Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics #284

Transcript

00:00:00 You can’t have a permanent war without fiat.

00:00:04 And I also think there’s a case to be made

00:00:07 that you can’t really have fiat without war.

00:00:12 The following is a conversation with Safety Namus,

00:00:15 one of the central and most impactful economists,

00:00:17 philosophers, and educators in the world of Bitcoin.

00:00:21 He’s an Austrian economist, an anarchist,

00:00:24 and the author of The Bitcoin Standard

00:00:27 and the new book, The Fiat Standard.

00:00:29 Safety does not mince words in his criticism of economists

00:00:33 and humans in general with whom he disagrees.

00:00:36 For example, Paul Krugman,

00:00:39 who is a neo Ecclidean economist

00:00:41 and a previous guest at this podcast.

00:00:44 Safety’s opinions are strong and often controversial.

00:00:48 I do push back in this conversation,

00:00:50 playing devil’s advocate or trying to steal man each side.

00:00:54 But as always, I do so in the service of exploring

00:00:57 the rich space of ideas that Safety has

00:01:00 about human nature and human civilization.

00:01:03 I trust the intelligence of you, the listener,

00:01:06 to come to your own conclusions.

00:01:09 That is the burden of being a free thinking human.

00:01:12 It is on each of us individually

00:01:14 to dive into this chaos of ideas.

00:01:17 And from that chaos,

00:01:19 discover long lasting universal wisdom to live by.

00:01:24 This is the Lex Friedman podcast.

00:01:26 To support it, please check out our sponsors

00:01:28 in the description.

00:01:29 And now, dear friends, here’s Safety Amoose.

00:01:33 Let’s start with a big question.

00:01:35 What is money?

00:01:37 And what is the role of money

00:01:39 in the history of human civilization?

00:01:40 Money is a medium of exchange.

00:01:42 The thing that defines money is that it is a good

00:01:44 that you don’t buy for its own sake

00:01:46 because you wanna consume it itself

00:01:48 or because you want to employ it

00:01:50 in the production of other goods,

00:01:51 which is what capital goods are.

00:01:53 So we have consumption goods, we have capital goods.

00:01:55 Money is distinct from those two

00:01:57 because it is a good that is acquired

00:01:59 purely to be exchanged later on for other goods.

00:02:01 So it’s not something that you acquire for its own sake,

00:02:05 you acquire it so that you can then later on exchange it.

00:02:07 And that’s a market good.

00:02:09 That’s a market good like all other goods.

00:02:12 You acquire food because you eat it,

00:02:14 you acquire a car to move you around,

00:02:16 you acquire money so that you can exchange it

00:02:17 for other goods.

00:02:19 And that’s something that many people

00:02:21 have a hard time grasping,

00:02:22 of the concept of money as a market good.

00:02:25 But it is a market good, just like all others.

00:02:27 And the importance of it is that it allows us to trade.

00:02:31 It allows us to develop the division of labor,

00:02:35 which would not be possible

00:02:37 at any kind of sophisticated level without money.

00:02:39 So if we live in a small society of 10 people,

00:02:44 then think about all the things that we can make,

00:02:46 all the things that we can produce.

00:02:49 If we’re only 10 people isolated from the world,

00:02:51 there’s only very few things that we can make.

00:02:53 And therefore we can exchange those things directly

00:02:56 with one another.

00:02:57 But as, you know, if we get in contact with other societies

00:03:02 that have more people,

00:03:04 then the opportunities for specialization increase.

00:03:06 You know, if there’s 10 people,

00:03:07 the only thing that you can make is the very basics

00:03:10 you need for your survival.

00:03:12 But if you’re part of an economy of 10 million people,

00:03:15 there’s much more room for specialization.

00:03:17 You can make a car, you can make a house,

00:03:19 that’s very sophisticated.

00:03:22 And that relies on the division of labor.

00:03:24 That relies on you specializing

00:03:26 in doing one tiny little thing,

00:03:28 which is not what you consume.

00:03:30 You know, and you trade that thing

00:03:33 for all the things that you consume.

00:03:34 So as the economy becomes more sophisticated

00:03:37 and involves more people,

00:03:38 and currently we’re all part of an economy

00:03:41 of almost 8 billion people,

00:03:43 each one of us produces one tiny little thing.

00:03:46 And they exchange that thing

00:03:48 for all the things that they want.

00:03:50 And so, because we specialize,

00:03:52 we become more productive

00:03:53 in doing the thing that we’re good at.

00:03:55 So, you know, there’s people out there who are engineers,

00:03:57 who are designing windshields in cars.

00:04:00 It’s a very specialized thing.

00:04:01 They sell windshield design to Mercedes Benz.

00:04:05 And then from that, you know,

00:04:07 that windshield design is added on

00:04:09 to millions of cars around the world.

00:04:11 And from that, they’re able to get enough money

00:04:14 to meet all of their needs.

00:04:16 So the division of labor is enhanced enormously with money,

00:04:19 because without money,

00:04:20 it’s very difficult to be able to exchange

00:04:23 a large number of goods.

00:04:24 It’s very difficult to have a sophisticated economy

00:04:27 with a large degree of specialization,

00:04:29 because it’s very difficult to find people

00:04:33 who want the thing that you have

00:04:36 and have the thing that you want.

00:04:37 We call this the coincidence of wants.

00:04:40 And that’s really the problem that money solves.

00:04:42 So you make apples and I make oranges.

00:04:46 I’d like to have some of your apples,

00:04:48 but you don’t want my oranges.

00:04:50 And that’s, we have a problem of coincidence of wants.

00:04:52 So what do I do?

00:04:53 You want bananas.

00:04:54 I need to find somebody who has bananas,

00:04:56 give them my oranges, take their bananas,

00:04:58 give you their bananas, and then I take the apples.

00:05:00 In that case, bananas are a medium of exchange.

00:05:03 So it’s natural that a medium of exchange will evolve

00:05:06 and will emerge in an economy

00:05:07 as an economy becomes more sophisticated.

00:05:09 As we move beyond 10 people and 10 goods,

00:05:12 it’s inevitable that we’re going to come to a situation

00:05:15 where we have the problem of coincidence of wants.

00:05:18 And the way to solve that is to use a medium of exchange.

00:05:21 And it can be anything.

00:05:22 It can be a banana, it can be food stuff,

00:05:25 it can be any kind of good.

00:05:28 As long as I acquire the good

00:05:29 with the purpose of passing it on to you,

00:05:32 not for the purpose of me consuming it or using it,

00:05:35 then that’s a medium of exchange.

00:05:36 So when we look at the entirety of human society

00:05:40 of millions of billions of people,

00:05:42 you think of them, just a bunch of individuals running around.

00:05:46 I love the term coincidence of wants.

00:05:49 So each one of them, it’s like a stochastic system.

00:05:52 They have desires, it’s like a random collection of desires,

00:05:56 somehow rooted in our evolutionary history,

00:05:59 but mostly random in terms of preference

00:06:01 of banana or apple, that kind of thing.

00:06:04 And then they also have the capacity for competence

00:06:08 and excellence in particular kind of labor.

00:06:11 So like specialization, they’re able to be like incredible

00:06:16 at a particular set of tasks.

00:06:18 So there’s a bunch of ants running around

00:06:20 with consciousness and intelligence,

00:06:23 and they have desires and they have capabilities.

00:06:26 And then there’s a coincidence of both the wants they have

00:06:32 and the capabilities they have,

00:06:34 and you wanted to create a system

00:06:36 that kind of exchanges those things.

00:06:39 So when you imagine like what is a good, what is markets?

00:06:45 When you imagine a market is like a hierarchical system,

00:06:49 what do you imagine?

00:06:50 What is a market?

00:06:52 A market is just the name

00:06:53 for the naturally emergent phenomena

00:06:55 of people voluntarily exchanging things.

00:06:58 It’s at any scale.

00:07:00 At any scale, yeah.

00:07:01 Individually, it could be a market of two people

00:07:03 on an island on their own.

00:07:04 It could be 8 billion people across the planet.

00:07:07 Naturally emerging.

00:07:09 Yes, this is the thing I think that is very hard

00:07:12 for many people who don’t have a good understanding

00:07:15 of economics to grasp that capitalism and markets

00:07:18 are not something that you need a central planner

00:07:23 or a government officer to make happen.

00:07:26 Capitalism is just what happens

00:07:28 when people are left to their own devices.

00:07:30 It’s just our cognitive capacity allows us to develop tools

00:07:34 that we can use for production.

00:07:36 And that’s what we do.

00:07:37 That’s what humans have been doing

00:07:39 since they started making spears to hunt.

00:07:42 That’s the first capital good probably.

00:07:44 So we’re constantly accumulating capital.

00:07:46 We’re constantly trading with one another.

00:07:47 We find an opportunity.

00:07:49 You’ve got a lot of oranges.

00:07:50 I’ve got a lot of apples.

00:07:52 Then I’ll take some of yours.

00:07:53 You’ll take some of mine.

00:07:54 We’re both better off.

00:07:56 This is just a naturally emergent thing.

00:07:58 And money is what makes it enormously powerful.

00:08:03 Money is what allows it to scale really.

00:08:05 Money is what allows it to go beyond small societies

00:08:09 into just something that is global.

00:08:11 Because with money, again, as I was saying earlier,

00:08:14 all you need to do is specialize in doing one thing,

00:08:17 the thing that you do best,

00:08:18 and then you exchange that for money.

00:08:19 And you don’t have to worry

00:08:21 about whether the other people involved in this

00:08:24 want what you have and have what you want.

00:08:26 You just sell it for money to whoever wants it.

00:08:30 And you buy whatever you want from whoever has it.

00:08:32 And that’s an enormous reduction in the mental burden

00:08:37 of how a market economy functions.

00:08:39 So the first thing that I would say about money

00:08:40 is that it allows for the division of labor

00:08:43 and it allows for the market system to grow.

00:08:45 And the second thing is that money is a mechanism

00:08:48 for storing value into the future.

00:08:50 So again, as humans, we develop the capacity

00:08:53 to think for the future.

00:08:55 We make a spear so that we can hunt,

00:08:58 and then we see that it works.

00:09:00 And then we take it out of the animal

00:09:01 that we hunted it with,

00:09:02 and we keep it for the next day’s hunt.

00:09:05 And then we start making a better spear,

00:09:07 and we make a better fishing rod,

00:09:08 and then we make a fishing net,

00:09:09 and then we make a fishing boat.

00:09:11 And that’s our ability to think of the future.

00:09:15 And as we start building durable goods,

00:09:18 we start thinking more and more of the future.

00:09:19 We start becoming more and more future oriented.

00:09:22 And that’s really the process of civilization,

00:09:26 the process of denying our needs now

00:09:29 in order to think for the future.

00:09:31 So instead of spending all of our day on the beach,

00:09:33 enjoying ourselves, we take time off from leisure

00:09:38 on the beach and spend some time making a spear

00:09:42 or making a fishing rod so that our productivity

00:09:45 in hunting or fishing tomorrow is gonna be higher.

00:09:48 And so that ability to think for the future

00:09:51 is enhanced by our ability to provide for the future.

00:09:54 And we do that with durable goods.

00:09:56 But then money ends up being the best mechanism

00:10:00 for providing for the future,

00:10:02 because the future is uncertain.

00:10:04 So you can save your apples and oranges.

00:10:07 You can save the spears.

00:10:09 You can save the animal that you hunted.

00:10:12 But these things, first they rot.

00:10:15 They’re not very good at holding onto their value over time.

00:10:17 But even if they were,

00:10:19 even if you have objects that are durable,

00:10:22 the problem with them is that you don’t know

00:10:24 if you need them tomorrow or next month or next year.

00:10:28 You’re not sure if you’re going to be needing them.

00:10:30 And you might end up not needing them.

00:10:31 And you might end up not finding anybody who needs them

00:10:33 or finding somebody who needs them,

00:10:35 but doesn’t value them much

00:10:36 and won’t give you much in exchange.

00:10:38 Money allows you the optionality

00:10:40 of saving the most liquid good, the most saleable good.

00:10:43 So it’s something that you can sell tomorrow

00:10:46 with the least uncertainty.

00:10:47 It has the most liquidity, the most ability

00:10:49 to be sold without a loss in its value.

00:10:52 So money is our most advanced technology

00:10:55 and our best technology for moving value into the future.

00:10:58 And so I think history really,

00:11:01 I argue this in all my books,

00:11:03 is that really history we see,

00:11:06 we can think of it as a process of our money gets harder.

00:11:10 And so our money gets better

00:11:12 at holding onto its value for the future.

00:11:16 And by harder, I mean harder to produce.

00:11:18 We find things that are hard to produce

00:11:20 that are better at holding onto their value.

00:11:23 So they hold onto their value better for the future.

00:11:25 And that allows us to plot and plan for the future.

00:11:28 That makes the future less uncertain.

00:11:31 And that makes us more future oriented.

00:11:33 In other words, it lowers our time preference.

00:11:36 And the harder the money is,

00:11:38 the better it is at allowing us to think of the future.

00:11:41 So people should know that you’ve written the book

00:11:44 Bitcoin Standard from 2018, I believe.

00:11:48 And then a new book called Fiat Standard.

00:11:52 The Bitcoin Standard is considered kind of the Bible

00:11:55 in the cryptocurrency space, in the Bitcoin space

00:11:57 of just a very rigorous systematic explanation

00:12:01 of why Bitcoin, what is it, why should it be,

00:12:06 why is it good?

00:12:07 So you’re describing in that book and in the new book,

00:12:10 different implementations of the technology of money.

00:12:14 In the new book, you talk about fiat money,

00:12:17 which is another way to do money.

00:12:19 So obviously, there’s a lot of different ways to do money.

00:12:22 And maybe you haven’t discovered the best way to do money,

00:12:25 yet our conversation today is how to do money better.

00:12:29 Maybe we’ll go back to bananas eventually, right?

00:12:33 Very good reasons why we won’t.

00:12:35 Well, we can disagree.

00:12:37 We can agree to disagree on this.

00:12:39 I’m open minded to the bananas.

00:12:42 One of the biggest source of joy to me

00:12:44 when I first came to this country is eating bananas.

00:12:48 And so maybe money, happiness, perishable happiness

00:12:53 will eventually become the best medium of exchange.

00:12:58 I don’t know, open minded.

00:13:00 Anyway, so you mentioned hard money and soft money.

00:13:03 So there’s different ways to do money.

00:13:05 What is hard money?

00:13:06 What is soft money?

00:13:08 In the Bitcoin standard, I present the argument

00:13:10 that money is always whatever is the hardest thing to make.

00:13:14 Historically, I think we see many examples of that.

00:13:17 So for instance, in prison, people use cigarettes as money

00:13:20 because nobody can make cigarettes in prison.

00:13:22 In societies, we have the example of Yap Island,

00:13:25 for instance, it’s an island that doesn’t have any limestone

00:13:28 but there’s a nearby island that has a lot of limestone.

00:13:31 And it’s very expensive obviously with primitive technology

00:13:34 to move limestone from Palau to Yap.

00:13:38 So on Yap, limestones were money.

00:13:41 Seashells, rare seashells that are not easy to find

00:13:44 end up serving as money in places where they’re rare.

00:13:48 Glass beads were money in West Africa

00:13:50 where there was no glass making technology

00:13:52 because they were imported from abroad

00:13:54 and they were very hard to make.

00:13:57 And I think there’s a conscious effort

00:13:59 of some people might recognize the hardness

00:14:02 and the scarcity and choose this as money.

00:14:04 But I think what’s more important

00:14:05 is just a natural evolutionary process

00:14:08 whereby people choose all kinds of random things as money,

00:14:12 bananas maybe even.

00:14:14 But then the people who end up making these bad choices

00:14:17 don’t end up with any wealth left.

00:14:18 Whereas the people who store their wealth

00:14:21 in the things that are hard to make

00:14:24 end up maintaining their wealth

00:14:26 and maybe even increasing it over time.

00:14:29 And of course this culminated in the 19th century,

00:14:32 in the end of the 19th century

00:14:33 by basically the entire planet being on a gold standard.

00:14:36 And that’s…

00:14:37 What is a gold standard?

00:14:38 The gold standard is basically when money is gold

00:14:41 or at least government currencies backed by gold.

00:14:44 But the reason gold became money

00:14:46 and not copper, not nickel, not bananas

00:14:49 is that gold is the hardest metal in the world.

00:14:52 And it is the hardest metal to increase the supply of.

00:14:55 And the reason for that is based in chemistry.

00:14:58 So gold is indestructible.

00:15:01 You can’t destroy gold in any meaningful sense.

00:15:03 It’s been accumulating stockpiles for thousands of years.

00:15:08 The gold that was worn by Nefertiti back in ancient Egypt

00:15:12 is today probably in somebody’s necklace

00:15:16 or in somebody’s gold coin.

00:15:17 It’s still there.

00:15:17 So for thousands of years, humans have been digging for gold.

00:15:21 They dig it out of the ground, they refine it

00:15:23 and then they put it in a jewelry or a coin

00:15:25 and then it just stays there.

00:15:27 It gets melted down into new other forms.

00:15:29 The jewelry gets turned into coins

00:15:31 or coins get turned into bars.

00:15:34 But it’s just stockpiles that are accumulating.

00:15:38 On the other hand, every year we get better

00:15:41 at our technology of looking for gold.

00:15:43 There’s more people all over the world.

00:15:45 The population increases, the technology improves.

00:15:47 So we keep finding more and more gold

00:15:49 and we keep making the stockpiles bigger.

00:15:52 However, because we’re constantly adding to a stockpile

00:15:55 that is not being devalued,

00:15:57 sorry, that is not being consumed

00:15:59 because there’s no way of consuming gold.

00:16:00 You can’t eat it, you can’t burn it, it doesn’t rust.

00:16:05 Because of that, we’re constantly adding

00:16:07 to a constantly growing stockpile.

00:16:08 So if you look at the numbers,

00:16:11 you see over the last 100 years,

00:16:13 we’ve got pretty reliable data on gold production worldwide.

00:16:16 We see that pretty much gold stockpiles increase

00:16:19 at around one and a half to 2% per year, every year.

00:16:22 So yes, we’re making more every year,

00:16:25 but we’re making more so we’re adding to the stockpile.

00:16:28 The stockpile grows more.

00:16:29 So every year we’re adding only around one and a half

00:16:31 to 2%.

00:16:33 Compare that to the second highest,

00:16:36 the second hardest metal historically was silver.

00:16:39 And that increased historically at around maybe 5%

00:16:42 per year or so.

00:16:43 Now it probably increases at something like closer to 30%

00:16:46 because it’s now getting used extensively

00:16:49 in industrial uses.

00:16:50 So when you use it in industry,

00:16:53 when you put silver in a laptop or in a camera

00:16:56 or in a machine, effectively,

00:16:59 you are consuming the stockpile

00:17:01 because it’s not used as money.

00:17:02 It’s taken out of the monetary stockpile.

00:17:04 So over the last 150 years, since 1870 in particular,

00:17:08 and I discussed this in detail in the Bitcoin standard,

00:17:11 what happened in 1870 was Germany won

00:17:14 the Franco Prussian war and Germany was on a silver standard,

00:17:18 but the value of silvers was declining.

00:17:21 So Germany did something very smart,

00:17:22 which is they took their indemnity from France

00:17:25 in silver and gold and use that big chunk of gold

00:17:30 to switch to going on a gold standard.

00:17:33 And since then, silver has been collapsing in value

00:17:36 next to gold.

00:17:37 So back then the price of an ounce of gold

00:17:40 was around 15 ounces of silver.

00:17:42 Today it’s closer to 100.

00:17:43 It’s just been declining for the last 150 years.

00:17:46 And so because of that, because of the fact

00:17:48 that it’s lost its monetary role

00:17:50 as people shifted toward gold,

00:17:52 the value of silver went down

00:17:54 and so it became economical to use it

00:17:56 in more and more industrial applications.

00:17:58 So the stockpile declines and then as a result

00:18:01 that weakens its monetary properties

00:18:05 more and more and more.

00:18:06 So that’s why by the end of the 19th century,

00:18:09 I mean at the beginning of the 19th century,

00:18:10 gold and silver were money.

00:18:12 By the end, it was basically only gold.

00:18:14 And the countries that were still on a silver standard,

00:18:16 China and India in particular suffered enormously from it

00:18:19 because their money was devaluing very quickly

00:18:22 next to gold and so Europeans who would come to China

00:18:25 or India were able to buy things

00:18:28 at practically a big discount.

00:18:30 So I hope it’s okay if I ask very simple,

00:18:33 very basic questions.

00:18:34 There’s few people in this world that are good,

00:18:37 as good as you are at answering very basic,

00:18:41 almost ridiculously basic questions

00:18:42 because I think exploring questions like what is money

00:18:45 is a really great way to think from first principles,

00:18:49 to really think deeply about this world.

00:18:50 So I really appreciate you doing that.

00:18:52 When you say standard, what does it mean?

00:18:55 When you say silver standard, gold standard,

00:18:57 again with a basic question.

00:18:59 The term really I think was based out of gold.

00:19:03 The first time this came out was the gold standard

00:19:06 because so I said gold was money

00:19:09 at the end of the 19th century,

00:19:10 but it wasn’t just that everybody was using gold coins

00:19:13 and trading with gold coins

00:19:15 because that’s got a problem of divisibility.

00:19:19 So a lot of things are worth less than one gold coin.

00:19:23 So how do you buy that thing?

00:19:25 And the answer was that you created the monetary instruments

00:19:28 that were backed by gold and so currencies,

00:19:31 national currencies under the gold standard

00:19:34 were specific units of gold

00:19:36 and that’s how a gold standard functioned.

00:19:38 Money was gold, but you had pieces of paper

00:19:41 that were redeemable in gold.

00:19:43 So you could go to the central bank,

00:19:45 you’d give them the piece of paper,

00:19:46 the $100 bill or the $10 bill

00:19:49 and they’ll give you gold in exchange

00:19:50 and they give you a specific quantity of gold in exchange.

00:19:53 Effectively, the paper was just a receipt for gold.

00:19:56 So the paper exactly represented the amount of gold.

00:19:59 Exactly, that was the plan.

00:20:01 That was what it’s supposed to do,

00:20:03 but arguably we never had a pure gold standard

00:20:07 because the nature of gold means

00:20:09 that the people who are in charge of the gold,

00:20:12 they have an enormous amount of power

00:20:13 because the gold is concentrated with them

00:20:15 and as long as not everybody shows up at the same time

00:20:17 asking for their gold,

00:20:18 then you can make more receipts than you have gold.

00:20:21 So there’s always shady stuff going on,

00:20:24 but at least that’s the state of gold

00:20:26 is the receipts should exactly represent

00:20:28 the amount of gold there.

00:20:29 And also when you say standard,

00:20:31 it means that governments sort of publicly stated

00:20:38 that this is the approved,

00:20:40 the main way of making transactions that are monetary.

00:20:44 So this is the money, this is the official money

00:20:46 that you should be using if you live in this country.

00:20:48 Yes, although I would say it’s more like

00:20:51 the other way around.

00:20:52 It’s not that the governments established gold as money.

00:20:55 It’s more like gold gave the governments

00:21:00 the credibility for their currencies.

00:21:01 So governments were not the ones that made gold money.

00:21:06 Gold has been money before states were invented.

00:21:10 States, if you have a government

00:21:12 and you’d like to have some legitimacy

00:21:14 and you’d like to be able to deal with other governments

00:21:16 on an equal footing, you had to go by the gold standard.

00:21:19 You had to have a currency that was redeemable in gold

00:21:22 so that you could trade with the rest of the world

00:21:24 so that people could in your country use that currency.

00:21:28 So it’s not that governments were choosing gold.

00:21:32 It’s more like they were having to adapt

00:21:35 their own currencies to gold

00:21:37 in order to give their currencies credibility.

00:21:39 So there’s a dance there though,

00:21:40 because if they had to,

00:21:43 then why did they switch away from it after?

00:21:46 So there is a dance where the governments,

00:21:49 the people pressure.

00:21:52 So first of all, the basic characteristics

00:21:56 of the hard money pressures the governments

00:21:59 and the people in terms of what should be used.

00:22:02 Then the people, based on their community,

00:22:05 the network effects, the narratives they tell each other,

00:22:09 all that kind of stuff, they pressure the governments

00:22:12 to take on a particular money.

00:22:14 Then the governments, they like power,

00:22:17 they like control, all those kinds of things.

00:22:19 They pressure the people

00:22:21 and tell different kinds of narratives.

00:22:22 So there’s a dance going on in this evolution

00:22:24 of what technology to use for a monetary system.

00:22:27 So the reason I don’t know if governments had to,

00:22:32 because they clearly didn’t have to,

00:22:34 because they eventually moved away from it.

00:22:37 But there was pressure probably.

00:22:39 Yeah, but even after they moved away from it,

00:22:41 central banks, until today,

00:22:42 they still hold a lot of gold reserves.

00:22:45 In fact, if you look at 1914,

00:22:47 when the world really went off the gold standard,

00:22:51 the amount of gold reserves held by central banks

00:22:53 was a tiny fraction of what it was.

00:22:55 As time went on,

00:22:57 central banks accumulated more and more gold.

00:22:59 What ended up happening is they prevented their citizens

00:23:02 from using the gold, but they continued to use it.

00:23:04 So gold continued to be money up until 1971

00:23:07 because effectively the world was on a dollar standard

00:23:10 and the dollars were backed by gold.

00:23:12 But then after 1971, even then,

00:23:15 central banks continued to accumulate gold

00:23:17 because why would you as a central bank

00:23:20 want to accumulate pieces of paper effectively

00:23:22 or credit liabilities of another central bank

00:23:25 that can produce them infinitely?

00:23:27 And it’s a lesson that’s becoming more and more obvious

00:23:31 to governments today,

00:23:33 as we see US sanctions taking, say, Russian reserves

00:23:36 or Afghanistan reserves.

00:23:39 And this is why we see China and Russia

00:23:40 have accumulated a lot of gold over the last 10, 20 years.

00:23:44 So just to return to the question of definitions,

00:23:48 so what is hard money versus soft money?

00:23:51 Yes, so hard, I mean, it’s a relative thing,

00:23:54 but the hardness refers to the difficulty

00:23:56 of producing more units of the money supply.

00:23:59 So an easy money would be a money

00:24:01 that is relatively easy to make.

00:24:04 So you can increase the supply by 10, 20, 30, 40, 50%

00:24:08 or something like that.

00:24:09 So pretty much all commodities, all market commodities,

00:24:12 other than gold and silver, they’re easy money

00:24:15 and they’re not suitable as a monetary medium

00:24:18 because they’re being consumed.

00:24:20 So if you look at, and in the Bitcoin standard,

00:24:22 I mentioned this metric called the stock to flow ratio,

00:24:25 which is the ratio of the annual production, the flow,

00:24:28 to the stockpile, the existing stockpile.

00:24:31 If you look at all the other metals,

00:24:33 they’re easy money because they’re being consumed.

00:24:36 So think about how much stockpiles of copper

00:24:38 there are in the world today.

00:24:40 So copper companies obviously have

00:24:41 some stockpiles of copper.

00:24:44 Major copper consumers will have stockpiles of copper,

00:24:47 but the vast majority of copper

00:24:48 is essentially on a conveyor belt of production

00:24:53 from the mine straight to the consumer good

00:24:56 that it’s being used for.

00:24:58 So the existing stockpiles are roughly

00:25:01 in the range of one year’s production.

00:25:04 If you take all of the companies,

00:25:06 I don’t have exact statistics,

00:25:09 hence it’s very difficult to get these,

00:25:10 but it’s roughly in the same range.

00:25:12 Like if copper production were to stop completely today,

00:25:17 we’ll have about a year’s production

00:25:19 stored in various places.

00:25:22 So that makes copper terrible money

00:25:24 because if you started using copper as money,

00:25:27 and this is why a lot of people say,

00:25:28 well, money is a collective illusion.

00:25:30 Money is a social construct.

00:25:34 If we all agree that something is money,

00:25:35 then something is money.

00:25:36 I think this is completely clueless,

00:25:37 and it’s usually Marxists who believe this,

00:25:40 obviously no understanding of economics.

00:25:42 It’s completely clueless

00:25:43 because even if everybody in society

00:25:45 decided we wanted to make copper as money,

00:25:47 even if we all decided to collectively

00:25:50 take part in this hallucination or illusion,

00:25:53 it would not make copper money.

00:25:54 It would just make everybody who decides

00:25:56 to take part in this hallucination poor, that’s it.

00:25:59 It would make copper miners rich.

00:26:01 It would make all of the people

00:26:02 who chose copper as money poor,

00:26:04 and copper would not be money.

00:26:05 It can’t work because what happens is,

00:26:07 because of the fact that the stockpiles are so small,

00:26:10 if you buy, you know,

00:26:11 even if you get the 1,000 richest people in the world,

00:26:14 all of the world’s billionaires,

00:26:16 they get together,

00:26:17 and they all dump all of the money that they have,

00:26:19 all the stocks, all the bonds, all the gold,

00:26:22 all of the Bitcoin, everything that they own,

00:26:24 they dump it, and they buy copper with it.

00:26:27 What’s gonna happen?

00:26:28 Price of copper is gonna go up a lot,

00:26:30 but what’s gonna stop copper miners

00:26:33 from flooding the market with even more copper

00:26:36 than what the billionaires bought?

00:26:37 Nothing.

00:26:38 They’re gonna dump all of that extra copper production.

00:26:41 If the price of copper is gonna go up

00:26:43 so there will be a lot more copper mining

00:26:45 than all the other metals,

00:26:47 a lot of nickel companies and gold miners

00:26:51 are gonna switch to focusing on copper,

00:26:53 and then we’re gonna dump an enormous amount of copper

00:26:56 on the market.

00:26:57 The value of copper is gonna crash,

00:26:59 and the people who chose copper as money

00:27:01 are just gonna end up with large warehouses

00:27:03 of very cheap rusting metal.

00:27:06 So that’s a brilliant description,

00:27:07 and that kind of pushes towards gold

00:27:09 where the stock to flow ratio,

00:27:13 I guess you would say is 1.5 to 2%,

00:27:15 like you mentioned earlier.

00:27:16 That would be like the inverse of the stock to flow.

00:27:18 That’s the supply growth rate,

00:27:19 so the stock to flow is the inverse.

00:27:21 It’s around 60.

00:27:22 60, got it.

00:27:23 But let me push back on,

00:27:26 as somebody who likes human psychology,

00:27:27 let me push back on the collective hallucination

00:27:30 and the illusion.

00:27:32 So that’s for copper, but what about paper money?

00:27:35 That’s not, you can’t smoke it,

00:27:40 you can’t eat it.

00:27:42 It’s just, it’s supposed to represent,

00:27:44 it’s supposed to just be the medium of exchange,

00:27:47 and in that sense, what role does collective hallucination

00:27:53 play in the effectiveness of money?

00:27:56 Exactly zero, because all of the paper money,

00:27:59 first of all, there’s never been an instance,

00:28:00 and again, this flies in the face

00:28:04 of a lot of what a lot of people like to think about money.

00:28:08 There’s never been an instance

00:28:09 where a government came out and said,

00:28:11 all right, we’re printing out these pieces of paper,

00:28:13 use them as money.

00:28:14 This one is worth 10 apples or use it for buying things,

00:28:19 and here’s the piece of paper.

00:28:19 This has never happened.

00:28:21 They’ve always taken fiat money, paper money,

00:28:26 all of these things were always born out of fraud.

00:28:30 Initially, it was a receipt for gold,

00:28:32 and then they told you, well, you know,

00:28:34 you don’t need the gold anyway, and you have to use this,

00:28:36 and then if you don’t use it, we throw you in jail.

00:28:39 And then, so first of all, it doesn’t,

00:28:42 you can’t enforce this thing,

00:28:44 so it’s never really just happened,

00:28:45 and it’s never been hallucinated into existence.

00:28:48 People can hallucinate this kind of nonsense

00:28:50 in writing textbooks and books and in academia,

00:28:54 but in the real world, people don’t hallucinate money.

00:28:57 People are very careful about what they put their money in.

00:29:00 For people listening,

00:29:01 we’re gonna have fun in this conversation,

00:29:03 because you already said Marxist, fraud, hallucination,

00:29:08 just because we use these words doesn’t mean they’re true,

00:29:11 but they’re fun to talk about.

00:29:12 So you have a strong certainty about the way you talk,

00:29:17 which I think is fun,

00:29:20 but allow me in my dumb self to push back,

00:29:22 to play devil’s advocate,

00:29:23 and I’ll actually ask you sometimes

00:29:25 to play devil’s advocate if possible,

00:29:27 because you’re smarter than me on all this stuff,

00:29:28 so we want the smartest devil’s advocate possible,

00:29:33 and I’m certainly not that, but anyway,

00:29:35 but nevertheless, we are currently on a fiat standard,

00:29:41 so money does have value, paper money,

00:29:50 and the reason it has value

00:29:51 is because we believe it has value.

00:29:53 To what degree, if we put the hallucination word aside,

00:29:57 the belief that something is worth value

00:30:01 is actually value, and is the thing that helps money work,

00:30:06 because you’re saying it’s fraud,

00:30:09 and the belief is almost valueless,

00:30:13 but how much value?

00:30:14 Can we quantify the value of the belief,

00:30:17 the collective belief?

00:30:18 I should say, all economics is subjective.

00:30:21 I consider myself an Austrian school economist,

00:30:24 and the starting point of all Austrian economics

00:30:26 is that all value is subjective,

00:30:28 so obviously, value only exists

00:30:33 because humans choose to make the valuation.

00:30:35 However, the economic reality of the way that money works

00:30:40 means that it’s just a technology like all others,

00:30:42 and so for me, when people say,

00:30:45 well, if we hallucinate that this thing can be money,

00:30:47 then it’ll be money.

00:30:48 If we can hallucinate bananas to be money,

00:30:49 then it’ll be money.

00:30:50 For me, it’s like saying, well, if we hallucinate

00:30:52 that bananas can be spaceships, they’ll be spaceships.

00:30:54 I mean, you can call them spaceships if you want,

00:30:56 but a banana’s not gonna get you to the moon.

00:30:59 Well, then nevertheless, that’s true.

00:31:03 So you’re drawing a big distinction

00:31:05 between physical reality and the space of belief,

00:31:09 but it seems like so much power of human civilization,

00:31:14 so much destruction, so much creativity, creation,

00:31:18 happens in our minds.

00:31:21 Absolutely, everything does happen in the mind.

00:31:23 You’re not gonna get to the moon,

00:31:24 but you might still have a significant impact

00:31:27 on human civilization if a lot of people believe a thing.

00:31:31 True, but economic reality exists in a way

00:31:35 in which your beliefs are rewarded

00:31:37 when they match up with economic reality,

00:31:40 and they’re punished when they don’t.

00:31:41 So if you ride a banana and jump off a cliff

00:31:44 thinking you’re gonna get to the moon,

00:31:46 that solves the problem of people thinking

00:31:48 that bananas are spaceships by killing people

00:31:50 who think that bananas are spaceships.

00:31:53 And I think, to go back to your question

00:31:55 in terms of paper monies, so yes,

00:31:56 even though ignoring the original sin

00:32:01 of the creation of fiat money,

00:32:02 and ignoring everything that happened before 1971,

00:32:05 all right, well, here we are, people are using,

00:32:07 well, it’s not really paper money.

00:32:09 We should say fiat money is predominantly credit.

00:32:12 So it’s also a digital currency.

00:32:15 So more than 90% of dollars are digital.

00:32:18 Less than 10% of dollars are physical.

00:32:21 So it is a digital currency,

00:32:22 and all over the world, all these governments

00:32:24 are using digital currencies effectively

00:32:26 with some physical manifestations in paper.

00:32:29 But yet, even within these currencies,

00:32:32 it’s still the same analysis,

00:32:33 and I discussed this in chapter four,

00:32:35 the Bitcoin standard.

00:32:36 You look at government monies,

00:32:37 you see that the currencies that have held onto their value,

00:32:40 the ones that have the biggest value,

00:32:42 the ones that play the biggest role in global trade,

00:32:44 the ones that are used as currency reserves

00:32:46 all over the world,

00:32:48 are the ones that have the lowest supply growth rate.

00:32:50 The ones that grow, whose central banks

00:32:53 are the least inflationary.

00:32:55 And on the other hand,

00:32:56 the ones who supplies more inflationary,

00:32:58 similar to copper, end up failing.

00:33:00 You look at Lebanon, Venezuela, Zimbabwe,

00:33:03 these are currencies whose supply increases very quickly,

00:33:06 and therefore, their value collapses.

00:33:09 Whereas the dollar, the Swiss franc, the Euro,

00:33:12 the British pound, the Japanese yen,

00:33:14 they increase at a much lower rate in general

00:33:17 than these terrible currencies.

00:33:20 And that’s why all over the world,

00:33:21 you see people are looking to get more dollars

00:33:24 and more of these harder currencies than the easier ones.

00:33:28 So I think this analysis of the hardness of the money

00:33:32 and the ease of money is pretty well supported empirically.

00:33:37 So like you said, you’re at least in part,

00:33:40 or in whole, consider yourself an Austrian economist.

00:33:44 So you’re perhaps a great person to ask about the basics.

00:33:48 What is Austrian economics?

00:33:50 What is Keynesian economics?

00:33:52 How do you compare the two?

00:33:54 What should people know?

00:33:56 What are the interesting defining characteristics

00:33:59 to you about these schools of thought?

00:34:01 So Austrian economics, the way that I say it,

00:34:03 Austrian economics is economics.

00:34:04 It’s, we call it Austrian economics

00:34:07 because economics has been hijacked

00:34:09 by a bunch of frauds, really.

00:34:11 Or people who are wrong, okay.

00:34:12 Well, it’s much worse than wrong,

00:34:14 by people who are just essentially propagandists

00:34:16 for inflation.

00:34:17 Right.

00:34:18 So.

00:34:19 It’s like your opinion, man.

00:34:20 Right.

00:34:21 Yeah, well, that’s also like your opinion, man.

00:34:23 Yeah.

00:34:24 But you asked.

00:34:25 That’s true.

00:34:26 Well, I also talked to Paul Krugman on this podcast.

00:34:28 So he’s, the O speaks enough,

00:34:32 but he’s one of the people

00:34:35 that is perhaps most harshly criticized

00:34:38 by folks in Austrian economics perspective

00:34:42 and vice versa, which is a fascinating tension.

00:34:45 Yeah, he’s done a great job as an actor

00:34:48 who plays an economist on TV and the internet.

00:34:52 So anyway, now tell me what you really think.

00:34:55 No, but, so the basics of what is Austrian economics?

00:34:58 What is the, what perspective does it take on the world?

00:35:00 Yeah, so I mean, Austrian economics really is

00:35:03 the continuation of a tradition

00:35:06 that it goes back to the ancient Greeks

00:35:08 of studying economics.

00:35:09 Historically, it’s really just economics

00:35:13 and that has evolved over time.

00:35:14 And the establishment of the Austrian school per se

00:35:20 came in 1871, 150 years ago,

00:35:23 when Karl Menger, the father of the school,

00:35:25 wrote a book called Principles of Economics

00:35:28 and essentially invented marginal analysis,

00:35:30 which is a big deal in economics.

00:35:32 Marginal analysis is the idea that in economics,

00:35:35 individuals carry out decisions at the margin,

00:35:37 that it’s, when you make choice, you’re not making it.

00:35:42 For instance, if you’re making a choice

00:35:43 between what should I spend my money on,

00:35:46 you’re not making a choice whether it is,

00:35:49 this thing is object A or B,

00:35:51 which one is more valuable for me in general,

00:35:53 which one is more valuable for me for the rest of my life.

00:35:56 You’re choosing about the next unit right now

00:35:59 at this point, at this stage.

00:36:00 And if you analyze economic decision making at the margin,

00:36:04 it makes a lot more sense and you can understand

00:36:05 why people decide and make the decisions that they do.

00:36:09 Whereas if you don’t apply marginal analysis,

00:36:12 things don’t make sense.

00:36:14 The key thing that marginal analysis helps us solve

00:36:17 is what is called the water diamond paradox.

00:36:19 So you will die without water.

00:36:22 We all need water and yet water is dirt cheap.

00:36:25 Whereas diamonds are extremely superfluous,

00:36:29 nobody needs them.

00:36:30 Nobody is gonna live or die because they have a diamond

00:36:33 and yet they’re extremely expensive.

00:36:35 So why is it that as human beings,

00:36:37 we pay maybe say a dollar a liter for water,

00:36:41 whereas we pay thousands of dollars

00:36:43 for a few grams of diamonds.

00:36:44 Why is this the case?

00:36:46 Do we value water less than diamond?

00:36:49 The answer is no, but at the margin where we are right now,

00:36:53 you live in a place where water is very abundant

00:36:55 because cities are only built in places

00:36:57 where water is abundant.

00:36:59 And you’re only making a choice

00:37:03 about the next unit of water.

00:37:05 And so water is extremely abundant

00:37:07 and you’re choosing about whether to spend

00:37:10 the next unit of money on water.

00:37:14 The valuation that you give to water,

00:37:16 given that you have a lot of water at home

00:37:18 and that you live in a place that has abundant water

00:37:21 is pretty low to the marginal unit,

00:37:24 but it’s very high for water overall.

00:37:26 So if I asked you,

00:37:28 how much would you spend for water in general?

00:37:31 How much would you pay for water for all of your life?

00:37:34 It would be a lot higher than diamonds.

00:37:36 If I told you, you can only have water or diamonds

00:37:39 for the rest of your life.

00:37:40 You choose water, obviously,

00:37:42 but nobody’s ever had to make that choice.

00:37:44 You only make your choices at the margin.

00:37:47 So at the margin where we are, modern civilization,

00:37:50 we have an abundance of water.

00:37:51 That’s why we have civilization

00:37:53 and diamonds are very rare and scarce.

00:37:54 And people are only buying,

00:37:58 you buy your first diamond when you’re gonna get married,

00:38:01 you give it to your wife

00:38:03 and that’s gonna be the first few grams of diamond

00:38:06 that she’s ever gonna own.

00:38:07 Giving my wife water.

00:38:09 Smart move.

00:38:10 You should definitely give her Bitcoin instead of diamonds.

00:38:13 I tell my wife, I occasionally remind her

00:38:15 of how many Bitcoin we could have had

00:38:18 if I bought her Bitcoin with the price of the diamond ring.

00:38:20 What’s the downside of, by the way, diamonds

00:38:22 from the analysis of like gold and so on?

00:38:25 Ah, that’s a great question.

00:38:28 Arguably, diamonds are a scam.

00:38:30 Because they became popular as a thing in marriage

00:38:37 after gold was banned,

00:38:39 after gold ownership was banned in the US in the 1930s

00:38:41 and in many places around the world.

00:38:43 So before that, you’d give gold.

00:38:44 And the reason you’d give gold in a dowry, in a wedding

00:38:49 is because it wasn’t just that it’s pretty and shiny,

00:38:52 it’s because it’s money.

00:38:53 And so if you die, your wife can take the gold

00:38:58 and she can live off of it.

00:39:00 It’s a demonstration that you’re giving her

00:39:01 something valuable.

00:39:03 And that’s because nobody can make a lot more gold.

00:39:05 It has the high stock to flow ratio.

00:39:07 But then they banned gold ownership,

00:39:09 or they allowed people to only own

00:39:11 very tiny quantities of gold.

00:39:12 And that’s when the diamond industry stepped in

00:39:15 and marketed diamonds as the thing that you need to give.

00:39:19 But the problem with it is, of course,

00:39:21 that the diamonds aren’t like gold.

00:39:23 They’re not very hard to make more of.

00:39:27 And the reason we have scarcity in diamonds

00:39:29 is really artificial.

00:39:30 There’s effectively a monopoly of diamond producers.

00:39:34 They restrict the supply.

00:39:36 And it’s a pretty dirty business.

00:39:39 And the way that they do it is,

00:39:40 all of the talk about blood diamonds

00:39:44 is a way for them to ensure their monopoly.

00:39:46 So if you’re part of the monopoly of diamond producers,

00:39:51 then it doesn’t matter how many people get killed

00:39:53 producing your diamonds.

00:39:54 If you’re out of the monopoly,

00:39:55 then human rights organizations descend on you

00:39:58 and call for shutting you down for selling blood diamonds.

00:40:02 And they’re also restricting

00:40:03 the production of artificial diamonds.

00:40:04 This is the other thing.

00:40:05 You can make artificial diamond,

00:40:06 you can’t make artificial gold.

00:40:08 So they restrict the production of artificial diamond

00:40:11 and they try and insist that, you know,

00:40:13 you shouldn’t take artificial diamonds,

00:40:15 but they’re indistinguishable from real diamonds.

00:40:18 So it’s an artificial scarcity.

00:40:20 And I think there’s gonna come a point at some point

00:40:22 that this monopoly is gonna break.

00:40:23 And a lot of people are gonna be left with essentially

00:40:28 highly devalued jewelry.

00:40:30 I’m gonna take this segment of the podcast,

00:40:32 when I’m getting married, when the sun’s up,

00:40:34 and then instead you’re getting water or Bitcoin.

00:40:38 Yes, water and Bitcoin is all you need.

00:40:40 So marginal analysis, focusing on the margin

00:40:44 is the thing that allows you

00:40:45 to most accurately capture human nature,

00:40:47 the actual day to day decisions that we humans make.

00:40:50 Yeah, that’s really revolutionized economics, so 1870.

00:40:55 And that was Menger’s work.

00:40:59 And then he had a student, Eugen Bomberg,

00:41:02 who developed capital theory.

00:41:05 And then he had a student, Ludwig von Mises,

00:41:07 who is arguably the most important economist ever.

00:41:10 And he developed theory of money.

00:41:12 And he wrote a book in 1912

00:41:14 called The Theory of Money and Credit.

00:41:17 And then in the 40s, he wrote Human Action,

00:41:20 which is a big treatise on economics.

00:41:23 And I think this is the correct tradition of economics.

00:41:27 And before World War I, this was just known as economics.

00:41:32 And then after what happened in World War I,

00:41:35 and I discussed this in detail in the Fiat Standard,

00:41:37 is that the Bank of England essentially went off gold

00:41:42 and tried to pass off their own credit

00:41:45 as being as good as gold in order to finance the war.

00:41:49 And incidentally here,

00:41:51 this is part of the history that is not discussed often.

00:41:54 This is presented as an innovation.

00:41:57 Later on, they needed essentially a propaganda school

00:42:00 that would justify what they did.

00:42:03 And later on, it’s presented as,

00:42:05 oh, hey, we realized that gold was not good.

00:42:08 And now look, we’ve built this thing

00:42:10 that is better than gold,

00:42:11 where now the government can just print money

00:42:13 whenever it wants.

00:42:14 And now gold money is not an issue anymore,

00:42:17 which is extremely idiotic

00:42:20 because the whole point of money

00:42:22 is that it’s not easy to make.

00:42:23 If it’s easy to make, it’s not money anymore.

00:42:24 It’s just destroying the entire function of money.

00:42:27 And we’ve seen that happen extensively

00:42:28 in the 20th century

00:42:30 after countries went off the gold standard.

00:42:32 So essentially Keynesian economics

00:42:35 is just inflation apologia.

00:42:36 It’s just propaganda to justify inflationism.

00:42:39 And it’s profoundly nonsensical.

00:42:43 It’s built on the idea that if you just make more money,

00:42:47 you can stimulate economic production.

00:42:49 And of course, this is very self serving

00:42:51 to the central banks and to the banks

00:42:53 and to the governments who promote this nonsense.

00:42:56 And this is also very pervasive.

00:42:58 If you’ve had the misfortune of studying at a university

00:43:01 over the last century,

00:43:02 you were taught Keynesian garbage economics.

00:43:04 You were taught that if there’s a problem in the economy,

00:43:09 the way to fix it is that the government prints money,

00:43:11 the government lowers the interest rate,

00:43:13 and then that leads to more economic production,

00:43:17 which is completely nonsensical.

00:43:18 So you’re, again, for the listener,

00:43:23 you’re using strong words, you know, push back

00:43:26 just to find, to please devil’s advocate

00:43:30 to hopefully one day arrive at the truth.

00:43:33 So just because it’s in the interest

00:43:37 of the central banks and the government,

00:43:38 the interests and the models of Keynesian economics

00:43:43 and the government are aligned doesn’t mean they’re wrong.

00:43:47 So let’s give them a chance.

00:43:49 So the conventional wisdom, perhaps economics wisdom,

00:43:54 is that inflation is good in moderation

00:43:58 as it encourages spending,

00:44:00 but too much is bad because it completely devalues,

00:44:03 destroys people’s savings.

00:44:05 So a little bit of inflation is good to stimulate spending.

00:44:09 And I mean, I suppose this is one of the things

00:44:13 that’s supported by Keynesian economics.

00:44:17 Why is that wrong?

00:44:17 This is basically the whole point of Keynesian economics,

00:44:19 is to try and find an endless array of explanations

00:44:23 to explain why inflation is a good thing.

00:44:25 Well, the chicken and the egg.

00:44:28 So that’s the cynical take.

00:44:30 This is a propaganda machine

00:44:32 to sell the government’s narrative.

00:44:34 The less cynical take is there’s a bunch of economists

00:44:36 who are telling, who…

00:44:38 Who figured out this thing

00:44:39 and it happens to be good for banks and governments.

00:44:42 Just because it’s good for them doesn’t mean…

00:44:43 And it justifies the existence of government

00:44:45 and your basic, I don’t think it’s your basic assumption,

00:44:50 but a foundational principle of your thought

00:44:53 is that a lot of government is not a good thing.

00:44:56 Your first gut instinct, government bad.

00:45:00 Like I mentioned, I live next door to Michael Malice,

00:45:02 who probably beats you on the intensity

00:45:07 and how quickly he says government bad.

00:45:10 So there’s a potential argument for government good.

00:45:16 Some government is good.

00:45:17 Maybe a lot of government is good.

00:45:19 Maybe we need a lot of centralized management

00:45:22 for resource allocation and so on

00:45:23 because we humans specialize, we’re too busy and so on.

00:45:26 So there’s an argument for that that exists.

00:45:30 You probably disagree with any possible argument

00:45:32 on that side, but anyway,

00:45:33 so why is that idea of Keynesian economics wrong?

00:45:36 I’m gonna focus for this on the money idea,

00:45:39 the idea that a little bit of inflation is good.

00:45:42 The idea here, I mean, the criticism is that

00:45:46 without inflation, people wouldn’t spend

00:45:48 and then the economy would come to a grinding halt.

00:45:50 And that’s nonsensical because people spend

00:45:53 not because they wanna keep this magical monster

00:45:56 called the economy going.

00:45:58 People spend because they need to consume

00:45:59 because that’s how we live, that’s how we survive.

00:46:02 You need to eat, you need shelter,

00:46:04 you need clothes to keep you warm.

00:46:06 And as technology advances, the capabilities

00:46:09 of the things that we can do with our time increases

00:46:14 and so we wanna buy more things.

00:46:16 So people buy things because people want to consume.

00:46:19 There’s a limitless desire to consume,

00:46:21 that there’s no shortage of reasons for people to consume,

00:46:26 shortage of reasons for people to consume,

00:46:28 whether it’s food or Ferraris or private jets.

00:46:33 People just always wanna buy more.

00:46:35 Can I interrupt just really quick?

00:46:36 What about the fear about the uncertainty of the future

00:46:40 where they might want to buy things

00:46:45 but they’re really afraid because it seems like

00:46:48 there’s a lot like a pandemic going on or whatever it is.

00:46:50 Yeah, that’s good.

00:46:51 So fear of uncertainty, can you have too much fear?

00:46:55 Here’s the thing, what I was saying is,

00:46:57 I was making the point that we don’t need

00:47:00 to be motivated to consume.

00:47:02 Like we have the insatiable desire to consume.

00:47:05 Everybody would like to have more of all kinds of things.

00:47:08 Everybody would like to have a bigger house.

00:47:10 Well, not everybody, some people have a big enough house

00:47:12 but everybody would like a house,

00:47:14 everybody would like a car, jet, all kinds of things,

00:47:18 electronics, machines.

00:47:20 So we don’t need a desire to consume.

00:47:23 But of course the limit on how much we consume

00:47:26 is opportunity cost.

00:47:29 Why don’t you buy a Ferrari?

00:47:30 Well, because that’s really expensive

00:47:32 and it would mean that, well, maybe you do have a Ferrari

00:47:35 but I mean, most people don’t buy a Ferrari

00:47:36 because it’s too expensive, they can’t afford it.

00:47:39 They’d have to work too hard to get it.

00:47:41 And if they do get it, it might mean that

00:47:45 they can’t afford their house anymore.

00:47:46 So we have to economize, that’s a good thing.

00:47:49 And we have to also think of the future.

00:47:51 And so humans consume,

00:47:54 we don’t need more motivation to consume.

00:47:57 We have to deal with the economic reality

00:47:59 of the things that limit us from consuming more.

00:48:02 So what Keynesians present is that

00:48:06 when there is a problem in the economy,

00:48:08 like there was after World War I,

00:48:11 the problem is always caused by the inflation.

00:48:17 And what the Keynesian hucksters do

00:48:18 is that they look at the inflation,

00:48:21 at the consequences of inflation

00:48:23 and blame it on people not spending enough.

00:48:25 When people are doing the rational thing,

00:48:27 the money is, so there was inflation,

00:48:30 caused an unsustainable boom, it caused the recession.

00:48:34 And now a lot of people lost their jobs

00:48:36 and they don’t have enough money

00:48:37 to go out and spend frivolously.

00:48:39 So they save for the future, the future is uncertain.

00:48:42 That’s a good thing, that’s how you fix things.

00:48:46 You begin the recovery by, well, you lost some wealth,

00:48:49 so you spend less, like if your business goes bust,

00:48:52 if you lose your job, it’s natural and smart

00:48:56 that you stop spending money

00:48:57 on the frivolous thing that you used to spend

00:49:00 and you save it for the future.

00:49:01 You invest in something else, you get a new job.

00:49:04 And then once you’ve recovered, you start spending more.

00:49:06 This is very sane and very good

00:49:08 and it’s the way to recovery.

00:49:11 But essentially the Keynesians have used this

00:49:14 as a justification for more inflation

00:49:17 because inflation is an addiction.

00:49:19 Once the government gets down the path

00:49:21 of spending money to solve its problems,

00:49:23 then every problem looks like it can be solved

00:49:26 by more inflation.

00:49:27 And so this is where Keynesian economics comes in.

00:49:31 And of course, the Keynesian economics

00:49:34 is based on the work of Keynes, which came in the 1930s.

00:49:38 And this is the key point,

00:49:40 like it’s portrayed in the textbook

00:49:42 as if it’s just the scientific breakthrough

00:49:46 that somebody in the 1930s, this genius,

00:49:49 came about and realized that,

00:49:50 oh, we don’t actually need gold.

00:49:53 We don’t need hard money.

00:49:54 We can actually just print all the money.

00:49:56 And in reality, of course, it was just the very thin,

00:50:00 flimsy, idiotic justification

00:50:02 for what governments were already doing for 20 years.

00:50:05 They’d already gone off the gold standard

00:50:07 and they’d gone through 20 years

00:50:09 in which they were lying to their population,

00:50:11 telling their population we’re still on a gold standard,

00:50:14 but there are problems caused by various random things.

00:50:18 But don’t worry, we’re gonna be going back

00:50:20 on the gold standard.

00:50:20 20 years later, after they went off the gold standard,

00:50:23 they come up with this justification for why,

00:50:27 oh, actually the gold standard was bad.

00:50:29 And this is a really pernicious thing about it is

00:50:32 the problems that were caused by us

00:50:34 going off the gold standard

00:50:36 were caused by the gold standard.

00:50:39 And we’re going to fix them

00:50:40 by going off the gold standard even more.

00:50:42 Just because government is lying and it’s shady

00:50:45 and it does these kinds of things

00:50:47 doesn’t mean Keynesian economics is wrong.

00:50:49 So just, because I wanted to separate a few things you said.

00:50:53 It could very well be very wrong

00:50:55 and they could indeed be hucksters.

00:50:57 All of these, such colorful language.

00:51:00 I love you deeply for this, this is fun.

00:51:03 Yeah, but I mean, it’s like somebody like Krugman

00:51:05 doesn’t use this kind of language when discussing Austrians.

00:51:07 It’s just that when actors like him use it,

00:51:10 it’s presented as if it is legitimate

00:51:13 because he’s part of the major shows.

00:51:15 So the case they make and the criticism Keynesians make

00:51:22 of Austrian economics and the case they make

00:51:24 for Keynesian economics is it’s based on empirical evidence.

00:51:28 So Austrian economists are pie in the sky theorists

00:51:33 about like how human nature works.

00:51:37 And it’s just all theory.

00:51:39 And just like you said, Keynesian economics

00:51:41 kind of sell it as a science, data driven science.

00:51:44 And so where’s the data, bro?

00:51:50 So one way of saying it is how do you know

00:51:55 if we get rid of inflation?

00:51:57 How do you know if we get rid of central banks?

00:52:00 If we push towards that direction,

00:52:02 we will have a better world, a better functioning economy,

00:52:06 better functioning markets, better functioning society.

00:52:10 This is another inaccurate way in which they present.

00:52:14 The economics, they present as if it’s just theory

00:52:16 and that the data doesn’t matter, but that’s not the case.

00:52:19 What the Austrians say is that without guiding theory,

00:52:23 data is mute, data is dumb, data can’t say anything.

00:52:26 So theory first, and then you have to have models

00:52:32 to provide context for interpretation of the data.

00:52:35 And it’s a sign of just how little self awareness they have

00:52:38 that they think that they’re just being led by the data

00:52:42 when they’re being led by Keynes’s moronic theories.

00:52:47 And they use the data to justify those theories

00:52:50 and to stick by them.

00:52:52 And in fact, they are the ones whose theories

00:52:54 cannot be refuted because it’s just

00:52:58 government mandated religion.

00:53:00 So according to Keynes’s nonsense,

00:53:06 so the way that they justify the inflationism is this,

00:53:10 and I’m just using this to give an example

00:53:12 of what you’re talking about in terms of theory,

00:53:14 the way they justify the inflationism

00:53:15 to tie it back to the original point,

00:53:17 they justified it, all right, we need money to spend.

00:53:20 And then the level of spending in the economy

00:53:22 is what determines the state of the economy.

00:53:23 And I’ve taught macro economics

00:53:25 at university level for a while.

00:53:26 So I know Keynesian nonsense better than most Keynesians

00:53:31 know Austrians, if not all of them, I guarantee you.

00:53:34 And so the way they see it is the level of spending

00:53:38 in the economy is what determines the state of the economy.

00:53:40 There’s a level of output and there’s a level of spending.

00:53:42 So there’s like the factories on the one side

00:53:44 that are churning out goods,

00:53:45 and those goods have a certain quantity and value,

00:53:48 market value, and it’s completely nonsensical of course,

00:53:51 because how can the value of the goods produced

00:53:54 be different from the value of the spending?

00:53:56 But let’s put that aside for a second.

00:54:00 So the amount of spending that happens in the economy

00:54:02 determines the state of the economy.

00:54:04 If the value of the production, which they call Y

00:54:07 is higher than the aggregate expenditures,

00:54:10 so this is the production

00:54:11 and then the aggregate expenditure is lower,

00:54:13 then we don’t have enough spending to buy all the goods.

00:54:16 And then that causes a recession.

00:54:18 The factories start laying off workers

00:54:20 and then the laid off workers start spending less.

00:54:23 And then that leads to aggregate expenditure

00:54:25 dropping even further.

00:54:26 And so it’s a vicious cycle

00:54:28 where the economy gets into recession.

00:54:30 And the only way out is for Keynes’s bankster buddies

00:54:33 and government buddies to print a lot of money

00:54:36 to give to themselves.

00:54:37 And then that will…

00:54:39 That’s one interpretation.

00:54:40 But to print more money to increase the expenditure

00:54:44 that to match the supply.

00:54:46 To match the level of output.

00:54:47 Sounds pretty good to me, I’m sold.

00:54:49 All right.

00:54:50 Even though you’re saying huckster, so.

00:54:52 Yes.

00:54:53 I just, you know, the way, I love you very much,

00:54:56 but like just for people who are listening,

00:54:59 I think it’s, I love the way you talk and it’s great

00:55:03 and keep doing it, but just for context,

00:55:05 like I don’t know anything that involves human nature

00:55:10 deserves this level of certainty.

00:55:12 I, at least my position is that we don’t know

00:55:15 what the hell we’re doing on basically anything.

00:55:18 Perhaps, but I mean.

00:55:19 Like there’s a lot, like certainty can get us in trouble

00:55:23 is my worry.

00:55:24 I don’t know much about economics.

00:55:27 I don’t even know, you know, financial systems,

00:55:29 monetary systems, but I just seen us get in trouble

00:55:33 with human psychology, certainty,

00:55:36 certainty of ideologies in general.

00:55:38 You mentioned Marxism and so on.

00:55:40 I came from the Soviet Union.

00:55:42 There’s a lot of people that are very certain

00:55:44 throughout the history of the 20th century

00:55:46 that communism is the utopia that humanity should strive for.

00:55:52 So I’m nervous around certainty.

00:55:54 I could be wrong, but you know, you ask me for my opinion.

00:55:57 Yes, yes.

00:55:58 Sorry, so it’s that little bit of a caveat.

00:56:00 So to go back to the idea, then on the other hand,

00:56:03 you have the level of, if the other situation

00:56:05 is when the level of spending is higher

00:56:07 than the amount of aggregate output.

00:56:09 In that situation, you have too much spending.

00:56:11 So therefore what ends up happening is inflation.

00:56:14 So according to the Keynesian worldview,

00:56:16 this is really important because this is a way

00:56:18 that I’m gonna get to your point about empirical data

00:56:20 and to show you why they’re not correct.

00:56:26 Yeah, they’re not correct about what they say

00:56:28 about empirical data.

00:56:29 So then what this means is that there’s a level of output

00:56:32 and there’s a level of aggregate expenditure.

00:56:34 The aggregate expenditure can either be higher

00:56:36 or lower than the output or equal to it.

00:56:38 If it’s higher, we get inflation.

00:56:41 If it’s lower, we get recessions, okay?

00:56:46 So is there any universe in this model?

00:56:50 Is there any potential universe

00:56:52 in which you can have both inflation and a recession?

00:56:56 According to the Keynesian model, you can’t, right?

00:56:59 Because aggregate expenditure cannot be both higher

00:57:02 and lower than output.

00:57:04 So therefore, if you were truly being an empirical person,

00:57:08 if you were looking at evidence and trying to analyze data,

00:57:13 you’d look at this and say, one example,

00:57:16 you just need one example of high inflation

00:57:18 and high unemployment to refute this entire model, right?

00:57:23 And of course, the world is full of examples

00:57:25 of high inflation and high unemployment.

00:57:28 And that’s what happened in the 19, and of course,

00:57:30 they ignored it when it happens in poor countries

00:57:32 because poor countries don’t really matter.

00:57:34 But then in the 1970s, that happened in the US

00:57:37 and in the Western economies

00:57:38 and the most advanced industrial economies.

00:57:40 So historically, before then,

00:57:42 you had all these Keynesian central bankers

00:57:47 talking about this model and saying,

00:57:48 well, aggregate expenditure is too low now

00:57:51 and that’s why we have unemployment.

00:57:52 So we need to print more money.

00:57:53 And then they print more money, inflation goes up,

00:57:56 but also unemployment goes up because this model is broken.

00:58:01 That’s not how the world works.

00:58:04 The level of aggregate spending in the economy

00:58:06 is not a lever with which you can control

00:58:09 inflation and unemployment.

00:58:10 So what would a scientist do?

00:58:12 What would a non Huckster do in this case?

00:58:17 Admit the theory is wrong

00:58:18 and find another way to reformulate it.

00:58:21 Have the Keynesians done that?

00:58:23 No, still the same garbage in the textbook

00:58:25 that is being taught until today.

00:58:27 So is it possible to have a non Keynesian model

00:58:29 where one that still supports

00:58:31 moderate amount of inflation is good for the economy?

00:58:34 I mean, since the 1970s, since this has happened,

00:58:37 yeah, this is what basically most fiat economists,

00:58:43 as I like to call them,

00:58:44 essentially anybody at a university financed by governments,

00:58:46 which is financed by central banks,

00:58:47 which is financed by fiat.

00:58:48 Oh, we’ll talk about that.

00:58:50 The effect of fiat money on our life,

00:58:53 as you write about in your book,

00:58:56 fiat standard, one of them is education.

00:58:58 I’m sure we’ll disagree there too.

00:59:01 Not smart enough to disagree, but I’ll disagree anyway.

00:59:04 So yeah, so a whole bunch of other models came up,

00:59:06 but basically it’s such an example of motivated reasoning.

00:59:10 Like anybody who’s got a familiarity

00:59:12 with the scientific method

00:59:13 or who’s got an engineering background

00:59:14 who comes into economics immediately has a lot of red flags.

00:59:18 And I remember when I used to teach macro economics,

00:59:22 I used to teach introductory macro economics.

00:59:24 And it’s a course that would be taken by econ majors

00:59:26 as well as engineers.

00:59:27 A lot of engineers would take it as an elective.

00:59:29 And every time I’d explain,

00:59:31 and I would just teach the Keynesian basic stuff.

00:59:33 And every time I’d explain it,

00:59:34 there’s always that smart engineering kid

00:59:35 who just looks at me and says,

00:59:37 sir, this doesn’t make any sense

00:59:39 because this and this and that.

00:59:41 And I’m always like, you get it exactly.

00:59:43 You’re correct.

00:59:44 Because if you have any kind of shred of scientific thinking,

00:59:47 you see that this is all motivated reasoning.

00:59:50 Like the answer is government needs to print money.

00:59:52 And here’s a whole bunch of models brought up by people

00:59:56 for why government printing money is good.

00:59:59 And the reason they’re coming up to this conclusion

01:00:01 is that you only get funded

01:00:03 if you come up with this conclusion.

01:00:04 If you come up with a conclusion

01:00:05 that we need to shut down the central bank,

01:00:08 you don’t get funded by the central bank.

01:00:10 You don’t get published in the journals.

01:00:11 You don’t get a job at the prestigious universities.

01:00:14 You don’t get quoted by a fiat publications

01:00:16 like the New York Times and CNN.

01:00:18 They don’t invite you on as an expert.

01:00:21 Well, that’s a fundamental flaw

01:00:22 with a lot of institutions we have today

01:00:25 and throughout human history.

01:00:26 Let me zoom off for just a second to the big question.

01:00:29 What is economics in general?

01:00:32 What’s the goal?

01:00:33 You said there’s a bunch of models.

01:00:34 Is any economist basically trying to throw a bunch of models

01:00:38 about human behavior on the table

01:00:40 and try to generalize it to the global scale?

01:00:43 So both dance between micro and macro somehow

01:00:47 in order to determine public policy

01:00:49 and explain the past, predict the future,

01:00:53 prescribe policies that can control the future,

01:00:56 those kinds of things.

01:00:57 This is the big basic ridiculous question

01:01:00 of what is economics?

01:01:02 Economics is the study,

01:01:03 the way the Austrians define it is the study

01:01:05 of how humans make choices under the condition of scarcity.

01:01:09 We begin with the starting point of economics

01:01:11 as the fact that scarcity exists.

01:01:14 And why does scarcity exist?

01:01:16 Well, because it’s easier to want things

01:01:18 than it is to make them.

01:01:19 It’s much easier to want a Ferrari than it is to make one.

01:01:23 And so because we have wants

01:01:27 and we have limited means to meet those wants,

01:01:30 we need to economize.

01:01:32 It’s a permanent marker of the human condition.

01:01:37 We are always economizing at all times.

01:01:39 And so how people make those decisions

01:01:43 under the conditions of scarcity

01:01:45 is what economists study.

01:01:47 So to go back to your point on empiricism

01:01:49 in Austrian school,

01:01:51 so it isn’t that the Austrians don’t believe in data.

01:01:55 On the contrary, it’s that theory has to inform data.

01:02:00 And in fact, if you think about it

01:02:02 as the example of the stagflation of the 1970 shows,

01:02:08 if you have stagflation,

01:02:10 that just completely refutes the Keynesian model.

01:02:13 The Austrian way of thinking,

01:02:15 which is think from first principles,

01:02:17 understand how the world actually works,

01:02:19 think about how humans act and understand

01:02:21 that economics is really all about human action.

01:02:23 So it’s not about aggregates of goods.

01:02:26 This is really the key distinction

01:02:28 in terms of methodology.

01:02:29 For the Keynesians, it’s physics envy.

01:02:32 They look at the market economy,

01:02:34 they look at individuals in the market economy,

01:02:36 and they think that they can understand the market economy

01:02:39 by looking at aggregates.

01:02:40 This is really the key point of what I think

01:02:43 makes a certain branch of economics pseudoscientific

01:02:48 is the introduction of aggregates.

01:02:49 When you introduce those aggregates,

01:02:52 how much production takes place,

01:02:54 how many people are unemployed,

01:02:56 the percentage of the inflation rate,

01:02:59 and then you think that you can establish

01:03:01 scientific relationship between those aggregates,

01:03:04 it’s purely physics envy.

01:03:07 In physics, for instance, or in chemistry,

01:03:09 you put, let’s say, a container that contains a gas,

01:03:13 and you have the ideal gas law, PV equals to nRT,

01:03:18 calculate the pressure, calculate the volume,

01:03:20 and then the temperature.

01:03:24 If you have the pressure and the volume,

01:03:25 you can calculate the temperature

01:03:26 because you have the nR constants.

01:03:30 So there’s a clear relationship

01:03:32 that has been demonstrated in a laboratory

01:03:34 and that we can do it right now.

01:03:36 We can measure it and we can see it

01:03:38 and it continues to hold.

01:03:40 And all it takes is one scientist

01:03:42 to show that this relationship does not hold,

01:03:44 to do an experiment that shows that this does not hold,

01:03:48 and it stops being a law of chemistry and it’s broken.

01:03:52 Whereas in economics, what they’ve done

01:03:56 is they’ve copied the superficial shape of this

01:04:00 without any of the scientific rigor

01:04:02 that was used to build it.

01:04:04 There’s no experiments.

01:04:05 You can’t experiment on economies.

01:04:08 We don’t have the ability to establish laws,

01:04:11 and all the laws that we establish

01:04:13 are just models that get people published

01:04:15 and get them on the media to say,

01:04:18 my model says we need to print more money,

01:04:20 but it’s never subject to actual scientific scrutiny.

01:04:23 If it were, they would all be rejected in 15 minutes

01:04:25 because the world is full of examples that contradict them.

01:04:28 Was it possible to do scientific scrutiny

01:04:30 when it’s human nature when you can’t,

01:04:32 when there’s a nearly infinite number of variables

01:04:34 and you can’t control them?

01:04:36 Is it possible, so what’s the best thing

01:04:38 you could possibly do?

01:04:40 You do thought experiments.

01:04:43 But the problem with thought experiments,

01:04:46 Freud thinks everybody wants to have sex with their mother.

01:04:49 Is he right? That’s the problem with Freud.

01:04:51 I don’t know, maybe he’s right.

01:04:53 Well, obviously I’m joking on that front, but the…

01:04:57 Freud is probably under the canes.

01:05:00 Well, no, I think there’s power to the thought experiment.

01:05:03 Just like Einstein, a lot of general relativity,

01:05:06 special relativity, that’s a thought experiment.

01:05:09 It originates in a thought experiment.

01:05:10 Now, is it true?

01:05:13 Nice thing about physics,

01:05:14 you can’t eventually have experimental validation.

01:05:17 The downside of economics is you really can’t have

01:05:20 experimental, definitive experimental scientific rigor

01:05:25 of validation of a theory.

01:05:27 So a thought experiment is just a thought experiment.

01:05:29 Using your intuition, it’s the power of reasoning together

01:05:32 about human nature.

01:05:33 And that’s why economics cannot make the claims

01:05:36 that physics can make.

01:05:37 So with physics, you can predict that if you get this gas

01:05:40 at this pressure, at this volume,

01:05:42 the temperature will be that much.

01:05:43 And you can make that prediction and test it a million times

01:05:47 and you’ll always get the precisely correct answer.

01:05:50 With economics, we can’t make quantitative predictions.

01:05:53 But still, on Twitter, and even today,

01:05:54 you’re very certain about the statements you’re making.

01:05:57 Do you…

01:05:58 Yeah, but I don’t make quantitatively certain statements.

01:06:00 That’s the thing.

01:06:01 In economics, we don’t make quantitative predictions.

01:06:03 We cannot do that because we don’t have experiments.

01:06:06 But we can understand how the world actually works

01:06:09 with humility.

01:06:10 This is really the key difference

01:06:11 that the Keynesians think they just wanna copy

01:06:13 the methods of physics.

01:06:15 And then that’s just gonna give them the certainty

01:06:18 of the results of physics, which is like me saying,

01:06:20 I’m just gonna put a red blanket on my back

01:06:23 and jump from the fourth floor because I’m Superman.

01:06:26 Well, it’s not the red blanket

01:06:27 that’s gonna make me Superman.

01:06:29 There’s a lot more to it.

01:06:30 So humility manifests itself in economics

01:06:33 as the belief in a free market.

01:06:35 Meaning like, I can’t centralize,

01:06:37 I can’t do centralized control on this thing.

01:06:41 We’re going to minimize the friction

01:06:44 of the free exchange of goods.

01:06:47 So Austrian economics puts priority in the market.

01:06:52 Yes, and you could arrive at it through two paths.

01:06:55 The more practical path, which most scientific minded

01:07:01 people arrive at.

01:07:02 I came from an engineering background.

01:07:03 So I initially had this idea that what is lacking

01:07:07 in economics is mathematicization.

01:07:09 We need to have better math models.

01:07:11 We need to get all of those tools from engineering,

01:07:13 apply them to economics, and then we’ll be able

01:07:15 to plan the world economy and make it work better.

01:07:18 And then you start actually trying to solve problems,

01:07:21 trying to actually calculate them.

01:07:22 And you realize nobody can have that ability

01:07:24 because the difference ultimately comes down to the fact

01:07:28 we can’t have experiments.

01:07:29 And the reason we can’t have experiments is that

01:07:31 you can experiment on particles of a gas.

01:07:33 You can’t experiment on human beings and entire economies.

01:07:37 And because particles of a gas are just dumb matter.

01:07:42 And so you kick matter in a certain way.

01:07:46 You can calculate exactly how much is going to fly.

01:07:48 Human beings are much more complex.

01:07:50 They have a will inside them.

01:07:51 And this is really, this is the humility to understand

01:07:55 that you are a human being and other people

01:07:57 are also human being just like you.

01:07:59 And that every person wakes up every morning

01:08:03 and they have a million things in their mind,

01:08:06 a million things they care about,

01:08:07 a million things they want to do.

01:08:09 And you will never be able to make the decisions

01:08:13 for somebody else, let alone for millions of other people.

01:08:16 So this is one path by which you arrive at the conclusion

01:08:18 that free markets are better because you realize

01:08:21 that all of the people that think

01:08:22 that they can centrally plan markets

01:08:24 can’t actually do that.

01:08:26 And that there’s really nothing scientific about them

01:08:30 except essentially the rituals they ape

01:08:33 of the scientific process.

01:08:35 And the other path I think that makes you arrive

01:08:38 at the Austrian perspective or the libertarian perspective

01:08:41 I should say, is simply the notion of individuals

01:08:47 as having their own inalienable right

01:08:49 to decide what they want to do with themselves.

01:08:51 If you, I mean, the only way that you can give yourself

01:08:55 the idea that you get to be planner is ultimately

01:09:00 you think you’re better than other people.

01:09:02 You think your choice, your judgment overrides mine.

01:09:05 And I don’t think that’s a defensible position.

01:09:08 I think I’m in no position to want to force anybody ever.

01:09:11 I will never want to force anybody

01:09:13 to do anything they don’t want.

01:09:15 The Keynesian perspective, the central planning perspective

01:09:18 is unlike physics, which is let’s force a bunch

01:09:22 of particles to sit in the lab so that we can study them.

01:09:26 In economics, you’re forcing people to do things.

01:09:28 Let’s stop these people from doing this job

01:09:31 because it’s bad for the economy

01:09:32 and let’s get them to do that job.

01:09:34 Let’s force them to pay this price.

01:09:35 Let’s tax them this much.

01:09:37 Let’s prevent them from using gold as money

01:09:39 and force them to use our credit as money.

01:09:42 So it has to rely on coercion.

01:09:44 There’s no central planning without coercion.

01:09:46 And coercion is a crime, in my opinion.

01:09:49 There’s no way that it is justifiable morally or ethically.

01:09:51 So from a politics, from an ethical perspective,

01:09:55 your view is the, I mean, perhaps the,

01:09:58 broadly speaking, the libertarian view

01:09:59 is coercion is unethical, freedom is essential.

01:10:07 What is, what are the pros and cons

01:10:09 of government intervention in the economy?

01:10:12 So can you steal, can you provide pros?

01:10:14 You just kind of provided arguments against.

01:10:19 Is there any arguments to be made

01:10:20 for government intervention,

01:10:22 for the role of government in society?

01:10:25 Speaking from a political or from an economics perspective,

01:10:28 what is the positive role of government

01:10:31 that you can imagine you can speak to?

01:10:33 I can repeat many other cases,

01:10:34 but I don’t find any of them compelling

01:10:37 for the reason that I mentioned,

01:10:38 which is that ultimately they all rely on

01:10:41 putting a gun to somebody’s head

01:10:42 and using the threat of force.

01:10:43 So that’s for me, it can never be justifiable.

01:10:46 Whatever the ends are,

01:10:47 if the means are violence and the threat of violence,

01:10:52 then the ends aren’t justified.

01:10:55 Everything that’s good,

01:10:56 governments will use as an excuse to justify coercion.

01:10:59 So, you know, what do you like?

01:11:01 You like motherhood and apple pie?

01:11:03 Well, government needs to ensure

01:11:04 that motherhood works well,

01:11:06 and we need the government central planning of birth.

01:11:09 We need regulations on birth, for instance.

01:11:11 We need regulations on how people give birth.

01:11:14 We need to ban people from giving birth

01:11:16 in traditional ways that have been tried

01:11:18 for thousands of years.

01:11:18 We need to force people to do things

01:11:20 in the modern scientific way.

01:11:22 Well, so what about things like that all of us use,

01:11:26 so infrastructure, for example, or education,

01:11:31 or, well, the economy too, right?

01:11:35 Can you make a case for the role

01:11:38 of some large scale centralized systems,

01:11:42 whether it’s government or not,

01:11:43 that do this kind of management?

01:11:45 I guess, perhaps you could say

01:11:46 there’s the economies of scale argument

01:11:48 that some things must exist at a very large scale,

01:11:52 and therefore you would want political accountability

01:11:56 of the people who manage them.

01:11:58 This is kind of the argument

01:11:59 that’s given for infrastructure monopolies.

01:12:01 For instance, roads or electricity.

01:12:05 Let’s say we live in a country,

01:12:07 we need one power plant.

01:12:08 The bigger the power plant, the better off we will all be.

01:12:11 And there’s a natural monopoly in the power plant business.

01:12:15 So we’re gonna have to have one power plant.

01:12:17 And since it’s only one power plant,

01:12:19 then we can’t just let anybody own it

01:12:22 because then they’re gonna make it too expensive.

01:12:24 So we need to have the government own it

01:12:26 so it can make it too expensive.

01:12:28 And you don’t find that case compelling?

01:12:29 Not at all.

01:12:30 I used to believe in it.

01:12:31 I was pretty much a Keynesian

01:12:33 when I first started my graduate studies at Columbia.

01:12:38 No, I don’t find that compelling at all

01:12:40 because I think all these examples that they mention

01:12:42 of natural monopolies or economies of scale

01:12:45 that can only fit at a scale of government,

01:12:51 government bans people from opening power plants.

01:12:54 And then there’s only one power plant

01:12:56 and they need to be in charge of it.

01:12:58 But in reality, no.

01:13:01 In reality, power plants can exist at all kinds of manners

01:13:04 of scales of operation.

01:13:06 And yes, of course, there are benefits to centralization

01:13:08 in power plants in particular

01:13:10 because there’s efficiency in generation.

01:13:13 One big power plant is more efficient

01:13:17 than 10 equivalent smaller power plants.

01:13:20 But there’s also inefficiencies in centralization

01:13:22 because the more centralized and the bigger the plant is,

01:13:25 the further away a lot of the population is going to be.

01:13:29 So you’re gonna be losing a lot of the electricity

01:13:31 and transmission.

01:13:33 And you believe the free market is best in managing

01:13:36 that dance, that balance of centralization.

01:13:39 Exactly, and if we do end up in a situation

01:13:41 where there’s one power plant for an area,

01:13:44 then if the markets ends up centralizing all of it

01:13:48 into one power plant, I don’t see that as a problem.

01:13:52 There are places, there’s a small town

01:13:54 with only one barber shop.

01:13:56 Is that a catastrophe?

01:13:57 No, because they don’t need two barber shops.

01:14:00 Now, if that barber shop started to take advantage

01:14:03 of people, started to charge higher price,

01:14:05 well, then that’s just an opportunity for others

01:14:07 to step in and put them in their place.

01:14:10 And that’s the same thing with power plants.

01:14:11 It’s the same thing with everything.

01:14:13 Ultimately, I think the key thing is this.

01:14:17 From the central planning perspective,

01:14:20 they’ll present you the problem as it is,

01:14:22 and they’ll tell you, well, this is bad.

01:14:24 So the fix, and what we can do is better.

01:14:28 So let’s stop what’s bad and do what is better.

01:14:31 Two problems here.

01:14:32 Usually, the reason that the thing is bad

01:14:34 in the first place is because it is a government monopoly.

01:14:37 It’s because of government intervention.

01:14:39 But the second thing is that this notion

01:14:41 that we could just pass a law and fix what’s wrong

01:14:44 and make it better, it ignores the fundamental

01:14:48 underlying reality, which is that what you’re doing

01:14:51 is you’re offering only one way for this problem

01:14:54 to be solved and making all other solutions

01:14:57 practically illegal.

01:14:58 You’re taking taxpayer money, you’re putting guns

01:15:00 to people’s heads to take their money,

01:15:02 to use it to build, say, this one solution

01:15:04 for a power plant, but you’re preventing

01:15:07 the free market process from providing us

01:15:09 with other alternatives.

01:15:11 Well, so you phrased it sort of from that perspective,

01:15:13 but in theory, there is a feedback accountability mechanism

01:15:18 for the solution that you propose and enforce

01:15:22 by, as you’re saying, placing a gun to people’s head.

01:15:25 You’re accountable for that choice,

01:15:29 for the quality of that solution,

01:15:30 by being voted out if the solution is actually bad.

01:15:34 So it’s just a different selection mechanism.

01:15:37 And I think, I personally believe it is a selection mechanism

01:15:41 that has worked in the past.

01:15:43 It just often does not work nearly as well

01:15:46 as a free market.

01:15:48 And the question is, are there domains

01:15:52 in which the free market gets itself into trouble?

01:15:54 So this theoretical view is that that’s the point

01:15:58 of a free market, is it doesn’t, if there’s trouble,

01:16:02 that’s a signal, and it will respond to that signal,

01:16:05 and it will respond appropriately

01:16:07 to try to maximize happiness.

01:16:10 The question is, is there a local optima

01:16:12 that free markets get stuck in and need governments

01:16:15 to represent the broader scale of the people

01:16:19 to get outside of that?

01:16:20 I think the fundamental problem here is the idea

01:16:24 that there is a feedback mechanism

01:16:26 when there is coercion in one party,

01:16:28 when one party can employ coercion and the other one cannot.

01:16:31 So in other words, I’m gonna put a gun to your head,

01:16:34 I’m gonna take your money, and I’m gonna use it

01:16:36 to buy more guns for me to put against your head,

01:16:39 but somehow you’re gonna put a paper in a box

01:16:42 and that’s going to deactivate my guns.

01:16:45 Well, love requires a push and pull,

01:16:48 a little bit of tension, a little spice in a relationship,

01:16:50 I think, a little gun to the head.

01:16:53 Good luck to anybody who’s gonna be dating you

01:16:55 if you think putting a gun to people’s head

01:16:57 is comparable to a relationship.

01:17:00 All jokes, but yes, I mean, the people don’t often think

01:17:04 of it as government and the military as gun to the head,

01:17:09 but that is sort of a libertarian perspective

01:17:11 because ultimately when you, you know,

01:17:13 turtles all the way down and at the bottom there’s guns.

01:17:16 Yeah, so.

01:17:17 At the bottom if you don’t want to pay,

01:17:18 if you don’t want to, you know,

01:17:19 all right, I don’t want to be part of your power plant,

01:17:21 I want to get my own generator, I don’t want to do it,

01:17:23 and I don’t want to pay for it, I’ll go to jail.

01:17:25 You can’t not pay for it.

01:17:26 That’s really the asymmetry which the market doesn’t have,

01:17:28 which is why, in my opinion, it’s not as if, you know,

01:17:31 I’m being stubborn and stuck on the idea

01:17:34 that I want a market and that the government can’t work.

01:17:37 It’s presented as if, you know, we’re choosing

01:17:39 between two different machines.

01:17:40 You know, should we use an Apple or a PC?

01:17:43 And I’m just constantly choosing one of them

01:17:46 and saying that the other one can’t work.

01:17:48 It’s not equivalent, it’s not two machines.

01:17:50 We’re comparing between a machine and a gun to the head.

01:17:54 And we’re comparing between a situation

01:17:56 in which anybody anywhere is free to provide the service

01:17:59 or the good, and anybody anywhere is free to buy it

01:18:02 from them or reject to buy it from them.

01:18:05 So anyone can build a power plant, anyone can succeed at it,

01:18:08 anybody can fail at it, anybody can build it in a way

01:18:10 that I can choose to take part in or not take part in.

01:18:14 I can build my own.

01:18:15 So we have a situation which 10 million people, let’s say,

01:18:18 they each can freely choose to provide the good

01:18:22 or to buy the good.

01:18:23 That cannot be considered an alternative on an equal footing

01:18:28 to a situation where one person or one entity

01:18:31 gets to decide for everybody and those people

01:18:33 decide for everybody and those who disagree go to jail.

01:18:37 So the problem is that the alternative to governments

01:18:41 is other large successful entities that have humans in them

01:18:45 and human nature is such that there’s corruption,

01:18:48 manipulation and so on.

01:18:50 I think free market depends on the honest communication

01:18:57 of information as widely as possible

01:18:59 so that people can make great rational decisions

01:19:02 but sort of my fear is, I’d like to propose

01:19:06 is that in general there’s manipulation

01:19:08 whether it’s government, whether it’s companies.

01:19:10 They’re going to try to do propaganda.

01:19:13 They’re going to try to manipulate you, deceive you,

01:19:16 shut down competition by playing games,

01:19:19 human games of different kinds

01:19:22 and sometimes even meaning well.

01:19:24 It’s not like everybody thinks they’re doing good

01:19:26 and they’re actually doing evil.

01:19:27 So how do we prevent the worst of human nature coming out

01:19:32 in a free market as well?

01:19:35 By not giving the worst of human nature

01:19:37 a monopoly on violence in the institution of government.

01:19:40 That little inkling of coercion,

01:19:42 that little bit of asymmetry creates a gigantic

01:19:47 like ripple effect of asymmetry in your view.

01:19:49 Yes and it ends up just being the place

01:19:51 where corporations, individuals, free markets,

01:19:55 they can’t coerce without the resort to government.

01:19:57 So you think about all the examples

01:19:59 of corrupt corporations doing bad things.

01:20:02 It’s always because they have certain privileges

01:20:06 from governments because as it exists,

01:20:10 Coca Cola, McDonald’s, all of these giant corporations,

01:20:13 they can’t do anything to me without government.

01:20:15 They can’t take any of my money

01:20:17 and they can’t force me to buy their stuff

01:20:19 and so it doesn’t matter to me.

01:20:21 So if Coca Cola is corrupted,

01:20:24 that’s a problem for Coca Cola customers,

01:20:25 that’s a problem for Coca Cola shareholders,

01:20:27 that’s a problem for anybody who deals with Coca Cola

01:20:30 but as somebody who doesn’t drink their stuff

01:20:32 and isn’t a shareholder,

01:20:34 I have absolutely no interest in what happens.

01:20:36 They could all go bust tomorrow and I don’t care.

01:20:38 I don’t buy their product and I’m not a shareholder.

01:20:43 So in this situation where you choose to voluntarily

01:20:47 associate with people and you only give your money

01:20:50 to people you want to voluntarily give the money to

01:20:52 so you either buy their product

01:20:54 or invest in their production,

01:20:55 in that situation, the only way that a company

01:20:58 can get my money is if they build a product that I value

01:21:03 or if they convince me that they are going to use it

01:21:07 in a way that’s profitable and I may be wrong.

01:21:10 I may invest in a company that fails

01:21:12 or I may invest in a company that turns out to be fraudulent

01:21:17 but that’s my fault and it’s my fault

01:21:23 that I gave them my money

01:21:24 and then it turned out to be scoundrels

01:21:26 but it’s a totally different problem

01:21:28 when we make it mandatory.

01:21:32 It’s violence, it’s a crime to put a gun to my head

01:21:36 and force me to subsidize companies

01:21:38 and force me to come at certain conclusions.

01:21:41 Do you find an interesting distinction,

01:21:43 Mr. Michael Malice, between anarchism and libertarianism?

01:21:46 So this particular use of violence,

01:21:50 this last resort, this policing force

01:21:53 that libertarianism is okay with

01:21:56 and anarchism is not okay with.

01:21:58 So basically nation states that keep you safe

01:22:02 from the worst of war.

01:22:05 Yeah, I think to be more accurate,

01:22:06 the distinction between anarchism and minarchism,

01:22:09 I think libertarianism is kind of a vague term

01:22:11 that can encompass both.

01:22:13 Means a lot of things, okay.

01:22:14 Yeah.

01:22:15 On the Karl Marx to Michael Malice spectrum,

01:22:19 where do you?

01:22:20 No, no, I’m full anarchist.

01:22:22 You’re a full anarchist.

01:22:22 Yeah, full anarchist.

01:22:23 I mean, I don’t find any justification

01:22:26 for the use of force and I think recently perhaps,

01:22:31 maybe I’m getting old, maybe I’m getting senile,

01:22:33 maybe I’m getting wise, who knows?

01:22:36 But I’m beginning to become more sympathetic to monarchy.

01:22:39 So I’m an anarchist, monarchy.

01:22:43 Which, what is that?

01:22:44 Kings, royal. Oh, monarchy.

01:22:46 Yeah.

01:22:46 And I think.

01:22:49 Wait, are you joking or not?

01:22:51 No, I’m not joking.

01:22:53 And I think, I mean, I think morally and intellectually,

01:22:58 I’m an anarchist, but the reality is we find ourselves

01:23:02 in a world in which a lot of people are not.

01:23:05 And the question is, what is the thing

01:23:09 that is going to provide you with more freedom?

01:23:12 And I think, I’m recently coming around to the idea

01:23:16 that monarchy might be the best way

01:23:19 to provide people with the largest amount of freedom

01:23:22 because to have a free society, you need a majority,

01:23:25 perhaps, or a plurality of people

01:23:28 to have a very strong understanding of libertarian ideas,

01:23:31 to have a low time preference,

01:23:33 to have a preference for the future.

01:23:35 So you need a majority of the population

01:23:37 to not decide to go and do something insane

01:23:41 in order to continue to have a free society.

01:23:44 You know, when a respiratory illness comes along,

01:23:48 unfortunately, you know, the last couple of years

01:23:51 showed that we, the vast majority of people

01:23:53 are gonna freak out and lose their mind

01:23:57 and support whatever their stupid TV tells them to support.

01:24:00 And, you know, there’s always a current thing

01:24:03 and the media is always telling you

01:24:05 that we need this current thing as an excuse

01:24:08 for more and more government power

01:24:10 and more and more government coercion.

01:24:11 What’s the role of kings and queens

01:24:13 in that case of a monarchy?

01:24:15 What’s the role of a leader?

01:24:17 I think there might be a case that,

01:24:21 so as I was saying, you need a majority of the population

01:24:24 to get together and decide, nope, whatever is the case,

01:24:28 you know, the answer is voluntary.

01:24:31 No matter how bad the disease is,

01:24:34 it doesn’t justify forcing people to stay home.

01:24:36 You wanna stay home, stay home.

01:24:37 You wanna wear a mask, take a vaccine,

01:24:39 do whatever you want, but you can’t force others to do that.

01:24:42 So you need a majority of the people

01:24:43 to strongly believe in this principle

01:24:46 in order to get it in a democracy.

01:24:50 Whereas in a monarchy,

01:24:52 maybe you just need the king to get it.

01:24:54 And I think the reason kings are more likely to get it

01:24:57 is that kings have a low time preference

01:25:00 where they think about things for many generations.

01:25:03 Whereas in a democratic system,

01:25:05 your president is likely only going to be there

01:25:08 for four years or eight years or 10 years

01:25:10 or five years or whatever it is.

01:25:12 So the only way that, you know,

01:25:14 all humans are self interested.

01:25:15 So the only way that your president in a democracy

01:25:17 can provide for themselves is to maximize

01:25:20 the amount of exploitation that they can do

01:25:23 of the population during their brief stint.

01:25:26 And then when he’s out, you get a new one,

01:25:28 and then that one wants to start all over again.

01:25:30 So every four years, you get a new robber.

01:25:33 With monarchy, you sign up for a multi generation

01:25:37 subscription to the same family.

01:25:41 And when they have the security of knowing that,

01:25:44 you know, his great grandson is going to be

01:25:47 taking money from your great grandson,

01:25:50 suddenly his interest in yours align

01:25:54 because they both want your great grandson

01:25:56 to be prosperous and have enough money

01:25:58 for his great grandson to take.

01:26:00 It’s a monarchy with a tiny government.

01:26:02 So anything required to really provide for a free market.

01:26:08 So for maximizing individual freedom

01:26:11 and the freedom of the economy.

01:26:12 Yeah, and if I were a king, which is highly unlikely

01:26:15 to ever happen, but I think, you know,

01:26:17 if you look historically, the dynasties

01:26:20 that have succeeded at lasting for a long time,

01:26:23 the key thing that they managed to do

01:26:24 is to basically be libertarian.

01:26:26 The key to being a good king is to just leave people alone.

01:26:29 Let them do whatever they want.

01:26:31 Don’t rob them too much or rob them as little as possible,

01:26:34 or maybe even don’t rob them.

01:26:36 And, you know, as a king, use your power only

01:26:40 to punish people who aggress against others.

01:26:43 Don’t use your power to enrich yourself

01:26:44 and enrich your friends.

01:26:46 And that’s really, like, if you look at smart kings,

01:26:49 this is what they do.

01:26:50 This is what they teach their children.

01:26:51 And the cycle of kingdoms is that, you know,

01:26:54 the first king understands this,

01:26:56 builds the empire and the first couple of generations,

01:26:59 they get this and the society is free, the economy is free.

01:27:04 And because of that, you know, there’s peace and prosperity,

01:27:09 but then over time, the next generation of kids

01:27:12 become a lot more high time preference.

01:27:14 They haven’t worked hard.

01:27:17 They don’t understand the meaning of hard work.

01:27:20 So they become more likely to engage

01:27:23 in destructive behavior.

01:27:24 So raise taxes, pass laws that require people to do things,

01:27:31 even when they’re not hurting anybody.

01:27:33 And that ends up basically eventually destroying the kingdom.

01:27:37 Of course, power corrupts.

01:27:40 So you have to kind of create human institutions

01:27:42 that prevent you as a king or any kind of leader

01:27:45 from expand, so going back on the original promises

01:27:52 and the purposes of your position.

01:27:54 And then distracting, using tools of technology

01:27:58 and communication to distract the populace

01:28:00 while you expand the power.

01:28:01 Exactly.

01:28:02 All right, you wrote the fiat standard.

01:28:05 I think we danced around it quite a bit,

01:28:08 but I don’t know if we actually defined it.

01:28:10 So what is fiat money?

01:28:11 What is the history of how it came to be?

01:28:14 The fascinating history of the birth

01:28:16 of the fiat monetary system is something

01:28:18 that really only got uncovered in 2017.

01:28:21 This is extremely, extremely interesting.

01:28:25 In 1914, Britain joined World War I.

01:28:29 And if you remember your history books,

01:28:31 it’s famous that this was called August Bank Holiday.

01:28:35 It was just going to be a few weeks

01:28:36 where the British troops were gonna go

01:28:38 and kick European ass and come back triumphant.

01:28:41 And most European countries believed that.

01:28:44 But then the war kept on dragging on.

01:28:46 And of course, to finance the war,

01:28:48 the government, this is what they used to do

01:28:49 under the gold standard,

01:28:50 governments would issue bonds.

01:28:53 So you’d issue the bonds, people would buy the bonds,

01:28:55 the money would be used to finance the military,

01:28:57 and then the government would pay off the bond

01:29:00 over the next five or 10 or 20 years.

01:29:03 So for World War I, the British government,

01:29:06 the British treasury issued bonds for financing the war.

01:29:10 And this only came to light in 2017.

01:29:13 Only a third of the bonds were actually subscribed.

01:29:15 So people, British people,

01:29:17 and this is perhaps the greatest thing

01:29:19 that they’ve ever done,

01:29:20 they decided fighting a war in Europe

01:29:22 is just not my ideal way of investing my capital.

01:29:25 It’s a stupid thing.

01:29:26 Why should I go and fight?

01:29:27 Because the Austrians and the Germans and the Serbians

01:29:30 are at each other’s throats.

01:29:34 I’d rather invest in something else.

01:29:36 So they only bought a third of the bond issue.

01:29:38 And then the astonishing thing that happened,

01:29:42 which really set the tone for the next century

01:29:44 of war, murder, Keynesianism, and theft and inflation,

01:29:49 was that the Bank of England went and got

01:29:52 two of the high ranking officials in the Bank of England

01:29:56 to buy the other remaining outstanding two thirds

01:29:59 of the bonds under their own name

01:30:01 with a line of credit from the Bank of England.

01:30:03 So it wasn’t their own money.

01:30:04 But they took money essentially from the Bank of England,

01:30:06 bought two thirds of the bonds that financed the war.

01:30:10 And that was how England was able

01:30:12 to keep going into the war.

01:30:14 So that’s essentially what they did

01:30:17 is what we today know as quantitative easing.

01:30:20 Back then, they just got, they printed money

01:30:23 from the Bank of England, or credit, printed credit,

01:30:26 gave it to those two employees.

01:30:29 They bought the bonds.

01:30:30 The government could fight the war.

01:30:32 Sounds like it’s a nice idea.

01:30:34 And Keynes, of course, being a huckster himself,

01:30:38 he himself said this was, he wrote a letter

01:30:42 to the Bank of England that was uncovered recently.

01:30:44 And he said, I congratulate you

01:30:45 on this masterly manipulation.

01:30:48 I quote it in the book.

01:30:49 Masterly manipulation is what he called it.

01:30:51 That they basically managed to buy the bonds

01:30:54 using the money of the government.

01:30:56 And of course, he never had an idea of how economics works

01:31:00 because he never could ask the question of,

01:31:01 okay, and then what?

01:31:02 All right, so we just printed money

01:31:04 to buy two thirds of these government bonds.

01:31:07 What’s gonna happen next?

01:31:09 What could go wrong?

01:31:10 Not a question Keynesians ask themselves

01:31:12 because their jobs depend on not thinking

01:31:16 about what’s going to go wrong.

01:31:18 So a quick question about war.

01:31:20 And as somebody who’s been nonstop reading

01:31:23 and thinking about the wars of the 20th century

01:31:26 and thinking that most of those wars

01:31:31 were unjust, unethical, and destructive,

01:31:37 how else do you find, how would you finance a war?

01:31:40 So.

01:31:41 Ideally you don’t.

01:31:41 No, but I mean, of course there are,

01:31:43 sometimes you wanna fight for self defense.

01:31:45 Yeah, you finance it, taxation, or bonds.

01:31:48 See, the people really need to want a war

01:31:51 not just with their voices, their thoughts,

01:31:54 their tweets, or their actual financial investment.

01:31:56 Put up the bullets and the cost of the bullets

01:31:59 and the bodies.

01:32:00 So their life and their financial well being.

01:32:05 That’s how it was under the gold standard mostly

01:32:07 because under the gold standard,

01:32:09 the government couldn’t print gold.

01:32:10 And so they had a budget and they had a certain amount

01:32:12 of gold and that wasn’t just, you know,

01:32:15 that they couldn’t infinitely increase it.

01:32:16 So they couldn’t tax their population at will.

01:32:20 And it’s very difficult to take money from people.

01:32:22 You know, you go knock on doors and search everybody’s home,

01:32:25 see where they’re hiding their gold.

01:32:27 It’s very complicated.

01:32:28 On the other hand, when you gave them paper money,

01:32:30 which is what the case was in 1914,

01:32:33 you could take their wealth just by printing the money.

01:32:36 And that’s what changed everything when it comes to war.

01:32:38 That’s why the 20th century was the century of total war.

01:32:41 Because under the gold standard,

01:32:43 governments fought until they ran out of their own gold.

01:32:46 Under the fiat standard, with paper money,

01:32:48 with credit money, governments fought

01:32:50 until they ran out of liquid wealth

01:32:53 in the hands of all of their citizens.

01:32:55 So let’s find flaws in this thinking if there’s any.

01:33:01 Okay, there’s a lot of pacifist type of thinking

01:33:06 in World War II as Hitler was expanding and expanding.

01:33:10 Hitler framed himself as a victim of the past, of history.

01:33:14 He never attacked anybody.

01:33:16 Everyone’s always threatening to attack him.

01:33:18 That’s kind of the narrative.

01:33:20 And he keeps expanding.

01:33:21 He keeps sweet talking with his charisma,

01:33:23 all the countries around him,

01:33:25 into sort of embracing pacifism.

01:33:28 Stay out of the war until the war is on your doorstep.

01:33:31 So France, just very suboptimal military strategy

01:33:37 from the perspective of many European nations

01:33:39 in response to Hitler.

01:33:41 They were basically hoodwinked by his words.

01:33:45 So then there’s Churchill, Winston Churchill,

01:33:50 who stepped up and says, perhaps irrationally,

01:33:55 from some kind of economics perspective,

01:33:57 saying we’re not going to back down.

01:33:59 We’re going to fight Germany.

01:34:01 And perhaps that step alone is one of the biggest reasons

01:34:05 that Hitler failed in his expansion.

01:34:11 That decision to fight back,

01:34:15 how, what’s the right way to do that?

01:34:18 If you’re Winston Churchill,

01:34:21 what’s the right way to do that?

01:34:23 If you’re, to fight back evil when violence is required.

01:34:28 Evil when violence is required.

01:34:30 Now, you could argue that no war is just,

01:34:35 but there is such a thing as a just war index.

01:34:38 And a lot of people argue if there is a just war

01:34:41 in the 20th century, it’s World War II.

01:34:46 So how would you fund, if you were Britain, the war?

01:34:49 Would you require Winston Churchill

01:34:52 to convince the populace?

01:34:54 Don’t fight until they’re fully convinced

01:34:57 that this is the right thing to do.

01:34:59 You can’t just make a decision for them.

01:35:01 You have to convince them fully

01:35:02 so that they give their life

01:35:04 and they give their money to support the war.

01:35:07 Is that the right way to do it?

01:35:08 I think so.

01:35:09 And I think when you have a true threat

01:35:13 and a true evil and a true force

01:35:14 that people really do think is genuine,

01:35:18 you don’t need to convince them.

01:35:19 I mean, when it’s real, people will want to fight

01:35:22 and people will want to pay to fight.

01:35:24 And I mean, I think, though, on this particular example,

01:35:28 I think the best way to fight Hitler

01:35:30 is to have not fought World War I

01:35:33 and not take out the Kaiser of Germany.

01:35:36 If Britain and the US had not gotten involved

01:35:40 in World War I, which really is the senseless war

01:35:44 about nothing, what was in it?

01:35:46 And what was the goal from anybody fighting that war?

01:35:49 If you look at it, after World War I,

01:35:52 there were very minor adjustments

01:35:54 in the borders of the countries that were participating.

01:35:57 So Germany lost some land, Austria lost some land,

01:36:00 but really it wasn’t all that massive.

01:36:04 And it wasn’t like Britain wanted to take over Germany

01:36:09 and move their people into Germany and kick the Germans out.

01:36:12 So there was no real value from that war.

01:36:17 And that’s why the British people

01:36:18 didn’t want to take part in it.

01:36:19 And that’s why if they hadn’t done

01:36:22 this enormously criminal manipulation

01:36:25 of printing money to buy the bonds,

01:36:28 Britain wouldn’t have gotten into the war.

01:36:30 Germany would still be a kingdom and Hitler wouldn’t rise.

01:36:34 And yeah, there’d be small changes

01:36:37 in the borders of various European countries.

01:36:41 I struggled to see how it could have been worse.

01:36:44 I mean, I struggled to see who benefited

01:36:47 from four years of carnage in Europe.

01:36:50 And then this came at the height of civilization.

01:36:53 Before that, the people of Europe

01:36:55 had the golden era under the gold standard.

01:37:00 They were trading with one another, they traveled

01:37:02 and technology was advancing.

01:37:04 And they did not expect this war to last this long.

01:37:08 And my favorite story from World War I

01:37:11 is the Christmas truce football game,

01:37:14 which I mentioned in my book.

01:37:16 British and German soldiers at the height of the conflict,

01:37:19 they stopped on Christmas day

01:37:20 and they played a football game against each other.

01:37:23 I mean, this is not a real war,

01:37:25 where it’s a war for survival.

01:37:27 Britain didn’t want to end Germany.

01:37:30 Germany didn’t want to end Britain.

01:37:31 It was just kings who were emboldened

01:37:35 by the fact that they had a printing press

01:37:38 playing with the lives of the people.

01:37:42 Take that away, take away the printing press,

01:37:44 take away their ability to print money.

01:37:46 I think we’d have had a much, much, much better

01:37:49 20th century.

01:37:50 Yeah, the counterfactual history.

01:37:52 Neil Ferguson is a historian

01:37:54 who gets in quite a bit of trouble.

01:37:56 Basically, well, he’s a Brit,

01:38:00 suggesting that if Britain stayed out of World War I,

01:38:03 there would be no Hitler, there would be no World War II.

01:38:05 Yep, I agree entirely.

01:38:09 But fiat money.

01:38:10 Yeah, so how fiat money was born.

01:38:12 Yeah, let’s get back to that.

01:38:13 So they financed the war with that money.

01:38:16 So what could go wrong?

01:38:17 That’s where we left off.

01:38:19 Well, what could go wrong when you’ve just printed

01:38:21 an enormous amount of credit and used it to buy bonds?

01:38:26 What goes wrong is that the value of the currency

01:38:28 is going to go down.

01:38:29 Or in other words, prices of things are gonna go up.

01:38:32 So during the war, prices keep going up.

01:38:35 And this is, of course,

01:38:38 this is gonna sound very familiar

01:38:39 to victims of the 20th century.

01:38:41 A government tells you it’s because of the war,

01:38:43 it’s not our fault, it’s because of the Germans,

01:38:45 it’s because of the foreigners, it’s because of Putin,

01:38:47 it’s because of this, it’s because of that.

01:38:49 This has always been the case.

01:38:50 There’s always, war is a very good cover for inflation,

01:38:55 which is caused by monetary phenomena.

01:38:57 So then the war ends.

01:38:59 And inflation, prices have more than doubled

01:39:02 over the past four years,

01:39:04 over the four years of World War I,

01:39:07 prices have more than doubled.

01:39:09 And then the British economy is in bad trouble,

01:39:12 obviously, lost a lot of the labor force for four years

01:39:16 that was out there fighting.

01:39:18 Now those workers come back, you’ve got prices are up.

01:39:23 And so people are demanding

01:39:25 that the government control prices

01:39:27 and the government is trying to fix the problem

01:39:29 of inflation by doing price controls,

01:39:31 which is what they always do,

01:39:32 which is catastrophic because it makes things worse.

01:39:36 When you implement price controls,

01:39:38 you are, when you make, you say, all right,

01:39:40 well, bread can’t be sold for more than X price.

01:39:45 Well, that’s just preventing bread producers

01:39:48 from producing a lot of bread.

01:39:49 And that’s just making the problem worse.

01:39:51 If you let the price rise, the extra price,

01:39:55 first of all, it makes people economize,

01:39:56 so people will only buy what they need.

01:39:58 And it provides the money for the bread producers

01:40:00 to acquire the capital and the resources

01:40:03 they need to produce more bread,

01:40:04 which then brings the price of bread down.

01:40:06 But price controls destroy that.

01:40:08 Then they also implement wage controls.

01:40:10 So you wanna also make sure that people have high wages.

01:40:15 So you raise people’s wages artificially,

01:40:17 you lower prices artificially,

01:40:18 and you cause an economic problem.

01:40:21 And this is basically, I use this historical example

01:40:24 because it’s the birth of fiat,

01:40:26 because the Bank of England was the most important

01:40:28 monetary system in the world at that time.

01:40:31 And because it’s the prototype

01:40:33 that basically the entire planet copied

01:40:35 over the last 100 years.

01:40:36 We’ve had this same thing happen.

01:40:38 The government prints money because of a stupid reason,

01:40:40 because somebody in power decided

01:40:42 this was worth destroying everybody’s livelihood

01:40:44 and savings for.

01:40:46 And then the consequences come in

01:40:47 and then they start covering up with price controls,

01:40:49 wage controls, and then that makes things worse.

01:40:52 And then they, and of course, throughout all of that,

01:40:57 they’re promising that we’re going to go,

01:40:58 oh, and also the other thing that they did,

01:41:01 which I mentioned in the chapter is,

01:41:03 they stopped people from using physical gold

01:41:05 and they confiscated the, well, they didn’t confiscate it,

01:41:07 but they took the physical gold and they gave people paper.

01:41:10 So I call it the fiat white paper.

01:41:12 You know, in Bitcoin, we have the white paper.

01:41:14 The fiat white paper was that the Bank of England

01:41:17 announced to all of its banks and post offices.

01:41:20 And from now on, you should not make payment in gold

01:41:23 and you should take payment in gold

01:41:24 and you should encourage all your customers

01:41:26 to turn in all of their gold and give them paper instead.

01:41:28 Is there an actual document?

01:41:30 Oh, yeah, yeah, yeah.

01:41:30 Nice.

01:41:31 Yeah, it was, this is all new stuff.

01:41:33 Obviously, nobody really likes to talk about this stuff

01:41:35 because, you know, they’re fiat economists,

01:41:36 so they don’t wanna talk about the original sin, but.

01:41:41 Well, you should like republish it

01:41:42 as the fiat white paper or something like that.

01:41:45 There’s a fascinating book by a guy called John Osborne.

01:41:49 So in the 1920s, I think his name was Montagu.

01:41:53 He was the chief of the Bank of England.

01:41:54 He commissioned one of his secretaries, John Osborne,

01:41:58 to study what the bank did during World War I.

01:42:02 And it was a study that was kept under wraps,

01:42:05 a confidential, in the Bank of England,

01:42:07 only released in 2017, almost a century later.

01:42:12 And.

01:42:13 What was special about 2017, by the way, it’s a year.

01:42:15 It’s just it was a year in which

01:42:17 some of this information was released.

01:42:19 Yeah, a bunch of people got into parts of the basements

01:42:22 of the Bank of England and found this and published it

01:42:24 and now you can download it as a PDF

01:42:26 and find all of the amazing details.

01:42:29 So they confiscated the gold

01:42:31 and they forced people to use the paper

01:42:32 and they promised people that as soon as the war

01:42:34 was gonna be over, this is temporary,

01:42:36 we’re gonna be back to using gold.

01:42:38 And of course, you know, if you told people in Britain,

01:42:42 this is the real scam about fiat.

01:42:43 If you told people in Britain in 1914,

01:42:47 hey, we’re gonna go off the gold standard

01:42:49 because it’s better.

01:42:50 I mean, there might’ve been lynchings

01:42:53 of government officials because the British pound

01:42:56 at that point, it had been the global currency

01:43:00 of the whole world.

01:43:01 And the fact that they’d managed,

01:43:04 the Bank of England had kept the British pound

01:43:07 at a fixed rate next to gold for,

01:43:09 since Newton, you know, the exchange rate,

01:43:12 the value of the British pound was set

01:43:14 by Isaac Newton himself.

01:43:16 He was the warden of the mint

01:43:18 and he made the pound a specific amount of gold.

01:43:22 And since then, up until World War I,

01:43:24 it was 4.25 pounds per ounce of gold.

01:43:28 I think I might be wrong, but I have it in the book.

01:43:31 So he’d set that price.

01:43:32 And it was a matter of national pride

01:43:34 for people in England, you know.

01:43:35 The sterling is as good as gold

01:43:37 because for two centuries it has been stuck to gold.

01:43:40 There was the exception of the Napoleonic Wars,

01:43:42 but for two centuries, mostly it was stuck to that.

01:43:45 And so they went off that and then they couldn’t go back

01:43:49 because if they wanted to go back,

01:43:50 they didn’t have enough gold.

01:43:51 They shipped their gold to the US to finance the war.

01:43:54 And they had printed a whole bunch of money

01:43:56 that was out there.

01:43:58 So this begins the problem for England.

01:44:01 And that begins the end of England

01:44:03 as the world’s superpower.

01:44:05 And the way they tried to fight that

01:44:06 was to get more and more countries around the world

01:44:08 to establish central banks and have,

01:44:10 and hold British pounds.

01:44:12 So they’d hold, you know, basically dumping their bags

01:44:15 like just any other shit coin.

01:44:17 You just, if you get people to buy your shit coin,

01:44:20 you know, that raises the value of your shit coin.

01:44:21 So.

01:44:22 Can you define shit coin?

01:44:23 Shit coin is, in my definition of a shit coin

01:44:27 is that it’s any form of money

01:44:28 where somebody can produce it.

01:44:31 So soft money.

01:44:33 Not necessarily, I guess.

01:44:35 I think the difference, so there’s easy money,

01:44:38 but the shit coin is something that someone can produce

01:44:42 at a rate that is, at a cost that is different

01:44:45 from the market cost.

01:44:46 So gold, nobody can make gold except if they dig for it.

01:44:49 And the cost of mining gold is generally in the range

01:44:52 of the price of gold.

01:44:54 Seems true for Bitcoin.

01:44:56 So gold is not a shit coin.

01:44:57 Gold is not a shit coin.

01:44:59 The copper is.

01:45:00 Copper, I’m not so sure.

01:45:03 I wouldn’t call copper a shit coin

01:45:04 as much as it is easy money.

01:45:05 But I think government currencies and other alt coins,

01:45:09 I think are shit coins because somebody could click a button

01:45:13 and make 10 times the supply.

01:45:14 Would it be fair to say that this began

01:45:19 with the will for war in World War I?

01:45:23 So the march towards fiat began

01:45:30 with a global desire for war in the 20th century.

01:45:35 Did war start this or was war a result?

01:45:39 It’s difficult to say really.

01:45:40 I think it goes both ways.

01:45:42 I think you can’t have permanent war without fiat.

01:45:48 And I also think there’s a case to be made

01:45:51 that you can’t really have fiat without war.

01:45:54 So it’s some kind of weird dynamical system

01:45:57 with a chicken and egg situation

01:45:59 and they build on top of each other

01:46:00 and there’s a few individuals that figured out

01:46:03 there’s a way to manipulate this to play this kind of game

01:46:05 and it escalates and nothing gives you the ability

01:46:08 to manipulate money quite like war.

01:46:12 When you have a war, you can declare an emergency.

01:46:15 You can call all the people who oppose you traitors.

01:46:19 You can get people to support you

01:46:23 not because what you’re doing is good

01:46:25 but because you play on their sense of tribalism.

01:46:28 In your book, you do cost benefit analysis.

01:46:31 So you do acknowledge or think about

01:46:33 the pros of fiat currency.

01:46:35 Can you do just that, look at the benefit

01:46:41 and look at the cost just broadly at the highest level?

01:46:43 So the way that I write the fiat standard

01:46:45 is that I try and analyze it as an engineering system

01:46:49 in the same way that I wrote the Bitcoin standard.

01:46:51 So with the Bitcoin standard,

01:46:52 I looked at Bitcoin from first principles

01:46:54 and tried to explain how it works

01:46:56 for a reader that doesn’t really have much of a background

01:46:59 in computer science, networks or economics.

01:47:03 And I thought I’ll do the same with the fiat.

01:47:05 Let’s just ignore the official stories

01:47:07 and look at how this thing actually works.

01:47:10 And I think it does have value

01:47:14 in the fact that the reason that they were able

01:47:18 to pull it off is because it was not possible

01:47:21 for people who don’t want to be part of it

01:47:25 to use gold independently of governments.

01:47:28 This is really the key thing.

01:47:29 Gold is just very expensive to move around.

01:47:31 And the fact that it is expensive to move around

01:47:36 means that there’s inevitably going to emerge institutions

01:47:41 where it is centralized in physical location.

01:47:44 And then these institutions trade liabilities for the gold.

01:47:47 So really the gold standard intrinsically must involve credit

01:47:55 as becoming part of the monetary system.

01:47:58 It has to be the credit and because it gets centralized

01:48:00 it can easily be captured by the government.

01:48:03 So to be fair, the benefits of the fiat system

01:48:06 is that it saves us on the cost of moving gold around,

01:48:09 which is pretty significant.

01:48:11 Like generally, moving a bar of gold across the Atlantic

01:48:15 is gonna cost somewhere between 0.1 to 1%

01:48:18 of the cost of the gold bar.

01:48:19 So you move it 100 times back and forth

01:48:22 between the Atlantic, you need to pay the whole gold bar,

01:48:25 the cost of the whole gold bar to move it 100 times across.

01:48:28 Well, with fiat money, it’s essentially government credit.

01:48:31 And so it’s just sending a message

01:48:33 from one central bank to another

01:48:36 and you can move it halfway around the world.

01:48:38 Is there also something to be said about the cost in time?

01:48:41 So you’re saving the sort of,

01:48:42 you’re reducing the friction of the communication as well.

01:48:45 Exactly.

01:48:46 Of the transactions as well.

01:48:47 Exactly, it’s faster.

01:48:50 How big is that benefit?

01:48:52 Because wouldn’t you argue that that potential

01:48:54 is the thing that enables modern economy,

01:48:56 both the speed and the low cost,

01:48:58 so increasing the scale and the frequency,

01:49:01 the speed of the transactions?

01:49:03 Yeah, arguably it does help in that regard.

01:49:06 However, it isn’t as if you couldn’t have

01:49:10 fast transactions built on top of gold.

01:49:12 So you could have gold being used for final settlement

01:49:15 and you could have banks settling with one another

01:49:19 essentially using credit settlement.

01:49:21 Can you define settlement just for people

01:49:24 who are outside of this world?

01:49:25 Because we’ll mention that word quite a bit probably.

01:49:27 Good question.

01:49:28 So the way that it works is, let’s say right now

01:49:29 I’m gonna pay you $10 over PayPal or credit card.

01:49:35 So it shows up in your PayPal or credit card

01:49:37 within a few seconds that I’ve sent you the money

01:49:39 and then that’s yours.

01:49:41 But it didn’t also happen in those 10 seconds

01:49:46 that my bank, which could be in another country,

01:49:49 sent the money to your bank into your account.

01:49:54 There’s a lot of infrastructure underneath that.

01:49:57 So what actually happened is that I have an account

01:49:59 with my bank and you have an account with your bank.

01:50:01 And when the message is communicated from my app to yours,

01:50:05 my bank crosses out the money

01:50:07 and your bank credits you with the money.

01:50:10 And then at the end of the day, week or month,

01:50:14 banks in the same city will settle with one another,

01:50:16 banks in the same country will settle with one another

01:50:19 and banks from different countries

01:50:21 will settle with one another.

01:50:22 So they won’t move the $10 from my account to yours.

01:50:27 At the end of the day or week or month,

01:50:29 they’ll tally all of the money that was sent

01:50:32 from one bank to the other

01:50:33 and then just settle the difference.

01:50:35 So it turns out at the end of the month,

01:50:37 my bank had sent $15 million to your bank

01:50:40 and your bank had sent $14 million to my bank.

01:50:43 So they give them $1 million and that settles it,

01:50:46 that finalizes the transaction.

01:50:48 So final settlement 3D is like the,

01:50:51 you can think about it as the infrastructure of the system.

01:50:54 And then you can think of these things

01:50:56 as being the higher layer levels.

01:50:59 And you had a wonderful discussion about that

01:51:01 with Michael Saylor.

01:51:02 So the final settlement is like the moment

01:51:05 when you paper and ideas connect to physical reality.

01:51:11 Or to some representation of physical reality.

01:51:13 Yeah, and under gold,

01:51:15 everything was tethered to physical reality

01:51:17 because there was a market commodity

01:51:19 at the bottom of all of this

01:51:20 and nobody could print that market commodity.

01:51:22 And so at the end of the month,

01:51:23 if your bank made too many payments,

01:51:26 if you made too many payments, there was a reckoning.

01:51:29 If you were reckless, if you were insolvent,

01:51:33 you went out of business.

01:51:34 So there was no way to fool that.

01:51:37 But then we moved to the fiat century

01:51:39 and everything is credit.

01:51:41 At the end of the day,

01:51:42 the final layer is government credit.

01:51:45 And so as long as you’re friends with the government,

01:51:48 basically you never go bankrupt.

01:51:50 So all kinds of hucksters managed to find their way

01:51:54 into getting into position where they don’t get bankrupt.

01:51:58 So in part two of the fiat standard called Fiat Life,

01:52:03 you describe the effects of fiat money

01:52:04 on a bunch of things like life, food, science, education.

01:52:10 What is the most pernicious effect of fiat money

01:52:14 on our world, on our life?

01:52:15 So taking a step outside of the monetary system,

01:52:18 actually like how that affects our life from this book?

01:52:21 I mean, there’s a whole bunch of things

01:52:23 and I won’t be able to go over them

01:52:25 and I highly recommend reading the book.

01:52:26 But if I were to pick one,

01:52:28 I would say it’s the impact that it has

01:52:29 on our time preference, on our valuation of the future.

01:52:33 So remember when we started the discussion,

01:52:35 I said that the key function of money

01:52:38 is that it serves as a store of value.

01:52:41 And the harder the money is,

01:52:42 the better it is at providing us

01:52:45 with a way for providing for our future.

01:52:48 And so the harder the money is,

01:52:49 the less we discount the future.

01:52:51 We always discount the future compared to the present.

01:52:53 So if I told you, I’m gonna give you something today

01:52:56 versus giving it to you 10 years from now,

01:52:58 the same thing, you would prefer to take it now

01:53:00 because then you’d get to enjoy it over the next 10 years.

01:53:03 So we always prefer the present to the future.

01:53:06 There’s always a discount on the future.

01:53:09 And that discount is called time preference.

01:53:10 The degree to which we prefer the present to the future

01:53:13 is called our time preference.

01:53:15 So the higher our time preference,

01:53:18 the less we care about the future.

01:53:20 And the process of civilization

01:53:22 is the process of lowering our time preference,

01:53:24 where we start caring more for the future,

01:53:26 we start prioritizing the present less and less.

01:53:29 So we start being able to not consume everything

01:53:32 that we have and store it.

01:53:34 And so money is essential for that.

01:53:36 And under the gold standard,

01:53:38 everyone in the world had the ability

01:53:40 to provide for their future

01:53:42 by simply using the same money that they use.

01:53:44 You would work a day and you would get paid in a gold coin

01:53:47 and you could take that gold coin

01:53:49 and keep it safe for 10 years

01:53:51 and know that at the end of those 10 years,

01:53:54 that gold coin would buy you slightly more

01:53:56 than what it bought you the day that you earned it.

01:53:59 So anybody could provide for their future

01:54:01 and anybody could have very high degree of certainty

01:54:04 that whatever they’re saving is going to be there

01:54:08 when they want it in the future.

01:54:10 Because the money supply was only increasing

01:54:12 at one and a half percent,

01:54:13 whereas the production of goods and services

01:54:16 was increasing for most cases, for most periods

01:54:21 at a higher rate than that.

01:54:22 So you could buy more apples and oranges

01:54:24 and houses and cars at the end of the 10 years

01:54:27 than you could at the beginning of the 10 years.

01:54:29 So everybody had a way of providing for the future.

01:54:31 And with that, people lower their time preference.

01:54:34 And that is reflected across all aspects of life.

01:54:38 I think it’s not just the economic thing.

01:54:40 You see it in the savings rate,

01:54:41 the ability to deny yourself gratification today.

01:54:44 I could take the money that I have

01:54:46 and throw a giant party, buy a sports car, buy a yacht.

01:54:50 And yet you decided, I’m not going to do that.

01:54:52 I’m going to keep it so that tomorrow

01:54:54 I can throw a bigger party or buy a better yacht

01:54:57 or have a better life or give my children a better life.

01:55:01 So all of human civilization really

01:55:03 is the process of us lowering our time preference

01:55:06 and finding harder monies that allow us

01:55:09 to provide better for the future

01:55:10 is how we really technologically we do that.

01:55:15 I think of the hardness of money

01:55:17 as being the control knob for our time preference.

01:55:20 And you can see this reflected in the 20th century

01:55:23 where we go from the money supply increases

01:55:26 at around one and a half percent under gold

01:55:28 to this current situation where over the last 60 years

01:55:31 I ran the numbers on money supply and fiat,

01:55:34 the global fiat supply has increased

01:55:36 at around 14% per year.

01:55:38 So we’ve done a 10X in the increase

01:55:40 in the supply of money annually.

01:55:43 And 14% is a weighted average.

01:55:45 So if you take a basic numerical average

01:55:48 for all fiat currencies, you get something like 30%.

01:55:52 The average fiat currency increases by 30%.

01:55:55 But if you value it by the volume of each currency

01:55:57 so that you’re not giving equal weight

01:56:00 to the Venezuelan Bolivar increasing at 500% a year

01:56:04 and the dollar increasing at 8% a year,

01:56:07 if you do it by value of the currencies

01:56:10 so that you get the total supply of fiat,

01:56:12 it’s something like 14%.

01:56:13 And weighted is 30% you said?

01:56:15 Yeah, 30%.

01:56:16 It’s insane.

01:56:17 I’d like to see the worst ones,

01:56:19 the people that are tracking that average up.

01:56:22 Yeah.

01:56:23 But 14% is still an incredibly high, high number.

01:56:25 And so you’re saying that,

01:56:27 sorry, that’s the average over the century

01:56:29 or the past 100 years?

01:56:30 Over the past 60 years, 1960 to 2020,

01:56:32 we get World Bank data on that,

01:56:34 pretty reliable data on World Bank

01:56:35 and European Union OECD data.

01:56:38 I ran the numbers on that weighted average,

01:56:40 something like 14%.

01:56:42 And what effect that has on time preference?

01:56:45 The effect is now it’s much, much, much harder

01:56:47 for everybody to provide for their future.

01:56:50 Everywhere in the world, it’s much harder.

01:56:52 So how do I get the equivalent of the old gold coin

01:56:56 that I could just put under my mattress

01:56:58 and expect it to be there 10 years from now?

01:56:59 Well, gold itself isn’t cutting it.

01:57:01 Gold can’t keep up with inflation.

01:57:03 And the reason for that is that gold is not being used

01:57:06 as a money anymore in that you can’t send it internationally.

01:57:11 Internationally, you can’t use it

01:57:13 to settle trade internationally,

01:57:14 which therefore means demand for it monetarily is limited.

01:57:18 And so it’s becoming more and more an industrial metal.

01:57:23 And as a result of the fact that its value

01:57:26 doesn’t keep up with inflation,

01:57:28 it becomes economical to use it in industry.

01:57:30 So we’re seeing gold become like silver

01:57:32 in that it gets used in industry.

01:57:34 So the stockpile declines.

01:57:36 And so the stock to flow ratio declines as well,

01:57:38 and it becomes more and more of an industrial metal.

01:57:41 And it can’t protect your wealth over time very well.

01:57:44 So what do you do?

01:57:45 Well, you could invest.

01:57:47 And this is kind of the obvious answer

01:57:49 that Keynesian will give you is,

01:57:50 well, you just put your money in an investment.

01:57:52 But investment is different from saving.

01:57:55 Saving, the whole point of saving

01:57:56 is that the thing is liquid

01:57:57 and that the thing carries little uncertainty.

01:58:00 You just held the gold coin and it just sat there.

01:58:03 It did nothing.

01:58:04 It didn’t take risk.

01:58:05 You knew that it was gonna be there in 10 years.

01:58:07 Investment means you give the gold coin to somebody

01:58:10 to go and do something with it.

01:58:13 And it could work, it could not work.

01:58:14 If it works, you get a positive return.

01:58:16 You get more gold back.

01:58:18 If it fails, you might not get any of your gold back.

01:58:21 So taking on risk is something very different from saving.

01:58:24 Saving is just a way of buying the future.

01:58:27 Investing is taking on a risk

01:58:29 and you could lose everything with it.

01:58:31 So what ends up happening,

01:58:33 and this is the Keynesian objection I think

01:58:35 is very wrong and bad

01:58:39 because investment is a job in itself.

01:58:44 To figure out what to do with your money

01:58:46 in order to beat inflation is something

01:58:49 that there are professionals out there on Wall Street

01:58:52 that have PhDs in finance, that have enormous computers,

01:58:55 and they have enormous staffs of PhDs and master’s degrees

01:58:59 and math nerds that are crunching numbers

01:59:01 and figuring out how to allocate your portfolio

01:59:04 so that you can beat inflation.

01:59:05 And guess what?

01:59:06 The majority of them don’t beat inflation.

01:59:08 The majority of them can’t beat inflation.

01:59:10 Not as measured by CPI, which is completely fraudulent,

01:59:13 but if you remember.

01:59:14 14%.

01:59:15 Yeah, that 14% or even the 7%,

01:59:18 like if you look at just the increase in the money supply,

01:59:21 which I think is a much better metric.

01:59:23 And this is what’s reflected on the desirable goods.

01:59:25 Like if you look at the price of real estate

01:59:27 in Miami Beach, as Michael Saylor mentioned in your example,

01:59:30 it goes up at around 6, 7% per year on average

01:59:32 over the last century.

01:59:34 So that’s, if you wanna live in a nice area,

01:59:38 that’s what happening to real estate.

01:59:39 If you wanna go to the good universities,

01:59:41 that’s what’s going up.

01:59:41 It’s going up at a rate that’s similar

01:59:43 to the increase in the money supply.

01:59:44 And you can beat CPI,

01:59:47 but CPI is designed so you can beat it,

01:59:50 but you can’t really beat the appreciation

01:59:52 in the things that you actually want to buy,

01:59:54 in the price of good food, the price of good real estate.

01:59:57 So, and most investment professionals fail at doing that.

02:00:01 So what hope does a doctor or an engineer or a scientist

02:00:06 or an athlete have in doing those things?

02:00:08 And investment is hard and saving should be easy.

02:00:11 Exactly.

02:00:12 Saving is essential for us as a civilization.

02:00:15 And what fiat did is it took that away from us.

02:00:18 And then it forced everybody to become an investor

02:00:22 or more accurately a gambler, because you’re not just even,

02:00:25 because the money itself is broken,

02:00:27 because the money itself is constantly changing in value,

02:00:30 investing is becoming more of a crapshoot.

02:00:33 I mean, value investing is completely underperforming,

02:00:36 compared to market analysis.

02:00:38 You know, you listen to the Fed,

02:00:40 and what matters to the price of individual companies

02:00:47 is monetary policy much more

02:00:48 than it is their own performance.

02:00:50 So basically you need to be a junkie watching the Fed

02:00:52 and following all of the world’s central banks.

02:00:54 And yeah, I need to learn macro economics

02:00:55 and you need to learn what all the central banks are doing.

02:00:58 And you need to understand how commodity markets work.

02:01:00 And you need to understand how equity markets work

02:01:02 and bond markets and real estate markets.

02:01:05 You need to do all of those things

02:01:07 just in order to be able to save and earn

02:01:10 and keep the money that you’ve already earned.

02:01:13 That’s the criminal thing about it.

02:01:14 Like I’ve already earned that money being a doctor,

02:01:17 being a dentist, being an athlete, being an engineer.

02:01:19 I built a house for somebody and I got that money.

02:01:22 And all I wanna do is just make sure

02:01:24 that I can have it 10 years from now.

02:01:26 The only way to do so is to become a crappy engineer

02:01:29 because you have to spend half your time

02:01:30 not doing engineering and instead spend half of that time

02:01:34 learning about Japanese central bank monetary policy

02:01:37 and commodity markets and what’s gonna happen to copper

02:01:40 and what’s gonna happen to oil

02:01:41 and what’s happening in the wars

02:01:44 and what’s happening with foreign policy

02:01:46 and Russia and the US and all of those things.

02:01:51 Under the gold standard,

02:01:52 you didn’t care about any of that stuff.

02:01:54 Your gold coin worked regardless of all of those things.

02:01:56 So what this means is the future,

02:01:59 so first of all, we have all of the problems I mentioned,

02:02:01 but also it means that the future becomes

02:02:04 much more uncertain.

02:02:05 So you’re far less likely to provide for yourself

02:02:08 10 years from now,

02:02:09 far less likely to find an easy way

02:02:11 to give yourself value 10 years from now.

02:02:14 And so you become more short termist.

02:02:17 And that is reflected economically

02:02:18 in a lower savings rate and we see savings rates decline,

02:02:22 but it is also reflected in all manners of decision making.

02:02:25 And I think if you really wanna see what it is,

02:02:27 take a look at a society that goes through hyperinflation

02:02:30 and look at what happens there.

02:02:32 How do people change under hyperinflation

02:02:36 and compare that to essentially what we see

02:02:39 in the 20th century all over under not hyperinflation,

02:02:43 but under low inflation,

02:02:45 10, 15% that you see across the board most of the time

02:02:49 is just slow motion hyperinflation.

02:02:51 So what happens in hyperinflation?

02:02:53 Everybody gets their paychecks,

02:02:54 they run straight to the supermarket,

02:02:56 they spend all of their money.

02:02:58 Nobody thinks about savings.

02:03:00 Nobody thinks about the future.

02:03:01 Survival until the end of this month is highly uncertain.

02:03:05 How likely are you to be planning

02:03:07 for what you’re going to be doing five years from now?

02:03:11 Very unlikely.

02:03:12 But also it’s reflected not just economically,

02:03:15 it’s also reflected in all aspects of morality

02:03:17 and all the way in which we deal

02:03:19 with each other as human beings.

02:03:20 When your survival is precarious,

02:03:23 how much are you invested in the notion

02:03:26 of being a good citizen, on caring about your reputation,

02:03:29 on caring about not getting caught in a crime?

02:03:32 All of these things become harder to value.

02:03:35 So people start committing crime,

02:03:37 people start caring less and less about the future.

02:03:39 And we see it reflected in everything.

02:03:41 And I argue, you see it reflected in architecture.

02:03:43 We used to build houses in the 19th century

02:03:45 that last until today.

02:03:47 And then in the 20th century,

02:03:48 we build essentially disposable cardboard boxes

02:03:51 that get scrapped in 20 years.

02:03:54 So what can you say about potential positive effects

02:03:57 of lower time preferences?

02:03:59 So I mean, it’s a balance.

02:04:00 Like basically, you’re talking about

02:04:04 an average kind of time preference,

02:04:05 but there’s some things in life

02:04:07 where low time preference could be a negative thing.

02:04:10 So like if I want to take on risk,

02:04:13 not for investment, for a kind of investment,

02:04:15 but say I want to start a business,

02:04:18 I want to take something crazy,

02:04:20 take a leap into the unknown, be an entrepreneur.

02:04:24 What can you say about that kind of leap?

02:04:26 Taking on debt.

02:04:28 What’s the value of that within the current system?

02:04:31 What’s the right approach to that

02:04:32 within the current system?

02:04:33 What’s the right approach overall

02:04:35 from an economics perspective?

02:04:37 So it’s not saving for the future.

02:04:40 It’s doing something wild,

02:04:43 taking the money from your mattress, taking on debt,

02:04:46 and having a dream in your heart

02:04:48 that you somehow just want to do.

02:04:50 Maybe it’s not the wisest investment decision,

02:04:52 but it’s something, you know, it’s being human.

02:04:55 It’s taking a leap into the unknown

02:04:58 because something in your heart says to do it.

02:05:00 I think you’re more likely to be taking the leap

02:05:02 in the unknown when you have a little bit of gold

02:05:04 in the mattress than when you don’t.

02:05:06 I think this is the thing.

02:05:07 Like if you look at the late 19th century,

02:05:10 and I discussed this in the Bitcoin standard,

02:05:11 that was arguably the most innovative period

02:05:14 in human history.

02:05:16 You know, there’s qualitative evidence.

02:05:17 You know, look at the world around you today.

02:05:20 Pretty much everything that we use

02:05:21 was invented in that period.

02:05:23 The car, the airplane, the telegraph, the telephone,

02:05:30 the camera, pretty much modern life as late 19th century.

02:05:35 You know, the period between 1870 and 1914,

02:05:38 because the whole world was practically on a gold standard,

02:05:41 the whole world was using the same money,

02:05:43 and the whole world could save in the same currency.

02:05:46 That meant that a bicycle shop owner,

02:05:49 two bicycle shop owning brothers in North Carolina

02:05:52 could go and try and fly,

02:05:53 even as all the scientific experts in 1903

02:05:57 were confirming that the possibility of flight

02:06:01 has been debunked as unscientific.

02:06:03 You know, Lord Kelvin said,

02:06:05 not in a million years we’re going to be flying.

02:06:07 Thomas Edison said it’s never gonna happen.

02:06:09 No, I think it was Edison who said a million years,

02:06:11 but Kelvin also said it’s never gonna happen.

02:06:14 The New York Times said it’s never gonna happen

02:06:16 the same month in which the Wright brothers did it.

02:06:20 And they continued to deny that it was gonna happen

02:06:22 even two years after they did it.

02:06:25 But that’s, why could they do that?

02:06:27 Because they had savings in gold.

02:06:29 They had the security with something that you know

02:06:33 is gonna be there.

02:06:34 And then you can take a risk with the stuff that is extra.

02:06:37 You know, I have say three years expenditures in gold

02:06:40 under my mattress.

02:06:42 And I know that I could take a risk with everything else

02:06:45 because whatever bad things happen with all of my dreams,

02:06:48 like even, you know, flying, think about how insane that is.

02:06:51 I still can go back to the three years of gold

02:06:54 that I have saved.

02:06:55 It’s still okay to take on debt

02:06:57 given the stuff, the gold under the mattress.

02:06:58 Well, this is the thing, under the gold standard,

02:07:00 the way that people finance things

02:07:02 was predominantly with capital, with equity.

02:07:04 So you would, because you had gold savings,

02:07:07 I had gold savings, everybody had gold savings.

02:07:09 When you wanted to start the business,

02:07:11 you could use your own savings or somebody else’s savings.

02:07:14 So you didn’t need to get into debt.

02:07:18 Well, you could get equity from others

02:07:19 and you could also get debt from others.

02:07:21 So there was.

02:07:22 But it’s directly mapped to physical reality.

02:07:25 Yeah, it’s directly mapped to economic reality

02:07:27 and that there’s a hard money out there

02:07:28 that, you know, what you’re spending money,

02:07:31 you know, you wanna build your airplane factory,

02:07:34 you need to get actual resources.

02:07:35 So you get actual gold, either yours or somebody else’s,

02:07:38 you borrow it or you give them equity,

02:07:40 but there’s real resources.

02:07:42 Now, what happened with the fiat system?

02:07:43 And this is, you know, the first part of the book

02:07:45 where I look at it from an engineering kind of perspective

02:07:48 is essentially, and I think this is like the breakthrough

02:07:50 inside of the book, what fiat does

02:07:53 is that it replaces gold mining with credit creation.

02:07:59 The way that we make fiat money,

02:08:01 the way that fiat is mined into existence

02:08:04 is through credit creation.

02:08:05 Most people think of fiat money

02:08:06 as being something that happens

02:08:07 when government prints money.

02:08:08 And we still use the term government’s printing money,

02:08:11 but the vast majority of fiat is not physical.

02:08:14 And in fact, fiat is not created

02:08:16 when it is printed physically,

02:08:18 it’s created when it is lent.

02:08:19 So when you go to a bank to get a $1 million loan

02:08:22 to buy a house, that bank is not gonna give you

02:08:25 a million dollars from their own money

02:08:27 or from their depositor’s money.

02:08:29 They’re gonna make a fresh new million dollars.

02:08:32 When you walk out of that bank,

02:08:34 the money supply has increased by $1 million

02:08:36 to finance your home.

02:08:38 So what fiat does is, I mean,

02:08:41 it was basically born out of government credit

02:08:44 and the credit of banks that are backed

02:08:46 by the central bank and the government.

02:08:48 So if you’re part of the institutions

02:08:51 that are allowed fiat privilege,

02:08:53 where you can just issue loans backed by the central bank,

02:08:56 backed by the currency,

02:08:57 you are effectively creating new currency,

02:09:00 new money every time you issue the loan.

02:09:02 That’s fiat mining is credit creation, I love it.

02:09:05 So can you say something, I mean,

02:09:07 you can’t really have credit without a demand for credit.

02:09:10 You can’t really have an increase in supply

02:09:12 without a demand for it.

02:09:14 Is there any value you place in the humans wanting it?

02:09:18 Basically, people wanting to do something with that credit,

02:09:22 wanting to take big leaps, big risks,

02:09:25 big entrepreneurial decisions.

02:09:27 So is all credit bad?

02:09:31 No, I think what’s bad is anything, in my opinion,

02:09:36 anything that is consensual,

02:09:38 I wanna borrow money from you and we agree the terms,

02:09:40 I can’t object to that.

02:09:42 As long as you and I both agree, I can’t object to that.

02:09:46 But in the case of the fiat system,

02:09:48 it’s not just you and the bank who come to an agreement.

02:09:51 Everybody who uses the currency

02:09:53 is forced to be part of that agreement.

02:09:55 Because if you default,

02:09:57 effectively what’s protecting the bank from you

02:10:00 is the fact that the government

02:10:01 can just print a bunch of money and make the bank whole.

02:10:04 So effectively.

02:10:06 Interesting.

02:10:07 So that little agreement between the bank and you

02:10:11 is actually an agreement between the bank, you,

02:10:14 and the entire populace that’s using the currency.

02:10:16 Exactly.

02:10:17 They’re forced to provide the safety net for you and me

02:10:19 to go and make that loan.

02:10:21 And that safety net is the devaluation of the currency.

02:10:24 That’s how the whole thing actually works.

02:10:28 So this is why I wrote the Bitcoin standard,

02:10:30 explaining Bitcoin,

02:10:31 and basically the takeaway message of the Bitcoin standard

02:10:34 is you need to stack as much Bitcoin as you can,

02:10:36 because this is the best money that has ever been invented.

02:10:38 And we’ll talk about that,

02:10:39 why Bitcoin is the hardest money.

02:10:42 Yeah.

02:10:43 But with fiat, the conclusion of the fiat standard,

02:10:45 and again, this is not financial advice,

02:10:47 I’m a lowly academic,

02:10:49 you shouldn’t listen to me on issues of money,

02:10:51 but I think theoretically and intellectually,

02:10:54 the conclusion of the fiat system

02:10:55 is you need to be short fiat as much as you can.

02:10:58 That’s the smart winning move.

02:11:00 So human wisdom over thousands of years is to save,

02:11:04 try and not borrow as much as you can,

02:11:06 try and accumulate as much savings as you can.

02:11:08 That’s reversed under fiat.

02:11:09 If you’re saving money,

02:11:11 you’re just subsidizing everybody else taking on loans.

02:11:14 If you’re taking on loans,

02:11:16 you’re benefiting from all the people that are borrowing.

02:11:18 So the winning move under the fiat system,

02:11:21 and this is what rich people do, is you borrow.

02:11:23 Rich people under the fiat monetary system,

02:11:25 they don’t hold assets.

02:11:28 If you’re worth a billion dollars today,

02:11:30 you don’t have a billion dollars in a checking account.

02:11:33 You’ve got maybe a hundred thousand, a million,

02:11:36 five million or something like that.

02:11:39 A tiny fraction of your money is held in cash.

02:11:41 The majority is going to be held

02:11:43 in all kinds of other hard assets.

02:11:46 And you’re gonna be borrowing.

02:11:48 The richest people in the world

02:11:49 are the biggest borrowers in the world.

02:11:50 The most powerful entities in the world,

02:11:52 the governments are the biggest borrowers in the world.

02:11:54 And that’s how they are the richest and the most powerful,

02:11:57 because every time you’re borrowing,

02:12:00 you’re giving the bank an excuse to print new money.

02:12:03 So you’re devaluing everybody else’s money

02:12:05 and you’re getting a bit of the cut.

02:12:06 If you were going to buy a house with your savings,

02:12:10 you’re accumulating the savings and they’re losing value.

02:12:13 And if I were to go buy the same house with credit,

02:12:17 I’m getting the bank to print money for me.

02:12:21 So obviously they can cut me in on that deal.

02:12:23 And that’s why it’s much cheaper

02:12:24 for everybody to buy with credit.

02:12:26 That’s why everybody buys everything on credit.

02:12:29 So when we look at the global monetary system,

02:12:31 the thing you wanna do as a government

02:12:34 is be the sexiest currency out there.

02:12:37 So the main currency, like the dollar currently is,

02:12:42 is the one that has the most power in that kind of context.

02:12:46 So you have, if you were to try to summarize

02:12:49 what is the global monetary system as it is today,

02:12:53 is a bunch of fiat currencies battling for position,

02:12:57 for use outside their nation,

02:13:03 and in so doing trying to gain power

02:13:05 in the geopolitical sense.

02:13:06 Is that, if we just zoom out,

02:13:09 what is the global monetary system?

02:13:11 Like how, what is it currently?

02:13:14 So outside of the United States, the whole thing.

02:13:15 Yeah, you could say that, but I think it’s more realistic

02:13:18 looking at how it has actually evolved

02:13:19 over the past few decades.

02:13:21 It’s really a dollar system.

02:13:23 It’s not a system of currencies buying with one another.

02:13:26 It’s a dollar system, and all other currencies

02:13:28 are just basically, I like to call them dollar

02:13:30 plus country risk.

02:13:32 So each.

02:13:34 It always returns home to the dollar.

02:13:36 Yeah, there is no competition.

02:13:37 There is no second best, as Michael Saylor would say.

02:13:41 And money is like that.

02:13:42 Gold was a winner take all by the end of the 19th century.

02:13:46 The global monetary market is effectively

02:13:49 a winner take all for the dollar.

02:13:51 And if we get it to Bitcoin, you’ll know,

02:13:54 I also think digital currencies are also going to be

02:13:57 a winner take all situation.

02:13:59 So money wants to be one.

02:14:01 In fact, there is no such thing as multiple currencies.

02:14:04 Multiple currencies is just a step back to barter.

02:14:07 Money is one.

02:14:08 If you go back to a system of several currencies,

02:14:11 you’re just reinventing barter.

02:14:13 So in the case of the dollar system,

02:14:16 the global dollar system is built around the dollar

02:14:20 because all central banks have dollar reserves

02:14:23 and because all central banks use

02:14:24 the dollar’s clearing mechanisms.

02:14:26 So that’s why you’re basically playing in the dollar system.

02:14:30 This seems to have changed over the last couple of months

02:14:33 with the sanctions on Russia

02:14:35 and the confiscation of Russian reserves.

02:14:37 It remains to be seen what that’s going to do

02:14:40 and how that’s going to change.

02:14:42 But it is looking like this dollar system

02:14:47 is clearly unsustainable.

02:14:48 It’s not sustainable for the US.

02:14:49 It’s not sustainable for anybody.

02:14:51 Speaking of which, so you do an amazing podcast

02:14:56 called the Bitcoin Standard Podcast.

02:14:58 So episode 108 of that podcast

02:15:01 is about the very thing you just mentioned.

02:15:03 And allow me please to read the description of that

02:15:06 and then ask you a couple questions

02:15:07 about your thoughts in general.

02:15:09 The description reads,

02:15:11 after the Russian invasion of Ukraine,

02:15:13 the US confiscated the Russian central bank’s

02:15:15 significant monetary reserves

02:15:17 and banned some Russian banks from the SWIFT network.

02:15:20 Serious questions are being asked

02:15:22 about the survival of the postwar dollar

02:15:25 based world monetary order.

02:15:28 Will Russia, China and other countries

02:15:30 actually build an alternative international settlement system

02:15:33 after years of threatening to do so?

02:15:35 Question mark.

02:15:36 Will global central banks stop accumulating

02:15:38 US treasury bonds and replace them

02:15:40 with gold and commodities?

02:15:42 Will we witness the birth of a new commodity

02:15:45 gold based monetary order?

02:15:47 In this seminar, we use the insights

02:15:49 from the Bitcoin Standard and the Fiat Standard

02:15:52 on temporal and spatial salability

02:15:54 to explain why reports of the death of the dollar

02:15:57 and the emergence of a new gold standard may be exaggerated.

02:16:00 So I would love to get your analysis on this situation.

02:16:04 What are the fundamentals of it?

02:16:06 What is SWIFT?

02:16:07 What are the possible future evolutions

02:16:09 of the global monetary system?

02:16:11 Yeah, so SWIFT is the network

02:16:12 that the US Federal Reserve uses

02:16:14 for moving money around the world.

02:16:17 So basically the US government can sanction you

02:16:20 off of SWIFT as they’ve done with Russian banks,

02:16:22 as they’ve done with Iran,

02:16:24 and as they’ve done with Afghanistan.

02:16:27 So effectively, I mean, this is really the catastrophe

02:16:30 of the current monetary system

02:16:32 is that in order to be able to trade

02:16:34 as a member, as a citizen of your country,

02:16:37 you need your monopoly local central bank

02:16:40 to be on good terms with the US government

02:16:42 so that they would let them operate.

02:16:44 And this is really like on top of the aspect

02:16:48 of the hardness of money,

02:16:49 this is the other really powerful thing about Bitcoin,

02:16:52 which is that it’s just purely a technological thing.

02:16:54 It doesn’t matter if you’re Russian, if you’re Iranian,

02:16:57 if you’re American, if you’re Chinese, it’s a technology.

02:17:00 And so it’s like a spoon or a knife or a car,

02:17:03 you operate it properly and it works.

02:17:06 And so with Bitcoin, it’s the same thing.

02:17:07 It doesn’t care about your passport.

02:17:09 If you have the private key, you click send

02:17:11 and the money goes, well, it doesn’t really go,

02:17:14 but effectively it does go anywhere at once

02:17:18 and the money can move

02:17:19 without having to abide by political situations.

02:17:22 And the point here is not to bash US foreign policy

02:17:26 much as that might be deserved.

02:17:27 I’m just going to discuss it

02:17:28 from a kind of technical perspective.

02:17:31 It has to be a political system with fiat

02:17:33 because ultimately it relies on credit.

02:17:35 And then the government is the one that has the guns

02:17:37 and the government is going to decide

02:17:38 who gets to pay their loans anyway.

02:17:40 And the government’s going to have to make its own rules

02:17:46 about who gets to play and who doesn’t.

02:17:47 And so it has to be political as this kind of fiat system.

02:17:52 And when I wrote the Bitcoin standard,

02:17:56 initially I used to be much more of a gold bug.

02:17:58 And in my mind, gold bugs have spent the last 50 years

02:18:02 saying the global monetary system

02:18:04 is going to collapse next week

02:18:05 and we’re going to go back to a gold standard.

02:18:07 And writing the fiat standard gave me

02:18:10 a very good appreciation for why this hasn’t happened

02:18:13 and why it’s not very likely to happen.

02:18:15 I think the reason is, as I said earlier,

02:18:18 just gold is very expensive to move around

02:18:20 and perhaps more importantly,

02:18:22 it’s very expensive to verify.

02:18:24 That’s really the problem with it.

02:18:25 It’s very expensive to verify

02:18:27 that the gold that you’re receiving is original gold.

02:18:29 So the only way to do this properly

02:18:32 is to melt the gold bars down and recast them,

02:18:35 which is pretty expensive.

02:18:37 So we have this situation now where Russia,

02:18:40 which is one of the biggest economies in the world

02:18:42 has been kicked off to varying degrees

02:18:45 off the global monetary system

02:18:47 and the US has confiscated their reserves.

02:18:49 And I don’t have political opinions about the war.

02:18:52 It’s not something I’m very familiar with.

02:18:54 It’s outside of my area of expertise.

02:18:56 I’m just analyzing the monetary aspects of it.

02:18:58 It is, on the one hand,

02:19:00 whether you think the war is justified

02:19:02 or the sanctions are justified

02:19:04 is not something I can opine on.

02:19:08 But the implication of this is that effectively

02:19:11 the US might be shooting itself in the foot

02:19:13 because it’s telling everybody in the world,

02:19:15 your money in our system is not really your money.

02:19:18 It’s just a token to play in our arcade.

02:19:22 And any point in time, if you misbehave,

02:19:23 we kick you out of the arcade and we take your tokens.

02:19:27 And so, I mean, this is something that China, Russia, Iran

02:19:32 and many countries have made a lot of noise about

02:19:33 over the past decades.

02:19:35 It got real this year,

02:19:38 but it’s been decades of China, Iran and Russia

02:19:43 to some extent saying that, you know,

02:19:44 we wanna build an alternative to the US dollar based system.

02:19:48 And yet they haven’t.

02:19:50 And I think there’s very good reasons they haven’t.

02:19:51 And the reason is, what do you do based on?

02:19:54 How do you build it?

02:19:55 So you can do a credit based system based on,

02:19:57 but then who’s gonna be the big boss?

02:20:00 Is it gonna be China?

02:20:01 Is it gonna be Russia?

02:20:02 Is it gonna be Iran?

02:20:03 Is it gonna be India?

02:20:04 None of these countries wants to be, you know,

02:20:06 they don’t wanna jump out of the US based system

02:20:10 to get into somebody else’s based system.

02:20:12 So China doesn’t wanna use a Russian system.

02:20:14 Russia doesn’t wanna use a Chinese system.

02:20:16 And so therefore you can’t use

02:20:17 their own central bank’s currencies.

02:20:19 Don’t you think they have enough leverage,

02:20:23 India, China, Russia combined with several other nations

02:20:27 have enough leverage and incentive

02:20:29 to create their own system?

02:20:32 So any one player, yes, but if they collaborate.

02:20:35 Yeah, but then, okay, so what are you based on?

02:20:37 Like who’s going to be the boss?

02:20:39 Who’s going to be the one who can?

02:20:40 In this case, China, right?

02:20:44 Because China’s becoming increasingly

02:20:45 an economic power in the world.

02:20:47 Yeah.

02:20:48 That’s hard to deny.

02:20:49 Yes, it’s true.

02:20:50 And it’s the most likely scenario perhaps

02:20:52 if we were to witness something like this

02:20:54 is going to be a Chinese based system.

02:20:57 So is it possible to have like a split

02:21:00 in what is the driving currency of the world?

02:21:04 It’s possible, but I don’t think it’s sustainable.

02:21:06 Again, money wants to be won.

02:21:08 And that’s the kind of thing that I argue in that seminar.

02:21:10 So we could see this emerge based around the Yuan

02:21:13 and likely, I mean, Russia is obviously going to hurt

02:21:18 economically from what happened

02:21:19 from the confiscation of the reserves and from the sanctions.

02:21:22 So it’s not going to be in a position.

02:21:24 And of course, because it’s outside of the US based system,

02:21:27 it’s not in the strongest negotiating position

02:21:29 with the Chinese.

02:21:30 So the Chinese might be able to get them

02:21:32 to join their Yuan based system.

02:21:34 But I don’t think that’s sustainable in the long run

02:21:36 because these governments can issue their laws

02:21:41 and make their designs and then make their monetary systems.

02:21:45 But ultimately, there are billions of Chinese people

02:21:50 and billions of dollar based people

02:21:52 and they’re going to want to trade with one another.

02:21:53 And the power to want to trade with one another

02:21:55 is too strong.

02:21:56 We can’t just split the world economy

02:21:58 into two monetary systems that don’t trade with one another.

02:22:00 So then they’re going to want to trade with one another.

02:22:02 Or the dark possibility is the inability to trade

02:22:10 as opposed to being a forcing function for trade.

02:22:14 It will become a forcing function for conflict

02:22:17 in cyberspace and potentially hot war.

02:22:20 Yes, this is the scary part of it.

02:22:22 And this is basically how World War II happened

02:22:24 because there’s an old historian who used to say

02:22:28 when I think his name is Otto Mallory

02:22:30 and I quote him in the Bitcoin standard,

02:22:31 if goods don’t cross borders, then bombs will.

02:22:35 If people trade with one another,

02:22:36 they have an incentive for each other’s wellbeing

02:22:39 and then they have less of an incentive to fight.

02:22:42 And it was the death of global trade in the 1930s

02:22:45 because of the failure of the fiat system

02:22:48 that brought about the rise of the populism

02:22:52 and the rise of all those leaders that hated each other

02:22:54 and helped finance the war and bring it about.

02:22:56 So that is the scary possibility.

02:22:59 And of course, you can’t discount that

02:23:00 with all of the escalation that you see,

02:23:02 that is a possibility that it could turn into a real war.

02:23:05 But then even so, I think ultimately,

02:23:09 you can’t fight wars forever.

02:23:12 It’s going to end at some point.

02:23:13 And we’re going to be back at square one

02:23:15 or well, not square one.

02:23:16 We’re going to be back at the same dilemma

02:23:18 of who’s going to have the global monetary system.

02:23:21 And so one alternative is that what the Chinese

02:23:24 and the Russians could do is they could base it

02:23:27 on a commodity.

02:23:28 So a lot of people are now saying,

02:23:29 well, they’re going to base it on copper and corn

02:23:32 and agricultural commodities.

02:23:35 And that’s the analysis of saleability

02:23:38 that we discuss in the Bitcoin standard

02:23:39 and the fiat standard.

02:23:40 I don’t think that’s workable.

02:23:42 If you end up basing the monetary system on copper,

02:23:44 as we said earlier, it doesn’t matter how many governments

02:23:47 say that we’re going to make a new monetary system

02:23:50 based on copper grains and nickel and iron and so on.

02:23:56 It doesn’t matter.

02:23:57 You’re going to have to stockpile those things

02:24:00 in order to make a market in them.

02:24:02 And then if you stockpile those things,

02:24:03 you’re just raising their value,

02:24:05 inviting the producers to make more, flood the market.

02:24:08 I hope they don’t try this because it’s going to be

02:24:10 a devastating, devastating impact on the world economy.

02:24:15 You’re going to have central banks bidding up the price

02:24:17 of essential commodities that people need for real uses

02:24:20 in order to back their currencies with them,

02:24:23 and then just incentivizing the producers

02:24:24 to make more and more and more of it,

02:24:26 and then bringing the price back down.

02:24:28 So it’s going to be a very expensive mistake

02:24:29 where we raise the price of copper,

02:24:31 destroy a lot of industries dependent on copper,

02:24:33 and it’s not just copper, but also food,

02:24:35 and then increase the supply beyond what we need.

02:24:38 And the end result is copper miners make out well,

02:24:41 governments go broke,

02:24:43 and we end up with a lot of rust in copper

02:24:46 in government warehouses.

02:24:49 That’s why I don’t think it works to use commodities

02:24:54 that are not monetary commodities.

02:24:56 Then the question is maybe gold.

02:24:58 Can we go back on another gold standard?

02:25:00 And I mean, Russia seems to have done that.

02:25:04 I’m not so sure.

02:25:05 It’s very difficult to get reliable information.

02:25:07 I’m trying to look into this more,

02:25:10 but they seem to have said that they’re fixing

02:25:13 the price of gold in rubles.

02:25:15 So they will buy and sell gold at a fixed ruble rate,

02:25:18 which effectively means you’re on a gold standard.

02:25:20 Now, I’m not sure how much, how serious this is,

02:25:24 how they’ve managed to stick to it,

02:25:26 but it seems to have stabilized the ruble

02:25:28 and in fact brought it back to its pre war level,

02:25:31 which I found absolutely astonishing,

02:25:33 considering all the sanctions going on.

02:25:35 But in the short run, it’s obviously much better

02:25:39 than having your currency pegged to nothing.

02:25:41 But in the long run,

02:25:43 I also don’t think gold is gonna cut it

02:25:45 in the 21st century.

02:25:46 Do you think there’s any chance they go full gangster move

02:25:50 and go into the digital space on the blockchain

02:25:54 and go with Bitcoin?

02:25:56 I think the point of this discussion is that,

02:25:59 we run through all these other options,

02:26:01 a Chinese based system, why it probably won’t work,

02:26:04 a commodity based system, why it won’t work,

02:26:06 and a gold based system, why it won’t work.

02:26:08 I think they might have to learn this the wrong way.

02:26:12 I mean, the hard way.

02:26:13 But eventually, I don’t see them doing it now,

02:26:16 but eventually I think the winning move

02:26:18 is going to be to go on a Bitcoin based monetary system.

02:26:21 Well, I don’t know if everything always has to be

02:26:23 the hard way.

02:26:25 I’d love it not to be, but I mean,

02:26:28 it doesn’t look like there is any kind of desire

02:26:31 in China or in Russia to switch to a Bitcoin based system.

02:26:34 To take a leap to Bitcoin.

02:26:36 So unfortunately, I think we’re gonna go through

02:26:39 a few years, maybe many years of learning the lesson

02:26:44 the hard way, of trying to accumulate these commodities

02:26:46 and seeing the limitations that make them unsuitable

02:26:49 as money today.

02:26:50 One of the things I’m really concerned about

02:26:52 is the tension, the amount,

02:26:55 the increasing amount of hate in the world.

02:26:58 Yes.

02:26:58 And the increasing amount of power centers in the world

02:27:03 between which hate is making a regular appearance.

02:27:12 And because the weapons of war are becoming

02:27:14 more and more powerful as they have been

02:27:16 in the past many decades,

02:27:19 I’m really concerned about nuclear war.

02:27:22 So let us see if Bitcoin can fix this.

02:27:25 Yes, Bitcoin fixes all of this.

02:27:27 The first rule of Bitcoin is if it’s a problem,

02:27:31 Bitcoin fixes it.

02:27:32 All right, well I have some personal questions

02:27:35 for Bitcoin then, because I have some,

02:27:37 my life is pretty fucked up, so I’ll have to try to see.

02:27:40 A quick pause for bathroom breaking, any?

02:27:41 Sure.

02:27:43 Let’s return to the basics.

02:27:44 What is Bitcoin?

02:27:46 We started with what is money, what is Bitcoin?

02:27:49 We talked about hard money, inflation,

02:27:52 fiat, the history of money, the history of war

02:27:56 in the 20th century, and that takes us

02:27:58 into the 21st century.

02:28:00 What is Bitcoin?

02:28:02 Bitcoin is a software, and it’s a distributed software

02:28:05 to operate peer to peer network between members

02:28:09 who are all equal on the network, they’re all peers.

02:28:11 And what this software does is that it allows you

02:28:14 to operate a payment network between those peers,

02:28:19 and that payment network has its own currency.

02:28:22 And that seems like just a simple software game,

02:28:26 but the reason this is such a big deal is,

02:28:28 I believe Bitcoin is the most advanced form

02:28:30 of money ever invented.

02:28:32 And the reason for that comes from two properties

02:28:34 that this network has.

02:28:36 The first one is that the currency

02:28:39 is the hardest money ever invented.

02:28:41 It’s the money whose supply is the most resistant

02:28:44 to inflation.

02:28:45 It’s the first monetary asset that we’ve ever invented

02:28:49 that is guaranteed to be fixed in its supply,

02:28:52 that cannot be increased beyond a certain number.

02:28:54 So there’s only ever going to be 21 million Bitcoins.

02:28:56 And that’s a qualitative leap forward

02:29:00 in our technologies of money.

02:29:02 All of our monies leak, essentially,

02:29:05 because people can always make more and more and more of them.

02:29:08 You know, the best money is the one that leaks the least,

02:29:11 which is gold, because it only leaks one and a half percent.

02:29:13 In other words, your share of the gold stock

02:29:17 is diluted by one and a half percent every year.

02:29:21 Ideally, you’d like it to be zero.

02:29:23 Bitcoin is currently at around 1.8% headed towards zero.

02:29:27 So it’s the first money that we’ve ever had

02:29:29 that goes to zero in terms of terminal supply.

02:29:31 So there’ll never be more than 21 million Bitcoin.

02:29:34 I think that’s a huge deal because, you know,

02:29:36 as I said earlier, money is always whatever

02:29:39 is the hardest to make,

02:29:40 and now Bitcoin is the hardest thing to make.

02:29:43 And then the second property,

02:29:44 which is extremely important as well,

02:29:46 is the fact that it operates without the need

02:29:50 to trust in anybody.

02:29:51 It doesn’t have a party that is in charge of it.

02:29:54 It doesn’t have a central authority that can,

02:29:57 you know, as I said, it’s peer to peer.

02:29:58 So it only has users.

02:30:00 It doesn’t have any admins.

02:30:02 There’s no authority in charge of Bitcoin

02:30:04 that can take your Bitcoin,

02:30:05 that can stop you from using Bitcoin,

02:30:08 that can change the rules of Bitcoin.

02:30:09 They can’t make more of it.

02:30:11 So it’s fixed.

02:30:12 It’s available for anybody in the world.

02:30:15 It’s the hardest money ever invented.

02:30:17 And it is absolutely, I think, an enormously,

02:30:21 enormously significant invention

02:30:23 because if you read the fiat standard

02:30:26 and the Bitcoin standard as well,

02:30:28 you’ll see my perspective for why I think

02:30:31 a very large number of problems in the world

02:30:34 are caused by easy money, are caused by inflation,

02:30:38 and caused by government having access to essentially

02:30:41 an infinite recourse to people’s wealth.

02:30:45 And I think Bitcoin fixes this

02:30:47 because it allows us to have money

02:30:51 that has the salability of gold across time,

02:30:54 meaning it holds its value across time like gold,

02:30:57 but much better than gold.

02:30:58 But also it is similar to fiat

02:31:01 in that fiat can travel quickly,

02:31:03 but Bitcoin can travel even faster than fiat.

02:31:06 So it combines gold’s salability across time

02:31:11 with fiat’s salability across space

02:31:14 in one immutable package that nobody can change

02:31:17 and nobody can control.

02:31:18 Can you define the word salability?

02:31:20 Salability is the essential property of money.

02:31:22 It’s the ability of a good to be sold easily on the market,

02:31:28 specifically to be sold without much loss in its value.

02:31:31 So houses are great for living in,

02:31:33 but they’re not very salable.

02:31:35 If you wanna sell a house,

02:31:36 you can just click a button and sell a house

02:31:38 and have a giant market of people buying houses from you.

02:31:41 You need to find somebody

02:31:45 who wants the exact house that you have

02:31:46 with the exact specifications that you have.

02:31:48 And because houses are not identical,

02:31:50 there’s no liquid giant market

02:31:52 for people to just buy and sell identical houses from.

02:31:56 So gold, for instance, has good salability as money

02:32:01 because it’s a liquid good, it’s uniform,

02:32:03 and people are always buying it.

02:32:06 Fiat dollars have great salability

02:32:08 because everybody’s always buying

02:32:09 and exchanging dollars for other goods.

02:32:11 So if you have $100 bill, you can easily get rid of it

02:32:15 and you’ll get $100 worth of stuff for it.

02:32:18 If you have $100 worth of stuff,

02:32:20 it’s harder to get rid of it.

02:32:22 If you have $100 worth of phone,

02:32:24 it’s not as easy to spend it as a $100 bill.

02:32:26 That’s salability.

02:32:28 What do you mean that Bitcoin,

02:32:31 I understand that Bitcoin has the salability

02:32:33 of gold across time.

02:32:35 Better even, yeah.

02:32:36 Better, yes, like on the order or whatever.

02:32:39 And then it has the salability of fiat across space.

02:32:42 What does that mean?

02:32:43 So if you remember when you asked me

02:32:44 what is the advantage of fiat,

02:32:46 what is the advantage it offers us,

02:32:48 it’s cheaper to move fiat across space

02:32:50 than it is to move gold.

02:32:52 With the current fiat monetary system,

02:32:54 for all of its flaws, you can send money,

02:32:58 I could send money from my bank account in the US

02:33:01 to a bank account in China in a couple of days,

02:33:05 or in Britain, in France, in a day or two,

02:33:08 which is much faster than you could do with gold

02:33:10 and much cheaper than you could do with gold.

02:33:13 But in reality, with fiat,

02:33:16 the reason Bitcoin improves on that

02:33:17 is that with Bitcoin, you’re actually selling,

02:33:19 you’re sending final settlement in a couple of hours.

02:33:23 So you send the Bitcoin transaction,

02:33:24 you get six confirmations in an hour,

02:33:26 you get about 12 confirmations in two hours on average.

02:33:29 With 12 confirmations, you’re pretty definitely

02:33:34 clearly safe on this.

02:33:36 So within a couple of hours,

02:33:38 you could send a billion dollars across the ocean

02:33:41 and have final settlement on them.

02:33:44 It’s not just that you’ve sent a credit obligation

02:33:46 that’s gonna need weeks and months to settle,

02:33:49 which is the case with fiat.

02:33:51 So it is faster than fiat, effectively.

02:33:54 So it’s harder than gold and faster than fiat.

02:33:56 That’s a good way of putting it.

02:34:00 One other aspect of Bitcoin I have to ask,

02:34:04 to me on a human level, it’s fascinating,

02:34:06 is it was founded by Satoshi Nakamoto,

02:34:09 an anonymous founder, there’s no leader.

02:34:12 So that’s another aspect of the decentralization

02:34:14 is leaderless.

02:34:16 Yeah.

02:34:17 So unfortunately, it’s not a monarchy.

02:34:19 Fortunately.

02:34:20 Or fortunately, yes.

02:34:22 Who is Satoshi Nakamoto, do you think?

02:34:24 And first of all, is it you?

02:34:26 It definitely is not me.

02:34:29 I don’t know who it is.

02:34:30 If it was, would you tell me?

02:34:32 That’s a trick question.

02:34:34 Yeah, I know, trick question.

02:34:35 But I mean, everybody who knows me knows

02:34:37 I can’t read the code.

02:34:38 So you would say that even if you could.

02:34:42 But that’s true.

02:34:43 Do you think it’s one person?

02:34:44 Do you think it’s multiple people?

02:34:45 Is it interesting to you?

02:34:47 Do you think it’s fundamental to the coin itself

02:34:49 to not to coin the entirety of the concept

02:34:54 that it’s founders and animus?

02:34:56 And how much guts do you think it takes

02:34:58 if it’s one person to just walk away from so much money?

02:35:02 I’ve considered all these questions many times.

02:35:04 It’s very hard to formulate a definitive answer

02:35:07 to all of them.

02:35:09 I don’t know who it is.

02:35:10 And I don’t know why he or them or she

02:35:15 are not spending the coins that they most likely have.

02:35:19 I think what really matters in Bitcoin about Satoshi

02:35:23 is the fact that he’s not there.

02:35:24 And this is what’s truly astonishing about it.

02:35:28 The most important fact in Bitcoin

02:35:29 is the fact that the creators disappeared

02:35:31 and the thing has continued to operate now

02:35:33 for almost 12 years without him being there

02:35:35 or 11 years I think it’s been since he’s left.

02:35:38 And this is really the most important thing.

02:35:41 And maybe he died or she died

02:35:44 or they got into an accident on a road trip or whatever

02:35:49 and that’s why they haven’t accessed their coins.

02:35:51 Maybe they’re incapacitated for some reason.

02:35:54 But whatever reason it is,

02:35:55 I really think it’s fate or serendipity

02:36:00 that has given us this very vital,

02:36:04 very, very, very vital building ingredient in Bitcoin

02:36:07 which no other digital currency would ever recreate,

02:36:11 which is that because it was the first,

02:36:14 it was the one that was able to establish

02:36:17 the first mover advantage and get all of the people

02:36:19 who are interested in the technology to get into it.

02:36:22 And so that’s an enormous advantage,

02:36:23 but the cherry on top or what made the whole thing

02:36:28 really function well is the fact

02:36:31 that the guy who made it disappeared

02:36:33 and that it continued to operate,

02:36:35 which is just a clear illustration

02:36:37 that this is a network with no admins.

02:36:39 And I’m tempted to think that they’re incapacitated

02:36:42 in some way, probably dead or gone

02:36:44 because I can’t believe the,

02:36:48 I don’t believe any human being

02:36:50 would have this level of self control

02:36:52 to not get into, not want to meddle

02:36:55 with their invention so much, even if they,

02:37:00 they might have had the self control

02:37:01 to like mine the first million coins

02:37:03 to get the network going and then throw away the coins

02:37:05 or send them to an address

02:37:07 that they don’t have the key to

02:37:10 because they really just wanted the network to take off.

02:37:12 They may have no access to the coins

02:37:14 and that’s why they can’t move them.

02:37:15 I could see that happening,

02:37:17 but I find it harder to believe

02:37:18 that they would resist the temptation

02:37:20 to mess with the network.

02:37:21 You know, it’s funny, I find that the founders of ideas

02:37:25 are often principled and have the integrity

02:37:29 that the eventual users of those ideas don’t fully have.

02:37:35 I tend to, you know, we have the kind of cynical view,

02:37:38 power corrupts, absolute power corrupts absolutely.

02:37:41 And we tend to, in our mind,

02:37:42 generalize that all humans are corruptible.

02:37:45 And perhaps that’s true to some degree,

02:37:47 but I think some people are more corruptible than others.

02:37:51 And I find that there is, I mean,

02:37:53 I like to think that Satoshi Nakamoto’s out there

02:37:58 and, you know, just like George Washington

02:38:00 chose to walk away and it’s a principle.

02:38:03 And the principle is more powerful

02:38:05 than the financial reward or any of those kinds of things.

02:38:10 It’s a principle that stands for freedom.

02:38:12 And there’s a lot of people throughout history,

02:38:14 even recent history,

02:38:14 that are willing to die for these principles

02:38:18 or live a life full of suffering and sacrifice

02:38:23 because they’re still living a life of principle

02:38:27 and choosing that day after day after day.

02:38:29 So, I mean, there’s power to that.

02:38:31 Money, what’s the worth of money in the end?

02:38:35 In terms of just personal financial gain

02:38:37 versus knowing how much positive impact there is.

02:38:43 So the person that chooses to walk away like that,

02:38:46 I think is the same kind of person

02:38:47 that chooses to live by that principle.

02:38:52 You have people like that, you know,

02:38:53 in Grigori Grisha Perlman in mathematics

02:38:58 who turned down the Fields Medal because he was.

02:39:01 Yeah, that’s a medal, not $50 billion of Bitcoin.

02:39:05 Well, that’s, I.

02:39:06 No, I know, I know, I’m joking.

02:39:08 Well, that’s actually an interesting, just a brief comment.

02:39:10 You know, when people talk about Bitcoin

02:39:12 in the cryptocurrency space,

02:39:14 that it’s often mixed up financial interest and ideas.

02:39:19 And I think those are often correlated,

02:39:24 but that good feeling you get when you win

02:39:27 or number go up or you just,

02:39:31 just somebody, you know,

02:39:32 I found 20 bucks on the street the other day.

02:39:35 And just that feeling of just like,

02:39:38 ooh, like more money, that positive feeling,

02:39:41 that’s correlated, but it is distinct

02:39:44 from the power of the idea to change a world,

02:39:47 to change the world for the better.

02:39:49 For the, to alleviate, it’s like Alex Gladstein,

02:39:51 in the case of Bitcoin,

02:39:53 that decreased the amount of suffering in the world

02:39:55 because of the authoritarian regimes.

02:39:56 And just because your number goes up

02:40:00 like that gambling feeling of like, yes, yes, this is good.

02:40:04 And I mean, short term number go up.

02:40:07 There’s a long term number go up

02:40:08 that’s more like investment and so on.

02:40:10 And there’s a short term number go up

02:40:12 that’s just a good feeling that you can’t,

02:40:14 you have to, in your mind, keep those distinct

02:40:16 from the power of the idea to transform the world.

02:40:21 And if you focus on the power of the idea,

02:40:24 maybe a billion or billions of dollars don’t matter as much.

02:40:28 At least that’s what I would like to believe.

02:40:30 Perhaps, but what matters ultimately

02:40:32 is that the thing works without him.

02:40:34 The thing’s worked for 11 years without him.

02:40:35 And I think this is the really important thing.

02:40:38 If they had stuck around for whatever reason

02:40:41 and they had continued to meddle with it,

02:40:43 it’s not clear to me how decentralized

02:40:46 it could have been.

02:40:47 This is the problem with the other currencies.

02:40:49 It’s like, how do you lose control

02:40:52 of the Frankenstein that you’ve created?

02:40:54 The only way that this Frankenstein continues to survive

02:40:57 is if the person in charge of it continues to feed it.

02:41:00 And so it continues to be yours.

02:41:02 And that’s the problem

02:41:03 with all the other digital currencies.

02:41:05 If you’ve heard about any of the other 16,000

02:41:07 digital currencies out there,

02:41:09 you’ve only heard about it

02:41:10 because there’s a small group of people behind it

02:41:11 that are working on it, that are promoting it.

02:41:14 And that’s why, and I think Michael Saylor’s discussion

02:41:17 with you was a magnificent illustration

02:41:19 of the difference between Bitcoin and altcoins

02:41:23 in that they are securities.

02:41:24 And I think he makes a very compelling, brilliant case

02:41:27 for why this makes them categorically different

02:41:31 from Bitcoin.

02:41:32 Bitcoin, you’re buying property.

02:41:34 I think he mentioned he’s a huge fan of Dogecoin,

02:41:36 but I might be misremembering.

02:41:38 You are misremembering.

02:41:39 Okay, me too.

02:41:40 Maybe I’m quoting him out of context.

02:41:42 Okay, let me just ask you about some possible criticisms

02:41:47 of Bitcoin.

02:41:49 So on centralization, so there’s a criticism

02:41:52 on the mining and on the node side,

02:41:55 or the node is not really the criticism,

02:41:58 but Bitcoin mining is not fully decentralized

02:42:00 because a small number of miners control a majority

02:42:04 of the hashing power.

02:42:06 I looked it up, there’s 10,000, 15,000,

02:42:08 whatever the number is of computers that are full nodes,

02:42:11 that have the full, that are actively connected

02:42:15 to the network.

02:42:16 So you could argue that’s decentralized

02:42:18 because it’s global, it’s all across the world,

02:42:20 but the miners, they’re still, it’s more centralized.

02:42:25 So if you’re thinking of making a case

02:42:27 for Bitcoin being decentralized,

02:42:30 do you worry about the miners being somewhat centralized?

02:42:34 Is the nodes the important thing to think about?

02:42:37 Yeah.

02:42:38 And what number of nodes counts as centralized

02:42:40 and not?

02:42:42 The nodes are what matters because the nodes

02:42:43 are what determines Bitcoin’s consensus parameters.

02:42:46 I think the best way to think about it is that miners

02:42:51 simply sell a commodity to the nodes

02:42:54 and that commodity is Bitcoin blocks.

02:42:56 So what a miner does is they solve the proof of work problem

02:43:00 so they keep operating their computers

02:43:02 until they can get a solution to the problem.

02:43:04 And then they attach that to a bunch of transactions

02:43:07 and present it to the nodes for the nodes to ratify

02:43:10 and approve it.

02:43:11 So therefore, this is, and this is,

02:43:14 I strongly recommend people learn about the 2017 block size

02:43:18 war to understand why miners don’t control Bitcoin.

02:43:21 I discussed this briefly in my Bitcoin standard,

02:43:25 but there’s a recent book that discusses this in detail

02:43:27 called The Block Size War by Jonathan Beer.

02:43:30 It’s a great description of, in 2017,

02:43:33 essentially the miners thought that they can control Bitcoin.

02:43:36 You know, they had, there was one mining company

02:43:39 that produced the majority of the machines

02:43:42 that were on the network and they,

02:43:44 and their allies had control of the machines

02:43:48 that were out there and they controlled the majority

02:43:51 of the hash rate and they thought that they could change

02:43:53 Bitcoin’s supply, not supply, sorry,

02:43:55 they could change Bitcoin’s block size,

02:43:57 which is a tiny little detail, technical parameters,

02:44:01 not even all that big of a deal for the economics of it.

02:44:05 But they thought that they could pass this change,

02:44:08 they could force this change on the network.

02:44:10 And the members of the network rejected it

02:44:13 and they weren’t able to do it.

02:44:15 So the nodes are what is sovereign.

02:44:17 The nodes are what determine the rules of the game.

02:44:20 The miners are a service provider.

02:44:23 The miners invest capital upfront.

02:44:25 You know, they buy the machines, they buy the electricity,

02:44:28 they buy the storage, they buy the locations,

02:44:31 they pay the rent, and they invest all of that money

02:44:34 based on the idea that if they behave according

02:44:38 to what the nodes want,

02:44:39 the nodes will reward them with Bitcoin.

02:44:42 So the miners are in no position

02:44:43 to dictate terms for anyone.

02:44:45 You know, they’ve put up their capital upfront

02:44:47 and they will only recoup it if they do what the nodes want.

02:44:51 So therefore what really matters

02:44:53 is the decentralization of the nodes.

02:44:54 So we wanna, you wanna have as many nodes as possible.

02:44:57 You should, you wanna have a system

02:44:59 where there’s a large number of nodes.

02:45:01 And this is of course the biggest problem

02:45:04 with other digital currencies is that, you know,

02:45:08 because basically Bitcoin has cornered the market

02:45:11 on a digital currency,

02:45:13 the only way that you can really get traction

02:45:16 is to generate a whole bunch of buzzwords

02:45:18 about, you know, we’re doing this and we’re doing that.

02:45:20 And so other digital currencies are optimized

02:45:23 for bells and whistles and buzzwords.

02:45:27 And that means adding computational load,

02:45:30 which makes the nodes bigger, harder to operate,

02:45:33 and therefore you have a very small number of nodes.

02:45:35 In fact, very few digital currencies are keen

02:45:39 to publicize how many nodes there are,

02:45:42 and they don’t have full nodes in the true sense.

02:45:44 And it doesn’t even matter how many nodes they have

02:45:46 because de facto, you know, you can spin up a million nodes

02:45:53 tomorrow on AWS, doesn’t really matter.

02:45:57 What matters is de facto do the nodes dictate

02:46:00 the rules of consensus.

02:46:02 And the fact that with most digital currencies

02:46:03 you can have hard forks very frequently

02:46:06 and they can change the supply all the time

02:46:08 means that there’s a small group of people

02:46:09 who agree amongst themselves how to move forward.

02:46:11 Yeah, so you threw in a few criticisms of all coins there.

02:46:15 So one is the small group.

02:46:17 That one we could talk about.

02:46:18 It’s a tricky one, and we talked about that

02:46:21 with Satoshi Nakamoto.

02:46:22 But the other one is small number of nodes

02:46:25 sort of to push back on that.

02:46:27 As computational power increases,

02:46:29 you can argue that that enables more and more

02:46:32 cheap computers to serve as nodes.

02:46:35 So at least it paints a future

02:46:38 where nodes are always increasing

02:46:40 because computational power is always increasing

02:46:42 and getting cheaper and cheaper and cheaper.

02:46:44 So at least there’s a hope for the future

02:46:46 for greater and greater decentralization

02:46:49 on the node front.

02:46:50 Yeah, but I mean, ultimately, again,

02:46:52 it doesn’t really matter how many nodes you have

02:46:55 if the way that the currency is run

02:46:59 is that you’re gonna have a hard fork every few months,

02:47:01 which is the case with most other currencies.

02:47:03 Bitcoin’s the only one that’s not have a hard fork.

02:47:07 Basically, the unique thing about Bitcoin

02:47:10 in a technical sense is that you could get

02:47:12 the original software that Satoshi himself ran in 2009

02:47:16 to start the network.

02:47:18 And you could run it today

02:47:21 and it would sync with the blockchain.

02:47:23 There’s one bug you need to fix,

02:47:25 one mistake that would have only appeared

02:47:28 I think in around 2013 or 14 or something like that,

02:47:31 so that he wasn’t aware of back then.

02:47:33 So you just need to fix this one tiny little bug.

02:47:35 And then the consensus parameters are still the same.

02:47:37 So you’re able to sync to it.

02:47:39 This is not true for most other digital currencies.

02:47:41 I’d say probably all of them

02:47:42 because they’ve all had many hard forks,

02:47:44 which they think of as upgrades.

02:47:46 And they market this thing as,

02:47:49 well, Bitcoin can’t upgrade, but we upgrade all the time.

02:47:52 Well, yeah, you know what else upgrades all the time?

02:47:55 Facebook, Apple, Amazon,

02:47:57 anything that centralizes is very easy to upgrade.

02:47:59 And that’s precisely why, as Michael Saylor says,

02:48:01 these things are somebody’s liability.

02:48:03 They are security.

02:48:04 You’re carrying on somebody’s technical

02:48:07 and economic liability.

02:48:08 They can hard fork, they can 10x the supply tomorrow.

02:48:12 Yeah, they can fall victim to the same corrupting forces

02:48:19 that governments fall victim to.

02:48:21 Sure, and for people who don’t know,

02:48:22 yeah, hard fork is a reverse incompatible change

02:48:29 to the underlying function of a cryptocurrency.

02:48:35 Of course, there is hard forks of Bitcoin as well.

02:48:40 I’m sure all of which you love dearly.

02:48:43 Anyway, but that doesn’t matter.

02:48:44 The original Bitcoin, for the most part,

02:48:47 has not undergone any changes.

02:48:49 And that’s one of the…

02:48:50 I mean, it has undergone changes,

02:48:51 but none in the important parameters of the network.

02:48:57 So another criticism is about energy.

02:49:00 So the proof of work,

02:49:02 consensus mechanism uses a lot of energy.

02:49:06 What’s the response to that criticism of Bitcoin?

02:49:08 Yes, because it’s worth it.

02:49:12 Okay, the airplane uses a lot more energy than a kayak.

02:49:14 You know, when you’re gonna cross the Atlantic next time,

02:49:16 what are you gonna take?

02:49:17 A kayak that is environmentally friendly,

02:49:19 according to this insane definition,

02:49:21 or are you gonna take an airplane

02:49:22 that consumes a lot of energy?

02:49:24 So the cost benefit analysis here,

02:49:28 essentially, you have to consider

02:49:29 both the cost and the benefit.

02:49:31 Exactly, and I think it’s an astonishing testament

02:49:34 to just how far backward people’s scientific

02:49:38 and technological thinking has devolved

02:49:41 to the point where we think of energy consumption

02:49:43 as a bad thing.

02:49:44 I think it’s just…

02:49:45 And in the Fiat standard,

02:49:46 I discussed the whole hysteria around energy,

02:49:48 and I think it’s a product of Fiat inflation

02:49:52 because it’s a way of trying to covering up

02:49:55 the fact that energy fuels that are reliable

02:49:58 and necessary for the current world

02:50:00 are becoming more and more expensive because of inflation.

02:50:03 And so governments are always looking for excuses

02:50:05 for why you should not be using those things.

02:50:07 And so they promote all kinds of stupid pseudosciences

02:50:10 that tell you about why these things are bad.

02:50:13 But really, you know, all technology is…

02:50:16 Well, not all, but the vast majority

02:50:19 of technological innovations involve

02:50:22 economizing on human time and judgment

02:50:24 and replacing it with machines,

02:50:26 with reliable machines that spend a lot of energy.

02:50:28 So that’s what a telephone does.

02:50:31 Instead of having to send somebody across the world

02:50:33 to tell somebody something else or send a letter,

02:50:36 a telephone allows you to do it.

02:50:38 The car is like that.

02:50:39 You could walk, but a car consumes a lot more energy,

02:50:43 but it allows you to travel much faster and safer

02:50:45 and more reliably.

02:50:47 An airplane is like that.

02:50:48 Modern telecommunication, human prosperity

02:50:52 is an increase in the consumption of energy.

02:50:54 And I think it is an absolutely criminal thing.

02:50:58 I mean, genuinely mean the word criminal

02:51:01 to portray energy consumption as a bad thing,

02:51:04 because it is truly depriving people of the chance

02:51:07 to live a life that makes life better, you know?

02:51:10 It’s truly criminal to tell poor countries

02:51:12 that they should not consume the same energy sources

02:51:15 that are being used in rich countries

02:51:17 on which our modern infrastructure and modern life relies.

02:51:21 That’s what life is.

02:51:22 You know, if you reduce the consumption of energy in the US

02:51:25 to the levels that you have in poor countries today,

02:51:28 the US would become desperately poor.

02:51:30 A lot of people would die.

02:51:31 Cities would collapse.

02:51:32 The quality of life would decrease significantly.

02:51:34 A high quality of life often requires,

02:51:37 given the current technology, a high expenditure of energy.

02:51:39 Yeah, and I should be clear, you know,

02:51:41 it’s not a quality of life in the sense of,

02:51:42 many people think of this as,

02:51:43 oh yeah, well, you know,

02:51:46 taking needless flights for vacations.

02:51:50 No, no, these are the cherries on top of the cake,

02:51:53 but the substance of the cake

02:51:54 and the real benefits of energy

02:51:56 is the fact that children, premature babies,

02:52:00 survive in countries that have reliable

02:52:03 24 hour cheap electricity.

02:52:05 If your child is born premature,

02:52:07 that you put in an incubator,

02:52:08 put him in an incubator or her,

02:52:10 they’re highly likely to survive.

02:52:11 If you don’t have 24 hour electricity,

02:52:14 that child is not gonna make it.

02:52:16 And you see it, you know,

02:52:18 the level of energy consumption per capita

02:52:20 is highly correlated, not just to income,

02:52:23 but also to health outcomes, to infant mortality,

02:52:26 to all of the things that you care about.

02:52:28 And Bitcoin is just another technology.

02:52:31 It does consume a lot more energy than central banks.

02:52:34 A lot of Bitcoiners like to take a cop out of this

02:52:37 by saying, well, you know, central banks consume money

02:52:40 and ATMs consume a lot of energy.

02:52:42 And I think if you calculate

02:52:44 how much central banks and banks consume,

02:52:45 I think it’s a rounding error

02:52:47 next to what Bitcoin consumes.

02:52:49 I think Bitcoin is just, maybe not a rounding error,

02:52:52 but it’s still, Bitcoin I think is going to consume

02:52:54 a lot more, and that’s a good thing.

02:52:56 You know what’s humbling is to look,

02:52:58 because even just looking into this

02:53:00 forces me to look at the energy expenditures

02:53:02 for many of the things we take for granted.

02:53:04 Obviously computers and other digital,

02:53:07 our digital lives are just, Bitcoin becomes a rounding error

02:53:12 relative to how much energy is spent

02:53:15 on all the computers in our world.

02:53:16 But also things like home appliances,

02:53:19 microwaves, and hair dryers and stuff.

02:53:22 Yeah.

02:53:23 It’s that.

02:53:24 Yeah, I mean, this is, that’s being hilarious.

02:53:26 It’s like, oh, these things

02:53:28 that are just part of our modern life,

02:53:31 they’re either the same order,

02:53:33 at least the same order of magnitude as Bitcoin,

02:53:35 and they seem like trivial parts of life.

02:53:39 Yeah, and this is the thing,

02:53:40 all of the people that complain

02:53:41 about Bitcoin’s energy consumption,

02:53:43 I presume they use washing machines.

02:53:45 Now, why should their desire for clean and dry clothes

02:53:51 get to consume energy?

02:53:52 And I mean, I used to live in Lebanon.

02:53:54 Lebanon had hyperinflation.

02:53:56 I escaped from hyperinflation.

02:53:58 I escaped, it prevented,

02:54:01 my life could have been ruined by hyperinflation.

02:54:03 And the reason that it wasn’t ruined

02:54:04 is because I have Bitcoin.

02:54:06 So, I don’t know, am I allowed to swear on your podcast?

02:54:10 Yes, please.

02:54:10 So, fuck your washing machine.

02:54:12 given a choice between my washing machine

02:54:16 and my Bitcoin, I’ll choose Bitcoin.

02:54:18 It’s a technology that has been,

02:54:20 that has already saved my life,

02:54:21 and I think it’s gonna save the lives

02:54:22 of many, many, many, many more people.

02:54:24 So, but of course, I don’t have to choose

02:54:27 between my Bitcoin and my washing machine

02:54:31 because this is, you know,

02:54:33 we’re just constantly consuming more energy

02:54:35 and we’re gonna continue to consume more energy

02:54:36 in this world, and that’s just what progress is.

02:54:39 And a small remark.

02:54:41 So, in principle, I don’t think this is a problem,

02:54:43 but the other thing about Bitcoin,

02:54:45 where it is different from washing machines,

02:54:47 Bitcoin is truly unique in this.

02:54:48 It’s the only thing whose energy consumption

02:54:52 can be produced absolutely anywhere.

02:54:55 Your washing machine needs to be in your house

02:54:57 where you live, and you live in a city

02:54:58 surrounded by 10 million people,

02:55:00 and they all have their washing machines,

02:55:02 and they’re all connected to the grid,

02:55:04 and they generally tend to do their laundry

02:55:06 around the same time.

02:55:07 And so you have to put the load of the washing machine

02:55:11 on the grid at the same time.

02:55:14 There needs to be one power plant

02:55:16 and all of the infrastructure needs to work

02:55:17 at the same time, and the electricity

02:55:19 is pretty expensive because it’s being done

02:55:21 in a place with high demand.

02:55:23 Bitcoin does not need to buy electricity

02:55:26 from places where it has high demand

02:55:28 because it can buy electricity from anywhere.

02:55:30 This is what’s truly mind blowing about it.

02:55:32 You can buy, you know, what you need,

02:55:35 the electricity that you need for mining

02:55:37 can be done anywhere.

02:55:38 So you can mine, you know, you can have a waterfall

02:55:42 in the north of Canada, 300 miles away

02:55:44 from any population center.

02:55:46 There’s water falling, there’s energy.

02:55:48 You can put a hydroelectric dam there,

02:55:51 and then you can use that energy to operate the miners,

02:55:53 and then the miners just need

02:55:54 a satellite internet connection,

02:55:56 and effectively you’re selling that energy

02:55:58 that is isolated to the grid.

02:56:01 And because of the way that Bitcoin functions,

02:56:02 because of the difficulty adjustment,

02:56:04 the only profitable miners are the ones

02:56:07 who can get cheap electricity.

02:56:09 Basically if you’re mining at grid cost,

02:56:11 if you’re mining at around, the average electricity price

02:56:14 in the world is around 14 cents.

02:56:16 If you’re mining at 14 cents in Bitcoin,

02:56:19 you’re most likely not gonna make it.

02:56:21 If you’re running your miners at 14 cents,

02:56:23 because everybody could mine at 14 cents,

02:56:26 and so what happens is if everybody’s mining

02:56:28 at 14 cents, 14 cents stops being profitable,

02:56:32 and then only the people mining

02:56:33 at a lower price are profitable.

02:56:35 So that’s why Bitcoin mining is not competing

02:56:38 with your washing machine.

02:56:39 This is the absurd thing

02:56:41 about this kind of energy scarcity viewpoint

02:56:45 where, oh no, it’s a catastrophe,

02:56:47 Bitcoin is taking all the electricity,

02:56:48 as if the electricity is just one fixed pie

02:56:51 that we all have to share and fight over.

02:56:53 And this is how I keep making fun

02:56:54 of these stupid headlines they put out

02:56:56 where Bitcoin’s consuming more electricity

02:56:58 than Portugal.

02:56:59 All right, well, maybe we should shut down Portugal then.

02:57:03 What the hell is Portugal giving us?

02:57:04 Like, obviously it’s not, it’s not competing.

02:57:07 He doesn’t mean that, I’ve gotten so much criticism

02:57:09 for saying Cristiano Ronaldo’s not in the top five.

02:57:13 I apologize, I love Portugal.

02:57:16 That’s another discussion we should get into at some point.

02:57:18 Because you posted a few soccer things.

02:57:20 I’m not, I realize how passionate people are about this.

02:57:23 Listen, it was a joke, all right?

02:57:25 He deserves to be potentially in the top five.

02:57:27 Yeah, I love Portugal.

02:57:28 And even though I’m a Liverpool fan,

02:57:30 I still respect Cristiano Ronaldo a lot.

02:57:32 In fact, I hold a very unpopular opinion

02:57:35 where I think Cristiano Ronaldo’s

02:57:37 the greatest football player ever.

02:57:39 Number one, over Pelé and Maradona, Messi,

02:57:41 better than Messi.

02:57:42 Yes, he’s been doing it for 20 years at the top.

02:57:44 Nobody’s ever done that.

02:57:45 He’s won everything everywhere,

02:57:46 everywhere he goes at the top, at the Champions League.

02:57:50 Really strong argument to be made for him.

02:57:53 Messi’s never done anything outside of Barcelona,

02:57:55 that’s the thing.

02:57:55 So you appreciate performance, long term,

02:57:59 versus the genius of the actual play on the field.

02:58:04 I mean, the genius is,

02:58:05 Ronaldo’s the top scorer of all time.

02:58:07 He scores more goals.

02:58:08 So the genius is in the scoring,

02:58:09 not the actual dance of the play, the creativity.

02:58:13 Well, I mean, I don’t know,

02:58:14 Messi’s been absolutely mediocre since he’s left Barcelona.

02:58:18 These are strong words.

02:58:20 He scored, what, two goals in PSG season this year?

02:58:23 They’re out of the Champions League.

02:58:25 What about Mohamed Salah?

02:58:26 You posted about him.

02:58:28 Is he climbing up to be someone?

02:58:31 I think he should win the Ballon dOr this year.

02:58:33 He probably should have won it last year as well.

02:58:34 He’s been absolutely outstanding,

02:58:36 but I mean, just people are so crazy about Messi.

02:58:39 They keep giving him accolades.

02:58:40 He hasn’t deserved, I think,

02:58:41 Messi the last couple of Ballon dOrs that he got.

02:58:45 I mean, he’s a great player and everything,

02:58:46 but no, he did not deserve it last year.

02:58:51 We can agree to disagree.

02:58:53 There’s something.

02:58:54 Do you think you’re a Barca fan or a Messi fan?

02:58:56 I would say, no, I wouldn’t say I’m a Barca fan,

02:58:59 but a Barca fan because of Messi,

02:59:01 and I just, I think it’s like, there’s certain things.

02:59:06 So when I was growing up in the Soviet Union, Russia,

02:59:09 I remember Maradona, he was the first person I saw

02:59:15 that I was like, oh, wow, this could be,

02:59:19 this is greatness in sport, not just football and sport,

02:59:22 right, and for some reason.

02:59:23 I mean, it’s something about Diego Armando Maradona,

02:59:26 the way they were commentating the genius of his play,

02:59:30 the mix of ego, and again, the performance,

02:59:32 but being able to carry a team on his shoulders,

02:59:35 that, I just fell in love with whatever he represented,

02:59:38 and then by that, Argentina, and then Messi,

02:59:41 I saw when he was 16, 17, when he was just in the early days,

02:59:46 and when you first see a person and you see the genius

02:59:49 and you notice that, and then it turns out

02:59:51 to be actually a great player, for some reason,

02:59:54 you’re invested, you’re emotionally invested,

02:59:57 you’re, I don’t know, so you kind of just fall in love

03:00:00 and then you get, you pick sides.

03:00:03 I mean, that’s the thing about football.

03:00:04 Part of the fun things about football, soccer,

03:00:07 is like, you pick a guy, you pick a team,

03:00:11 and fuck everyone else, and you just have fun talking shit.

03:00:13 I mean, that’s part of it, you know?

03:00:15 It’s great, it’s great because I think,

03:00:18 obviously it’s a very stupid thing to do,

03:00:19 but I think if you don’t do it in football,

03:00:21 you’re gonna do it in real life.

03:00:22 Elsewhere, that’s right.

03:00:23 That’s why it’s very good, like, that’s it.

03:00:26 Instead of hating people for their religion

03:00:28 and for their skin color, hate them

03:00:31 because they support Manchester United.

03:00:32 Exactly.

03:00:33 So you’re a Liverpool fan, that’s it.

03:00:35 Yes, yes, hardcore, long term.

03:00:38 But yeah, so to go back to the original point on Portugal.

03:00:41 Energy.

03:00:42 Yeah, energy.

03:00:43 Bitcoin is not competing with Portugal

03:00:45 because Bitcoin is buying energy

03:00:47 from places where we can’t buy it,

03:00:49 because all the places where we can buy energy

03:00:52 for our washing machines, we’re bidding up the price

03:00:55 enough to make it nonviable for Bitcoin.

03:00:58 That’s why, you know, you’ll see those headlines

03:01:00 about Bitcoin consuming more energy than Portugal.

03:01:02 Well, if you look at Portugal, I mean,

03:01:04 they’ve got giant power plants in Portugal,

03:01:06 they’ve got millions of people,

03:01:07 and they’ve got enormous amounts of infrastructure.

03:01:09 Where are all of these infrastructure for Bitcoin mining?

03:01:13 You don’t see it in the cities.

03:01:14 It’s all isolated, it’s all out away from the cities,

03:01:18 or it’s connected to grids that have serious overcapacity.

03:01:21 So Bitcoin is not out there buying the expensive energy,

03:01:25 taking energy away from people who can’t afford it.

03:01:29 It’s out there buying its own energy

03:01:30 because it doesn’t need to buy the expensive energy

03:01:32 that people really need.

03:01:34 So one other criticism from an investment perspective,

03:01:37 from a gambling perspective that people see

03:01:39 is the volatility of Bitcoin.

03:01:41 Of course, that’s been somewhat decreasing over time,

03:01:44 but what’s your answer to the sort of criticism

03:01:48 that Bitcoin is too volatile, I wanna stay away,

03:01:51 it doesn’t seem like a safe place for me

03:01:53 to invest either short term or long term?

03:01:57 There’s no denying there’s a volatility

03:01:58 and there’s a high oscillation in the value

03:02:00 in the short term.

03:02:01 So I think the safe way to approach that

03:02:05 is in terms of position sizing.

03:02:07 If the volatility bothers you,

03:02:10 then you’re overinvested perhaps.

03:02:12 So maybe you should reduce the size of your position

03:02:17 so that the volatility doesn’t bother you.

03:02:19 And this is the short answer that you know,

03:02:23 like stack as much as your conviction

03:02:26 will allow you to tolerate the volatility.

03:02:31 And of course, the reason you should try

03:02:33 and consider tolerating volatility more

03:02:36 is the options are you hold fiat assets,

03:02:40 which only go down stable, relatively stable,

03:02:43 not a lot of volatility day to day,

03:02:46 value of your dollar doesn’t change 40% overnight,

03:02:50 20% overnight or something like that.

03:02:52 But it does go down reliably, it’s gonna go down 40%.

03:02:56 You can count on it, it might take a year,

03:02:58 two years, five years, 10 years,

03:02:59 compared to the things that you want to buy,

03:03:01 it’s gonna go down by 40%.

03:03:04 And it’s not gonna come back

03:03:05 and it’s gonna go down another 40%

03:03:07 and then another 40% and then another 40%.

03:03:09 So the option really is relatively short term stability

03:03:14 with long term decline,

03:03:16 or short term volatility with long term rise.

03:03:19 And so that’s another way in which Bitcoin teaches people

03:03:22 to have a low time preference and think about the long term.

03:03:24 So stack, accumulate and think of it in the long term.

03:03:29 It’s a function of the fact that Bitcoin is new.

03:03:31 Bitcoin is currently less than 1%

03:03:32 of the global money market.

03:03:34 So there’s about $100 trillion of money

03:03:36 out there in the world.

03:03:37 $100 trillion roughly of fiat

03:03:40 and about $10 trillion of gold.

03:03:42 And Bitcoin is less than $1 trillion.

03:03:44 So one rich guy decides to get into Bitcoin,

03:03:48 that’s gonna show up on the Bitcoin chart.

03:03:50 You look at it, Elon Musk decides to buy Bitcoin,

03:03:52 you see the buy, you see the news,

03:03:55 it happens and you see the pump.

03:03:57 Elon Musk decides that he doesn’t like Bitcoin,

03:03:59 you see the drop.

03:04:01 But a few years ago, it used to be

03:04:03 that one random millionaire would cause that pump.

03:04:07 Now you have to be the richest guy in the world to do that.

03:04:09 In a few years, you’re gonna have to be

03:04:11 the richest country in the world to be able to do that

03:04:14 to the Bitcoin price, maybe many years,

03:04:15 maybe not a few years.

03:04:17 But as Bitcoin grows, think about it

03:04:19 as a liquid pool of money.

03:04:22 Currently it’s a small pool next to a much larger ocean,

03:04:25 which is the entire money market.

03:04:26 And so one person jumps from that to this small pool,

03:04:30 they can make a big splash.

03:04:32 As the pool grows, essentially the salability increases

03:04:36 and the likelihood of one individual purchase

03:04:38 affecting the price so violently decreases.

03:04:43 And so over time, as the size of the market increases,

03:04:46 I think we’re gonna see the volatility decline

03:04:48 more and more.

03:04:49 Ultimately, if you look at gold historically,

03:04:52 gold has been very, very stable.

03:04:54 It did not achieve its stability

03:04:56 because the central bank was in charge of gold supply

03:04:58 or because there was a gold committee

03:05:00 that decided how much gold gets produced.

03:05:03 It achieved that stability because it became

03:05:06 the most saleable good and so therefore became the good

03:05:09 that contains the most cash balances in the world.

03:05:12 And the end of the 19th century,

03:05:14 everybody held cash balances in gold

03:05:16 and new production was a tiny little addition

03:05:20 to global production, to the supply.

03:05:23 So that’s what made gold the most relatively,

03:05:26 I shouldn’t say stable

03:05:27 because nothing is stable in economics,

03:05:29 but relatively it holds onto its value

03:05:31 and it’s much less volatile than digital currency,

03:05:35 than national currencies.

03:05:37 That’s because it has the highest stock to flow ratio

03:05:41 and that’s because its supply is a tiny fraction

03:05:45 of the liquid market.

03:05:47 And as the liquid market grows,

03:05:48 as the size of cash balances grows

03:05:50 and trades in Bitcoin cancel each other out,

03:05:54 you get only slight changes in value.

03:05:56 So I think as Bitcoin matures, that’s going to decline.

03:06:01 So effectively, I think the end game

03:06:03 is Bitcoin is huge, Bitcoin is worth something like,

03:06:08 I think the total addressable market for Bitcoin

03:06:11 is not just national currencies

03:06:14 and gold’s addressable market, but also government bonds.

03:06:16 That’s the really big one.

03:06:17 So how do banks compare to gold?

03:06:20 So you’re saying it’ll surpass gold, the 10 trillion?

03:06:23 Yeah.

03:06:24 What’s bonds?

03:06:25 Where does bonds stand?

03:06:26 So then there’s also national currencies,

03:06:28 which are about 100 trillion

03:06:30 and then there’s government bonds,

03:06:31 which are around $120 billion, sorry, trillion dollars.

03:06:36 Trillion.

03:06:37 Trillion, sorry.

03:06:38 Yes, trillion.

03:06:38 If we’re saying billion, we meant trillion.

03:06:40 Yeah.

03:06:42 So you think bonds can move to Bitcoin?

03:06:46 I’ve always held this is the prize, this is the main dish.

03:06:50 Gold is the appetizer, bonds are the main dish

03:06:52 because bonds have replaced gold.

03:06:53 I have an appetizer.

03:06:54 Yeah.

03:06:56 I mean, bonds have replaced gold in people’s portfolio.

03:06:59 People, you remember when we were saying gold was,

03:07:02 you’d hold it as a saving,

03:07:04 as the secure part of your portfolio

03:07:05 and then you take risk with the equity.

03:07:08 Currently people do that

03:07:09 by holding a part of their portfolio in bonds.

03:07:11 That’s the part that they treat as their saving account.

03:07:14 And then the rest they use for not speculation,

03:07:18 for investment in which they take risk.

03:07:19 Yeah, speculation.

03:07:21 And that’s stocks and equity and other high risk assets.

03:07:27 I think Bitcoin is not gonna replace equity.

03:07:29 There will always be equity.

03:07:30 There’ll always be companies

03:07:31 and people will wanna have equity.

03:07:34 But it’ll probably replace a big chunk

03:07:35 of current equity markets

03:07:36 because right now, if you want to save,

03:07:39 it used to be that you hold bonds.

03:07:40 Now, if you wanna save, you go into stock indexes.

03:07:43 So I think Bitcoin likely eats a big chunk

03:07:46 of equity markets because currently it’s,

03:07:49 people are using it as saving.

03:07:51 And I think it eats all the bonds.

03:07:53 That’s my most ambitious statement.

03:07:56 The question is the scale of time that happens across,

03:08:00 but the most important statement you make is about trend.

03:08:03 Yeah, and also, I mean, let’s also remember

03:08:05 currently bonds nominally don’t beat inflation

03:08:08 and in real terms,

03:08:09 they don’t come close to beating inflation.

03:08:13 So currently with bonds,

03:08:15 you’re taking on credit default risk to buy a bond

03:08:19 and also getting less money back in real terms.

03:08:23 Well, Bitcoin doesn’t offer you returns,

03:08:26 but in real terms, it appreciates much more

03:08:28 and it has, I believe, a lot less risk associated with it

03:08:31 than any company or government.

03:08:34 So let’s make things spicy

03:08:35 and ask if Bitcoin fails in the long term future.

03:08:40 As you just said, economics, volatility,

03:08:43 things happen in this world.

03:08:44 The human civilization might end in this century.

03:08:48 I hope it doesn’t, but it might.

03:08:50 There could be catastrophic events.

03:08:52 If Bitcoin fails, it goes to zero, loses its number one spot.

03:08:57 What would be the reason?

03:08:58 If you’re an alien visiting Earth 100 years from now

03:09:03 and just were to analyze the situation,

03:09:05 Bitcoin is a pretty new thing.

03:09:07 So the possible trajectories of how the world evolves

03:09:10 together with this new monetary technology

03:09:13 is nearly infinite.

03:09:15 So if it fails, one of those trajectories

03:09:17 surely involves Bitcoin failing.

03:09:19 What would be the reason?

03:09:21 I think the most likely reason that it could fail,

03:09:23 I don’t think this is likely in general,

03:09:25 but I think it is the most likely

03:09:27 of all the unlikely things that could destroy Bitcoin,

03:09:30 is governments go back on a gold standard.

03:09:34 Oh, interesting.

03:09:35 So they make, in your view, a better decision

03:09:38 than the current system, just not the best decision.

03:09:41 Yeah.

03:09:42 I thought you would go much darker.

03:09:44 But, so that’s, yeah, okay, interesting.

03:09:47 So maybe because of Russia, because of China and so on,

03:09:50 because of the current war,

03:09:52 they might reconsider the power that America holds

03:09:57 because of the monetary,

03:09:59 because it being the primary currency,

03:10:01 and they’ll start thinking about going on a gold standard.

03:10:05 Yeah, but it would also require the US and the Europeans

03:10:08 and everybody to want to join in this system

03:10:10 and sing Kumbaya and play nice with each other

03:10:13 around the gold standard.

03:10:15 I think, you know, given that gold already

03:10:17 is about 10 times larger than Bitcoin,

03:10:19 so it has a first mover advantage,

03:10:23 if governments were to go and peg their currencies

03:10:25 to gold again, the price of gold would shoot up 5, 10x,

03:10:30 and it would rise in value a lot more.

03:10:33 Of course, that doesn’t necessarily kill Bitcoin.

03:10:36 No, again, I’m not saying it’s likely to happen.

03:10:37 I’m saying it’s, I imagine, less likely,

03:10:41 less unlikely than all the other unlikely scenarios.

03:10:44 Because, you know, even with a nuclear war,

03:10:46 like 90% of the planet is destroyed,

03:10:50 the 10% continue to run Bitcoin.

03:10:55 That’s a quote.

03:10:57 Okay, there’s a movement,

03:10:59 a community of people referred to as Bitcoin maximalists.

03:11:03 I’ve seen you referred, at least in the past,

03:11:05 as the leader of the Bitcoin maximalists,

03:11:10 probably because of your book,

03:11:12 Bitcoin Standard, consider the Bible in general.

03:11:14 You’re one of the leaders in this space.

03:11:18 Do you regret any of the toxicity and derision

03:11:22 that often or perhaps sometimes originates

03:11:25 from this community?

03:11:28 Definitely not.

03:11:28 I’m not in the position to regret other people’s actions,

03:11:31 so let’s just be clear.

03:11:33 I think the rhetoric of community is,

03:11:37 I reject this rhetoric because I think it’s a way

03:11:41 for kind of political manipulation and subversion

03:11:45 to try and portray people as part of a community

03:11:49 and hold people responsible for other people’s actions,

03:11:52 which I think is ridiculous.

03:11:53 So, you know, some guy on the internet

03:11:55 said something mean to somebody,

03:11:57 and then this is very common,

03:11:59 and I always try and not get involved in these things.

03:12:03 So some guy who identifies as a Bitcoiner

03:12:05 says something to somebody that’s very wrong.

03:12:08 Of course it happens.

03:12:09 Tens of millions of people use Bitcoin around the world,

03:12:13 and a lot of these, I’d say parasites,

03:12:16 people who don’t have anything productive

03:12:18 to do with their life, you know, outrage merchants,

03:12:21 they’ll come out and say something along the lines of,

03:12:24 you know, the Bitcoin maximalists are toxic,

03:12:27 they’re holding Bitcoin back, and they need,

03:12:30 and of course it’s manipulative.

03:12:31 The point behind it is they want to get to you,

03:12:34 they want to get people who are, you know,

03:12:36 not that nobody with 300 followers

03:12:38 who said something silly,

03:12:40 they want to get the notable people

03:12:42 to basically change their message.

03:12:44 So the idea is, you know, I’m supposed to apologize

03:12:47 because somebody with 300 followers

03:12:49 I’ve never met in my life who calls themselves a Bitcoiner

03:12:52 said a mean word, and then I need to apologize,

03:12:55 and I also need to cut down on my rhetoric

03:12:57 about other digital currencies, and I need to do that.

03:13:00 So I’m only responsible for my own actions,

03:13:03 and I don’t recall regretting anything.

03:13:07 Okay, but let me push back

03:13:08 or push further into that direction.

03:13:10 Fine, let’s leave community aside.

03:13:11 Labels suck, for sure.

03:13:14 But you have a spicy way about you on Twitter.

03:13:19 Even in this conversation, you know,

03:13:21 you had some good, strong words to say about movement.

03:13:25 I’ve always believed life is too short to mince words.

03:13:29 One day I’m gonna be dead, and on my deathbed

03:13:32 I’m not gonna look back and say,

03:13:35 I wish I was a little bit more circumspect

03:13:38 in expressing my opinions.

03:13:39 I’m far more likely to think, you know what,

03:13:40 I wish I said what I really think.

03:13:44 Yes, life is too short to hold back your opinion.

03:13:47 The question is, what is really your opinion?

03:13:50 Because you’re many people in one.

03:13:55 So there’s a person that loves,

03:13:56 there’s kindness for the human beings,

03:13:58 there’s a person that gets annoyed,

03:14:00 there’s a person that enjoys disagreement,

03:14:03 there’s a person that enjoys collaboration.

03:14:05 And you can emphasize all of those different things,

03:14:07 each of those different things,

03:14:09 weigh it differently in your online interaction.

03:14:12 There’s some aspects of online interaction

03:14:15 that encourages, in different communities,

03:14:18 online interaction is one community

03:14:20 that encourages kind of derision and mockery and so on.

03:14:24 So you can choose if you want to engage

03:14:26 that part of yourself or some other part of yourself.

03:14:29 Economics is another community that enjoys

03:14:34 being like very straightforward

03:14:36 about their disagreements, pretty harsh.

03:14:38 It’s fun to watch because it feels like you arrive

03:14:41 at the truth much faster because you tear each other apart.

03:14:45 But that’s a choice, that’s a deliberate choice.

03:14:49 And I don’t want to label an entire community of people

03:14:53 by its extremes, I don’t think you should do that.

03:14:56 But there’s cultural characteristics you start to notice

03:14:59 when you go to France, it’s a certain way.

03:15:00 When you go to Britain, London is different than rural.

03:15:04 Britain and New York is different than Iowa.

03:15:08 You start to notice things.

03:15:09 I mean, you don’t want to generalize,

03:15:10 there’s all kinds of people everywhere,

03:15:12 but there’s a certain way of communication

03:15:15 on crypto, Twitter in general,

03:15:16 but also Bitcoin maximalists

03:15:19 that I even early on received a bunch of heat.

03:15:21 I was like, what the hell?

03:15:24 So listen, there’s definitely a difference

03:15:27 when I go to the computer science community,

03:15:29 the machine learning community,

03:15:31 it’s way friendlier than the cryptocurrency community.

03:15:35 I have much more freedom to actually be what I enjoy being,

03:15:39 which is asking simple dumb questions.

03:15:42 Even when I’ve already spent years,

03:15:44 sometimes decades with an idea,

03:15:46 I like asking dumb questions anyway.

03:15:48 The crypto folks punish you for this,

03:15:52 for curiosity, for exploration.

03:15:56 I understand the mechanism

03:15:57 because so many other people come into that community

03:16:00 and they might masquerade as curious,

03:16:04 but really they’re trying to inject,

03:16:06 they’re trying to sell some kind of altcoin,

03:16:08 there’s some scheme, there’s some scheme to make money.

03:16:10 And so I understand,

03:16:12 maybe that’s just the dynamics of the community by nature.

03:16:14 It’s not like you respond appropriately

03:16:18 to the amount of charlatans in the community.

03:16:22 So if the fraction of charlatans is low,

03:16:25 maybe you can afford to be more loving and kind and so on.

03:16:27 And when the fraction of charlatans is high,

03:16:30 you have to be harsher.

03:16:32 Perhaps, perhaps.

03:16:34 But I think also the stakes are extremely high

03:16:37 in this situation.

03:16:38 And I think if you don’t like Bitcoiners,

03:16:40 if you think Bitcoiners are toxic,

03:16:41 wait till you meet fiaters.

03:16:44 The fiat community has financed world wars and genocides

03:16:49 and tyrants and the mass death and destruction.

03:16:53 The fiat community, if you wanna use that term,

03:16:56 I don’t believe that you should,

03:16:57 but I mean, fiat has destroyed the savings

03:17:00 of pretty much anybody who’s lived

03:17:02 through the last 20th century.

03:17:03 Pretty much anybody who’s lived through the 20th century,

03:17:05 no matter where you lived,

03:17:07 Switzerland, US, Ethiopia, Russia,

03:17:09 you’ve gone through fiat problems.

03:17:12 You’ve had hyperinflation, you’ve had bank confiscation.

03:17:15 There isn’t a family in the world today

03:17:17 that hasn’t had its wealth destroyed over the last century.

03:17:21 They all have a story about the inflation

03:17:24 and the hyperinflation.

03:17:25 And Bitcoin offers us a way out of this.

03:17:27 And shitcoins, altcoins are essentially fiat world’s

03:17:34 last gasp attempt to try and salvage fiat,

03:17:39 to try and salvage the idea that some people

03:17:41 will continue to be able to print money

03:17:43 and other people will have to use that money.

03:17:46 You know, this is Twitter, it’s a free market,

03:17:49 it’s the internet.

03:17:50 You don’t have to follow anybody, that’s the thing.

03:17:52 So what I find really objectionable about the people

03:17:57 who are so butthurt always about Bitcoin maximalists

03:18:00 is you don’t have to click follow on people you don’t like.

03:18:04 There are 300 million Twitter accounts.

03:18:06 And if you choose to follow the accounts

03:18:09 that say things that annoy you

03:18:11 and then complain about the fact

03:18:12 that they say things that annoy you,

03:18:15 I’m sorry, but you’re an idiot

03:18:16 that you don’t know how to use Twitter.

03:18:18 Just follow the accounts that you like.

03:18:20 It’s, you know, you don’t have to be part of this.

03:18:24 You don’t have to listen to those people.

03:18:25 You can choose, there are a lot of Bitcoiners

03:18:27 that don’t act like this.

03:18:28 You can just unfollow the ones that you don’t like.

03:18:30 Since in the past year, man, time flies.

03:18:33 I’ve met a lot of them and I enjoy them a lot.

03:18:36 And you build that community of people that you enjoy.

03:18:38 There are less that communicate in the way you enjoy.

03:18:40 And it’s becoming me at this point

03:18:42 that I block with love, I think.

03:18:44 Yes.

03:18:45 Because I did not.

03:18:47 I block very prolifically

03:18:48 and I strongly recommend people continue to block.

03:18:51 I think Twitter is, you know,

03:18:52 you’re not gonna get to interact

03:18:53 with 300 million accounts anyway.

03:18:55 So you wanna be constantly curating the experience

03:18:58 by getting rid of people you don’t like

03:19:00 and following people that you like.

03:19:02 And that’s just how, you know,

03:19:03 after 10 years of using Twitter,

03:19:05 you know, you get, you accumulate the block list,

03:19:08 which is very big, which I’m very happy for.

03:19:09 I’m gonna pass on to my children.

03:19:11 That’s, on your deathbed,

03:19:15 the grandchildren will gather around

03:19:17 and your grandfather can finally share the full list.

03:19:22 Yeah.

03:19:23 So like, again, it’s just a Twitter account.

03:19:25 If it bothers you so much, ask yourself why it bothers you

03:19:28 that some people are so,

03:19:29 I’m not referring to you obviously,

03:19:31 but I mean, the people that are constantly aggravated

03:19:34 about this, I don’t get bothered by anything on Twitter.

03:19:36 I just block immediately.

03:19:38 And I get to curate the experience that I enjoy.

03:19:40 And I recommend people do that.

03:19:43 It’s really a lot less pathetic than complaining

03:19:46 about strangers saying things you don’t like,

03:19:48 which a lot of, and of course the reason for it is,

03:19:51 you know, I mean, when I say it’s stupid,

03:19:53 it’s not really stupid.

03:19:55 There’s an ulterior motive there.

03:19:56 And the ulterior motive is,

03:19:58 hey, I have this shit coin that I made

03:19:59 with five other friends of mine.

03:20:01 And I’d like you to,

03:20:02 I’d like to ride your coattails, Bitcoiners,

03:20:05 and I’d like you to please help me promote this shit coin.

03:20:07 Like this is, I get this practically every week,

03:20:10 whether through email or through Twitter,

03:20:12 where, hey, you know, this is our shit coin.

03:20:15 You know, it’s just like Bitcoin,

03:20:17 but it’s better because it does this and this and that.

03:20:19 And, you know, basically how can we get you

03:20:22 to promote this shit coin for us?

03:20:24 And being straightforward and forthright

03:20:27 is a great productivity hack,

03:20:29 because, you know, you just tell those people,

03:20:32 no, I’m not interested.

03:20:33 It’s a stupid shit coin.

03:20:34 And I wish you quick and swift failure

03:20:36 before you take a lot of people’s money.

03:20:39 And that’s what I genuinely think.

03:20:41 Well, but I’ll just be upfront with the fact,

03:20:44 at least for my taste,

03:20:45 just labeling everything as a shit coin worries me.

03:20:50 So this is my own preference.

03:20:52 It’s not a judgment on you.

03:20:53 It’s just my own preference

03:20:54 that I’m afraid I’ll miss good ideas.

03:20:57 I think when you’re, me personally,

03:20:59 when I’m too certain about things,

03:21:01 when I’m too tribal about things,

03:21:03 I’ll miss actually really strong ideas,

03:21:06 outlier ideas, totally new ideas.

03:21:09 So that worries me.

03:21:10 One of the downsides of the way Bitcoin is,

03:21:16 how much shit is at stake financially

03:21:18 is that it’s less open to good,

03:21:20 and actually by design, that it’s not changing,

03:21:23 like with the hard forks and so on,

03:21:25 that there’s not a kind of curiosity

03:21:28 about exploration of ideas.

03:21:30 Of course, in some way,

03:21:33 that curiosity can start getting injected

03:21:35 when you start talking about other layers

03:21:37 built on top of Bitcoin,

03:21:39 when you start talking about applications

03:21:40 or different things like lightning network,

03:21:43 that’s where the curiosity can emerge.

03:21:45 But still, that’s why with cryptocurrency in general,

03:21:48 I just try to keep an open mind.

03:21:49 And just the shit coin as a term

03:21:52 is just a good statement

03:21:53 that I’m gonna close my mind to.

03:21:54 That’s the way I hear it.

03:21:57 But coming out of your mouth,

03:21:59 because you say a lot of other edgy stuff,

03:22:01 it’s just more you having fun.

03:22:02 That’s the way I hear it.

03:22:03 But if I said something like that,

03:22:05 I would feel like I’m closing my mind.

03:22:08 I mean, let me give you the counter argument to that.

03:22:10 How much time do you spend emailing back

03:22:13 all of these Nigerian Prince email scams

03:22:15 that you know email you tell you,

03:22:16 send me $5,000 and I’ll send you $15 million?

03:22:19 None. None.

03:22:21 Why are you being close minded

03:22:22 to all of these great ideas?

03:22:23 Well, no, but I’m also…

03:22:25 You know, maybe one of them

03:22:26 will actually send you $15 million.

03:22:28 But I don’t know if I know the difference

03:22:29 between the Nigerian Prince

03:22:32 and many other people I do talk to

03:22:34 who are colleagues and so on

03:22:35 that are also emailing me.

03:22:37 And they’re also offering me things,

03:22:39 but they don’t sound as ridiculously spammy.

03:22:42 Yeah, but I mean, the moment that somebody tells you,

03:22:44 hey, I’m gonna give you $15 million for nothing,

03:22:46 just if you send me $5,000,

03:22:48 you know, you’re getting something for nothing.

03:22:49 And essentially, with all of the digital currencies,

03:22:53 it’s the same pitch.

03:22:53 Say, hey, you know, come use this thing

03:22:56 that’ll allow you to do things that…

03:22:58 All of the things that they pretend that they can do

03:23:00 that can be done with computers

03:23:01 without having digital currencies.

03:23:03 You know, we already have AWS that does cloud computing,

03:23:06 that does everything that shitcoins pretend to do.

03:23:09 The only difference is AWS doesn’t have

03:23:11 its own monetary system tacked on top of it

03:23:13 to allow Jeff Bezos to basically print his own money.

03:23:17 But don’t you think there’s some gray area?

03:23:19 So let me go for the historical record

03:23:22 and let’s see if you’ve changed

03:23:23 as a philosopher, economist, human being.

03:23:27 You tweeted three years ago.

03:23:29 Oh, well.

03:23:30 Anyone who believes proof of stake in work

03:23:33 is either one completely clueless

03:23:35 at how and why Bitcoin works at all

03:23:38 or two, a con artist using it as a buzzword

03:23:41 to promote a worthless scam like Ethereum.

03:23:44 Do you still believe that Ethereum is a scam

03:23:50 and in general, proof of stake?

03:23:51 You’re either clueless if you think it’s interesting.

03:23:55 Yeah, no, I still stand by that.

03:23:57 I think the…

03:23:58 Would you classify Ethereum as a shitcoin?

03:24:00 For sure.

03:24:01 It’s the mother asshole from which the shitcoins spring.

03:24:05 The royal, the king shitcoin.

03:24:07 Yeah.

03:24:08 I think the key thing is,

03:24:09 the way to think about there’s another tweet

03:24:11 from a couple of years ago,

03:24:12 which is essentially proof of work

03:24:14 was like the invention of flight.

03:24:16 Like we’ve gotten this machine

03:24:17 and we managed to get it to fly off the ground.

03:24:19 And proof of stake is,

03:24:21 hey, we found a great way to make airplanes cheaper

03:24:25 and faster by not making them fly.

03:24:30 By keeping them on the ground.

03:24:31 Like the invention of proof of work,

03:24:34 the reason the entire digital currency space exists

03:24:38 is because Bitcoin operates based on proof of work.

03:24:40 If Bitcoin was based on proof of stake,

03:24:43 it would have died or been shut down from day one.

03:24:45 But that’s a hypothesis and a lot of people believe that

03:24:49 and I think they have a lot of strong support.

03:24:51 But basically, proof of work is grounded in physics

03:24:55 in the real world.

03:24:56 The proof of stake is more about…

03:24:58 It’s politics.

03:24:59 It’s the Federal Reserve.

03:25:00 It’s exactly what we have.

03:25:02 It’s exactly what we have.

03:25:03 It’s just a group of people who get to decide the rules.

03:25:06 And it’s essentially a system that is,

03:25:09 it’s a security, it’s a company.

03:25:11 So it’s not an innovation in any sense.

03:25:13 It’s a step backwards to what we already had,

03:25:16 which is you get a bunch of people in charge of the money.

03:25:18 Now, the only reason it survives in this,

03:25:22 the reason I call these things scam

03:25:24 and I have no problem with calling them a scam

03:25:25 is because they fraudulently present themselves

03:25:29 as being decentralized.

03:25:31 They present themselves as just being a different way

03:25:33 of doing decentralization than Bitcoin, when it’s not.

03:25:36 It’s just they’re writing Bitcoin’s coattails

03:25:39 and they’re writing the fact that most people

03:25:40 don’t quite understand what Bitcoin is and how it works

03:25:43 to portray themselves as a cheaper, better,

03:25:45 more efficient way of doing what Bitcoin does.

03:25:48 It’s not.

03:25:49 It’s a less legally accountable way

03:25:52 of doing what central banks do.

03:25:54 Right, so and the basic criticism is that

03:25:56 there’s a group of people,

03:25:58 sometimes a very small group of people

03:25:59 that can control the parameters

03:26:01 of the operation of the system.

03:26:03 So over time, you can’t trust,

03:26:06 it’s not gold under the mattress.

03:26:09 It doesn’t have that kind of heart.

03:26:10 It’s not property.

03:26:11 And I really very strongly recommend your discussion

03:26:14 with Saylor for people who want to elaborate more on this.

03:26:16 There’s a bunch of people in charge,

03:26:17 which means that legally,

03:26:20 they should be doing this under securities law.

03:26:23 But even as an anarchist,

03:26:24 if I don’t want to care about that,

03:26:26 the technical implication of it is,

03:26:28 this is never going to be adopted

03:26:30 as a neutral way of transferring value on the internet

03:26:33 because you need something

03:26:35 that enemies can trade with one another.

03:26:37 You can’t have something

03:26:38 that has a small group of people in charge

03:26:40 because A, this small group of people themselves

03:26:43 can be corrupted and B, they can be coerced.

03:26:47 You can put a bunch of people in a room,

03:26:49 put a gun to their head,

03:26:50 and you can change everything

03:26:52 in any of these digital currencies.

03:26:53 And that’s why I think you’ll find a lot more sympathy

03:26:58 among fiaters to shitcoins.

03:27:01 The Keynesian economist to Ethereum fanboy pipeline

03:27:05 is a very strong one because it’s the same thing.

03:27:09 It’s like you like the idea

03:27:11 of people being in charge of money

03:27:13 and you think you’re going to be the one

03:27:14 who’s going to be in charge of money.

03:27:15 So you see a lot of this phenomenon

03:27:18 and you see the same people that want gold

03:27:20 and don’t like central banking, they get into Bitcoin.

03:27:23 Yeah, so just to actually push back on a couple of things.

03:27:27 So one is theater.

03:27:29 It sounds like I’m trying to be a sophisticated Brit

03:27:32 talking about theater,

03:27:34 but for many reasons not making me feel good about that.

03:27:38 So day by day, things change.

03:27:42 You used to be one of those.

03:27:44 So people evolve, people learn.

03:27:46 People that are supporters of Bitcoin

03:27:48 might eventually become supporters of Ethereum

03:27:51 or go back to supporting fiat.

03:27:53 We don’t know.

03:27:54 People evolve for different reasons.

03:27:56 You grow up, you mature, or you become enlightened.

03:28:00 So I think every single person sort of,

03:28:03 as this technology is evolving, as this world is evolving,

03:28:07 as wars break on, as your politics change,

03:28:10 as the monetary system is constantly put under stress,

03:28:14 people will evolve.

03:28:15 So we’re trying to all figure it out together.

03:28:17 That’s why like open mindedness here,

03:28:19 I think for people like me at least seems essential.

03:28:23 I know, so I expect you to be answering

03:28:25 all of the spam emails you get.

03:28:27 I will, prince by prince by prince.

03:28:29 But no, I don’t have a clear understanding

03:28:32 what is a good investment in my time,

03:28:34 what is a good investment in my money.

03:28:36 That doesn’t seem clear because things,

03:28:40 things are good at promoting themselves.

03:28:42 I’m not talking about the different kinds of things

03:28:45 like Ethereum, altcoins, and so on.

03:28:47 I just mean life, like dating, jobs, friendships.

03:28:52 Like everybody’s advertising themselves

03:28:56 as a great investment, right?

03:28:59 But you don’t know and you have to keep an open mind.

03:29:02 And also I don’t, and be sort of self introspective

03:29:06 about what, how like biases I operate under

03:29:12 and ways I delude myself,

03:29:14 like hallucinations that I’m living under.

03:29:16 It’s like breaking out of all these hallucinations.

03:29:19 It’s very hard to introspect thinking like

03:29:22 what are the assumptions under which I live my entire life

03:29:25 that might be actually false assumptions.

03:29:27 That’s a really difficult thought process to take.

03:29:31 It’s a dangerous one.

03:29:32 It’s the nature if you gaze long into the abyss,

03:29:35 the abyss gaze into you.

03:29:37 It’s like Alex Jones talks about this.

03:29:40 I mean he’s living, he’s got demons in his head.

03:29:43 So he has like all these conspiracy theories

03:29:45 that it holds in his head

03:29:46 but it begins to really destroy him.

03:29:48 So it’s a psychological burden to carry.

03:29:51 So if you question, if you question authority,

03:29:53 if you question government, if you question culture,

03:29:55 the way things have been done, it’s really difficult.

03:29:59 And the biases you operate under,

03:30:02 it’s really difficult to question them.

03:30:03 So I think like being constantly open minded

03:30:07 and self critical, not constantly,

03:30:10 but a little bit every day is important I think.

03:30:12 Yeah, but I mean, you know, you’re talking to somebody,

03:30:15 I grew up in Ramallah in Palestine in the West Bank.

03:30:18 I’ve changed my mind on all kinds of different things.

03:30:22 The fact that I was even open to the idea of Bitcoin

03:30:25 is required, has required an enormous, enormous amount of,

03:30:29 it’s a heck of a journey.

03:30:30 So I’d much rather appreciate, you know, direct arguments

03:30:34 rather than these kinds of general fluffy,

03:30:37 you know, you should be, oh, of course, yes,

03:30:39 you should be open minded,

03:30:40 but you know, also you come up with conclusions

03:30:42 and you delete spam email sometimes

03:30:44 when you know that it is spam

03:30:45 because you have to move on with your life.

03:30:46 You can’t, there’s an opportunity cost

03:30:48 to considering every spam email, so.

03:30:50 Well, to me, okay, so I’ll just say

03:30:52 from my relatively sort of shallow perspective,

03:30:56 almost like a technical person, mostly,

03:30:59 my understanding of economics is weak.

03:31:02 Proof of stake is not obviously

03:31:07 a weak consensus mechanism relative to proof of work.

03:31:10 So that’s not obvious to me that that goes wrong

03:31:14 and becomes corrupted in the way

03:31:16 that governments get corrupted

03:31:18 because it still seems decentralized.

03:31:21 Now, your criticism of governance is an interesting one,

03:31:24 but if you put that aside,

03:31:26 it still is a decentralized mechanism

03:31:29 and it’s more transparent than the mechanism

03:31:32 that governments operate on.

03:31:33 It isn’t, it’s exactly what the Federal Reserve is.

03:31:35 The Federal Reserve is a proof of stake system.

03:31:37 The Federal Reserve is owned by its constituent banks

03:31:40 and so the rules of the Federal Reserve

03:31:42 and the regulations are determined by the ownership,

03:31:44 which is the banks.

03:31:45 So it’s exactly what the Federal Reserve is.

03:31:47 But it’s too backdoor, the agreements

03:31:50 between the banks and the Federal Reserve.

03:31:53 It feels like a lot of those agreements

03:31:55 are made between individuals that sort of behind the scenes.

03:31:58 It’s not hard to, it’s opaque.

03:32:01 Yes, but the only way that a proof of stake system

03:32:03 will take off is if you have a military

03:32:05 to force people to use it.

03:32:07 That’s the thing.

03:32:08 Ultimately, there’s no way that it’s going to take off

03:32:10 on a free market.

03:32:11 And that’s why for all of the bluster

03:32:14 about wanting to move to a proof of stake system,

03:32:16 Ethereum have been saying this since 2014.

03:32:19 It’s now been eight years that they’ve been talking about it.

03:32:22 We still haven’t seen the proof of stake system

03:32:25 operational in the wild.

03:32:26 It’s vaporware for all practical and intentional.

03:32:28 Oh, Cardano’s proof of stake.

03:32:30 It’s potential.

03:32:31 I mean, you can do it in a centralized way,

03:32:33 but can it survive?

03:32:36 Can it last for a long time?

03:32:38 I don’t think so.

03:32:39 I think it can last perhaps initially with marketing,

03:32:44 with centralized marketing, you can promote it.

03:32:46 But ultimately, user demand,

03:32:50 the people that are not interested in speculating

03:32:53 because they want to get rich on this,

03:32:54 the people that are going to use it,

03:32:55 they’re going to want to use it because they can trust

03:32:58 that it is not going to be messed with.

03:33:00 Yes, but there’s also applications.

03:33:03 That’s also a lightning network.

03:33:04 But there’s applications on top.

03:33:06 Well, the reason I’m interested in things like Ethereum

03:33:09 is you might think it’s ridiculous.

03:33:11 I thought it was ridiculous, but NFTs.

03:33:14 So you can have NFTs probably on top of Bitcoin,

03:33:18 but you don’t because there’s no marketing on Bitcoin

03:33:20 because all of these ideas get promoted

03:33:22 on proprietary shitcoins because, yes.

03:33:25 But there’s the network effects of ideas, of applications.

03:33:28 So they just take off for some reason.

03:33:30 And human civilization is such that you get excited

03:33:33 about stuff and large amounts of people believe a thing

03:33:35 and they start to get excited and it actually has impact.

03:33:38 Like the fact that NFTs can have an impact on the art world

03:33:41 or the world in general is wild to me.

03:33:45 But it worked.

03:33:46 So the question is.

03:33:47 David Rothcall has an impact on the art world.

03:33:50 That doesn’t say much.

03:33:51 Well, I’m saying these ideas have,

03:33:54 we’re collective intelligent beings

03:33:56 and we can believe a thing and that has power.

03:33:59 That has led to major wars and all those kinds of things.

03:34:02 So it’s interesting to me that NFTs took hold.

03:34:07 And the question is, is there distributed DApps?

03:34:09 Is there distributed apps built on top

03:34:11 of different blockchains

03:34:13 that might somehow transform the world?

03:34:14 You have to kind of keep an open mind to that.

03:34:17 Cause right now it’s like,

03:34:19 it’s like I’m the same place with that

03:34:21 as I am with like virtual reality.

03:34:23 It’s like, all right, this seems like a really

03:34:26 intellectually promising set of ideas here,

03:34:29 but there’s something either technically

03:34:31 or socially not quite taking hold.

03:34:33 Why?

03:34:35 And I don’t know what the right answer is.

03:34:37 So with virtual reality, what’s the right answer?

03:34:39 Is it just technically the latency is too high

03:34:43 or the games are not good enough?

03:34:46 Or is it a fundamentally flawed idea

03:34:48 that you can live in a virtual world and enjoy it?

03:34:51 That the physical world is just orders of magnitude better?

03:34:54 Or a two dimensional display is just as good

03:34:57 as a three dimensional world?

03:34:59 I don’t know.

03:35:00 Why is virtual reality not taking off?

03:35:01 It’s been since the 80s, right?

03:35:03 I don’t have strong opinions on it,

03:35:05 on the prospect of the technology.

03:35:07 Personally, I don’t want to ever imagine myself

03:35:10 having something on my eyes.

03:35:12 I’d rather just go out into the real world.

03:35:15 But I don’t have strong opinions on virtual reality.

03:35:17 I do have on dApps and NFTs.

03:35:20 Yeah, what’s your criticism of dApps and NFTs?

03:35:22 Is this a distraction?

03:35:23 It’s a way to sell a flawed technology?

03:35:27 The problem with dApps is, I mean,

03:35:29 it’s just the economics of it makes no sense

03:35:31 in the sense that currently,

03:35:35 if you wanted to run an application,

03:35:37 whatever the application is,

03:35:40 you want to run it on AWS,

03:35:41 you pay a specific amount of money,

03:35:43 you want to run it on your own laptop,

03:35:44 you pay a specific amount of money per kilobyte of data.

03:35:48 If you wanted to run the same thing on a distributed ledger,

03:35:50 where you’re distributing the data

03:35:52 over thousands of computers worldwide,

03:35:54 it’s infinitely more expensive.

03:35:56 And that’s why we haven’t seen any of these dApps take off.

03:36:00 And that’s why I’ve said this many years ago,

03:36:03 the only working application

03:36:04 of blockchain technology is Bitcoin.

03:36:07 Because with Bitcoin, you know,

03:36:09 with a few hundred bytes of data,

03:36:11 with a few bytes of data,

03:36:12 you could move a billion dollars worth of economic value

03:36:17 from here to China and move it safely and reliably.

03:36:21 So that power,

03:36:24 I can’t see it being justified

03:36:27 for anything that is not as mission critical,

03:36:29 as moving large amounts of value,

03:36:32 which require very little amount of information.

03:36:34 So when you look at all of the buzzwords

03:36:36 that the Ethereum and other altcoin marketing people

03:36:40 like to use, and you know,

03:36:43 if you want to wonder really why

03:36:44 we come to this kind of aggression

03:36:46 is because we’ve heard all of this, you know,

03:36:48 I’ve had all of these hucksters come to me for years,

03:36:50 you know, it’s been, I’ve had, you know, people in 2016

03:36:54 talk to me about how Ethereum blockchain technology

03:36:59 is going to revolutionize real estate deeds in India.

03:37:02 I remember this guy,

03:37:05 I’m not going to mention his name,

03:37:07 but this guy was, you know, 2016,

03:37:09 and he sold a lot of shitcoins

03:37:11 and he made a lot of money off of shitcoins

03:37:13 based on all these silly ideas.

03:37:15 We’re going to have Blackjack on a distributed ledger.

03:37:19 We’re going to have Indian real estate

03:37:20 on a distributed ledger.

03:37:22 And it’s just, it’s concerned trolling marketing.

03:37:25 You know, oh, there’s a problem with real estate in India,

03:37:28 real estate deeds, blockchain fixes this, buy my shitcoin.

03:37:32 And then people buy the shitcoin,

03:37:33 Indian real estate isn’t fixed,

03:37:35 and the guy gets rich and they move on.

03:37:38 But I mean, I’m still waiting for a dap to actually emerge.

03:37:42 Like, you know, it’s, the promise that we keep hearing

03:37:46 is something completely world changing,

03:37:49 world transforming.

03:37:51 And the reality is not one app.

03:37:53 Like there’s one of my good friends, Jimmy Song,

03:37:56 eventually they refused to go ahead with the bet.

03:37:57 He wanted to bet with one of the Ethereum people

03:38:00 about these daps.

03:38:02 You know, the Ethereum people are constantly saying

03:38:04 those daps are going to grow

03:38:05 and they’re going to have so many applications

03:38:07 and they’re going to have so many ideas.

03:38:09 And the reality is all the apps that work

03:38:11 are centralized apps, you know?

03:38:13 So there is no Uber on the blockchain.

03:38:16 There is no Twitter on the blockchain.

03:38:20 There is no social media on the blockchain

03:38:21 because these are businesses

03:38:23 and businesses require a centralized authority

03:38:25 to make decisions.

03:38:26 You can’t have it be decentralized.

03:38:29 Listen, you’re frustrated,

03:38:30 and I could see it over a few years

03:38:33 of just having dealt with a humongous influx of charlatans.

03:38:37 I wouldn’t say frustrated, I’m amused.

03:38:39 And it’s no, it’s water off my back.

03:38:43 No, but a man that uses,

03:38:45 and a community that uses the word shit coin

03:38:47 is a little bit, you call it amusement.

03:38:50 And I think amusement is a way

03:38:53 to deal with the frustration.

03:38:55 It’s a channel and you have frustration.

03:38:57 Like sometimes when you have to deal with bullshit,

03:39:01 the best way is just to laugh at the absurdity of it all.

03:39:04 And that’s what you mean by amusement.

03:39:07 But the fact is like,

03:39:10 there’s things like artificial intelligence for,

03:39:13 what is it, how many decades, seven decades,

03:39:18 has been off and on promising to change everything.

03:39:23 And it has failed time and time again

03:39:28 to deliver to the promise.

03:39:30 But that doesn’t mean there’s something fundamental

03:39:32 and really powerful about both the small

03:39:34 and the big things going on

03:39:36 within the actual research and development

03:39:39 within those communities.

03:39:40 There’s a lot of exciting developments.

03:39:41 And the scale at which those developments

03:39:44 might actually have a transformative impact,

03:39:46 the time scale is unclear.

03:39:48 It seems like we’re certainly overpromising.

03:39:51 We dream too big and too aggressively

03:39:54 in the AI community, but in a lot of communities.

03:39:56 And I’m happy to give people the benefit of the doubt

03:39:58 when they’re overpromising,

03:39:59 but not when they’re making their own money.

03:40:01 When you start making your own currency,

03:40:03 then you don’t get the benefit of the doubt.

03:40:05 Because if your idea needs you to have a new currency

03:40:08 that you print when Bitcoin is out there,

03:40:10 then I’m gonna go ahead and assume

03:40:12 that you’re doing this for the money.

03:40:13 It’s a good time to mention

03:40:14 that I am actually launching my new coin called LexCoin.

03:40:19 You mean ShitCoin.

03:40:20 Yes.

03:40:20 Oh, God.

03:40:22 I’m gonna have to block you with love.

03:40:26 Okay, one thing I wanted to ask you about

03:40:28 is the Feds, this paper they released in January 20th

03:40:34 on the potential central bank digital currency, CBDC.

03:40:39 What are your thoughts about that?

03:40:40 Is it just another, like, is there pros and cons to this?

03:40:43 Is it at all interesting to you

03:40:45 that they’re even considering this kind of thing?

03:40:47 I used to think that it’s just basically a waffle.

03:40:51 It’s meaningless.

03:40:53 And because as it exists,

03:40:55 the dollar is a central bank digital currency.

03:40:57 The vast majority of dollars are digital.

03:40:59 And, but I think the way that over the last couple of years

03:41:03 I’ve changed my mind on this,

03:41:04 I think there’s some serious substance behind these ideas.

03:41:08 And what they mean effectively

03:41:10 is the disintermediation of the banking system

03:41:14 and giving everybody an account at the Federal Reserve.

03:41:17 This is kind of the really dangerous idea.

03:41:21 And I think this is enormously significant.

03:41:22 Effectively, as somebody who’s lived in the Soviet Union,

03:41:25 what this is, is the return of the Gosbank

03:41:27 on a global scale with modern technology.

03:41:30 So under the Soviet Union,

03:41:31 there was something called the Gosbank or People’s Bank.

03:41:34 And that was the only bank in the country.

03:41:36 And you had an account with the National Bank.

03:41:39 And if you said something wrong,

03:41:42 your money got terminated from the Gosbank.

03:41:45 Now, imagine that combined

03:41:47 with the power of digital technology.

03:41:50 And you can see that this could be

03:41:52 an enormously powerful technology really,

03:41:56 because if banks are out of the picture,

03:41:58 then we changed the fundamental reality of fiat

03:42:03 as being the creation of money through lending.

03:42:05 And then it becomes the creation of money truly by fiat,

03:42:08 by government fiat.

03:42:10 So we moved to a system in which money is just basically,

03:42:14 it’s like we have money that is pieces of paper.

03:42:16 And every time we’ve had money,

03:42:18 we’ve had fiat money that was just pieces of paper,

03:42:20 it collapsed very quickly.

03:42:22 With the current system, money is credit.

03:42:25 And the creation of credit is restricted to some point.

03:42:28 And the creation of credit is self correcting.

03:42:30 I discussed this in the fiat standard.

03:42:32 If the central bank allows banks to create too much credit,

03:42:35 that creates a bubble.

03:42:35 And then there’s a collapse in the money supply,

03:42:38 which prevents hyperinflation from happening

03:42:40 because the money creation is self destructive,

03:42:44 it’s self correcting.

03:42:45 So you end up with an average of like 7% per year increase

03:42:49 because you have 10% for five years

03:42:52 and then you get negative 20% for one year

03:42:55 and it’s correcting.

03:42:57 But now if you get rid of the credit creation mechanism,

03:43:00 it’s just assigning money directly,

03:43:02 we’re likely gonna get much faster inflation.

03:43:04 And I think that’s obviously the huge problem

03:43:08 and perhaps the even bigger problem

03:43:10 is the enormous amount of power

03:43:12 that it gives to governments.

03:43:14 It allows them to create an awful dystopia

03:43:18 where you’ve got your money on your phone

03:43:22 and anything you do is completely supervised

03:43:27 and controlled through your spending.

03:43:28 So they wanna introduce a new lockdown,

03:43:31 then they’ll just make your money not work.

03:43:34 Your money is broken today, you can’t spend money

03:43:36 or you can only spend money in your local supermarket

03:43:39 for the next three months

03:43:40 because you can’t leave your neighborhood,

03:43:42 your money stops working outside of your neighborhood.

03:43:45 This Chinese social credit score system

03:43:48 is an example of this.

03:43:50 And I think, I don’t know, I don’t have a crystal ball,

03:43:53 so I don’t know what the likelihood is

03:43:55 of implementing something like this in the US.

03:43:58 I’ve discussed it with Michael Saylor,

03:43:59 he thinks it’s highly unlikely.

03:44:02 He thinks the people who’ve been pushing this

03:44:05 are very far from the position of power

03:44:07 and the traditional monetary and financial system

03:44:10 is going to survive intact.

03:44:13 I certainly hope so.

03:44:15 I think this would be a terrible thing if it comes to pass.

03:44:17 But I don’t think, many people think

03:44:19 that it is something that would undermine Bitcoin.

03:44:21 Like a lot of common objection to Bitcoin is,

03:44:24 well, governments are just gonna launch

03:44:26 their own digital currencies

03:44:27 and then Bitcoin is gonna die.

03:44:28 And I think this is completely missing the point.

03:44:31 People think Bitcoin is important because it’s digital.

03:44:33 It’s not.

03:44:34 National currencies can be digital.

03:44:36 Bitcoin is important because it’s not inflationary

03:44:39 and because nobody controls it.

03:44:41 Central bank digital currencies

03:44:42 are likely to be very inflationary

03:44:44 and they’re likely to have very strong control at the top.

03:44:47 So if anything, they are an advertisement for Bitcoin

03:44:50 rather than a replacement for it.

03:44:52 If it’s Bitcoin, if it’s gold,

03:44:54 it’s a way for multiple nations to partake.

03:44:56 So if you were to imagine a future

03:44:59 where we move from the fiat standard

03:45:03 back to the gold standard and then to the Bitcoin standard

03:45:06 or skipping that, going directly to the Bitcoin standard,

03:45:10 what would it take?

03:45:12 Is it gradual, is it immediate?

03:45:14 What are possible trajectories that take us?

03:45:17 Well, basically where the final sort of empirical

03:45:19 observation is that you overtake,

03:45:22 Bitcoin overtakes first gold and then bonds

03:45:26 in terms of its monetary power in the world.

03:45:31 But like just specifically from a government perspective,

03:45:34 how do we move the United States, China, Russia,

03:45:37 India, European Union to a Bitcoin standard?

03:45:43 I’m not entirely concerned about

03:45:45 whether governments move or not.

03:45:46 In fact, I’d be very happy for them not to move

03:45:50 as long as possible so that individuals can accumulate

03:45:53 more and more Bitcoin while it’s still cheap.

03:45:56 So the people will move and the governments will catch up.

03:46:01 Yeah, and I think this is kind of what I allude to.

03:46:04 I mean, the point of the fiat standard,

03:46:05 the fiat standard is really a Bitcoin book

03:46:07 and it talks about fiat most of the time,

03:46:10 but it does so to analyze Bitcoin and the rise of Bitcoin.

03:46:13 In the final chapter, I discuss how I think

03:46:16 this relationship plays out.

03:46:22 The way that I tend to think of it

03:46:23 is that most likely what’s going to happen

03:46:25 is we’re gonna have kind of a financial apartheid

03:46:28 where there’s going to be two monetary systems.

03:46:31 One is government controlled and it comes

03:46:34 with increasing amounts of surveillance and inflation.

03:46:37 And then if you want, you can just opt out of that

03:46:41 and get into Bitcoin.

03:46:42 And it’s likely going to be difficult for governments

03:46:45 to stop people from getting into Bitcoin

03:46:48 for all of the technical reasons

03:46:49 that make it very hard to stop Bitcoin.

03:46:52 So then we have this alternative that is Bitcoin,

03:46:54 which is not inflationary and does not have

03:46:57 a central authority that can censor it.

03:47:00 I think gradually is my hope

03:47:04 and I also think my most likely scenario,

03:47:07 but maybe I am biased because everybody thinks

03:47:10 what they want is what’s gonna happen.

03:47:13 I think we’re just gonna witness the same relationship

03:47:16 because governments make their currencies

03:47:18 so that they can devalue them and Bitcoin thrives on that.

03:47:22 And more and more people are gonna learn,

03:47:24 more and more people are gonna find out.

03:47:26 And whether it’s through curiosity or self interest

03:47:29 or through the destruction of the national currency,

03:47:32 all roads lead to a Bitcoin.

03:47:34 So more and more people are gonna buy Bitcoin,

03:47:36 the price of Bitcoin is going to go up.

03:47:38 And as it goes up, Bitcoin becomes a more significant part

03:47:41 of the world economy.

03:47:42 And this is something that the skeptics don’t get.

03:47:45 Like a lot of the academic skeptics to Bitcoin,

03:47:48 they offer up all of these theories

03:47:50 about why they think Bitcoin can’t work

03:47:53 and then they present it and they think,

03:47:56 they’ve delivered the knockout blow

03:47:58 as if Bitcoin needs their permission

03:47:59 or the world is going to need their permission.

03:48:01 Well, the reality is people are gonna join Bitcoin

03:48:02 out of greed, out of self interest.

03:48:05 Number go up technology is really

03:48:07 what’s going to get everybody in.

03:48:10 And that’s really the Trojan horse for fixing the world.

03:48:14 Come for the greed and stay for the revolution.

03:48:16 It’s gonna keep going up

03:48:18 because people don’t like to be poor,

03:48:21 except for most economists and academics.

03:48:24 People don’t like to be poor.

03:48:25 People don’t enjoy getting their wealth destroyed

03:48:28 and they care more about their self interest

03:48:30 than they care about economic theories

03:48:32 about whether this works as money or not.

03:48:34 They see their cousin escaped hyperinflation

03:48:37 and managed to get a bigger house

03:48:38 because they bought Bitcoin five years ago.

03:48:40 They realized maybe I should stop mocking my cousin

03:48:43 and start buying more Bitcoin.

03:48:45 And this is, I think an indomitable force

03:48:47 that’s going to continue.

03:48:49 And one thing, most Bitcoiners tend to lean

03:48:53 toward an apocalyptic transition.

03:48:57 Fiat’s gonna collapse, we’re gonna get hyperinflation,

03:48:59 everything’s gonna be terrible

03:49:00 and then we’re gonna move to Bitcoin.

03:49:02 And I present the case for why I think

03:49:05 maybe that might not be the case.

03:49:07 Maybe we won’t get this kind of apocalyptic scenario.

03:49:10 And this was like the conclusion of the fiat standard,

03:49:14 which is once you realize that mining fiat

03:49:16 is creating debt and Bitcoin is allowing.

03:49:20 So in order to have fiat money,

03:49:22 we need to have people borrow.

03:49:23 We need to have people make loans.

03:49:26 And the problem that fiat money runs into today

03:49:29 is that if you wanna save money,

03:49:31 if you wanna hold savings, you have a problem.

03:49:35 Where do you put your savings?

03:49:36 So you put your savings in debt

03:49:38 in the creation of more bonds.

03:49:41 Wherever you take your savings,

03:49:42 you create a bubble in those things.

03:49:44 And this is why we see a bubble in the stock market,

03:49:46 a bubble in the bond market, a bubble in housing.

03:49:48 It’s because people are looking for savings,

03:49:51 looking for a place where they can save.

03:49:52 All of those things are crappy saving instruments

03:49:54 because they’re like copper

03:49:58 and that there’s nothing to stop the people behind them

03:50:00 to make more of them.

03:50:01 House builders can build more houses.

03:50:05 Governments can issue more bonds.

03:50:07 The crappy fraudulent companies can list

03:50:10 on the stock market and make more stocks.

03:50:12 Well, Bitcoin finally offers us an outlet.

03:50:14 We don’t need to keep creating more debt.

03:50:16 We can invest in this asset that is hard

03:50:20 and that is internationally liquid

03:50:23 and that nobody can make more of.

03:50:25 So there is no bubble in it.

03:50:26 There is no mechanism for somebody to increase the supply

03:50:30 and bring the price crashing down,

03:50:31 like with copper and real estate and bonds.

03:50:34 So Bitcoin is the way out.

03:50:36 And this is why I think there’s a good case to be made

03:50:38 for why the fiat authorities might embrace Bitcoin

03:50:42 because they’ll see it is their way out

03:50:44 of this enormous debt bubble that everybody is stuck in.

03:50:49 Particularly, the richest and most powerful people

03:50:51 in the world and the richest

03:50:53 and most powerful governments in the world

03:50:54 are the world’s biggest borrowers.

03:50:56 They’re the ones in a lot of debt.

03:50:57 So a continuous slow devaluation of the value of that debt

03:51:02 as people upgrade and move on to a hard asset

03:51:05 that continues to appreciate is the peaceful way

03:51:10 that we wind down the fiat ponzi, I think.

03:51:13 You could see it being like a political,

03:51:15 part of a political platform for future people

03:51:18 that run for president, those kinds of things to address.

03:51:21 Obviously, it’s not just for the powerful and the rich.

03:51:26 The people are bothered by the debt.

03:51:28 The people are bothered by everything

03:51:30 that you describe with fiat.

03:51:31 And if you wanna sell yourself in a democracy

03:51:35 as a good leader, you might want to make

03:51:38 that part of the platform.

03:51:39 You mentioned you know Michael Malice.

03:51:41 He just texted me asking me to ask you,

03:51:46 what do you like best about Michael Malice?

03:51:49 If you can spend five to 10 to 20 to an hour

03:51:52 talking about the genius of Michael Malice,

03:51:54 what do you like?

03:51:57 Where does one even start?

03:51:58 Well, obviously, the haircut first.

03:52:00 Yeah, he just gets sexier with age, that’s for sure.

03:52:04 That’s good.

03:52:05 Do you know his ideas, his trolling and humor,

03:52:10 have you gotten a chance to interact with him?

03:52:12 Yes, yes, I’ve met Michael maybe 10, 12 years ago

03:52:16 in New York.

03:52:17 I used to live in New York when he used to live in New York.

03:52:20 Met him a couple of times.

03:52:21 There was a bunch of anarchists in New York

03:52:24 used to throw a happy hour once a month.

03:52:27 It was called the High Time Preference Hoppe Hour

03:52:31 in honor of Hans Hermann Hoppe.

03:52:34 So I met him there a couple of times

03:52:35 and we followed each other on Twitter for a while.

03:52:39 Is it interesting that you’re aware

03:52:41 of philosophical differences in your worldviews?

03:52:45 No, I think we pretty much see eye to eye.

03:52:48 I think the difference is mainly that he spends

03:52:51 a lot of time focusing on American politics

03:52:53 and American pop culture,

03:52:55 which I don’t pay much attention to, I guess.

03:52:57 So you look more at the monetary system,

03:53:00 the economics of it all, and just the history

03:53:02 and just looking at it, zooming out at the big picture

03:53:07 of it all.

03:53:07 Although recently he’s working on a book called

03:53:09 The White Pill and he’s been, every time I see him,

03:53:14 I mean, he’s in some dark aspect of the 20th century.

03:53:18 He’s just like, I just finished writing about Holodomor.

03:53:22 As you might imagine, he’s not taking much, I believe,

03:53:25 of a monetary perspective on things.

03:53:27 His book, his writing, at least for time,

03:53:30 has a kind of philosophical ideology perspective

03:53:34 that’s outside of the monetary system.

03:53:37 But you argue that those are actually inextricably linked.

03:53:41 Yeah, and I don’t think he would disagree.

03:53:43 He would.

03:53:44 But a book has to be, can only be so long, I suppose.

03:53:49 It can only focus on so many things.

03:53:52 If you can put on your wise sage hat

03:53:56 and give some advice to young people.

03:53:58 I mean, the past four hours have been a kind of advice,

03:54:02 but if you can focus, and if somebody in high school

03:54:05 or college is thinking about what to do with their career,

03:54:09 can have a successful career, or to have a life

03:54:11 they can be proud of, what would you tell them?

03:54:13 I’d say probably the most important advice

03:54:15 that I would give is to find a way

03:54:17 to give value to other people.

03:54:20 This is really the key thing.

03:54:21 You need to wake up every morning

03:54:23 and figure out how to serve others.

03:54:25 This is the key to everything you want in life.

03:54:30 Everything that you want is on the other side

03:54:32 of you serving others.

03:54:34 So figure out how you can serve others in a good way,

03:54:37 how you can do it in a way that they value.

03:54:39 And you’ve got an incredible mechanism

03:54:42 for figuring that out, which is the market.

03:54:45 Go out there and do things for other people.

03:54:47 And you know, the market will tell you.

03:54:49 The market will tell you exactly.

03:54:51 If you’re young, you have the enormous advantage

03:54:53 of being able to make mistakes, essentially,

03:54:56 and learn from them.

03:54:58 So go out there, do things of value for others,

03:55:02 figuring out how you can do something that contributes,

03:55:06 what is it that you can do that contributes

03:55:07 the most value to other people’s lives?

03:55:10 And increasingly, I think with the modern technology,

03:55:13 this is increasingly becoming online.

03:55:15 And I think you should consider

03:55:18 how you can create value online,

03:55:21 because that scales beyond anything that you can do

03:55:25 in the physical world in a very, very,

03:55:27 well, maybe not beyond, obviously,

03:55:29 there are profitable businesses in the physical world.

03:55:33 But I think online is enormous potential,

03:55:36 and coding, I think, is enormously powerful.

03:55:39 I’m not a coder myself, but I strongly recommend

03:55:41 people get into learning how to code.

03:55:44 And I think it’s probably the thing

03:55:46 that carries the most power.

03:55:48 So initially, we were working with our hands,

03:55:51 we started working with machines,

03:55:52 machines are much more productive.

03:55:54 Well, code is an even higher level of productivity

03:55:57 where you basically program the machines to produce things.

03:56:00 So, you know, few clicks of a keyboard,

03:56:05 and you can move millions of machines

03:56:07 around the world in certain ways.

03:56:09 So it carries an enormous amount of value.

03:56:11 I think I always tell all young people to learn to code,

03:56:15 it’s the best thing.

03:56:16 I used to tell it to my students when I was at university,

03:56:18 I tell them to drop out and go learn to code.

03:56:21 It’s probably a better use of their time and money.

03:56:23 Well, you could probably do both.

03:56:25 Yeah.

03:56:26 University has an interesting function.

03:56:28 I mean, probably you and I have different perspective

03:56:30 on this, probably has to do with a little bit

03:56:32 of a different journey in terms of fields,

03:56:35 because I’m so, I’ve stayed engineering focused

03:56:38 for a long time, and there’s less,

03:56:40 some of the troubles you might highlight

03:56:41 in the education system, there’s less troubles

03:56:44 of that kind in engineering,

03:56:46 because math hasn’t changed for a long time.

03:56:49 So a lot of it is just doing hard things,

03:56:53 being forced to do hard things,

03:56:55 and becoming a bit of a generalist,

03:56:57 while on the side, you’re also becoming a specialist

03:57:01 based on your own passion, driven by your own passion.

03:57:04 So school, at least high school,

03:57:06 I don’t know about the university,

03:57:07 but high school has a really nice,

03:57:11 one of the only times in your life,

03:57:13 at least in my life, I was forced,

03:57:17 but now I see given the opportunity

03:57:20 to spend my entire day learning broadly.

03:57:24 And that’s something, I don’t know,

03:57:25 the way time works, it just runs away from you,

03:57:28 and you never really get a chance to do,

03:57:30 learn quite that broadly again.

03:57:33 That’s the curse of specialization,

03:57:35 is you kind of never get a chance

03:57:37 to study biology, chemistry.

03:57:39 If you’re a physicist, time runs away from you.

03:57:42 So enjoy the broad education of it.

03:57:46 But yeah, like you said,

03:57:48 find the things that valued by the market.

03:57:53 And on the other side of it, you said all the good stuff.

03:57:56 So that’s also a way to get happiness.

03:57:58 Yeah, and I’ll also add,

03:57:59 the horse that I like to whip all the time

03:58:01 is the low time preference aspect of things,

03:58:04 saving with Bitcoin.

03:58:06 So I think my advice to young people is,

03:58:08 when you’re young, you think of the world

03:58:11 in a very short term, generally.

03:58:13 You’re focused on the present,

03:58:15 and you think that everything that’s happening

03:58:17 in the present is the most important thing

03:58:18 that’s ever gonna happen in the history of humanity.

03:58:21 Lower your time preference, think about the future,

03:58:23 think about, think further down the line,

03:58:25 think about the consequences of the things you do,

03:58:28 and then what?

03:58:29 And so you do this now, it feels good today,

03:58:31 but then what happens tomorrow?

03:58:33 You go out, you drink, you enjoy yourself,

03:58:35 well, think about the hangover.

03:58:37 But more in longterm, think about the implication

03:58:40 of living this kind of life.

03:58:42 Think about every decision that you make,

03:58:44 the longterm implication of it.

03:58:46 And part of that is Bitcoin,

03:58:47 part of that is save in Bitcoin.

03:58:49 I urge everybody to put savings in Bitcoin for the longterm.

03:58:54 Don’t buy Bitcoin for the short term,

03:58:56 don’t buy Bitcoin today so that you can sell it,

03:58:59 don’t put your savings in Bitcoin today

03:59:00 so that you can sell it all next month and buy a house.

03:59:04 Put money in Bitcoin that you expect to keep in Bitcoin

03:59:07 for another five, 10 years or so,

03:59:11 at least four years is what I recommend for people.

03:59:13 So keep a low time preference,

03:59:15 focus on the future, and save in Bitcoin.

03:59:18 And learn about how to buy Bitcoin,

03:59:21 how to learn about all this technology.

03:59:23 Part of this is this conversation,

03:59:24 but there’s so much awesome material out there.

03:59:26 And thank you, by the way,

03:59:28 for this gift of a hardware wallet.

03:59:30 Nice.

03:59:31 So you should definitely invest in it yourself.

03:59:33 And what would you call this?

03:59:36 These are?

03:59:37 Open dimes.

03:59:38 Open dimes, yeah.

03:59:39 So this is like USB that you can,

03:59:41 like a hardware device that stores Bitcoin.

03:59:44 Yeah, so you don’t have to worry

03:59:45 about knowing the password.

03:59:47 It contains the password within it and it’s tamper proof.

03:59:50 So you can save the Bitcoin on it and.

03:59:52 So when the apocalypse comes,

03:59:54 you need the value to be stored,

03:59:56 an actual thing that you can have

03:59:58 in your physical possession.

03:59:59 Yeah.

04:00:00 That’s exactly what this is.

04:00:02 You’ve had a heck of a life.

04:00:04 You’ve been in a bunch of places in this world.

04:00:07 A lot of places.

04:00:08 Life is not easy in some of those places.

04:00:12 What has been, if you can take a step

04:00:14 to maybe a bit of a dark step for a short time,

04:00:19 what has been maybe darkest time period,

04:00:23 place you’ve ever gone in your mind,

04:00:26 a dark period of your life,

04:00:28 a struggle you had to overcome, had to survive?

04:00:32 Well, I’m Palestinian.

04:00:33 So that is the tragedy of my life.

04:00:36 I’m Palestinian Jordanian.

04:00:38 My family’s suffered a lot because of this historically.

04:00:43 I grew up in Ramallah in the West Bank.

04:00:47 I wasn’t ideal to see that.

04:00:51 People like to think of it as this intractable conflict

04:00:54 between two bitter enemies.

04:00:55 But the reality of the matter is that it’s not.

04:00:59 A foreign ideology came in with the idea

04:01:02 that this country needs to be occupied

04:01:04 by people from only one religion

04:01:06 and the existing population, which,

04:01:09 I mean, Jews had always lived in Palestine historically.

04:01:12 And at the turn of the 20th century,

04:01:15 they were only 10% of the population.

04:01:16 But then with the birth of fiat money,

04:01:19 incidentally, the link with all of this is that

04:01:22 when the Bank of England went off gold,

04:01:25 a big reason why they were able to pull that off

04:01:28 was that the Rothschild banking family supported them.

04:01:31 And in exchange, the Rothschilds got Palestine.

04:01:33 And the Balfour Declaration was written

04:01:37 by the government of Britain to the Rothschild family,

04:01:42 telling them that they’d like to make Palestine

04:01:47 a homeland for Jews.

04:01:49 So obviously that’s not very convenient

04:01:51 for people who are not Jewish, for whom that is a homeland.

04:01:54 And the past 80 years has been a very painful struggle.

04:01:59 If you happen to not be Jewish.

04:02:01 And obviously, you know, obviously Palestinians

04:02:04 have done all kinds of things trying to fight back

04:02:06 and they’ve done all kinds of wrong things.

04:02:09 But I don’t think you can escape the fundamental reality

04:02:12 underlying this, which is that if you’re not Jewish,

04:02:15 you are being moved out of the land.

04:02:18 And so it’s happened in 1947, 48,

04:02:21 happened in 1976, 1967,

04:02:24 more land was taken over by Israel.

04:02:26 Now you see it with the settlements.

04:02:28 You know, if you ignore the day to day headlines

04:02:31 and you ignore the media propaganda

04:02:33 and you ignore all of this,

04:02:34 there’s a very clear thing that is happening,

04:02:36 which is more land owned by an exclusive ideology

04:02:42 that believes this land needs to be owned

04:02:43 by people from one religion

04:02:45 and everybody else is being kicked out.

04:02:47 And so that is the tragedy of my life.

04:02:52 And my wife is also a Palestinian refugee from Lebanon

04:02:55 and her family was evicted from Jaffa,

04:02:59 which is today on the outskirts of Tel Aviv.

04:03:02 They still have their homes in Jaffa.

04:03:05 Their homes are being, you know,

04:03:06 they got kicked out of their homes

04:03:08 and their lands and their property.

04:03:09 They became refugees in Lebanon.

04:03:11 So my children, you know, it’s an ongoing tragedy.

04:03:14 It’s not something that is,

04:03:18 a lot of the people that think of it as,

04:03:20 you know, they think Palestinians are just out there

04:03:22 to get Israelis because they hate them,

04:03:25 but it’s an inescapable tragedy.

04:03:27 I don’t have a home anywhere.

04:03:29 Is there an escape from this tragedy in the future

04:03:32 that you see if you zoom out across the scale of decades,

04:03:38 will we see,

04:03:41 I hesitate to say peace,

04:03:44 but a significant decrease in human suffering

04:03:50 in this part of the region?

04:03:52 I certainly hope so.

04:03:53 And I think, you know, my interest in Bitcoin comes from,

04:03:58 came from a place of desperation with the situation there.

04:04:02 Traditional politics is a dead end.

04:04:05 I don’t see what I can be doing

04:04:08 to make things better there using traditional politics.

04:04:11 And I think a good friend of mine, Pierre Rochard,

04:04:14 you may know him on Twitter,

04:04:16 one of the brightest minds in Bitcoin in my opinion,

04:04:18 he told me his theory is that Bitcoin

04:04:20 is gonna bring peace to the Middle East

04:04:22 because land is a shit coin.

04:04:24 And I think he’s got a very good point there,

04:04:30 that this fixation with land

04:04:32 and the bitterness with which people have to live,

04:04:35 land is likely to decline

04:04:38 when people are gonna have a form of property

04:04:40 that they can keep.

04:04:42 And so hopefully that will help in one way.

04:04:45 And of course the more obvious way

04:04:47 is that this is a conflict of governments

04:04:50 and it’s a conflict that is financed by fiat.

04:04:52 And from day one, the entirely insane notion

04:04:56 that you could build a national and ethnic homeland.

04:05:01 And of course, this is the early 20th century.

04:05:03 So the idea behind Zionism is coming from the same place

04:05:09 where all these other ethnic nationalisms of Europe

04:05:11 were emerging.

04:05:12 And we saw how well, how horribly these worked out.

04:05:16 But the idea that you could,

04:05:19 it’s one thing to say we wanna build a homeland

04:05:21 for Germans in Germany.

04:05:23 It’s one thing to say we wanna build the homelands

04:05:25 for Germans somewhere else.

04:05:28 And that was Palestine, that was Zionism.

04:05:32 And that was only possible thanks to fiat,

04:05:34 thanks to the ability of the British government

04:05:36 and all these other governments to continue to finance

04:05:39 this colonialist effort over time.

04:05:42 And it continues to finance war

04:05:45 and we see war all over the world continue to escalate

04:05:50 because the people who’d make the decision

04:05:53 to escalate the war are not the ones who are paying for it

04:05:55 and they’re not the ones who are fighting.

04:05:57 They’re the ones who sit in offices.

04:05:59 And in the case of most of Middle Eastern conflict,

04:06:02 it’s people who live abroad.

04:06:05 It’s people who are abroad who are not part of it

04:06:07 who just are emotionally charged to it

04:06:09 because they watch it on TV.

04:06:11 So you have billions of Muslims around the world

04:06:14 and Jews around the world

04:06:16 who feel extremely emotionally attached to it.

04:06:19 They’re not the ones fighting.

04:06:20 They’re not the ones paying their own money.

04:06:22 They’re just getting governments to send money

04:06:24 and to send weapons and to take part.

04:06:27 And it’s fun as a spectator sport

04:06:32 for most of these people

04:06:33 because they don’t get to live in it.

04:06:35 But I got to live in it, I saw it.

04:06:37 I grew up there.

04:06:37 I saw the settlement expansion.

04:06:40 And recently a few weeks ago, I went back to Ramallah

04:06:43 and it’s amazing every time you go,

04:06:47 the settlements are just growing in an astonishing way.

04:06:50 Like it’s not just housing units that are going up.

04:06:55 It’s an entire attempt to build,

04:06:58 to basically suffocate Palestinian areas

04:07:01 and force Palestinians to leave

04:07:03 or keep them living in horrific conditions.

04:07:07 And if I may, just because I have family in Ukraine,

04:07:11 I have family in Russia, since this war,

04:07:15 echoes of similar things are happening

04:07:17 in that part of the world too.

04:07:19 And I shudder to think about the decades to come

04:07:23 of the hate that is brewing,

04:07:25 the suffering that is brewing

04:07:27 based on decisions and pressures

04:07:29 and from not always people directly impacted by this.

04:07:36 So again, it feels like that military conflict

04:07:40 is not just a creation of like people on the ground.

04:07:45 It’s a creation of leaders, power centers.

04:07:48 And perhaps, again, I’m not smart enough,

04:07:52 but even the monetary system probably has a role to play.

04:07:55 I absolutely think it does.

04:07:56 Monetary system is what allows people

04:08:00 to just continue to treat war as a spectator sport.

04:08:04 That’s really what it comes down to.

04:08:06 And it starts with World War I and it’s continued.

04:08:09 And this is why really, I think I’ve said this before,

04:08:13 I’ve tweeted this before and it was a pretty popular tweet,

04:08:15 but it also got a lot of people to dismiss the idea

04:08:20 with mockery, of course.

04:08:22 But I really think Bitcoin is the only technology

04:08:24 that’s going to end World War I.

04:08:26 Once World War I started,

04:08:28 we got into this endless conflict

04:08:30 that’s been ongoing since then.

04:08:32 If you look at all the world’s conflicts today,

04:08:33 pretty much they all trace back to World War I.

04:08:36 And it’s because when that Pandora’s box

04:08:39 of government control of money was opened,

04:08:42 there was no longer a real restraint on war

04:08:44 except complete defeat and complete destruction

04:08:47 and complete death.

04:08:48 The war had to be total.

04:08:50 Before that, under the gold standard,

04:08:54 kings would send professional armies

04:08:57 to fight each other in battlefields.

04:08:59 And as soon as it became clear

04:09:02 that one side was establishing an advantage,

04:09:04 the fighting would stop and the kings would settle,

04:09:10 would agree to new terms.

04:09:12 Because it was extremely expensive

04:09:13 to build a professional army and you ran out of money.

04:09:16 So it was always the smartest thing to do

04:09:18 is to just stop fighting whenever you could.

04:09:20 And wars would take place.

04:09:23 Countries would fight each other in the battlefield.

04:09:25 But in the cities, life went on as normal.

04:09:28 And people within the same cities,

04:09:30 within the cities of the two countries

04:09:31 would be trading with one another.

04:09:33 Life would go on, but the war would be there.

04:09:35 And it was just an independent part of politics

04:09:40 that all right, we have a problem over this piece of land.

04:09:43 Let’s take it outside.

04:09:45 We don’t fight in the civilian areas.

04:09:48 We go to the battlefield.

04:09:49 We fight with professional armies.

04:09:50 And in fact, sometimes the conflicts would be,

04:09:53 the armies would line up

04:09:55 and they would just have a small contingent

04:09:58 of the two armies fight with one another.

04:10:00 And as soon as one of them establishes an advantage,

04:10:02 then all right, well, you won, let’s move on with it.

04:10:07 Governments were far, far, far more careful

04:10:09 about their monetary policy and their, sorry,

04:10:14 their war policy when they couldn’t print their money.

04:10:17 And that has changed with Fiat.

04:10:19 And that has allowed this new emergence of this class

04:10:22 of what I like to call chicken hawks

04:10:24 of people who sit in offices

04:10:26 like the entire foreign policy establishment

04:10:28 in Washington, DC.

04:10:30 People who have never fought in war,

04:10:32 whose children will never fight a war,

04:10:34 who’ll never pay to fight a war,

04:10:36 who’ll never suffer a broken window

04:10:39 in their house because of war,

04:10:41 sitting there and based on these fucking moronic garbage

04:10:45 that they teach at moronic Fiat universities

04:10:48 about politics and geopolitics,

04:10:50 making decisions about, we need to invade that country

04:10:52 and we need to send war there.

04:10:54 And they can do that because they have

04:10:56 this endless money printer.

04:10:57 And that’s why, back under gold,

04:11:01 if you were a warrior, you went and actually joined the war.

04:11:05 And that, the people who pontificated about war

04:11:08 were the people who had experience with war,

04:11:10 the people who were sending their own children to war,

04:11:13 the people who were fighting with their own money.

04:11:15 Now you have all these fat parasitics come

04:11:18 sitting in Washington, DC deciding,

04:11:20 and Washington is just an example,

04:11:21 but all over the world this exists.

04:11:23 People who have never fought,

04:11:24 who’ll never carry the consequences,

04:11:26 are going to devalue the world’s money

04:11:29 in order to go and have other people’s children

04:11:32 fight each other because of stupid garbage

04:11:35 they learned about politics in university.

04:11:40 You said you value low time preference,

04:11:44 but I have news for you, that one day you will die,

04:11:48 as far as we know, you’re a mortal being.

04:11:51 Do you think about your death?

04:11:52 Do you think about your mortality?

04:11:55 Are you afraid of it?

04:11:57 I’ve spent a lot of time introspecting

04:12:02 and thinking about these things,

04:12:03 and I value life a lot.

04:12:06 I value my time on earth a lot,

04:12:08 and you’ll see this in my dealings with people.

04:12:12 Go back to Twitter, why am I so brash and straightforward?

04:12:15 It really is because life is short.

04:12:17 Because I don’t want to waste,

04:12:19 I think on my, I’ve said this before,

04:12:25 on my tombstone, let it be written.

04:12:27 He never let anyone waste his time twice in his life.

04:12:32 His life is short.

04:12:33 Yeah, you can waste my time once,

04:12:35 you can get me to do something,

04:12:36 and then I realize that was a waste of time,

04:12:37 you will never get me to waste my time twice.

04:12:39 And so you show up in my Twitter with something stupid,

04:12:42 you’re never showing up in my Twitter ever again.

04:12:45 You give people a chance, but you’re a fast learner.

04:12:47 Yeah, and I try and use my time very wisely,

04:12:50 and I’m unapologetic about it.

04:12:52 My time is the most precious thing,

04:12:54 and the way to get on my shit list forever

04:12:58 is to try and take away my time and to abuse my time.

04:13:02 If you do that, it’s the one unforgivable sin for me.

04:13:08 And I think that’s really, I think that’s my way

04:13:11 of coming to terms with mortality.

04:13:13 We’re all gonna die, and so let’s make the most out of it

04:13:15 while we’re still here.

04:13:16 And of course, the other way you come to terms

04:13:18 with mortality is you have children.

04:13:21 Given what you just said, doubly so,

04:13:26 it’s a huge honor that you would spend

04:13:27 your valuable time with me.

04:13:29 This is the first time you did it,

04:13:30 so you probably regret all of it,

04:13:32 so we’ll probably never see each other again.

04:13:35 But I’m glad you at least took the chance to do it.

04:13:38 It’s a huge honor, man.

04:13:39 I’ve been a huge fan of yours.

04:13:40 I think you have impact on the world

04:13:44 that you probably are not even aware of.

04:13:46 It’s tremendous, and a lot of people love you,

04:13:49 and your work is important.

04:13:50 Even, you know, I disagree with some things you say,

04:13:53 and there’s people that disagree with you,

04:13:55 but everybody respects you.

04:13:57 And thank you so much for spending

04:13:58 your really valuable time with me today, brother.

04:14:00 Thank you, sir, really appreciate it.

04:14:01 This was not a waste of time,

04:14:02 and I’d be happy to do it again.

04:14:04 Thanks for listening to this conversation

04:14:06 with Savedina Moose.

04:14:07 To support this podcast,

04:14:09 please check out our sponsors in the description.

04:14:11 And now, let me leave you with some words

04:14:13 from the Austrian economist Friedrich Hayek.

04:14:17 Economic control is not merely control

04:14:19 of a sector of human life

04:14:21 which can be separated from the rest.

04:14:23 It is the control of the means for all our ends.

04:14:27 Thank you for listening, and hope to see you next time.