back to indexSaifedean Ammous: Bitcoin, Anarchy, and Austrian Economics | Lex Fridman Podcast #284
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You can't have a permanent war without fiat.
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And I also think there's a case to be made
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that you can't really have fiat without war.
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The following is a conversation with Safety Namus,
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one of the central and most impactful economists,
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philosophers, and educators in the world of Bitcoin.
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He's an Austrian economist, an anarchist,
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and the author of The Bitcoin Standard
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and the new book, The Fiat Standard.
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Safety does not mince words in his criticism of economists
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and humans in general with whom he disagrees.
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For example, Paul Krugman,
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who is a neo Ecclidean economist
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and a previous guest at this podcast.
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Safety's opinions are strong and often controversial.
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I do push back in this conversation,
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playing devil's advocate or trying to steal man each side.
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But as always, I do so in the service of exploring
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the rich space of ideas that Safety has
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about human nature and human civilization.
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I trust the intelligence of you, the listener,
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to come to your own conclusions.
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That is the burden of being a free thinking human.
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It is on each of us individually
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to dive into this chaos of ideas.
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And from that chaos,
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discover long lasting universal wisdom to live by.
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This is the Lex Friedman podcast.
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To support it, please check out our sponsors
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in the description.
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And now, dear friends, here's Safety Amoose.
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Let's start with a big question.
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And what is the role of money
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in the history of human civilization?
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Money is a medium of exchange.
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The thing that defines money is that it is a good
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that you don't buy for its own sake
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because you wanna consume it itself
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or because you want to employ it
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in the production of other goods,
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which is what capital goods are.
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So we have consumption goods, we have capital goods.
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Money is distinct from those two
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because it is a good that is acquired
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purely to be exchanged later on for other goods.
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So it's not something that you acquire for its own sake,
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you acquire it so that you can then later on exchange it.
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And that's a market good.
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That's a market good like all other goods.
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You acquire food because you eat it,
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you acquire a car to move you around,
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you acquire money so that you can exchange it
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And that's something that many people
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have a hard time grasping,
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of the concept of money as a market good.
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But it is a market good, just like all others.
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And the importance of it is that it allows us to trade.
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It allows us to develop the division of labor,
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which would not be possible
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at any kind of sophisticated level without money.
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So if we live in a small society of 10 people,
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then think about all the things that we can make,
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all the things that we can produce.
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If we're only 10 people isolated from the world,
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there's only very few things that we can make.
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And therefore we can exchange those things directly
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But as, you know, if we get in contact with other societies
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that have more people,
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then the opportunities for specialization increase.
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You know, if there's 10 people,
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the only thing that you can make is the very basics
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you need for your survival.
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But if you're part of an economy of 10 million people,
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there's much more room for specialization.
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You can make a car, you can make a house,
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that's very sophisticated.
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And that relies on the division of labor.
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That relies on you specializing
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in doing one tiny little thing,
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which is not what you consume.
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You know, and you trade that thing
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for all the things that you consume.
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So as the economy becomes more sophisticated
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and involves more people,
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and currently we're all part of an economy
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of almost 8 billion people,
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each one of us produces one tiny little thing.
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And they exchange that thing
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for all the things that they want.
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And so, because we specialize,
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we become more productive
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in doing the thing that we're good at.
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So, you know, there's people out there who are engineers,
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who are designing windshields in cars.
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It's a very specialized thing.
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They sell windshield design to Mercedes Benz.
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And then from that, you know,
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that windshield design is added on
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to millions of cars around the world.
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And from that, they're able to get enough money
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to meet all of their needs.
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So the division of labor is enhanced enormously with money,
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because without money,
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it's very difficult to be able to exchange
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a large number of goods.
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It's very difficult to have a sophisticated economy
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with a large degree of specialization,
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because it's very difficult to find people
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who want the thing that you have
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and have the thing that you want.
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We call this the coincidence of wants.
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And that's really the problem that money solves.
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So you make apples and I make oranges.
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I'd like to have some of your apples,
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but you don't want my oranges.
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And that's, we have a problem of coincidence of wants.
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I need to find somebody who has bananas,
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give them my oranges, take their bananas,
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give you their bananas, and then I take the apples.
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In that case, bananas are a medium of exchange.
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So it's natural that a medium of exchange will evolve
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and will emerge in an economy
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as an economy becomes more sophisticated.
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As we move beyond 10 people and 10 goods,
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it's inevitable that we're going to come to a situation
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where we have the problem of coincidence of wants.
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And the way to solve that is to use a medium of exchange.
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And it can be anything.
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It can be a banana, it can be food stuff,
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it can be any kind of good.
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As long as I acquire the good
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with the purpose of passing it on to you,
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not for the purpose of me consuming it or using it,
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then that's a medium of exchange.
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So when we look at the entirety of human society
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of millions of billions of people,
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you think of them, just a bunch of individuals running around.
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I love the term coincidence of wants.
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So each one of them, it's like a stochastic system.
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They have desires, it's like a random collection of desires,
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somehow rooted in our evolutionary history,
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but mostly random in terms of preference
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of banana or apple, that kind of thing.
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And then they also have the capacity for competence
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and excellence in particular kind of labor.
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So like specialization, they're able to be like incredible
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at a particular set of tasks.
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So there's a bunch of ants running around
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with consciousness and intelligence,
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and they have desires and they have capabilities.
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And then there's a coincidence of both the wants they have
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and the capabilities they have,
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and you wanted to create a system
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that kind of exchanges those things.
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So when you imagine like what is a good, what is markets?
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When you imagine a market is like a hierarchical system,
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what do you imagine?
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A market is just the name
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for the naturally emergent phenomena
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of people voluntarily exchanging things.
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It's at any scale.
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At any scale, yeah.
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Individually, it could be a market of two people
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on an island on their own.
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It could be 8 billion people across the planet.
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Naturally emerging.
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Yes, this is the thing I think that is very hard
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for many people who don't have a good understanding
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of economics to grasp that capitalism and markets
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are not something that you need a central planner
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or a government officer to make happen.
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Capitalism is just what happens
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when people are left to their own devices.
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It's just our cognitive capacity allows us to develop tools
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that we can use for production.
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And that's what we do.
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That's what humans have been doing
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since they started making spears to hunt.
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That's the first capital good probably.
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So we're constantly accumulating capital.
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We're constantly trading with one another.
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We find an opportunity.
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You've got a lot of oranges.
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I've got a lot of apples.
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Then I'll take some of yours.
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You'll take some of mine.
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We're both better off.
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This is just a naturally emergent thing.
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And money is what makes it enormously powerful.
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Money is what allows it to scale really.
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Money is what allows it to go beyond small societies
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into just something that is global.
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Because with money, again, as I was saying earlier,
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all you need to do is specialize in doing one thing,
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the thing that you do best,
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and then you exchange that for money.
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And you don't have to worry
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about whether the other people involved in this
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want what you have and have what you want.
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You just sell it for money to whoever wants it.
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And you buy whatever you want from whoever has it.
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And that's an enormous reduction in the mental burden
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of how a market economy functions.
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So the first thing that I would say about money
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is that it allows for the division of labor
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and it allows for the market system to grow.
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And the second thing is that money is a mechanism
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for storing value into the future.
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So again, as humans, we develop the capacity
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to think for the future.
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We make a spear so that we can hunt,
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and then we see that it works.
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And then we take it out of the animal
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that we hunted it with,
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and we keep it for the next day's hunt.
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And then we start making a better spear,
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and we make a better fishing rod,
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and then we make a fishing net,
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and then we make a fishing boat.
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And that's our ability to think of the future.
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And as we start building durable goods,
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we start thinking more and more of the future.
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We start becoming more and more future oriented.
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And that's really the process of civilization,
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the process of denying our needs now
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in order to think for the future.
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So instead of spending all of our day on the beach,
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enjoying ourselves, we take time off from leisure
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on the beach and spend some time making a spear
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or making a fishing rod so that our productivity
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in hunting or fishing tomorrow is gonna be higher.
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And so that ability to think for the future
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is enhanced by our ability to provide for the future.
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And we do that with durable goods.
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But then money ends up being the best mechanism
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for providing for the future,
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because the future is uncertain.
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So you can save your apples and oranges.
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You can save the spears.
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You can save the animal that you hunted.
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But these things, first they rot.
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They're not very good at holding onto their value over time.
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But even if they were,
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even if you have objects that are durable,
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the problem with them is that you don't know
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if you need them tomorrow or next month or next year.
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You're not sure if you're going to be needing them.
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And you might end up not needing them.
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And you might end up not finding anybody who needs them
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or finding somebody who needs them,
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but doesn't value them much
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and won't give you much in exchange.
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Money allows you the optionality
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of saving the most liquid good, the most saleable good.
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So it's something that you can sell tomorrow
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with the least uncertainty.
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It has the most liquidity, the most ability
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to be sold without a loss in its value.
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So money is our most advanced technology
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and our best technology for moving value into the future.
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And so I think history really,
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I argue this in all my books,
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is that really history we see,
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we can think of it as a process of our money gets harder.
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And so our money gets better
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at holding onto its value for the future.
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And by harder, I mean harder to produce.
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We find things that are hard to produce
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that are better at holding onto their value.
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So they hold onto their value better for the future.
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And that allows us to plot and plan for the future.
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That makes the future less uncertain.
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And that makes us more future oriented.
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In other words, it lowers our time preference.
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And the harder the money is,
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the better it is at allowing us to think of the future.
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So people should know that you've written the book
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Bitcoin Standard from 2018, I believe.
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And then a new book called Fiat Standard.
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The Bitcoin Standard is considered kind of the Bible
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in the cryptocurrency space, in the Bitcoin space
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of just a very rigorous systematic explanation
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of why Bitcoin, what is it, why should it be,
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So you're describing in that book and in the new book,
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different implementations of the technology of money.
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In the new book, you talk about fiat money,
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which is another way to do money.
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So obviously, there's a lot of different ways to do money.
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And maybe you haven't discovered the best way to do money,
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yet our conversation today is how to do money better.
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Maybe we'll go back to bananas eventually, right?
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Very good reasons why we won't.
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Well, we can disagree.
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We can agree to disagree on this.
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I'm open minded to the bananas.
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One of the biggest source of joy to me
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when I first came to this country is eating bananas.
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And so maybe money, happiness, perishable happiness
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will eventually become the best medium of exchange.
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I don't know, open minded.
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Anyway, so you mentioned hard money and soft money.
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So there's different ways to do money.
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What is hard money?
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What is soft money?
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In the Bitcoin standard, I present the argument
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that money is always whatever is the hardest thing to make.
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Historically, I think we see many examples of that.
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So for instance, in prison, people use cigarettes as money
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because nobody can make cigarettes in prison.
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In societies, we have the example of Yap Island,
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for instance, it's an island that doesn't have any limestone
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but there's a nearby island that has a lot of limestone.
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And it's very expensive obviously with primitive technology
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to move limestone from Palau to Yap.
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So on Yap, limestones were money.
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Seashells, rare seashells that are not easy to find
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end up serving as money in places where they're rare.
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Glass beads were money in West Africa
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where there was no glass making technology
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because they were imported from abroad
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and they were very hard to make.
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And I think there's a conscious effort
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of some people might recognize the hardness
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and the scarcity and choose this as money.
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But I think what's more important
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is just a natural evolutionary process
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whereby people choose all kinds of random things as money,
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bananas maybe even.
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But then the people who end up making these bad choices
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don't end up with any wealth left.
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Whereas the people who store their wealth
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in the things that are hard to make
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end up maintaining their wealth
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and maybe even increasing it over time.
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And of course this culminated in the 19th century,
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in the end of the 19th century
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by basically the entire planet being on a gold standard.
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What is a gold standard?
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The gold standard is basically when money is gold
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or at least government currencies backed by gold.
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But the reason gold became money
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and not copper, not nickel, not bananas
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is that gold is the hardest metal in the world.
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And it is the hardest metal to increase the supply of.
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And the reason for that is based in chemistry.
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So gold is indestructible.
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You can't destroy gold in any meaningful sense.
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It's been accumulating stockpiles for thousands of years.
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The gold that was worn by Nefertiti back in ancient Egypt
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is today probably in somebody's necklace
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or in somebody's gold coin.
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So for thousands of years, humans have been digging for gold.
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They dig it out of the ground, they refine it
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and then they put it in a jewelry or a coin
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and then it just stays there.
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It gets melted down into new other forms.
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The jewelry gets turned into coins
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or coins get turned into bars.
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But it's just stockpiles that are accumulating.
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On the other hand, every year we get better
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at our technology of looking for gold.
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There's more people all over the world.
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The population increases, the technology improves.
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So we keep finding more and more gold
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and we keep making the stockpiles bigger.
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However, because we're constantly adding to a stockpile
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that is not being devalued,
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sorry, that is not being consumed
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because there's no way of consuming gold.
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You can't eat it, you can't burn it, it doesn't rust.
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Because of that, we're constantly adding
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to a constantly growing stockpile.
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So if you look at the numbers,
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you see over the last 100 years,
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we've got pretty reliable data on gold production worldwide.
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We see that pretty much gold stockpiles increase
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at around one and a half to 2% per year, every year.
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So yes, we're making more every year,
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but we're making more so we're adding to the stockpile.
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The stockpile grows more.
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So every year we're adding only around one and a half
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Compare that to the second highest,
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the second hardest metal historically was silver.
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And that increased historically at around maybe 5%
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Now it probably increases at something like closer to 30%
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because it's now getting used extensively
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in industrial uses.
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So when you use it in industry,
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when you put silver in a laptop or in a camera
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or in a machine, effectively,
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you are consuming the stockpile
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because it's not used as money.
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It's taken out of the monetary stockpile.
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So over the last 150 years, since 1870 in particular,
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and I discussed this in detail in the Bitcoin standard,
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what happened in 1870 was Germany won
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the Franco Prussian war and Germany was on a silver standard,
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but the value of silvers was declining.
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So Germany did something very smart,
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which is they took their indemnity from France
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in silver and gold and use that big chunk of gold
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to switch to going on a gold standard.
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And since then, silver has been collapsing in value
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So back then the price of an ounce of gold
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was around 15 ounces of silver.
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Today it's closer to 100.
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It's just been declining for the last 150 years.
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And so because of that, because of the fact
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that it's lost its monetary role
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as people shifted toward gold,
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the value of silver went down
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and so it became economical to use it
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in more and more industrial applications.
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So the stockpile declines and then as a result
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that weakens its monetary properties
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more and more and more.
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So that's why by the end of the 19th century,
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I mean at the beginning of the 19th century,
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gold and silver were money.
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By the end, it was basically only gold.
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And the countries that were still on a silver standard,
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China and India in particular suffered enormously from it
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because their money was devaluing very quickly
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next to gold and so Europeans who would come to China
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or India were able to buy things
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at practically a big discount.
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So I hope it's okay if I ask very simple,
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very basic questions.
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There's few people in this world that are good,
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as good as you are at answering very basic,
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almost ridiculously basic questions
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because I think exploring questions like what is money
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is a really great way to think from first principles,
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to really think deeply about this world.
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So I really appreciate you doing that.
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When you say standard, what does it mean?
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When you say silver standard, gold standard,
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again with a basic question.
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The term really I think was based out of gold.
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The first time this came out was the gold standard
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because so I said gold was money
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at the end of the 19th century,
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but it wasn't just that everybody was using gold coins
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and trading with gold coins
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because that's got a problem of divisibility.
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So a lot of things are worth less than one gold coin.
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So how do you buy that thing?
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And the answer was that you created the monetary instruments
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that were backed by gold and so currencies,
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national currencies under the gold standard
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were specific units of gold
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and that's how a gold standard functioned.
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Money was gold, but you had pieces of paper
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that were redeemable in gold.
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So you could go to the central bank,
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you'd give them the piece of paper,
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the $100 bill or the $10 bill
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and they'll give you gold in exchange
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and they give you a specific quantity of gold in exchange.
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Effectively, the paper was just a receipt for gold.
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So the paper exactly represented the amount of gold.
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Exactly, that was the plan.
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That was what it's supposed to do,
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but arguably we never had a pure gold standard
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because the nature of gold means
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that the people who are in charge of the gold,
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they have an enormous amount of power
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because the gold is concentrated with them
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and as long as not everybody shows up at the same time
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asking for their gold,
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then you can make more receipts than you have gold.
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So there's always shady stuff going on,
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but at least that's the state of gold
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is the receipts should exactly represent
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the amount of gold there.
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And also when you say standard,
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it means that governments sort of publicly stated
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that this is the approved,
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the main way of making transactions that are monetary.
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So this is the money, this is the official money
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that you should be using if you live in this country.
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Yes, although I would say it's more like
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the other way around.
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It's not that the governments established gold as money.
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It's more like gold gave the governments
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the credibility for their currencies.
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So governments were not the ones that made gold money.
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Gold has been money before states were invented.
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States, if you have a government
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and you'd like to have some legitimacy
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and you'd like to be able to deal with other governments
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on an equal footing, you had to go by the gold standard.
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You had to have a currency that was redeemable in gold
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so that you could trade with the rest of the world
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so that people could in your country use that currency.
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So it's not that governments were choosing gold.
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It's more like they were having to adapt
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their own currencies to gold
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in order to give their currencies credibility.
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So there's a dance there though,
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because if they had to,
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then why did they switch away from it after?
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So there is a dance where the governments,
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the people pressure.
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So first of all, the basic characteristics
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of the hard money pressures the governments
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and the people in terms of what should be used.
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Then the people, based on their community,
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the network effects, the narratives they tell each other,
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all that kind of stuff, they pressure the governments
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to take on a particular money.
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Then the governments, they like power,
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they like control, all those kinds of things.
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They pressure the people
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and tell different kinds of narratives.
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So there's a dance going on in this evolution
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of what technology to use for a monetary system.
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So the reason I don't know if governments had to,
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because they clearly didn't have to,
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because they eventually moved away from it.
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But there was pressure probably.
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Yeah, but even after they moved away from it,
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central banks, until today,
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they still hold a lot of gold reserves.
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In fact, if you look at 1914,
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when the world really went off the gold standard,
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the amount of gold reserves held by central banks
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was a tiny fraction of what it was.
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central banks accumulated more and more gold.
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What ended up happening is they prevented their citizens
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from using the gold, but they continued to use it.
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So gold continued to be money up until 1971
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because effectively the world was on a dollar standard
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and the dollars were backed by gold.
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But then after 1971, even then,
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central banks continued to accumulate gold
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because why would you as a central bank
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want to accumulate pieces of paper effectively
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or credit liabilities of another central bank
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that can produce them infinitely?
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And it's a lesson that's becoming more and more obvious
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to governments today,
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as we see US sanctions taking, say, Russian reserves
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or Afghanistan reserves.
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And this is why we see China and Russia
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have accumulated a lot of gold over the last 10, 20 years.
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So just to return to the question of definitions,
link |
so what is hard money versus soft money?
link |
Yes, so hard, I mean, it's a relative thing,
link |
but the hardness refers to the difficulty
link |
of producing more units of the money supply.
link |
So an easy money would be a money
link |
that is relatively easy to make.
link |
So you can increase the supply by 10, 20, 30, 40, 50%
link |
or something like that.
link |
So pretty much all commodities, all market commodities,
link |
other than gold and silver, they're easy money
link |
and they're not suitable as a monetary medium
link |
because they're being consumed.
link |
So if you look at, and in the Bitcoin standard,
link |
I mentioned this metric called the stock to flow ratio,
link |
which is the ratio of the annual production, the flow,
link |
to the stockpile, the existing stockpile.
link |
If you look at all the other metals,
link |
they're easy money because they're being consumed.
link |
So think about how much stockpiles of copper
link |
there are in the world today.
link |
So copper companies obviously have
link |
some stockpiles of copper.
link |
Major copper consumers will have stockpiles of copper,
link |
but the vast majority of copper
link |
is essentially on a conveyor belt of production
link |
from the mine straight to the consumer good
link |
that it's being used for.
link |
So the existing stockpiles are roughly
link |
in the range of one year's production.
link |
If you take all of the companies,
link |
I don't have exact statistics,
link |
hence it's very difficult to get these,
link |
but it's roughly in the same range.
link |
Like if copper production were to stop completely today,
link |
we'll have about a year's production
link |
stored in various places.
link |
So that makes copper terrible money
link |
because if you started using copper as money,
link |
and this is why a lot of people say,
link |
well, money is a collective illusion.
link |
Money is a social construct.
link |
If we all agree that something is money,
link |
then something is money.
link |
I think this is completely clueless,
link |
and it's usually Marxists who believe this,
link |
obviously no understanding of economics.
link |
It's completely clueless
link |
because even if everybody in society
link |
decided we wanted to make copper as money,
link |
even if we all decided to collectively
link |
take part in this hallucination or illusion,
link |
it would not make copper money.
link |
It would just make everybody who decides
link |
to take part in this hallucination poor, that's it.
link |
It would make copper miners rich.
link |
It would make all of the people
link |
who chose copper as money poor,
link |
and copper would not be money.
link |
It can't work because what happens is,
link |
because of the fact that the stockpiles are so small,
link |
if you buy, you know,
link |
even if you get the 1,000 richest people in the world,
link |
all of the world's billionaires,
link |
they get together,
link |
and they all dump all of the money that they have,
link |
all the stocks, all the bonds, all the gold,
link |
all of the Bitcoin, everything that they own,
link |
they dump it, and they buy copper with it.
link |
What's gonna happen?
link |
Price of copper is gonna go up a lot,
link |
but what's gonna stop copper miners
link |
from flooding the market with even more copper
link |
than what the billionaires bought?
link |
They're gonna dump all of that extra copper production.
link |
If the price of copper is gonna go up
link |
so there will be a lot more copper mining
link |
than all the other metals,
link |
a lot of nickel companies and gold miners
link |
are gonna switch to focusing on copper,
link |
and then we're gonna dump an enormous amount of copper
link |
The value of copper is gonna crash,
link |
and the people who chose copper as money
link |
are just gonna end up with large warehouses
link |
of very cheap rusting metal.
link |
So that's a brilliant description,
link |
and that kind of pushes towards gold
link |
where the stock to flow ratio,
link |
I guess you would say is 1.5 to 2%,
link |
like you mentioned earlier.
link |
That would be like the inverse of the stock to flow.
link |
That's the supply growth rate,
link |
so the stock to flow is the inverse.
link |
But let me push back on,
link |
as somebody who likes human psychology,
link |
let me push back on the collective hallucination
link |
So that's for copper, but what about paper money?
link |
That's not, you can't smoke it,
link |
It's just, it's supposed to represent,
link |
it's supposed to just be the medium of exchange,
link |
and in that sense, what role does collective hallucination
link |
play in the effectiveness of money?
link |
Exactly zero, because all of the paper money,
link |
first of all, there's never been an instance,
link |
and again, this flies in the face
link |
of a lot of what a lot of people like to think about money.
link |
There's never been an instance
link |
where a government came out and said,
link |
all right, we're printing out these pieces of paper,
link |
use them as money.
link |
This one is worth 10 apples or use it for buying things,
link |
and here's the piece of paper.
link |
This has never happened.
link |
They've always taken fiat money, paper money,
link |
all of these things were always born out of fraud.
link |
Initially, it was a receipt for gold,
link |
and then they told you, well, you know,
link |
you don't need the gold anyway, and you have to use this,
link |
and then if you don't use it, we throw you in jail.
link |
And then, so first of all, it doesn't,
link |
you can't enforce this thing,
link |
so it's never really just happened,
link |
and it's never been hallucinated into existence.
link |
People can hallucinate this kind of nonsense
link |
in writing textbooks and books and in academia,
link |
but in the real world, people don't hallucinate money.
link |
People are very careful about what they put their money in.
link |
For people listening,
link |
we're gonna have fun in this conversation,
link |
because you already said Marxist, fraud, hallucination,
link |
just because we use these words doesn't mean they're true,
link |
but they're fun to talk about.
link |
So you have a strong certainty about the way you talk,
link |
which I think is fun,
link |
but allow me in my dumb self to push back,
link |
to play devil's advocate,
link |
and I'll actually ask you sometimes
link |
to play devil's advocate if possible,
link |
because you're smarter than me on all this stuff,
link |
so we want the smartest devil's advocate possible,
link |
and I'm certainly not that, but anyway,
link |
but nevertheless, we are currently on a fiat standard,
link |
so money does have value, paper money,
link |
and the reason it has value
link |
is because we believe it has value.
link |
To what degree, if we put the hallucination word aside,
link |
the belief that something is worth value
link |
is actually value, and is the thing that helps money work,
link |
because you're saying it's fraud,
link |
and the belief is almost valueless,
link |
but how much value?
link |
Can we quantify the value of the belief,
link |
the collective belief?
link |
I should say, all economics is subjective.
link |
I consider myself an Austrian school economist,
link |
and the starting point of all Austrian economics
link |
is that all value is subjective,
link |
so obviously, value only exists
link |
because humans choose to make the valuation.
link |
However, the economic reality of the way that money works
link |
means that it's just a technology like all others,
link |
and so for me, when people say,
link |
well, if we hallucinate that this thing can be money,
link |
then it'll be money.
link |
If we can hallucinate bananas to be money,
link |
then it'll be money.
link |
For me, it's like saying, well, if we hallucinate
link |
that bananas can be spaceships, they'll be spaceships.
link |
I mean, you can call them spaceships if you want,
link |
but a banana's not gonna get you to the moon.
link |
Well, then nevertheless, that's true.
link |
So you're drawing a big distinction
link |
between physical reality and the space of belief,
link |
but it seems like so much power of human civilization,
link |
so much destruction, so much creativity, creation,
link |
happens in our minds.
link |
Absolutely, everything does happen in the mind.
link |
You're not gonna get to the moon,
link |
but you might still have a significant impact
link |
on human civilization if a lot of people believe a thing.
link |
True, but economic reality exists in a way
link |
in which your beliefs are rewarded
link |
when they match up with economic reality,
link |
and they're punished when they don't.
link |
So if you ride a banana and jump off a cliff
link |
thinking you're gonna get to the moon,
link |
that solves the problem of people thinking
link |
that bananas are spaceships by killing people
link |
who think that bananas are spaceships.
link |
And I think, to go back to your question
link |
in terms of paper monies, so yes,
link |
even though ignoring the original sin
link |
of the creation of fiat money,
link |
and ignoring everything that happened before 1971,
link |
all right, well, here we are, people are using,
link |
well, it's not really paper money.
link |
We should say fiat money is predominantly credit.
link |
So it's also a digital currency.
link |
So more than 90% of dollars are digital.
link |
Less than 10% of dollars are physical.
link |
So it is a digital currency,
link |
and all over the world, all these governments
link |
are using digital currencies effectively
link |
with some physical manifestations in paper.
link |
But yet, even within these currencies,
link |
it's still the same analysis,
link |
and I discussed this in chapter four,
link |
the Bitcoin standard.
link |
You look at government monies,
link |
you see that the currencies that have held onto their value,
link |
the ones that have the biggest value,
link |
the ones that play the biggest role in global trade,
link |
the ones that are used as currency reserves
link |
all over the world,
link |
are the ones that have the lowest supply growth rate.
link |
The ones that grow, whose central banks
link |
are the least inflationary.
link |
And on the other hand,
link |
the ones who supplies more inflationary,
link |
similar to copper, end up failing.
link |
You look at Lebanon, Venezuela, Zimbabwe,
link |
these are currencies whose supply increases very quickly,
link |
and therefore, their value collapses.
link |
Whereas the dollar, the Swiss franc, the Euro,
link |
the British pound, the Japanese yen,
link |
they increase at a much lower rate in general
link |
than these terrible currencies.
link |
And that's why all over the world,
link |
you see people are looking to get more dollars
link |
and more of these harder currencies than the easier ones.
link |
So I think this analysis of the hardness of the money
link |
and the ease of money is pretty well supported empirically.
link |
So like you said, you're at least in part,
link |
or in whole, consider yourself an Austrian economist.
link |
So you're perhaps a great person to ask about the basics.
link |
What is Austrian economics?
link |
What is Keynesian economics?
link |
How do you compare the two?
link |
What should people know?
link |
What are the interesting defining characteristics
link |
to you about these schools of thought?
link |
So Austrian economics, the way that I say it,
link |
Austrian economics is economics.
link |
It's, we call it Austrian economics
link |
because economics has been hijacked
link |
by a bunch of frauds, really.
link |
Or people who are wrong, okay.
link |
Well, it's much worse than wrong,
link |
by people who are just essentially propagandists
link |
It's like your opinion, man.
link |
Yeah, well, that's also like your opinion, man.
link |
Well, I also talked to Paul Krugman on this podcast.
link |
So he's, the O speaks enough,
link |
but he's one of the people
link |
that is perhaps most harshly criticized
link |
by folks in Austrian economics perspective
link |
and vice versa, which is a fascinating tension.
link |
Yeah, he's done a great job as an actor
link |
who plays an economist on TV and the internet.
link |
So anyway, now tell me what you really think.
link |
No, but, so the basics of what is Austrian economics?
link |
What is the, what perspective does it take on the world?
link |
Yeah, so I mean, Austrian economics really is
link |
the continuation of a tradition
link |
that it goes back to the ancient Greeks
link |
of studying economics.
link |
Historically, it's really just economics
link |
and that has evolved over time.
link |
And the establishment of the Austrian school per se
link |
came in 1871, 150 years ago,
link |
when Karl Menger, the father of the school,
link |
wrote a book called Principles of Economics
link |
and essentially invented marginal analysis,
link |
which is a big deal in economics.
link |
Marginal analysis is the idea that in economics,
link |
individuals carry out decisions at the margin,
link |
that it's, when you make choice, you're not making it.
link |
For instance, if you're making a choice
link |
between what should I spend my money on,
link |
you're not making a choice whether it is,
link |
this thing is object A or B,
link |
which one is more valuable for me in general,
link |
which one is more valuable for me for the rest of my life.
link |
You're choosing about the next unit right now
link |
at this point, at this stage.
link |
And if you analyze economic decision making at the margin,
link |
it makes a lot more sense and you can understand
link |
why people decide and make the decisions that they do.
link |
Whereas if you don't apply marginal analysis,
link |
things don't make sense.
link |
The key thing that marginal analysis helps us solve
link |
is what is called the water diamond paradox.
link |
So you will die without water.
link |
We all need water and yet water is dirt cheap.
link |
Whereas diamonds are extremely superfluous,
link |
nobody needs them.
link |
Nobody is gonna live or die because they have a diamond
link |
and yet they're extremely expensive.
link |
So why is it that as human beings,
link |
we pay maybe say a dollar a liter for water,
link |
whereas we pay thousands of dollars
link |
for a few grams of diamonds.
link |
Why is this the case?
link |
Do we value water less than diamond?
link |
The answer is no, but at the margin where we are right now,
link |
you live in a place where water is very abundant
link |
because cities are only built in places
link |
where water is abundant.
link |
And you're only making a choice
link |
about the next unit of water.
link |
And so water is extremely abundant
link |
and you're choosing about whether to spend
link |
the next unit of money on water.
link |
The valuation that you give to water,
link |
given that you have a lot of water at home
link |
and that you live in a place that has abundant water
link |
is pretty low to the marginal unit,
link |
but it's very high for water overall.
link |
So if I asked you,
link |
how much would you spend for water in general?
link |
How much would you pay for water for all of your life?
link |
It would be a lot higher than diamonds.
link |
If I told you, you can only have water or diamonds
link |
for the rest of your life.
link |
You choose water, obviously,
link |
but nobody's ever had to make that choice.
link |
You only make your choices at the margin.
link |
So at the margin where we are, modern civilization,
link |
we have an abundance of water.
link |
That's why we have civilization
link |
and diamonds are very rare and scarce.
link |
And people are only buying,
link |
you buy your first diamond when you're gonna get married,
link |
you give it to your wife
link |
and that's gonna be the first few grams of diamond
link |
that she's ever gonna own.
link |
Giving my wife water.
link |
You should definitely give her Bitcoin instead of diamonds.
link |
I tell my wife, I occasionally remind her
link |
of how many Bitcoin we could have had
link |
if I bought her Bitcoin with the price of the diamond ring.
link |
What's the downside of, by the way, diamonds
link |
from the analysis of like gold and so on?
link |
Ah, that's a great question.
link |
Arguably, diamonds are a scam.
link |
Because they became popular as a thing in marriage
link |
after gold was banned,
link |
after gold ownership was banned in the US in the 1930s
link |
and in many places around the world.
link |
So before that, you'd give gold.
link |
And the reason you'd give gold in a dowry, in a wedding
link |
is because it wasn't just that it's pretty and shiny,
link |
it's because it's money.
link |
And so if you die, your wife can take the gold
link |
and she can live off of it.
link |
It's a demonstration that you're giving her
link |
something valuable.
link |
And that's because nobody can make a lot more gold.
link |
It has the high stock to flow ratio.
link |
But then they banned gold ownership,
link |
or they allowed people to only own
link |
very tiny quantities of gold.
link |
And that's when the diamond industry stepped in
link |
and marketed diamonds as the thing that you need to give.
link |
But the problem with it is, of course,
link |
that the diamonds aren't like gold.
link |
They're not very hard to make more of.
link |
And the reason we have scarcity in diamonds
link |
is really artificial.
link |
There's effectively a monopoly of diamond producers.
link |
They restrict the supply.
link |
And it's a pretty dirty business.
link |
And the way that they do it is,
link |
all of the talk about blood diamonds
link |
is a way for them to ensure their monopoly.
link |
So if you're part of the monopoly of diamond producers,
link |
then it doesn't matter how many people get killed
link |
producing your diamonds.
link |
If you're out of the monopoly,
link |
then human rights organizations descend on you
link |
and call for shutting you down for selling blood diamonds.
link |
And they're also restricting
link |
the production of artificial diamonds.
link |
This is the other thing.
link |
You can make artificial diamond,
link |
you can't make artificial gold.
link |
So they restrict the production of artificial diamond
link |
and they try and insist that, you know,
link |
you shouldn't take artificial diamonds,
link |
but they're indistinguishable from real diamonds.
link |
So it's an artificial scarcity.
link |
And I think there's gonna come a point at some point
link |
that this monopoly is gonna break.
link |
And a lot of people are gonna be left with essentially
link |
highly devalued jewelry.
link |
I'm gonna take this segment of the podcast,
link |
when I'm getting married, when the sun's up,
link |
and then instead you're getting water or Bitcoin.
link |
Yes, water and Bitcoin is all you need.
link |
So marginal analysis, focusing on the margin
link |
is the thing that allows you
link |
to most accurately capture human nature,
link |
the actual day to day decisions that we humans make.
link |
Yeah, that's really revolutionized economics, so 1870.
link |
And that was Menger's work.
link |
And then he had a student, Eugen Bomberg,
link |
who developed capital theory.
link |
And then he had a student, Ludwig von Mises,
link |
who is arguably the most important economist ever.
link |
And he developed theory of money.
link |
And he wrote a book in 1912
link |
called The Theory of Money and Credit.
link |
And then in the 40s, he wrote Human Action,
link |
which is a big treatise on economics.
link |
And I think this is the correct tradition of economics.
link |
And before World War I, this was just known as economics.
link |
And then after what happened in World War I,
link |
and I discussed this in detail in the Fiat Standard,
link |
is that the Bank of England essentially went off gold
link |
and tried to pass off their own credit
link |
as being as good as gold in order to finance the war.
link |
And incidentally here,
link |
this is part of the history that is not discussed often.
link |
This is presented as an innovation.
link |
Later on, they needed essentially a propaganda school
link |
that would justify what they did.
link |
And later on, it's presented as,
link |
oh, hey, we realized that gold was not good.
link |
And now look, we've built this thing
link |
that is better than gold,
link |
where now the government can just print money
link |
whenever it wants.
link |
And now gold money is not an issue anymore,
link |
which is extremely idiotic
link |
because the whole point of money
link |
is that it's not easy to make.
link |
If it's easy to make, it's not money anymore.
link |
It's just destroying the entire function of money.
link |
And we've seen that happen extensively
link |
in the 20th century
link |
after countries went off the gold standard.
link |
So essentially Keynesian economics
link |
is just inflation apologia.
link |
It's just propaganda to justify inflationism.
link |
And it's profoundly nonsensical.
link |
It's built on the idea that if you just make more money,
link |
you can stimulate economic production.
link |
And of course, this is very self serving
link |
to the central banks and to the banks
link |
and to the governments who promote this nonsense.
link |
And this is also very pervasive.
link |
If you've had the misfortune of studying at a university
link |
over the last century,
link |
you were taught Keynesian garbage economics.
link |
You were taught that if there's a problem in the economy,
link |
the way to fix it is that the government prints money,
link |
the government lowers the interest rate,
link |
and then that leads to more economic production,
link |
which is completely nonsensical.
link |
So you're, again, for the listener,
link |
you're using strong words, you know, push back
link |
just to find, to please devil's advocate
link |
to hopefully one day arrive at the truth.
link |
So just because it's in the interest
link |
of the central banks and the government,
link |
the interests and the models of Keynesian economics
link |
and the government are aligned doesn't mean they're wrong.
link |
So let's give them a chance.
link |
So the conventional wisdom, perhaps economics wisdom,
link |
is that inflation is good in moderation
link |
as it encourages spending,
link |
but too much is bad because it completely devalues,
link |
destroys people's savings.
link |
So a little bit of inflation is good to stimulate spending.
link |
And I mean, I suppose this is one of the things
link |
that's supported by Keynesian economics.
link |
Why is that wrong?
link |
This is basically the whole point of Keynesian economics,
link |
is to try and find an endless array of explanations
link |
to explain why inflation is a good thing.
link |
Well, the chicken and the egg.
link |
So that's the cynical take.
link |
This is a propaganda machine
link |
to sell the government's narrative.
link |
The less cynical take is there's a bunch of economists
link |
who are telling, who...
link |
Who figured out this thing
link |
and it happens to be good for banks and governments.
link |
Just because it's good for them doesn't mean...
link |
And it justifies the existence of government
link |
and your basic, I don't think it's your basic assumption,
link |
but a foundational principle of your thought
link |
is that a lot of government is not a good thing.
link |
Your first gut instinct, government bad.
link |
Like I mentioned, I live next door to Michael Malice,
link |
who probably beats you on the intensity
link |
and how quickly he says government bad.
link |
So there's a potential argument for government good.
link |
Some government is good.
link |
Maybe a lot of government is good.
link |
Maybe we need a lot of centralized management
link |
for resource allocation and so on
link |
because we humans specialize, we're too busy and so on.
link |
So there's an argument for that that exists.
link |
You probably disagree with any possible argument
link |
on that side, but anyway,
link |
so why is that idea of Keynesian economics wrong?
link |
I'm gonna focus for this on the money idea,
link |
the idea that a little bit of inflation is good.
link |
The idea here, I mean, the criticism is that
link |
without inflation, people wouldn't spend
link |
and then the economy would come to a grinding halt.
link |
And that's nonsensical because people spend
link |
not because they wanna keep this magical monster
link |
called the economy going.
link |
People spend because they need to consume
link |
because that's how we live, that's how we survive.
link |
You need to eat, you need shelter,
link |
you need clothes to keep you warm.
link |
And as technology advances, the capabilities
link |
of the things that we can do with our time increases
link |
and so we wanna buy more things.
link |
So people buy things because people want to consume.
link |
There's a limitless desire to consume,
link |
that there's no shortage of reasons for people to consume,
link |
shortage of reasons for people to consume,
link |
whether it's food or Ferraris or private jets.
link |
People just always wanna buy more.
link |
Can I interrupt just really quick?
link |
What about the fear about the uncertainty of the future
link |
where they might want to buy things
link |
but they're really afraid because it seems like
link |
there's a lot like a pandemic going on or whatever it is.
link |
Yeah, that's good.
link |
So fear of uncertainty, can you have too much fear?
link |
Here's the thing, what I was saying is,
link |
I was making the point that we don't need
link |
to be motivated to consume.
link |
Like we have the insatiable desire to consume.
link |
Everybody would like to have more of all kinds of things.
link |
Everybody would like to have a bigger house.
link |
Well, not everybody, some people have a big enough house
link |
but everybody would like a house,
link |
everybody would like a car, jet, all kinds of things,
link |
electronics, machines.
link |
So we don't need a desire to consume.
link |
But of course the limit on how much we consume
link |
is opportunity cost.
link |
Why don't you buy a Ferrari?
link |
Well, because that's really expensive
link |
and it would mean that, well, maybe you do have a Ferrari
link |
but I mean, most people don't buy a Ferrari
link |
because it's too expensive, they can't afford it.
link |
They'd have to work too hard to get it.
link |
And if they do get it, it might mean that
link |
they can't afford their house anymore.
link |
So we have to economize, that's a good thing.
link |
And we have to also think of the future.
link |
And so humans consume,
link |
we don't need more motivation to consume.
link |
We have to deal with the economic reality
link |
of the things that limit us from consuming more.
link |
So what Keynesians present is that
link |
when there is a problem in the economy,
link |
like there was after World War I,
link |
the problem is always caused by the inflation.
link |
And what the Keynesian hucksters do
link |
is that they look at the inflation,
link |
at the consequences of inflation
link |
and blame it on people not spending enough.
link |
When people are doing the rational thing,
link |
the money is, so there was inflation,
link |
caused an unsustainable boom, it caused the recession.
link |
And now a lot of people lost their jobs
link |
and they don't have enough money
link |
to go out and spend frivolously.
link |
So they save for the future, the future is uncertain.
link |
That's a good thing, that's how you fix things.
link |
You begin the recovery by, well, you lost some wealth,
link |
so you spend less, like if your business goes bust,
link |
if you lose your job, it's natural and smart
link |
that you stop spending money
link |
on the frivolous thing that you used to spend
link |
and you save it for the future.
link |
You invest in something else, you get a new job.
link |
And then once you've recovered, you start spending more.
link |
This is very sane and very good
link |
and it's the way to recovery.
link |
But essentially the Keynesians have used this
link |
as a justification for more inflation
link |
because inflation is an addiction.
link |
Once the government gets down the path
link |
of spending money to solve its problems,
link |
then every problem looks like it can be solved
link |
by more inflation.
link |
And so this is where Keynesian economics comes in.
link |
And of course, the Keynesian economics
link |
is based on the work of Keynes, which came in the 1930s.
link |
And this is the key point,
link |
like it's portrayed in the textbook
link |
as if it's just the scientific breakthrough
link |
that somebody in the 1930s, this genius,
link |
came about and realized that,
link |
oh, we don't actually need gold.
link |
We don't need hard money.
link |
We can actually just print all the money.
link |
And in reality, of course, it was just the very thin,
link |
flimsy, idiotic justification
link |
for what governments were already doing for 20 years.
link |
They'd already gone off the gold standard
link |
and they'd gone through 20 years
link |
in which they were lying to their population,
link |
telling their population we're still on a gold standard,
link |
but there are problems caused by various random things.
link |
But don't worry, we're gonna be going back
link |
on the gold standard.
link |
20 years later, after they went off the gold standard,
link |
they come up with this justification for why,
link |
oh, actually the gold standard was bad.
link |
And this is a really pernicious thing about it is
link |
the problems that were caused by us
link |
going off the gold standard
link |
were caused by the gold standard.
link |
And we're going to fix them
link |
by going off the gold standard even more.
link |
Just because government is lying and it's shady
link |
and it does these kinds of things
link |
doesn't mean Keynesian economics is wrong.
link |
So just, because I wanted to separate a few things you said.
link |
It could very well be very wrong
link |
and they could indeed be hucksters.
link |
All of these, such colorful language.
link |
I love you deeply for this, this is fun.
link |
Yeah, but I mean, it's like somebody like Krugman
link |
doesn't use this kind of language when discussing Austrians.
link |
It's just that when actors like him use it,
link |
it's presented as if it is legitimate
link |
because he's part of the major shows.
link |
So the case they make and the criticism Keynesians make
link |
of Austrian economics and the case they make
link |
for Keynesian economics is it's based on empirical evidence.
link |
So Austrian economists are pie in the sky theorists
link |
about like how human nature works.
link |
And it's just all theory.
link |
And just like you said, Keynesian economics
link |
kind of sell it as a science, data driven science.
link |
And so where's the data, bro?
link |
So one way of saying it is how do you know
link |
if we get rid of inflation?
link |
How do you know if we get rid of central banks?
link |
If we push towards that direction,
link |
we will have a better world, a better functioning economy,
link |
better functioning markets, better functioning society.
link |
This is another inaccurate way in which they present.
link |
The economics, they present as if it's just theory
link |
and that the data doesn't matter, but that's not the case.
link |
What the Austrians say is that without guiding theory,
link |
data is mute, data is dumb, data can't say anything.
link |
So theory first, and then you have to have models
link |
to provide context for interpretation of the data.
link |
And it's a sign of just how little self awareness they have
link |
that they think that they're just being led by the data
link |
when they're being led by Keynes's moronic theories.
link |
And they use the data to justify those theories
link |
and to stick by them.
link |
And in fact, they are the ones whose theories
link |
cannot be refuted because it's just
link |
government mandated religion.
link |
So according to Keynes's nonsense,
link |
so the way that they justify the inflationism is this,
link |
and I'm just using this to give an example
link |
of what you're talking about in terms of theory,
link |
the way they justify the inflationism
link |
to tie it back to the original point,
link |
they justified it, all right, we need money to spend.
link |
And then the level of spending in the economy
link |
is what determines the state of the economy.
link |
And I've taught macro economics
link |
at university level for a while.
link |
So I know Keynesian nonsense better than most Keynesians
link |
know Austrians, if not all of them, I guarantee you.
link |
And so the way they see it is the level of spending
link |
in the economy is what determines the state of the economy.
link |
There's a level of output and there's a level of spending.
link |
So there's like the factories on the one side
link |
that are churning out goods,
link |
and those goods have a certain quantity and value,
link |
market value, and it's completely nonsensical of course,
link |
because how can the value of the goods produced
link |
be different from the value of the spending?
link |
But let's put that aside for a second.
link |
So the amount of spending that happens in the economy
link |
determines the state of the economy.
link |
If the value of the production, which they call Y
link |
is higher than the aggregate expenditures,
link |
so this is the production
link |
and then the aggregate expenditure is lower,
link |
then we don't have enough spending to buy all the goods.
link |
And then that causes a recession.
link |
The factories start laying off workers
link |
and then the laid off workers start spending less.
link |
And then that leads to aggregate expenditure
link |
dropping even further.
link |
And so it's a vicious cycle
link |
where the economy gets into recession.
link |
And the only way out is for Keynes's bankster buddies
link |
and government buddies to print a lot of money
link |
to give to themselves.
link |
And then that will...
link |
That's one interpretation.
link |
But to print more money to increase the expenditure
link |
that to match the supply.
link |
To match the level of output.
link |
Sounds pretty good to me, I'm sold.
link |
Even though you're saying huckster, so.
link |
I just, you know, the way, I love you very much,
link |
but like just for people who are listening,
link |
I think it's, I love the way you talk and it's great
link |
and keep doing it, but just for context,
link |
like I don't know anything that involves human nature
link |
deserves this level of certainty.
link |
I, at least my position is that we don't know
link |
what the hell we're doing on basically anything.
link |
Perhaps, but I mean.
link |
Like there's a lot, like certainty can get us in trouble
link |
I don't know much about economics.
link |
I don't even know, you know, financial systems,
link |
monetary systems, but I just seen us get in trouble
link |
with human psychology, certainty,
link |
certainty of ideologies in general.
link |
You mentioned Marxism and so on.
link |
I came from the Soviet Union.
link |
There's a lot of people that are very certain
link |
throughout the history of the 20th century
link |
that communism is the utopia that humanity should strive for.
link |
So I'm nervous around certainty.
link |
I could be wrong, but you know, you ask me for my opinion.
link |
Sorry, so it's that little bit of a caveat.
link |
So to go back to the idea, then on the other hand,
link |
you have the level of, if the other situation
link |
is when the level of spending is higher
link |
than the amount of aggregate output.
link |
In that situation, you have too much spending.
link |
So therefore what ends up happening is inflation.
link |
So according to the Keynesian worldview,
link |
this is really important because this is a way
link |
that I'm gonna get to your point about empirical data
link |
and to show you why they're not correct.
link |
Yeah, they're not correct about what they say
link |
about empirical data.
link |
So then what this means is that there's a level of output
link |
and there's a level of aggregate expenditure.
link |
The aggregate expenditure can either be higher
link |
or lower than the output or equal to it.
link |
If it's higher, we get inflation.
link |
If it's lower, we get recessions, okay?
link |
So is there any universe in this model?
link |
Is there any potential universe
link |
in which you can have both inflation and a recession?
link |
According to the Keynesian model, you can't, right?
link |
Because aggregate expenditure cannot be both higher
link |
and lower than output.
link |
So therefore, if you were truly being an empirical person,
link |
if you were looking at evidence and trying to analyze data,
link |
you'd look at this and say, one example,
link |
you just need one example of high inflation
link |
and high unemployment to refute this entire model, right?
link |
And of course, the world is full of examples
link |
of high inflation and high unemployment.
link |
And that's what happened in the 19, and of course,
link |
they ignored it when it happens in poor countries
link |
because poor countries don't really matter.
link |
But then in the 1970s, that happened in the US
link |
and in the Western economies
link |
and the most advanced industrial economies.
link |
So historically, before then,
link |
you had all these Keynesian central bankers
link |
talking about this model and saying,
link |
well, aggregate expenditure is too low now
link |
and that's why we have unemployment.
link |
So we need to print more money.
link |
And then they print more money, inflation goes up,
link |
but also unemployment goes up because this model is broken.
link |
That's not how the world works.
link |
The level of aggregate spending in the economy
link |
is not a lever with which you can control
link |
inflation and unemployment.
link |
So what would a scientist do?
link |
What would a non Huckster do in this case?
link |
Admit the theory is wrong
link |
and find another way to reformulate it.
link |
Have the Keynesians done that?
link |
No, still the same garbage in the textbook
link |
that is being taught until today.
link |
So is it possible to have a non Keynesian model
link |
where one that still supports
link |
moderate amount of inflation is good for the economy?
link |
I mean, since the 1970s, since this has happened,
link |
yeah, this is what basically most fiat economists,
link |
as I like to call them,
link |
essentially anybody at a university financed by governments,
link |
which is financed by central banks,
link |
which is financed by fiat.
link |
Oh, we'll talk about that.
link |
The effect of fiat money on our life,
link |
as you write about in your book,
link |
fiat standard, one of them is education.
link |
I'm sure we'll disagree there too.
link |
Not smart enough to disagree, but I'll disagree anyway.
link |
So yeah, so a whole bunch of other models came up,
link |
but basically it's such an example of motivated reasoning.
link |
Like anybody who's got a familiarity
link |
with the scientific method
link |
or who's got an engineering background
link |
who comes into economics immediately has a lot of red flags.
link |
And I remember when I used to teach macro economics,
link |
I used to teach introductory macro economics.
link |
And it's a course that would be taken by econ majors
link |
as well as engineers.
link |
A lot of engineers would take it as an elective.
link |
And every time I'd explain,
link |
and I would just teach the Keynesian basic stuff.
link |
And every time I'd explain it,
link |
there's always that smart engineering kid
link |
who just looks at me and says,
link |
sir, this doesn't make any sense
link |
because this and this and that.
link |
And I'm always like, you get it exactly.
link |
Because if you have any kind of shred of scientific thinking,
link |
you see that this is all motivated reasoning.
link |
Like the answer is government needs to print money.
link |
And here's a whole bunch of models brought up by people
link |
for why government printing money is good.
link |
And the reason they're coming up to this conclusion
link |
is that you only get funded
link |
if you come up with this conclusion.
link |
If you come up with a conclusion
link |
that we need to shut down the central bank,
link |
you don't get funded by the central bank.
link |
You don't get published in the journals.
link |
You don't get a job at the prestigious universities.
link |
You don't get quoted by a fiat publications
link |
like the New York Times and CNN.
link |
They don't invite you on as an expert.
link |
Well, that's a fundamental flaw
link |
with a lot of institutions we have today
link |
and throughout human history.
link |
Let me zoom off for just a second to the big question.
link |
What is economics in general?
link |
You said there's a bunch of models.
link |
Is any economist basically trying to throw a bunch of models
link |
about human behavior on the table
link |
and try to generalize it to the global scale?
link |
So both dance between micro and macro somehow
link |
in order to determine public policy
link |
and explain the past, predict the future,
link |
prescribe policies that can control the future,
link |
those kinds of things.
link |
This is the big basic ridiculous question
link |
of what is economics?
link |
Economics is the study,
link |
the way the Austrians define it is the study
link |
of how humans make choices under the condition of scarcity.
link |
We begin with the starting point of economics
link |
as the fact that scarcity exists.
link |
And why does scarcity exist?
link |
Well, because it's easier to want things
link |
than it is to make them.
link |
It's much easier to want a Ferrari than it is to make one.
link |
And so because we have wants
link |
and we have limited means to meet those wants,
link |
we need to economize.
link |
It's a permanent marker of the human condition.
link |
We are always economizing at all times.
link |
And so how people make those decisions
link |
under the conditions of scarcity
link |
is what economists study.
link |
So to go back to your point on empiricism
link |
in Austrian school,
link |
so it isn't that the Austrians don't believe in data.
link |
On the contrary, it's that theory has to inform data.
link |
And in fact, if you think about it
link |
as the example of the stagflation of the 1970 shows,
link |
if you have stagflation,
link |
that just completely refutes the Keynesian model.
link |
The Austrian way of thinking,
link |
which is think from first principles,
link |
understand how the world actually works,
link |
think about how humans act and understand
link |
that economics is really all about human action.
link |
So it's not about aggregates of goods.
link |
This is really the key distinction
link |
in terms of methodology.
link |
For the Keynesians, it's physics envy.
link |
They look at the market economy,
link |
they look at individuals in the market economy,
link |
and they think that they can understand the market economy
link |
by looking at aggregates.
link |
This is really the key point of what I think
link |
makes a certain branch of economics pseudoscientific
link |
is the introduction of aggregates.
link |
When you introduce those aggregates,
link |
how much production takes place,
link |
how many people are unemployed,
link |
the percentage of the inflation rate,
link |
and then you think that you can establish
link |
scientific relationship between those aggregates,
link |
it's purely physics envy.
link |
In physics, for instance, or in chemistry,
link |
you put, let's say, a container that contains a gas,
link |
and you have the ideal gas law, PV equals to nRT,
link |
calculate the pressure, calculate the volume,
link |
and then the temperature.
link |
If you have the pressure and the volume,
link |
you can calculate the temperature
link |
because you have the nR constants.
link |
So there's a clear relationship
link |
that has been demonstrated in a laboratory
link |
and that we can do it right now.
link |
We can measure it and we can see it
link |
and it continues to hold.
link |
And all it takes is one scientist
link |
to show that this relationship does not hold,
link |
to do an experiment that shows that this does not hold,
link |
and it stops being a law of chemistry and it's broken.
link |
Whereas in economics, what they've done
link |
is they've copied the superficial shape of this
link |
without any of the scientific rigor
link |
that was used to build it.
link |
There's no experiments.
link |
You can't experiment on economies.
link |
We don't have the ability to establish laws,
link |
and all the laws that we establish
link |
are just models that get people published
link |
and get them on the media to say,
link |
my model says we need to print more money,
link |
but it's never subject to actual scientific scrutiny.
link |
If it were, they would all be rejected in 15 minutes
link |
because the world is full of examples that contradict them.
link |
Was it possible to do scientific scrutiny
link |
when it's human nature when you can't,
link |
when there's a nearly infinite number of variables
link |
and you can't control them?
link |
Is it possible, so what's the best thing
link |
you could possibly do?
link |
You do thought experiments.
link |
But the problem with thought experiments,
link |
Freud thinks everybody wants to have sex with their mother.
link |
Is he right? That's the problem with Freud.
link |
I don't know, maybe he's right.
link |
Well, obviously I'm joking on that front, but the...
link |
Freud is probably under the canes.
link |
Well, no, I think there's power to the thought experiment.
link |
Just like Einstein, a lot of general relativity,
link |
special relativity, that's a thought experiment.
link |
It originates in a thought experiment.
link |
Nice thing about physics,
link |
you can't eventually have experimental validation.
link |
The downside of economics is you really can't have
link |
experimental, definitive experimental scientific rigor
link |
of validation of a theory.
link |
So a thought experiment is just a thought experiment.
link |
Using your intuition, it's the power of reasoning together
link |
about human nature.
link |
And that's why economics cannot make the claims
link |
that physics can make.
link |
So with physics, you can predict that if you get this gas
link |
at this pressure, at this volume,
link |
the temperature will be that much.
link |
And you can make that prediction and test it a million times
link |
and you'll always get the precisely correct answer.
link |
With economics, we can't make quantitative predictions.
link |
But still, on Twitter, and even today,
link |
you're very certain about the statements you're making.
link |
Yeah, but I don't make quantitatively certain statements.
link |
In economics, we don't make quantitative predictions.
link |
We cannot do that because we don't have experiments.
link |
But we can understand how the world actually works
link |
This is really the key difference
link |
that the Keynesians think they just wanna copy
link |
the methods of physics.
link |
And then that's just gonna give them the certainty
link |
of the results of physics, which is like me saying,
link |
I'm just gonna put a red blanket on my back
link |
and jump from the fourth floor because I'm Superman.
link |
Well, it's not the red blanket
link |
that's gonna make me Superman.
link |
There's a lot more to it.
link |
So humility manifests itself in economics
link |
as the belief in a free market.
link |
Meaning like, I can't centralize,
link |
I can't do centralized control on this thing.
link |
We're going to minimize the friction
link |
of the free exchange of goods.
link |
So Austrian economics puts priority in the market.
link |
Yes, and you could arrive at it through two paths.
link |
The more practical path, which most scientific minded
link |
I came from an engineering background.
link |
So I initially had this idea that what is lacking
link |
in economics is mathematicization.
link |
We need to have better math models.
link |
We need to get all of those tools from engineering,
link |
apply them to economics, and then we'll be able
link |
to plan the world economy and make it work better.
link |
And then you start actually trying to solve problems,
link |
trying to actually calculate them.
link |
And you realize nobody can have that ability
link |
because the difference ultimately comes down to the fact
link |
we can't have experiments.
link |
And the reason we can't have experiments is that
link |
you can experiment on particles of a gas.
link |
You can't experiment on human beings and entire economies.
link |
And because particles of a gas are just dumb matter.
link |
And so you kick matter in a certain way.
link |
You can calculate exactly how much is going to fly.
link |
Human beings are much more complex.
link |
They have a will inside them.
link |
And this is really, this is the humility to understand
link |
that you are a human being and other people
link |
are also human being just like you.
link |
And that every person wakes up every morning
link |
and they have a million things in their mind,
link |
a million things they care about,
link |
a million things they want to do.
link |
And you will never be able to make the decisions
link |
for somebody else, let alone for millions of other people.
link |
So this is one path by which you arrive at the conclusion
link |
that free markets are better because you realize
link |
that all of the people that think
link |
that they can centrally plan markets
link |
can't actually do that.
link |
And that there's really nothing scientific about them
link |
except essentially the rituals they ape
link |
of the scientific process.
link |
And the other path I think that makes you arrive
link |
at the Austrian perspective or the libertarian perspective
link |
I should say, is simply the notion of individuals
link |
as having their own inalienable right
link |
to decide what they want to do with themselves.
link |
If you, I mean, the only way that you can give yourself
link |
the idea that you get to be planner is ultimately
link |
you think you're better than other people.
link |
You think your choice, your judgment overrides mine.
link |
And I don't think that's a defensible position.
link |
I think I'm in no position to want to force anybody ever.
link |
I will never want to force anybody
link |
to do anything they don't want.
link |
The Keynesian perspective, the central planning perspective
link |
is unlike physics, which is let's force a bunch
link |
of particles to sit in the lab so that we can study them.
link |
In economics, you're forcing people to do things.
link |
Let's stop these people from doing this job
link |
because it's bad for the economy
link |
and let's get them to do that job.
link |
Let's force them to pay this price.
link |
Let's tax them this much.
link |
Let's prevent them from using gold as money
link |
and force them to use our credit as money.
link |
So it has to rely on coercion.
link |
There's no central planning without coercion.
link |
And coercion is a crime, in my opinion.
link |
There's no way that it is justifiable morally or ethically.
link |
So from a politics, from an ethical perspective,
link |
your view is the, I mean, perhaps the,
link |
broadly speaking, the libertarian view
link |
is coercion is unethical, freedom is essential.
link |
What is, what are the pros and cons
link |
of government intervention in the economy?
link |
So can you steal, can you provide pros?
link |
You just kind of provided arguments against.
link |
Is there any arguments to be made
link |
for government intervention,
link |
for the role of government in society?
link |
Speaking from a political or from an economics perspective,
link |
what is the positive role of government
link |
that you can imagine you can speak to?
link |
I can repeat many other cases,
link |
but I don't find any of them compelling
link |
for the reason that I mentioned,
link |
which is that ultimately they all rely on
link |
putting a gun to somebody's head
link |
and using the threat of force.
link |
So that's for me, it can never be justifiable.
link |
Whatever the ends are,
link |
if the means are violence and the threat of violence,
link |
then the ends aren't justified.
link |
Everything that's good,
link |
governments will use as an excuse to justify coercion.
link |
So, you know, what do you like?
link |
You like motherhood and apple pie?
link |
Well, government needs to ensure
link |
that motherhood works well,
link |
and we need the government central planning of birth.
link |
We need regulations on birth, for instance.
link |
We need regulations on how people give birth.
link |
We need to ban people from giving birth
link |
in traditional ways that have been tried
link |
for thousands of years.
link |
We need to force people to do things
link |
in the modern scientific way.
link |
Well, so what about things like that all of us use,
link |
so infrastructure, for example, or education,
link |
or, well, the economy too, right?
link |
Can you make a case for the role
link |
of some large scale centralized systems,
link |
whether it's government or not,
link |
that do this kind of management?
link |
I guess, perhaps you could say
link |
there's the economies of scale argument
link |
that some things must exist at a very large scale,
link |
and therefore you would want political accountability
link |
of the people who manage them.
link |
This is kind of the argument
link |
that's given for infrastructure monopolies.
link |
For instance, roads or electricity.
link |
Let's say we live in a country,
link |
we need one power plant.
link |
The bigger the power plant, the better off we will all be.
link |
And there's a natural monopoly in the power plant business.
link |
So we're gonna have to have one power plant.
link |
And since it's only one power plant,
link |
then we can't just let anybody own it
link |
because then they're gonna make it too expensive.
link |
So we need to have the government own it
link |
so it can make it too expensive.
link |
And you don't find that case compelling?
link |
I used to believe in it.
link |
I was pretty much a Keynesian
link |
when I first started my graduate studies at Columbia.
link |
No, I don't find that compelling at all
link |
because I think all these examples that they mention
link |
of natural monopolies or economies of scale
link |
that can only fit at a scale of government,
link |
government bans people from opening power plants.
link |
And then there's only one power plant
link |
and they need to be in charge of it.
link |
But in reality, no.
link |
In reality, power plants can exist at all kinds of manners
link |
of scales of operation.
link |
And yes, of course, there are benefits to centralization
link |
in power plants in particular
link |
because there's efficiency in generation.
link |
One big power plant is more efficient
link |
than 10 equivalent smaller power plants.
link |
But there's also inefficiencies in centralization
link |
because the more centralized and the bigger the plant is,
link |
the further away a lot of the population is going to be.
link |
So you're gonna be losing a lot of the electricity
link |
And you believe the free market is best in managing
link |
that dance, that balance of centralization.
link |
Exactly, and if we do end up in a situation
link |
where there's one power plant for an area,
link |
then if the markets ends up centralizing all of it
link |
into one power plant, I don't see that as a problem.
link |
There are places, there's a small town
link |
with only one barber shop.
link |
Is that a catastrophe?
link |
No, because they don't need two barber shops.
link |
Now, if that barber shop started to take advantage
link |
of people, started to charge higher price,
link |
well, then that's just an opportunity for others
link |
to step in and put them in their place.
link |
And that's the same thing with power plants.
link |
It's the same thing with everything.
link |
Ultimately, I think the key thing is this.
link |
From the central planning perspective,
link |
they'll present you the problem as it is,
link |
and they'll tell you, well, this is bad.
link |
So the fix, and what we can do is better.
link |
So let's stop what's bad and do what is better.
link |
Two problems here.
link |
Usually, the reason that the thing is bad
link |
in the first place is because it is a government monopoly.
link |
It's because of government intervention.
link |
But the second thing is that this notion
link |
that we could just pass a law and fix what's wrong
link |
and make it better, it ignores the fundamental
link |
underlying reality, which is that what you're doing
link |
is you're offering only one way for this problem
link |
to be solved and making all other solutions
link |
practically illegal.
link |
You're taking taxpayer money, you're putting guns
link |
to people's heads to take their money,
link |
to use it to build, say, this one solution
link |
for a power plant, but you're preventing
link |
the free market process from providing us
link |
with other alternatives.
link |
Well, so you phrased it sort of from that perspective,
link |
but in theory, there is a feedback accountability mechanism
link |
for the solution that you propose and enforce
link |
by, as you're saying, placing a gun to people's head.
link |
You're accountable for that choice,
link |
for the quality of that solution,
link |
by being voted out if the solution is actually bad.
link |
So it's just a different selection mechanism.
link |
And I think, I personally believe it is a selection mechanism
link |
that has worked in the past.
link |
It just often does not work nearly as well
link |
And the question is, are there domains
link |
in which the free market gets itself into trouble?
link |
So this theoretical view is that that's the point
link |
of a free market, is it doesn't, if there's trouble,
link |
that's a signal, and it will respond to that signal,
link |
and it will respond appropriately
link |
to try to maximize happiness.
link |
The question is, is there a local optima
link |
that free markets get stuck in and need governments
link |
to represent the broader scale of the people
link |
to get outside of that?
link |
I think the fundamental problem here is the idea
link |
that there is a feedback mechanism
link |
when there is coercion in one party,
link |
when one party can employ coercion and the other one cannot.
link |
So in other words, I'm gonna put a gun to your head,
link |
I'm gonna take your money, and I'm gonna use it
link |
to buy more guns for me to put against your head,
link |
but somehow you're gonna put a paper in a box
link |
and that's going to deactivate my guns.
link |
Well, love requires a push and pull,
link |
a little bit of tension, a little spice in a relationship,
link |
I think, a little gun to the head.
link |
Good luck to anybody who's gonna be dating you
link |
if you think putting a gun to people's head
link |
is comparable to a relationship.
link |
All jokes, but yes, I mean, the people don't often think
link |
of it as government and the military as gun to the head,
link |
but that is sort of a libertarian perspective
link |
because ultimately when you, you know,
link |
turtles all the way down and at the bottom there's guns.
link |
At the bottom if you don't want to pay,
link |
if you don't want to, you know,
link |
all right, I don't want to be part of your power plant,
link |
I want to get my own generator, I don't want to do it,
link |
and I don't want to pay for it, I'll go to jail.
link |
You can't not pay for it.
link |
That's really the asymmetry which the market doesn't have,
link |
which is why, in my opinion, it's not as if, you know,
link |
I'm being stubborn and stuck on the idea
link |
that I want a market and that the government can't work.
link |
It's presented as if, you know, we're choosing
link |
between two different machines.
link |
You know, should we use an Apple or a PC?
link |
And I'm just constantly choosing one of them
link |
and saying that the other one can't work.
link |
It's not equivalent, it's not two machines.
link |
We're comparing between a machine and a gun to the head.
link |
And we're comparing between a situation
link |
in which anybody anywhere is free to provide the service
link |
or the good, and anybody anywhere is free to buy it
link |
from them or reject to buy it from them.
link |
So anyone can build a power plant, anyone can succeed at it,
link |
anybody can fail at it, anybody can build it in a way
link |
that I can choose to take part in or not take part in.
link |
I can build my own.
link |
So we have a situation which 10 million people, let's say,
link |
they each can freely choose to provide the good
link |
or to buy the good.
link |
That cannot be considered an alternative on an equal footing
link |
to a situation where one person or one entity
link |
gets to decide for everybody and those people
link |
decide for everybody and those who disagree go to jail.
link |
So the problem is that the alternative to governments
link |
is other large successful entities that have humans in them
link |
and human nature is such that there's corruption,
link |
manipulation and so on.
link |
I think free market depends on the honest communication
link |
of information as widely as possible
link |
so that people can make great rational decisions
link |
but sort of my fear is, I'd like to propose
link |
is that in general there's manipulation
link |
whether it's government, whether it's companies.
link |
They're going to try to do propaganda.
link |
They're going to try to manipulate you, deceive you,
link |
shut down competition by playing games,
link |
human games of different kinds
link |
and sometimes even meaning well.
link |
It's not like everybody thinks they're doing good
link |
and they're actually doing evil.
link |
So how do we prevent the worst of human nature coming out
link |
in a free market as well?
link |
By not giving the worst of human nature
link |
a monopoly on violence in the institution of government.
link |
That little inkling of coercion,
link |
that little bit of asymmetry creates a gigantic
link |
like ripple effect of asymmetry in your view.
link |
Yes and it ends up just being the place
link |
where corporations, individuals, free markets,
link |
they can't coerce without the resort to government.
link |
So you think about all the examples
link |
of corrupt corporations doing bad things.
link |
It's always because they have certain privileges
link |
from governments because as it exists,
link |
Coca Cola, McDonald's, all of these giant corporations,
link |
they can't do anything to me without government.
link |
They can't take any of my money
link |
and they can't force me to buy their stuff
link |
and so it doesn't matter to me.
link |
So if Coca Cola is corrupted,
link |
that's a problem for Coca Cola customers,
link |
that's a problem for Coca Cola shareholders,
link |
that's a problem for anybody who deals with Coca Cola
link |
but as somebody who doesn't drink their stuff
link |
and isn't a shareholder,
link |
I have absolutely no interest in what happens.
link |
They could all go bust tomorrow and I don't care.
link |
I don't buy their product and I'm not a shareholder.
link |
So in this situation where you choose to voluntarily
link |
associate with people and you only give your money
link |
to people you want to voluntarily give the money to
link |
so you either buy their product
link |
or invest in their production,
link |
in that situation, the only way that a company
link |
can get my money is if they build a product that I value
link |
or if they convince me that they are going to use it
link |
in a way that's profitable and I may be wrong.
link |
I may invest in a company that fails
link |
or I may invest in a company that turns out to be fraudulent
link |
but that's my fault and it's my fault
link |
that I gave them my money
link |
and then it turned out to be scoundrels
link |
but it's a totally different problem
link |
when we make it mandatory.
link |
It's violence, it's a crime to put a gun to my head
link |
and force me to subsidize companies
link |
and force me to come at certain conclusions.
link |
Do you find an interesting distinction,
link |
Mr. Michael Malice, between anarchism and libertarianism?
link |
So this particular use of violence,
link |
this last resort, this policing force
link |
that libertarianism is okay with
link |
and anarchism is not okay with.
link |
So basically nation states that keep you safe
link |
from the worst of war.
link |
Yeah, I think to be more accurate,
link |
the distinction between anarchism and minarchism,
link |
I think libertarianism is kind of a vague term
link |
that can encompass both.
link |
Means a lot of things, okay.
link |
On the Karl Marx to Michael Malice spectrum,
link |
No, no, I'm full anarchist.
link |
You're a full anarchist.
link |
Yeah, full anarchist.
link |
I mean, I don't find any justification
link |
for the use of force and I think recently perhaps,
link |
maybe I'm getting old, maybe I'm getting senile,
link |
maybe I'm getting wise, who knows?
link |
But I'm beginning to become more sympathetic to monarchy.
link |
So I'm an anarchist, monarchy.
link |
Which, what is that?
link |
Kings, royal. Oh, monarchy.
link |
Wait, are you joking or not?
link |
No, I'm not joking.
link |
And I think, I mean, I think morally and intellectually,
link |
I'm an anarchist, but the reality is we find ourselves
link |
in a world in which a lot of people are not.
link |
And the question is, what is the thing
link |
that is going to provide you with more freedom?
link |
And I think, I'm recently coming around to the idea
link |
that monarchy might be the best way
link |
to provide people with the largest amount of freedom
link |
because to have a free society, you need a majority,
link |
perhaps, or a plurality of people
link |
to have a very strong understanding of libertarian ideas,
link |
to have a low time preference,
link |
to have a preference for the future.
link |
So you need a majority of the population
link |
to not decide to go and do something insane
link |
in order to continue to have a free society.
link |
You know, when a respiratory illness comes along,
link |
unfortunately, you know, the last couple of years
link |
showed that we, the vast majority of people
link |
are gonna freak out and lose their mind
link |
and support whatever their stupid TV tells them to support.
link |
And, you know, there's always a current thing
link |
and the media is always telling you
link |
that we need this current thing as an excuse
link |
for more and more government power
link |
and more and more government coercion.
link |
What's the role of kings and queens
link |
in that case of a monarchy?
link |
What's the role of a leader?
link |
I think there might be a case that,
link |
so as I was saying, you need a majority of the population
link |
to get together and decide, nope, whatever is the case,
link |
you know, the answer is voluntary.
link |
No matter how bad the disease is,
link |
it doesn't justify forcing people to stay home.
link |
You wanna stay home, stay home.
link |
You wanna wear a mask, take a vaccine,
link |
do whatever you want, but you can't force others to do that.
link |
So you need a majority of the people
link |
to strongly believe in this principle
link |
in order to get it in a democracy.
link |
Whereas in a monarchy,
link |
maybe you just need the king to get it.
link |
And I think the reason kings are more likely to get it
link |
is that kings have a low time preference
link |
where they think about things for many generations.
link |
Whereas in a democratic system,
link |
your president is likely only going to be there
link |
for four years or eight years or 10 years
link |
or five years or whatever it is.
link |
So the only way that, you know,
link |
all humans are self interested.
link |
So the only way that your president in a democracy
link |
can provide for themselves is to maximize
link |
the amount of exploitation that they can do
link |
of the population during their brief stint.
link |
And then when he's out, you get a new one,
link |
and then that one wants to start all over again.
link |
So every four years, you get a new robber.
link |
With monarchy, you sign up for a multi generation
link |
subscription to the same family.
link |
And when they have the security of knowing that,
link |
you know, his great grandson is going to be
link |
taking money from your great grandson,
link |
suddenly his interest in yours align
link |
because they both want your great grandson
link |
to be prosperous and have enough money
link |
for his great grandson to take.
link |
It's a monarchy with a tiny government.
link |
So anything required to really provide for a free market.
link |
So for maximizing individual freedom
link |
and the freedom of the economy.
link |
Yeah, and if I were a king, which is highly unlikely
link |
to ever happen, but I think, you know,
link |
if you look historically, the dynasties
link |
that have succeeded at lasting for a long time,
link |
the key thing that they managed to do
link |
is to basically be libertarian.
link |
The key to being a good king is to just leave people alone.
link |
Let them do whatever they want.
link |
Don't rob them too much or rob them as little as possible,
link |
or maybe even don't rob them.
link |
And, you know, as a king, use your power only
link |
to punish people who aggress against others.
link |
Don't use your power to enrich yourself
link |
and enrich your friends.
link |
And that's really, like, if you look at smart kings,
link |
this is what they do.
link |
This is what they teach their children.
link |
And the cycle of kingdoms is that, you know,
link |
the first king understands this,
link |
builds the empire and the first couple of generations,
link |
they get this and the society is free, the economy is free.
link |
And because of that, you know, there's peace and prosperity,
link |
but then over time, the next generation of kids
link |
become a lot more high time preference.
link |
They haven't worked hard.
link |
They don't understand the meaning of hard work.
link |
So they become more likely to engage
link |
in destructive behavior.
link |
So raise taxes, pass laws that require people to do things,
link |
even when they're not hurting anybody.
link |
And that ends up basically eventually destroying the kingdom.
link |
Of course, power corrupts.
link |
So you have to kind of create human institutions
link |
that prevent you as a king or any kind of leader
link |
from expand, so going back on the original promises
link |
and the purposes of your position.
link |
And then distracting, using tools of technology
link |
and communication to distract the populace
link |
while you expand the power.
link |
All right, you wrote the fiat standard.
link |
I think we danced around it quite a bit,
link |
but I don't know if we actually defined it.
link |
So what is fiat money?
link |
What is the history of how it came to be?
link |
The fascinating history of the birth
link |
of the fiat monetary system is something
link |
that really only got uncovered in 2017.
link |
This is extremely, extremely interesting.
link |
In 1914, Britain joined World War I.
link |
And if you remember your history books,
link |
it's famous that this was called August Bank Holiday.
link |
It was just going to be a few weeks
link |
where the British troops were gonna go
link |
and kick European ass and come back triumphant.
link |
And most European countries believed that.
link |
But then the war kept on dragging on.
link |
And of course, to finance the war,
link |
the government, this is what they used to do
link |
under the gold standard,
link |
governments would issue bonds.
link |
So you'd issue the bonds, people would buy the bonds,
link |
the money would be used to finance the military,
link |
and then the government would pay off the bond
link |
over the next five or 10 or 20 years.
link |
So for World War I, the British government,
link |
the British treasury issued bonds for financing the war.
link |
And this only came to light in 2017.
link |
Only a third of the bonds were actually subscribed.
link |
So people, British people,
link |
and this is perhaps the greatest thing
link |
that they've ever done,
link |
they decided fighting a war in Europe
link |
is just not my ideal way of investing my capital.
link |
It's a stupid thing.
link |
Why should I go and fight?
link |
Because the Austrians and the Germans and the Serbians
link |
are at each other's throats.
link |
I'd rather invest in something else.
link |
So they only bought a third of the bond issue.
link |
And then the astonishing thing that happened,
link |
which really set the tone for the next century
link |
of war, murder, Keynesianism, and theft and inflation,
link |
was that the Bank of England went and got
link |
two of the high ranking officials in the Bank of England
link |
to buy the other remaining outstanding two thirds
link |
of the bonds under their own name
link |
with a line of credit from the Bank of England.
link |
So it wasn't their own money.
link |
But they took money essentially from the Bank of England,
link |
bought two thirds of the bonds that financed the war.
link |
And that was how England was able
link |
to keep going into the war.
link |
So that's essentially what they did
link |
is what we today know as quantitative easing.
link |
Back then, they just got, they printed money
link |
from the Bank of England, or credit, printed credit,
link |
gave it to those two employees.
link |
They bought the bonds.
link |
The government could fight the war.
link |
Sounds like it's a nice idea.
link |
And Keynes, of course, being a huckster himself,
link |
he himself said this was, he wrote a letter
link |
to the Bank of England that was uncovered recently.
link |
And he said, I congratulate you
link |
on this masterly manipulation.
link |
I quote it in the book.
link |
Masterly manipulation is what he called it.
link |
That they basically managed to buy the bonds
link |
using the money of the government.
link |
And of course, he never had an idea of how economics works
link |
because he never could ask the question of,
link |
okay, and then what?
link |
All right, so we just printed money
link |
to buy two thirds of these government bonds.
link |
What's gonna happen next?
link |
What could go wrong?
link |
Not a question Keynesians ask themselves
link |
because their jobs depend on not thinking
link |
about what's going to go wrong.
link |
So a quick question about war.
link |
And as somebody who's been nonstop reading
link |
and thinking about the wars of the 20th century
link |
and thinking that most of those wars
link |
were unjust, unethical, and destructive,
link |
how else do you find, how would you finance a war?
link |
Ideally you don't.
link |
No, but I mean, of course there are,
link |
sometimes you wanna fight for self defense.
link |
Yeah, you finance it, taxation, or bonds.
link |
See, the people really need to want a war
link |
not just with their voices, their thoughts,
link |
their tweets, or their actual financial investment.
link |
Put up the bullets and the cost of the bullets
link |
So their life and their financial well being.
link |
That's how it was under the gold standard mostly
link |
because under the gold standard,
link |
the government couldn't print gold.
link |
And so they had a budget and they had a certain amount
link |
of gold and that wasn't just, you know,
link |
that they couldn't infinitely increase it.
link |
So they couldn't tax their population at will.
link |
And it's very difficult to take money from people.
link |
You know, you go knock on doors and search everybody's home,
link |
see where they're hiding their gold.
link |
It's very complicated.
link |
On the other hand, when you gave them paper money,
link |
which is what the case was in 1914,
link |
you could take their wealth just by printing the money.
link |
And that's what changed everything when it comes to war.
link |
That's why the 20th century was the century of total war.
link |
Because under the gold standard,
link |
governments fought until they ran out of their own gold.
link |
Under the fiat standard, with paper money,
link |
with credit money, governments fought
link |
until they ran out of liquid wealth
link |
in the hands of all of their citizens.
link |
So let's find flaws in this thinking if there's any.
link |
Okay, there's a lot of pacifist type of thinking
link |
in World War II as Hitler was expanding and expanding.
link |
Hitler framed himself as a victim of the past, of history.
link |
He never attacked anybody.
link |
Everyone's always threatening to attack him.
link |
That's kind of the narrative.
link |
And he keeps expanding.
link |
He keeps sweet talking with his charisma,
link |
all the countries around him,
link |
into sort of embracing pacifism.
link |
Stay out of the war until the war is on your doorstep.
link |
So France, just very suboptimal military strategy
link |
from the perspective of many European nations
link |
in response to Hitler.
link |
They were basically hoodwinked by his words.
link |
So then there's Churchill, Winston Churchill,
link |
who stepped up and says, perhaps irrationally,
link |
from some kind of economics perspective,
link |
saying we're not going to back down.
link |
We're going to fight Germany.
link |
And perhaps that step alone is one of the biggest reasons
link |
that Hitler failed in his expansion.
link |
That decision to fight back,
link |
how, what's the right way to do that?
link |
If you're Winston Churchill,
link |
what's the right way to do that?
link |
If you're, to fight back evil when violence is required.
link |
Evil when violence is required.
link |
Now, you could argue that no war is just,
link |
but there is such a thing as a just war index.
link |
And a lot of people argue if there is a just war
link |
in the 20th century, it's World War II.
link |
So how would you fund, if you were Britain, the war?
link |
Would you require Winston Churchill
link |
to convince the populace?
link |
Don't fight until they're fully convinced
link |
that this is the right thing to do.
link |
You can't just make a decision for them.
link |
You have to convince them fully
link |
so that they give their life
link |
and they give their money to support the war.
link |
Is that the right way to do it?
link |
And I think when you have a true threat
link |
and a true evil and a true force
link |
that people really do think is genuine,
link |
you don't need to convince them.
link |
I mean, when it's real, people will want to fight
link |
and people will want to pay to fight.
link |
And I mean, I think, though, on this particular example,
link |
I think the best way to fight Hitler
link |
is to have not fought World War I
link |
and not take out the Kaiser of Germany.
link |
If Britain and the US had not gotten involved
link |
in World War I, which really is the senseless war
link |
about nothing, what was in it?
link |
And what was the goal from anybody fighting that war?
link |
If you look at it, after World War I,
link |
there were very minor adjustments
link |
in the borders of the countries that were participating.
link |
So Germany lost some land, Austria lost some land,
link |
but really it wasn't all that massive.
link |
And it wasn't like Britain wanted to take over Germany
link |
and move their people into Germany and kick the Germans out.
link |
So there was no real value from that war.
link |
And that's why the British people
link |
didn't want to take part in it.
link |
And that's why if they hadn't done
link |
this enormously criminal manipulation
link |
of printing money to buy the bonds,
link |
Britain wouldn't have gotten into the war.
link |
Germany would still be a kingdom and Hitler wouldn't rise.
link |
And yeah, there'd be small changes
link |
in the borders of various European countries.
link |
I struggled to see how it could have been worse.
link |
I mean, I struggled to see who benefited
link |
from four years of carnage in Europe.
link |
And then this came at the height of civilization.
link |
Before that, the people of Europe
link |
had the golden era under the gold standard.
link |
They were trading with one another, they traveled
link |
and technology was advancing.
link |
And they did not expect this war to last this long.
link |
And my favorite story from World War I
link |
is the Christmas truce football game,
link |
which I mentioned in my book.
link |
British and German soldiers at the height of the conflict,
link |
they stopped on Christmas day
link |
and they played a football game against each other.
link |
I mean, this is not a real war,
link |
where it's a war for survival.
link |
Britain didn't want to end Germany.
link |
Germany didn't want to end Britain.
link |
It was just kings who were emboldened
link |
by the fact that they had a printing press
link |
playing with the lives of the people.
link |
Take that away, take away the printing press,
link |
take away their ability to print money.
link |
I think we'd have had a much, much, much better
link |
Yeah, the counterfactual history.
link |
Neil Ferguson is a historian
link |
who gets in quite a bit of trouble.
link |
Basically, well, he's a Brit,
link |
suggesting that if Britain stayed out of World War I,
link |
there would be no Hitler, there would be no World War II.
link |
Yep, I agree entirely.
link |
Yeah, so how fiat money was born.
link |
Yeah, let's get back to that.
link |
So they financed the war with that money.
link |
So what could go wrong?
link |
That's where we left off.
link |
Well, what could go wrong when you've just printed
link |
an enormous amount of credit and used it to buy bonds?
link |
What goes wrong is that the value of the currency
link |
is going to go down.
link |
Or in other words, prices of things are gonna go up.
link |
So during the war, prices keep going up.
link |
And this is, of course,
link |
this is gonna sound very familiar
link |
to victims of the 20th century.
link |
A government tells you it's because of the war,
link |
it's not our fault, it's because of the Germans,
link |
it's because of the foreigners, it's because of Putin,
link |
it's because of this, it's because of that.
link |
This has always been the case.
link |
There's always, war is a very good cover for inflation,
link |
which is caused by monetary phenomena.
link |
So then the war ends.
link |
And inflation, prices have more than doubled
link |
over the past four years,
link |
over the four years of World War I,
link |
prices have more than doubled.
link |
And then the British economy is in bad trouble,
link |
obviously, lost a lot of the labor force for four years
link |
that was out there fighting.
link |
Now those workers come back, you've got prices are up.
link |
And so people are demanding
link |
that the government control prices
link |
and the government is trying to fix the problem
link |
of inflation by doing price controls,
link |
which is what they always do,
link |
which is catastrophic because it makes things worse.
link |
When you implement price controls,
link |
you are, when you make, you say, all right,
link |
well, bread can't be sold for more than X price.
link |
Well, that's just preventing bread producers
link |
from producing a lot of bread.
link |
And that's just making the problem worse.
link |
If you let the price rise, the extra price,
link |
first of all, it makes people economize,
link |
so people will only buy what they need.
link |
And it provides the money for the bread producers
link |
to acquire the capital and the resources
link |
they need to produce more bread,
link |
which then brings the price of bread down.
link |
But price controls destroy that.
link |
Then they also implement wage controls.
link |
So you wanna also make sure that people have high wages.
link |
So you raise people's wages artificially,
link |
you lower prices artificially,
link |
and you cause an economic problem.
link |
And this is basically, I use this historical example
link |
because it's the birth of fiat,
link |
because the Bank of England was the most important
link |
monetary system in the world at that time.
link |
And because it's the prototype
link |
that basically the entire planet copied
link |
over the last 100 years.
link |
We've had this same thing happen.
link |
The government prints money because of a stupid reason,
link |
because somebody in power decided
link |
this was worth destroying everybody's livelihood
link |
And then the consequences come in
link |
and then they start covering up with price controls,
link |
wage controls, and then that makes things worse.
link |
And then they, and of course, throughout all of that,
link |
they're promising that we're going to go,
link |
oh, and also the other thing that they did,
link |
which I mentioned in the chapter is,
link |
they stopped people from using physical gold
link |
and they confiscated the, well, they didn't confiscate it,
link |
but they took the physical gold and they gave people paper.
link |
So I call it the fiat white paper.
link |
You know, in Bitcoin, we have the white paper.
link |
The fiat white paper was that the Bank of England
link |
announced to all of its banks and post offices.
link |
And from now on, you should not make payment in gold
link |
and you should take payment in gold
link |
and you should encourage all your customers
link |
to turn in all of their gold and give them paper instead.
link |
Is there an actual document?
link |
Oh, yeah, yeah, yeah.
link |
Yeah, it was, this is all new stuff.
link |
Obviously, nobody really likes to talk about this stuff
link |
because, you know, they're fiat economists,
link |
so they don't wanna talk about the original sin, but.
link |
Well, you should like republish it
link |
as the fiat white paper or something like that.
link |
There's a fascinating book by a guy called John Osborne.
link |
So in the 1920s, I think his name was Montagu.
link |
He was the chief of the Bank of England.
link |
He commissioned one of his secretaries, John Osborne,
link |
to study what the bank did during World War I.
link |
And it was a study that was kept under wraps,
link |
a confidential, in the Bank of England,
link |
only released in 2017, almost a century later.
link |
What was special about 2017, by the way, it's a year.
link |
It's just it was a year in which
link |
some of this information was released.
link |
Yeah, a bunch of people got into parts of the basements
link |
of the Bank of England and found this and published it
link |
and now you can download it as a PDF
link |
and find all of the amazing details.
link |
So they confiscated the gold
link |
and they forced people to use the paper
link |
and they promised people that as soon as the war
link |
was gonna be over, this is temporary,
link |
we're gonna be back to using gold.
link |
And of course, you know, if you told people in Britain,
link |
this is the real scam about fiat.
link |
If you told people in Britain in 1914,
link |
hey, we're gonna go off the gold standard
link |
because it's better.
link |
I mean, there might've been lynchings
link |
of government officials because the British pound
link |
at that point, it had been the global currency
link |
of the whole world.
link |
And the fact that they'd managed,
link |
the Bank of England had kept the British pound
link |
at a fixed rate next to gold for,
link |
since Newton, you know, the exchange rate,
link |
the value of the British pound was set
link |
by Isaac Newton himself.
link |
He was the warden of the mint
link |
and he made the pound a specific amount of gold.
link |
And since then, up until World War I,
link |
it was 4.25 pounds per ounce of gold.
link |
I think I might be wrong, but I have it in the book.
link |
So he'd set that price.
link |
And it was a matter of national pride
link |
for people in England, you know.
link |
The sterling is as good as gold
link |
because for two centuries it has been stuck to gold.
link |
There was the exception of the Napoleonic Wars,
link |
but for two centuries, mostly it was stuck to that.
link |
And so they went off that and then they couldn't go back
link |
because if they wanted to go back,
link |
they didn't have enough gold.
link |
They shipped their gold to the US to finance the war.
link |
And they had printed a whole bunch of money
link |
that was out there.
link |
So this begins the problem for England.
link |
And that begins the end of England
link |
as the world's superpower.
link |
And the way they tried to fight that
link |
was to get more and more countries around the world
link |
to establish central banks and have,
link |
and hold British pounds.
link |
So they'd hold, you know, basically dumping their bags
link |
like just any other shit coin.
link |
You just, if you get people to buy your shit coin,
link |
you know, that raises the value of your shit coin.
link |
Can you define shit coin?
link |
Shit coin is, in my definition of a shit coin
link |
is that it's any form of money
link |
where somebody can produce it.
link |
Not necessarily, I guess.
link |
I think the difference, so there's easy money,
link |
but the shit coin is something that someone can produce
link |
at a rate that is, at a cost that is different
link |
from the market cost.
link |
So gold, nobody can make gold except if they dig for it.
link |
And the cost of mining gold is generally in the range
link |
of the price of gold.
link |
Seems true for Bitcoin.
link |
So gold is not a shit coin.
link |
Gold is not a shit coin.
link |
Copper, I'm not so sure.
link |
I wouldn't call copper a shit coin
link |
as much as it is easy money.
link |
But I think government currencies and other alt coins,
link |
I think are shit coins because somebody could click a button
link |
and make 10 times the supply.
link |
Would it be fair to say that this began
link |
with the will for war in World War I?
link |
So the march towards fiat began
link |
with a global desire for war in the 20th century.
link |
Did war start this or was war a result?
link |
It's difficult to say really.
link |
I think it goes both ways.
link |
I think you can't have permanent war without fiat.
link |
And I also think there's a case to be made
link |
that you can't really have fiat without war.
link |
So it's some kind of weird dynamical system
link |
with a chicken and egg situation
link |
and they build on top of each other
link |
and there's a few individuals that figured out
link |
there's a way to manipulate this to play this kind of game
link |
and it escalates and nothing gives you the ability
link |
to manipulate money quite like war.
link |
When you have a war, you can declare an emergency.
link |
You can call all the people who oppose you traitors.
link |
You can get people to support you
link |
not because what you're doing is good
link |
but because you play on their sense of tribalism.
link |
In your book, you do cost benefit analysis.
link |
So you do acknowledge or think about
link |
the pros of fiat currency.
link |
Can you do just that, look at the benefit
link |
and look at the cost just broadly at the highest level?
link |
So the way that I write the fiat standard
link |
is that I try and analyze it as an engineering system
link |
in the same way that I wrote the Bitcoin standard.
link |
So with the Bitcoin standard,
link |
I looked at Bitcoin from first principles
link |
and tried to explain how it works
link |
for a reader that doesn't really have much of a background
link |
in computer science, networks or economics.
link |
And I thought I'll do the same with the fiat.
link |
Let's just ignore the official stories
link |
and look at how this thing actually works.
link |
And I think it does have value
link |
in the fact that the reason that they were able
link |
to pull it off is because it was not possible
link |
for people who don't want to be part of it
link |
to use gold independently of governments.
link |
This is really the key thing.
link |
Gold is just very expensive to move around.
link |
And the fact that it is expensive to move around
link |
means that there's inevitably going to emerge institutions
link |
where it is centralized in physical location.
link |
And then these institutions trade liabilities for the gold.
link |
So really the gold standard intrinsically must involve credit
link |
as becoming part of the monetary system.
link |
It has to be the credit and because it gets centralized
link |
it can easily be captured by the government.
link |
So to be fair, the benefits of the fiat system
link |
is that it saves us on the cost of moving gold around,
link |
which is pretty significant.
link |
Like generally, moving a bar of gold across the Atlantic
link |
is gonna cost somewhere between 0.1 to 1%
link |
of the cost of the gold bar.
link |
So you move it 100 times back and forth
link |
between the Atlantic, you need to pay the whole gold bar,
link |
the cost of the whole gold bar to move it 100 times across.
link |
Well, with fiat money, it's essentially government credit.
link |
And so it's just sending a message
link |
from one central bank to another
link |
and you can move it halfway around the world.
link |
Is there also something to be said about the cost in time?
link |
So you're saving the sort of,
link |
you're reducing the friction of the communication as well.
link |
Of the transactions as well.
link |
Exactly, it's faster.
link |
How big is that benefit?
link |
Because wouldn't you argue that that potential
link |
is the thing that enables modern economy,
link |
both the speed and the low cost,
link |
so increasing the scale and the frequency,
link |
the speed of the transactions?
link |
Yeah, arguably it does help in that regard.
link |
However, it isn't as if you couldn't have
link |
fast transactions built on top of gold.
link |
So you could have gold being used for final settlement
link |
and you could have banks settling with one another
link |
essentially using credit settlement.
link |
Can you define settlement just for people
link |
who are outside of this world?
link |
Because we'll mention that word quite a bit probably.
link |
So the way that it works is, let's say right now
link |
I'm gonna pay you $10 over PayPal or credit card.
link |
So it shows up in your PayPal or credit card
link |
within a few seconds that I've sent you the money
link |
and then that's yours.
link |
But it didn't also happen in those 10 seconds
link |
that my bank, which could be in another country,
link |
sent the money to your bank into your account.
link |
There's a lot of infrastructure underneath that.
link |
So what actually happened is that I have an account
link |
with my bank and you have an account with your bank.
link |
And when the message is communicated from my app to yours,
link |
my bank crosses out the money
link |
and your bank credits you with the money.
link |
And then at the end of the day, week or month,
link |
banks in the same city will settle with one another,
link |
banks in the same country will settle with one another
link |
and banks from different countries
link |
will settle with one another.
link |
So they won't move the $10 from my account to yours.
link |
At the end of the day or week or month,
link |
they'll tally all of the money that was sent
link |
from one bank to the other
link |
and then just settle the difference.
link |
So it turns out at the end of the month,
link |
my bank had sent $15 million to your bank
link |
and your bank had sent $14 million to my bank.
link |
So they give them $1 million and that settles it,
link |
that finalizes the transaction.
link |
So final settlement 3D is like the,
link |
you can think about it as the infrastructure of the system.
link |
And then you can think of these things
link |
as being the higher layer levels.
link |
And you had a wonderful discussion about that
link |
with Michael Saylor.
link |
So the final settlement is like the moment
link |
when you paper and ideas connect to physical reality.
link |
Or to some representation of physical reality.
link |
Yeah, and under gold,
link |
everything was tethered to physical reality
link |
because there was a market commodity
link |
at the bottom of all of this
link |
and nobody could print that market commodity.
link |
And so at the end of the month,
link |
if your bank made too many payments,
link |
if you made too many payments, there was a reckoning.
link |
If you were reckless, if you were insolvent,
link |
you went out of business.
link |
So there was no way to fool that.
link |
But then we moved to the fiat century
link |
and everything is credit.
link |
At the end of the day,
link |
the final layer is government credit.
link |
And so as long as you're friends with the government,
link |
basically you never go bankrupt.
link |
So all kinds of hucksters managed to find their way
link |
into getting into position where they don't get bankrupt.
link |
So in part two of the fiat standard called Fiat Life,
link |
you describe the effects of fiat money
link |
on a bunch of things like life, food, science, education.
link |
What is the most pernicious effect of fiat money
link |
on our world, on our life?
link |
So taking a step outside of the monetary system,
link |
actually like how that affects our life from this book?
link |
I mean, there's a whole bunch of things
link |
and I won't be able to go over them
link |
and I highly recommend reading the book.
link |
But if I were to pick one,
link |
I would say it's the impact that it has
link |
on our time preference, on our valuation of the future.
link |
So remember when we started the discussion,
link |
I said that the key function of money
link |
is that it serves as a store of value.
link |
And the harder the money is,
link |
the better it is at providing us
link |
with a way for providing for our future.
link |
And so the harder the money is,
link |
the less we discount the future.
link |
We always discount the future compared to the present.
link |
So if I told you, I'm gonna give you something today
link |
versus giving it to you 10 years from now,
link |
the same thing, you would prefer to take it now
link |
because then you'd get to enjoy it over the next 10 years.
link |
So we always prefer the present to the future.
link |
There's always a discount on the future.
link |
And that discount is called time preference.
link |
The degree to which we prefer the present to the future
link |
is called our time preference.
link |
So the higher our time preference,
link |
the less we care about the future.
link |
And the process of civilization
link |
is the process of lowering our time preference,
link |
where we start caring more for the future,
link |
we start prioritizing the present less and less.
link |
So we start being able to not consume everything
link |
that we have and store it.
link |
And so money is essential for that.
link |
And under the gold standard,
link |
everyone in the world had the ability
link |
to provide for their future
link |
by simply using the same money that they use.
link |
You would work a day and you would get paid in a gold coin
link |
and you could take that gold coin
link |
and keep it safe for 10 years
link |
and know that at the end of those 10 years,
link |
that gold coin would buy you slightly more
link |
than what it bought you the day that you earned it.
link |
So anybody could provide for their future
link |
and anybody could have very high degree of certainty
link |
that whatever they're saving is going to be there
link |
when they want it in the future.
link |
Because the money supply was only increasing
link |
at one and a half percent,
link |
whereas the production of goods and services
link |
was increasing for most cases, for most periods
link |
at a higher rate than that.
link |
So you could buy more apples and oranges
link |
and houses and cars at the end of the 10 years
link |
than you could at the beginning of the 10 years.
link |
So everybody had a way of providing for the future.
link |
And with that, people lower their time preference.
link |
And that is reflected across all aspects of life.
link |
I think it's not just the economic thing.
link |
You see it in the savings rate,
link |
the ability to deny yourself gratification today.
link |
I could take the money that I have
link |
and throw a giant party, buy a sports car, buy a yacht.
link |
And yet you decided, I'm not going to do that.
link |
I'm going to keep it so that tomorrow
link |
I can throw a bigger party or buy a better yacht
link |
or have a better life or give my children a better life.
link |
So all of human civilization really
link |
is the process of us lowering our time preference
link |
and finding harder monies that allow us
link |
to provide better for the future
link |
is how we really technologically we do that.
link |
I think of the hardness of money
link |
as being the control knob for our time preference.
link |
And you can see this reflected in the 20th century
link |
where we go from the money supply increases
link |
at around one and a half percent under gold
link |
to this current situation where over the last 60 years
link |
I ran the numbers on money supply and fiat,
link |
the global fiat supply has increased
link |
at around 14% per year.
link |
So we've done a 10X in the increase
link |
in the supply of money annually.
link |
And 14% is a weighted average.
link |
So if you take a basic numerical average
link |
for all fiat currencies, you get something like 30%.
link |
The average fiat currency increases by 30%.
link |
But if you value it by the volume of each currency
link |
so that you're not giving equal weight
link |
to the Venezuelan Bolivar increasing at 500% a year
link |
and the dollar increasing at 8% a year,
link |
if you do it by value of the currencies
link |
so that you get the total supply of fiat,
link |
it's something like 14%.
link |
And weighted is 30% you said?
link |
I'd like to see the worst ones,
link |
the people that are tracking that average up.
link |
But 14% is still an incredibly high, high number.
link |
And so you're saying that,
link |
sorry, that's the average over the century
link |
or the past 100 years?
link |
Over the past 60 years, 1960 to 2020,
link |
we get World Bank data on that,
link |
pretty reliable data on World Bank
link |
and European Union OECD data.
link |
I ran the numbers on that weighted average,
link |
something like 14%.
link |
And what effect that has on time preference?
link |
The effect is now it's much, much, much harder
link |
for everybody to provide for their future.
link |
Everywhere in the world, it's much harder.
link |
So how do I get the equivalent of the old gold coin
link |
that I could just put under my mattress
link |
and expect it to be there 10 years from now?
link |
Well, gold itself isn't cutting it.
link |
Gold can't keep up with inflation.
link |
And the reason for that is that gold is not being used
link |
as a money anymore in that you can't send it internationally.
link |
Internationally, you can't use it
link |
to settle trade internationally,
link |
which therefore means demand for it monetarily is limited.
link |
And so it's becoming more and more an industrial metal.
link |
And as a result of the fact that its value
link |
doesn't keep up with inflation,
link |
it becomes economical to use it in industry.
link |
So we're seeing gold become like silver
link |
in that it gets used in industry.
link |
So the stockpile declines.
link |
And so the stock to flow ratio declines as well,
link |
and it becomes more and more of an industrial metal.
link |
And it can't protect your wealth over time very well.
link |
So what do you do?
link |
Well, you could invest.
link |
And this is kind of the obvious answer
link |
that Keynesian will give you is,
link |
well, you just put your money in an investment.
link |
But investment is different from saving.
link |
Saving, the whole point of saving
link |
is that the thing is liquid
link |
and that the thing carries little uncertainty.
link |
You just held the gold coin and it just sat there.
link |
It didn't take risk.
link |
You knew that it was gonna be there in 10 years.
link |
Investment means you give the gold coin to somebody
link |
to go and do something with it.
link |
And it could work, it could not work.
link |
If it works, you get a positive return.
link |
You get more gold back.
link |
If it fails, you might not get any of your gold back.
link |
So taking on risk is something very different from saving.
link |
Saving is just a way of buying the future.
link |
Investing is taking on a risk
link |
and you could lose everything with it.
link |
So what ends up happening,
link |
and this is the Keynesian objection I think
link |
is very wrong and bad
link |
because investment is a job in itself.
link |
To figure out what to do with your money
link |
in order to beat inflation is something
link |
that there are professionals out there on Wall Street
link |
that have PhDs in finance, that have enormous computers,
link |
and they have enormous staffs of PhDs and master's degrees
link |
and math nerds that are crunching numbers
link |
and figuring out how to allocate your portfolio
link |
so that you can beat inflation.
link |
The majority of them don't beat inflation.
link |
The majority of them can't beat inflation.
link |
Not as measured by CPI, which is completely fraudulent,
link |
but if you remember.
link |
Yeah, that 14% or even the 7%,
link |
like if you look at just the increase in the money supply,
link |
which I think is a much better metric.
link |
And this is what's reflected on the desirable goods.
link |
Like if you look at the price of real estate
link |
in Miami Beach, as Michael Saylor mentioned in your example,
link |
it goes up at around 6, 7% per year on average
link |
over the last century.
link |
So that's, if you wanna live in a nice area,
link |
that's what happening to real estate.
link |
If you wanna go to the good universities,
link |
that's what's going up.
link |
It's going up at a rate that's similar
link |
to the increase in the money supply.
link |
And you can beat CPI,
link |
but CPI is designed so you can beat it,
link |
but you can't really beat the appreciation
link |
in the things that you actually want to buy,
link |
in the price of good food, the price of good real estate.
link |
So, and most investment professionals fail at doing that.
link |
So what hope does a doctor or an engineer or a scientist
link |
or an athlete have in doing those things?
link |
And investment is hard and saving should be easy.
link |
Saving is essential for us as a civilization.
link |
And what fiat did is it took that away from us.
link |
And then it forced everybody to become an investor
link |
or more accurately a gambler, because you're not just even,
link |
because the money itself is broken,
link |
because the money itself is constantly changing in value,
link |
investing is becoming more of a crapshoot.
link |
I mean, value investing is completely underperforming,
link |
compared to market analysis.
link |
You know, you listen to the Fed,
link |
and what matters to the price of individual companies
link |
is monetary policy much more
link |
than it is their own performance.
link |
So basically you need to be a junkie watching the Fed
link |
and following all of the world's central banks.
link |
And yeah, I need to learn macro economics
link |
and you need to learn what all the central banks are doing.
link |
And you need to understand how commodity markets work.
link |
And you need to understand how equity markets work
link |
and bond markets and real estate markets.
link |
You need to do all of those things
link |
just in order to be able to save and earn
link |
and keep the money that you've already earned.
link |
That's the criminal thing about it.
link |
Like I've already earned that money being a doctor,
link |
being a dentist, being an athlete, being an engineer.
link |
I built a house for somebody and I got that money.
link |
And all I wanna do is just make sure
link |
that I can have it 10 years from now.
link |
The only way to do so is to become a crappy engineer
link |
because you have to spend half your time
link |
not doing engineering and instead spend half of that time
link |
learning about Japanese central bank monetary policy
link |
and commodity markets and what's gonna happen to copper
link |
and what's gonna happen to oil
link |
and what's happening in the wars
link |
and what's happening with foreign policy
link |
and Russia and the US and all of those things.
link |
Under the gold standard,
link |
you didn't care about any of that stuff.
link |
Your gold coin worked regardless of all of those things.
link |
So what this means is the future,
link |
so first of all, we have all of the problems I mentioned,
link |
but also it means that the future becomes
link |
much more uncertain.
link |
So you're far less likely to provide for yourself
link |
10 years from now,
link |
far less likely to find an easy way
link |
to give yourself value 10 years from now.
link |
And so you become more short termist.
link |
And that is reflected economically
link |
in a lower savings rate and we see savings rates decline,
link |
but it is also reflected in all manners of decision making.
link |
And I think if you really wanna see what it is,
link |
take a look at a society that goes through hyperinflation
link |
and look at what happens there.
link |
How do people change under hyperinflation
link |
and compare that to essentially what we see
link |
in the 20th century all over under not hyperinflation,
link |
but under low inflation,
link |
10, 15% that you see across the board most of the time
link |
is just slow motion hyperinflation.
link |
So what happens in hyperinflation?
link |
Everybody gets their paychecks,
link |
they run straight to the supermarket,
link |
they spend all of their money.
link |
Nobody thinks about savings.
link |
Nobody thinks about the future.
link |
Survival until the end of this month is highly uncertain.
link |
How likely are you to be planning
link |
for what you're going to be doing five years from now?
link |
But also it's reflected not just economically,
link |
it's also reflected in all aspects of morality
link |
and all the way in which we deal
link |
with each other as human beings.
link |
When your survival is precarious,
link |
how much are you invested in the notion
link |
of being a good citizen, on caring about your reputation,
link |
on caring about not getting caught in a crime?
link |
All of these things become harder to value.
link |
So people start committing crime,
link |
people start caring less and less about the future.
link |
And we see it reflected in everything.
link |
And I argue, you see it reflected in architecture.
link |
We used to build houses in the 19th century
link |
that last until today.
link |
And then in the 20th century,
link |
we build essentially disposable cardboard boxes
link |
that get scrapped in 20 years.
link |
So what can you say about potential positive effects
link |
of lower time preferences?
link |
So I mean, it's a balance.
link |
Like basically, you're talking about
link |
an average kind of time preference,
link |
but there's some things in life
link |
where low time preference could be a negative thing.
link |
So like if I want to take on risk,
link |
not for investment, for a kind of investment,
link |
but say I want to start a business,
link |
I want to take something crazy,
link |
take a leap into the unknown, be an entrepreneur.
link |
What can you say about that kind of leap?
link |
What's the value of that within the current system?
link |
What's the right approach to that
link |
within the current system?
link |
What's the right approach overall
link |
from an economics perspective?
link |
So it's not saving for the future.
link |
It's doing something wild,
link |
taking the money from your mattress, taking on debt,
link |
and having a dream in your heart
link |
that you somehow just want to do.
link |
Maybe it's not the wisest investment decision,
link |
but it's something, you know, it's being human.
link |
It's taking a leap into the unknown
link |
because something in your heart says to do it.
link |
I think you're more likely to be taking the leap
link |
in the unknown when you have a little bit of gold
link |
in the mattress than when you don't.
link |
I think this is the thing.
link |
Like if you look at the late 19th century,
link |
and I discussed this in the Bitcoin standard,
link |
that was arguably the most innovative period
link |
You know, there's qualitative evidence.
link |
You know, look at the world around you today.
link |
Pretty much everything that we use
link |
was invented in that period.
link |
The car, the airplane, the telegraph, the telephone,
link |
the camera, pretty much modern life as late 19th century.
link |
You know, the period between 1870 and 1914,
link |
because the whole world was practically on a gold standard,
link |
the whole world was using the same money,
link |
and the whole world could save in the same currency.
link |
That meant that a bicycle shop owner,
link |
two bicycle shop owning brothers in North Carolina
link |
could go and try and fly,
link |
even as all the scientific experts in 1903
link |
were confirming that the possibility of flight
link |
has been debunked as unscientific.
link |
You know, Lord Kelvin said,
link |
not in a million years we're going to be flying.
link |
Thomas Edison said it's never gonna happen.
link |
No, I think it was Edison who said a million years,
link |
but Kelvin also said it's never gonna happen.
link |
The New York Times said it's never gonna happen
link |
the same month in which the Wright brothers did it.
link |
And they continued to deny that it was gonna happen
link |
even two years after they did it.
link |
But that's, why could they do that?
link |
Because they had savings in gold.
link |
They had the security with something that you know
link |
is gonna be there.
link |
And then you can take a risk with the stuff that is extra.
link |
You know, I have say three years expenditures in gold
link |
under my mattress.
link |
And I know that I could take a risk with everything else
link |
because whatever bad things happen with all of my dreams,
link |
like even, you know, flying, think about how insane that is.
link |
I still can go back to the three years of gold
link |
that I have saved.
link |
It's still okay to take on debt
link |
given the stuff, the gold under the mattress.
link |
Well, this is the thing, under the gold standard,
link |
the way that people finance things
link |
was predominantly with capital, with equity.
link |
So you would, because you had gold savings,
link |
I had gold savings, everybody had gold savings.
link |
When you wanted to start the business,
link |
you could use your own savings or somebody else's savings.
link |
So you didn't need to get into debt.
link |
Well, you could get equity from others
link |
and you could also get debt from others.
link |
But it's directly mapped to physical reality.
link |
Yeah, it's directly mapped to economic reality
link |
and that there's a hard money out there
link |
that, you know, what you're spending money,
link |
you know, you wanna build your airplane factory,
link |
you need to get actual resources.
link |
So you get actual gold, either yours or somebody else's,
link |
you borrow it or you give them equity,
link |
but there's real resources.
link |
Now, what happened with the fiat system?
link |
And this is, you know, the first part of the book
link |
where I look at it from an engineering kind of perspective
link |
is essentially, and I think this is like the breakthrough
link |
inside of the book, what fiat does
link |
is that it replaces gold mining with credit creation.
link |
The way that we make fiat money,
link |
the way that fiat is mined into existence
link |
is through credit creation.
link |
Most people think of fiat money
link |
as being something that happens
link |
when government prints money.
link |
And we still use the term government's printing money,
link |
but the vast majority of fiat is not physical.
link |
And in fact, fiat is not created
link |
when it is printed physically,
link |
it's created when it is lent.
link |
So when you go to a bank to get a $1 million loan
link |
to buy a house, that bank is not gonna give you
link |
a million dollars from their own money
link |
or from their depositor's money.
link |
They're gonna make a fresh new million dollars.
link |
When you walk out of that bank,
link |
the money supply has increased by $1 million
link |
to finance your home.
link |
So what fiat does is, I mean,
link |
it was basically born out of government credit
link |
and the credit of banks that are backed
link |
by the central bank and the government.
link |
So if you're part of the institutions
link |
that are allowed fiat privilege,
link |
where you can just issue loans backed by the central bank,
link |
backed by the currency,
link |
you are effectively creating new currency,
link |
new money every time you issue the loan.
link |
That's fiat mining is credit creation, I love it.
link |
So can you say something, I mean,
link |
you can't really have credit without a demand for credit.
link |
You can't really have an increase in supply
link |
without a demand for it.
link |
Is there any value you place in the humans wanting it?
link |
Basically, people wanting to do something with that credit,
link |
wanting to take big leaps, big risks,
link |
big entrepreneurial decisions.
link |
So is all credit bad?
link |
No, I think what's bad is anything, in my opinion,
link |
anything that is consensual,
link |
I wanna borrow money from you and we agree the terms,
link |
I can't object to that.
link |
As long as you and I both agree, I can't object to that.
link |
But in the case of the fiat system,
link |
it's not just you and the bank who come to an agreement.
link |
Everybody who uses the currency
link |
is forced to be part of that agreement.
link |
Because if you default,
link |
effectively what's protecting the bank from you
link |
is the fact that the government
link |
can just print a bunch of money and make the bank whole.
link |
So that little agreement between the bank and you
link |
is actually an agreement between the bank, you,
link |
and the entire populace that's using the currency.
link |
They're forced to provide the safety net for you and me
link |
to go and make that loan.
link |
And that safety net is the devaluation of the currency.
link |
That's how the whole thing actually works.
link |
So this is why I wrote the Bitcoin standard,
link |
explaining Bitcoin,
link |
and basically the takeaway message of the Bitcoin standard
link |
is you need to stack as much Bitcoin as you can,
link |
because this is the best money that has ever been invented.
link |
And we'll talk about that,
link |
why Bitcoin is the hardest money.
link |
But with fiat, the conclusion of the fiat standard,
link |
and again, this is not financial advice,
link |
I'm a lowly academic,
link |
you shouldn't listen to me on issues of money,
link |
but I think theoretically and intellectually,
link |
the conclusion of the fiat system
link |
is you need to be short fiat as much as you can.
link |
That's the smart winning move.
link |
So human wisdom over thousands of years is to save,
link |
try and not borrow as much as you can,
link |
try and accumulate as much savings as you can.
link |
That's reversed under fiat.
link |
If you're saving money,
link |
you're just subsidizing everybody else taking on loans.
link |
If you're taking on loans,
link |
you're benefiting from all the people that are borrowing.
link |
So the winning move under the fiat system,
link |
and this is what rich people do, is you borrow.
link |
Rich people under the fiat monetary system,
link |
they don't hold assets.
link |
If you're worth a billion dollars today,
link |
you don't have a billion dollars in a checking account.
link |
You've got maybe a hundred thousand, a million,
link |
five million or something like that.
link |
A tiny fraction of your money is held in cash.
link |
The majority is going to be held
link |
in all kinds of other hard assets.
link |
And you're gonna be borrowing.
link |
The richest people in the world
link |
are the biggest borrowers in the world.
link |
The most powerful entities in the world,
link |
the governments are the biggest borrowers in the world.
link |
And that's how they are the richest and the most powerful,
link |
because every time you're borrowing,
link |
you're giving the bank an excuse to print new money.
link |
So you're devaluing everybody else's money
link |
and you're getting a bit of the cut.
link |
If you were going to buy a house with your savings,
link |
you're accumulating the savings and they're losing value.
link |
And if I were to go buy the same house with credit,
link |
I'm getting the bank to print money for me.
link |
So obviously they can cut me in on that deal.
link |
And that's why it's much cheaper
link |
for everybody to buy with credit.
link |
That's why everybody buys everything on credit.
link |
So when we look at the global monetary system,
link |
the thing you wanna do as a government
link |
is be the sexiest currency out there.
link |
So the main currency, like the dollar currently is,
link |
is the one that has the most power in that kind of context.
link |
So you have, if you were to try to summarize
link |
what is the global monetary system as it is today,
link |
is a bunch of fiat currencies battling for position,
link |
for use outside their nation,
link |
and in so doing trying to gain power
link |
in the geopolitical sense.
link |
Is that, if we just zoom out,
link |
what is the global monetary system?
link |
Like how, what is it currently?
link |
So outside of the United States, the whole thing.
link |
Yeah, you could say that, but I think it's more realistic
link |
looking at how it has actually evolved
link |
over the past few decades.
link |
It's really a dollar system.
link |
It's not a system of currencies buying with one another.
link |
It's a dollar system, and all other currencies
link |
are just basically, I like to call them dollar
link |
plus country risk.
link |
It always returns home to the dollar.
link |
Yeah, there is no competition.
link |
There is no second best, as Michael Saylor would say.
link |
And money is like that.
link |
Gold was a winner take all by the end of the 19th century.
link |
The global monetary market is effectively
link |
a winner take all for the dollar.
link |
And if we get it to Bitcoin, you'll know,
link |
I also think digital currencies are also going to be
link |
a winner take all situation.
link |
So money wants to be one.
link |
In fact, there is no such thing as multiple currencies.
link |
Multiple currencies is just a step back to barter.
link |
If you go back to a system of several currencies,
link |
you're just reinventing barter.
link |
So in the case of the dollar system,
link |
the global dollar system is built around the dollar
link |
because all central banks have dollar reserves
link |
and because all central banks use
link |
the dollar's clearing mechanisms.
link |
So that's why you're basically playing in the dollar system.
link |
This seems to have changed over the last couple of months
link |
with the sanctions on Russia
link |
and the confiscation of Russian reserves.
link |
It remains to be seen what that's going to do
link |
and how that's going to change.
link |
But it is looking like this dollar system
link |
is clearly unsustainable.
link |
It's not sustainable for the US.
link |
It's not sustainable for anybody.
link |
Speaking of which, so you do an amazing podcast
link |
called the Bitcoin Standard Podcast.
link |
So episode 108 of that podcast
link |
is about the very thing you just mentioned.
link |
And allow me please to read the description of that
link |
and then ask you a couple questions
link |
about your thoughts in general.
link |
The description reads,
link |
after the Russian invasion of Ukraine,
link |
the US confiscated the Russian central bank's
link |
significant monetary reserves
link |
and banned some Russian banks from the SWIFT network.
link |
Serious questions are being asked
link |
about the survival of the postwar dollar
link |
based world monetary order.
link |
Will Russia, China and other countries
link |
actually build an alternative international settlement system
link |
after years of threatening to do so?
link |
Will global central banks stop accumulating
link |
US treasury bonds and replace them
link |
with gold and commodities?
link |
Will we witness the birth of a new commodity
link |
gold based monetary order?
link |
In this seminar, we use the insights
link |
from the Bitcoin Standard and the Fiat Standard
link |
on temporal and spatial salability
link |
to explain why reports of the death of the dollar
link |
and the emergence of a new gold standard may be exaggerated.
link |
So I would love to get your analysis on this situation.
link |
What are the fundamentals of it?
link |
What are the possible future evolutions
link |
of the global monetary system?
link |
Yeah, so SWIFT is the network
link |
that the US Federal Reserve uses
link |
for moving money around the world.
link |
So basically the US government can sanction you
link |
off of SWIFT as they've done with Russian banks,
link |
as they've done with Iran,
link |
and as they've done with Afghanistan.
link |
So effectively, I mean, this is really the catastrophe
link |
of the current monetary system
link |
is that in order to be able to trade
link |
as a member, as a citizen of your country,
link |
you need your monopoly local central bank
link |
to be on good terms with the US government
link |
so that they would let them operate.
link |
And this is really like on top of the aspect
link |
of the hardness of money,
link |
this is the other really powerful thing about Bitcoin,
link |
which is that it's just purely a technological thing.
link |
It doesn't matter if you're Russian, if you're Iranian,
link |
if you're American, if you're Chinese, it's a technology.
link |
And so it's like a spoon or a knife or a car,
link |
you operate it properly and it works.
link |
And so with Bitcoin, it's the same thing.
link |
It doesn't care about your passport.
link |
If you have the private key, you click send
link |
and the money goes, well, it doesn't really go,
link |
but effectively it does go anywhere at once
link |
and the money can move
link |
without having to abide by political situations.
link |
And the point here is not to bash US foreign policy
link |
much as that might be deserved.
link |
I'm just going to discuss it
link |
from a kind of technical perspective.
link |
It has to be a political system with fiat
link |
because ultimately it relies on credit.
link |
And then the government is the one that has the guns
link |
and the government is going to decide
link |
who gets to pay their loans anyway.
link |
And the government's going to have to make its own rules
link |
about who gets to play and who doesn't.
link |
And so it has to be political as this kind of fiat system.
link |
And when I wrote the Bitcoin standard,
link |
initially I used to be much more of a gold bug.
link |
And in my mind, gold bugs have spent the last 50 years
link |
saying the global monetary system
link |
is going to collapse next week
link |
and we're going to go back to a gold standard.
link |
And writing the fiat standard gave me
link |
a very good appreciation for why this hasn't happened
link |
and why it's not very likely to happen.
link |
I think the reason is, as I said earlier,
link |
just gold is very expensive to move around
link |
and perhaps more importantly,
link |
it's very expensive to verify.
link |
That's really the problem with it.
link |
It's very expensive to verify
link |
that the gold that you're receiving is original gold.
link |
So the only way to do this properly
link |
is to melt the gold bars down and recast them,
link |
which is pretty expensive.
link |
So we have this situation now where Russia,
link |
which is one of the biggest economies in the world
link |
has been kicked off to varying degrees
link |
off the global monetary system
link |
and the US has confiscated their reserves.
link |
And I don't have political opinions about the war.
link |
It's not something I'm very familiar with.
link |
It's outside of my area of expertise.
link |
I'm just analyzing the monetary aspects of it.
link |
It is, on the one hand,
link |
whether you think the war is justified
link |
or the sanctions are justified
link |
is not something I can opine on.
link |
But the implication of this is that effectively
link |
the US might be shooting itself in the foot
link |
because it's telling everybody in the world,
link |
your money in our system is not really your money.
link |
It's just a token to play in our arcade.
link |
And any point in time, if you misbehave,
link |
we kick you out of the arcade and we take your tokens.
link |
And so, I mean, this is something that China, Russia, Iran
link |
and many countries have made a lot of noise about
link |
over the past decades.
link |
It got real this year,
link |
but it's been decades of China, Iran and Russia
link |
to some extent saying that, you know,
link |
we wanna build an alternative to the US dollar based system.
link |
And yet they haven't.
link |
And I think there's very good reasons they haven't.
link |
And the reason is, what do you do based on?
link |
How do you build it?
link |
So you can do a credit based system based on,
link |
but then who's gonna be the big boss?
link |
Is it gonna be China?
link |
Is it gonna be Russia?
link |
Is it gonna be Iran?
link |
Is it gonna be India?
link |
None of these countries wants to be, you know,
link |
they don't wanna jump out of the US based system
link |
to get into somebody else's based system.
link |
So China doesn't wanna use a Russian system.
link |
Russia doesn't wanna use a Chinese system.
link |
And so therefore you can't use
link |
their own central bank's currencies.
link |
Don't you think they have enough leverage,
link |
India, China, Russia combined with several other nations
link |
have enough leverage and incentive
link |
to create their own system?
link |
So any one player, yes, but if they collaborate.
link |
Yeah, but then, okay, so what are you based on?
link |
Like who's going to be the boss?
link |
Who's going to be the one who can?
link |
In this case, China, right?
link |
Because China's becoming increasingly
link |
an economic power in the world.
link |
That's hard to deny.
link |
And it's the most likely scenario perhaps
link |
if we were to witness something like this
link |
is going to be a Chinese based system.
link |
So is it possible to have like a split
link |
in what is the driving currency of the world?
link |
It's possible, but I don't think it's sustainable.
link |
Again, money wants to be won.
link |
And that's the kind of thing that I argue in that seminar.
link |
So we could see this emerge based around the Yuan
link |
and likely, I mean, Russia is obviously going to hurt
link |
economically from what happened
link |
from the confiscation of the reserves and from the sanctions.
link |
So it's not going to be in a position.
link |
And of course, because it's outside of the US based system,
link |
it's not in the strongest negotiating position
link |
So the Chinese might be able to get them
link |
to join their Yuan based system.
link |
But I don't think that's sustainable in the long run
link |
because these governments can issue their laws
link |
and make their designs and then make their monetary systems.
link |
But ultimately, there are billions of Chinese people
link |
and billions of dollar based people
link |
and they're going to want to trade with one another.
link |
And the power to want to trade with one another
link |
We can't just split the world economy
link |
into two monetary systems that don't trade with one another.
link |
So then they're going to want to trade with one another.
link |
Or the dark possibility is the inability to trade
link |
as opposed to being a forcing function for trade.
link |
It will become a forcing function for conflict
link |
in cyberspace and potentially hot war.
link |
Yes, this is the scary part of it.
link |
And this is basically how World War II happened
link |
because there's an old historian who used to say
link |
when I think his name is Otto Mallory
link |
and I quote him in the Bitcoin standard,
link |
if goods don't cross borders, then bombs will.
link |
If people trade with one another,
link |
they have an incentive for each other's wellbeing
link |
and then they have less of an incentive to fight.
link |
And it was the death of global trade in the 1930s
link |
because of the failure of the fiat system
link |
that brought about the rise of the populism
link |
and the rise of all those leaders that hated each other
link |
and helped finance the war and bring it about.
link |
So that is the scary possibility.
link |
And of course, you can't discount that
link |
with all of the escalation that you see,
link |
that is a possibility that it could turn into a real war.
link |
But then even so, I think ultimately,
link |
you can't fight wars forever.
link |
It's going to end at some point.
link |
And we're going to be back at square one
link |
or well, not square one.
link |
We're going to be back at the same dilemma
link |
of who's going to have the global monetary system.
link |
And so one alternative is that what the Chinese
link |
and the Russians could do is they could base it
link |
So a lot of people are now saying,
link |
well, they're going to base it on copper and corn
link |
and agricultural commodities.
link |
And that's the analysis of saleability
link |
that we discuss in the Bitcoin standard
link |
and the fiat standard.
link |
I don't think that's workable.
link |
If you end up basing the monetary system on copper,
link |
as we said earlier, it doesn't matter how many governments
link |
say that we're going to make a new monetary system
link |
based on copper grains and nickel and iron and so on.
link |
It doesn't matter.
link |
You're going to have to stockpile those things
link |
in order to make a market in them.
link |
And then if you stockpile those things,
link |
you're just raising their value,
link |
inviting the producers to make more, flood the market.
link |
I hope they don't try this because it's going to be
link |
a devastating, devastating impact on the world economy.
link |
You're going to have central banks bidding up the price
link |
of essential commodities that people need for real uses
link |
in order to back their currencies with them,
link |
and then just incentivizing the producers
link |
to make more and more and more of it,
link |
and then bringing the price back down.
link |
So it's going to be a very expensive mistake
link |
where we raise the price of copper,
link |
destroy a lot of industries dependent on copper,
link |
and it's not just copper, but also food,
link |
and then increase the supply beyond what we need.
link |
And the end result is copper miners make out well,
link |
governments go broke,
link |
and we end up with a lot of rust in copper
link |
in government warehouses.
link |
That's why I don't think it works to use commodities
link |
that are not monetary commodities.
link |
Then the question is maybe gold.
link |
Can we go back on another gold standard?
link |
And I mean, Russia seems to have done that.
link |
It's very difficult to get reliable information.
link |
I'm trying to look into this more,
link |
but they seem to have said that they're fixing
link |
the price of gold in rubles.
link |
So they will buy and sell gold at a fixed ruble rate,
link |
which effectively means you're on a gold standard.
link |
Now, I'm not sure how much, how serious this is,
link |
how they've managed to stick to it,
link |
but it seems to have stabilized the ruble
link |
and in fact brought it back to its pre war level,
link |
which I found absolutely astonishing,
link |
considering all the sanctions going on.
link |
But in the short run, it's obviously much better
link |
than having your currency pegged to nothing.
link |
But in the long run,
link |
I also don't think gold is gonna cut it
link |
in the 21st century.
link |
Do you think there's any chance they go full gangster move
link |
and go into the digital space on the blockchain
link |
and go with Bitcoin?
link |
I think the point of this discussion is that,
link |
we run through all these other options,
link |
a Chinese based system, why it probably won't work,
link |
a commodity based system, why it won't work,
link |
and a gold based system, why it won't work.
link |
I think they might have to learn this the wrong way.
link |
I mean, the hard way.
link |
But eventually, I don't see them doing it now,
link |
but eventually I think the winning move
link |
is going to be to go on a Bitcoin based monetary system.
link |
Well, I don't know if everything always has to be
link |
I'd love it not to be, but I mean,
link |
it doesn't look like there is any kind of desire
link |
in China or in Russia to switch to a Bitcoin based system.
link |
To take a leap to Bitcoin.
link |
So unfortunately, I think we're gonna go through
link |
a few years, maybe many years of learning the lesson
link |
the hard way, of trying to accumulate these commodities
link |
and seeing the limitations that make them unsuitable
link |
One of the things I'm really concerned about
link |
is the tension, the amount,
link |
the increasing amount of hate in the world.
link |
And the increasing amount of power centers in the world
link |
between which hate is making a regular appearance.
link |
And because the weapons of war are becoming
link |
more and more powerful as they have been
link |
in the past many decades,
link |
I'm really concerned about nuclear war.
link |
So let us see if Bitcoin can fix this.
link |
Yes, Bitcoin fixes all of this.
link |
The first rule of Bitcoin is if it's a problem,
link |
All right, well I have some personal questions
link |
for Bitcoin then, because I have some,
link |
my life is pretty fucked up, so I'll have to try to see.
link |
A quick pause for bathroom breaking, any?
link |
Let's return to the basics.
link |
We started with what is money, what is Bitcoin?
link |
We talked about hard money, inflation,
link |
fiat, the history of money, the history of war
link |
in the 20th century, and that takes us
link |
into the 21st century.
link |
Bitcoin is a software, and it's a distributed software
link |
to operate peer to peer network between members
link |
who are all equal on the network, they're all peers.
link |
And what this software does is that it allows you
link |
to operate a payment network between those peers,
link |
and that payment network has its own currency.
link |
And that seems like just a simple software game,
link |
but the reason this is such a big deal is,
link |
I believe Bitcoin is the most advanced form
link |
of money ever invented.
link |
And the reason for that comes from two properties
link |
that this network has.
link |
The first one is that the currency
link |
is the hardest money ever invented.
link |
It's the money whose supply is the most resistant
link |
It's the first monetary asset that we've ever invented
link |
that is guaranteed to be fixed in its supply,
link |
that cannot be increased beyond a certain number.
link |
So there's only ever going to be 21 million Bitcoins.
link |
And that's a qualitative leap forward
link |
in our technologies of money.
link |
All of our monies leak, essentially,
link |
because people can always make more and more and more of them.
link |
You know, the best money is the one that leaks the least,
link |
which is gold, because it only leaks one and a half percent.
link |
In other words, your share of the gold stock
link |
is diluted by one and a half percent every year.
link |
Ideally, you'd like it to be zero.
link |
Bitcoin is currently at around 1.8% headed towards zero.
link |
So it's the first money that we've ever had
link |
that goes to zero in terms of terminal supply.
link |
So there'll never be more than 21 million Bitcoin.
link |
I think that's a huge deal because, you know,
link |
as I said earlier, money is always whatever
link |
is the hardest to make,
link |
and now Bitcoin is the hardest thing to make.
link |
And then the second property,
link |
which is extremely important as well,
link |
is the fact that it operates without the need
link |
to trust in anybody.
link |
It doesn't have a party that is in charge of it.
link |
It doesn't have a central authority that can,
link |
you know, as I said, it's peer to peer.
link |
So it only has users.
link |
It doesn't have any admins.
link |
There's no authority in charge of Bitcoin
link |
that can take your Bitcoin,
link |
that can stop you from using Bitcoin,
link |
that can change the rules of Bitcoin.
link |
They can't make more of it.
link |
It's available for anybody in the world.
link |
It's the hardest money ever invented.
link |
And it is absolutely, I think, an enormously,
link |
enormously significant invention
link |
because if you read the fiat standard
link |
and the Bitcoin standard as well,
link |
you'll see my perspective for why I think
link |
a very large number of problems in the world
link |
are caused by easy money, are caused by inflation,
link |
and caused by government having access to essentially
link |
an infinite recourse to people's wealth.
link |
And I think Bitcoin fixes this
link |
because it allows us to have money
link |
that has the salability of gold across time,
link |
meaning it holds its value across time like gold,
link |
but much better than gold.
link |
But also it is similar to fiat
link |
in that fiat can travel quickly,
link |
but Bitcoin can travel even faster than fiat.
link |
So it combines gold's salability across time
link |
with fiat's salability across space
link |
in one immutable package that nobody can change
link |
and nobody can control.
link |
Can you define the word salability?
link |
Salability is the essential property of money.
link |
It's the ability of a good to be sold easily on the market,
link |
specifically to be sold without much loss in its value.
link |
So houses are great for living in,
link |
but they're not very salable.
link |
If you wanna sell a house,
link |
you can just click a button and sell a house
link |
and have a giant market of people buying houses from you.
link |
You need to find somebody
link |
who wants the exact house that you have
link |
with the exact specifications that you have.
link |
And because houses are not identical,
link |
there's no liquid giant market
link |
for people to just buy and sell identical houses from.
link |
So gold, for instance, has good salability as money
link |
because it's a liquid good, it's uniform,
link |
and people are always buying it.
link |
Fiat dollars have great salability
link |
because everybody's always buying
link |
and exchanging dollars for other goods.
link |
So if you have $100 bill, you can easily get rid of it
link |
and you'll get $100 worth of stuff for it.
link |
If you have $100 worth of stuff,
link |
it's harder to get rid of it.
link |
If you have $100 worth of phone,
link |
it's not as easy to spend it as a $100 bill.
link |
That's salability.
link |
What do you mean that Bitcoin,
link |
I understand that Bitcoin has the salability
link |
of gold across time.
link |
Better even, yeah.
link |
Better, yes, like on the order or whatever.
link |
And then it has the salability of fiat across space.
link |
What does that mean?
link |
So if you remember when you asked me
link |
what is the advantage of fiat,
link |
what is the advantage it offers us,
link |
it's cheaper to move fiat across space
link |
than it is to move gold.
link |
With the current fiat monetary system,
link |
for all of its flaws, you can send money,
link |
I could send money from my bank account in the US
link |
to a bank account in China in a couple of days,
link |
or in Britain, in France, in a day or two,
link |
which is much faster than you could do with gold
link |
and much cheaper than you could do with gold.
link |
But in reality, with fiat,
link |
the reason Bitcoin improves on that
link |
is that with Bitcoin, you're actually selling,
link |
you're sending final settlement in a couple of hours.
link |
So you send the Bitcoin transaction,
link |
you get six confirmations in an hour,
link |
you get about 12 confirmations in two hours on average.
link |
With 12 confirmations, you're pretty definitely
link |
clearly safe on this.
link |
So within a couple of hours,
link |
you could send a billion dollars across the ocean
link |
and have final settlement on them.
link |
It's not just that you've sent a credit obligation
link |
that's gonna need weeks and months to settle,
link |
which is the case with fiat.
link |
So it is faster than fiat, effectively.
link |
So it's harder than gold and faster than fiat.
link |
That's a good way of putting it.
link |
One other aspect of Bitcoin I have to ask,
link |
to me on a human level, it's fascinating,
link |
is it was founded by Satoshi Nakamoto,
link |
an anonymous founder, there's no leader.
link |
So that's another aspect of the decentralization
link |
So unfortunately, it's not a monarchy.
link |
Or fortunately, yes.
link |
Who is Satoshi Nakamoto, do you think?
link |
And first of all, is it you?
link |
It definitely is not me.
link |
I don't know who it is.
link |
If it was, would you tell me?
link |
That's a trick question.
link |
Yeah, I know, trick question.
link |
But I mean, everybody who knows me knows
link |
I can't read the code.
link |
So you would say that even if you could.
link |
Do you think it's one person?
link |
Do you think it's multiple people?
link |
Is it interesting to you?
link |
Do you think it's fundamental to the coin itself
link |
to not to coin the entirety of the concept
link |
that it's founders and animus?
link |
And how much guts do you think it takes
link |
if it's one person to just walk away from so much money?
link |
I've considered all these questions many times.
link |
It's very hard to formulate a definitive answer
link |
I don't know who it is.
link |
And I don't know why he or them or she
link |
are not spending the coins that they most likely have.
link |
I think what really matters in Bitcoin about Satoshi
link |
is the fact that he's not there.
link |
And this is what's truly astonishing about it.
link |
The most important fact in Bitcoin
link |
is the fact that the creators disappeared
link |
and the thing has continued to operate now
link |
for almost 12 years without him being there
link |
or 11 years I think it's been since he's left.
link |
And this is really the most important thing.
link |
And maybe he died or she died
link |
or they got into an accident on a road trip or whatever
link |
and that's why they haven't accessed their coins.
link |
Maybe they're incapacitated for some reason.
link |
But whatever reason it is,
link |
I really think it's fate or serendipity
link |
that has given us this very vital,
link |
very, very, very vital building ingredient in Bitcoin
link |
which no other digital currency would ever recreate,
link |
which is that because it was the first,
link |
it was the one that was able to establish
link |
the first mover advantage and get all of the people
link |
who are interested in the technology to get into it.
link |
And so that's an enormous advantage,
link |
but the cherry on top or what made the whole thing
link |
really function well is the fact
link |
that the guy who made it disappeared
link |
and that it continued to operate,
link |
which is just a clear illustration
link |
that this is a network with no admins.
link |
And I'm tempted to think that they're incapacitated
link |
in some way, probably dead or gone
link |
because I can't believe the,
link |
I don't believe any human being
link |
would have this level of self control
link |
to not get into, not want to meddle
link |
with their invention so much, even if they,
link |
they might have had the self control
link |
to like mine the first million coins
link |
to get the network going and then throw away the coins
link |
or send them to an address
link |
that they don't have the key to
link |
because they really just wanted the network to take off.
link |
They may have no access to the coins
link |
and that's why they can't move them.
link |
I could see that happening,
link |
but I find it harder to believe
link |
that they would resist the temptation
link |
to mess with the network.
link |
You know, it's funny, I find that the founders of ideas
link |
are often principled and have the integrity
link |
that the eventual users of those ideas don't fully have.
link |
I tend to, you know, we have the kind of cynical view,
link |
power corrupts, absolute power corrupts absolutely.
link |
And we tend to, in our mind,
link |
generalize that all humans are corruptible.
link |
And perhaps that's true to some degree,
link |
but I think some people are more corruptible than others.
link |
And I find that there is, I mean,
link |
I like to think that Satoshi Nakamoto's out there
link |
and, you know, just like George Washington
link |
chose to walk away and it's a principle.
link |
And the principle is more powerful
link |
than the financial reward or any of those kinds of things.
link |
It's a principle that stands for freedom.
link |
And there's a lot of people throughout history,
link |
even recent history,
link |
that are willing to die for these principles
link |
or live a life full of suffering and sacrifice
link |
because they're still living a life of principle
link |
and choosing that day after day after day.
link |
So, I mean, there's power to that.
link |
Money, what's the worth of money in the end?
link |
In terms of just personal financial gain
link |
versus knowing how much positive impact there is.
link |
So the person that chooses to walk away like that,
link |
I think is the same kind of person
link |
that chooses to live by that principle.
link |
You have people like that, you know,
link |
in Grigori Grisha Perlman in mathematics
link |
who turned down the Fields Medal because he was.
link |
Yeah, that's a medal, not $50 billion of Bitcoin.
link |
No, I know, I know, I'm joking.
link |
Well, that's actually an interesting, just a brief comment.
link |
You know, when people talk about Bitcoin
link |
in the cryptocurrency space,
link |
that it's often mixed up financial interest and ideas.
link |
And I think those are often correlated,
link |
but that good feeling you get when you win
link |
or number go up or you just,
link |
just somebody, you know,
link |
I found 20 bucks on the street the other day.
link |
And just that feeling of just like,
link |
ooh, like more money, that positive feeling,
link |
that's correlated, but it is distinct
link |
from the power of the idea to change a world,
link |
to change the world for the better.
link |
For the, to alleviate, it's like Alex Gladstein,
link |
in the case of Bitcoin,
link |
that decreased the amount of suffering in the world
link |
because of the authoritarian regimes.
link |
And just because your number goes up
link |
like that gambling feeling of like, yes, yes, this is good.
link |
And I mean, short term number go up.
link |
There's a long term number go up
link |
that's more like investment and so on.
link |
And there's a short term number go up
link |
that's just a good feeling that you can't,
link |
you have to, in your mind, keep those distinct
link |
from the power of the idea to transform the world.
link |
And if you focus on the power of the idea,
link |
maybe a billion or billions of dollars don't matter as much.
link |
At least that's what I would like to believe.
link |
Perhaps, but what matters ultimately
link |
is that the thing works without him.
link |
The thing's worked for 11 years without him.
link |
And I think this is the really important thing.
link |
If they had stuck around for whatever reason
link |
and they had continued to meddle with it,
link |
it's not clear to me how decentralized
link |
it could have been.
link |
This is the problem with the other currencies.
link |
It's like, how do you lose control
link |
of the Frankenstein that you've created?
link |
The only way that this Frankenstein continues to survive
link |
is if the person in charge of it continues to feed it.
link |
And so it continues to be yours.
link |
And that's the problem
link |
with all the other digital currencies.
link |
If you've heard about any of the other 16,000
link |
digital currencies out there,
link |
you've only heard about it
link |
because there's a small group of people behind it
link |
that are working on it, that are promoting it.
link |
And that's why, and I think Michael Saylor's discussion
link |
with you was a magnificent illustration
link |
of the difference between Bitcoin and altcoins
link |
in that they are securities.
link |
And I think he makes a very compelling, brilliant case
link |
for why this makes them categorically different
link |
Bitcoin, you're buying property.
link |
I think he mentioned he's a huge fan of Dogecoin,
link |
but I might be misremembering.
link |
You are misremembering.
link |
Maybe I'm quoting him out of context.
link |
Okay, let me just ask you about some possible criticisms
link |
So on centralization, so there's a criticism
link |
on the mining and on the node side,
link |
or the node is not really the criticism,
link |
but Bitcoin mining is not fully decentralized
link |
because a small number of miners control a majority
link |
of the hashing power.
link |
I looked it up, there's 10,000, 15,000,
link |
whatever the number is of computers that are full nodes,
link |
that have the full, that are actively connected
link |
So you could argue that's decentralized
link |
because it's global, it's all across the world,
link |
but the miners, they're still, it's more centralized.
link |
So if you're thinking of making a case
link |
for Bitcoin being decentralized,
link |
do you worry about the miners being somewhat centralized?
link |
Is the nodes the important thing to think about?
link |
And what number of nodes counts as centralized
link |
The nodes are what matters because the nodes
link |
are what determines Bitcoin's consensus parameters.
link |
I think the best way to think about it is that miners
link |
simply sell a commodity to the nodes
link |
and that commodity is Bitcoin blocks.
link |
So what a miner does is they solve the proof of work problem
link |
so they keep operating their computers
link |
until they can get a solution to the problem.
link |
And then they attach that to a bunch of transactions
link |
and present it to the nodes for the nodes to ratify
link |
So therefore, this is, and this is,
link |
I strongly recommend people learn about the 2017 block size
link |
war to understand why miners don't control Bitcoin.
link |
I discussed this briefly in my Bitcoin standard,
link |
but there's a recent book that discusses this in detail
link |
called The Block Size War by Jonathan Beer.
link |
It's a great description of, in 2017,
link |
essentially the miners thought that they can control Bitcoin.
link |
You know, they had, there was one mining company
link |
that produced the majority of the machines
link |
that were on the network and they,
link |
and their allies had control of the machines
link |
that were out there and they controlled the majority
link |
of the hash rate and they thought that they could change
link |
Bitcoin's supply, not supply, sorry,
link |
they could change Bitcoin's block size,
link |
which is a tiny little detail, technical parameters,
link |
not even all that big of a deal for the economics of it.
link |
But they thought that they could pass this change,
link |
they could force this change on the network.
link |
And the members of the network rejected it
link |
and they weren't able to do it.
link |
So the nodes are what is sovereign.
link |
The nodes are what determine the rules of the game.
link |
The miners are a service provider.
link |
The miners invest capital upfront.
link |
You know, they buy the machines, they buy the electricity,
link |
they buy the storage, they buy the locations,
link |
they pay the rent, and they invest all of that money
link |
based on the idea that if they behave according
link |
to what the nodes want,
link |
the nodes will reward them with Bitcoin.
link |
So the miners are in no position
link |
to dictate terms for anyone.
link |
You know, they've put up their capital upfront
link |
and they will only recoup it if they do what the nodes want.
link |
So therefore what really matters
link |
is the decentralization of the nodes.
link |
So we wanna, you wanna have as many nodes as possible.
link |
You should, you wanna have a system
link |
where there's a large number of nodes.
link |
And this is of course the biggest problem
link |
with other digital currencies is that, you know,
link |
because basically Bitcoin has cornered the market
link |
on a digital currency,
link |
the only way that you can really get traction
link |
is to generate a whole bunch of buzzwords
link |
about, you know, we're doing this and we're doing that.
link |
And so other digital currencies are optimized
link |
for bells and whistles and buzzwords.
link |
And that means adding computational load,
link |
which makes the nodes bigger, harder to operate,
link |
and therefore you have a very small number of nodes.
link |
In fact, very few digital currencies are keen
link |
to publicize how many nodes there are,
link |
and they don't have full nodes in the true sense.
link |
And it doesn't even matter how many nodes they have
link |
because de facto, you know, you can spin up a million nodes
link |
tomorrow on AWS, doesn't really matter.
link |
What matters is de facto do the nodes dictate
link |
the rules of consensus.
link |
And the fact that with most digital currencies
link |
you can have hard forks very frequently
link |
and they can change the supply all the time
link |
means that there's a small group of people
link |
who agree amongst themselves how to move forward.
link |
Yeah, so you threw in a few criticisms of all coins there.
link |
So one is the small group.
link |
That one we could talk about.
link |
It's a tricky one, and we talked about that
link |
with Satoshi Nakamoto.
link |
But the other one is small number of nodes
link |
sort of to push back on that.
link |
As computational power increases,
link |
you can argue that that enables more and more
link |
cheap computers to serve as nodes.
link |
So at least it paints a future
link |
where nodes are always increasing
link |
because computational power is always increasing
link |
and getting cheaper and cheaper and cheaper.
link |
So at least there's a hope for the future
link |
for greater and greater decentralization
link |
on the node front.
link |
Yeah, but I mean, ultimately, again,
link |
it doesn't really matter how many nodes you have
link |
if the way that the currency is run
link |
is that you're gonna have a hard fork every few months,
link |
which is the case with most other currencies.
link |
Bitcoin's the only one that's not have a hard fork.
link |
Basically, the unique thing about Bitcoin
link |
in a technical sense is that you could get
link |
the original software that Satoshi himself ran in 2009
link |
to start the network.
link |
And you could run it today
link |
and it would sync with the blockchain.
link |
There's one bug you need to fix,
link |
one mistake that would have only appeared
link |
I think in around 2013 or 14 or something like that,
link |
so that he wasn't aware of back then.
link |
So you just need to fix this one tiny little bug.
link |
And then the consensus parameters are still the same.
link |
So you're able to sync to it.
link |
This is not true for most other digital currencies.
link |
I'd say probably all of them
link |
because they've all had many hard forks,
link |
which they think of as upgrades.
link |
And they market this thing as,
link |
well, Bitcoin can't upgrade, but we upgrade all the time.
link |
Well, yeah, you know what else upgrades all the time?
link |
Facebook, Apple, Amazon,
link |
anything that centralizes is very easy to upgrade.
link |
And that's precisely why, as Michael Saylor says,
link |
these things are somebody's liability.
link |
They are security.
link |
You're carrying on somebody's technical
link |
and economic liability.
link |
They can hard fork, they can 10x the supply tomorrow.
link |
Yeah, they can fall victim to the same corrupting forces
link |
that governments fall victim to.
link |
Sure, and for people who don't know,
link |
yeah, hard fork is a reverse incompatible change
link |
to the underlying function of a cryptocurrency.
link |
Of course, there is hard forks of Bitcoin as well.
link |
I'm sure all of which you love dearly.
link |
Anyway, but that doesn't matter.
link |
The original Bitcoin, for the most part,
link |
has not undergone any changes.
link |
And that's one of the...
link |
I mean, it has undergone changes,
link |
but none in the important parameters of the network.
link |
So another criticism is about energy.
link |
So the proof of work,
link |
consensus mechanism uses a lot of energy.
link |
What's the response to that criticism of Bitcoin?
link |
Yes, because it's worth it.
link |
Okay, the airplane uses a lot more energy than a kayak.
link |
You know, when you're gonna cross the Atlantic next time,
link |
what are you gonna take?
link |
A kayak that is environmentally friendly,
link |
according to this insane definition,
link |
or are you gonna take an airplane
link |
that consumes a lot of energy?
link |
So the cost benefit analysis here,
link |
essentially, you have to consider
link |
both the cost and the benefit.
link |
Exactly, and I think it's an astonishing testament
link |
to just how far backward people's scientific
link |
and technological thinking has devolved
link |
to the point where we think of energy consumption
link |
I think it's just...
link |
And in the Fiat standard,
link |
I discussed the whole hysteria around energy,
link |
and I think it's a product of Fiat inflation
link |
because it's a way of trying to covering up
link |
the fact that energy fuels that are reliable
link |
and necessary for the current world
link |
are becoming more and more expensive because of inflation.
link |
And so governments are always looking for excuses
link |
for why you should not be using those things.
link |
And so they promote all kinds of stupid pseudosciences
link |
that tell you about why these things are bad.
link |
But really, you know, all technology is...
link |
Well, not all, but the vast majority
link |
of technological innovations involve
link |
economizing on human time and judgment
link |
and replacing it with machines,
link |
with reliable machines that spend a lot of energy.
link |
So that's what a telephone does.
link |
Instead of having to send somebody across the world
link |
to tell somebody something else or send a letter,
link |
a telephone allows you to do it.
link |
The car is like that.
link |
You could walk, but a car consumes a lot more energy,
link |
but it allows you to travel much faster and safer
link |
and more reliably.
link |
An airplane is like that.
link |
Modern telecommunication, human prosperity
link |
is an increase in the consumption of energy.
link |
And I think it is an absolutely criminal thing.
link |
I mean, genuinely mean the word criminal
link |
to portray energy consumption as a bad thing,
link |
because it is truly depriving people of the chance
link |
to live a life that makes life better, you know?
link |
It's truly criminal to tell poor countries
link |
that they should not consume the same energy sources
link |
that are being used in rich countries
link |
on which our modern infrastructure and modern life relies.
link |
That's what life is.
link |
You know, if you reduce the consumption of energy in the US
link |
to the levels that you have in poor countries today,
link |
the US would become desperately poor.
link |
A lot of people would die.
link |
Cities would collapse.
link |
The quality of life would decrease significantly.
link |
A high quality of life often requires,
link |
given the current technology, a high expenditure of energy.
link |
Yeah, and I should be clear, you know,
link |
it's not a quality of life in the sense of,
link |
many people think of this as,
link |
oh yeah, well, you know,
link |
taking needless flights for vacations.
link |
No, no, these are the cherries on top of the cake,
link |
but the substance of the cake
link |
and the real benefits of energy
link |
is the fact that children, premature babies,
link |
survive in countries that have reliable
link |
24 hour cheap electricity.
link |
If your child is born premature,
link |
that you put in an incubator,
link |
put him in an incubator or her,
link |
they're highly likely to survive.
link |
If you don't have 24 hour electricity,
link |
that child is not gonna make it.
link |
And you see it, you know,
link |
the level of energy consumption per capita
link |
is highly correlated, not just to income,
link |
but also to health outcomes, to infant mortality,
link |
to all of the things that you care about.
link |
And Bitcoin is just another technology.
link |
It does consume a lot more energy than central banks.
link |
A lot of Bitcoiners like to take a cop out of this
link |
by saying, well, you know, central banks consume money
link |
and ATMs consume a lot of energy.
link |
And I think if you calculate
link |
how much central banks and banks consume,
link |
I think it's a rounding error
link |
next to what Bitcoin consumes.
link |
I think Bitcoin is just, maybe not a rounding error,
link |
but it's still, Bitcoin I think is going to consume
link |
a lot more, and that's a good thing.
link |
You know what's humbling is to look,
link |
because even just looking into this
link |
forces me to look at the energy expenditures
link |
for many of the things we take for granted.
link |
Obviously computers and other digital,
link |
our digital lives are just, Bitcoin becomes a rounding error
link |
relative to how much energy is spent
link |
on all the computers in our world.
link |
But also things like home appliances,
link |
microwaves, and hair dryers and stuff.
link |
Yeah, I mean, this is, that's being hilarious.
link |
It's like, oh, these things
link |
that are just part of our modern life,
link |
they're either the same order,
link |
at least the same order of magnitude as Bitcoin,
link |
and they seem like trivial parts of life.
link |
Yeah, and this is the thing,
link |
all of the people that complain
link |
about Bitcoin's energy consumption,
link |
I presume they use washing machines.
link |
Now, why should their desire for clean and dry clothes
link |
get to consume energy?
link |
And I mean, I used to live in Lebanon.
link |
Lebanon had hyperinflation.
link |
I escaped from hyperinflation.
link |
I escaped, it prevented,
link |
my life could have been ruined by hyperinflation.
link |
And the reason that it wasn't ruined
link |
is because I have Bitcoin.
link |
So, I don't know, am I allowed to swear on your podcast?
link |
So, fuck your washing machine.
link |
given a choice between my washing machine
link |
and my Bitcoin, I'll choose Bitcoin.
link |
It's a technology that has been,
link |
that has already saved my life,
link |
and I think it's gonna save the lives
link |
of many, many, many, many more people.
link |
So, but of course, I don't have to choose
link |
between my Bitcoin and my washing machine
link |
because this is, you know,
link |
we're just constantly consuming more energy
link |
and we're gonna continue to consume more energy
link |
in this world, and that's just what progress is.
link |
And a small remark.
link |
So, in principle, I don't think this is a problem,
link |
but the other thing about Bitcoin,
link |
where it is different from washing machines,
link |
Bitcoin is truly unique in this.
link |
It's the only thing whose energy consumption
link |
can be produced absolutely anywhere.
link |
Your washing machine needs to be in your house
link |
where you live, and you live in a city
link |
surrounded by 10 million people,
link |
and they all have their washing machines,
link |
and they're all connected to the grid,
link |
and they generally tend to do their laundry
link |
around the same time.
link |
And so you have to put the load of the washing machine
link |
on the grid at the same time.
link |
There needs to be one power plant
link |
and all of the infrastructure needs to work
link |
at the same time, and the electricity
link |
is pretty expensive because it's being done
link |
in a place with high demand.
link |
Bitcoin does not need to buy electricity
link |
from places where it has high demand
link |
because it can buy electricity from anywhere.
link |
This is what's truly mind blowing about it.
link |
You can buy, you know, what you need,
link |
the electricity that you need for mining
link |
can be done anywhere.
link |
So you can mine, you know, you can have a waterfall
link |
in the north of Canada, 300 miles away
link |
from any population center.
link |
There's water falling, there's energy.
link |
You can put a hydroelectric dam there,
link |
and then you can use that energy to operate the miners,
link |
and then the miners just need
link |
a satellite internet connection,
link |
and effectively you're selling that energy
link |
that is isolated to the grid.
link |
And because of the way that Bitcoin functions,
link |
because of the difficulty adjustment,
link |
the only profitable miners are the ones
link |
who can get cheap electricity.
link |
Basically if you're mining at grid cost,
link |
if you're mining at around, the average electricity price
link |
in the world is around 14 cents.
link |
If you're mining at 14 cents in Bitcoin,
link |
you're most likely not gonna make it.
link |
If you're running your miners at 14 cents,
link |
because everybody could mine at 14 cents,
link |
and so what happens is if everybody's mining
link |
at 14 cents, 14 cents stops being profitable,
link |
and then only the people mining
link |
at a lower price are profitable.
link |
So that's why Bitcoin mining is not competing
link |
with your washing machine.
link |
This is the absurd thing
link |
about this kind of energy scarcity viewpoint
link |
where, oh no, it's a catastrophe,
link |
Bitcoin is taking all the electricity,
link |
as if the electricity is just one fixed pie
link |
that we all have to share and fight over.
link |
And this is how I keep making fun
link |
of these stupid headlines they put out
link |
where Bitcoin's consuming more electricity
link |
All right, well, maybe we should shut down Portugal then.
link |
What the hell is Portugal giving us?
link |
Like, obviously it's not, it's not competing.
link |
He doesn't mean that, I've gotten so much criticism
link |
for saying Cristiano Ronaldo's not in the top five.
link |
I apologize, I love Portugal.
link |
That's another discussion we should get into at some point.
link |
Because you posted a few soccer things.
link |
I'm not, I realize how passionate people are about this.
link |
Listen, it was a joke, all right?
link |
He deserves to be potentially in the top five.
link |
Yeah, I love Portugal.
link |
And even though I'm a Liverpool fan,
link |
I still respect Cristiano Ronaldo a lot.
link |
In fact, I hold a very unpopular opinion
link |
where I think Cristiano Ronaldo's
link |
the greatest football player ever.
link |
Number one, over Pelé and Maradona, Messi,
link |
better than Messi.
link |
Yes, he's been doing it for 20 years at the top.
link |
Nobody's ever done that.
link |
He's won everything everywhere,
link |
everywhere he goes at the top, at the Champions League.
link |
Really strong argument to be made for him.
link |
Messi's never done anything outside of Barcelona,
link |
So you appreciate performance, long term,
link |
versus the genius of the actual play on the field.
link |
I mean, the genius is,
link |
Ronaldo's the top scorer of all time.
link |
He scores more goals.
link |
So the genius is in the scoring,
link |
not the actual dance of the play, the creativity.
link |
Well, I mean, I don't know,
link |
Messi's been absolutely mediocre since he's left Barcelona.
link |
These are strong words.
link |
He scored, what, two goals in PSG season this year?
link |
They're out of the Champions League.
link |
What about Mohamed Salah?
link |
You posted about him.
link |
Is he climbing up to be someone?
link |
I think he should win the Ballon dOr this year.
link |
He probably should have won it last year as well.
link |
He's been absolutely outstanding,
link |
but I mean, just people are so crazy about Messi.
link |
They keep giving him accolades.
link |
He hasn't deserved, I think,
link |
Messi the last couple of Ballon dOrs that he got.
link |
I mean, he's a great player and everything,
link |
but no, he did not deserve it last year.
link |
We can agree to disagree.
link |
There's something.
link |
Do you think you're a Barca fan or a Messi fan?
link |
I would say, no, I wouldn't say I'm a Barca fan,
link |
but a Barca fan because of Messi,
link |
and I just, I think it's like, there's certain things.
link |
So when I was growing up in the Soviet Union, Russia,
link |
I remember Maradona, he was the first person I saw
link |
that I was like, oh, wow, this could be,
link |
this is greatness in sport, not just football and sport,
link |
right, and for some reason.
link |
I mean, it's something about Diego Armando Maradona,
link |
the way they were commentating the genius of his play,
link |
the mix of ego, and again, the performance,
link |
but being able to carry a team on his shoulders,
link |
that, I just fell in love with whatever he represented,
link |
and then by that, Argentina, and then Messi,
link |
I saw when he was 16, 17, when he was just in the early days,
link |
and when you first see a person and you see the genius
link |
and you notice that, and then it turns out
link |
to be actually a great player, for some reason,
link |
you're invested, you're emotionally invested,
link |
you're, I don't know, so you kind of just fall in love
link |
and then you get, you pick sides.
link |
I mean, that's the thing about football.
link |
Part of the fun things about football, soccer,
link |
is like, you pick a guy, you pick a team,
link |
and fuck everyone else, and you just have fun talking shit.
link |
I mean, that's part of it, you know?
link |
It's great, it's great because I think,
link |
obviously it's a very stupid thing to do,
link |
but I think if you don't do it in football,
link |
you're gonna do it in real life.
link |
Elsewhere, that's right.
link |
That's why it's very good, like, that's it.
link |
Instead of hating people for their religion
link |
and for their skin color, hate them
link |
because they support Manchester United.
link |
So you're a Liverpool fan, that's it.
link |
Yes, yes, hardcore, long term.
link |
But yeah, so to go back to the original point on Portugal.
link |
Bitcoin is not competing with Portugal
link |
because Bitcoin is buying energy
link |
from places where we can't buy it,
link |
because all the places where we can buy energy
link |
for our washing machines, we're bidding up the price
link |
enough to make it nonviable for Bitcoin.
link |
That's why, you know, you'll see those headlines
link |
about Bitcoin consuming more energy than Portugal.
link |
Well, if you look at Portugal, I mean,
link |
they've got giant power plants in Portugal,
link |
they've got millions of people,
link |
and they've got enormous amounts of infrastructure.
link |
Where are all of these infrastructure for Bitcoin mining?
link |
You don't see it in the cities.
link |
It's all isolated, it's all out away from the cities,
link |
or it's connected to grids that have serious overcapacity.
link |
So Bitcoin is not out there buying the expensive energy,
link |
taking energy away from people who can't afford it.
link |
It's out there buying its own energy
link |
because it doesn't need to buy the expensive energy
link |
that people really need.
link |
So one other criticism from an investment perspective,
link |
from a gambling perspective that people see
link |
is the volatility of Bitcoin.
link |
Of course, that's been somewhat decreasing over time,
link |
but what's your answer to the sort of criticism
link |
that Bitcoin is too volatile, I wanna stay away,
link |
it doesn't seem like a safe place for me
link |
to invest either short term or long term?
link |
There's no denying there's a volatility
link |
and there's a high oscillation in the value
link |
in the short term.
link |
So I think the safe way to approach that
link |
is in terms of position sizing.
link |
If the volatility bothers you,
link |
then you're overinvested perhaps.
link |
So maybe you should reduce the size of your position
link |
so that the volatility doesn't bother you.
link |
And this is the short answer that you know,
link |
like stack as much as your conviction
link |
will allow you to tolerate the volatility.
link |
And of course, the reason you should try
link |
and consider tolerating volatility more
link |
is the options are you hold fiat assets,
link |
which only go down stable, relatively stable,
link |
not a lot of volatility day to day,
link |
value of your dollar doesn't change 40% overnight,
link |
20% overnight or something like that.
link |
But it does go down reliably, it's gonna go down 40%.
link |
You can count on it, it might take a year,
link |
two years, five years, 10 years,
link |
compared to the things that you want to buy,
link |
it's gonna go down by 40%.
link |
And it's not gonna come back
link |
and it's gonna go down another 40%
link |
and then another 40% and then another 40%.
link |
So the option really is relatively short term stability
link |
with long term decline,
link |
or short term volatility with long term rise.
link |
And so that's another way in which Bitcoin teaches people
link |
to have a low time preference and think about the long term.
link |
So stack, accumulate and think of it in the long term.
link |
It's a function of the fact that Bitcoin is new.
link |
Bitcoin is currently less than 1%
link |
of the global money market.
link |
So there's about $100 trillion of money
link |
out there in the world.
link |
$100 trillion roughly of fiat
link |
and about $10 trillion of gold.
link |
And Bitcoin is less than $1 trillion.
link |
So one rich guy decides to get into Bitcoin,
link |
that's gonna show up on the Bitcoin chart.
link |
You look at it, Elon Musk decides to buy Bitcoin,
link |
you see the buy, you see the news,
link |
it happens and you see the pump.
link |
Elon Musk decides that he doesn't like Bitcoin,
link |
But a few years ago, it used to be
link |
that one random millionaire would cause that pump.
link |
Now you have to be the richest guy in the world to do that.
link |
In a few years, you're gonna have to be
link |
the richest country in the world to be able to do that
link |
to the Bitcoin price, maybe many years,
link |
maybe not a few years.
link |
But as Bitcoin grows, think about it
link |
as a liquid pool of money.
link |
Currently it's a small pool next to a much larger ocean,
link |
which is the entire money market.
link |
And so one person jumps from that to this small pool,
link |
they can make a big splash.
link |
As the pool grows, essentially the salability increases
link |
and the likelihood of one individual purchase
link |
affecting the price so violently decreases.
link |
And so over time, as the size of the market increases,
link |
I think we're gonna see the volatility decline
link |
Ultimately, if you look at gold historically,
link |
gold has been very, very stable.
link |
It did not achieve its stability
link |
because the central bank was in charge of gold supply
link |
or because there was a gold committee
link |
that decided how much gold gets produced.
link |
It achieved that stability because it became
link |
the most saleable good and so therefore became the good
link |
that contains the most cash balances in the world.
link |
And the end of the 19th century,
link |
everybody held cash balances in gold
link |
and new production was a tiny little addition
link |
to global production, to the supply.
link |
So that's what made gold the most relatively,
link |
I shouldn't say stable
link |
because nothing is stable in economics,
link |
but relatively it holds onto its value
link |
and it's much less volatile than digital currency,
link |
than national currencies.
link |
That's because it has the highest stock to flow ratio
link |
and that's because its supply is a tiny fraction
link |
of the liquid market.
link |
And as the liquid market grows,
link |
as the size of cash balances grows
link |
and trades in Bitcoin cancel each other out,
link |
you get only slight changes in value.
link |
So I think as Bitcoin matures, that's going to decline.
link |
So effectively, I think the end game
link |
is Bitcoin is huge, Bitcoin is worth something like,
link |
I think the total addressable market for Bitcoin
link |
is not just national currencies
link |
and gold's addressable market, but also government bonds.
link |
That's the really big one.
link |
So how do banks compare to gold?
link |
So you're saying it'll surpass gold, the 10 trillion?
link |
Where does bonds stand?
link |
So then there's also national currencies,
link |
which are about 100 trillion
link |
and then there's government bonds,
link |
which are around $120 billion, sorry, trillion dollars.
link |
If we're saying billion, we meant trillion.
link |
So you think bonds can move to Bitcoin?
link |
I've always held this is the prize, this is the main dish.
link |
Gold is the appetizer, bonds are the main dish
link |
because bonds have replaced gold.
link |
I have an appetizer.
link |
I mean, bonds have replaced gold in people's portfolio.
link |
People, you remember when we were saying gold was,
link |
you'd hold it as a saving,
link |
as the secure part of your portfolio
link |
and then you take risk with the equity.
link |
Currently people do that
link |
by holding a part of their portfolio in bonds.
link |
That's the part that they treat as their saving account.
link |
And then the rest they use for not speculation,
link |
for investment in which they take risk.
link |
Yeah, speculation.
link |
And that's stocks and equity and other high risk assets.
link |
I think Bitcoin is not gonna replace equity.
link |
There will always be equity.
link |
There'll always be companies
link |
and people will wanna have equity.
link |
But it'll probably replace a big chunk
link |
of current equity markets
link |
because right now, if you want to save,
link |
it used to be that you hold bonds.
link |
Now, if you wanna save, you go into stock indexes.
link |
So I think Bitcoin likely eats a big chunk
link |
of equity markets because currently it's,
link |
people are using it as saving.
link |
And I think it eats all the bonds.
link |
That's my most ambitious statement.
link |
The question is the scale of time that happens across,
link |
but the most important statement you make is about trend.
link |
Yeah, and also, I mean, let's also remember
link |
currently bonds nominally don't beat inflation
link |
and in real terms,
link |
they don't come close to beating inflation.
link |
So currently with bonds,
link |
you're taking on credit default risk to buy a bond
link |
and also getting less money back in real terms.
link |
Well, Bitcoin doesn't offer you returns,
link |
but in real terms, it appreciates much more
link |
and it has, I believe, a lot less risk associated with it
link |
than any company or government.
link |
So let's make things spicy
link |
and ask if Bitcoin fails in the long term future.
link |
As you just said, economics, volatility,
link |
things happen in this world.
link |
The human civilization might end in this century.
link |
I hope it doesn't, but it might.
link |
There could be catastrophic events.
link |
If Bitcoin fails, it goes to zero, loses its number one spot.
link |
What would be the reason?
link |
If you're an alien visiting Earth 100 years from now
link |
and just were to analyze the situation,
link |
Bitcoin is a pretty new thing.
link |
So the possible trajectories of how the world evolves
link |
together with this new monetary technology
link |
is nearly infinite.
link |
So if it fails, one of those trajectories
link |
surely involves Bitcoin failing.
link |
What would be the reason?
link |
I think the most likely reason that it could fail,
link |
I don't think this is likely in general,
link |
but I think it is the most likely
link |
of all the unlikely things that could destroy Bitcoin,
link |
is governments go back on a gold standard.
link |
So they make, in your view, a better decision
link |
than the current system, just not the best decision.
link |
I thought you would go much darker.
link |
But, so that's, yeah, okay, interesting.
link |
So maybe because of Russia, because of China and so on,
link |
because of the current war,
link |
they might reconsider the power that America holds
link |
because of the monetary,
link |
because it being the primary currency,
link |
and they'll start thinking about going on a gold standard.
link |
Yeah, but it would also require the US and the Europeans
link |
and everybody to want to join in this system
link |
and sing Kumbaya and play nice with each other
link |
around the gold standard.
link |
I think, you know, given that gold already
link |
is about 10 times larger than Bitcoin,
link |
so it has a first mover advantage,
link |
if governments were to go and peg their currencies
link |
to gold again, the price of gold would shoot up 5, 10x,
link |
and it would rise in value a lot more.
link |
Of course, that doesn't necessarily kill Bitcoin.
link |
No, again, I'm not saying it's likely to happen.
link |
I'm saying it's, I imagine, less likely,
link |
less unlikely than all the other unlikely scenarios.
link |
Because, you know, even with a nuclear war,
link |
like 90% of the planet is destroyed,
link |
the 10% continue to run Bitcoin.
link |
Okay, there's a movement,
link |
a community of people referred to as Bitcoin maximalists.
link |
I've seen you referred, at least in the past,
link |
as the leader of the Bitcoin maximalists,
link |
probably because of your book,
link |
Bitcoin Standard, consider the Bible in general.
link |
You're one of the leaders in this space.
link |
Do you regret any of the toxicity and derision
link |
that often or perhaps sometimes originates
link |
from this community?
link |
I'm not in the position to regret other people's actions,
link |
so let's just be clear.
link |
I think the rhetoric of community is,
link |
I reject this rhetoric because I think it's a way
link |
for kind of political manipulation and subversion
link |
to try and portray people as part of a community
link |
and hold people responsible for other people's actions,
link |
which I think is ridiculous.
link |
So, you know, some guy on the internet
link |
said something mean to somebody,
link |
and then this is very common,
link |
and I always try and not get involved in these things.
link |
So some guy who identifies as a Bitcoiner
link |
says something to somebody that's very wrong.
link |
Of course it happens.
link |
Tens of millions of people use Bitcoin around the world,
link |
and a lot of these, I'd say parasites,
link |
people who don't have anything productive
link |
to do with their life, you know, outrage merchants,
link |
they'll come out and say something along the lines of,
link |
you know, the Bitcoin maximalists are toxic,
link |
they're holding Bitcoin back, and they need,
link |
and of course it's manipulative.
link |
The point behind it is they want to get to you,
link |
they want to get people who are, you know,
link |
not that nobody with 300 followers
link |
who said something silly,
link |
they want to get the notable people
link |
to basically change their message.
link |
So the idea is, you know, I'm supposed to apologize
link |
because somebody with 300 followers
link |
I've never met in my life who calls themselves a Bitcoiner
link |
said a mean word, and then I need to apologize,
link |
and I also need to cut down on my rhetoric
link |
about other digital currencies, and I need to do that.
link |
So I'm only responsible for my own actions,
link |
and I don't recall regretting anything.
link |
Okay, but let me push back
link |
or push further into that direction.
link |
Fine, let's leave community aside.
link |
Labels suck, for sure.
link |
But you have a spicy way about you on Twitter.
link |
Even in this conversation, you know,
link |
you had some good, strong words to say about movement.
link |
I've always believed life is too short to mince words.
link |
One day I'm gonna be dead, and on my deathbed
link |
I'm not gonna look back and say,
link |
I wish I was a little bit more circumspect
link |
in expressing my opinions.
link |
I'm far more likely to think, you know what,
link |
I wish I said what I really think.
link |
Yes, life is too short to hold back your opinion.
link |
The question is, what is really your opinion?
link |
Because you're many people in one.
link |
So there's a person that loves,
link |
there's kindness for the human beings,
link |
there's a person that gets annoyed,
link |
there's a person that enjoys disagreement,
link |
there's a person that enjoys collaboration.
link |
And you can emphasize all of those different things,
link |
each of those different things,
link |
weigh it differently in your online interaction.
link |
There's some aspects of online interaction
link |
that encourages, in different communities,
link |
online interaction is one community
link |
that encourages kind of derision and mockery and so on.
link |
So you can choose if you want to engage
link |
that part of yourself or some other part of yourself.
link |
Economics is another community that enjoys
link |
being like very straightforward
link |
about their disagreements, pretty harsh.
link |
It's fun to watch because it feels like you arrive
link |
at the truth much faster because you tear each other apart.
link |
But that's a choice, that's a deliberate choice.
link |
And I don't want to label an entire community of people
link |
by its extremes, I don't think you should do that.
link |
But there's cultural characteristics you start to notice
link |
when you go to France, it's a certain way.
link |
When you go to Britain, London is different than rural.
link |
Britain and New York is different than Iowa.
link |
You start to notice things.
link |
I mean, you don't want to generalize,
link |
there's all kinds of people everywhere,
link |
but there's a certain way of communication
link |
on crypto, Twitter in general,
link |
but also Bitcoin maximalists
link |
that I even early on received a bunch of heat.
link |
I was like, what the hell?
link |
So listen, there's definitely a difference
link |
when I go to the computer science community,
link |
the machine learning community,
link |
it's way friendlier than the cryptocurrency community.
link |
I have much more freedom to actually be what I enjoy being,
link |
which is asking simple dumb questions.
link |
Even when I've already spent years,
link |
sometimes decades with an idea,
link |
I like asking dumb questions anyway.
link |
The crypto folks punish you for this,
link |
for curiosity, for exploration.
link |
I understand the mechanism
link |
because so many other people come into that community
link |
and they might masquerade as curious,
link |
but really they're trying to inject,
link |
they're trying to sell some kind of altcoin,
link |
there's some scheme, there's some scheme to make money.
link |
And so I understand,
link |
maybe that's just the dynamics of the community by nature.
link |
It's not like you respond appropriately
link |
to the amount of charlatans in the community.
link |
So if the fraction of charlatans is low,
link |
maybe you can afford to be more loving and kind and so on.
link |
And when the fraction of charlatans is high,
link |
you have to be harsher.
link |
But I think also the stakes are extremely high
link |
in this situation.
link |
And I think if you don't like Bitcoiners,
link |
if you think Bitcoiners are toxic,
link |
wait till you meet fiaters.
link |
The fiat community has financed world wars and genocides
link |
and tyrants and the mass death and destruction.
link |
The fiat community, if you wanna use that term,
link |
I don't believe that you should,
link |
but I mean, fiat has destroyed the savings
link |
of pretty much anybody who's lived
link |
through the last 20th century.
link |
Pretty much anybody who's lived through the 20th century,
link |
no matter where you lived,
link |
Switzerland, US, Ethiopia, Russia,
link |
you've gone through fiat problems.
link |
You've had hyperinflation, you've had bank confiscation.
link |
There isn't a family in the world today
link |
that hasn't had its wealth destroyed over the last century.
link |
They all have a story about the inflation
link |
and the hyperinflation.
link |
And Bitcoin offers us a way out of this.
link |
And shitcoins, altcoins are essentially fiat world's
link |
last gasp attempt to try and salvage fiat,
link |
to try and salvage the idea that some people
link |
will continue to be able to print money
link |
and other people will have to use that money.
link |
You know, this is Twitter, it's a free market,
link |
it's the internet.
link |
You don't have to follow anybody, that's the thing.
link |
So what I find really objectionable about the people
link |
who are so butthurt always about Bitcoin maximalists
link |
is you don't have to click follow on people you don't like.
link |
There are 300 million Twitter accounts.
link |
And if you choose to follow the accounts
link |
that say things that annoy you
link |
and then complain about the fact
link |
that they say things that annoy you,
link |
I'm sorry, but you're an idiot
link |
that you don't know how to use Twitter.
link |
Just follow the accounts that you like.
link |
It's, you know, you don't have to be part of this.
link |
You don't have to listen to those people.
link |
You can choose, there are a lot of Bitcoiners
link |
that don't act like this.
link |
You can just unfollow the ones that you don't like.
link |
Since in the past year, man, time flies.
link |
I've met a lot of them and I enjoy them a lot.
link |
And you build that community of people that you enjoy.
link |
There are less that communicate in the way you enjoy.
link |
And it's becoming me at this point
link |
that I block with love, I think.
link |
Because I did not.
link |
I block very prolifically
link |
and I strongly recommend people continue to block.
link |
I think Twitter is, you know,
link |
you're not gonna get to interact
link |
with 300 million accounts anyway.
link |
So you wanna be constantly curating the experience
link |
by getting rid of people you don't like
link |
and following people that you like.
link |
And that's just how, you know,
link |
after 10 years of using Twitter,
link |
you know, you get, you accumulate the block list,
link |
which is very big, which I'm very happy for.
link |
I'm gonna pass on to my children.
link |
That's, on your deathbed,
link |
the grandchildren will gather around
link |
and your grandfather can finally share the full list.
link |
So like, again, it's just a Twitter account.
link |
If it bothers you so much, ask yourself why it bothers you
link |
that some people are so,
link |
I'm not referring to you obviously,
link |
but I mean, the people that are constantly aggravated
link |
about this, I don't get bothered by anything on Twitter.
link |
I just block immediately.
link |
And I get to curate the experience that I enjoy.
link |
And I recommend people do that.
link |
It's really a lot less pathetic than complaining
link |
about strangers saying things you don't like,
link |
which a lot of, and of course the reason for it is,
link |
you know, I mean, when I say it's stupid,
link |
it's not really stupid.
link |
There's an ulterior motive there.
link |
And the ulterior motive is,
link |
hey, I have this shit coin that I made
link |
with five other friends of mine.
link |
And I'd like you to,
link |
I'd like to ride your coattails, Bitcoiners,
link |
and I'd like you to please help me promote this shit coin.
link |
Like this is, I get this practically every week,
link |
whether through email or through Twitter,
link |
where, hey, you know, this is our shit coin.
link |
You know, it's just like Bitcoin,
link |
but it's better because it does this and this and that.
link |
And, you know, basically how can we get you
link |
to promote this shit coin for us?
link |
And being straightforward and forthright
link |
is a great productivity hack,
link |
because, you know, you just tell those people,
link |
no, I'm not interested.
link |
It's a stupid shit coin.
link |
And I wish you quick and swift failure
link |
before you take a lot of people's money.
link |
And that's what I genuinely think.
link |
Well, but I'll just be upfront with the fact,
link |
at least for my taste,
link |
just labeling everything as a shit coin worries me.
link |
So this is my own preference.
link |
It's not a judgment on you.
link |
It's just my own preference
link |
that I'm afraid I'll miss good ideas.
link |
I think when you're, me personally,
link |
when I'm too certain about things,
link |
when I'm too tribal about things,
link |
I'll miss actually really strong ideas,
link |
outlier ideas, totally new ideas.
link |
So that worries me.
link |
One of the downsides of the way Bitcoin is,
link |
how much shit is at stake financially
link |
is that it's less open to good,
link |
and actually by design, that it's not changing,
link |
like with the hard forks and so on,
link |
that there's not a kind of curiosity
link |
about exploration of ideas.
link |
Of course, in some way,
link |
that curiosity can start getting injected
link |
when you start talking about other layers
link |
built on top of Bitcoin,
link |
when you start talking about applications
link |
or different things like lightning network,
link |
that's where the curiosity can emerge.
link |
But still, that's why with cryptocurrency in general,
link |
I just try to keep an open mind.
link |
And just the shit coin as a term
link |
is just a good statement
link |
that I'm gonna close my mind to.
link |
That's the way I hear it.
link |
But coming out of your mouth,
link |
because you say a lot of other edgy stuff,
link |
it's just more you having fun.
link |
That's the way I hear it.
link |
But if I said something like that,
link |
I would feel like I'm closing my mind.
link |
I mean, let me give you the counter argument to that.
link |
How much time do you spend emailing back
link |
all of these Nigerian Prince email scams
link |
that you know email you tell you,
link |
send me $5,000 and I'll send you $15 million?
link |
Why are you being close minded
link |
to all of these great ideas?
link |
Well, no, but I'm also...
link |
You know, maybe one of them
link |
will actually send you $15 million.
link |
But I don't know if I know the difference
link |
between the Nigerian Prince
link |
and many other people I do talk to
link |
who are colleagues and so on
link |
that are also emailing me.
link |
And they're also offering me things,
link |
but they don't sound as ridiculously spammy.
link |
Yeah, but I mean, the moment that somebody tells you,
link |
hey, I'm gonna give you $15 million for nothing,
link |
just if you send me $5,000,
link |
you know, you're getting something for nothing.
link |
And essentially, with all of the digital currencies,
link |
it's the same pitch.
link |
Say, hey, you know, come use this thing
link |
that'll allow you to do things that...
link |
All of the things that they pretend that they can do
link |
that can be done with computers
link |
without having digital currencies.
link |
You know, we already have AWS that does cloud computing,
link |
that does everything that shitcoins pretend to do.
link |
The only difference is AWS doesn't have
link |
its own monetary system tacked on top of it
link |
to allow Jeff Bezos to basically print his own money.
link |
But don't you think there's some gray area?
link |
So let me go for the historical record
link |
and let's see if you've changed
link |
as a philosopher, economist, human being.
link |
You tweeted three years ago.
link |
Anyone who believes proof of stake in work
link |
is either one completely clueless
link |
at how and why Bitcoin works at all
link |
or two, a con artist using it as a buzzword
link |
to promote a worthless scam like Ethereum.
link |
Do you still believe that Ethereum is a scam
link |
and in general, proof of stake?
link |
You're either clueless if you think it's interesting.
link |
Yeah, no, I still stand by that.
link |
Would you classify Ethereum as a shitcoin?
link |
It's the mother asshole from which the shitcoins spring.
link |
The royal, the king shitcoin.
link |
I think the key thing is,
link |
the way to think about there's another tweet
link |
from a couple of years ago,
link |
which is essentially proof of work
link |
was like the invention of flight.
link |
Like we've gotten this machine
link |
and we managed to get it to fly off the ground.
link |
And proof of stake is,
link |
hey, we found a great way to make airplanes cheaper
link |
and faster by not making them fly.
link |
By keeping them on the ground.
link |
Like the invention of proof of work,
link |
the reason the entire digital currency space exists
link |
is because Bitcoin operates based on proof of work.
link |
If Bitcoin was based on proof of stake,
link |
it would have died or been shut down from day one.
link |
But that's a hypothesis and a lot of people believe that
link |
and I think they have a lot of strong support.
link |
But basically, proof of work is grounded in physics
link |
in the real world.
link |
The proof of stake is more about...
link |
It's the Federal Reserve.
link |
It's exactly what we have.
link |
It's exactly what we have.
link |
It's just a group of people who get to decide the rules.
link |
And it's essentially a system that is,
link |
it's a security, it's a company.
link |
So it's not an innovation in any sense.
link |
It's a step backwards to what we already had,
link |
which is you get a bunch of people in charge of the money.
link |
Now, the only reason it survives in this,
link |
the reason I call these things scam
link |
and I have no problem with calling them a scam
link |
is because they fraudulently present themselves
link |
as being decentralized.
link |
They present themselves as just being a different way
link |
of doing decentralization than Bitcoin, when it's not.
link |
It's just they're writing Bitcoin's coattails
link |
and they're writing the fact that most people
link |
don't quite understand what Bitcoin is and how it works
link |
to portray themselves as a cheaper, better,
link |
more efficient way of doing what Bitcoin does.
link |
It's a less legally accountable way
link |
of doing what central banks do.
link |
Right, so and the basic criticism is that
link |
there's a group of people,
link |
sometimes a very small group of people
link |
that can control the parameters
link |
of the operation of the system.
link |
So over time, you can't trust,
link |
it's not gold under the mattress.
link |
It doesn't have that kind of heart.
link |
It's not property.
link |
And I really very strongly recommend your discussion
link |
with Saylor for people who want to elaborate more on this.
link |
There's a bunch of people in charge,
link |
which means that legally,
link |
they should be doing this under securities law.
link |
But even as an anarchist,
link |
if I don't want to care about that,
link |
the technical implication of it is,
link |
this is never going to be adopted
link |
as a neutral way of transferring value on the internet
link |
because you need something
link |
that enemies can trade with one another.
link |
You can't have something
link |
that has a small group of people in charge
link |
because A, this small group of people themselves
link |
can be corrupted and B, they can be coerced.
link |
You can put a bunch of people in a room,
link |
put a gun to their head,
link |
and you can change everything
link |
in any of these digital currencies.
link |
And that's why I think you'll find a lot more sympathy
link |
among fiaters to shitcoins.
link |
The Keynesian economist to Ethereum fanboy pipeline
link |
is a very strong one because it's the same thing.
link |
It's like you like the idea
link |
of people being in charge of money
link |
and you think you're going to be the one
link |
who's going to be in charge of money.
link |
So you see a lot of this phenomenon
link |
and you see the same people that want gold
link |
and don't like central banking, they get into Bitcoin.
link |
Yeah, so just to actually push back on a couple of things.
link |
So one is theater.
link |
It sounds like I'm trying to be a sophisticated Brit
link |
talking about theater,
link |
but for many reasons not making me feel good about that.
link |
So day by day, things change.
link |
You used to be one of those.
link |
So people evolve, people learn.
link |
People that are supporters of Bitcoin
link |
might eventually become supporters of Ethereum
link |
or go back to supporting fiat.
link |
People evolve for different reasons.
link |
You grow up, you mature, or you become enlightened.
link |
So I think every single person sort of,
link |
as this technology is evolving, as this world is evolving,
link |
as wars break on, as your politics change,
link |
as the monetary system is constantly put under stress,
link |
people will evolve.
link |
So we're trying to all figure it out together.
link |
That's why like open mindedness here,
link |
I think for people like me at least seems essential.
link |
I know, so I expect you to be answering
link |
all of the spam emails you get.
link |
I will, prince by prince by prince.
link |
But no, I don't have a clear understanding
link |
what is a good investment in my time,
link |
what is a good investment in my money.
link |
That doesn't seem clear because things,
link |
things are good at promoting themselves.
link |
I'm not talking about the different kinds of things
link |
like Ethereum, altcoins, and so on.
link |
I just mean life, like dating, jobs, friendships.
link |
Like everybody's advertising themselves
link |
as a great investment, right?
link |
But you don't know and you have to keep an open mind.
link |
And also I don't, and be sort of self introspective
link |
about what, how like biases I operate under
link |
and ways I delude myself,
link |
like hallucinations that I'm living under.
link |
It's like breaking out of all these hallucinations.
link |
It's very hard to introspect thinking like
link |
what are the assumptions under which I live my entire life
link |
that might be actually false assumptions.
link |
That's a really difficult thought process to take.
link |
It's a dangerous one.
link |
It's the nature if you gaze long into the abyss,
link |
the abyss gaze into you.
link |
It's like Alex Jones talks about this.
link |
I mean he's living, he's got demons in his head.
link |
So he has like all these conspiracy theories
link |
that it holds in his head
link |
but it begins to really destroy him.
link |
So it's a psychological burden to carry.
link |
So if you question, if you question authority,
link |
if you question government, if you question culture,
link |
the way things have been done, it's really difficult.
link |
And the biases you operate under,
link |
it's really difficult to question them.
link |
So I think like being constantly open minded
link |
and self critical, not constantly,
link |
but a little bit every day is important I think.
link |
Yeah, but I mean, you know, you're talking to somebody,
link |
I grew up in Ramallah in Palestine in the West Bank.
link |
I've changed my mind on all kinds of different things.
link |
The fact that I was even open to the idea of Bitcoin
link |
is required, has required an enormous, enormous amount of,
link |
it's a heck of a journey.
link |
So I'd much rather appreciate, you know, direct arguments
link |
rather than these kinds of general fluffy,
link |
you know, you should be, oh, of course, yes,
link |
you should be open minded,
link |
but you know, also you come up with conclusions
link |
and you delete spam email sometimes
link |
when you know that it is spam
link |
because you have to move on with your life.
link |
You can't, there's an opportunity cost
link |
to considering every spam email, so.
link |
Well, to me, okay, so I'll just say
link |
from my relatively sort of shallow perspective,
link |
almost like a technical person, mostly,
link |
my understanding of economics is weak.
link |
Proof of stake is not obviously
link |
a weak consensus mechanism relative to proof of work.
link |
So that's not obvious to me that that goes wrong
link |
and becomes corrupted in the way
link |
that governments get corrupted
link |
because it still seems decentralized.
link |
Now, your criticism of governance is an interesting one,
link |
but if you put that aside,
link |
it still is a decentralized mechanism
link |
and it's more transparent than the mechanism
link |
that governments operate on.
link |
It isn't, it's exactly what the Federal Reserve is.
link |
The Federal Reserve is a proof of stake system.
link |
The Federal Reserve is owned by its constituent banks
link |
and so the rules of the Federal Reserve
link |
and the regulations are determined by the ownership,
link |
which is the banks.
link |
So it's exactly what the Federal Reserve is.
link |
But it's too backdoor, the agreements
link |
between the banks and the Federal Reserve.
link |
It feels like a lot of those agreements
link |
are made between individuals that sort of behind the scenes.
link |
It's not hard to, it's opaque.
link |
Yes, but the only way that a proof of stake system
link |
will take off is if you have a military
link |
to force people to use it.
link |
Ultimately, there's no way that it's going to take off
link |
And that's why for all of the bluster
link |
about wanting to move to a proof of stake system,
link |
Ethereum have been saying this since 2014.
link |
It's now been eight years that they've been talking about it.
link |
We still haven't seen the proof of stake system
link |
operational in the wild.
link |
It's vaporware for all practical and intentional.
link |
Oh, Cardano's proof of stake.
link |
I mean, you can do it in a centralized way,
link |
but can it survive?
link |
Can it last for a long time?
link |
I think it can last perhaps initially with marketing,
link |
with centralized marketing, you can promote it.
link |
But ultimately, user demand,
link |
the people that are not interested in speculating
link |
because they want to get rich on this,
link |
the people that are going to use it,
link |
they're going to want to use it because they can trust
link |
that it is not going to be messed with.
link |
Yes, but there's also applications.
link |
That's also a lightning network.
link |
But there's applications on top.
link |
Well, the reason I'm interested in things like Ethereum
link |
is you might think it's ridiculous.
link |
I thought it was ridiculous, but NFTs.
link |
So you can have NFTs probably on top of Bitcoin,
link |
but you don't because there's no marketing on Bitcoin
link |
because all of these ideas get promoted
link |
on proprietary shitcoins because, yes.
link |
But there's the network effects of ideas, of applications.
link |
So they just take off for some reason.
link |
And human civilization is such that you get excited
link |
about stuff and large amounts of people believe a thing
link |
and they start to get excited and it actually has impact.
link |
Like the fact that NFTs can have an impact on the art world
link |
or the world in general is wild to me.
link |
So the question is.
link |
David Rothcall has an impact on the art world.
link |
That doesn't say much.
link |
Well, I'm saying these ideas have,
link |
we're collective intelligent beings
link |
and we can believe a thing and that has power.
link |
That has led to major wars and all those kinds of things.
link |
So it's interesting to me that NFTs took hold.
link |
And the question is, is there distributed DApps?
link |
Is there distributed apps built on top
link |
of different blockchains
link |
that might somehow transform the world?
link |
You have to kind of keep an open mind to that.
link |
Cause right now it's like,
link |
it's like I'm the same place with that
link |
as I am with like virtual reality.
link |
It's like, all right, this seems like a really
link |
intellectually promising set of ideas here,
link |
but there's something either technically
link |
or socially not quite taking hold.
link |
And I don't know what the right answer is.
link |
So with virtual reality, what's the right answer?
link |
Is it just technically the latency is too high
link |
or the games are not good enough?
link |
Or is it a fundamentally flawed idea
link |
that you can live in a virtual world and enjoy it?
link |
That the physical world is just orders of magnitude better?
link |
Or a two dimensional display is just as good
link |
as a three dimensional world?
link |
Why is virtual reality not taking off?
link |
It's been since the 80s, right?
link |
I don't have strong opinions on it,
link |
on the prospect of the technology.
link |
Personally, I don't want to ever imagine myself
link |
having something on my eyes.
link |
I'd rather just go out into the real world.
link |
But I don't have strong opinions on virtual reality.
link |
I do have on dApps and NFTs.
link |
Yeah, what's your criticism of dApps and NFTs?
link |
Is this a distraction?
link |
It's a way to sell a flawed technology?
link |
The problem with dApps is, I mean,
link |
it's just the economics of it makes no sense
link |
in the sense that currently,
link |
if you wanted to run an application,
link |
whatever the application is,
link |
you want to run it on AWS,
link |
you pay a specific amount of money,
link |
you want to run it on your own laptop,
link |
you pay a specific amount of money per kilobyte of data.
link |
If you wanted to run the same thing on a distributed ledger,
link |
where you're distributing the data
link |
over thousands of computers worldwide,
link |
it's infinitely more expensive.
link |
And that's why we haven't seen any of these dApps take off.
link |
And that's why I've said this many years ago,
link |
the only working application
link |
of blockchain technology is Bitcoin.
link |
Because with Bitcoin, you know,
link |
with a few hundred bytes of data,
link |
with a few bytes of data,
link |
you could move a billion dollars worth of economic value
link |
from here to China and move it safely and reliably.
link |
I can't see it being justified
link |
for anything that is not as mission critical,
link |
as moving large amounts of value,
link |
which require very little amount of information.
link |
So when you look at all of the buzzwords
link |
that the Ethereum and other altcoin marketing people
link |
like to use, and you know,
link |
if you want to wonder really why
link |
we come to this kind of aggression
link |
is because we've heard all of this, you know,
link |
I've had all of these hucksters come to me for years,
link |
you know, it's been, I've had, you know, people in 2016
link |
talk to me about how Ethereum blockchain technology
link |
is going to revolutionize real estate deeds in India.
link |
I remember this guy,
link |
I'm not going to mention his name,
link |
but this guy was, you know, 2016,
link |
and he sold a lot of shitcoins
link |
and he made a lot of money off of shitcoins
link |
based on all these silly ideas.
link |
We're going to have Blackjack on a distributed ledger.
link |
We're going to have Indian real estate
link |
on a distributed ledger.
link |
And it's just, it's concerned trolling marketing.
link |
You know, oh, there's a problem with real estate in India,
link |
real estate deeds, blockchain fixes this, buy my shitcoin.
link |
And then people buy the shitcoin,
link |
Indian real estate isn't fixed,
link |
and the guy gets rich and they move on.
link |
But I mean, I'm still waiting for a dap to actually emerge.
link |
Like, you know, it's, the promise that we keep hearing
link |
is something completely world changing,
link |
world transforming.
link |
And the reality is not one app.
link |
Like there's one of my good friends, Jimmy Song,
link |
eventually they refused to go ahead with the bet.
link |
He wanted to bet with one of the Ethereum people
link |
You know, the Ethereum people are constantly saying
link |
those daps are going to grow
link |
and they're going to have so many applications
link |
and they're going to have so many ideas.
link |
And the reality is all the apps that work
link |
are centralized apps, you know?
link |
So there is no Uber on the blockchain.
link |
There is no Twitter on the blockchain.
link |
There is no social media on the blockchain
link |
because these are businesses
link |
and businesses require a centralized authority
link |
to make decisions.
link |
You can't have it be decentralized.
link |
Listen, you're frustrated,
link |
and I could see it over a few years
link |
of just having dealt with a humongous influx of charlatans.
link |
I wouldn't say frustrated, I'm amused.
link |
And it's no, it's water off my back.
link |
No, but a man that uses,
link |
and a community that uses the word shit coin
link |
is a little bit, you call it amusement.
link |
And I think amusement is a way
link |
to deal with the frustration.
link |
It's a channel and you have frustration.
link |
Like sometimes when you have to deal with bullshit,
link |
the best way is just to laugh at the absurdity of it all.
link |
And that's what you mean by amusement.
link |
But the fact is like,
link |
there's things like artificial intelligence for,
link |
what is it, how many decades, seven decades,
link |
has been off and on promising to change everything.
link |
And it has failed time and time again
link |
to deliver to the promise.
link |
But that doesn't mean there's something fundamental
link |
and really powerful about both the small
link |
and the big things going on
link |
within the actual research and development
link |
within those communities.
link |
There's a lot of exciting developments.
link |
And the scale at which those developments
link |
might actually have a transformative impact,
link |
the time scale is unclear.
link |
It seems like we're certainly overpromising.
link |
We dream too big and too aggressively
link |
in the AI community, but in a lot of communities.
link |
And I'm happy to give people the benefit of the doubt
link |
when they're overpromising,
link |
but not when they're making their own money.
link |
When you start making your own currency,
link |
then you don't get the benefit of the doubt.
link |
Because if your idea needs you to have a new currency
link |
that you print when Bitcoin is out there,
link |
then I'm gonna go ahead and assume
link |
that you're doing this for the money.
link |
It's a good time to mention
link |
that I am actually launching my new coin called LexCoin.
link |
You mean ShitCoin.
link |
I'm gonna have to block you with love.
link |
Okay, one thing I wanted to ask you about
link |
is the Feds, this paper they released in January 20th
link |
on the potential central bank digital currency, CBDC.
link |
What are your thoughts about that?
link |
Is it just another, like, is there pros and cons to this?
link |
Is it at all interesting to you
link |
that they're even considering this kind of thing?
link |
I used to think that it's just basically a waffle.
link |
And because as it exists,
link |
the dollar is a central bank digital currency.
link |
The vast majority of dollars are digital.
link |
And, but I think the way that over the last couple of years
link |
I've changed my mind on this,
link |
I think there's some serious substance behind these ideas.
link |
And what they mean effectively
link |
is the disintermediation of the banking system
link |
and giving everybody an account at the Federal Reserve.
link |
This is kind of the really dangerous idea.
link |
And I think this is enormously significant.
link |
Effectively, as somebody who's lived in the Soviet Union,
link |
what this is, is the return of the Gosbank
link |
on a global scale with modern technology.
link |
So under the Soviet Union,
link |
there was something called the Gosbank or People's Bank.
link |
And that was the only bank in the country.
link |
And you had an account with the National Bank.
link |
And if you said something wrong,
link |
your money got terminated from the Gosbank.
link |
Now, imagine that combined
link |
with the power of digital technology.
link |
And you can see that this could be
link |
an enormously powerful technology really,
link |
because if banks are out of the picture,
link |
then we changed the fundamental reality of fiat
link |
as being the creation of money through lending.
link |
And then it becomes the creation of money truly by fiat,
link |
by government fiat.
link |
So we moved to a system in which money is just basically,
link |
it's like we have money that is pieces of paper.
link |
And every time we've had money,
link |
we've had fiat money that was just pieces of paper,
link |
it collapsed very quickly.
link |
With the current system, money is credit.
link |
And the creation of credit is restricted to some point.
link |
And the creation of credit is self correcting.
link |
I discussed this in the fiat standard.
link |
If the central bank allows banks to create too much credit,
link |
that creates a bubble.
link |
And then there's a collapse in the money supply,
link |
which prevents hyperinflation from happening
link |
because the money creation is self destructive,
link |
it's self correcting.
link |
So you end up with an average of like 7% per year increase
link |
because you have 10% for five years
link |
and then you get negative 20% for one year
link |
and it's correcting.
link |
But now if you get rid of the credit creation mechanism,
link |
it's just assigning money directly,
link |
we're likely gonna get much faster inflation.
link |
And I think that's obviously the huge problem
link |
and perhaps the even bigger problem
link |
is the enormous amount of power
link |
that it gives to governments.
link |
It allows them to create an awful dystopia
link |
where you've got your money on your phone
link |
and anything you do is completely supervised
link |
and controlled through your spending.
link |
So they wanna introduce a new lockdown,
link |
then they'll just make your money not work.
link |
Your money is broken today, you can't spend money
link |
or you can only spend money in your local supermarket
link |
for the next three months
link |
because you can't leave your neighborhood,
link |
your money stops working outside of your neighborhood.
link |
This Chinese social credit score system
link |
is an example of this.
link |
And I think, I don't know, I don't have a crystal ball,
link |
so I don't know what the likelihood is
link |
of implementing something like this in the US.
link |
I've discussed it with Michael Saylor,
link |
he thinks it's highly unlikely.
link |
He thinks the people who've been pushing this
link |
are very far from the position of power
link |
and the traditional monetary and financial system
link |
is going to survive intact.
link |
I certainly hope so.
link |
I think this would be a terrible thing if it comes to pass.
link |
But I don't think, many people think
link |
that it is something that would undermine Bitcoin.
link |
Like a lot of common objection to Bitcoin is,
link |
well, governments are just gonna launch
link |
their own digital currencies
link |
and then Bitcoin is gonna die.
link |
And I think this is completely missing the point.
link |
People think Bitcoin is important because it's digital.
link |
National currencies can be digital.
link |
Bitcoin is important because it's not inflationary
link |
and because nobody controls it.
link |
Central bank digital currencies
link |
are likely to be very inflationary
link |
and they're likely to have very strong control at the top.
link |
So if anything, they are an advertisement for Bitcoin
link |
rather than a replacement for it.
link |
If it's Bitcoin, if it's gold,
link |
it's a way for multiple nations to partake.
link |
So if you were to imagine a future
link |
where we move from the fiat standard
link |
back to the gold standard and then to the Bitcoin standard
link |
or skipping that, going directly to the Bitcoin standard,
link |
what would it take?
link |
Is it gradual, is it immediate?
link |
What are possible trajectories that take us?
link |
Well, basically where the final sort of empirical
link |
observation is that you overtake,
link |
Bitcoin overtakes first gold and then bonds
link |
in terms of its monetary power in the world.
link |
But like just specifically from a government perspective,
link |
how do we move the United States, China, Russia,
link |
India, European Union to a Bitcoin standard?
link |
I'm not entirely concerned about
link |
whether governments move or not.
link |
In fact, I'd be very happy for them not to move
link |
as long as possible so that individuals can accumulate
link |
more and more Bitcoin while it's still cheap.
link |
So the people will move and the governments will catch up.
link |
Yeah, and I think this is kind of what I allude to.
link |
I mean, the point of the fiat standard,
link |
the fiat standard is really a Bitcoin book
link |
and it talks about fiat most of the time,
link |
but it does so to analyze Bitcoin and the rise of Bitcoin.
link |
In the final chapter, I discuss how I think
link |
this relationship plays out.
link |
The way that I tend to think of it
link |
is that most likely what's going to happen
link |
is we're gonna have kind of a financial apartheid
link |
where there's going to be two monetary systems.
link |
One is government controlled and it comes
link |
with increasing amounts of surveillance and inflation.
link |
And then if you want, you can just opt out of that
link |
and get into Bitcoin.
link |
And it's likely going to be difficult for governments
link |
to stop people from getting into Bitcoin
link |
for all of the technical reasons
link |
that make it very hard to stop Bitcoin.
link |
So then we have this alternative that is Bitcoin,
link |
which is not inflationary and does not have
link |
a central authority that can censor it.
link |
I think gradually is my hope
link |
and I also think my most likely scenario,
link |
but maybe I am biased because everybody thinks
link |
what they want is what's gonna happen.
link |
I think we're just gonna witness the same relationship
link |
because governments make their currencies
link |
so that they can devalue them and Bitcoin thrives on that.
link |
And more and more people are gonna learn,
link |
more and more people are gonna find out.
link |
And whether it's through curiosity or self interest
link |
or through the destruction of the national currency,
link |
all roads lead to a Bitcoin.
link |
So more and more people are gonna buy Bitcoin,
link |
the price of Bitcoin is going to go up.
link |
And as it goes up, Bitcoin becomes a more significant part
link |
of the world economy.
link |
And this is something that the skeptics don't get.
link |
Like a lot of the academic skeptics to Bitcoin,
link |
they offer up all of these theories
link |
about why they think Bitcoin can't work
link |
and then they present it and they think,
link |
they've delivered the knockout blow
link |
as if Bitcoin needs their permission
link |
or the world is going to need their permission.
link |
Well, the reality is people are gonna join Bitcoin
link |
out of greed, out of self interest.
link |
Number go up technology is really
link |
what's going to get everybody in.
link |
And that's really the Trojan horse for fixing the world.
link |
Come for the greed and stay for the revolution.
link |
It's gonna keep going up
link |
because people don't like to be poor,
link |
except for most economists and academics.
link |
People don't like to be poor.
link |
People don't enjoy getting their wealth destroyed
link |
and they care more about their self interest
link |
than they care about economic theories
link |
about whether this works as money or not.
link |
They see their cousin escaped hyperinflation
link |
and managed to get a bigger house
link |
because they bought Bitcoin five years ago.
link |
They realized maybe I should stop mocking my cousin
link |
and start buying more Bitcoin.
link |
And this is, I think an indomitable force
link |
that's going to continue.
link |
And one thing, most Bitcoiners tend to lean
link |
toward an apocalyptic transition.
link |
Fiat's gonna collapse, we're gonna get hyperinflation,
link |
everything's gonna be terrible
link |
and then we're gonna move to Bitcoin.
link |
And I present the case for why I think
link |
maybe that might not be the case.
link |
Maybe we won't get this kind of apocalyptic scenario.
link |
And this was like the conclusion of the fiat standard,
link |
which is once you realize that mining fiat
link |
is creating debt and Bitcoin is allowing.
link |
So in order to have fiat money,
link |
we need to have people borrow.
link |
We need to have people make loans.
link |
And the problem that fiat money runs into today
link |
is that if you wanna save money,
link |
if you wanna hold savings, you have a problem.
link |
Where do you put your savings?
link |
So you put your savings in debt
link |
in the creation of more bonds.
link |
Wherever you take your savings,
link |
you create a bubble in those things.
link |
And this is why we see a bubble in the stock market,
link |
a bubble in the bond market, a bubble in housing.
link |
It's because people are looking for savings,
link |
looking for a place where they can save.
link |
All of those things are crappy saving instruments
link |
because they're like copper
link |
and that there's nothing to stop the people behind them
link |
to make more of them.
link |
House builders can build more houses.
link |
Governments can issue more bonds.
link |
The crappy fraudulent companies can list
link |
on the stock market and make more stocks.
link |
Well, Bitcoin finally offers us an outlet.
link |
We don't need to keep creating more debt.
link |
We can invest in this asset that is hard
link |
and that is internationally liquid
link |
and that nobody can make more of.
link |
So there is no bubble in it.
link |
There is no mechanism for somebody to increase the supply
link |
and bring the price crashing down,
link |
like with copper and real estate and bonds.
link |
So Bitcoin is the way out.
link |
And this is why I think there's a good case to be made
link |
for why the fiat authorities might embrace Bitcoin
link |
because they'll see it is their way out
link |
of this enormous debt bubble that everybody is stuck in.
link |
Particularly, the richest and most powerful people
link |
in the world and the richest
link |
and most powerful governments in the world
link |
are the world's biggest borrowers.
link |
They're the ones in a lot of debt.
link |
So a continuous slow devaluation of the value of that debt
link |
as people upgrade and move on to a hard asset
link |
that continues to appreciate is the peaceful way
link |
that we wind down the fiat ponzi, I think.
link |
You could see it being like a political,
link |
part of a political platform for future people
link |
that run for president, those kinds of things to address.
link |
Obviously, it's not just for the powerful and the rich.
link |
The people are bothered by the debt.
link |
The people are bothered by everything
link |
that you describe with fiat.
link |
And if you wanna sell yourself in a democracy
link |
as a good leader, you might want to make
link |
that part of the platform.
link |
You mentioned you know Michael Malice.
link |
He just texted me asking me to ask you,
link |
what do you like best about Michael Malice?
link |
If you can spend five to 10 to 20 to an hour
link |
talking about the genius of Michael Malice,
link |
Where does one even start?
link |
Well, obviously, the haircut first.
link |
Yeah, he just gets sexier with age, that's for sure.
link |
Do you know his ideas, his trolling and humor,
link |
have you gotten a chance to interact with him?
link |
Yes, yes, I've met Michael maybe 10, 12 years ago
link |
I used to live in New York when he used to live in New York.
link |
Met him a couple of times.
link |
There was a bunch of anarchists in New York
link |
used to throw a happy hour once a month.
link |
It was called the High Time Preference Hoppe Hour
link |
in honor of Hans Hermann Hoppe.
link |
So I met him there a couple of times
link |
and we followed each other on Twitter for a while.
link |
Is it interesting that you're aware
link |
of philosophical differences in your worldviews?
link |
No, I think we pretty much see eye to eye.
link |
I think the difference is mainly that he spends
link |
a lot of time focusing on American politics
link |
and American pop culture,
link |
which I don't pay much attention to, I guess.
link |
So you look more at the monetary system,
link |
the economics of it all, and just the history
link |
and just looking at it, zooming out at the big picture
link |
Although recently he's working on a book called
link |
The White Pill and he's been, every time I see him,
link |
I mean, he's in some dark aspect of the 20th century.
link |
He's just like, I just finished writing about Holodomor.
link |
As you might imagine, he's not taking much, I believe,
link |
of a monetary perspective on things.
link |
His book, his writing, at least for time,
link |
has a kind of philosophical ideology perspective
link |
that's outside of the monetary system.
link |
But you argue that those are actually inextricably linked.
link |
Yeah, and I don't think he would disagree.
link |
But a book has to be, can only be so long, I suppose.
link |
It can only focus on so many things.
link |
If you can put on your wise sage hat
link |
and give some advice to young people.
link |
I mean, the past four hours have been a kind of advice,
link |
but if you can focus, and if somebody in high school
link |
or college is thinking about what to do with their career,
link |
can have a successful career, or to have a life
link |
they can be proud of, what would you tell them?
link |
I'd say probably the most important advice
link |
that I would give is to find a way
link |
to give value to other people.
link |
This is really the key thing.
link |
You need to wake up every morning
link |
and figure out how to serve others.
link |
This is the key to everything you want in life.
link |
Everything that you want is on the other side
link |
of you serving others.
link |
So figure out how you can serve others in a good way,
link |
how you can do it in a way that they value.
link |
And you've got an incredible mechanism
link |
for figuring that out, which is the market.
link |
Go out there and do things for other people.
link |
And you know, the market will tell you.
link |
The market will tell you exactly.
link |
If you're young, you have the enormous advantage
link |
of being able to make mistakes, essentially,
link |
and learn from them.
link |
So go out there, do things of value for others,
link |
figuring out how you can do something that contributes,
link |
what is it that you can do that contributes
link |
the most value to other people's lives?
link |
And increasingly, I think with the modern technology,
link |
this is increasingly becoming online.
link |
And I think you should consider
link |
how you can create value online,
link |
because that scales beyond anything that you can do
link |
in the physical world in a very, very,
link |
well, maybe not beyond, obviously,
link |
there are profitable businesses in the physical world.
link |
But I think online is enormous potential,
link |
and coding, I think, is enormously powerful.
link |
I'm not a coder myself, but I strongly recommend
link |
people get into learning how to code.
link |
And I think it's probably the thing
link |
that carries the most power.
link |
So initially, we were working with our hands,
link |
we started working with machines,
link |
machines are much more productive.
link |
Well, code is an even higher level of productivity
link |
where you basically program the machines to produce things.
link |
So, you know, few clicks of a keyboard,
link |
and you can move millions of machines
link |
around the world in certain ways.
link |
So it carries an enormous amount of value.
link |
I think I always tell all young people to learn to code,
link |
it's the best thing.
link |
I used to tell it to my students when I was at university,
link |
I tell them to drop out and go learn to code.
link |
It's probably a better use of their time and money.
link |
Well, you could probably do both.
link |
University has an interesting function.
link |
I mean, probably you and I have different perspective
link |
on this, probably has to do with a little bit
link |
of a different journey in terms of fields,
link |
because I'm so, I've stayed engineering focused
link |
for a long time, and there's less,
link |
some of the troubles you might highlight
link |
in the education system, there's less troubles
link |
of that kind in engineering,
link |
because math hasn't changed for a long time.
link |
So a lot of it is just doing hard things,
link |
being forced to do hard things,
link |
and becoming a bit of a generalist,
link |
while on the side, you're also becoming a specialist
link |
based on your own passion, driven by your own passion.
link |
So school, at least high school,
link |
I don't know about the university,
link |
but high school has a really nice,
link |
one of the only times in your life,
link |
at least in my life, I was forced,
link |
but now I see given the opportunity
link |
to spend my entire day learning broadly.
link |
And that's something, I don't know,
link |
the way time works, it just runs away from you,
link |
and you never really get a chance to do,
link |
learn quite that broadly again.
link |
That's the curse of specialization,
link |
is you kind of never get a chance
link |
to study biology, chemistry.
link |
If you're a physicist, time runs away from you.
link |
So enjoy the broad education of it.
link |
But yeah, like you said,
link |
find the things that valued by the market.
link |
And on the other side of it, you said all the good stuff.
link |
So that's also a way to get happiness.
link |
Yeah, and I'll also add,
link |
the horse that I like to whip all the time
link |
is the low time preference aspect of things,
link |
saving with Bitcoin.
link |
So I think my advice to young people is,
link |
when you're young, you think of the world
link |
in a very short term, generally.
link |
You're focused on the present,
link |
and you think that everything that's happening
link |
in the present is the most important thing
link |
that's ever gonna happen in the history of humanity.
link |
Lower your time preference, think about the future,
link |
think about, think further down the line,
link |
think about the consequences of the things you do,
link |
And so you do this now, it feels good today,
link |
but then what happens tomorrow?
link |
You go out, you drink, you enjoy yourself,
link |
well, think about the hangover.
link |
But more in longterm, think about the implication
link |
of living this kind of life.
link |
Think about every decision that you make,
link |
the longterm implication of it.
link |
And part of that is Bitcoin,
link |
part of that is save in Bitcoin.
link |
I urge everybody to put savings in Bitcoin for the longterm.
link |
Don't buy Bitcoin for the short term,
link |
don't buy Bitcoin today so that you can sell it,
link |
don't put your savings in Bitcoin today
link |
so that you can sell it all next month and buy a house.
link |
Put money in Bitcoin that you expect to keep in Bitcoin
link |
for another five, 10 years or so,
link |
at least four years is what I recommend for people.
link |
So keep a low time preference,
link |
focus on the future, and save in Bitcoin.
link |
And learn about how to buy Bitcoin,
link |
how to learn about all this technology.
link |
Part of this is this conversation,
link |
but there's so much awesome material out there.
link |
And thank you, by the way,
link |
for this gift of a hardware wallet.
link |
So you should definitely invest in it yourself.
link |
And what would you call this?
link |
So this is like USB that you can,
link |
like a hardware device that stores Bitcoin.
link |
Yeah, so you don't have to worry
link |
about knowing the password.
link |
It contains the password within it and it's tamper proof.
link |
So you can save the Bitcoin on it and.
link |
So when the apocalypse comes,
link |
you need the value to be stored,
link |
an actual thing that you can have
link |
in your physical possession.
link |
That's exactly what this is.
link |
You've had a heck of a life.
link |
You've been in a bunch of places in this world.
link |
Life is not easy in some of those places.
link |
What has been, if you can take a step
link |
to maybe a bit of a dark step for a short time,
link |
what has been maybe darkest time period,
link |
place you've ever gone in your mind,
link |
a dark period of your life,
link |
a struggle you had to overcome, had to survive?
link |
Well, I'm Palestinian.
link |
So that is the tragedy of my life.
link |
I'm Palestinian Jordanian.
link |
My family's suffered a lot because of this historically.
link |
I grew up in Ramallah in the West Bank.
link |
I wasn't ideal to see that.
link |
People like to think of it as this intractable conflict
link |
between two bitter enemies.
link |
But the reality of the matter is that it's not.
link |
A foreign ideology came in with the idea
link |
that this country needs to be occupied
link |
by people from only one religion
link |
and the existing population, which,
link |
I mean, Jews had always lived in Palestine historically.
link |
And at the turn of the 20th century,
link |
they were only 10% of the population.
link |
But then with the birth of fiat money,
link |
incidentally, the link with all of this is that
link |
when the Bank of England went off gold,
link |
a big reason why they were able to pull that off
link |
was that the Rothschild banking family supported them.
link |
And in exchange, the Rothschilds got Palestine.
link |
And the Balfour Declaration was written
link |
by the government of Britain to the Rothschild family,
link |
telling them that they'd like to make Palestine
link |
a homeland for Jews.
link |
So obviously that's not very convenient
link |
for people who are not Jewish, for whom that is a homeland.
link |
And the past 80 years has been a very painful struggle.
link |
If you happen to not be Jewish.
link |
And obviously, you know, obviously Palestinians
link |
have done all kinds of things trying to fight back
link |
and they've done all kinds of wrong things.
link |
But I don't think you can escape the fundamental reality
link |
underlying this, which is that if you're not Jewish,
link |
you are being moved out of the land.
link |
And so it's happened in 1947, 48,
link |
happened in 1976, 1967,
link |
more land was taken over by Israel.
link |
Now you see it with the settlements.
link |
You know, if you ignore the day to day headlines
link |
and you ignore the media propaganda
link |
and you ignore all of this,
link |
there's a very clear thing that is happening,
link |
which is more land owned by an exclusive ideology
link |
that believes this land needs to be owned
link |
by people from one religion
link |
and everybody else is being kicked out.
link |
And so that is the tragedy of my life.
link |
And my wife is also a Palestinian refugee from Lebanon
link |
and her family was evicted from Jaffa,
link |
which is today on the outskirts of Tel Aviv.
link |
They still have their homes in Jaffa.
link |
Their homes are being, you know,
link |
they got kicked out of their homes
link |
and their lands and their property.
link |
They became refugees in Lebanon.
link |
So my children, you know, it's an ongoing tragedy.
link |
It's not something that is,
link |
a lot of the people that think of it as,
link |
you know, they think Palestinians are just out there
link |
to get Israelis because they hate them,
link |
but it's an inescapable tragedy.
link |
I don't have a home anywhere.
link |
Is there an escape from this tragedy in the future
link |
that you see if you zoom out across the scale of decades,
link |
I hesitate to say peace,
link |
but a significant decrease in human suffering
link |
in this part of the region?
link |
I certainly hope so.
link |
And I think, you know, my interest in Bitcoin comes from,
link |
came from a place of desperation with the situation there.
link |
Traditional politics is a dead end.
link |
I don't see what I can be doing
link |
to make things better there using traditional politics.
link |
And I think a good friend of mine, Pierre Rochard,
link |
you may know him on Twitter,
link |
one of the brightest minds in Bitcoin in my opinion,
link |
he told me his theory is that Bitcoin
link |
is gonna bring peace to the Middle East
link |
because land is a shit coin.
link |
And I think he's got a very good point there,
link |
that this fixation with land
link |
and the bitterness with which people have to live,
link |
land is likely to decline
link |
when people are gonna have a form of property
link |
that they can keep.
link |
And so hopefully that will help in one way.
link |
And of course the more obvious way
link |
is that this is a conflict of governments
link |
and it's a conflict that is financed by fiat.
link |
And from day one, the entirely insane notion
link |
that you could build a national and ethnic homeland.
link |
And of course, this is the early 20th century.
link |
So the idea behind Zionism is coming from the same place
link |
where all these other ethnic nationalisms of Europe
link |
And we saw how well, how horribly these worked out.
link |
But the idea that you could,
link |
it's one thing to say we wanna build a homeland
link |
for Germans in Germany.
link |
It's one thing to say we wanna build the homelands
link |
for Germans somewhere else.
link |
And that was Palestine, that was Zionism.
link |
And that was only possible thanks to fiat,
link |
thanks to the ability of the British government
link |
and all these other governments to continue to finance
link |
this colonialist effort over time.
link |
And it continues to finance war
link |
and we see war all over the world continue to escalate
link |
because the people who'd make the decision
link |
to escalate the war are not the ones who are paying for it
link |
and they're not the ones who are fighting.
link |
They're the ones who sit in offices.
link |
And in the case of most of Middle Eastern conflict,
link |
it's people who live abroad.
link |
It's people who are abroad who are not part of it
link |
who just are emotionally charged to it
link |
because they watch it on TV.
link |
So you have billions of Muslims around the world
link |
and Jews around the world
link |
who feel extremely emotionally attached to it.
link |
They're not the ones fighting.
link |
They're not the ones paying their own money.
link |
They're just getting governments to send money
link |
and to send weapons and to take part.
link |
And it's fun as a spectator sport
link |
for most of these people
link |
because they don't get to live in it.
link |
But I got to live in it, I saw it.
link |
I saw the settlement expansion.
link |
And recently a few weeks ago, I went back to Ramallah
link |
and it's amazing every time you go,
link |
the settlements are just growing in an astonishing way.
link |
Like it's not just housing units that are going up.
link |
It's an entire attempt to build,
link |
to basically suffocate Palestinian areas
link |
and force Palestinians to leave
link |
or keep them living in horrific conditions.
link |
And if I may, just because I have family in Ukraine,
link |
I have family in Russia, since this war,
link |
echoes of similar things are happening
link |
in that part of the world too.
link |
And I shudder to think about the decades to come
link |
of the hate that is brewing,
link |
the suffering that is brewing
link |
based on decisions and pressures
link |
and from not always people directly impacted by this.
link |
So again, it feels like that military conflict
link |
is not just a creation of like people on the ground.
link |
It's a creation of leaders, power centers.
link |
And perhaps, again, I'm not smart enough,
link |
but even the monetary system probably has a role to play.
link |
I absolutely think it does.
link |
Monetary system is what allows people
link |
to just continue to treat war as a spectator sport.
link |
That's really what it comes down to.
link |
And it starts with World War I and it's continued.
link |
And this is why really, I think I've said this before,
link |
I've tweeted this before and it was a pretty popular tweet,
link |
but it also got a lot of people to dismiss the idea
link |
with mockery, of course.
link |
But I really think Bitcoin is the only technology
link |
that's going to end World War I.
link |
Once World War I started,
link |
we got into this endless conflict
link |
that's been ongoing since then.
link |
If you look at all the world's conflicts today,
link |
pretty much they all trace back to World War I.
link |
And it's because when that Pandora's box
link |
of government control of money was opened,
link |
there was no longer a real restraint on war
link |
except complete defeat and complete destruction
link |
and complete death.
link |
The war had to be total.
link |
Before that, under the gold standard,
link |
kings would send professional armies
link |
to fight each other in battlefields.
link |
And as soon as it became clear
link |
that one side was establishing an advantage,
link |
the fighting would stop and the kings would settle,
link |
would agree to new terms.
link |
Because it was extremely expensive
link |
to build a professional army and you ran out of money.
link |
So it was always the smartest thing to do
link |
is to just stop fighting whenever you could.
link |
And wars would take place.
link |
Countries would fight each other in the battlefield.
link |
But in the cities, life went on as normal.
link |
And people within the same cities,
link |
within the cities of the two countries
link |
would be trading with one another.
link |
Life would go on, but the war would be there.
link |
And it was just an independent part of politics
link |
that all right, we have a problem over this piece of land.
link |
Let's take it outside.
link |
We don't fight in the civilian areas.
link |
We go to the battlefield.
link |
We fight with professional armies.
link |
And in fact, sometimes the conflicts would be,
link |
the armies would line up
link |
and they would just have a small contingent
link |
of the two armies fight with one another.
link |
And as soon as one of them establishes an advantage,
link |
then all right, well, you won, let's move on with it.
link |
Governments were far, far, far more careful
link |
about their monetary policy and their, sorry,
link |
their war policy when they couldn't print their money.
link |
And that has changed with Fiat.
link |
And that has allowed this new emergence of this class
link |
of what I like to call chicken hawks
link |
of people who sit in offices
link |
like the entire foreign policy establishment
link |
in Washington, DC.
link |
People who have never fought in war,
link |
whose children will never fight a war,
link |
who'll never pay to fight a war,
link |
who'll never suffer a broken window
link |
in their house because of war,
link |
sitting there and based on these fucking moronic garbage
link |
that they teach at moronic Fiat universities
link |
about politics and geopolitics,
link |
making decisions about, we need to invade that country
link |
and we need to send war there.
link |
And they can do that because they have
link |
this endless money printer.
link |
And that's why, back under gold,
link |
if you were a warrior, you went and actually joined the war.
link |
And that, the people who pontificated about war
link |
were the people who had experience with war,
link |
the people who were sending their own children to war,
link |
the people who were fighting with their own money.
link |
Now you have all these fat parasitics come
link |
sitting in Washington, DC deciding,
link |
and Washington is just an example,
link |
but all over the world this exists.
link |
People who have never fought,
link |
who'll never carry the consequences,
link |
are going to devalue the world's money
link |
in order to go and have other people's children
link |
fight each other because of stupid garbage
link |
they learned about politics in university.
link |
You said you value low time preference,
link |
but I have news for you, that one day you will die,
link |
as far as we know, you're a mortal being.
link |
Do you think about your death?
link |
Do you think about your mortality?
link |
Are you afraid of it?
link |
I've spent a lot of time introspecting
link |
and thinking about these things,
link |
and I value life a lot.
link |
I value my time on earth a lot,
link |
and you'll see this in my dealings with people.
link |
Go back to Twitter, why am I so brash and straightforward?
link |
It really is because life is short.
link |
Because I don't want to waste,
link |
I think on my, I've said this before,
link |
on my tombstone, let it be written.
link |
He never let anyone waste his time twice in his life.
link |
His life is short.
link |
Yeah, you can waste my time once,
link |
you can get me to do something,
link |
and then I realize that was a waste of time,
link |
you will never get me to waste my time twice.
link |
And so you show up in my Twitter with something stupid,
link |
you're never showing up in my Twitter ever again.
link |
You give people a chance, but you're a fast learner.
link |
Yeah, and I try and use my time very wisely,
link |
and I'm unapologetic about it.
link |
My time is the most precious thing,
link |
and the way to get on my shit list forever
link |
is to try and take away my time and to abuse my time.
link |
If you do that, it's the one unforgivable sin for me.
link |
And I think that's really, I think that's my way
link |
of coming to terms with mortality.
link |
We're all gonna die, and so let's make the most out of it
link |
while we're still here.
link |
And of course, the other way you come to terms
link |
with mortality is you have children.
link |
Given what you just said, doubly so,
link |
it's a huge honor that you would spend
link |
your valuable time with me.
link |
This is the first time you did it,
link |
so you probably regret all of it,
link |
so we'll probably never see each other again.
link |
But I'm glad you at least took the chance to do it.
link |
It's a huge honor, man.
link |
I've been a huge fan of yours.
link |
I think you have impact on the world
link |
that you probably are not even aware of.
link |
It's tremendous, and a lot of people love you,
link |
and your work is important.
link |
Even, you know, I disagree with some things you say,
link |
and there's people that disagree with you,
link |
but everybody respects you.
link |
And thank you so much for spending
link |
your really valuable time with me today, brother.
link |
Thank you, sir, really appreciate it.
link |
This was not a waste of time,
link |
and I'd be happy to do it again.
link |
Thanks for listening to this conversation
link |
with Savedina Moose.
link |
To support this podcast,
link |
please check out our sponsors in the description.
link |
And now, let me leave you with some words
link |
from the Austrian economist Friedrich Hayek.
link |
Economic control is not merely control
link |
of a sector of human life
link |
which can be separated from the rest.
link |
It is the control of the means for all our ends.
link |
Thank you for listening, and hope to see you next time.