
Okay, but let me push back or push further into that direction.
11
SPEAKER_01
Fine, let s leave community aside.
11
SPEAKER_01
Labels suck, for sure.
11
SPEAKER_01
But you have a spicy way about you on Twitter.
11
SPEAKER_01
Even in this conversation, you know, you had some
11
SPEAKER_01
some good, strong words to say about Bookman.
11
SPEAKER_00
Yeah, I mean, I ve always believed life is too short to mince words.
11
SPEAKER_00
One day I m gonna be dead, and on my deathbed, I m not gonna look back and say, I wish I was a little bit more circumspect in expressing my opinions.
11
SPEAKER_00
I m far more likely to think, you know what, I wish I said what I really think.
11
SPEAKER_01
Yes, life is too short to hold back your opinion.
11
SPEAKER_01
The question is, what is really your opinion?
11
SPEAKER_01
Because you re,
11
SPEAKER_01
you re many people in one.
11
SPEAKER_01
So there s a person that loves, there s kindness for other human beings, there s a person that gets annoyed, there s a person that enjoys disagreement, there s a person that enjoys collaboration.
11
SPEAKER_01
And you can emphasize all of those different things, each of those different things, weigh it differently in your online interaction.
11
SPEAKER_01
There s some aspects of online interaction that encourages
11
SPEAKER_01
and different communities.
11
SPEAKER_01
Online interaction is one community that encourages derision and mockery and so on.
11
SPEAKER_01
So you can choose if you want to engage that part of yourself or some other part of yourself.
11
SPEAKER_01
Economics is another community that enjoys
11
SPEAKER_01
being very straightforward about their disagreements, pretty harsh.
11
SPEAKER_01
It s fun to watch, because it feels like you arrive at the truth much faster, because you tear each other apart.
11
SPEAKER_01
But that s a choice, that s a deliberate choice.
11
SPEAKER_01
I don t want to label an entire community of people by its extremes, I don t think you should do that.
11
SPEAKER_01
But there s cultural characteristics you start to notice.
11
SPEAKER_01
When you go to France, it s a certain way.
11
SPEAKER_01
When you go to Britain, London is different than rural Britain.
11
SPEAKER_01
New York is different than Iowa.
11
SPEAKER_01
You start to notice things.
11
SPEAKER_01
I mean, you don t wanna generalize.
11
SPEAKER_01
There s all kinds of people everywhere, but there s a certain way of communication on crypto, Twitter in general, but also Bitcoin maximalists that I even early on received a bunch of heat.
11
SPEAKER_01
I was like, what the hell?
11
SPEAKER_01
So listen, there s definitely a difference when I go to the computer science community, machine learning community.
11
SPEAKER_01
It s way friendlier than the cryptocurrency community.
11
SPEAKER_01
I have much more freedom to actually be what I enjoy being, which is asking simple, dumb questions.
11
SPEAKER_01
Even when I ve already spent years, sometimes decades with an idea, I like asking dumb questions anyway.
11
SPEAKER_01
The crypto folks punish you for this.
11
SPEAKER_01
for curiosity, for like exploration.
11
SPEAKER_01
I understand the mechanism because so many other people come into that community and they might masquerade.
11
SPEAKER_01
as curious, but really they re trying to inject, they re trying to sell some kind of altcoin, there s some scheme, there s some scheme to make money, and so I understand, maybe that s just the dynamics of the community by nature.
11
SPEAKER_01
It s not like you respond appropriately to the amount of charlatans in the community.
11
SPEAKER_01
So if the fraction of charlatans is low, maybe you can afford to be more loving and kind and so on, and when the fraction of charlatans is high, you have to be harsher.
11
SPEAKER_00
Perhaps, perhaps, but... I think also, you know, the stakes are extremely high in this situation.
11
SPEAKER_00
And I think, you know, if you don t like Bitcoiners, if you think Bitcoiners are toxic, wait till you meet fiaters, you know.
11
SPEAKER_00
The fiat community has financed world wars and genocides and tyrants and the mass death and destruction.
11
SPEAKER_00
The fiat community, if you want to use that term, I don t believe that you should, but I mean, you know, fiat has destroyed the savings of pretty much anybody who s lived through the last 20th century, pretty much anybody who s lived through the 20th century, no matter where you lived, Switzerland, US, Ethiopia, Russia, you ve gone through
11
SPEAKER_00
fiat problems.
11
SPEAKER_00
You ve had hyperinflation, you ve had bank confiscation.
11
SPEAKER_00
There isn t a family in the world today that hasn t had its wealth destroyed over the last century.
11
SPEAKER_00
They all have a story about the inflation and the hyperinflation.
11
SPEAKER_00
And Bitcoin offers us a way out of this.
11
SPEAKER_00
And shitcoins, altcoins, are essentially fiat world s last gasp attempt to try and salvage
11
SPEAKER_00
to try and salvage the idea that some people will continue to be able to print money and other people will have to use that money.
11
SPEAKER_00
This is Twitter, it s a free market, it s the internet.
11
SPEAKER_00
You don t have to follow anybody, that s the thing.
11
SPEAKER_00
So what I find really objectionable about the people who are so butthurt always about Bitcoin maximalists is
11
SPEAKER_00
You don t have to click follow on people you don t like.
11
SPEAKER_00
There are 300 million Twitter accounts, and if you choose to follow the accounts that say things that annoy you and then complain about the fact that they say things that annoy you, I m sorry, but you re an idiot and you don t know how to use Twitter.
11
SPEAKER_00
Just follow the accounts that you like.
11
SPEAKER_00
You don t have to be part of this.
11
SPEAKER_00
You don t have to listen to those people.
11
SPEAKER_00
You can choose, there are a lot of Bitcoiners that don t act like this.
11
SPEAKER_00
You can just unfollow the ones that you know, like Flock.
11
SPEAKER_01
Since in the past year, man, time flies, I ve met a lot of them.
11
SPEAKER_01
I enjoy them a lot.
11
SPEAKER_01
And you build that community of people that you enjoy.
11
SPEAKER_01
There are lots that communicate in the way you enjoy.
11
SPEAKER_01
And it s become a meme at this point that I block with love, I think.
11
SPEAKER_00
Yes.
11
SPEAKER_00
Because I did not,
11
SPEAKER_00
I block very prolifically and I strongly recommend people continue to block.
11
SPEAKER_00
I think Twitter is, you know, you re not gonna get to interact with 300 million accounts anyway.
11
SPEAKER_00
So you wanna be constantly curating the experience by getting rid of people you don t like and following people that you like.
11
SPEAKER_00
And that s just how, you know, after 10 years of using Twitter, you know, you accumulate a block list, which is very big, which I m very happy for.
11
SPEAKER_00
I m gonna pass on to my children.
11
SPEAKER_01
And your deathbed, your grandchildren will gather around and your grandfather can finally share the full list.
11
SPEAKER_00
Yeah.
11
SPEAKER_00
So like, again, it s just a Twitter account.
11
SPEAKER_00
If it bothers you so much, ask yourself why it bothers you that some people are so, I m not referring to you, obviously, but I mean, the people that are constantly aggravated about this.
11
SPEAKER_00
I don t get bothered by anything on Twitter.
11
SPEAKER_00
I just block immediately.
11
SPEAKER_00
And I get to curate the experience that I enjoy.
11
SPEAKER_00
And I recommend people do that.
11
SPEAKER_00
It s really a lot less pathetic than complaining about strangers saying things you don t like, which a lot of, and of course, the reason for it is, I mean, when I say it s stupid, it s not really stupid.
11
SPEAKER_00
There s an ulterior motive there, and the ulterior motive is, hey, I have this shitcoin that I made with five other friends of mine, and I d like you to, I d like to ride your coattails, Bitcoiners, and I d like you to please help me promote this shitcoin.
11
SPEAKER_00
Like this is, I get this,
11
SPEAKER_00
practically every week, whether through email or through Twitter, where, hey, this is our shitcoin.
11
SPEAKER_00
It s just like Bitcoin, but it s better because it does this and this and that.
11
SPEAKER_00
And basically, how can we get you to promote this shitcoin for us?
11
SPEAKER_00
And being straightforward and forthright is a great productivity hack because
11
SPEAKER_00
You just tell those people, no, I m not interested, it s a stupid shitcoin, and I wish you quick and swift failure before you take a lot of people s money.
11
SPEAKER_00
And that s what I genuinely think.
11
SPEAKER_01
Well, but I ll just be upfront with the fact, at least for my taste, just labeling everything as a shitcoin.
11
SPEAKER_01
Worries me so this is my own preference.
11
SPEAKER_01
It s not a judgment on you It s just my own preference that I m afraid I ll miss good ideas I think when you re me personally when I m too certain about things when I to tribal about things I ll miss actually really strong ideas outlier ideas totally new ideas so that that worries me one of the
11
SPEAKER_01
downsides of the way Bitcoin is, how much is at stake financially, is that it s less open to good, actually by design, that it s not changing, like with the hard forks and so on, that there s not a kind of curiosity about exploration of ideas.
11
SPEAKER_01
Of course, in some way, that curiosity can start getting ejected when you start talking about other layers built on top of Bitcoin.
11
SPEAKER_01
You start talking about applications or different things like lightning network.
11
SPEAKER_01
That s where the curiosity can emerge.
11
SPEAKER_01
But still, that s why with cryptocurrency in general, I just try to keep an open mind.
11
SPEAKER_01
And just the shitcoin
11
SPEAKER_01
as a term is just like a statement that I m gonna close my mind to.
11
SPEAKER_01
That s the way I hear it.
11
SPEAKER_01
But coming out of your mouth, because you say a lot of other edgy stuff, it s just more you having fun.
11
SPEAKER_01
That s the way I hear it.
12
SPEAKER_01
If I said something like that, I would feel like I m closing my mind.
12
SPEAKER_00
I mean, let me give you the counter-argument to that.
12
SPEAKER_00
How much time do you spend emailing back all of these Nigerian Prince email scams that email you, tell you, send me $5,000 and I ll send you $15 million?
12
SPEAKER_00
None.
12
SPEAKER_00
None.
12
SPEAKER_00
Why are you being closed-minded to all of these great ideas?
12
SPEAKER_00
Well, no, but I m also...
12
SPEAKER_00
Maybe one of them will actually send you $15 million.
12
SPEAKER_01
But I don t know if I know the difference between a Nigerian prince and many other people I do talk to who are colleagues and so on that are also emailing me and are also offering me things, but they don t sound as ridiculously spammy.
12
SPEAKER_00
Yeah, but I mean, the moment that somebody tells you, Hey, I m going to give you $15 million for nothing, just if you send me $5,000, you know, you re getting something for nothing.
12
SPEAKER_00
And essentially, with all the digital currencies, it s the same pitch, hey, you know, come use this thing that will allow you to do things that all of the things that they pretend that they can do that can be done with computers without having digital currencies.
12
SPEAKER_00
You know, we already have AWS that does cloud computing that does everything that shitcoins pretend to do.
12
SPEAKER_00
The only difference is AWS doesn t have its own monetary system tacked on top of it to allow Jeff Bezos to basically print his own money.
12
SPEAKER_01
But don t you think there s some gray area?
12
SPEAKER_01
So let me go for the historical record and let s see if you ve changed as a philosopher, economist, human being.
12
SPEAKER_01
You tweeted three years ago.
12
SPEAKER_01
Oh, well.
12
SPEAKER_01
Anyone who believes proof-of-stake can work is either one completely clueless at how and why Bitcoin works at all, or two, a con artist using it as a buzzword to promote a worthless scam like Ethereum.
12
SPEAKER_01
Do you still believe that Ethereum is a scam and in general proof-of-stake?
12
SPEAKER_01
You re either clueless if you think it s interesting,
12
SPEAKER_00
Yeah, no, I still stand by that.
12
SPEAKER_00
I think the... Would you classify Ethereum as a shitcoin?
12
SPEAKER_00
For sure.
12
SPEAKER_00
It s the mother asshole from which the shitcoins spring.
12
SPEAKER_00
The royal, the king shitcoin?
12
SPEAKER_00
Yeah.
12
SPEAKER_00
I think the key thing is, you know, the way to think about it, there s another tweet from a couple of years ago which is,
12
SPEAKER_00
Essentially proof of work was like the invention of flight.
12
SPEAKER_00
Like we ve got in this machine and we managed to get it to fly off the ground.
12
SPEAKER_00
And proof of stake is, hey, we found a great way to make airplanes cheaper and faster by not making them fly.
12
SPEAKER_00
by keeping them on the ground.
12
SPEAKER_00
The invention of proof-of-work, the reason the entire digital currency space exists is because Bitcoin operates based on proof-of-work.
12
SPEAKER_00
If Bitcoin was based on proof-of-stake, it would have died or been shut down from day one.
12
SPEAKER_01
But that s a hypothesis, and a lot of people believe that, and I think they have a lot of strong support.
12
SPEAKER_01
But basically, proof-of-work is grounded in physics.
12
SPEAKER_01
In the real world, the proof-of-stake is more about
12
SPEAKER_00
is politics is is the federal reserve it s exactly what we have it s exactly what we have it s it s just a group of people who get to decide the rules and it s essentially uh... a system that is you know it s a security it s a company so it s not an innovation in any sense it s a step backward to what we already had which is you get a bunch of people in charge of the money now the only reason it survives in this uh... and the reason i call these things scam and i have no problem calling them a scam is because
12
SPEAKER_00
fraudulently present themselves as being decentralized.
12
SPEAKER_00
They present themselves as just being a different way of doing decentralization than Bitcoin, when it s not.
12
SPEAKER_00
It s just they re riding Bitcoin s coattails, and they re riding the fact that most people don t quite understand what Bitcoin is and how it works to portray themselves as a cheaper, better, more efficient way of doing what Bitcoin does.
12
SPEAKER_00
It s not.
12
SPEAKER_00
It s a less legally accountable way of doing what central banks do.
12
SPEAKER_01
Right, so, and the basic criticism is that there s a group of people, sometimes a very small group of people that can control the parameters of the operation of the system.
12
SPEAKER_01
So over time, you can t trust it s not gold under the mattress.
12
SPEAKER_01
It doesn t have that kind of hardness.
12
SPEAKER_00
It s not proper, Dan.
12
SPEAKER_00
I really very strongly recommend your discussion with Saylor for people who want to elaborate more on this.
12
SPEAKER_00
There s a bunch of people in charge, which means that
12
SPEAKER_00
Legally, they should be doing this under securities law, but even as an anarchist, if I don t want to care about that, the technical implication of it is this is never going to be adopted as a neutral way of transferring value on the internet because you need something that enemies can trade with one another.
12
SPEAKER_00
You can t have something that has a small group of people in charge because A, this small group of people themselves can be corrupted and B,
12
SPEAKER_00
they can be coerced.
12
SPEAKER_00
You can put a bunch of people in a room, put a gun to their head, and you can change everything in any of these digital currencies.
12
SPEAKER_00
And that s why I think you ll find a lot more sympathy among theatres to shitcoins.
12
SPEAKER_00
The Keynesian economist to Ethereum fanboy pipeline is a very strong one because
12
SPEAKER_00
It s the same thing.
12
SPEAKER_00
It s like you like the idea of people being in charge of money and you think you re going to be the one who s going to be in charge of money.
12
SPEAKER_00
So you see a lot of this phenomena and you see the same people that want gold and don t like central banking, they get into Bitcoin.
12
SPEAKER_01
Yeah, so just to actually push back on a couple of things.
12
SPEAKER_01
So one is theater.
12
SPEAKER_01
It sounds like I m trying to be a sophisticated Brit talking about theater, but for many reasons it s not making me feel good about that.
12
SPEAKER_01
So, you know, day by day things change.
12
SPEAKER_01
You used to be one of those.
12
SPEAKER_01
So people evolve, people learn.
12
SPEAKER_01
People that are supporters of Bitcoin might eventually become supporters of Ethereum or go back to supporting fiat.
12
SPEAKER_01
We don t know.
12
SPEAKER_01
People evolve for different reasons.
12
SPEAKER_01
You grow up, you mature, or you become enlightened.
12
SPEAKER_01
So I think every single person sort of...
12
SPEAKER_01
As this technology is evolving, as this world is evolving, as wars break out and geopolitics change, as the monetary system is constantly put under stress, people will evolve.
12
SPEAKER_01
So we re trying to all figure it out together.
12
SPEAKER_01
That s why open-mindedness here, I think, for people like me at least, seems essential.
12
SPEAKER_00
I know, so I expect you to be answering all of the spam emails you get.
12
SPEAKER_00
I will, prince by prince by prince.
12
SPEAKER_01
But no, I don t have a clear understanding.
12
SPEAKER_01
What is a good investment of my time?
12
SPEAKER_01
What is a good investment of my money?
12
SPEAKER_01
That doesn t seem clear, because things are good at promoting themselves.
12
SPEAKER_01
I m not talking about the different kinds of things like Ethereum, altcoins, and so on.
12
SPEAKER_01
I just mean life, like dating, jobs,
12
SPEAKER_01
friendships, like everybody s advertising themselves as a great investment, right?
12
SPEAKER_01
But you don t know, and you have to keep an open mind, and also, you know, I don t, and be sort of self-introspective about what, how, like biases I operate under, and ways I delude myself, like hallucinations that I m living under, it s like breaking, you know, breaking out of all these hallucinations.
12
SPEAKER_01
It s very hard to introspect.
12
SPEAKER_01
thinking like, what are the assumptions under which I lived my entire life that might be actually false assumptions?
12
SPEAKER_01
That s a really difficult thought process to take.
12
SPEAKER_01
It s a dangerous one.
12
SPEAKER_01
The Nietzsche, if you gaze long into the abyss, the abyss gazes into you.
12
SPEAKER_01
It s like Alex Jones talks about this.
12
SPEAKER_01
I mean, he s living, he s got demons in his head.
12
SPEAKER_01
So he has all these conspiracy theories that it holds in his head, but it begins to really destroy him.
12
SPEAKER_01
So it s a psychological burden to carry.
12
SPEAKER_01
So if you question authority, if you question government, if you question culture, the way things have been done, it s really difficult.
12
SPEAKER_01
And the biases you operate under, it s really difficult to question them.
12
SPEAKER_01
So I think being constantly open-minded and self-critical, not constantly, but a little bit every day is important, I think.
12
SPEAKER_00
Yeah, but I mean, you re talking to somebody, I grew up in Ramallah in Palestine in the West Bank.
12
SPEAKER_00
I ve changed my mind on all kinds of different things.
12
SPEAKER_00
The fact that I was even open to the idea of Bitcoin has required an enormous amount of... It s a heck of a journey.
12
SPEAKER_00
It s a heck of a journey.
12
SPEAKER_00
I d much rather appreciate direct arguments rather than these kind of general fluffy, you should be, oh, of course, yes, you should be open-minded, but also you come up with conclusions and you delete spam emails sometimes when you know that it is spam because you have to move on with your life.
12
SPEAKER_00
There s an opportunity cost to considering every spam email.
12
SPEAKER_01
So what to me, okay, so I ll just say from my relatively sort of shallow perspective, almost like a technical person, mostly my understanding of economics is weak.
12
SPEAKER_01
Proof of stake is not obviously a weak consensus mechanism relative to proof of work.
12
SPEAKER_01
So that s not obvious to me that that goes wrong and becomes corrupted in the way that governments get corrupted, because it still seems decentralized.
12
SPEAKER_01
Now your criticism of governance is an interesting one, but if you put that aside, it still is a decentralized mechanism.
12
SPEAKER_01
and it s more transparent than the mechanism that governments operate on.
12
SPEAKER_00
It isn t.
12
SPEAKER_00
It s exactly what the Federal Reserve is.
12
SPEAKER_00
The Federal Reserve is a proof-of-stake system.
12
SPEAKER_00
The Federal Reserve is owned by its constituent banks.
12
SPEAKER_00
And so the rules of the Federal Reserve and the regulations are determined by the ownership, which is the banks.
12
SPEAKER_00
So it s exactly what the Federal Reserve is.
12
SPEAKER_00
But it s too backdoor.
12
SPEAKER_01
The agreements between the banks and the Federal Reserve
12
SPEAKER_01
It feels like a lot of those agreements are made between individuals that sort of behind the scenes.
12
SPEAKER_01
It s not hard to, it s opaque.
12
SPEAKER_00
Yes, but the only way that a proof of stake system will take off is if you have a military to force people to use it.
12
SPEAKER_00
That s the thing.
12
SPEAKER_00
Ultimately, there s no way that it s going to take off on a free market.
12
SPEAKER_00
And that s why
12
SPEAKER_00
You know, for all of the bluster about wanting to move to a proof-of-stake system, Ethereum have been saying this since 2014.
12
SPEAKER_00
It s now been eight years, you know, that they ve been talking about it.
12
SPEAKER_00
We still haven t seen the proof-of-stake system operational in the wild.
12
SPEAKER_00
It s vaporware, for all practical intents and purposes.
12
SPEAKER_00
It s potential.
12
SPEAKER_00
I mean, you can do it in a centralized way, but like, can it survive?
12
SPEAKER_00
Can it last for a long time?
12
SPEAKER_00
I don t think so.
12
SPEAKER_00
And I think, you know, it can last perhaps initially with marketing, with centralized marketing, you can promote it, but ultimately,
12
SPEAKER_00
the user demand, the people that are not interested in speculating because they wanna get rich on this, the people that are gonna use it, they re gonna wanna use it because they can trust that it is not gonna be messed with.
12
SPEAKER_00
So like.
12
SPEAKER_01
But there s also applications on top, so Lightning Network, but there s applications on top, like well the reason I m interested in things like Ethereum is you might think it s ridiculous, I thought it was ridiculous, but NFTs.
12
SPEAKER_00
So you can have NFTs probably on top of Bitcoin, but you don t because there s no marketing on Bitcoin because all of these ideas get promoted on proprietary shitcoins because, yes.
12
SPEAKER_01
But there s the network effects of ideas, of applications.
12
SPEAKER_01
So they just take off for some reason.
12
SPEAKER_01
And human civilization is such that you get excited about stuff and large amounts of people believe a thing and they start to get excited and it actually has impact.
12
SPEAKER_01
The fact that NFTs can have an impact on the art world or the world in general,
12
SPEAKER_01
is wild to me, but it worked.
12
SPEAKER_00
So the question is... David Rothko has an impact on the art world, doesn t say much.
12
SPEAKER_01
I was saying his ideas have, we re collective intelligent beings and we can believe a thing and that has...
12
SPEAKER_01
but that has power, that has led to major wars and all those kinds of things.
12
SPEAKER_01
So it s interesting to me that NFTs took hold, and the question is, is there distributed dApps, is there distributed apps built on top of different blockchains that might somehow transform the world?
12
SPEAKER_01
You have to kind of keep an open mind to that, because right now it s like, I m the same place with that as I am with virtual reality.
12
SPEAKER_01
It s like, all right, this seems like a really intellectually promising set of ideas here, but there s something either technically or socially not quite taking hold.
12
SPEAKER_01
Why?
12
SPEAKER_01
And I don t know what the right answer is.
12
SPEAKER_01
So with virtual reality, what s the right answer?
12
SPEAKER_01
Is it just technically the latency is too high, or the games are not good enough, or is it a fundamentally flawed idea that you can live in a virtual world and enjoy it?
12
SPEAKER_01
that the physical world is just orders of magnitude better?
12
SPEAKER_01
Or a two-dimensional display is just as good as a three-dimensional world?
12
SPEAKER_01
I don t know, why is virtual reality not taking off?
12
SPEAKER_00
It s been since the 80s, right?
12
SPEAKER_00
I don t have strong opinions on it, on the prospects of the technology.
12
SPEAKER_00
Personally, I don t wanna ever imagine myself having something on my eyes.
12
SPEAKER_00
I d rather just go out into the real world.
12
SPEAKER_00
But I don t have strong opinions on virtual reality.
12
SPEAKER_00
I do have on dApps and NFTs.
12
SPEAKER_00
Yeah, what s your criticism of dApps and NFTs?
12
SPEAKER_00
Is it a distraction?
12
SPEAKER_01
It s a way to sell a flawed technology?
12
SPEAKER_00
The problem with the apps is, I mean, it s just the economics of it makes no sense in the sense that currently, if you wanted to run an application, whatever the application is, you wanna run it on AWS, you pay a specific amount of money.
12
SPEAKER_00
You wanna run it on your own laptop, you pay a specific amount of money per kilobyte of data.
12
SPEAKER_00
If you wanted to run the same thing on a distributed ledger, where you re distributing the data over thousands of computers worldwide,
12
SPEAKER_00
it s infinitely more expensive.
12
SPEAKER_00
And that s why we haven t seen any of these dApps take off.
12
SPEAKER_00
And that s why I ve said this many years ago, the only working application of blockchain technology is Bitcoin.
12
SPEAKER_00
Because with Bitcoin, you re with a few hundred bytes of data, with a few bytes of data, you could move a billion dollars worth of economic value from here to China and move it safely and reliably.
12
SPEAKER_00
So that power,
12
SPEAKER_00
I can t see it being justified for anything that is not as mission critical as moving large amounts of value, which require very little amount of information.
12
SPEAKER_00
So when you look at all of the buzzwords that Ethereum and other altcoin marketing people like to use, and if you wanna wonder really why we come to this kind of aggression, it s because we ve heard all of this.
12
SPEAKER_00
I ve had all of these hucksters come to me for years.
12
SPEAKER_00
I ve had people in 2016 talk to me about how Ethereum blockchain technology is gonna revolutionize real estate deeds in India.
12
SPEAKER_00
And I remember this guy,
12
SPEAKER_00
I m not gonna mention his name.
12
SPEAKER_00
But this guy was, you know, 2016, and he sold a lot of shitcoins and he made a lot of money off of shitcoins based on all these silly ideas.
12
SPEAKER_00
We re gonna have blackjack on a distributed ledger.
12
SPEAKER_00
We re gonna have Indian real estate on a distributed ledger.
12
SPEAKER_00
And it s just, it s concern trolling marketing.
12
SPEAKER_00
You know, oh, there s a problem with real estate in India, real estate deeds.
12
SPEAKER_00
Blockchain fixes this, buy my shitcoin.
12
SPEAKER_00
And then people buy the shitcoin,
12
SPEAKER_00
Indian real estate isn t fixed and the guy gets rich and they move on.
12
SPEAKER_00
But I mean, I m still waiting for a dap to actually emerge.
12
SPEAKER_00
Like, you know, it s the promise that we keep hearing is something completely world changing, world transforming.
12
SPEAKER_00
And the reality is not one app.
12
SPEAKER_00
Like there s one of my good friends, Jimmy Song,
12
SPEAKER_00
Eventually, they refused to go ahead with the bet.
12
SPEAKER_00
He wanted to bet with one of the Ethereum people about these dApps.
12
SPEAKER_00
The Ethereum people are constantly saying those dApps are going to grow and they re going to have so many applications and they re going to have so many ideas.
12
SPEAKER_00
The reality is all the apps that work are centralized apps.
12
SPEAKER_00
Uber on the blockchain, there is no Twitter on the blockchain, there is no social media on the blockchain because these are businesses and businesses require a centralized authority to make decisions.
12
SPEAKER_00
You can t have it be decentralized.
12
SPEAKER_01
Listen, you re frustrated and I could see it over a few years of just having dealt with a humongous influx of charlatans.
12
SPEAKER_01
I wouldn t say frustrated, I m amused.
12
SPEAKER_00
It s water off my back.
12
SPEAKER_01
No, but a man that uses, and a community that uses the word shitcoin, is a little bit, you call it amusement, and I think amusement is a way to deal with the frustration, it s a channeling of frustration.
12
SPEAKER_01
Sometimes when you have to deal with bullshit,
12
SPEAKER_01
The best way is just to laugh at the absurdity of it all, and that s what you mean by amusement.
12
SPEAKER_01
But the fact is, there s things like artificial intelligence for, what is it, how many decades, six, seven decades, has been off and on promising to change everything, and it has failed.
13
SPEAKER_01
failed time and time again to deliver to the promise.
13
SPEAKER_01
But that doesn t mean there s something fundamental and really powerful about both the small and the big things going on within the actual research and development within those communities.
13
SPEAKER_01
There s a lot of exciting developments and the scale at which those developments might actually have a transformative impact, the time scale is unclear.
13
SPEAKER_01
It seems like we certainly over promise.
13
SPEAKER_01
We dream too big and too aggressively.
13
SPEAKER_01
in the AI community, but a lot of companies.
13
SPEAKER_00
Yeah, and I m happy to give people the benefit of the doubt when they re over-promising, but not when they re making their own money.
13
SPEAKER_00
When you start making your own currency, then you don t get the benefit of the doubt.
13
SPEAKER_00
Because if your idea needs you to have a new currency that you print when Bitcoin is out there,
13
SPEAKER_00
then I m going to go ahead and assume that you re doing this for the money.
13
SPEAKER_01
It s a good time to mention that I am actually launching my new coin called LexCoin.
13
SPEAKER_01
You mean ShitCoin?
13
SPEAKER_01
Yes.
13
SPEAKER_01
Oh, God.
13
SPEAKER_01
I m going to have to block you with love.
13
SPEAKER_01
Okay, one thing I wanted to ask you about is the Fed s, this paper they released in January 20th on the potential central bank digital currency, CBDC.
13
SPEAKER_01
What are your thoughts about that?
13
SPEAKER_01
Is it just another, like, is there pros and cons to this?
13
SPEAKER_01
Is it at all interesting to you that they re even considering this kind of thing?
13
SPEAKER_00
I used to think that it s just basically a waffle.
13
SPEAKER_00
It s meaningless.
13
SPEAKER_00
And because as it exists, the dollar is a central bank digital currency.
13
SPEAKER_00
The vast majority of dollars are digital.
13
SPEAKER_00
But I think the way that over the last couple of years, I ve changed my mind on this.
13
SPEAKER_00
I think there s some serious substance behind these ideas.
13
SPEAKER_00
And what they mean effectively is the disintermediation of the banking system.
13
SPEAKER_00
and giving everybody an account at the Federal Reserve.
13
SPEAKER_00
This is kind of the really dangerous idea, and I think this is enormously significant.
13
SPEAKER_00
Effectively, as somebody who s lived in the Soviet Union, what this is is the return of the Gosbank on a global scale with modern technology.
13
SPEAKER_00
So under the Soviet Union, there was something called the Gosbank or the People s Bank, and that was the only bank in the country.
13
SPEAKER_00
And you had an account with the National Bank,
13
SPEAKER_00
And if you said something wrong, your money got terminated from the Goss bank.
13
SPEAKER_00
Now imagine that combined with the power of digital technology.
13
SPEAKER_00
And you can see that this could be an enormously powerful technology really, because if banks are out of the picture, then we changed the fundamental reality of fiat as being the creation of money through lending.
13
SPEAKER_00
And then it becomes the creation of money truly by fiat, by government fiat.
13
SPEAKER_00
So we move to a system in which money is just basically, it s like we have money that is pieces of paper and every time we ve had money, we ve had fiat money that was just pieces of paper, it collapsed very quickly.
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With the current system, money is credit and the creation of credit is restricted to some point and the creation of credit is self-correcting.
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I discussed this in the fiat standard.
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If the central bank allows banks to create too much credit, that creates a bubble and then there s a collapse in the money supply, which prevents hyperinflation from happening because
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the money creation is self-destructive, it s self-correcting.
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So you end up with an average of like 7% per year increase because you have 10% for five years and then you get negative 20% for one year and it s correcting.
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But now if you get rid of the credit creation mechanism and it s just assigning money directly, we re likely gonna get much faster inflation.
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And I think that s obviously a huge problem and perhaps an even bigger problem is the enormous amount of power that it gives to governments.
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It allows them to create an awful dystopia where you ve got your money on your phone
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anything you do is completely supervised and controlled through your spending.
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So they wanna introduce a new lockdown, then they ll just make your money not work.
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You know, your money s broken today, you can t spend money.
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Or you can only spend money in your local supermarket for the next three months because you can t leave your neighborhood, your money stops working outside of your neighborhood.
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You know, the Chinese social credit score system is an example of this.
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And I think, I don t know, I don t have a crystal ball, so I don t know what the likelihood is of implementing something like this in the US.
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I ve discussed it with Michael Saylor, he thinks it s highly unlikely, he thinks, you know, the people who ve been pushing this are very far from the position of power and the traditional monetary and financial system is going to survive intact.
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I certainly hope so.
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I think this would be a terrible thing if it comes to pass.
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But I don t think, many people think that it is something that would undermine Bitcoin.
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Like a lot of common objection to Bitcoin is, well, governments are just gonna launch their own digital currencies and then Bitcoin is gonna die.
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And I think this is completely missing the point.
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People think Bitcoin is important because it s digital.
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It s not.
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National currencies can be digital.
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Bitcoin is important because it s not inflationary.
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and because nobody controls it.
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Central bank digital currencies are likely to be very inflationary and they re likely to have very strong control at the top.
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So if anything, they are an advertisement for Bitcoin rather than a replacement for it.
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If it s Bitcoin, if it s gold, it s a way for multiple nations to partake.
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So if you were to imagine a future where we move
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from the fiat standard back to the gold standard and then to the Bitcoin standard, or skipping that, going directly to the Bitcoin standard, what would it take?
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Is it gradual, is it immediate?
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What are possible trajectories that take us, well, basically where the final sort of empirical observation is that you overtake, Bitcoin overtakes first gold and then bonds in terms of its monetary power in the world.
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but like just specifically from a government perspective, how do we move the United States, China, Russia, India, European Union to a Bitcoin standard?
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I m not entirely concerned about whether governments move or not.
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In fact, I d be very happy for them not to move as long as possible so that individuals can accumulate more and more Bitcoin while it s still cheap.
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So the people will move and the governments will catch up
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Yeah, and I think this is kind of what I allude to.
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I mean, the point of the fiat standard, the fiat standard is really a Bitcoin book.
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It talks about fiat most of the time, but it does so to analyze Bitcoin and the rise of Bitcoin.
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In the final chapter, I discuss how I think this relationship plays out.
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The way that I tend to think of it is that most likely what s going to happen is we re going to have a kind of financial apartheid where there s going to be two monetary systems.
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One is government controlled and it comes with increasing amounts of surveillance and inflation.
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And then if you want, you can just opt out of that and get into Bitcoin.
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And it s likely going to be difficult for governments to stop people from getting into Bitcoin for all of the technical reasons that make it very hard to stop Bitcoin.
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So then we have this alternative that is Bitcoin, which is not inflationary and does not have a central authority that can censor it.
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I think gradually is my hope and I also think my most likely scenario, but maybe I am biased because everybody thinks what they want is what s gonna happen.
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I think we re just gonna witness the same relationship because governments make their currency so that they can devalue them.
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And Bitcoin thrives on that.
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And more and more people are gonna learn, more and more people are gonna find out.
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And whether it s through curiosity or self-interest, or through the destruction of the national currency, all roads lead to Bitcoin.
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So more and more people are gonna buy Bitcoin, the price of Bitcoin is going to go up.
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And as it goes up, Bitcoin becomes a more significant part of the world economy.
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This is something that skeptics don t get.
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Like a lot of the academic skeptics to Bitcoin, they offer up all of these theories about why they think Bitcoin can t work and then they present it and they think they ve delivered the knockout blow as if Bitcoin needs their permission or the world is going to need their permission.
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Well, the reality is people are gonna join Bitcoin out of greed, out of self-interest.
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Number go up technology is really what s going to get everybody in.
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And that s really the Trojan horse for,
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fixing the world.
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Come for the greed and stay for the revolution.
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It s gonna keep going up because people don t like to be poor, except for most economists and academics.
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People don t like to be poor.
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People don t enjoy getting their wealth destroyed.
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And they care more about their self-interest than they care about economic theories about whether this works as money or not.
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They see their cousin escaped hyperinflation and managed to get a bigger house because they bought Bitcoin five years ago.
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They realize maybe I should stop
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mocking my cousin and start buying more Bitcoin.
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This is, I think, an indomitable force that s going to continue.
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And one thing, most Bitcoiners tend to lean toward an apocalyptic transition.
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Fiat s gonna collapse, we re gonna get hyperinflation, everything s gonna be terrible, and then we re gonna move to Bitcoin.
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And I present the case for why I think maybe that might not be the case.
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Maybe we won t get this kind of apocalyptic scenario.
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And this was like the conclusion of the fiat standard, which is once you realize that mining fiat is creating debt.
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And Bitcoin is allowing, so in order to have fiat money, we need to have people borrow.
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We need to have people make loans.
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And the problem that fiat money runs into today is that if you wanna save money, if you wanna hold savings,
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You have a problem, where do you put your savings?
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So you put your savings in debt, in the creation of more bonds.
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Wherever you take your savings, you create a bubble in those things.
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And this is why we see a bubble in the stock market, a bubble in the bond market, a bubble in housing.
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It s because people are looking for savings, looking for a place where they can save.
13
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All of those things are crappy saving instruments because they re like copper in that there s nothing to stop the people behind them to make more of them.
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House builders can build more houses.
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Governments can issue more bonds.
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The crappy fraudulent companies can list on the stock market and make more stocks.
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Well, Bitcoin finally offers us an outlet.
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We don t need to keep creating more debt.
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We can invest in this asset that is hard.
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and that is internationally liquid, and that nobody can make more of.
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So there is no bubble in it.
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There is no mechanism for somebody to increase the supply and bring the price crashing down, like with copper and real estate and bonds.
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So Bitcoin is the way out.
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And this is why I think there s a good case to be made for why the fiat authorities might embrace Bitcoin, because they ll see it is their way out of this enormous debt bubble that everybody is stuck in.
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particularly the richest and most powerful people in the world.
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and the richest and most powerful governments in the world are the world s biggest borrowers.
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They re the ones in a lot of debt.
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So a continuous slow devaluation of the value of that debt as people upgrade and move on to a hard asset that continues to appreciate is the peaceful way that we wind down the fiat Ponzi, I think.
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You could see it being like a political, part of a political platform for future people that run for president, those kinds of things to address.
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Obviously, it s not just for the powerful and the rich.
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The people are bothered by the debt.
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The people are bothered by everything that you described with Fiat.
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And if you wanna sell yourself in a democracy as a good leader, you might want to make that part of the platform.
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You mentioned you know Michael Malice.
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He just texted me asking, me to ask you, what do you like best about Michael Malice?
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SPEAKER_01
If you can spend,
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5 to 10 to 20 to an hour talking about the genius of Michael Malice.
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What do you like, where does one even start?
13
SPEAKER_01
Well, obviously the haircut first.
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Yeah, he just gets sexier with age, that s for sure.
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Do you, you know, his ideas
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his trolling and humor.
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Have you gotten a chance to interact with him?
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Yes, yes, I ve met Michael maybe 10, 12 years ago in New York.
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I used to live in New York when he used to live in New York.
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I met him a couple of times.
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There was a bunch of anarchists in New York used to throw a happy hour once a month.
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It was called the High Time Preference Hoppe Hour in honor of Hans-Hermann Hoppe.
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So I met him there a couple of times.
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We followed each other on Twitter for a while.
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Is it interesting that you re aware of philosophical differences in your world views?
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No, I think we pretty much see eye to eye.
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I think the difference is mainly that he spends a lot of time focusing on American politics and American pop culture, which I don t pay much attention to, I guess.
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So you look more at the monetary system, the economics of it all, and just the history, and just looking at it, zooming out.
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at the big picture of it all.
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Although recently he s working on a book called The White Pill, and he s been, every time I see him, I mean, he s in some dark aspect of the 20th century.
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He s just like, I just finished writing about Holodomor.
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as you might imagine, he s not taking much, I believe, of a monetary perspective on things.
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His book, his writing, at least for time, his kind of philosophical ideology perspective that s outside of the monetary system.
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But you argue that those are actually inextricably linked.
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Yeah, and I don t think he would disagree, but a book has to be, can only be so long, I suppose.
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It can only focus on so many things.
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If you can put on your wise sage hat and give some advice to young people, I mean, the past four hours have been a kind of advice, but if you can focus, and if somebody in high school or college is thinking about,
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what to do with their career, can have a successful career, or to have a life they can be proud of, what would you tell them?
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I d say probably the most important advice that I would give is to find a way to give value to other people.
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This is really the key thing.
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You need to wake up every morning and figure out how to serve others.
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This is the key to everything you want in life.
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Everything that you want is on the other side of you serving others.
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So figure out how you can serve others in a good way.
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how you can do it in a way that they value.
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And you ve got an incredible mechanism for figuring that out, which is the market.
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Go out there and do things for other people.
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And, you know- The market will tell you.
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The market will tell you, exactly.
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If you re young, you have the enormous advantage of being able to make mistakes, essentially, and learn from them.
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So go out there, do things of value for others, figuring out how you can do something that, what is it that you can do that contributes the most value to other people s lives?
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And increasingly, I think with the modern technology, this is increasingly becoming online.
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And it s, I think you should consider how you can create value online because that scales,
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beyond anything that you can do in the physical world, in a very, very, well, maybe not beyond, obviously, there are profitable businesses in the physical world, but I think online is enormous potential, and coding, I think, is enormously powerful.
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I m not a coder myself, but I strongly recommend people get into learning how to code.
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And I think it s probably the thing that carries the most power.
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So initially we were working with our hands.
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We started working with machines.
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Machines are much more productive.
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Well, code is an even higher level of productivity where you basically program the machines to produce things.
13
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So, you know, few clicks of a keyboard and you can move millions of machines around the world in certain ways.
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So it carries an enormous amount of value.
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I think I always tell all young people to learn to code.
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It s the best thing.
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I used to tell it to my students when I was at university.
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Tell them to drop out and go learn to code.
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It s probably a better use of their time and money.
13
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We could probably do both.
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University has an interesting function.
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I mean, probably you and I have different perspectives on this, probably has to do with a little bit of a different journey in terms of fields, because I ve stayed engineering focused for a long time, and there s less, some of the troubles you might highlight in the education system, there s less troubles of that kind in engineering, because math has
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hasn t changed for a long time.
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A lot of it is just doing hard things, being forced to do hard things, and becoming a bit of a generalist, while on the side you re also becoming a specialist.
14
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based on your own passion, driven by your own passion.
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So school, at least high school, I don t know about the university, but high school, that s a really nice, one of the only times in your life, at least in my life, I was forced, but now I see, given the opportunity to spend my entire day learning broadly.
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And that s something, I don t know, the way time works, it just runs away from you and you never really get a chance to learn quite that broadly again.
14
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That s the curse of specialization is you kind of never get a chance to study biology, chemistry, if you re a physicist, time runs away from you.
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So enjoy the broad education.
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But yeah, like you said, find the things that valued by the market.
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SPEAKER_01
And on the other side of it, you said all the good stuff, so that s also a way to get happiness?
14
SPEAKER_00
Yeah, and I ll also add that the horse that I like to whip all the time is the low time preference aspect of things, saving with Bitcoin.
14
SPEAKER_00
So I think my advice to young people is, you know, when you re young, you think of the world in a very short term generally.
14
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You re focused on the present and you think that everything that s happening in the present is the most important thing that s ever gonna happen in the history of humanity.
14
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Lower your time preference, think about the future, think further down the line, think about the consequences of the things you do and then what.
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And so you do this now, it feels good today, but then what happens tomorrow?
14
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You go out, you drink, you enjoy yourself, well, think about the hangover.
14
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But more long-term, think about the implication of living this kind of life.
14
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Think about every decision that you make, the longterm implication of it.
14
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And part of that is Bitcoin.
14
SPEAKER_00
Part of that is save in Bitcoin.
14
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I urge everybody to put savings in Bitcoin for the longterm.
14
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Don t buy Bitcoin for the short term.
14
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Don t buy Bitcoin today so that you can sell it.
14
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Don t put your savings in Bitcoin today so that you can sell it all next month and buy a house.
14
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Put money in Bitcoin that you expect to keep in Bitcoin for another five, 10 years or so, at least four years is what I recommend for people.
14
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So keep a low time preference, focus on the future and save in Bitcoin.
14
SPEAKER_01
And learn about how to buy Bitcoin, how to...
14
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learn about all this technology.
14
SPEAKER_01
Part of this is this conversation, but there s so much awesome material out there.
14
SPEAKER_01
And thank you, by the way, for this gift of a hardware wallet.
14
SPEAKER_01
So you should definitely invest in it yourself.
14
SPEAKER_01
And what would you call this?
14
SPEAKER_01
These are... Open dimes.
14
SPEAKER_01
Open dimes, yeah.
14
SPEAKER_01
So this is like USB that you can, like a hardware device that stores Bitcoin.
14
SPEAKER_00
Yeah, so you don t have to worry about knowing the passport.
14
SPEAKER_00
It contains the passport within it and it s tamper-proof.
14
SPEAKER_00
So you can save the Bitcoin on it.
14
SPEAKER_01
So when the apocalypse comes, you need the value to be stored on an actual thing that you can have in your physical possession.
14
SPEAKER_01
That s exactly what this is.
14
SPEAKER_01
You ve had a heck of a life.
14
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You ve been in a bunch of places in this world, a lot of places.
14
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Life is not easy in some of those places.
14
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What has been, if we can take a step to maybe a bit of a dark step for a short time, what has been maybe darkest time, period, place you ve ever gone in your mind, a dark period of your life, a struggle you had to overcome, you had to survive?
14
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Well, I m Palestinian, so that is the tragedy of my life.
14
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I m Palestinian-Jordanian.
14
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My family s suffered a lot because of this historically.
14
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I grew up in Ramallah in the West Bank.
14
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It wasn t ideal to see that.
14
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People like to think of it as this intractable conflict between two bitter enemies, but the reality of the matter is that it s not.
14
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a foreign ideology came in with the idea that this country needs to be occupied by people from only one religion.
14
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And the existing population, which, you know, I mean, Jews had always lived in Palestine historically.
14
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And at the turn of the 20th century, they were only 10% of the population.
14
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But then, with the birth of fiat money, incidentally, you know, the link with all of this is that
14
SPEAKER_00
uh... when the bank of england went off gold uh... big reason why they were able to pull that off was that the rothschild banking family supported them and in exchange the rothschilds got palestine and uh... the balfour declaration was written by the uh... government of britain to the rothschild family telling them that uh... they d like to make palestine a homeland for jews
14
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So obviously that s not very convenient for people who are not Jewish, for whom that is a homeland.
14
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And the past 80 years has been a very painful struggle if you happen to not be Jewish.
14
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And obviously, you know, obviously Palestinians have done all kinds of things trying to fight back and they ve done all kinds of wrong things.
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But I don t think you can escape the fundamental reality underlying this, which is that if you re not Jewish, you are,
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being moved out of the land.
14
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And so it s happened in 1947, 48.
14
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It happened in 1976, 1967.
14
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More land was taken over by Israel.
14
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Now you see it with the settlements.
14
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If you ignore the day-to-day headlines and you ignore the media propaganda and you ignore all of this thing, there s a very clear thing that is happening, which is more land owned by an exclusive group
14
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ideology that believes this land needs to be owned by people from one religion and everybody else is being kicked out and so that is the tragedy of my life and my wife is also a Palestinian refugee from Lebanon and her family was evicted from Jaffa which is today on the outskirts of Tel Aviv
14
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They still have their homes in Niafa, their homes are being left, you know, they got kicked out of their homes and their lands and their property.
14
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They became refugees in Lebanon.
14
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So my children, you know, it s an ongoing tragedy.
14
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It s not something that is, a lot of the people that think of it as,
14
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They think Palestinians are just out there to get Israelis because they hate them, but it s an inescapable tragedy.
14
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I don t have a home anywhere.
14
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Is there an escape from this tragedy in the future that you see?
14
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If you zoom out across the scale of decades, will we see, I hesitate to say peace, but
14
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a significant decrease in human suffering in this part of the region?
14
SPEAKER_00
I certainly hope so.
14
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And I think, you know, my interest in Bitcoin comes from, came from a place of desperation with the situation there.
14
SPEAKER_00
Traditional politics is
14
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a dead end.
14
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I don t see what I can be doing to make things better there using traditional politics.
14
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And I think a good friend of mine, Pierre Rochard, you may know him on Twitter, one of the brightest minds in Bitcoin in my opinion, he told me his theory is that Bitcoin is going to bring peace to the Middle East because land is a shitcoin.
14
SPEAKER_01
Land is a shit coin, I love it.
14
SPEAKER_00
And I think he s got a very good point there, that this fixation with land and the bitterness with which people have to live land is,
14
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likely to decline when people are gonna have a form of property that they can keep.
14
SPEAKER_00
And so hopefully that will help in one way.
14
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And of course, the more obvious way is that this is a conflict of governments and it s a conflict that is financed by fiat.
14
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From day one, the entirely insane notion that you could build a national, an ethnic homeland.
14
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And of course, this is the early 20th century.
14
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The idea behind Zionism is coming from the same place where all these other ethnic nationalisms of Europe were emerging and we saw how well, how horribly these worked out.
14
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But the idea that you could, you know, it s one thing to say we want to build a homeland for Germans in Germany.
14
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It s one thing to say we want to build a homeland for Germans somewhere else.
14
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And that was Palestine, that was Zionism.
14
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And that was only possible thanks to Fiat, thanks to the ability of the British government and all these other governments to continue to finance this colonialist effort over time.
14
SPEAKER_00
And it continues to finance war and it continues, we see war all over the world continue to escalate because
14
SPEAKER_00
The people who d make the decision to escalate the war are not the ones who are paying for it and they re not the ones who are fighting.
14
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They re the ones who sit in offices.
14
SPEAKER_00
And in the case of most of Middle Eastern conflict, it s people who live abroad.
14
SPEAKER_00
It s people who are abroad or not part of it who just are emotionally charged to it because they watch it on TV.
14
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So you have billions of Muslims around the world and
14
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Jews around the world who feel extremely emotionally attached to it.
14
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They re not the ones fighting.
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They re not the ones paying their own money.
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They re just getting governments to send money and to send weapons and to take part.
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And it s fun as a spectator sport for most of these people because they don t get to live in it.
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But I got to live in it.
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I saw it.
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I grew up there.
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I saw the settlement expansion.
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And recently, a few weeks ago, I went back to Ramallah.
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It s amazing every time you go, the settlements are just growing in an astonishing way.
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It s not just housing units that are going up, it s an entire attempt to build, to basically suffocate Palestinian areas and force Palestinians to leave or keep them living in horrific conditions.
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And if I may, just because I have family in Ukraine, I have family in Russia, since this war, echoes of similar things are happening in that part of the world too.
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And I shudder to think about the decades to come of the hate that is brewing, the suffering that is brewing.
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based on decisions and pressures and from not always people directly impacted by this.
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So again, it feels like that military conflict is not just a creation of,
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like people on the ground.
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It s a creation of leaders, power centers.
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And perhaps, again I m not smart enough, but even the monetary system probably has a role to play.
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I absolutely think it does.
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Monetary system is what allows
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is what allows people to just continue to treat war as a spectator sport.
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That s really what it comes down to.
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And it starts with World War I, and it s continued.
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And this is why I really, I think I ve said this before, I ve tweeted this before, and it was a pretty popular tweet, but it also got a lot of people to dismiss the idea with mockery, of course.
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But I really think Bitcoin is the only technology that s going to end World War I. Once World War I started, we got into this endless conflict that s been ongoing since then.
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If you look at all the world s conflicts today, pretty much they all trace back to World War I. And it s because when that Pandora s box of government control of money was opened,
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There was no longer a real restraint on war except complete defeat and complete destruction and complete death.
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The war had to be total.
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Before that, under the gold standard, kings would send professional armies to fight each other in battlefields.
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And as soon as it became clear that one side was establishing an advantage, the fighting would stop and the kings would settle, would agree to new terms because it was extremely expensive to build a professional army and you ran out of money.
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So it was always the smartest thing to do is to just stop fighting whenever you could.
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And wars would take place.
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Countries would fight each other in the battlefield.
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But in the cities, life went on as normal.
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And people within the same cities, within the cities of the two countries, would be trading with one another.
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life would go on, but the war would be there.
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And it was just an independent part of politics that, all right, we have a problem over this piece of land, let s take it outside.
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We don t fight in the civilian areas, we go to the battlefield, we fight with professional armies.
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And in fact, sometimes the conflicts would be, the armies would line up and they would just have a small,
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contingent of the two armies fight with one another.
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And as soon as one of them establishes an advantage, then, all right, well, you won, let s move on with it.
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Governments were far, far, far more careful about their monetary policy and their, sorry, their war policy when they couldn t print their money.
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And that has changed with fiat.
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And that has allowed this new emergence of this class of what I like to call chicken hawks.
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of people who sit in offices like the entire foreign policy establishment in Washington DC, people who have never fought a war, whose children will never fight a war, who will never pay to fight a war, who will never suffer a broken window in their house because of war, sitting there and based on these fucking moronic garbage that they teach at
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moronic fiat universities about politics and geopolitics making decisions about you know we need to invade that country and we need to send war there and they can do that because they have this endless money printer and that s why you know back under gold if you were a warrior you know you went and actually joined the war
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And that, you know, the people who pontificated about war were the people who had experience with war, the people who were sending their own children to war, the people who were fighting with their own money.
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Now you have all these fat parasitics come sitting in Washington, D.C., deciding, and Washington s just an example, but all over the world this exists, people who ve never fought, who ll never carry the consequences, who are going to devalue the world s money.
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in order to go and have other people s children fight each other because of stupid garbage they learned about politics in university.
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You said you value low time preference, but I have news for you that one day you will die.
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As far as we know, you re a mortal being.
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Do you think about your death?
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Do you think about your mortality?
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Are you afraid of it?
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I ve spent a lot of time introspecting and thinking about these things, and I value life a lot.
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I value my time on Earth a lot, and you ll see this in my dealings with people.
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Go back to Twitter, why am I so brash and straightforward?
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It really is because life is short, because I don t wanna waste, I think on my,
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I ve said this before, on my tombstone, let it be written, he never let anyone waste his time twice in his life.
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because life is short.
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Yeah, you can waste my time once.
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You can get me to do something, and then I realize that was a waste of time.
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You will never get me to waste my time twice.
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And so you show up in my Twitter with something stupid, you re never showing up in my Twitter ever again.
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So you re a fast learner.
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You give people a chance, but you re a fast learner.
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Yeah, and I try and use my time very wisely, and I m unapologetic about it.
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My time is the most precious thing, and the way to get on my shit list forever is to try and take away my time.
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and to abuse my time.
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If you do that, it s the one unforgivable sin for me.
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And I think that s really, I think that s my way of coming to terms with mortality.
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We re all gonna die, and so let s make the most out of it while we re still here.
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And of course, the other way you come to terms with mortality is you have children.
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Given what you just said,
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Doubly so, it s a huge honor that you would spend your valuable time with me.
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This is the first time you did it, so you probably regret all of it, so we ll probably never see each other again.
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But I m glad you at least took the chance to do it.
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It s a huge honor, man.
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I ve been a huge fan of yours.
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I think you have impact on the world that you probably are not even aware of.
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It s tremendous.
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A lot of people love you, and your work is important.
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You know, I disagree with some things you say, and there s people that disagree with you, but everybody respects you, and thank you so much for spending your really valuable time with me today, brother.
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Thank you, sir.
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I really appreciate it.
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This was not a waste of time, and I d be happy to do it again.
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Thanks for listening to this conversation with Save Dina Moose.
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To support this podcast, please check out our sponsor.
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in the description.
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And now let me leave you with some words from the Austrian economist Friedrich Hayek.
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Economic control is not merely control of a sector of human life which can be separated from the rest.
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It is the control of the means for all our ends.
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Thank you for listening and hope to see you next time.
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you