back to indexSaifedean Ammous: Bitcoin, Anarchy, and Austrian Economics | Lex Fridman Podcast #284
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you can't have 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 and Amuse,
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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
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of economists and humans in general
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with whom he disagrees.
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For example, Paul Krugman,
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who is a Neil McKenziean economist
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and a previous guest at this podcast.
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Safety and 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 on 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 and moose.
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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 want to 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 purely
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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 have
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a hard time grasping of the concept of money
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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
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directly with one another.
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But as 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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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 in doing
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one tiny little thing 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 eight 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 in doing the thing
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that we're good at.
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So, you know, there's people out there
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who are engineers who are designing windshields in cars.
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It's a very specialized thing.
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They sell windshield design to Mercedes Benz.
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And then from that, 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, it's very difficult
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to be able to exchange 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.
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It can be food stuff.
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It can be any kind of good.
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As long as I acquire the good with the purpose
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of passing it on to you,
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not with 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
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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.
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It's like a random collection of desires.
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Some somehow rooted in our evolutionary history,
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but mostly random in terms of preference of banana
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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 a specialization.
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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 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 want it 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?
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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 for the naturally emergent
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phenomena 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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Individuals could be a market of two people
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on an island on their own.
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It could be eight billion people across the planet.
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Naturally emerging.
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Yes, this is the thing I think that is very hard
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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 when people are left
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to their own devices.
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It's just our cognitive capacity allows us
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to develop tools that we can use for production.
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And that's what we do.
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That's what humans have been doing since they started
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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 about whether the other people
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involved in this want what you have and have what you want.
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You just sell it for money to whoever wants it
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and you buy whatever you want from whoever has it.
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And that's an enormous reduction in the mental burden
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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
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is a mechanism 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 and then we
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see that it works and then we take it out of the animal
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that we hunted it with 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 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 in hunting
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or fishing tomorrow is going to 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 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 on to their value over time.
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But even if they were, even if you have objects
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that are durable, the problem with them
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is that you don't know if you need them tomorrow
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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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and 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 at holding on
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to its value for the future.
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And by harder, I mean harder to produce.
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We find things that are hard to produce
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that are better at holding on to their value.
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So they hold on to their value better for the future
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and that allows us to plot and plan for the future.
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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
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the book Bitcoin Standard from 2018, I believe.
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And then a new book called Fiat Standard.
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The Bitcoin Standard is considered kind of the Bible
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in the cryptocurrency space and 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 to 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
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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,
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with primitive technology to move limestone
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from Palau to Yap.
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So on Yap, limestones wear 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 wear 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 and the scarcity
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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 whereby people choose
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all kinds of random things as money, bananas, maybe even.
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But then the people who end up making these bad choices
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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 acquiring, 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 and not copper,
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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,
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we get better 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, sorry,
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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,
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you can't, 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
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increase at around 1.5 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,
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so we're adding to the stockpile, the stockpile grows more.
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So every year, we're adding only around 1.5 to 2%.
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Compare that to the second hardest metal,
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historically, was silver.
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And that increased historically at around
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maybe 5% per year or so.
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Now it probably increases 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 let's discuss this in detail in the Bitcoin standard,
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what happened in 1870 was Germany won the Franco Prussian War
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and Germany was on a silver standard,
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but the value of silver 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
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and used 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's been collapsing in value next to gold.
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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
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and then as a result that weakens its monetary properties
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more and more and more.
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So that's why at 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,
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suffered enormously from it
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because their money was devaluing very quickly next to gold.
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And so Europeans who would come to China or India
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were able to buy things 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 monetary instruments
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that were backed by gold.
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And so currencies, national currencies
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under the gold standard,
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were specific units of gold.
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And that's how a gold standard function.
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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 could 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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Well, 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 goal
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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, the main way
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of making transactions that are monetary.
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So this is the money.
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This is the official money that you should be using
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if you live in this country.
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Yes, although I would say it's more like the other way around.
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It's not that the government's 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 the 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
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with other governments on an equal footing,
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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 way they,
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the narratives they tell each other,
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all that kind of stuff,
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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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to 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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So, but there was pressure probably.
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Yeah, but I mean, 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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As time went on, 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, you know, as we see US sanctions
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taking say Russian reserves or Afghanistan reserves.
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And this is why, you know,
link |
we see China and Russia have accumulated a lot of gold
link |
over the last 10, 20 years.
link |
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,
link |
the flow to the stockpile, the existing stockpiles.
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 some stockpiles of copper.
link |
Major copper consumers will have stockpiles of copper,
link |
but the vast majority of copper is essentially
link |
on a conveyor belt of production from the mine
link |
straight to the consumer good 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 |
and 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 |
so obviously no understanding of economics.
link |
It's completely clueless
link |
because even if everybody in society decided
link |
we wanted to make copper as money,
link |
even if we all decided to collectively take part
link |
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.
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, even if you get the 1,000 richest people
link |
in the world, all of the world's billionaires,
link |
they get together and they all dump
link |
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 |
It's 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
link |
of copper on the market.
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, it's around 60.
link |
But let me push back on 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, you can't eat it.
link |
It's supposed to represent,
link |
it's supposed to just be the medium of exchange.
link |
In that sense, what role does collective hallucination play
link |
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 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 borne out of fraud.
link |
Initially it was a receipt for gold.
link |
And then they told you, well, you don't need the gold anyway
link |
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 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, we're gonna have fun in this conversation.
link |
Cause you're like, you already said Marxist,
link |
fraud, hallucination, just because we use these words
link |
doesn't mean they're true, 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, and I'll actually ask you sometimes
link |
to play devil's advocate if possible,
link |
cause 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.
link |
But anyway, so, but nevertheless,
link |
we are currently on a fiat standard.
link |
So money does have value, paper money,
link |
and the reason it has value is because
link |
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 is the thing that helps money work.
link |
Cause you're saying it's fraud and the belief
link |
is almost valueless.
link |
But how much value, can we quantify the value of the belief,
link |
the collective belief?
link |
I should say like, 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, well,
link |
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,
link |
if we hallucinate that bananas can be spaceships,
link |
they'll be spaceships.
link |
I mean, you can call them spaceships
link |
if you want, but a banana's not gonna get you to the moon.
link |
With it, 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,
link |
creation happens in our minds.
link |
Everything does happen in the minds.
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 |
With this reality.
link |
And they're punished when they don't.
link |
So if you ride a banana, jump off a cliff,
link |
thinking you're gonna get to the moon,
link |
that solves the problem of people thinking
link |
the 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.
link |
So yes, 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.
link |
People are using, well, it's not really paper money.
link |
And we should say like fiat money is predominantly credit.
link |
So like, it's also 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,
link |
all these governments 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 of 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 rates.
link |
The ones that grow, whose central banks
link |
are the least inflationary.
link |
And on the other hand,
link |
the ones that who supplies more inflationary
link |
similar to copper end up failing.
link |
You look at Lebanon, Venezuela, as in Bobway.
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 bound, 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,
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 Kenzian economics?
link |
How do you compare the two?
link |
What should people know some interest?
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 by a bunch of frauds.
link |
People who are wrong.
link |
Well, it's much worse than wrong
link |
by people who are just essentially propagandists
link |
So it's like your opinion, man.
link |
Yeah, well, that's also like your opinion, man.
link |
Yeah, that's true.
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 that is perhaps most harshly
link |
criticized 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 in the world?
link |
Yeah, so I mean, Austrian economics really is
link |
the continuation of tradition that it goes back
link |
to the ancient Greeks 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, when Karl Manger,
link |
the father of the school wrote a book
link |
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
link |
and you can understand why people decide
link |
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 |
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 how much would you spend
link |
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, 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, you buy your first diamond
link |
when you're gonna get married, 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 |
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,
link |
diamonds from the analysis of gold and so on?
link |
It'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 |
that 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 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 and it's a pretty dirty business.
link |
And the way that they do it is all of us
link |
talk about blood diamonds is a way for them
link |
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 shouldn't
link |
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
link |
essentially highly devalued jewelry.
link |
I'm gonna take this segment of the podcast.
link |
When I'm getting married, when the sun did,
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 Manger's work.
link |
And then he had a student,
link |
Eugen Bomberg, 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 a 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 here.
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 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 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 them as fortunate of studying
link |
at a university 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 and I will push back
link |
just 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, but too much is bad
link |
because it completely devalues, 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 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 figured out this thing
link |
and it happens to be good for banks and governments.
link |
And 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 in Michael Malus
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, 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 on that side,
link |
but anyway, so why is that idea of Kenzen 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,
link |
the capabilities of the things that we can do
link |
with our time increases 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 |
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 is good.
link |
Can you have too much fear of uncertainty?
link |
Here's the thing, what I was saying is
link |
I was making the point that
link |
we don't need to be motivated to consume.
link |
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
link |
that 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, that we don't need more motivation
link |
to consume, 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 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 a recession,
link |
and now a lot of people lost their jobs
link |
and they don't have enough money to go out
link |
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 on the frivolous thing
link |
that you used to spend, and you save it for the future,
link |
and 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 is based
link |
on the work of Keynes, which came in the 1930s.
link |
And this is the key point, like it's portrayed
link |
in the textbook as if it's just this scientific breakthrough
link |
that somebody in the 1930s, this genius came about
link |
and realized that, 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 for what governments
link |
were already doing for 20 years.
link |
They'd already gone off the gold standard,
link |
and they'd gone through 20 years in which they were lying
link |
to their population, telling their population,
link |
we're still on a gold standard,
link |
but that our 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,
link |
is the problems that were caused by us going
link |
off the gold standard were caused by the gold standard.
link |
And we're going to fix them by going off
link |
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 Kenzian 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 not 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
link |
Kenzians make of Austrian economics,
link |
and the case they make for Kenzian economics
link |
is it's based on empirical evidence.
link |
So Austrian economists are pie in the sky,
link |
theorists about how human nature works,
link |
and it's just all theory.
link |
And just like you said, Kenzian economics
link |
kind of sell it as a science, data driven science.
link |
And so where's the data, bro, on the Austrian?
link |
So one way of saying it is
link |
how do you know 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
link |
in which they present the economics.
link |
They present as if it's just theory
link |
and 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 |
Exactly, and it's a sign of just how little self awareness
link |
they have that they think that they're just being led
link |
by the data when they're being led
link |
by Kenz'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 government
link |
mandated religion.
link |
So according to Kenz's nonsense, so the way
link |
that the whole thing is, the way that they justify
link |
the inflationism is this, and I'm just using this
link |
to give an example of what you're talking about
link |
in terms of theory, the way they justify the inflationism
link |
to tie it back to the original point,
link |
they justify the, all right, we need the 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 macroeconomics at university level
link |
for a while, so I know this.
link |
I know Keynesian nonsense better than most Keynesians,
link |
no 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, and those goods have
link |
a certain quantity and value, market value,
link |
is 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 expenditure,
link |
so this is the production, and the aggregate expenditure
link |
is lower, then we don't have enough spending
link |
to buy all the goods, 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, and so it's a vicious cycle
link |
where the economy gets into recession,
link |
and the only way out is for Keynes's banks to buddies
link |
and government buddies to print a lot of money
link |
to give to themselves, and then that will...
link |
That's one interpreter, so to print more money,
link |
to increase the expenditure, 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 |
You know, the way... I love you very much,
link |
but just for people who are listening,
link |
I think it's... I love the way you talk,
link |
and it's great, 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, and...
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 financial systems, monetary systems,
link |
but I just seen us get in trouble with human psychology.
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 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...
link |
If the other situation is when the level of spending
link |
is higher 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 post 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 be,
link |
trying to analyze data, you'd look at this
link |
and say one example, you just need one example
link |
of high inflation and high unemployment
link |
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 19th,
link |
and of course, they ignored it when it happens
link |
in poor countries 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, you know,
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
link |
because this model is broken.
link |
That's not how the world works.
link |
That's not, the level of aggregate spending
link |
in the economy is not a lever
link |
with which you can control inflation and unemployment.
link |
So what would a scientist do?
link |
What would a nonhuxter do in this case?
link |
Admit the theories 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 moderate amount
link |
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 |
We'll talk about that.
link |
The effect of fiat money on our life
link |
as you write about in your book, fiat standard,
link |
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 or who's got an engineering
link |
background who comes into economics
link |
immediately has a lot of red flags.
link |
And I remember when I used to teach macroeconomics,
link |
I used to teach introductory macroeconomics
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 the,
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.
link |
Exactly, you're correct.
link |
Because if you have any kind of shred
link |
of scientific thinking, you see
link |
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
link |
brought up by people for why government printing money
link |
And the reason they're coming up to this conclusion
link |
is that you only get funded if you come up
link |
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 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 out 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
link |
of models 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 |
That's the big, basic, ridiculous question.
link |
What is economics?
link |
Economics is the study, the way the Austrians define it
link |
is the study of how humans make choices
link |
under the condition of scarcity.
link |
And 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 and we have limited means
link |
to meet those wants, 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 is what economists study.
link |
So to go back to your point on empiricism
link |
in Austrian school, so it isn't that the Austrians
link |
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 1970s shows,
link |
if you have stagflation, that just completely refutes
link |
the Keynesian model.
link |
The Austrian way of thinking, which is think
link |
from first principles, understand how the world
link |
actually works, think about how humans act,
link |
and understand that economics is really all
link |
about human action.
link |
So it's not about aggregates of goods.
link |
This is really the key distinction
link |
in terms of methodology for the Keynesians.
link |
It's physics envy.
link |
They look at the market economy,
link |
that it could individuals in the market economy,
link |
and they think that they can understand
link |
the market economy by looking at aggregates.
link |
This is really the key point of what I think
link |
makes the 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 with 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 |
You can, if you have the pressure and volume,
link |
you can calculate the temperature
link |
because you have the nrt 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's continuous 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,
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 there's a nearly infant number
link |
of variables, and you can't control them?
link |
So what's the best thing 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 |
That's the problem with Freud.
link |
I don't know, maybe he's right.
link |
Well, obviously, I'm joking on that front,
link |
but 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 |
A nice thing about physics,
link |
you can't eventually have experiment to 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.
link |
It's the power of reasoning together 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
link |
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 want to copy
link |
the methods of physics,
link |
and then that's just gonna give them the certainty
link |
of the results of physics.
link |
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 that's gonna make me Superman.
link |
It does 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 of the free exchange
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,
link |
which most scientific minded people arrive at,
link |
and I came from an engineering background.
link |
So I initially had this idea
link |
that what is lacking 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,
link |
and then we'll be able to plan the world economy
link |
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
link |
is that 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,
link |
this is the humility to understand
link |
that you are a human being
link |
and other people are also human being just like you.
link |
And that the, you know, 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,
link |
let alone for millions of other people.
link |
So this is one path by which you arrive
link |
at the conclusion that free markets are better
link |
because you realize that all of the people
link |
that think 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
link |
or at the libertarian perspective I should say
link |
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
link |
is ultimately 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,
link |
the central planning perspective is unlike physics,
link |
which is let's force a bunch of particles
link |
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
link |
So from a politics, from an ethical perspective,
link |
your view is the, I mean, perhaps broadly speaking,
link |
the libertarian view is coercion is the unethical.
link |
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
link |
to justify coercion.
link |
So, 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 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
link |
that all of us use, so infrastructure, for example,
link |
or education, 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, 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 |
And no, I don't find that compelling at all
link |
because I think all these examples
link |
that they mentioned of natural monopolies
link |
or economies of scale that can only fit
link |
at a scale of government, it's always,
link |
it's always, government bans people
link |
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, in reality,
link |
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
link |
of the electricity and transmission.
link |
And you believe the free market is best in managing
link |
that dance, that balance of how 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 market 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 barbershop.
link |
Is that a catastrophe?
link |
No, because they don't need two barbershops.
link |
Now, if that barbershop started to take advantage of people,
link |
started to charge higher price,
link |
well, then that's just an opportunity
link |
for others 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, usually the reason
link |
that the thing is bad in the first place
link |
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 is
link |
you're offering only one way for this problem to be solved
link |
and making all other solutions practically illegal.
link |
You're taking taxpayer money,
link |
you're putting guns to people's heads,
link |
to take their money, to use it to build, say,
link |
this one solution for a power plant,
link |
but you're preventing the free market process
link |
from providing us with other alternatives.
link |
Well, so you phrased it 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 by being voted out
link |
if the solution is actually bad.
link |
So it's just a different selection mechanism.
link |
And I think I personally believe
link |
it is a selection mechanism that has worked in the past.
link |
It just often does not work nearly as well as a free market.
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
link |
that's the point of a free market,
link |
is it doesn't, if there's trouble, that's a signal
link |
and it will respond to that signal
link |
and it will respond appropriately
link |
to make you 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
link |
is the idea that there is a feedback mechanism
link |
when there is coercion in one party,
link |
when one party can employ coercion
link |
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,
link |
and I'm gonna use it to buy more guns for me
link |
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 |
A little gun to the head,
link |
Good luck to anybody who's gonna be dating you
link |
if you think you're putting a gun to people's head,
link |
it's comparable to a relationship.
link |
But yes, I mean, the people don't often think of it
link |
as gun to the head, as government and the military
link |
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 |
Yeah, so at the bottom, if you don't wanna pay,
link |
if you don't wanna, you know,
link |
all right, I don't wanna be part of your power plant,
link |
I wanna get my own generator, I don't wanna do it,
link |
and I don't wanna pay for it.
link |
You go to jail, you can't not pay for it.
link |
That's really the asymmetry,
link |
which the market doesn't have,
link |
which is why, in my opinion,
link |
it's not as if, you know, I'm being stubborn
link |
and stuck on the idea that I want a market
link |
and that the government can't work.
link |
It's presented as if, you know,
link |
we're choosing 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 government 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 in which
link |
anybody anywhere is free to provide the service
link |
or the good and anybody anywhere is free to buy it from them
link |
or reject to buy it from them.
link |
So anyone can build a power plant.
link |
Anyone can succeed, anybody can fail at it.
link |
Anybody can build it in a way that I can choose
link |
to take part in or not take part in.
link |
I can build my own.
link |
So we have a situation in which 10 million people,
link |
let's say, they each can freely choose
link |
to provide the good or to buy the good.
link |
That cannot be considered an alternative
link |
on an equal footing to a situation where one person
link |
or one entity gets to decide for everybody
link |
and those who disagree go to jail.
link |
So the problem is that the alternative to governments
link |
is other large successful entities
link |
that have humans in them and human nature is such
link |
that there's corruption manipulation and so on.
link |
I think free market depends on the honest communication
link |
of information as widely as possible
link |
so people can make great rational decisions.
link |
But sort of my fear is that like the proposal is
link |
that in general there's manipulation
link |
whether it's government, whether it's companies,
link |
they're going to manipulate,
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 a monopoly
link |
on violence in the institution of governments.
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 where,
link |
you know, corporations, individuals, free markets,
link |
they can't coerce without the resort to government.
link |
So, you know, 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, you know, as it exists,
link |
you know, Coca Cola, McDonald's,
link |
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 doesn't matter to me, you know,
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, in that situation,
link |
the only way that a company can get my money
link |
is if they build the product that I value
link |
or if they convince me that they are going to use it
link |
in a way that's profitable.
link |
And I may be wrong, you know,
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, you know?
link |
And it's my fault 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, you know?
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 Malis, between anarchism and libertarianism?
link |
So this particular use of violence, this like last resort,
link |
this policing force 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 monarchism,
link |
I think libertarianism is kind of a vague term
link |
that can encompass both.
link |
It means a lot of things, okay.
link |
Yeah, but on the Karl Marx to Michael Malis spectrum,
link |
No, no, I'm full anarchist.
link |
You're full anarchist.
link |
Yeah, full anarchist.
link |
I mean, I don't find any justification
link |
for the use of force.
link |
And I think recently, perhaps, maybe I'm getting old,
link |
maybe I'm getting senile, maybe I'm getting wise.
link |
But I'm beginning to become more sympathetic to monarchy.
link |
So I'm an anarchist, monarchy.
link |
Which, what is that?
link |
Wait, are you joking or not?
link |
No, I'm not joking.
link |
And I think, I mean, I think, you know,
link |
morally and intellectually, I'm an anarchist,
link |
but it's what 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 that is going
link |
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 the majority
link |
of the population to get together and decide,
link |
nope, whatever is the case, you know,
link |
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, 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 the amount
link |
of exploitation that they can do of the population
link |
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, you know,
link |
his great grandson is going to be taking money
link |
from your great grandson, suddenly his interest
link |
in yours align because they both want your great grandson
link |
to be prosperous and have enough money
link |
for his great grandson to take.
link |
So it's a monarchy with a tiny government.
link |
So anything required to really provide for free market.
link |
So for maximize 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 that have succeeded
link |
at lasting for a long time, the key thing that they managed
link |
to do 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, builds the empire
link |
and the first couple of generations, they get this
link |
and the society is free, the economy is free.
link |
And because of that, you know, there's peace
link |
and prosperity, but then over time, the next generation
link |
of kids 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
link |
to do things even when they're not hurting anybody.
link |
And that ends up basically eventually
link |
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 |
So going back on the original promises
link |
and the purposes of your position and then distracting,
link |
using tools of technology and communication
link |
to distract the populace while you expend the power.
link |
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 the 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, the government,
link |
this is what they used to do under the gold standard,
link |
governments would issue bonds.
link |
So you'd issue the bonds.
link |
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, and this is perhaps
link |
the greatest thing 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, why should I go and fight?
link |
Because the Austrians and the Germans
link |
and the Serbians 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 two
link |
of the high ranking officials in the Bank of England
link |
to buy the other remaining outstanding two third
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 to keep going into the war.
link |
So that's essentially what they did
link |
is what we today know as quantitative easing.
link |
And back then, they just got,
link |
they printed money from the Bank of England
link |
or credit, printed credit, gave it to those two employees.
link |
They bought the bonds, 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,
link |
he wrote a letter to the Bank of England
link |
that was uncovered recently and he said,
link |
I congratulate you 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, 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 Keynes is gonna ask themselves
link |
because their jobs depend on not thinking
link |
about what's going to go wrong.
link |
So just a quick question about war
link |
and somebody's been nonstop reading and thinking
link |
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 |
So ideally you don't.
link |
No, but I mean, of course there are sometimes,
link |
you know, you wanna fight for self defense.
link |
Yeah, you finance it, taxation or bonds.
link |
So the people really need to want to war
link |
not just with their voices, their thoughts, their tweets,
link |
with 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, go knock on doors and search everybody's homes,
link |
see where they're hiding their gold is 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
link |
when it comes to war.
link |
That's why the 20th century was the century
link |
of total war because under the gold standard,
link |
governments fought until they ran out of their own gold.
link |
Under the fiat standard with paper money, with credit money,
link |
governments fought 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,
link |
expanding Hitler friend himself as a victim
link |
of the past of history.
link |
He never attacked anybody.
link |
Yeah, everyone's always threatening to attack him.
link |
That's kind of the narrative and he keeps expanding.
link |
He keeps sweet talking with his charisma,
link |
all the countries around him into sort of embracing
link |
pacifism, stay out of the war until the war's
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, what's the right way to do that?
link |
If you're, to fight back evil when violence is required.
link |
Now, you could argue that no war is just,
link |
but there are 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 to convince the populace?
link |
Like 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 so that they give their life
link |
and that 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 that people really do think
link |
is genuine, 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,
link |
on this particular example, I think, you know,
link |
that the best way to fight Hitler
link |
is to have not fought World War I,
link |
not take out the Kaiser of Germany.
link |
If Britain hadn't, and Britain in the US
link |
had not gotten involved in World War I,
link |
which really is the senseless war about nothing.
link |
Like 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 in the borders
link |
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, you know,
link |
it wasn't like Britain wanted to take over Germany
link |
and move their people into Germany
link |
and kick the Germans out.
link |
So there was no real value from that war.
link |
And that's why the British people didn't want to take part in it.
link |
And that's why if they hadn't done this
link |
enormously criminal manipulation of printing money
link |
to buy the ponds, Britain wouldn't have gotten into the war.
link |
Germany would still be a kingdom,
link |
and Hitler wouldn't rise.
link |
And yeah, there'd be small changes in the borders
link |
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 |
You know, before that, the people of Europe
link |
had the golden era,
link |
the gold standard they were trading with one another.
link |
They traveled and technology was advancing.
link |
And they did not expect this war to last this long.
link |
And, you know, 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 |
And 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 20th century.
link |
Yeah, the counterfactual history in Neil Ferguson
link |
is a historian who gets quite a bit of a 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, 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, or in other words,
link |
prices of things are going to go up.
link |
So during the war, prices keep going up,
link |
and this is, of course,
link |
this is going to sound very familiar to victims
link |
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 |
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, you know, lost a lot of the labor force
link |
for four years that was out there fighting.
link |
Now those workers come back.
link |
Prices are up, 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, which is catastrophic,
link |
because it makes things worse.
link |
When you implement price controls,
link |
when you say, alright, well,
link |
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 want to 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
link |
copied 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 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,
link |
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
link |
the Bank of England announced
link |
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. Nice.
link |
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 want to talk about the original sin.
link |
Well, you should like republish it
link |
as the Fiat white paper or something like that.
link |
There's a fascinating book
link |
by a guy called John Osborne.
link |
I think his name was Montagu.
link |
He was the chief of the Bank of England.
link |
He commissioned one of his secretaries,
link |
to study what the bank did
link |
during World War I,
link |
and it was a study that was kept under wraps,
link |
in the Bank of England,
link |
only released in 2017,
link |
almost a century later.
link |
What was special about 2017,
link |
by the way, was a year.
link |
It was a year on 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 |
is going to be over, this is temporary,
link |
we're going to be back to using gold.
link |
And of course, you know,
link |
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 going to go off the gold standard
link |
because it's better.
link |
I mean, there might have been lynchings
link |
of government officials
link |
because the British pound
link |
at that point had been
link |
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
link |
for, since Newton,
link |
you know, the exchange rate,
link |
the value of the British pound
link |
was set by Isaac Newton himself.
link |
He was the warden of the Mint,
link |
and he made the pound
link |
a specific amount of gold,
link |
and since then, up until World War I,
link |
4.25 pounds per ounce of gold,
link |
I think I might be wrong,
link |
but I have it in the book.
link |
So he'd set that price, 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 had 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,
link |
and then they couldn't go back
link |
because they wanted to go back,
link |
they didn't have enough gold,
link |
they didn't have access 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
link |
for England, and that begins the end
link |
of England 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,
link |
and have unhauled British pounds.
link |
So if they'd hold, you know,
link |
basically dumping their bags,
link |
like just any other shit coin,
link |
if you get people to buy your shit coin,
link |
that raises the value of your shit coin.
link |
Can you define shit coin?
link |
Shit coin is, in my definition
link |
of a shit coin is that it's any form of money
link |
where somebody can produce it.
link |
Not necessarily, I guess.
link |
I think the difference,
link |
so there's easy money,
link |
is something that someone can produce
link |
at a rate that is different,
link |
at a cost that is different from the market cost.
link |
So gold, nobody can make gold
link |
except that they dig for it,
link |
and the cost of mining gold
link |
is generally in the range 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 |
I wouldn't call copper a shit coin
link |
as much as it is easy money,
link |
but I think government currencies
link |
and other alt coins, I think are shit coins,
link |
because somebody could click a button
link |
and make 10 times the supply.
link |
I think that this began
link |
will for war in World War I.
link |
So the march towards fiat
link |
with a global desire
link |
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 |
you can't have permanent war
link |
there's a case to be made that you can't really have
link |
So it's some kind of weird
link |
dynamical system with a chicken and egg
link |
situation, and they build it on top of each other,
link |
and there's a few individuals that
link |
figured out there's a way to manipulate this
link |
to play this kind of game, and it escalates,
link |
and nothing gives you the
link |
ability to manipulate money
link |
When you have a war,
link |
you can declare an emergency,
link |
you can call all the people who oppose you
link |
get people to support you not because
link |
what you're doing is good, but because
link |
you play on their sense of tribalism.
link |
In your book, you do cost benefit analysis.
link |
So you do acknowledge
link |
or think about the pros
link |
What do you do with it and look at the cost
link |
just broadly at the highest level?
link |
So the way that I write the fiat standard
link |
analyze it as an engineering system in the same
link |
way that I wrote the Bitcoin standard.
link |
So with the Bitcoin standard, I looked at Bitcoin
link |
from first principles and tried to explain
link |
how it works for a reader that doesn't
link |
really have much of a background in
link |
computer science, networks,
link |
And I thought I'll do the same with the fiat.
link |
Let's just ignore the official stories
link |
and see if anything actually works.
link |
I think it does have value
link |
in the fact that it,
link |
you know, the reason that it was,
link |
that they were able to pull it off
link |
is because it was not possible
link |
for people who don't
link |
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 |
the fact that it is expensive to move around
link |
inevitably going to emerge institutions
link |
where it is centralized in physical
link |
location. And then
link |
these institutions trade liabilities
link |
for the gold. So really
link |
credit as becoming part of the monetary
link |
system. It has to be the credit
link |
and because it gets centralized can easily
link |
be captured by the government.
link |
the benefit of the fiat system is that it
link |
saves us on the cost of moving gold around
link |
which is pretty significant.
link |
Generally, you know, moving a bar of gold
link |
across the Atlantic is going to cost
link |
somewhere between 0.1 to 1%
link |
of the cost of the gold bar.
link |
So you move it 100 times
link |
back and forth between the Atlantic,
link |
you need to pay the whole gold bar.
link |
The cost of the whole gold bar to move it 100 times
link |
across. Well, with fiat money
link |
with essentially government credit
link |
it's just sending a message
link |
from one's central bank to another
link |
and you can move it halfway around
link |
the world. Is there also something to be said
link |
about the cost in time?
link |
So you're saving the sort of, you're reducing the friction
link |
with 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
link |
potential is the thing that enables modern
link |
economy both the speed
link |
and the low cost. So increasing the scale
link |
of the speed of the transactions.
link |
Yeah, arguably it does help
link |
in that regard. However
link |
it isn't as if you couldn't have
link |
fast transactions built on top of
link |
gold. So you could have gold being used
link |
for final settlement and you could
link |
settling with one another essentially
link |
using credit settlement. Can you define settlement
link |
who are outside of this world? Because we'll mention
link |
that word quite a bit probably. Good question.
link |
So the way that it works is, let's say
link |
right now I'm going to pay you
link |
PayPal or credit card.
link |
So it shows up in your PayPal or credit card
link |
within a few seconds that I've
link |
sent you the money and then that's yours.
link |
it didn't also happen
link |
in those 10 seconds that my bank
link |
which could be in another country
link |
sent the money to your bank
link |
into your account.
link |
There's a lot of infrastructure
link |
making that. So what actually happened
link |
is that I have an account with my bank
link |
and you have an account with your bank
link |
and when the message is communicated from
link |
my bank crosses out the money and
link |
your bank credits you with the money
link |
and then at the end of the day,
link |
banks in the same city will settle with
link |
one another, banks in the same country
link |
will settle with one another and banks
link |
from different countries
link |
will settle with one another. So they won't
link |
move the $10 from my account to yours
link |
at the end of the day or week
link |
tally all of the money that was sent from
link |
one bank to the other and then just
link |
settle the difference. So it turns out
link |
at the end of the month my bank had sent
link |
$15 million to your bank
link |
and your bank had sent $14 million to
link |
give them $1 million and that settles it.
link |
That finalizes the transaction.
link |
So final settlement
link |
3D is like the, you can think about it
link |
as the infrastructure of the system
link |
and then you can think of these
link |
things as being the higher
link |
layer levels and you had a wonderful
link |
discussion about that with Michael
link |
Saylor. So the final settlement is
link |
you paper and ideas
link |
connect to physical reality
link |
representation of physical reality. Yeah and
link |
under gold, everything was
link |
tethered to physical reality because there was
link |
a market commodity at the bottom of all of this
link |
and nobody could print that market commodity
link |
and so at the end of the month, if your
link |
bank made too many payments, if
link |
you made too many payments, there was
link |
a reckoning. There were, you know, if you were
link |
reckless, if you were insolvent
link |
you went out of business.
link |
there was no way to fool that. But then
link |
we moved to the fiat century and
link |
everything is credit. At the end of
link |
the day, the final layer
link |
is government credit and so
link |
as long as your friends with the government
link |
basically you never go bankrupt.
link |
hucksters managed to find their way into
link |
you know getting into
link |
position where they don't get bankrupt.
link |
So in part two of the fiat standard
link |
you describe the effects of fiat money
link |
and a bunch of things like life
link |
food, science, education
link |
what is the most pernicious effect
link |
of fiat money on our world
link |
on our life. So taking a
link |
step outside of the monetary system
link |
actually like how that affects our life
link |
from this book. There's
link |
a whole bunch of things and I won't
link |
be able to go over them and I highly recommend reading
link |
the book. But if I were to pick one
link |
I would say it's the impact that it has on our time
link |
valuation of the future. So
link |
remember when we started the discussion I said
link |
of money is that it serves as a store
link |
of value and the harder the money is
link |
the better it is at
link |
providing us with a way for
link |
providing for our future.
link |
And so the harder the money is the less
link |
we discount the future. We always discount the future
link |
compared to the present. So if I told you
link |
I'm going to give you something today
link |
versus giving it to you 10 years from now
link |
the same thing you would prefer to take
link |
it now because then you'd get to enjoy it over the next
link |
10 years. So we always prefer
link |
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
link |
the present to the future is called our time preference.
link |
our time preference
link |
the less we care about the future
link |
and the process of civilization is the process
link |
of lowering our time preference
link |
where we start caring more for the future
link |
we start prioritizing
link |
the present less and less so we start
link |
being able to not consume
link |
everything 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
link |
in a gold coin and you could take that
link |
gold coin and keep it safe
link |
for 10 years and know
link |
that at the end of those 10 years that
link |
gold coin would buy you slightly
link |
more than what it bought you the day that you
link |
earned it. So anybody could
link |
provide for their future and anybody
link |
could have very high degree of certainty
link |
their saving is going to be there
link |
and they want it in the future
link |
because the money supply was only increasing
link |
the production of goods
link |
and services was increasing for most
link |
for most periods at a higher rate than that
link |
so you could buy more apples and oranges
link |
and houses and cars at the
link |
end of the 10 years than you could
link |
at the beginning of the 10 years so everybody had
link |
a way of providing for the future and
link |
with that people lower their time preference
link |
and that is reflected across
link |
all aspects of life
link |
I think it's not just an economic thing
link |
you see it in the savings rate you know the ability
link |
to deny yourself gratification today
link |
I could take the money that I have
link |
and throw a giant party
link |
buy a sports car buy a yacht
link |
and yet you decide
link |
I'm not going to do that I'm going to keep it so that tomorrow
link |
I can throw a bigger party
link |
or buy a better yacht or
link |
have a better life or give my children
link |
all of human civilization really is the process
link |
of us lowering our time preference
link |
and finding harder
link |
monies that allow us to provide better for the future
link |
really technologically we do that
link |
hardness of money as being the control knob
link |
for our time preference
link |
and you can see this reflected
link |
in the 20th century where we go from
link |
the money supply increases at around
link |
one and a half percent under gold
link |
to this current situation where
link |
over the last 60 years I ran the numbers
link |
on money supply and fiat
link |
the global fiat supply has increased
link |
at around 14% per year so
link |
we've done a 10x in the increase
link |
in the supply of money
link |
is a weighted average so
link |
if you take a basic numerical average
link |
for all fiat currencies you get something
link |
like 30% the average
link |
fiat currency increases by 30%
link |
but if you value it by
link |
the volume of each currency so that
link |
you know you're not giving equal weight
link |
to the Venezuelan bolivar
link |
increasing at 500%
link |
a year and the dollar increasing at 8%
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 |
unweighted is 30% you said
link |
I'd like to see the worst ones
link |
track that average up
link |
an incredibly high high number
link |
and so you're saying that
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
link |
weighted average something like 14%
link |
and what effect that has
link |
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 |
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 |
while 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
link |
internationally you can't use it to
link |
settle trade internationally
link |
which therefore means demand for it
link |
monetarily is limited and so
link |
it's becoming more and more
link |
an industrial metal
link |
as a result of the fact that
link |
its value 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 |
so the stock to flow ratio declines as well
link |
and it becomes more and more of an industrial metal
link |
protect your wealth over time very well
link |
so what do you do? well you could
link |
invest and this is kind of
link |
the obvious answer 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 and that the thing
link |
carries little uncertainty you know
link |
you just held the gold coin
link |
and it just sat there it did nothing
link |
it didn't take risk you knew
link |
that it was going to be there in 10 years investment means
link |
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 if it
link |
fails you might not get any of your gold back
link |
is something very different from saving
link |
saving is just a way of buying the future
link |
investing is taking on
link |
a risk and you could
link |
lose everything with it so
link |
what ends up happening and this is
link |
the Keynesian objection I think is
link |
wrong and bad because
link |
is a job in itself to
link |
figure out what to do with your money in order to
link |
is something that you know
link |
there are professionals out there on Wall Street
link |
that have PhDs in finance that have enormous
link |
they have enormous staffs of
link |
PhDs and master's degrees and math nerds
link |
that are crunching numbers and figuring out
link |
how to allocate your portfolio
link |
so that you can beat inflation and guess what
link |
the majority of them don't beat inflation
link |
the majority of them can't beat inflation
link |
not as measured by CPI
link |
which is completely fraudulent but
link |
if you remember 14%
link |
or even you know the 7%
link |
like if you look at just the increase in the
link |
money supply which I think is a much better metric
link |
and this is what's reflected on the
link |
desirable goods like if you look at the price
link |
of real estate in Miami Beach
link |
as Michael Saylor mentioned in your example
link |
it goes up at around 6% 7% per year
link |
on average over the last century
link |
so that's you know if you want
link |
to live in a nice area that's what
link |
happening to real estate if you want to go to the good universities
link |
that's what's going up it's going up at a rate
link |
that's similar to the increase in the money supply
link |
and you can beat CPI
link |
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 |
and you know most investment professionals
link |
fail at doing that so what hope
link |
or an engineer or a scientist
link |
or an athlete have in doing those things
link |
investment is hard and saving
link |
should be easy exactly
link |
saving is essential
link |
for us as a civilization
link |
and what Fiat did is it took that away
link |
from us and then it forced everybody
link |
to become an investor
link |
or more accurately a gambler because
link |
you're not just even because the money
link |
itself is broken because the money itself
link |
is constantly changing in value
link |
investing is becoming more of a crapshoot
link |
I mean value investing is
link |
completely underperforming
link |
compared to market analysis
link |
you know you listen to the Fed
link |
what matters to the price of individual
link |
companies is monetary policy much more
link |
than it is their own performance so
link |
basically you need to be a junkie watching the Fed
link |
and following all of the world's central banks
link |
and you need to learn macroeconomics and you need to learn
link |
what all the central banks are doing
link |
and you need to understand how commodity markets
link |
work and you need to understand how equity markets
link |
work 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
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
link |
being a doctor being a dentist
link |
being an athlete being an engineer I built a house
link |
for somebody and I got that money
link |
and all I want to do is just make sure that I can
link |
have it 10 years from now
link |
the only way to do so is to become a crappy
link |
engineer because you have to spend half your
link |
time not doing engineering
link |
instead spend half of that time
link |
learning about Japanese central bank
link |
monetary policy and commodity markets
link |
and what's going to happen to copper
link |
and what's going to happen to oil and
link |
what's happening in the wars
link |
and what's happening with foreign policy
link |
and Russia and the US
link |
and all of those things
link |
gold standard you didn't care about any of that stuff
link |
your gold coin worked regardless of all of those
link |
things so what this means is
link |
the future so first of all you know we have
link |
all of the problems I mentioned but also
link |
it means that the future
link |
becomes much more uncertain so
link |
you're far less likely to provide for yourself
link |
10 years from now far less likely to
link |
find an easy way to give yourself
link |
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
link |
rates decline but it is also
link |
reflected in all manners of decision making
link |
and I think if you really want to see
link |
what it is take a look at
link |
a society that goes through hyperinflation
link |
and look at what happens there
link |
change under hyperinflation
link |
and compare that to
link |
essentially what we see in the 20th
link |
century all over under
link |
not hyperinflation but under low inflation
link |
that you see across the board most of the time
link |
is just slow motion
link |
hyperinflation 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
link |
is highly uncertain
link |
how likely are you to be planning for what
link |
you are going to be doing 5 years from now
link |
reflected not just economically
link |
it is also reflected in all aspects of morality
link |
all the way in which we deal with each other
link |
as human beings when
link |
your survival is precarious
link |
how much are you invested in the notion
link |
of being a good citizen
link |
about your reputation
link |
on caring about not getting caught in a crime
link |
all of these things become harder
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 we build
link |
essentially disposable cardboard boxes
link |
that get scrapped in 20 years
link |
so what can you say about
link |
the potential positive effects
link |
of lower time preferences
link |
so it is a balance
link |
you are talking about an average kind of time preference
link |
but there are some things in life
link |
where low time preference
link |
can be a negative thing
link |
so if I want to take on risk
link |
not for investment
link |
but say I want to start a business
link |
something crazy take a leap into the unknown
link |
be an entrepreneur
link |
what can you say about that kind of leap
link |
what is the value of that
link |
within the current system
link |
what is the right approach to that
link |
within the current system what is the right approach overall
link |
from an economics perspective
link |
so it is not saving for the future
link |
doing something while
link |
taking the money from your mattress
link |
and having a dream in your heart
link |
that you somehow just want to do
link |
a decision but it is something
link |
it is taking a leap into the unknown
link |
because something in your heart says to do it
link |
I think you are more likely to be taking the leap in the unknown
link |
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 |
if you look at the late 19th century
link |
and I discussed this in the Bitcoin standard
link |
that was arguably the most innovative
link |
period in human history
link |
there is qualitative evidence
link |
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
link |
pretty much modern life as
link |
the period between 1870 and 1914
link |
because the whole world was practically
link |
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 |
two bicycle shop owning brothers
link |
could go and try and fly
link |
even as all the scientific experts in 1903
link |
the possibility of flight has been
link |
debunked as unscientific
link |
not in a million years we are going to be flying
link |
Thomas Edison said it is never going to happen
link |
no I think it was Edison who said a million years
link |
but Kelvin also said it is never going to happen
link |
The New York Times said it is never going to happen
link |
the same month in which
link |
the Wright brothers did it
link |
and they continued to deny that it was going to happen
link |
even two years after they did it
link |
why could they do that?
link |
because they had savings in gold
link |
they had the security with something that you know
link |
is going to be there
link |
and then you can take a risk with the stuff
link |
that is extra you know
link |
I have say three years expenditures
link |
in gold under my mattress
link |
and I know that I could take a risk
link |
with everything else because whatever
link |
bad things happen with all of my dreams
link |
like even you know flying
link |
think about how insane that is
link |
I still can go back to the three years of
link |
gold that I have saved
link |
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 was predominantly
link |
with capital with equity
link |
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
link |
well you could get equity from others
link |
and you could also get debt from others
link |
but it's directly mapped
link |
to physical reality
link |
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 want to 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 the first part of the book
link |
where I look at it from an engineering kind of perspective
link |
and I think this is like the breakthrough inside of the book
link |
is that it replaces gold mining
link |
with credit creation
link |
the way that we make fiat money
link |
the way that fiat is
link |
mined into existence
link |
is through credit creation
link |
most people think of fiat money as being something that happens when government prints money
link |
and we still use the term government's printing money
link |
but the vast majority of fiat
link |
and in fact fiat is not created when it is printed
link |
it's created when it is lent
link |
so when you go to a bank
link |
to get a $1 million loan to buy a house
link |
that bank is not going to give you a million dollars
link |
from their own money or from their depositors money
link |
they're going to make a fresh new million dollars
link |
when you walk out of that bank
link |
the money supply has increased
link |
by $1 million to finance your home
link |
is it was basically
link |
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
link |
the institutions that are allowed
link |
fiat privilege where you can just issue
link |
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
link |
can you say something
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
link |
in the humans wanting it
link |
people wanting to do something with that credit
link |
wanting to take big leaps
link |
big risks big entrepreneurial decisions
link |
is it all bad is all credit bad
link |
anything in my opinion
link |
anything that is consensual
link |
i want to 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
link |
i can't object to that
link |
but in the case of the fiat
link |
system it's not just you and the bank
link |
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
link |
is the fact that the government can just print
link |
a bunch of money and make the bank hold
link |
that's interesting so that
link |
little agreement between
link |
the bank and you is
link |
actually an agreement between the bank you
link |
and the entire populace that's using the currency
link |
exactly they're forced to provide
link |
the safety net for you and me to go and make
link |
that loan and that safety net
link |
is the devaluation of the currency
link |
the whole thing actually works
link |
so this is why you know
link |
i wrote the bitcoin standard 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 |
the conclusion of the fiat standard
link |
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 to be short fiat as much as you can
link |
that's the smart winning move
link |
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
link |
borrowing so the winning move
link |
under the fiat system and this is what rich people do
link |
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 |
a hundred thousand, a million
link |
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 going to be borrowing
link |
the richest people in the world are the biggest borrowers
link |
and that's how they are the richest
link |
and the most powerful because
link |
every time you're borrowing
link |
you're giving the bank an excuse
link |
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're going to buy a house
link |
you're accumulating the savings and they're losing value
link |
if I were to go to buy
link |
the same house with credit
link |
I'm getting the bank to print
link |
money for me so obviously
link |
they can cut me in on that deal
link |
and that's why it's much cheaper for everybody to buy with credit
link |
that's why everybody buys everything
link |
so when we look at the global monetary system
link |
the thing you want to do as a government
link |
is be the sexiest currency
link |
the main currency like the dollar currently
link |
is the one that has the most power
link |
in that kind of context
link |
so you have if you were
link |
to try to summarize what is the global monetary system
link |
is a bunch of fiat currencies
link |
outside their nation
link |
trying to gain power in the geopolitical sense
link |
is that if we just zoom out
link |
what is the global monetary system
link |
like what is it currently
link |
so outside the United States
link |
you could say that but I think it's more realistic
link |
looking at how it has actually evolved over the past few decades
link |
it's really a dollar system
link |
it's not a system of currencies
link |
vying with one another
link |
it's a dollar system and all other currencies are just
link |
basically I like to call them dollar
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 |
you know gold was a winner take all
link |
by the end of the 19th century
link |
the global monetary market is effectively
link |
a winner take all for the dollar
link |
if we get it to bitcoin you'll know
link |
I also think digital currencies
link |
are also going to be a winner take all situation
link |
money wants to be won in fact there is no such thing
link |
as multiple currencies multiple currencies
link |
is just a step back to barter
link |
one if you go back to a system of several currencies
link |
you're just reinventing barter
link |
in the case of the dollar system
link |
the global dollar system is built around
link |
because all central banks have dollar
link |
reserves and because all central banks
link |
use the dollar's clearing mechanisms
link |
so that's why you're basically
link |
playing in the dollar system
link |
this seems to have changed over the last couple
link |
of months with the
link |
sanctions on Russia and the confiscation of
link |
Russian reserves it remains
link |
to be seen what that's going
link |
to do and how that's going to change
link |
it is looking like
link |
this dollar system is clearly
link |
unsustainable it's not sustainable for the US
link |
it's not sustainable for anybody
link |
speaking of which so you
link |
podcast called the bitcoin standard podcast
link |
of that podcast is about
link |
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 about your thoughts
link |
the description reads
link |
after the Russian invasion of Ukraine
link |
the US confiscated the Russian central banks
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 post war
link |
dollar based world
link |
will Russia, China and other countries
link |
actually build an alternative international settlement
link |
system after years of threatening
link |
will global central banks stop accumulating
link |
and replace them with gold and commodities
link |
will we witness the birth
link |
of a new commodity of gold based monetary order
link |
we use the insights from the bitcoin standard
link |
and the fiat standard
link |
on temporal and spatial salability
link |
to explain why reports
link |
of the death of the dollar and the emergence
link |
of a new gold standard may be exaggerated
link |
so I would love to get your analysis
link |
what are the fundamentals of it
link |
what is swift, what are the possible future
link |
evolutions of the global monetary system
link |
yeah so swift is the network that the US
link |
Federal Reserve uses
link |
for moving money around
link |
so basically the US government can sanction you
link |
off of swift as they've done with
link |
Russian banks, as they've done with Iran
link |
and as they've done with Afghanistan
link |
effectively, I mean this is really the
link |
catastrophe of the current monetary system
link |
in order to be able to trade
link |
as a member, as a citizen
link |
of your country, you need your monopoly
link |
local central bank
link |
to be on good terms with the US government
link |
so that they would let them operate it
link |
and this is really like
link |
aspect of the hardness of money, this is the other
link |
really powerful thing about bitcoin
link |
which is that it's just purely a technological thing
link |
if you're Russian, if you're Iranian, if you're American
link |
if you're Chinese, it's a technology
link |
so it's like a spoon or a knife
link |
or a car, you know
link |
you operate it properly and it works
link |
so with bitcoin it's the same thing, it doesn't care about
link |
your passport, if you have the private key
link |
you click send and the money
link |
goes, well it doesn't really
link |
go, but effectively it does
link |
go anywhere at once and
link |
the money can move without having
link |
to abide by political situations
link |
and the point here is not to bash
link |
US foreign policy much
link |
as that might be deserved, I'm just going to discuss
link |
it from a kind of technical
link |
perspective, it has to be a political system
link |
with fiat because ultimately it relies
link |
on credit and then the government
link |
is the one that has the guns and the government is going
link |
to decide who gets to pay their loans
link |
anyway and the government's
link |
make its own rules about
link |
who gets to play and who doesn't and so
link |
it has to be political as this kind
link |
when I wrote the bitcoin standard
link |
initially I used to be much more of a gold
link |
bug and in my mind
link |
gold bugs have spent the last 50 years
link |
saying the global monetary system
link |
is going to collapse next week and we're going to go back to
link |
a gold standard and writing
link |
gave me a very good appreciation for why this
link |
hasn't happened and why it's not
link |
very likely to happen and I think
link |
the reason is, as I said earlier
link |
gold is very expensive to move around
link |
and perhaps more importantly
link |
is very expensive to verify, that's
link |
really the problem with it, it's very expensive
link |
to verify that the gold that you're receiving
link |
is original gold so the only
link |
way to do this properly
link |
is to melt the gold bars down
link |
and recast them which is pretty
link |
we have this situation now where Russia
link |
which is one of the biggest economies in the world
link |
has been kicked off
link |
to varying degrees off of the global
link |
monetary system and the US has confiscated
link |
their reserves and I don't
link |
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
link |
is justified or the sanctions are justified
link |
is not something I can opine on
link |
the implication of this is that
link |
effectively the US might be shooting itself
link |
in the foot because it's telling everybody
link |
in the world, your money
link |
in our system is not really your money
link |
it's just a token to play
link |
at any point in time if you misbehave we kick you
link |
out of the arcade and we take your tokens
link |
I mean this is something that
link |
China, Russia, Iran and many countries
link |
have made a lot of noise about over the past decades
link |
but it's been decades
link |
of China, Iran and
link |
Russia to some extent saying
link |
that you know we want to build an alternative to the
link |
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 it based on
link |
how do you build it so you can do
link |
a credit based system based on
link |
but then who's going to be the big boss
link |
is it going to be China, is it going to be Russia
link |
is it going to be Iran, is it going to be India
link |
none of these countries wants to be
link |
they don't want to jump out of
link |
the US based system
link |
to get into somebody else's based system
link |
so China doesn't want to use a Russian system
link |
Russia doesn't want to use a Chinese system
link |
and so therefore you can't use their own
link |
central banks currencies
link |
don't you think they have enough leverage
link |
with several other nations have enough leverage
link |
and incentive to create
link |
so any one player yes but if they collaborate
link |
yeah but then okay
link |
so what are you based on like
link |
who's going to be the boss
link |
who's going to be the one who can in this case China
link |
China is becoming increasingly an economic
link |
power in the world yeah that's
link |
hard to deny yes it's true
link |
and it's the most likely scenario perhaps
link |
if we were to witness something like
link |
this is going to be a Chinese
link |
based system so is it possible to have
link |
what is the driving currency of the world
link |
it's possible but I don't think it's
link |
sustainable again money wants to be one
link |
and that's the kind of thing that I argue in that seminar
link |
so we could see this emerge based
link |
around the Yuan and
link |
you know likely I mean
link |
Russia is obviously going to hurt economically
link |
from what happened from the confiscation of
link |
the reserves and from the sanctions so
link |
it's not going to be in a position
link |
and of course because it's outside of the US
link |
based system it's not in
link |
the strongest negotiating position with the Chinese
link |
so the Chinese might be able to
link |
get them to join their Yuan based system
link |
but I don't think that's sustainable in the
link |
these governments can issue
link |
their laws and make their
link |
designs and then make their monetary
link |
systems but ultimately
link |
there are billions of Chinese people and
link |
billions of dollar based people and they're going
link |
to want to trade with one another and the power
link |
to want to trade with one another is too strong
link |
we can't just split the world economy into
link |
two monetary systems that don't trade with one
link |
another so then they're going to want to trade with one another
link |
the inability to trade
link |
being a forcing function for trade
link |
it will become a forcing function
link |
for conflict in cyberspace
link |
and potentially hot war
link |
yes this is the scary part of it
link |
and this is basically how World War II happened
link |
there's an old historian who used to say
link |
when I think his name is Auto 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 well being
link |
they have less of an incentive to fight
link |
and it was the death of global trade
link |
in the 1930s because of the
link |
failure of the fiat system
link |
that brought about the rise
link |
of the populism and the
link |
rise of all those leaders that hated each other and helped
link |
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
link |
a real war but then
link |
I think ultimately you can't fight wars forever
link |
that there's going to
link |
it's going to end at some point and we're going to be back
link |
at square one or well not
link |
square one we're going to be back at the same dilemma
link |
of who's going to have the global
link |
monetary system and
link |
so one alternative is that what the Chinese
link |
and the Russians could do is they could
link |
base it on a commodity
link |
so a lot of people are now saying well they're going to base it on
link |
corn and agricultural commodities
link |
the analysis of saleability that
link |
we discuss in the Bitcoin standard 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
link |
doesn't matter how many governments say that we're going to
link |
make a new monetary system based on
link |
doesn't matter you're just going to stockpile
link |
you're going to have to stockpile those things in order to
link |
make a market in them
link |
and then if you stockpile those things you're just
link |
raising their value inviting the producers
link |
to make more flood the market
link |
I hope they don't try this because it's going to be
link |
the world economy you're going to have
link |
central banks bidding up the price of essential commodities
link |
that people need for real uses
link |
in order to back their currencies with them
link |
and then just incentivizing the
link |
producers to make more and more and more of it
link |
and then bringing the price back down so it's going to be
link |
a very expensive mistake where we
link |
raise the price of copper destroy a lot of
link |
industries dependent on copper and it's not just copper
link |
but also food and then increase the supply
link |
beyond what we need and
link |
the end result is copper miners make out well
link |
governments go broke
link |
with a lot of rusting copper
link |
warehouses that's why I don't think it works
link |
to use commodities that are not
link |
monetary commodities
link |
then the question is maybe gold
link |
can we go back on another gold standard
link |
Russia seems to have done that
link |
I'm not so sure it's very difficult to get
link |
reliable information I'm trying to look into this
link |
but they seem to have said that they're
link |
they're fixing the price of gold
link |
in rubles so they will buy and sell
link |
gold at a fixed rubble
link |
rate which effectively means you're on a gold standard
link |
now I'm not sure how
link |
much how serious this
link |
is how they've managed to stick to it
link |
but it seems to have stabilized
link |
the rubble and in fact brought it back to its pre
link |
war level which I found absolutely
link |
astonishing you know considering all the sanctions
link |
it's obviously much better than having your currency
link |
pegged to nothing but in the long run
link |
I also don't think gold
link |
is going to cut it in the 21st century
link |
do you think there's any chance
link |
they go full gangster move
link |
go into the digital space on the blockchain
link |
and go with bitcoin
link |
I think you know the point
link |
of this discussion is that you know we run through
link |
all these other options you know a Chinese
link |
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
link |
won't work I think they might have to
link |
learn this the wrong way I mean
link |
the hard way but eventually
link |
I don't see them doing it now but eventually
link |
the winning move is going to be to go on a bitcoin based
link |
monetary system well I don't know
link |
if everything is always has to be the hard way
link |
not to be but I mean it's
link |
it doesn't look like there is
link |
any kind of desire in China
link |
or in Russia to switch to a bitcoin based
link |
to take a leap to bitcoin
link |
so unfortunately I think
link |
we're going to go through a few
link |
years maybe many years
link |
of learning the lesson the hard way
link |
of trying to accumulate these commodities
link |
and seeing the limitations that make them
link |
unsuitable as money today
link |
one of the things I'm really concerned about
link |
is the tension the amount
link |
amount of hate in the world yes
link |
and the increasing amount
link |
making a regular appearance
link |
and because the weapons of war becoming
link |
more and more powerful as they have been in the past
link |
many decades I'm really
link |
concerned about nuclear war
link |
so let us see if bitcoin can fix this
link |
first rule of bitcoin is
link |
if it's a problem bitcoin fixes it
link |
alright well I have some
link |
personal questions for bitcoin then because I have some
link |
my life is pretty fucked up
link |
so I'll have to try to see
link |
a quick pause for bathroom breaking
link |
let's return to the basics
link |
we started with what is money
link |
what is bitcoin we talked about hard money
link |
the history of money
link |
the history of war in the 20th century
link |
and that takes us into the 21st century
link |
bitcoin is a software
link |
and it's a distributed software
link |
to operate peer to peer network between
link |
members who are all equal
link |
and what this software does is that it allows
link |
you to operate a payment network
link |
between those peers
link |
and that payment network has its own currency
link |
just a simple software game
link |
but the reason this is such a big deal is
link |
I believe bitcoin is the most advanced
link |
form of money ever invented
link |
and the reason for that comes from two
link |
properties that this network has
link |
is that the currency is the hardest money
link |
is the money whose supply is the most
link |
resistant to inflation
link |
it's the first monetary asset that we've
link |
ever invented that is guaranteed
link |
to be fixed in its supply
link |
that cannot be increased beyond a certain
link |
number so there's only ever going to be 21
link |
million bitcoins and that's
link |
a qualitative leap forward
link |
in our technologies of money
link |
all of our monies leak
link |
essentially because people can always
link |
make more and more and more of them
link |
the best money is the one that leaks the least
link |
which is gold because it only
link |
leaks one and a half percent in other words
link |
your share of the gold
link |
diluted by one and a half percent every year
link |
ideally you'd like it to be
link |
zero bitcoin is currently at around
link |
headed towards zero so it's the first money
link |
that we've ever had that goes to zero
link |
in terms of terminal supply so
link |
there will never be more than 21 million bitcoin
link |
I think that's a huge deal because you know
link |
money is always whatever is the hardest to make
link |
and now bitcoin is the hardest thing to
link |
make and then the second property
link |
which is extremely important as well
link |
is the fact that it operates
link |
without the need to
link |
trust in anybody it doesn't have a
link |
party that is in charge of it it doesn't
link |
have a central authority that can
link |
you know it's as I said it's peer to
link |
peer so there's it only has users
link |
it doesn't have any admins
link |
there's no authority in charge of
link |
bitcoin that can take your bitcoin that can stop
link |
you from using bitcoin that
link |
can change the rules of bitcoin they can't make more
link |
of it so it's fixed
link |
it's available for anybody in the world
link |
it's the hardest money ever invented
link |
and it is absolutely
link |
enormously significant invention because
link |
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
link |
on the world are in the world
link |
are caused by easy money are caused
link |
government having access to essentially an infinite
link |
people's wealth and I think
link |
bitcoin fixes this because it
link |
money that has the
link |
salability of gold across time
link |
meaning it holds its value across time
link |
like gold but much better than gold
link |
it is similar to fiat and that fiat
link |
can travel quickly but bitcoin can
link |
travel even faster than fiat so
link |
across time with fiat's salability
link |
across space in one
link |
immutable package that nobody can change
link |
and nobody can control
link |
Can you define the word salability?
link |
Salability is the essential property
link |
of money it's the ability
link |
of a good to be sold
link |
easily on the market
link |
specifically to be sold without much loss
link |
in its value so houses are
link |
great for living in but they're not very
link |
salable you know if you want to sell a house
link |
you can just click a button and sell a house
link |
and have a giant market of people
link |
buying houses from you you need to
link |
you need to find somebody who wants the exact house that you
link |
have with the exact specifications that you have
link |
and because you know houses are not identical
link |
there's no liquid giant market for people
link |
to just buy and sell identical
link |
so gold for instance has
link |
good salability as
link |
money because it's a liquid
link |
good it's uniform and people
link |
are always buying it fiat
link |
dollars have great salability because
link |
everybody's always buying an exchanging
link |
dollar for other goods so if you have
link |
a hundred dollar bill you can easily
link |
get rid of it and you'll get a hundred
link |
dollars worth of stuff for it if you have
link |
a hundred dollars worth of
link |
stuff it's harder to get rid of it if you have
link |
a hundred dollars worth of phone
link |
it's not as easy to spend it as a hundred
link |
dollar bill that's salability
link |
what do you mean that
link |
bitcoin I understand that
link |
bitcoin has the salability of gold across time
link |
better yes like on the order whatever
link |
has the salability of fiat across
link |
space what does that mean so if you remember
link |
when you asked me what is the advantage of fiat
link |
what is the advantage it offers us
link |
it's cheaper to move fiat across
link |
space than it is to move gold
link |
with a current fiat monetary
link |
system for all of its flaws
link |
you can send money
link |
I could send money from my bank account
link |
in the US to a bank account
link |
in a couple of days or in Britain
link |
in France in a day or two
link |
which is much faster than you could
link |
do with gold and much cheaper than you could do with gold
link |
in reality with fiat
link |
the reason bitcoin improves on that is that
link |
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 6 confirmations in an hour
link |
you get about 12 confirmations in 2 hours
link |
with 12 confirmations you know you're pretty
link |
clearly safe on this
link |
so within a couple of hours
link |
you could send a billion dollars across the ocean
link |
have final settlement on them
link |
it's not just that you've sent a credit obligation
link |
that's going to need weeks and months to settle
link |
which is the case with fiat
link |
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
link |
to me on the human level it's fascinating
link |
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 |
it's a trick question
link |
I know it's a trick question but I mean
link |
everybody who knows me knows I can't read the code
link |
so you would say that
link |
do you think it's one person
link |
do you think it's multiple people
link |
is it interesting to you do you think it's fundamental
link |
to the coin itself
link |
to not the coin the
link |
the entirety of the concept
link |
that its founder is anonymous
link |
and how much guts do you think it takes
link |
if it's one person to just walk away
link |
from so much money
link |
I've considered all these questions many times
link |
it's very hard to formulate
link |
a definitive answer to all of them
link |
I don't know who it is
link |
spending the coins that they most
link |
I think what really matters
link |
in Bitcoin about Satoshi is the fact that he's not there
link |
and this is what's truly
link |
astonishing about it the fact
link |
the most important fact in Bitcoin is the fact that
link |
the creators disappeared and the thing
link |
has continued to operate now for almost 12 years
link |
without him being there or 11 years
link |
I think it's been since he's left
link |
and this is really the most
link |
important thing and
link |
maybe he died or she died
link |
an accident on a road trip
link |
or whatever and that's why they haven't accessed
link |
their coins maybe they are incapacitated
link |
but whatever reason it is
link |
it's fate or serendipity
link |
giving us this very vital
link |
very very very vital
link |
building ingredient in Bitcoin which
link |
no other digital currency would ever
link |
recreate which is that
link |
because it was the first
link |
it was the one that was able to
link |
establish the first mover advantage
link |
and get all the people who are interested in the technology
link |
and so that's an enormous advantage but
link |
cherry on top or what made the whole
link |
thing really function
link |
well is the fact that the guy who
link |
made it disappeared and that it
link |
continued to operate which is just
link |
a clear illustration that this is a network
link |
with no admins and I'm
link |
tempted to think that they're incapacitated
link |
in some way probably dead or gone
link |
I don't believe an human being would
link |
have this level of self control
link |
not want to meddle with their invention
link |
they might have had the self control to like mine
link |
the first million coins to get the network going
link |
and then throw away the coins or
link |
send them to an address that they don't have the key
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 I could see that
link |
happening but I find it hard 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
link |
of ideas are often
link |
principled and have the integrity
link |
eventual users of those ideas
link |
we have the kind of cynical view
link |
power corrupts absolute power corrupts
link |
absolutely and we tend to in our
link |
mind generalize that all humans are corruptible
link |
that's true to some degree but I think
link |
some people are more corruptible than others
link |
and I find that there is
link |
I mean I like to think
link |
Satoshi Nakamoto is out there
link |
and you know just like George Washington
link |
chose to walk away
link |
and it's a principle and the principle
link |
is more powerful than
link |
the financial award or any of those kinds
link |
it's a principle that stands for freedom
link |
and there's a lot of people throughout history
link |
even recent history that are willing to die
link |
for these principles
link |
and sacrifice because
link |
they're still living a life
link |
of principle and choosing that day after
link |
I mean there's power to that money
link |
what's the worth of money in the end
link |
in terms of just personal
link |
financial gain versus
link |
how much positive impact there is
link |
so the person that
link |
chooses to walk away like that
link |
I think is the same kind of person that chooses to live
link |
live by that principle
link |
you have people like that
link |
Gregori Grisha Perlman
link |
in Mathematics who turned down the Fields Medal
link |
yeah that's a medal not $50 billion
link |
I know I know I'm joking
link |
well that's actually an interesting
link |
just a brief comment
link |
when people talk about Bitcoin
link |
in the cryptocurrency space
link |
it's often mixed up
link |
financial interest
link |
I think there's often correlated
link |
but that good feeling
link |
you get when you win
link |
or the number go up
link |
or you just somebody
link |
you know I found $20 on the street
link |
and just that feeling of just like
link |
ooh like more money
link |
that positive feeling
link |
but it is distinct from the power of the idea
link |
to change the world
link |
to change the world for the better
link |
it's like Alex Gladstein in the case of Bitcoin
link |
that decreased the amount of suffering
link |
in the world because of authoritarian regimes
link |
your number goes up
link |
like that gambling feeling of like yes
link |
and I mean short term
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
link |
that you can't you have to in your mind
link |
from the power of the idea to transform the world
link |
and if you focus on the power of the idea
link |
a billion or billions of dollars
link |
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 things worked for 11 years without him
link |
and I think this is the really important thing
link |
if they had stuck around
link |
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
link |
lose control of the Frankenstein that you've created
link |
the only way that this Frankenstein
link |
continues to survive is if the person in charge of it
link |
continues to feed it
link |
and so it continues to be yours
link |
and that's the problem 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 because there's a small group
link |
of people behind it that are working on it
link |
that are promoting it
link |
and that's why I think
link |
Michael Saylor's discussion with you was
link |
a magnificent illustration of
link |
the difference between Bitcoin and
link |
altcoins in that they are securities
link |
and I think he makes a very compelling
link |
brilliant case for
link |
why this makes them
link |
categorically different from Bitcoin
link |
Bitcoin you're buying property
link |
I think he mentioned he's a huge fan of
link |
Dogecoin but I might be misremembering
link |
you are misremembering
link |
maybe I'm quoting him out of context
link |
let me just ask you about some
link |
possible criticisms of Bitcoin
link |
so on centralization
link |
so there's a criticism
link |
on the mining and on the
link |
or the node is not really the criticism but
link |
Bitcoin mining is not fully decentralized
link |
because a small number of miners
link |
control a majority
link |
of the hashing power
link |
I looked it up this 10,000, 15,000
link |
whatever the number is of computers
link |
that are full nodes
link |
that are actively connected
link |
so you could argue that's decentralized
link |
because it's global, it's all across the world
link |
it's more centralized
link |
so if you're thinking of making a case for Bitcoin being
link |
do you worry about the miners
link |
being somewhat centralized
link |
is the nodes the important thing to think
link |
is what number of nodes counts
link |
is centralized and not
link |
the nodes are what matters
link |
because the nodes are what determines
link |
Bitcoin's consensus parameters
link |
I think the best way
link |
to think about it is that miners
link |
simply sell a commodity
link |
to the nodes and that commodity
link |
is Bitcoin blocks so what a miner does
link |
is they solve the proof of work
link |
problem so they keep operating
link |
their computers until they can get a solution
link |
to the problem and then they attach
link |
their transactions and present it to the nodes
link |
for the nodes to ratify
link |
I strongly recommend people learn
link |
about the 2017 block size war
link |
why miners don't control Bitcoin
link |
I discussed this briefly in my Bitcoin standard
link |
but there's a recent book
link |
that discusses this in detail called
link |
the block size war by Jonathan Bier
link |
it's a great description of
link |
in 2017 essentially the miners
link |
thought that they could control Bitcoin
link |
one mining company
link |
that produced the majority of the machines
link |
that were on the network
link |
and their allies had
link |
a control of the machines
link |
that were out there
link |
and they controlled the majority of the hash rate
link |
and they thought that they could change Bitcoin's supply
link |
they could change Bitcoin's block size
link |
which is a tiny little detail
link |
technical parameters
link |
all that big of a deal for the economics of it
link |
but they thought that they could
link |
they could force this change on the network
link |
and the members of the network
link |
rejected it and they weren't able to
link |
the nodes are what is sovereign
link |
the nodes are what determine the rules of the game
link |
are a service provider
link |
the miners invest capital upfront
link |
they buy the machines
link |
they buy the electricity
link |
they buy the locations
link |
and they invest all that money
link |
based on the idea that if they behave
link |
according to what the nodes want
link |
the nodes will reward them with Bitcoin
link |
so the miners are in no position to dictate
link |
they've put up their capital upfront
link |
and they will only recoup it
link |
if they do what the nodes want
link |
so therefore what really matters
link |
is the decentralization of the nodes
link |
so you want to have as many nodes as possible
link |
and you want to have a system where
link |
there's a large number of nodes
link |
and this is of course the biggest problem
link |
with other digital currencies
link |
because basically Bitcoin has cornered
link |
the market on a digital currency
link |
the only way that you can really get
link |
is to generate a whole bunch of buzzwords
link |
but we're doing this and we're doing that
link |
and so other digital
link |
currencies are optimized for
link |
bells and whistles
link |
and that means adding a computational load
link |
which makes the nodes bigger
link |
harder to operate and therefore you have
link |
a very small number of nodes in fact
link |
very few digital currencies
link |
are keen to publicize
link |
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 |
you can spin up a million nodes
link |
doesn't really matter
link |
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 who agree
link |
amongst themselves how to move forward
link |
yeah so you threw in a few criticism
link |
of all coins there but so one is the small group
link |
that one we could talk about
link |
we talked about that with Satoshi Nakamoto
link |
but the other one is
link |
a small number of nodes
link |
to push back on that as computational power
link |
increases you can argue that
link |
that enables more and more
link |
cheap computers to serve as
link |
nodes so at least it paints
link |
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 |
yeah but I mean ultimately
link |
again it doesn't really matter how many nodes
link |
if the way that the currency is run is that you're gonna have
link |
a hard fork every few months which is the case
link |
with most other currencies bitcoins the only one
link |
that's not have hard fork
link |
the unique thing about bitcoin
link |
in a technical sense is that you could get
link |
the original software that Satoshi himself ran
link |
to start the network
link |
and you could run it
link |
today and it would sync
link |
with the blockchain there's one bug you need to fix
link |
mistake that would have only appeared
link |
I think in around 2013 or 2014 or something like that
link |
so that he wasn't aware of back then
link |
so you just need to fix this one time
link |
with a little bug and then the consensus parameters
link |
are still the same so you're able to sync
link |
to it this is not true for
link |
most other digital currencies I'd say probably
link |
all of them because they've all had many
link |
hard forks which they think of as upgrades
link |
and you know they market this
link |
thing as you know well bitcoin can't
link |
upgrade but we upgrade all the time
link |
well yeah you know what else upgrades all the
link |
time Facebook, Apple, Amazon
link |
anything that centralizes is very
link |
easy to upgrade and that's precisely why
link |
as Michael Saylor says these things are
link |
somebody's liability they are security
link |
you're carrying on somebody's
link |
technical and economic liability
link |
they can hard fork
link |
they can 10x the supply tomorrow
link |
they can fall victim to the same
link |
corrupting forces that governments
link |
fall victim to sure and for
link |
people who don't know yeah hard fork
link |
incompatible change
link |
function of a cryptocurrency
link |
of course there is hard forks
link |
I'm sure all of which you love
link |
dearly anyway but that doesn't matter
link |
the original bitcoin
link |
for the most part is not undergone
link |
I mean it has undergone changes but
link |
important parameters of the network
link |
so another criticism
link |
work consensus mechanism uses a lot of
link |
what's the response to that criticism of bitcoin
link |
yes because it's worth it
link |
the airplane uses a lot more energy than a kayak
link |
you know when you're going to cross the Atlantic
link |
next time what are you going to take a kayak
link |
that is environmentally friendly according to this
link |
insane definition or are you going to take
link |
an airplane that consumes a lot of energy
link |
so the cost benefit analysis here
link |
you have to consider both the cost and the benefit
link |
exactly and I think
link |
it's an astonishing
link |
testament to just how far backward
link |
people's scientific
link |
thinking has devolved to the point where we
link |
think of energy consumption as a bad thing
link |
I think it's just and in the fiat standard
link |
I discussed the whole hysteria around
link |
energy and I think it's
link |
a product of fiat inflation
link |
because it's a way of trying
link |
to covering up the fact that energy
link |
fuels that are reliable
link |
and necessary for the current world
link |
are becoming more and more expensive
link |
because of inflation and so governments
link |
are always looking for excuses for why you
link |
should not be using those things and so
link |
they promote all kinds of stupid pseudosciences
link |
why these things are bad but really
link |
you know all technology
link |
is well not all but
link |
the vast majority of technological innovations
link |
economizing on human time and judgment
link |
and replacing it with machines with reliable
link |
machines that spend a lot of energy
link |
so that's what a telephone
link |
does instead of having to send somebody
link |
across the world to tell somebody something else
link |
a telephone allows you to do it
link |
the car is like that you could walk
link |
but a car consumes a lot more energy
link |
but it allows you to travel much faster
link |
and safer and more reliably
link |
an airplane is like that
link |
modern telecommunication
link |
is an increase in the consumption of energy
link |
it is an absolutely criminal
link |
thing and I genuinely mean the word
link |
portray energy consumption as a bad thing
link |
because it is truly depriving
link |
people of the chance to live a life that makes life better
link |
you know and this is
link |
it's truly criminal to tell poor countries
link |
that they should not consume
link |
the same energy sources that are being used in rich countries
link |
our modern infrastructure and modern life
link |
that's what life is you know if you reduce the consumption
link |
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 cities would collapse
link |
the quality of life would decrease significantly
link |
a high quality of life often requires
link |
given the current technology
link |
a high expenditure of energy
link |
and I should be clear you know it's not a quality of life
link |
in the sense that many people think of this as oh yeah
link |
flights for vacations
link |
no no these are the
link |
cherries on top of the cake but the substance
link |
of the cake and the real benefits
link |
of energy is the fact that
link |
premature babies survive
link |
in countries that have reliable 24 hour
link |
if your child is born premature 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 going to make it
link |
you see it you know the level of energy consumption
link |
per capita is highly correlated
link |
not just to income but also to health
link |
outcomes to infant mortality
link |
to all of the things that you care about
link |
bitcoin is just another technology
link |
it does consume a lot more energy than central banks
link |
a lot of bitcoiners like to
link |
take a cop out of this by saying
link |
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 next to
link |
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 |
bitcoin becomes a rounding error
link |
relative to how much energy
link |
spent on all the computers in our world
link |
things like home appliances, microwaves
link |
and hair dryers and stuff
link |
yeah I mean this is
link |
it does being hilarious it's like
link |
oh these things that are just part of our
link |
they're either the same order
link |
at least the same order of magnitude as bitcoin
link |
and they seem like trivial
link |
yeah and this is the thing 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
link |
to consume energy and I mean
link |
I used to live in Lebanon
link |
Lebanon had hyperinflation
link |
I escaped from hyperinflation
link |
my life could have been ruined by hyperinflation
link |
and the reason that it wasn't ruined is because I have bitcoin
link |
I don't know am I allowed to swear
link |
on your podcast? yes please
link |
so fuck your washing machine
link |
between my washing machine and my bitcoin
link |
I'll choose bitcoin
link |
the technology that has already saved my life
link |
and I think it's going to save the lives of many
link |
many many more people
link |
but of course I don't have to choose
link |
between my bitcoin
link |
and my washing machine
link |
we're just constantly consuming more energy
link |
and we're going to continue to consume more energy in this world
link |
and that's just what progress is
link |
and a small remark
link |
I don't think this is a problem 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
link |
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 surrounded
link |
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 around the same time
link |
you have to put the load of the washing machine
link |
and one power plant
link |
and all of the infrastructure needs to work at the same time
link |
and the electricity is pretty expensive because
link |
it's being done in a place with high demand
link |
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 |
the electricity you need for mining
link |
can be done anywhere
link |
waterfall in the north of Canada
link |
300 miles away from any population center
link |
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 a satellite
link |
internet connection
link |
and effectively you're selling that energy
link |
that is isolated to the grid
link |
and because of the way the bitcoin functions
link |
because of the difficulty adjustment
link |
the only profitable miners
link |
are the ones who can get cheap electricity
link |
basically if you're mining at grid
link |
cost, if you're mining at around
link |
the average electricity price in the world is around
link |
if you're mining at 14 cents in bitcoin
link |
you're most likely not going to 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
link |
if everybody's mining at 14 cents
link |
being profitable and then only the people
link |
mining at a lower price are profitable
link |
so that's why bitcoin mining
link |
is not competing with your washing machine
link |
and this is the absurd thing
link |
about this kind of energy scarcity
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 where
link |
bitcoin is consuming more electricity than portugal
link |
alright well maybe we should shut down portugal then
link |
what the hell is portugal giving us
link |
like obviously it's not
link |
it doesn't mean that I've gotten so much criticism
link |
for saying Cristiano Ronaldo
link |
is not in the top five
link |
that's another discussion we should get into
link |
because you posted a few soccer things
link |
I realized how passionate people are about this
link |
listen it was a joke
link |
he doesn't have to be potential 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
link |
opinion where I think Cristiano Ronaldo
link |
is the greatest football player ever
link |
number one over Pele Maradona
link |
Messi better than Messi
link |
yes he's been doing it for 20 years at the top
link |
nobody's ever done that he's won everything everywhere
link |
everywhere he goes at the top at the Champions League
link |
argument to be made for him
link |
Messi's never done anything outside of Barcelona
link |
so you appreciate performance long term
link |
of the actual play on the field
link |
is Ronaldo the top scorer of all time
link |
so the genius is in the scoring
link |
not the actual dance
link |
of the play the creativity
link |
well I mean I don't know
link |
Messi's been absolutely mediocre
link |
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 Muhammad Saleh
link |
I think he should win the Ballon dors this year
link |
he probably should have won it last year as well
link |
he's been absolutely outstanding
link |
I mean just people are so crazy
link |
about Messi they keep giving him accolades
link |
he hasn't deserved I think Messi the last couple
link |
of Ballon dors that he got
link |
I mean he's a great player and everything
link |
but he did not deserve it last year
link |
we can agree to disagree
link |
you're a Barça fan or a Messi fan
link |
no I wouldn't say I'm a Barça fan
link |
but Barça fan because of Messi
link |
and I just I think it's like
link |
there's certain things
link |
growing up in the Soviet Union
link |
Russia I remember Maradona
link |
he was the first person
link |
I was like oh wow this could be
link |
this is greatness in sport not just football
link |
in sport right and for some
link |
reason I mean something about like
link |
the way they were commentating
link |
the genius of his play
link |
and again the performance but being able
link |
to carry a team on his shoulders
link |
that I just fell in love with
link |
whatever he represented and then by that
link |
Argentina and then
link |
Messi I saw when he was like
link |
16 17 when he was just like
link |
in the early days and when you first
link |
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
link |
for some reason you're invested
link |
you're emotionally invested
link |
you're I don't know
link |
so you kind of just fall in love and then
link |
you get you pick sides
link |
that's the thing about football part of the fun
link |
things about football soccer
link |
is like you pick a guy
link |
and fuck everyone else and you just have fun
link |
talking shit I mean there's part of it
link |
it's great because
link |
I think obviously it's a very stupid
link |
thing to do but I think if you don't do it
link |
in football you're gonna do it in real life
link |
that's why it's very good
link |
you know instead of hating people
link |
for their religion and for their
link |
skin color hate them because
link |
they support Manchester United
link |
so you're a Liverpool fan
link |
yes yes hardcore long term
link |
to go back to the original point on Portugal
link |
Bitcoin is not competing with
link |
Portugal because Bitcoin is buying energy
link |
from places where we can't buy it
link |
because all the places where
link |
we can buy energy for our washing machines
link |
we're bidding up the price
link |
enough to make it non viable
link |
for Bitcoin that's why you know
link |
you see those headlines about Bitcoin consuming
link |
more energy than Portugal well if you look at Portugal
link |
I mean they've got giant power plants
link |
in Portugal they've got millions of people
link |
and they've got enormous amounts of infrastructure
link |
where are all these
link |
infrastructure for Bitcoin mining
link |
you don't see it in the cities it's
link |
all isolated it's all out
link |
away from the cities or it's
link |
connected to grids that have serious overcapacity
link |
out there buying the expensive energy
link |
taking energy away from
link |
people who can't afford it
link |
it's out there buying its own energy because it doesn't
link |
need to buy the expensive energy that people
link |
really need so one other criticism
link |
from an investment perspective
link |
from a gambling perspective that people see
link |
is the volatility of Bitcoin
link |
of course has been somewhat decreasing
link |
what's your answer to the
link |
criticism that Bitcoin is too volatile
link |
I want to stay away
link |
it doesn't seem like a safe place for me to
link |
either short term or long term
link |
there's no denying there's a volatility and there's a high
link |
oscillation in the value in the short term so
link |
safe way to approach that
link |
is in terms of position sizing
link |
you're over invested perhaps so maybe you should
link |
reduce the size of your position
link |
so that the volatility doesn't bother you
link |
this is the short answer
link |
like stack as much as
link |
your conviction will allow you to
link |
tolerate the volatility
link |
and of course the reason you should try and
link |
consider tolerating the volatility
link |
the options are you hold
link |
fiat assets which only go
link |
down stable you know relatively
link |
stable not a lot of volatility day to day
link |
dollar doesn't change 40%
link |
overnight 20% overnight
link |
or something like that but it does go down
link |
reliably it's going to go down 40%
link |
you can count on it might take a year
link |
two years five years ten years
link |
compared to the things that you want to buy
link |
it's going to go down by 40%
link |
and it's not going to
link |
come back and it's going to go down another 40%
link |
and then another 40% and then another 40%
link |
so the option really is
link |
relatively short term stability
link |
with long term decline
link |
or short term volatility
link |
with long term rise
link |
and so that's another
link |
way in which bitcoin teaches people to have a low time
link |
preference and think about the long term so
link |
stack accumulate and think of it
link |
it's a function of the fact that bitcoin is new
link |
bitcoin is currently less than 1% of the global
link |
money market so there's about 100 trillion
link |
dollars of money out there in the world
link |
dollars roughly of fiat and about 10 trillion
link |
dollars of gold and bitcoin
link |
is less than 1 trillion dollars so
link |
you know one rich guy decides to
link |
get into bitcoin that's going to show up on
link |
the bitcoin chart you look at it you know
link |
Elon Musk decides to buy bitcoin you see
link |
the buy you know you see the news it
link |
happens and you see the pump
link |
Elon Musk decides that he doesn't like
link |
bitcoin you see the drop but
link |
you know a few years ago it used to be that
link |
one random millionaire
link |
would cause that pump
link |
and now you have to be the richest guy in the world
link |
to do that in a few years
link |
you're going to have to be the richest country in the world
link |
to be able to do that to the bitcoin price
link |
maybe many years maybe not a few years
link |
but as bitcoin grows you know think about it
link |
as a liquid pool of
link |
money currently it's a small
link |
pool next to a much larger ocean
link |
which is the entire money market and so
link |
one person jumps from
link |
that to this small pool they can make a big
link |
splash as the pool grows
link |
essentially the salability increases
link |
and the likelihood
link |
of one individual purchase affecting the
link |
price so violently increases
link |
over time you know as the size
link |
of the market increases I think
link |
we're going to see the volatility decline more and more
link |
you know if you look at gold historically gold has been
link |
very very stable it did not
link |
achieve its stability because the central bank
link |
was in charge of gold supply or because there was
link |
a gold committee that decided
link |
how much gold gets produced
link |
it achieved that stability
link |
because it became the most
link |
saleable good and so therefore became the
link |
good that contains the most cash balances
link |
in the world and the end of
link |
the 19th century everybody held cash balances
link |
new production was a tiny little
link |
global production to the supply
link |
so that's what made gold the most
link |
relatively I shouldn't say
link |
stable because nothing is stable in economics
link |
but relatively it holds on to its value
link |
and it's much less volatile
link |
than digital currency than
link |
national currencies that's because
link |
highest stock to flow ratio
link |
and that's because its supply
link |
fraction of the liquid market
link |
as the liquid market grows as the size
link |
of cash balances grows and trades in bitcoin
link |
cancel each other out
link |
only slight changes in value so I think
link |
as bitcoin matures
link |
that's going to decline
link |
so effectively I think the end
link |
game is bitcoin is
link |
bitcoin is worth something like
link |
I think the total addressable market for bitcoin
link |
is not just national
link |
currencies and gold's addressable market
link |
but also government bonds that's the really big one
link |
compare to gold so you're saying it'll surpass
link |
gold with the 10 trillion
link |
where's bonds stand
link |
and there's also national currencies which are about
link |
100 trillion and there's government bonds
link |
which are around 120 billion
link |
sorry trillion dollars trillion
link |
trillion sorry if we're saying
link |
billion we meant trillion
link |
bonds can move to bitcoin
link |
this is the prize this is the main
link |
dish and gold is the appetizer
link |
bonds are the main dish because bonds
link |
bonds have replaced gold in people's
link |
portfolio people remember when we were saying gold
link |
as a saving as the secure part of your portfolio
link |
and then you take risk with the equity
link |
currently people do that by holding
link |
a part of their portfolio in bonds
link |
that's the part that they treat as their
link |
saving account and then the rest
link |
not speculation for investment in which they take
link |
risk yes speculation
link |
and that's stocks and equity
link |
and other high risk
link |
I think bitcoin is not going to replace equity
link |
there will always be equity there will always be
link |
companies and people who want to have equity
link |
but it will probably replace a big chunk
link |
of current equity markets because right now
link |
if you want to save
link |
it used to be that you hold bonds now if you want to save
link |
you go into stock indexes
link |
so I think bitcoin likely eats
link |
a big chunk of equity markets
link |
people are using it as saving
link |
they could eat all the bonds
link |
ambitious statement
link |
the question is the scale of
link |
time that happens across but the most
link |
important statement you're making is about trend
link |
yeah and also I mean let's also remember
link |
nominally don't beat inflation and in real
link |
don't come close to beating inflation
link |
currently with bonds you're taking on credit
link |
default risk to buy a bond
link |
getting less money back in real terms
link |
well bitcoin doesn't offer you returns
link |
but in real terms it appreciates
link |
much more and it has I believe
link |
a lot less risk associated with it than
link |
any company or government
link |
so let's make things spicy
link |
and ask if bitcoin
link |
fails in the long term future
link |
as all you just said
link |
economics, volatility
link |
things happen in this world but the human civilization
link |
might end in this century
link |
I hope it doesn't but it might
link |
there could be catastrophic events
link |
it goes to zero loses its number one
link |
what would be the reason if you're
link |
an alien visiting earth
link |
100 years from now and just
link |
were to analyze the situation
link |
bitcoin is a pretty new thing
link |
so the possible trajectories of how the world
link |
evolves together with this new monetary
link |
nearly infinite so if it fails
link |
one of those trajectories surely
link |
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 of
link |
all the unlikely things that could destroy
link |
governments go back on a gold standard
link |
so they make in your view
link |
a better decision than the current system
link |
just not the best decision
link |
I thought you would go much
link |
so that's okay interesting
link |
so maybe because of Russia because of China
link |
and so on because the current war
link |
they might reconsider
link |
power that America holds
link |
because of the monetary
link |
because of being the primary currency and they'll
link |
start thinking about going
link |
on a gold standard
link |
yeah but it would also require the US
link |
and the Europeans and everybody to want to join
link |
in this system and sing kumbaya
link |
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
link |
currencies to gold again the price of gold
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
link |
happen I'm saying it's
link |
I imagine less likely
link |
less unlikely than
link |
all the other unlikely scenarios because
link |
even with a nuclear war
link |
of the planet is destroyed the 10%
link |
continue to run bitcoin
link |
okay there's a movement
link |
a community of people referred to as
link |
bitcoin maximalists
link |
I've seen you referred at least in the past
link |
of the bitcoin maximalist
link |
probably because of your
link |
book you know bitcoin standard
link |
consider the bible in general you're one of the
link |
leaders in this space
link |
any of the toxicity and
link |
derision that often
link |
or perhaps sometimes originates
link |
from this community
link |
definitely not I'm not
link |
in the position to regret other people's actions
link |
so let's just be clear
link |
I think the rhetoric of community
link |
I reject this rhetoric because I think it's
link |
kind of political manipulation
link |
portray people as part of a community
link |
and hold people responsible for other people's
link |
actions which I think is ridiculous
link |
so if you know some guy on the internet
link |
said something mean to somebody
link |
and then this is very common
link |
and it's I always try and
link |
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
link |
use bitcoin around the world
link |
and a lot of these I'd say
link |
parasites you know people who don't have
link |
anything productive to do with their life
link |
you know outrage merchants
link |
they'll come out and say something
link |
along the lines of you know the bitcoin
link |
toxic they're holding bitcoin back and
link |
they need and of course it's manipulative
link |
but the point behind it is they want to get
link |
to you to they want to get people
link |
who are you know not that nobody
link |
with 300 followers who said something
link |
silly they want to get the notable
link |
basically change their message so the idea
link |
is you know I'm supposed to
link |
apologize because somebody with 300 followers
link |
I've never met in my life who calls
link |
themselves a bitcoiner said a mean word
link |
and then I need I need to apologize
link |
and I also need to cut down on my rhetoric
link |
about other digital currencies
link |
I need to do that so
link |
I'm only responsible for my own actions
link |
recall regretting anything
link |
okay but let me push back or push further
link |
into that direction fine let's see
link |
community aside labels suck
link |
for sure but you have
link |
about you on Twitter
link |
even in this conversation
link |
you know you had some
link |
some good strong words
link |
I've always believed
link |
life is too short to mean words
link |
one day I'm gonna be dead and
link |
on my deathbed I'm not gonna
link |
I wish I was a little bit more
link |
circumspect 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 |
short to hold back your opinion
link |
the question is what is
link |
really your opinion because you're
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
link |
enjoys this agreement
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
link |
online interaction that encourages
link |
in different communities
link |
online interaction is one community
link |
that encourages kind of derision
link |
mockery and so on so you get
link |
you can choose if you want to engage that part of yourself
link |
or some other part of yourself
link |
economics is another community
link |
very straightforward about their disagreements
link |
pretty harsh it's fun to
link |
watch because it feels like you arrive
link |
at the truth much faster
link |
because you tear each other apart
link |
you know that's a choice that's a deliberate
link |
choice and I don't want
link |
to label an entire community
link |
of people by its extremes
link |
I don't think you should do that but there's cultural
link |
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
link |
than rural Britain
link |
and New York is different than
link |
Iowa you start to notice things
link |
I mean you don't want to generalize there's all kinds
link |
of people everywhere but
link |
there's a certain way of communication
link |
on crypto twitter in general
link |
but also bitcoin maximus
link |
that I even early on received a bunch
link |
of heat so what the hell
link |
there's definitely a difference
link |
when I go to the computer science community
link |
machine learning community
link |
it's way friendlier than the crypto
link |
currency community
link |
I have much more freedom to actually
link |
enjoy being which is
link |
asking simple dumb questions even when
link |
I've already spent years sometimes
link |
decades with an idea I like asking dumb
link |
crypto folks punish you for this
link |
like exploration I understand the mechanism
link |
because so many other people come
link |
into that community and they might
link |
as curious but really they're trying to
link |
inject they're trying to sell some kind
link |
of all coin there's some scheme
link |
there's some scheme to make money and so
link |
I understand maybe that's just the dynamics
link |
of the community by nature it's not like
link |
appropriately to the amount
link |
in the community so if the
link |
fraction of charlatans is low
link |
maybe you can afford to be more loving and kind
link |
and so on and when the fraction
link |
of charlatans is high you have to be
link |
perhaps but I think
link |
also you know the stakes are extremely high
link |
in this situation and I think you know if you don't
link |
like bitcoiners if you think bitcoiners
link |
are toxic wait till you meet fiaters
link |
the fiat the community
link |
world wars and genocides
link |
and the mass death and destruction
link |
the fiat community
link |
if you want to use that term I don't believe
link |
you should but I mean you know fiat
link |
has destroyed the savings of pretty much
link |
anybody who's lived through the last
link |
20th century pretty much anybody who's lived through
link |
the 20th century no matter where you lived
link |
Switzerland, US, Ethiopia, Russia
link |
you've gone through
link |
fiat problems you've had hyperinflation
link |
you've had bank confiscation
link |
there isn't a family in the world today
link |
that hasn't had its wealth destroyed
link |
over the last century you know
link |
they all have a story about
link |
inflation and the hyperinflation
link |
and bitcoin offers us a way out of this
link |
shitcoins, altcoins
link |
are essentially fiat worlds
link |
gasp attempt to try and
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 |
this is twitter it's a free market
link |
it's the internet you don't have to follow
link |
anybody that's the thing like so
link |
what I found really
link |
objectionable about the people
link |
who are so butt hurt always
link |
about bitcoin maximus is
link |
you don't have to click follow on people
link |
you don't like there are 300 million twitter
link |
if you choose to follow the accounts
link |
that say things that annoy you
link |
and then complain about the fact that
link |
they say things that annoy you
link |
I'm sorry but you're an idiot that you don't know how to
link |
use twitter just follow
link |
the accounts that you like it's
link |
you know you don't have to
link |
be part of this 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 you can just unfollow
link |
the ones that you like and vlog
link |
since in the past year man time flies
link |
I've met a lot of them
link |
and enjoy them a lot and you build that community
link |
of people that you enjoy there are lots
link |
that communicate in the way you enjoy
link |
and it's become a meme at this point
link |
that I block would love I think
link |
I block very prolifically and I strongly
link |
recommend people continue to block
link |
I think twitter is you know you're not going to
link |
get to interact with 300 million accounts anyway
link |
so you want to be constantly curating
link |
the experience by getting rid of people
link |
you don't like and
link |
following people that you like and that's just
link |
you know after 10 years of using twitter
link |
you know you get you accumulate
link |
the block list which is very big which I'm very
link |
happy for and I'm going to pass on to my children
link |
the grandchildren will gather around
link |
and your grandfather can finally
link |
again it's just a twitter account
link |
if it bothers you so much ask yourself
link |
why it bothers you that some people are so
link |
I'm not referring to you obviously
link |
but I mean the people that are constantly
link |
aggravated about this I don't get
link |
bothered by anything on twitter I just block
link |
immediately and I get to
link |
curate the experience that I enjoy and I
link |
recommend people do that
link |
it's really a lot less pathetic
link |
than complaining about strangers saying
link |
things you don't like which a lot of
link |
and of course the reason for it is
link |
you know I mean when I say
link |
it's stupid it's not really stupid there's
link |
an ulterior motive there and the ulterior motive
link |
is hey I have this shit coin that I made
link |
with five other friends of mine
link |
and I'd like you to I'd like to
link |
write your coattails bit coiners and I'd
link |
like you to please help me promote this shit coin
link |
like this is I get this practically
link |
every week whether through email
link |
or through twitter where hey you know
link |
this is our shit coin
link |
you know it's just like bitcoin but
link |
it's better because it does this and this and that
link |
and you know basically
link |
how can we get you to promote this shit
link |
being straightforward and forthright is
link |
a great productivity
link |
you just tell those people no I'm not interested
link |
it's a stupid shit coin and I wish you quick and
link |
swift failure before you take a lot of
link |
and that's what I genuinely think
link |
well but I'll just be upfront
link |
with the fact at least for my taste
link |
just labeling everything
link |
worries me so this is
link |
my own preference it's not a judgment on you
link |
it's just my own preference that
link |
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 am too tribal about
link |
things I'll miss actually
link |
really strong ideas outlier ideas
link |
so that that worries me one of the
link |
of the way bitcoin
link |
is how much is at stake
link |
financially is that it's
link |
less open to good actually by
link |
design that it's not changing
link |
like with the hard forks and so on
link |
that there's not a kind of
link |
curiosity but exploration of ideas
link |
curiosity can start getting injected
link |
when you start talking about other layers
link |
built on top of bitcoin
link |
you start talking about applications or different
link |
things like lightning network
link |
that's where the curiosity can emerge
link |
but still that's why with
link |
cryptocurrency in general I just tried to keep an open mind
link |
and just the shit coin
link |
as a term is just like a statement
link |
that I'm going to close my mind to it
link |
that's the way I hear it
link |
but coming out of your mouth
link |
because you say a lot of other IG stuff
link |
it's just more you having fun
link |
that's the way I hear but if I said something like that
link |
that's a I feel like
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 closed minded to all of these great ideas
link |
you know maybe one of them will actually
link |
send you $15 million
link |
but I don't know if I know the difference between the Nigerian Prince
link |
and many other people
link |
I do talk to 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
link |
that somebody tells you hey I'm going to give you $15 million
link |
for nothing just if you send me $5,000
link |
you know you're getting something for nothing
link |
and essentially with all the
link |
digital currencies it's the same pitch
link |
hey hey you know come
link |
use this thing that will allow you to do
link |
things that all of the things that they
link |
pretend that they can do they can be done with
link |
computers without having digital currencies
link |
you know we already have AWS that does
link |
cloud computing that does everything that
link |
shitcoins pretend to do
link |
the only difference is AWS doesn't have its own
link |
monetary system tacked on top of it
link |
to allow Jeff Bezos to basically
link |
print his own money
link |
but don't you think there's some gray area
link |
so let me let me go for the historical record
link |
and let's see if you've changed
link |
philosopher, economist, human being
link |
you tweeted three years ago
link |
anyone who believes proof of stake can work
link |
is either one completely clueless
link |
at how and why bitcoin works at all
link |
a con artist using it as a buzzword
link |
to promote a worthless scam like Ethereum
link |
do you still believe
link |
Ethereum is a scam
link |
and in general proof of stake
link |
you either clueless
link |
if you think it's interesting
link |
yeah no I still stand by that
link |
would you classify Ethereum as a shitcoin
link |
for sure it's the mother
link |
asshole from which the shitcoins spring
link |
the royal the king
link |
yeah I think the key thing is
link |
the way to think about there's another tweet
link |
from a couple years ago which is
link |
essentially proof of work was like the invention
link |
of flight 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
link |
to make airplanes cheaper
link |
and faster by not making them
link |
by keeping them on the ground
link |
like the invention
link |
of proof of work the reason the entire
link |
digital currency space exists
link |
is because bitcoin operates
link |
based on proof of work if bitcoin
link |
was based on proof of stake it would have
link |
died or been shot down from day one
link |
but that's a hypothesis
link |
and a lot of people believe that
link |
and I think they have a lot of strong support
link |
but basically proof of work
link |
is grounded in physics
link |
in the real world the proof of
link |
stake is more about
link |
it's politics it's the federal reserve it's exactly
link |
what we have it's exactly what we have
link |
it's just a group of people who get
link |
to decide the rules and it's essentially
link |
you know it's a security it's a company
link |
so it's not an innovation
link |
in any sense it's a step backward to what
link |
we already had which is you get a bunch of people
link |
in charge of the money now the only
link |
reason it survives in this
link |
and the reason I call
link |
these things scam and I have no problem
link |
with calling them as scams because they
link |
fraudulently present themselves
link |
as being decentralized they present
link |
themselves as just being a different way
link |
of doing decentralization than bitcoin
link |
when it's not it's just they're
link |
writing bitcoins coattails
link |
and they're writing the fact that most people don't quite
link |
understand what bitcoin is and how it works
link |
to portray themselves as a cheaper
link |
better more more efficient way of doing
link |
what bitcoin does it's not
link |
it's a less legally
link |
accountable way of doing what central banks do
link |
and the basic criticism is that there's a
link |
group of people sometimes a very small group
link |
of people that can control the parameters
link |
of the operation of the system
link |
so over time you can't
link |
gold under the mattress it doesn't have
link |
that kind of heart it's not property
link |
and I really very strongly recommend
link |
your discussion with sailor for people who want to
link |
elaborate more on this there's a bunch of people
link |
in charge which means that
link |
legally they should be doing this
link |
under securities law but
link |
even as an anarchist if I don't want to care
link |
about that the technical
link |
implication of it is this is never going
link |
to be adopted as a neutral way
link |
of transferring value on the internet because
link |
we need you need something
link |
that enemies can trade with one another
link |
you can't have something that has a small
link |
group of people in charge because A
link |
the small group of people themselves can be
link |
they can be coerced you know you
link |
can put a bunch of people in a room put a gun
link |
you can change everything in any of these digital
link |
currencies and that's why that's why I think
link |
you know you'll find a lot more sympathy
link |
the Keynesian economist
link |
to ethereum fanboy pipeline
link |
is a very strong one because
link |
it's the same thing
link |
it's like you like the idea of
link |
people being in charge of money and you think
link |
you're going to be the one who's going to be in charge of money
link |
so you see a lot of this
link |
phenomena and you see the same people that
link |
want gold and don't like central
link |
banking they get into bitcoin
link |
yeah so just to actually
link |
push back a couple of things
link |
so one is fiat her
link |
it sounds like I'm trying to be
link |
a sophisticated Brit talking about theater
link |
for many reasons it's not making
link |
me feel good about that so
link |
you know day by day
link |
things change you used to be one of those
link |
evolve people learn people that are supportive bitcoin
link |
might eventually become
link |
supporters of ethereum
link |
or go back to supporting fiat
link |
we don't know people evolve
link |
for different reasons you grow up you mature
link |
become enlightened so I think
link |
every single person sort of
link |
as this technology is evolving
link |
as this world is evolving
link |
as wars break out and geopolitics
link |
change as the monetary system
link |
put under stress people will evolve
link |
so we're trying to all figure it out together
link |
that's why like open mindedness here I think
link |
for people like me at least
link |
this seems essential
link |
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
link |
understanding what is the good investment
link |
in my time what is the good investment in my money
link |
that doesn't seem clear
link |
things are good at promoting themselves
link |
I'm not talking about
link |
the different kinds of things like
link |
ethereum altcoins and so on
link |
advertising themselves as a great investment
link |
but you don't know and you have to keep an open mind
link |
self introspective about what
link |
biases I operate under
link |
and ways I delude myself
link |
like hallucinations that I'm living under
link |
breaking out of all these hallucinations
link |
it's very hard to introspect
link |
thinking like what are the assumptions
link |
under which I lived my entire life
link |
that might be actually false assumptions
link |
that's a really difficult
link |
thought process to take
link |
it's a dangerous one
link |
the Nietzsche if you gaze
link |
long into the abyss the abyss
link |
it's like Alex Jones talks about this
link |
I mean he's living
link |
he's got demons in his head
link |
so he has like all these conspiracy theories
link |
that it holds in his head
link |
really destroy him
link |
so it's a psychological burden to carry
link |
so if you question authority
link |
if you question government if you question culture
link |
the way things have been done
link |
it's really difficult
link |
and the biases you operate
link |
under it's really difficult to question them
link |
so I think like being
link |
constantly open minded
link |
not constantly but a little bit every day
link |
is important I think
link |
yeah but I mean you know you're talking to somebody
link |
who grew up in Ramallah
link |
in Palestine in the West Bank
link |
I've changed my mind
link |
on all kinds of different things
link |
the fact that I was even open to the idea
link |
has required an enormous amount
link |
it's a heck of a journey
link |
so I'd much rather appreciate
link |
rather than these kind of general fluffy
link |
you know you should be
link |
oh of course yes you should be open minded
link |
but you know also you come up with conclusions
link |
from email sometimes when you know that it is spam
link |
because you have to move on with your life
link |
there's an opportunity cost to considering
link |
every spam email so
link |
well to me okay so I'll just say
link |
from my relatively
link |
sort of shallow perspective
link |
almost like a technical person
link |
mostly my understanding of economics is weak
link |
weak consensus mechanism
link |
relative to proof of work
link |
so that's not obvious to me
link |
that there goes wrong and it becomes
link |
corrupted in the way that governments
link |
get corrupted because it still
link |
seems decentralized
link |
now your criticism of governance
link |
is an interesting one but if you put
link |
that aside it still is a
link |
decentralized mechanism
link |
and it's more transparent than the
link |
mechanism that governments operate on
link |
it isn't, this is exactly what the Federal Reserve is
link |
the Federal Reserve is a proof of stake system
link |
the Federal Reserve is owned by its
link |
constituent banks and so the rules
link |
of the Federal Reserve and the regulations are
link |
determined by the ownership which is the banks
link |
so it's exactly what the Federal Reserve is
link |
but it's too backdoor
link |
the agreements between the banks
link |
and the Federal Reserve
link |
it feels like a lot of those agreements are made
link |
between individuals that
link |
sort of behind the scenes it's not
link |
hard to, it's opaque, yes
link |
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 |
that's the thing, ultimately there's no way
link |
that it's going to take off on a free
link |
market and that's why
link |
for all of the bluster about wanting to move
link |
to a proof of stake system, Ethereum have been
link |
saying this since 2014
link |
it's not been 8 years
link |
they've been talking about it
link |
we still haven't seen the proof of stake
link |
system operational in the wild, it's vaporware
link |
for all practical intents
link |
it's potential, I mean you can do it
link |
in a centralized way
link |
can it survive, can it last
link |
for a long time? I don't think so
link |
it can last perhaps initially
link |
with marketing, with centralized marketing
link |
you can promote it but
link |
user demand, the people that are not
link |
interested in speculating because
link |
they want to get rich on this, the people that are going to use it
link |
they're going to want to use it because they can
link |
not going to be messed with
link |
but there's also applications
link |
but there's applications on top
link |
like the other reason I'm
link |
interested in things like Ethereum
link |
is you might think it's ridiculous
link |
I thought it was ridiculous but NFTs
link |
you can have NFTs probably on top of Bitcoin
link |
but you don't because there's no marketing
link |
on in Bitcoin because
link |
all of these ideas get promoted on proprietary
link |
but there's the network effects of ideas
link |
of applications so they just
link |
take off for some reason and human civilization
link |
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
link |
has impact, like the fact that NFTs
link |
can have an impact on the art world
link |
or the world in general
link |
but it worked, so the question is
link |
David Rothkall has an impact
link |
I'm saying these ideas have
link |
you know, we're collective intelligent
link |
beings and we can believe a thing
link |
and that has power
link |
that has led to major wars
link |
and all those kinds of things
link |
so it's interesting to me
link |
that NFTs took hold
link |
and the question is, is there distributed
link |
dApps, is there distributed apps built on top
link |
of different blockchains that might
link |
somehow transform the world
link |
you have to kind of keep an open mind to that
link |
because right now it's like
link |
I'm the same place with that as I am
link |
with virtual reality
link |
this seems like a really intellectually
link |
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
link |
the latency is too high
link |
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
link |
orders of magnitude better
link |
a two dimensional display
link |
is just as good as a three dimensional world
link |
I don't know, why is virtual reality not taken off
link |
it's been since the 80s
link |
I don't have strong opinions on it
link |
on the prospects of the technology
link |
personally I don't want to ever
link |
imagine myself having
link |
something on my eyes, 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
link |
of dApps and NFTs, is this a distraction
link |
it's a way to sell
link |
a flawed technology
link |
the problem with dApps is
link |
the economics of it makes no sense
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
link |
if you wanted to run the same thing on a distributed ledger
link |
distributing the data over
link |
thousands of computers worldwide
link |
it's infinitely more expensive
link |
and that's why we haven't seen any of these dApps
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
link |
with a few hundred bytes of data
link |
with a few bytes of data you could
link |
move a billion dollars worth
link |
economic value from here to China
link |
and move it safely and reliably
link |
see it being justified
link |
for anything that is not as mission critical
link |
as moving large amounts of
link |
value which require very
link |
little amount of information
link |
so when you look at all of the buzzwords that Ethereum
link |
marketing people like to use
link |
if you want to wonder really why we come to
link |
this kind of aggression is because
link |
I've heard all of this
link |
I've had all of these hucksters come to me for years
link |
talk to me about how
link |
Ethereum blockchain technology
link |
is going to revolutionize real estate
link |
I remember this guy
link |
I'm not going to mention his name
link |
2016 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 can have blackjack
link |
on a distributed ledger
link |
we can have Indian real estate on a distributed ledger
link |
it's concerned trolling marketing
link |
oh there's a problem with real estate
link |
in India, real estate deeds
link |
blockchain fixes this
link |
buy my shitcoin and then people buy the shitcoin
link |
Indian real estate isn't fixed
link |
and the guy gets rich
link |
but I mean I'm still waiting
link |
for a DAP to actually emerge
link |
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
link |
with the bet, he wanted to bet with one of the Ethereum people
link |
the Ethereum people are constantly saying 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
link |
work are centralized apps
link |
Uber on the blockchain
link |
Twitter on the blockchain
link |
there is no social media on the blockchain because
link |
these are businesses and businesses require
link |
centralized authority 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
link |
a humongous influx
link |
it's water off my back
link |
no but a man they use this
link |
in a community they use the word shit coin
link |
you call it amusement and I think
link |
amusement is the way
link |
to deal with the frustration
link |
it's a channeling of frustration
link |
when you have to deal with bullshit
link |
the best way is just to laugh at the absurdity
link |
of it all and that's what you mean
link |
like artificial intelligence
link |
seven decades has been
link |
often on promising
link |
to change everything
link |
it has failed time and time again
link |
to deliver to the promise
link |
but that doesn't mean
link |
there's something fundamental and really powerful
link |
about both the small and the big things
link |
going on within the actual
link |
research and development
link |
within those communities there's a lot of exciting
link |
developments and the scale at which
link |
those developments might actually have
link |
a transformative impact the time scale
link |
is unclear it seems like
link |
we certainly over promise
link |
we dream too big and too aggressively
link |
in the AI community
link |
yeah and I'm happy to give people
link |
the benefit of the doubt when they're over promising
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
link |
to have a new currency that you print
link |
when Bitcoin is out there then
link |
I'm gonna go ahead and assume that you're doing this
link |
for the money printing.
link |
There's a good time to mention that I am actually launching my
link |
new coin called LexCoin
link |
I'm gonna have to block you with love
link |
one thing I want to ask you about is
link |
this paper they released in January
link |
on the potential central bank digital
link |
what are your thoughts about that is it just another
link |
like is there pros and cons to this
link |
is it all interesting to you
link |
that they're even considering this kind of thing
link |
I used to think that it's
link |
it's just basically
link |
waffle it's meaningless
link |
because as it exists
link |
the dollar is a central bank digital currency
link |
the vast majority of dollars are digital
link |
but I think the way that over the last couple of years
link |
I've changed my mind on this I think this is
link |
there's some serious substance behind these ideas
link |
what they mean effectively is
link |
the disintermediation of the banking system
link |
and giving everybody
link |
an account at the Federal Reserve
link |
this is kind of the really
link |
and I think this is enormously significant
link |
effectively as somebody who's lived in
link |
the Soviet Union what this is is the return of the
link |
Goss Bank on a global scale
link |
with modern technology so under the Soviet Union
link |
there was something called the Goss Bank
link |
or People's Bank and that was the only bank
link |
in the country and you had an account
link |
with the National Bank
link |
and you know if you
link |
said something wrong your
link |
money got terminated from the Goss Bank
link |
now imagine that combined
link |
with the power of digital technology
link |
and you can see that this
link |
could be an enormously powerful
link |
really because if banks
link |
are out of the picture then we
link |
changed the fundamental
link |
as being the creation of money through lending
link |
and then it becomes the creation of money
link |
truly by fiat by government fiat
link |
so we moved to a system in which
link |
money is just basically
link |
money that is pieces of paper and every time we've had
link |
money we've had fiat money
link |
that was just pieces of paper it collapsed very
link |
quickly with the current
link |
system money is credit and the
link |
creation of credit is restricted to some
link |
point and the creation of credit
link |
is self correcting I discussed this in the fiat standard
link |
if the central bank
link |
allows banks to create too much credit that creates
link |
a bubble and then there's a collapse in the money supply
link |
which prevents hyperinflation
link |
from happening because
link |
the money creation is
link |
self destructive it's self correcting
link |
so you end up with an average
link |
of like 7% per year
link |
increase because you have
link |
10% for 5 years and then you get
link |
correct but now if you get rid of the credit
link |
creation mechanism and it's just assigning money
link |
directly we're likely going to get
link |
much faster inflation and I think
link |
the huge problem and perhaps the
link |
even bigger problem is the
link |
enormous amount of power that it gives
link |
to governments it's
link |
it allows them to create an awful
link |
you've got your money
link |
is completely supervised and
link |
controlled through your spending so
link |
they want to introduce a new lockdown
link |
then they'll just make your money not
link |
work your money is broken today
link |
you can't spend money or you
link |
can only spend money in your local supermarket
link |
for the next 3 months because
link |
you can't leave your neighborhood your money stops working
link |
outside of your neighborhood
link |
this Chinese social credit
link |
core system is an example of this
link |
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
link |
Michael Saylor he thinks it's
link |
highly unlikely he thinks you know
link |
the people who've been pushing this
link |
are very far from the position of power
link |
and the traditional
link |
monetary and financial system is going to
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 that it
link |
is something that would undermine Bitcoin
link |
like a lot of common objection to Bitcoin
link |
governments are just going to launch their own digital currencies
link |
and then Bitcoin is going to 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 are likely to be
link |
and they're likely to have very strong control at the top
link |
so if anything they are an
link |
advertisement for Bitcoin rather than a
link |
replacement for it
link |
if it's Bitcoin if it's gold it's a way for multiple nations
link |
so if you were to imagine a future
link |
from the fiat standard
link |
back to the gold standard
link |
and then to the Bitcoin standard
link |
or skipping that going directly to the Bitcoin standard
link |
what would it take
link |
as a gradual as immediate
link |
trajectories that take us
link |
well basically where the final sort of empirical
link |
observation is that you overtake
link |
first gold and then bonds
link |
power in the world
link |
but like just specifically from
link |
a government perspective how do we move the United States
link |
China, Russia, India
link |
to a Bitcoin standard
link |
I'm not entirely concerned
link |
about whether governments move or not
link |
in fact I'd be very happy
link |
for them not to move
link |
as long as possible
link |
so that individuals can accumulate
link |
more and more Bitcoin while it's still cheap
link |
so the people will move
link |
and the governments
link |
yeah and I think this is kind of what I
link |
allude to I mean the point of the fiat standard
link |
the fiat standard is really a Bitcoin
link |
going book and it talks about fiat
link |
most of the time but it's
link |
does so to analyze Bitcoin
link |
and the rise of Bitcoin in the final chapter I discuss
link |
how I think this relationship
link |
the way that I tend to think of it
link |
is that most likely what's going to happen is
link |
we're gonna have kind of
link |
financial apartheid where there's going to be
link |
two monetary systems
link |
one is government controlled
link |
and it comes with increasing
link |
amounts of surveillance and inflation
link |
and then if you want
link |
you can just opt out of that
link |
and get into Bitcoin
link |
and it's likely going to be difficult
link |
for governments 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
link |
that is Bitcoin which is not inflationary
link |
a central authority that can censor it
link |
is my hope and I also think
link |
my most likely scenario
link |
but maybe I am biased because
link |
everybody thinks what they want
link |
is what's going to happen
link |
I think we're just going to witness the same
link |
relationship because
link |
governments make their currency so that they can
link |
and Bitcoin thrives on that
link |
and more and more people are going to learn
link |
more and more people are going to find out
link |
and whether it's through
link |
curiosity or self interest
link |
or personal currency
link |
all roads lead to Bitcoin
link |
so more and more people are going to buy Bitcoin
link |
the price of Bitcoin is going to go up
link |
and as it goes up Bitcoin becomes
link |
a more significant part of the world economy
link |
and this is something that skeptics
link |
don't get like a lot of the academic skeptics
link |
they offer up all of these theories
link |
about why they think Bitcoin
link |
can't work and then they present it
link |
and they think they've
link |
delivered the knockout blow
link |
or the word is going to need their permission
link |
well the reality is people are going to join Bitcoin out of greed
link |
out of self interest
link |
number go up technology
link |
is really what's going to get everybody in
link |
and that's really the Trojan horse
link |
for fixing the world
link |
come for the greed
link |
and stay for the revolution
link |
it's going to keep going up because
link |
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
link |
self interest than they care about
link |
economic theories about whether this works
link |
as money or not they see their cousin
link |
escaped hyperinflation
link |
managed to get a bigger house because they bought Bitcoin
link |
five years ago they realized maybe I should stop
link |
and start buying more Bitcoin and this is
link |
I think an indomitable force
link |
that's going to continue
link |
tend to lean toward an apocalyptic
link |
fiat is going to collapse we're going to get hyperinflation
link |
everything is going to be terrible and then we're going to move to Bitcoin
link |
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
link |
and this was like the conclusion of
link |
the fiat standard which is
link |
once you realize that mining fiat is creating
link |
and Bitcoin is allowing
link |
so in order to have fiat money we need to have people
link |
borrow we need to have people make loans
link |
the problem that fiat money runs into today
link |
is that if you want to save money
link |
if you want to hold savings
link |
you have a problem
link |
where do you put your savings
link |
so you put your savings in debt in the creation
link |
wherever you take your savings you create a bubble
link |
in those things and this is why we see a bubble
link |
in the stock market a bubble in the bond market
link |
a bubble in housing it's because
link |
people are looking for savings
link |
for a place where they can save all of those things
link |
are crappy saving instruments because
link |
they're like copper in that there's nothing
link |
to stop the people behind them to make more of them
link |
builders can build more houses
link |
governments can issue more bonds
link |
crappy fraudulent companies
link |
can list on the stock market and make more stocks
link |
well Bitcoin finally
link |
offers us an outlet we don't need to keep
link |
creating more debt we can
link |
invest in this asset that is
link |
hard and that is internationally
link |
that nobody can make more of so
link |
there is no bubble in it there is no mechanism
link |
increase the supply and bring the price crashing down
link |
like with copper in real estate and bonds
link |
Bitcoin is the way out and this is why I think
link |
there's a good case to be made for why the fiat
link |
might embrace Bitcoin because they'll see
link |
it is their way out of this
link |
enormous debt bubble that everybody
link |
is stuck in particularly
link |
the richest and most powerful people in the world
link |
and the richest and most powerful
link |
governments in the world are the world's biggest borrowers
link |
they're the ones in a lot of debt
link |
slow devaluation of the value
link |
of that debt as people
link |
upgrade and move on to a hard asset that
link |
continues to appreciate
link |
is the way that we
link |
is the peaceful way that we wind down
link |
the fiat Ponzi I think you could see
link |
it being like a political part
link |
of a political platform for future
link |
people that run for president those
link |
kinds of things to address
link |
it's not just for the powerful and the rich
link |
the people are bothered by the debt
link |
the people are bothered
link |
by everything that you describe with fiat
link |
and if you want to
link |
sell yourself in a democracy
link |
as a good leader you might want
link |
to make that part of the platform
link |
you mentioned you know Michael Malis
link |
he just texted me asking
link |
what do you like best
link |
about Michael Malis if you can
link |
to 20 to an hour talking about
link |
the genius of Michael Malis
link |
where does one even start
link |
obviously the haircut first
link |
yeah he just gets sexier with age
link |
and then she has to interact with him
link |
yes yes I've met Michael maybe
link |
10, 12 years ago in New York
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
link |
anarchists in New York used to throw a happy hour
link |
it was called the high time preference
link |
in honor of Hans Hermann Hoppe
link |
so I met him there a couple of times
link |
and we followed each other
link |
on Twitter for a while
link |
is there interesting that you're aware of
link |
philosophical differences in your world views
link |
we pretty much see eye to eye
link |
I think the difference is mainly that he's
link |
he spends 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 |
at the monetary system, the economics of it all
link |
and just the history and just looking at it
link |
at the big picture of it all
link |
although recently he's working on a book called
link |
every time I see him
link |
I mean he's in some dark aspect
link |
of the 20th century
link |
he's just like I just finished writing about Hallenomore
link |
as you might imagine
link |
he's not taking much
link |
I believe of a monetary perspective on things
link |
his writing at least for time
link |
his kind of philosophical
link |
ideology perspective
link |
on the outside of the monetary system
link |
but you argue that those are actually
link |
inextricably linked
link |
but yeah and I don't think he would disagree
link |
but a book has to be
link |
you know it can only be so long I suppose
link |
it can only focus on
link |
if you can put on your wise sage hat
link |
and give some advice
link |
I mean you know the past four hours have been
link |
a kind of advice but if you can
link |
focus and if somebody in high school
link |
or college is thinking about
link |
what to do with their career
link |
can have a successful career
link |
or to have a life they can be proud of
link |
what would you tell them?
link |
I'd say probably the most important advice that I would give
link |
is to find a way to give
link |
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
link |
everything you want in life
link |
is on the other side of you
link |
serving others so figure out
link |
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
link |
mechanism for figuring that out
link |
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
link |
advantage of being able to make
link |
mistakes essentially and learn from them
link |
go out there do things of value for others
link |
you can do something
link |
what is it that you can do
link |
that contributes the most value to other people's lives
link |
I think with modern technology
link |
this is increasingly becoming online
link |
I think you should consider how you can
link |
create value online
link |
because that scales
link |
beyond anything that you can do
link |
in the physical world
link |
well maybe not beyond obviously
link |
there are profitable businesses
link |
in the physical world
link |
but I think online is enormous
link |
potential and coding
link |
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 |
it's probably the thing that carries the most
link |
so initially we were working with our hands
link |
we started working with machines
link |
machines are much more productive
link |
and even higher level of productivity
link |
where you basically
link |
program the machines to produce things
link |
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 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 |
tell them to drop out and go learn to code
link |
it's probably a better use of their time and money
link |
we could probably do both
link |
university has an interesting function
link |
you and I have different perspective on this
link |
probably has to do with a little bit of a different journey
link |
fields because I'm so
link |
I've stayed engineering focused for a long time
link |
and there's less some of the troubles you might
link |
highlight in the education system
link |
there's less troubles of that kind
link |
because math hasn't changed for a long time
link |
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
link |
becoming a specialist
link |
based on your own passion
link |
driven by your own passion so
link |
school at least high school I don't know about the
link |
university but high school
link |
one of the only times in your life
link |
at least in my life
link |
given the opportunity to spend
link |
my entire day learning
link |
broadly and that's something
link |
I don't know the way time works
link |
it just runs away from you and you never really get a chance to do
link |
learn quite that broadly
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
link |
time runs away from you
link |
so enjoy the broad
link |
the broad education
link |
find the things that
link |
valued by the market
link |
and on the other side of it
link |
you said all the good stuff so
link |
that's also a way to get happiness
link |
and I also add the horse
link |
that I like to whip all the time is
link |
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
link |
of the world in a very short term
link |
generally you're focused
link |
on the present and you think that everything that's happening
link |
in the present is the most important thing
link |
that's ever going to happen in the history of humanity
link |
lower your time preference
link |
think about the future, think further down the line
link |
think about the consequences of things
link |
you do and then what
link |
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 |
think about the hangover
link |
think about the implication of living this kind of life
link |
every decision that you make
link |
the long term 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
link |
in bitcoin for the long term
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
link |
put money in bitcoin that you expect to
link |
keep in bitcoin for another
link |
at least 4 years is what I recommend
link |
for people so keep a low time
link |
preference, focus on the future and save in bitcoin
link |
learn about how to buy bitcoin
link |
how to learn about all this technology
link |
part of this is this conversation 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 |
what would you call this, these are
link |
so this is like USB
link |
like a hardware device that stores bitcoin
link |
so you don't have to worry about
link |
password, it contains the password within it
link |
and it's tamper proof so you can save the bitcoin on it
link |
so when the apocalypse comes
link |
the value to be stored
link |
an actual thing that you can have in your physical possession
link |
that's exactly what this is
link |
you've had a heck of a life
link |
in a bunch of places in this world
link |
life is not easy in some of those places
link |
if you can take a step to
link |
a bit of a dark step for a short time
link |
maybe darkest time
link |
period place you've ever got in your mind
link |
a dark period of your life
link |
they had to overcome, they had to survive
link |
well, I'm Palestinian
link |
tragedy of my life, I'm Palestinian
link |
suffered a lot because of this
link |
historically, I grew up
link |
in Ramallah in the West Bank
link |
people like to think of it as this
link |
intractable conflict between two bitter enemies
link |
the reality of the matter is that it's not
link |
a foreign ideology came in
link |
with the idea that this country needs to be
link |
occupied by people from
link |
and the existing population
link |
Jews had always lived in Palestine
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
link |
with all of this is that
link |
when the Bank of England went off gold
link |
a big reason why they were able
link |
to pull that off was that the Rothschild
link |
banking family supported them
link |
in exchange the Rothschilds got Palestine
link |
the Balfour Declaration
link |
was written by the government
link |
of Britain to the Rothschild family
link |
Palestine a homeland for Jews
link |
so obviously that's not very
link |
convenient for people who are not Jewish
link |
for whom that is a homeland
link |
and the past 80 years has been
link |
a very painful struggle
link |
if you happen to not be Jewish
link |
Palestinians have done all kinds of things
link |
trying to fight back and they've done
link |
all kinds of wrong things
link |
but I don't think you can escape the fundamental
link |
reality underlying this which is that
link |
if you're not Jewish
link |
you are being moved out of the land
link |
and so it's happened in 1947
link |
it happened in 1976
link |
more land was taken over by Israel
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and the settlements
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if you ignore the day to day headlines
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and you ignore the media propaganda
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and you ignore all of this
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there's a very clear thing that is happening
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which is more land
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owned by an exclusive
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ideology that believes this land
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needs to be owned by people from one religion
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and everybody else is being
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that is the tragedy of my life
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and my wife is also a Palestinian refugee
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in Lebanon and her family
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Yaffa which is today
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on the outskirts of Tel Aviv
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they still have their homes
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in Yaffa their homes are being
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kicked out of their homes and their lands
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and their property they became refugees in Lebanon
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it's an ongoing tragedy
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it's not something that is
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a lot of the people that
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they think Palestinians are just out there to get
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Israelis because they hate them
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but it's an inescapable tragedy
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I don't have a home anywhere
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is there an escape from this tragedy
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in the future that you see
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if you zoom out across the
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I hesitate to say peace
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a significant decrease
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in human suffering in this part of the region
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I certainly hope so
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my interest in Bitcoin comes from
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came from a place of desperation
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with the situation there
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traditional politics is
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I don't see what I
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can be doing to make things better there
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using traditional politics
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and I think a good friend of mine
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Pierre Rochard you may know him on Twitter
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one of the brightest minds in Bitcoin
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in my opinion he told me
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his theory is that Bitcoin is going to bring
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peace to the Middle East because land
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and land is a shit coin
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I love it and I think he's got a very good
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point there that this fixation
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with land and the bitterness
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with which people have to
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with land is likely
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to decline when people are going to have
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a form of property that they can
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hopefully that will help in one way
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and of course the more obvious way
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that this is a conflict of
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governments and it's a conflict that is
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financed by fiat and from day one
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you know the entirely
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insane notion that you could
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an ethnic homeland
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and of course you know this is the early
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the idea behind Zionism
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is coming from the same place where
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all these other ethnic nationalisms
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of Europe were emerging and we saw how
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horribly these worked out but the idea that
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you could you know
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it's one thing to say we want to build a homeland
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for Germans in Germany
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it's one thing to say we want to build a homeland
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for Germans somewhere else
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Palestine that was Zionism and that was
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only possible thanks to fiat thanks to the
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ability of the British government and
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all these other governments to continue to
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finance this colonialist effort over time
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you know it continues to finance war
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and it continues you know we see
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war all over the world continue to
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the people who make the decision to
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escalate the war are not the ones who are paying
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for it and they're not the ones who are fighting
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they're the ones who sit in offices and in
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the case of you know most of Middle
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Eastern conflict it's
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it's people who live abroad you know it's
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people who are abroad are not part of it who just
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are emotionally charged to it because
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they watch it on TV so
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you know you have billions of Muslims
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around the world and
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Jews around the world who feel
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extremely emotionally attached to it
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they're not the ones fighting they're not the ones paying
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their own money they're just getting
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governments to send money and to send
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weapons and to take part
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as a spectator sport for most of these
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people because they don't get to live in it
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but I got to live in it I saw it I grew
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the settlement expansion and you know
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recently a few weeks ago I went back to
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Ramallah and it's just
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it's amazing every time you go
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the the settlements are just growing in
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an astonishing way like it's
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housing units that are going up it's
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an entire attempt to build
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suffocate Palestinian areas
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and force Palestinians to leave or
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keep them living in horrific
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just because I have family in Ukraine
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I have family in Russia
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echoes of similar things are happening
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in that part of the world too
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shudder to think about the decades
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of the hate that is brewing
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the suffering that is brewing
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based on decisions and
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impacted by this so again
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it feels like that
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military conflict is not
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just a creation of
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like people on the ground
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it's a creation of leaders power centers
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again I'm not smart enough but even the
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monetary system probably has a role to play
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I absolutely think it does
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monetary system is what allows
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is what allows people to just continue
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to treat war as a spectator sport
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that's really what it comes down to
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and starts with World War I
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and it's continued and this is why
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I've said this before
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I've tweeted this before and it was a pretty popular tweet
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but it also got a lot of people
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the idea with mockery of course
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but I really think Bitcoin is the only
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technology that's going to end World War I
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started we got into this endless
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conflict it's been going on going since then
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if you look at all the world's conflicts today
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pretty much they all trace back to World War I
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when that Pandora's
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box of government control of money was
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opened there was no longer
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a real restraint on war except
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complete defeat and complete destruction
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and complete death the war had to be total
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before that you know
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under the gold standard
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send professional armies to fight
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each other in battlefields
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and as soon as it became clear
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that one side was establishing
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an advantage the fighting would stop
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you know would agree to new terms
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because it was extremely expensive
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to build a professional army
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and you ran out of money so it was always
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the smartest thing to do is to just stop
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fighting whenever you could
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and wars would take place you know
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countries would fight each other in the battlefield
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but in the cities life went on as normal
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and people within the same cities
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within the cities of the two countries
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would be trading with one another
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life would go on but the war would be there
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part of politics that
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alright we have a problem over this piece of land
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let's do it and you know let's take it outside
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we don't fight in the civilian
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areas we go to the battlefield
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we fight with professional armies and in fact
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sometimes the conflicts would be
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you know the armies would line up
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and they would just have a small
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contingent of the two armies
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fight with one another and as soon as one of them
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establishes an advantage then
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alright well you won
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let's move on with it
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governments were far far far more
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their monetary policy
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and their sorry their war
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policy when they couldn't print their money
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and that has changed with fiat
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and that has allowed this
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new emergence of this class of what I like to call
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of people who sit in office like the entire
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foreign policy establishment
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people who have never fought a war
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whose children will never fight a war
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who will never pay to fight a war
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who will never suffer a broken
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window in their house because of war
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sitting there and based on
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these fucking moronic
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garbage that they teach at
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moronic fiat universities about politics
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and geopolitics making decisions
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about you know we need to invade that country
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and we need to send war there and
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they can do that because they have this endless money printer
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where and that's why
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you know back under gold
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if you wear a warrior you know
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you went and actually joined the war
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the people who pontificated about war
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where the people who had experience with war
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the people who were sending their own children to war
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the people who were fighting with their own money
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now you have all these
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fat parasitics come sitting in washington
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and dc deciding and washington
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is just an example but all over the world this exists
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people who have never fought
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will never carry the consequences
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we're going to devalue the world's money
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in order to go and
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have other people's children
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fight each other because of
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stupid garbage they learned about
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politics in university
link |
you value low time preference
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but I have news for you
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that one day you will die
link |
you're a mortal being
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do you think about your death
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do you think about your mortality
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are you afraid of it
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spent a lot of time
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introspecting and thinking about these things
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and I value life a lot
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I value my time on earth a lot
link |
and you'll see this
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in my dealings with people
link |
you know go back to twitter
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why am I so brash and straight forward
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it really is because life is short
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because I don't want to waste
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I think you know on my
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on my tombstone let it be written
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he never let anyone waste his time
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yeah you can waste my time once
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you can get me to do something and then I realize
link |
that was a waste of time you will never get me to waste my time
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twice and so you show up
link |
in my twitter with something stupid
link |
showing up in my twitter
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you give people a chance but you're a fast learner
link |
use my time very wisely and I
link |
I'm unapologetic about it
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my time is the most precious thing and like
link |
the way to get on my shit side
link |
on my shit list forever is to try
link |
and take away my time
link |
and to abuse my time if you do that
link |
unforgivable sin for me
link |
and I think that's really I think
link |
my way of coming to terms with mortality
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we're all gonna die and so let's make the most out of it
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while we're still here and of course the other way
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you come to terms with mortality is you have children
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given what you just said
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doubly so it's a huge honor that you
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will spend your valuable time with me
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this is the first time you did it so you probably
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regret all of it so
link |
we'll probably never see each other again
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but I'm glad you at least took the chance
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to do it it's a huge honor
link |
I've been a huge fan of yours
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I think you have impact
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on the world that you probably are not even
link |
aware of it's tremendous
link |
and a lot of people love you
link |
and your work is important even
link |
you know I disagree with some things
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you say there's people that disagree with you
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but everybody respects you
link |
and thank you so much for spending your really valuable time
link |
with me today brother thank you sir
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really appreciate it this was not a waste of time
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and I'd be happy to do it again
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thanks for listening to this conversation
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to support this podcast please check out
link |
our sponsors in the description
link |
and now let me leave you with some words
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from the Austrian economist Friedrich Hayek
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economic control is not merely
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control of a sector of human life
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which can be separated from the rest
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it is the control of the
link |
means for all our ends
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thank you for listening
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and hope to see you next time