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1:00

Any kind of money, whatever gets

1:02

used as money, the fact that it's used as

1:04

money will incentivize anybody who can produce it to

1:06

make more of it. So if there was an

1:08

easy way to make gold, we'd all be out

1:10

there looking into gold prospecting. But then,

1:12

you know, we'd flood the market with gold and then

1:14

it would stop being gold. And the reason that gold

1:16

was money is because it was

1:18

very hard to find in large quantities compared

1:21

to the existing supply, which I explain in

1:23

more depth in the Bitcoin standard. Safediana

1:31

Moose, welcome to the show.

1:33

Thank you for having me, Tom. It's a pleasure to be here.

1:36

Dude, I am super uneasy to

1:38

make sure that I help

1:42

get these huge ideas across. You've

1:45

written a book called, well, you've written multiple

1:47

books, but the one we're going to be

1:49

talking about today is the fiat standard. You

1:51

also wrote the Bitcoin standard. As

1:56

I have gotten more into understanding

1:59

Bitcoin, and cryptocurrencies in general,

2:03

then you begin to encounter

2:05

the ideas of what money is, what fiat is. I

2:07

mean, this is something I've been in my entire life,

2:09

but had no idea what it was. If

2:12

you can, what I wanna do is start

2:14

with a brief description of what

2:17

fiat is, then we're

2:19

gonna tell people what the subtitle of your book

2:21

is, which I think will set us up nicely.

2:23

And then I have a really interesting

2:26

quote from your book that I wanna get

2:28

into. So what is

2:30

fiat? So the

2:32

way that I wrote the fiat standard

2:34

was almost like an imitation

2:36

of the Bitcoin standard. It was like a

2:38

knockoff of the Bitcoin standard in that with

2:41

the Bitcoin standard, I looked at Bitcoin with,

2:44

everybody's an amateur when it comes to Bitcoin. It's such

2:46

a new thing. Nobody's an expert in Bitcoin. So I

2:48

decided to just come at it from

2:50

first principles, try and figure out how it works,

2:52

look at it functionally, and then

2:55

tease out the implications of this thing

2:57

continuing to work and operate. And

2:59

that worked out pretty well. The book

3:01

sold very well. I heard from a

3:03

lot of people that they enjoyed it and they liked

3:05

it and it was quite influential. So

3:07

then I thought for my next trick, I should

3:10

do the same thing for the

3:12

fiat monetary system, which is the

3:14

monetary system that everybody uses. But

3:17

in a sense, we've never had the

3:19

luxury of looking at it with fresh

3:21

eyes because it's like asking a fish

3:23

to tell it, asking

3:25

a fish about what the water is like. We've

3:28

always been in water. It's just what we're used to. So

3:31

I decided, imagine if you

3:34

were coming at this civilization

3:37

that was using this monetary system from scratch

3:39

and you were trying to understand how this

3:42

thing works. So

3:44

what is it? How does it function? Explaining

3:46

it as if it's just another digital

3:49

currency similar to Bitcoin and

3:52

trying to draw analogy with Bitcoin. And I

3:54

found that to be a quite powerful analytical

3:56

tool in order to understand how fiat works.

3:59

And it was... the perfect setup

4:01

for writing the sequel to the Bitcoin standard

4:03

since the Bitcoin standard was all about how,

4:06

you know, why I think Bitcoin is such a big deal

4:08

and why I think Bitcoin is going to succeed. The

4:12

question that the Bitcoin standard leaves you with

4:14

is well then how is it going to

4:16

interact with the prevalent monetary system? How will

4:18

this survive? How is it going to grow?

4:21

What's going to be the relationship between the fiat monetary

4:23

system and the Bitcoin monetary system? And

4:26

in the fiat standard, I

4:28

thought this is

4:30

really the perfect way of approaching it. Let's

4:33

study fiat and then that'll help us figure

4:35

out how it would interact with Bitcoin. And

4:37

I found that to be quite a useful

4:39

framework. So by

4:41

drawing analogy to how Bitcoin works,

4:43

you know, Bitcoin has nodes, Bitcoin

4:45

has mining, and we

4:48

have a decentralized network where everybody determines the

4:50

rules. If you just carry these things

4:52

into fiat and then try and analyze how fiat

4:54

works, well, you find in the

4:56

case of fiat, you know, we don't have a distributed

4:58

network of nodes. We have – I

5:01

mean, there are nodes, but they're not all

5:03

equal. It's not peer-to-peer, like in Bitcoin, where

5:06

every node gets to dictate its own rules,

5:08

and then the network only works between

5:10

the nodes that agree on the

5:13

rules. And so it's entirely voluntary.

5:16

Well, Bitcoin is different – well, fiat is

5:18

different. Fiat is a network where there is

5:20

one sovereign node that determines the rules for

5:23

everybody else, and that's the US Federal Reserve.

5:26

And then there are all these partial nodes around

5:28

the world that can sort of determine the rules

5:30

locally, you know, the local central banks, but then

5:33

they are kind of subordinate to the master

5:36

node that runs the global monetary

5:38

system. And that, I think, is quite

5:41

important to understanding the political situation in

5:43

the world, the geopolitics of the world

5:45

today, you know, thinking about – Because

5:47

it opens up people to manipulate it.

5:49

Because one thing I've heard you say

5:51

about – if

5:53

I were going to have a concern about

5:56

Bitcoin, it would be that at some point

5:58

something happens where it begins to – centralized

6:00

that there are fewer nodes and it becomes

6:02

more likely that somebody can manipulate it. And

6:04

so as you start talking about the fiat

6:06

standard, it's like, hey, the entire

6:08

problem with the fiat standard is that it

6:11

can be manipulated. Now to your

6:13

earlier point about this is water, right? What's

6:16

it Brian Foster Wallace? I'm forgetting his first name, I think.

6:20

That fish don't even

6:22

understand that they are in water. Before

6:25

I started the journey into crypto, I

6:28

thought of money as a force of nature.

6:30

It just is a thing like gravity. It

6:32

is and first principles would

6:34

lead you to the axiomatic understanding that money

6:36

is and there's

6:39

this paper representation of what

6:41

money is that makes it easy to

6:43

transfer. But I had no concept of

6:46

a lot of how it's entirely

6:48

constructed, wildly manipulated,

6:51

even if you assume good intent

6:53

that it is this thing that

6:55

is designed to orchestrate society. And

6:58

so I was like, okay, that was a very

7:00

eye-opening introduction to things

7:02

and then as you begin to peel back

7:04

the layers and you realize that there

7:08

is disturbing, there's a disturbing setup,

7:10

right? Breaking away from gold and we'll get into

7:12

that, but that

7:14

there is a it's

7:18

influencing society in ways that you would never

7:20

have guessed because you're so used to it.

7:22

And I want

7:24

to talk about the the subtitle of your

7:26

book. So if fiat money is money by

7:28

decree, the government says there's nothing backing this

7:30

other than I say it's valuable and

7:33

so as long as everybody agrees we're good, I can print as much

7:35

as I want. I can just keep making it up because

7:38

it is literally money by decree. Gold

7:41

is money by star

7:43

explosion, right? So it's limited because

7:45

it is a metal that happens when

7:47

stars explode that embed themselves into

7:49

the crust of our earth

7:51

and therefore there's a limited quantity. So

7:56

You begin to understand, okay, wait, there's different types

7:58

of money and then obviously we'll get into. Bitcoin

8:00

and hard money and sound money and

8:02

all that. but I want to give

8:04

people. That said above, money is not.

8:07

A property of nature. That.

8:09

It is see arts is

8:11

something that is created. And

8:14

by a ridiculously small number of nodes to

8:16

use the bitcoin analogy of as the you

8:18

know for is the next question as or

8:21

and so there's no. But then what about

8:23

mining? We know how Bitcoin mining works, and

8:25

we know how. Ah well. I'll explain in

8:27

the bitcoin standards and we know how gold

8:30

mining worse? Well, how does feel mining works

8:32

Of most people have the idea that it's

8:34

just the authors paper money and then the

8:36

government prince it when it's needed in order

8:39

to keep the economy going. And as false,

8:41

the majority of the money is digital. Less

8:43

than ten percent. Of dollars are and

8:45

paper form. The majority of dollars are

8:48

digital dollars. They don't exist in physical

8:50

form. so how do they come into

8:52

existence and the answer to that of

8:54

that see up money comes into existence

8:56

when that is created when loans are

8:59

made new for yeah money is generated

9:01

and this is really the key of

9:03

for the starting point of the analysis

9:05

of the book because this is a

9:08

very powerful concept once you draw analogy

9:10

between lending in the fia world and

9:12

mining in bitcoin and gold. A

9:15

lot of the world around us begins to make

9:17

a lot of sense. So any kind of money,

9:19

Whatever he gets used the money. The fact

9:21

that it's use the money would incentivize anybody

9:24

who can produce to make more of it.

9:26

So is there was an easy way to

9:28

me gold. We'd all be out there looking

9:30

into gold prospecting, but then you know we'd

9:32

flood the market for goals and then I'm

9:34

would stop being gold. And the reason the

9:36

gold was money is because it was very

9:38

hard to find in large quantities compared to

9:40

the existing supply. To explain in more depth

9:42

and bitcoin standards and in Bitcoin, you know

9:44

we have the difficulty adjustment which continues to

9:46

make mining bitcoin difficult for most people and

9:49

only makes a profitable. For the people who

9:51

do it very efficiently, the most efficient

9:53

miners, the ones who mine at the

9:55

lowest electricity costs well in the case

9:57

of fields, basically any time a. Mint

10:00

backed entity or Central bank backed entity

10:02

is able to issue credits. New money

10:04

is made. So what does that tell

10:06

you about? This is so scandalous. When

10:08

I came across and the book I

10:10

it's a literally took a note. weight

10:13

is that's how long's work. Is this?

10:15

Always how. Loans. Worked and money

10:17

gets into the system it can. You give the

10:19

example that you gave in the book about how

10:21

you've got a house. You're about to buy house

10:23

to house exists. But. The money doesn't. And.

10:25

It is going to come into existence of

10:28

like had this is still I I can't

10:30

believe I'm Ashley understanding. Were you saying correctly?

10:32

The seems impossible and I discovered this forty

10:35

eight hours ago when I started reading a

10:37

book. has a true. Yeah

10:39

what I mean he is. So let's say

10:42

you're gonna sell me your house. Your house

10:44

is worth a million dollars. I agree with

10:46

you that I want a by the one

10:48

million dollar house from you know I have

10:51

two options. I can take one million dollars

10:53

from my money and go and give it

10:55

to you and casts and then in that

10:57

situation know death is created and so no

10:59

new money is created, the money supply stays

11:02

constant. All that happens that I have a

11:04

million dollars less and you have a million

11:06

dollars more. But most people obviously I'm buying

11:08

homes by. Borrowing. So I go to my

11:10

bank and I tell them hey I sound this

11:12

house I want to buy it I'd wanna borrow

11:14

a million dollars. Forget about the the. Down

11:17

payment for some for for simplicity. Now so

11:20

Sam Just gonna go borrow a million dollars

11:22

from the max. While the bank is not

11:24

going to take one million dollars from other

11:26

depositors and give them to me, they don't

11:28

need to do that. That's the whole way

11:30

in which banking works. In the Fiat's system.

11:32

they will give me alone. and because they're

11:35

backed by the central bank because there are

11:37

regulated financial institution that has. Back

11:39

to the and regulated by the

11:41

Central bank. They will make those

11:43

new one million dollars so the

11:45

money supply will increase. My one

11:47

million dollars after that alone is

11:49

generated. So the bank now owns

11:52

owns a one million dollar loan.

11:54

I owe the bank one million

11:56

dollars. You have an extra one

11:58

million dollars in your bags. Did

12:00

you got from the bank and I

12:02

own the house? So.

12:05

You. Know the the money supply has

12:07

increased by a million dollars is we've

12:10

devalued everybody elses money and society in

12:12

order for me to buy your house

12:14

and that's really very powerful when you

12:16

think about it because it's like mining.

12:18

You know when you mind new gold

12:21

you devalue everybody else gold. When you

12:23

make new bitcoins you're kind of devaluing

12:25

everybody else bitcoin with the new bit

12:27

than that you're producing and when you

12:29

make alone of some are financially ah

12:32

from from from financial institutions is backed

12:34

by the central bank. New money

12:36

is created. Snowed is not the same if

12:38

I borrowed that money from my mom. My

12:40

mom takes one million dollars from her bank.

12:43

C gives them to me that doesn't create

12:45

a new money. My mom's not backed by

12:47

the of the central bank to issue of

12:49

those loans. So. Or

12:52

it hold on this still. I understand a word

12:54

you say. It. Seems impossible

12:57

that this is true.

12:59

So how. What? Are the

13:01

guard rails on a bank? Because ah,

13:03

what was it Charlie Munger that said

13:05

they'd tell me the incentives and I'll

13:07

tell you the outcome. So as I

13:09

hear that a bank can now because

13:12

they're gonna get. The

13:14

fees from servicing.loan. And.

13:17

That means they are incentivized

13:19

alone. As. Much the hint because

13:21

it a boy don't really get to make up the

13:23

money and then. Take. A a

13:25

poll or thats. Cool.

13:28

Limits that. Well what limits

13:30

that is the central bank. The central bank doesn't

13:32

just allow them to go out and give loans

13:34

to everybody although it might look like a the

13:36

times there are in the central bank is is

13:39

per country. Yeah. Every

13:41

country has its own central bank more or

13:43

less that all use the same idea. But.

13:46

Yeah, basically here and is of the

13:48

twentieth century for you. Saw the Central

13:50

by. Puts. regulations on what who

13:52

own who can borrow and how they

13:54

can borrow on what they're able to

13:56

borrow and so you know that there

13:58

are criteria they not to give a million

14:00

dollars to anybody. Although, you know, recently

14:03

it looks like it, aren't they? Yeah,

14:05

but I mean generally you're going to have to have some

14:07

income and some kind of way

14:11

of demonstrating that you are able to make those

14:13

payments back. And that's kind of the

14:16

political restraint on fiat

14:19

mining, that the central bank doesn't just

14:21

allow anybody to do it and that

14:23

if a central bank

14:25

issues too many loans then the central

14:28

bank will punish it in certain

14:30

ways. You know, it'll have liquidity problems that it

14:32

might get liquidated and go out of business. But

14:35

in reality, the real check

14:37

on this is the fact that if you

14:40

just issue too many loans, you have a

14:42

lot of insolvent borrowers

14:44

and then those borrowers don't pay

14:46

you back and then that causes

14:49

your, you know, that

14:51

causes the money supply to contract. So

14:53

the way that we limit the growth

14:55

of the fiat money is that credit

14:57

creation is in itself self-correcting. And

14:59

that's the important insight that we gain from

15:01

the Austrian School of Economics and

15:04

Austrian business cycle of the, the Austrian theory

15:06

of the business cycle, which is that banks

15:09

want to create as much credit as

15:11

they can and they do, but then

15:14

that just means many more people have

15:16

money and are investing and have resources

15:18

and that leads to central banks,

15:21

that leads to a bubble and then that leads

15:23

to a collapse. And then when there's a collapse,

15:26

you know, I can't pay back my loan to the

15:28

bank. Well that reduces the money supply now

15:30

because the bank has to... Good. Who's the market now? Yeah.

15:33

The money's gone now and the bank has the house.

15:36

So I'm homeless. The bank has the house.

15:38

The bank needs to sell the house. But

15:40

obviously now that we've had a credit crash and

15:42

the bank can't issue as much credit as it

15:44

used to before, when it tries to sell that

15:46

house, there won't be as many suckers as me,

15:48

like me, willing to buy the house. So

15:50

they're probably going to get a lower price

15:53

for it. So the $1 million house is going

15:55

to sell for something like half a million dollar house. And

15:58

so this kind of process of... boom

16:01

and bust is what's limiting the

16:03

credit money system from continuing to

16:05

grow. And

16:07

that's kind of the equivalent of the

16:09

difficulty adjustment in Bitcoin, in that it

16:12

limits the growth of the money supply so

16:14

that it's not hyperinflationary. And in fact, when

16:16

we've seen examples of hyperinflation, we have seen

16:18

hyperinflation under this fiat monetary system. In fact,

16:21

it's the only monetary system that has seen

16:24

hyperinflation. But when we do see

16:26

hyperinflation, it's not through credit creation.

16:29

It's when the credit creation gets out

16:32

of hand and then the government wants

16:34

to bail out its buddies and then

16:36

they crank the actual physical printing presses.

16:39

That's the case in Lebanon right now.

16:41

The actual physical bills have

16:43

gone up in circulation. The

16:46

physical bills in supply has gone up by

16:48

about sevenfold in the first two years since

16:50

the currency began to devalue. So

16:53

they've gone sevenfold and so the price

16:55

of the currency has dropped more

16:57

than 90%. But

17:01

yeah. But

17:03

generally, yeah. That's

17:06

the case in Zimbabwe and that's the case in Venezuela. Because

17:09

what happens is that you keep doing this credit. What

17:11

governments do is they keep playing this credit

17:14

creation game like an addict taking

17:16

another hit of crack all the

17:18

time. And then the come

17:20

down keeps getting worse and

17:23

worse and then to ameliorate the come down, they

17:25

start printing money. Once you get into the phase

17:28

of printing money, that's when it

17:30

goes to the dogs

17:32

basically. All right. There's a

17:35

few things I want to anchor around. For

17:37

people that are like me where they have

17:39

enough information to follow along but they need

17:42

some of these breadcrumbs put together. So

17:46

I had read your whole book and because

17:48

I do everything audio, I actually hadn't seen

17:50

the sub headline. And I thought after reading

17:53

this, I need to see like the sub

17:55

head of this. And so I

17:57

will read the sub headline which is the debt. slavery

18:00

alternative to human civilization.

18:03

Okay, so then it's like, all right, wait a

18:05

second. Is

18:08

this a good alternative? Like what are we talking about here?

18:10

And I want to read

18:13

a quote from your book, which you

18:15

said earlier, but I think this quote

18:17

really sums it up. Getting others

18:19

is the quote from the book. Getting others into

18:22

debt is the fiat standards version

18:24

of gold prospecting. So

18:27

the whole way that the

18:29

fiat system gets more

18:31

of this very coveted thing is to get,

18:33

as you just walked us through, people to

18:35

take on debt, which creates these debt cycles,

18:38

which I'd heard about, but didn't understand. And

18:42

so we are in this sort

18:44

of forever boom and bust, constantly

18:46

pulling levers, like trying to engineer

18:48

the system. And I'm

18:52

curious to hear, what's

18:55

your sort of final take on

18:58

the fiat system? Cause you,

19:00

I don't want to put words in

19:02

your mouth, but you were basically like, I want

19:04

to look at fiat cause it's done some good

19:06

things. So where is the sort of good? Where

19:08

does it start to break down? What's your final

19:10

edict on the fiat standard? Having read

19:12

the book, I think I have a pretty good idea. But

19:16

what is that, the final take on this?

19:19

And what do you mean by that debt

19:21

slavery alternative to civilization?

19:24

Yeah, so historically, all through human

19:26

history, what humans have done is

19:28

we've always looked around and used

19:30

things as money. And naturally, whether

19:32

through our reason or just through

19:34

evolutionary selection, money

19:37

ends up being the hardest thing to produce. And that's why

19:39

the whole world was on a gold standard by the end

19:41

of the 19th century, because the hardest thing

19:43

to produce will hold on to its value much

19:45

better than everything else. Is that why it's called

19:47

hard money? It's hard to produce? Exactly,

19:50

yeah. That's what it is, hard to produce. And

19:52

easy money is easy to produce. So

19:54

the harder our money, the

19:57

more reliably we can provide for our

19:59

future. You earn money today and if

20:02

your experience in you throughout your life and

20:04

the experience of your family and friends around

20:06

you is that you save $100 today

20:08

and then next year you expect

20:12

it to be worth $102

20:14

for instance, you're

20:16

likely to save quite a bit of that

20:18

money much more than

20:20

you would save if your experience was that if I

20:23

saved those $100 next year, their

20:25

value is going to be something like let's say $85, right? So

20:29

by saving, if you lose money from saving,

20:31

you're less likely to save, you're more likely

20:33

to spend that money today. If

20:36

the money is likely to appreciate, you're more

20:38

likely to save for the future. So historically,

20:40

we've always moved toward harder money and that

20:42

has led us to constantly save

20:44

more because that allows us to provide

20:46

for the future and that

20:48

is the basic building block of civilization.

20:50

One of my favorite economists, Hans Hermann

20:53

Hoppe says the lowering of time preferences

20:56

is what initiates the process of

20:58

civilization and lowering time preferences refers

21:00

to the idea that your

21:03

time preferences, the degree to which you prefer the

21:05

present to the future and everybody prefers the present

21:07

to the future because the present is certain, the

21:10

future is uncertain. So if I gave you a

21:13

choice between having a house today and having

21:15

that house 10 years from now, you obviously

21:17

would prefer to take it today. You

21:20

wouldn't want to wait to 10 years. So

21:22

if I gave you the same choice between the same amount

21:24

of money, the same purchasing power today or in a year,

21:26

you prefer to take it today. But

21:30

there's the higher your time preference,

21:32

the more you prefer today and the more

21:34

you discount tomorrow. So the less you care

21:36

about tomorrow. So as we develop

21:38

the ability to have a stronger, harder money,

21:41

we're able to provide for our future more. We

21:44

start discounting the future less. We start

21:46

caring about the future more. We start

21:49

providing for the future more and that

21:51

makes us more future-oriented. And

21:55

so we become more moral, we become

21:57

better humans, we become

21:59

more civilized. We accumulate more

22:01

capital and we save more

22:03

and we invest more. And then, you know,

22:05

the more we save, the more capital we

22:07

have available for investment, the

22:09

more we invest, the more the productivity

22:12

goes up, the more our standard of

22:14

living increases. That's really the process

22:16

of civilization. That's really – I'd like my best

22:18

metaphor for it is to think about the fisherman

22:20

who goes from trying to catch fish with his

22:22

hands to building a fishing rod. That's capital. You

22:25

know, you have to sacrifice time fishing with

22:27

your hands in order to spend that time

22:30

building a fishing rod. But then

22:32

the result of that is that you can now

22:34

have a much higher productivity after you've made that

22:36

initial sacrifice. And then you build a

22:38

small boat and then you build a fishing net and

22:40

then you build a bigger boat and then you build

22:42

– currently, you know, our civilization has advanced

22:44

to the point where we have giant

22:47

trawlers that last 100 years

22:49

and continue to fish for 100 years. You know, people

22:51

100 years ago were giving

22:54

up consumption to build those gigantic boats that

22:56

are still in use until today. So

22:59

that's the process of civilization and it's a

23:01

process that's spurred by the

23:03

hardness of money. The harder the money,

23:06

the more we are able to provide for our

23:08

future, the more we invest in the future,

23:10

the more capital we accumulate. And

23:12

that was basically the process of humanity up

23:14

until the turn of the 20th century. And

23:17

then fiat really came along and provided us with

23:19

an alternative to this, where now,

23:22

you know, gold supply increased at

23:24

around 1.5 to 2% per year. And

23:27

now, fiat supply increases at around something like

23:29

14% per year on average. Some

23:32

currencies increase a lot more. Some currencies increase a

23:34

lot less. For the best currencies,

23:36

you know, the US dollar and the euro

23:38

and the yen and the Swiss franc, these

23:41

currencies increase every year at around 7, 8, 9, 10% or so. Some

23:46

currencies increase at 100% to 200% or

23:48

so, like, you know, the Lebanese and Venezuelan

23:51

currencies. But if you counted an average market

23:53

weight, it's around 14% or so. So

23:56

we go from 1.5% per year, an

23:59

increase in the money supply. to 14% per

24:01

year increase in the money supply. That

24:04

is happening because of the massive

24:07

incentive for mining fiat through issuing

24:09

debt. That's really the

24:11

subtitle of the book. We move from

24:13

a process of human civilization where

24:15

everybody is saving and accumulating wealth

24:19

in hard money in order to have a better existence

24:21

in the future to a process

24:23

of debt slavery where

24:25

everybody is getting into debt because

24:27

debt is mining money. Debt

24:30

is creation of money. You have a

24:32

huge incentive to go and borrow for buying your

24:34

house to go back to the original example because

24:36

when you buy it with your own money,

24:39

you're not creating any new money but when

24:41

you buy it with the central bank, with

24:43

the bank's money, new money is created.

24:45

You and the bank come out ahead in that

24:47

game because you're essentially devaluing the

24:50

money of everybody else in society. That

24:52

means everyone is in debt. Rules are in

24:54

debt. Corporations are in debt. Governments are in

24:56

debt. Everybody's borrowing. Everybody's

24:59

indebted to their future. Everybody's a slave

25:01

essentially and that doesn't change. It's

25:04

not like if you get richer, then

25:06

you snap out of this game and you're secure.

25:08

On the contrary, the richest people are the ones

25:10

who borrow the most. Everybody

25:13

is in debt and everybody has that insecurity of

25:15

debt. Everybody has payments to make at the end

25:17

of the month and if they don't make them,

25:19

they lose their business, they lose their home, they

25:21

lose all kinds of different things. We

25:24

move to the system of universal debt slavery

25:26

basically and that's really what I try

25:28

and explain in terms of what fiat

25:30

does. This

25:33

is obviously a very high price but I do try and

25:35

think about what the benefits of it are and to be

25:37

entirely fair, there are

25:40

benefits to the fiat monetary system over the

25:42

previous thing that it replaced which

25:44

is that gold is very expensive to move around

25:46

and that's why fiat was able to replace it.

25:49

It wouldn't have replaced it in a free

25:51

market because the cost of moving gold is

25:53

still much cheaper than this enormous cost of

25:57

destroying human civilization and turning everyone

25:59

into slaves. But

26:02

the fact that moving gold around was

26:05

so expensive meant that governments could get

26:07

away with banning you from using gold.

26:10

Ultimately, you have to, in order to

26:12

use gold as a trade, as

26:15

a medium of exchange, as money for

26:18

trade, as the world became

26:20

more globalized by the end of the

26:22

19th century, all of people's money was

26:24

centralized in banks, and then all of

26:26

the banks were centralized in a central

26:28

bank. That was just an inevitable outcome

26:30

of the fact that moving gold around

26:32

is expensive. So you need to have

26:34

all of that gold centralized in central

26:36

banks. Therefore, in the early 20th century,

26:38

when governments got into wars in World

26:40

War I, they all went off the

26:42

gold standard. They all confiscated their citizens'

26:45

gold, and they all issued more paper than

26:48

they had gold in reserve. Since then,

26:50

they've gone off the gold standard,

26:52

and it's now been an entire century of this

26:55

insanity. I think it has been enormously,

26:57

enormously catastrophic for humanity. I think we

26:59

take it for granted. We

27:02

think that this is just human nature, but I

27:04

think there's a reason that a lot of

27:06

very bad things that happened in the 20th century aren't

27:10

such a prevalent

27:12

part of human nature before. I think

27:14

this is a massive... I want to

27:16

get into what that is, but first

27:18

I want to ask a hard

27:20

question, which is, if hard

27:24

money is so good, how

27:28

did it get replaced by fiat? Is it really just

27:30

because it's hard to

27:32

move from place to place, or is it

27:36

the combination which you were stating

27:39

just now, which is the

27:41

government comes in and squashes it, basically,

27:43

because you said it's not a free

27:45

market, so they're manipulating it

27:47

somehow, breaking down that free market, and

27:50

leveraging that it's hard to move from place to

27:52

place? I'm asking

27:54

the same question in a different direction. Has

27:57

Bitcoin solved the only...

28:00

real issue, well I guess

28:02

two issues, that

28:04

made the previous take on

28:06

hard money, gold, vulnerable,

28:08

which is that it's easy to move

28:10

across time and space, and

28:13

it's hard, hard, hard, meaning that you,

28:16

there will be 21 million units, and

28:18

that is it, period, full stop.

28:21

Absolutely, yeah, that's kind of, you know, thanks for ruining

28:24

the book, I guess. Trust

28:26

me, when people get into it

28:28

and they see you detail, like, explaining the

28:31

fact that you have a whole, like, section

28:33

talking about how fiat destroyed food,

28:36

there is much more in

28:38

the book for people to discover, I mean,

28:40

it's like, literally crazy, I could have, unless

28:42

we read it in real time, we

28:45

would not be able to destroy the

28:47

number of ways that you, you

28:49

break down the, hey, this is water thing, the

28:51

thing that you don't think is a problem, or

28:53

that you don't even notice, let's start looking at

28:55

it. It's terrifying, and we're going

28:57

to go through some of it, but I

29:00

want to answer that question to see

29:02

if I'm really understanding the fundamental issue.

29:04

I think, you know, that's really what

29:07

it is. So the Bitcoin standard, my

29:09

first book focuses on Bitcoin's

29:11

saleability across time, Bitcoin's ability to hold

29:13

value across time, and that's what

29:16

made gold money, which

29:18

is the fact that it is the hardest

29:20

money, its supply increases at only around 1.5%

29:22

per year, and so therefore gold is excellent

29:25

at holding on to its value, and

29:27

that's why the Bitcoin standard has many examples

29:29

about how harder money eventually drives

29:32

out easier money all throughout human

29:34

history. The fiat standard focuses

29:36

on saleability across space, on money's ability to

29:38

hold on to its value across space, as

29:40

money, as you move money around, and that

29:42

was gold's Achilles heel, because, and in the

29:45

fiat standard, I look at this, I look

29:47

at how expensive it was to move gold

29:49

around, and I look at the

29:51

example of World War I, when gold was

29:53

demonetized, effectively, when those countries moved off the

29:55

gold standard, we see that the costs of

29:57

moving For

30:00

instance, it was around 0.5%, somewhere between 0.1% to 1% of

30:02

the value of the gold that

30:06

you move around. So that means

30:08

that a bar of gold costs

30:11

a bar of gold to move across the

30:13

Atlantic 100 times, roughly.

30:16

100 to 200 times you move it across the Atlantic, you

30:19

have to pay as much as the whole bar of gold.

30:21

That's quite expensive, you know? And

30:24

so that necessarily means that you can't just

30:26

keep moving gold around. You have to centralize

30:28

it. And that, in my mind,

30:31

is the Achilles heel of gold. That's what

30:33

makes it vulnerable. It's not that governments

30:35

went door to door and put guns to people's heads

30:37

and forced them to hand over their gold. And

30:39

the majority of the world, that's not the case. At least,

30:41

it definitely wasn't the case in

30:43

the most important advanced economies of the world in

30:46

the early 20th century. They didn't do this in

30:48

the US, in France, in Europe, in Germany. That's

30:50

not how it happened. But

30:52

the gold was already there in a central

30:55

bank. It had to be in a central

30:57

bank because you had to have the system

30:59

of batching the transactions effectively and doing periodic

31:02

clearance rather than moving the gold around

31:04

with each transaction. The

31:07

advantage that Bitcoin has, well, two advantages. The

31:09

first one is that it is even harder

31:11

than gold. So gold is

31:13

always increasing at 1.5 to 2%, which

31:15

means that the supply of gold, the

31:17

global stockpile of gold doubles roughly every

31:19

50 years or so. Every

31:22

50 years, the supply of gold will double,

31:24

whereas in Bitcoin,

31:28

gold, Bitcoin supply is never going to double. Bitcoin

31:30

supply is stuck at 21 million, and

31:32

that's it. We're already almost at 19 million. So

31:35

we only have another 2 million to produce over the

31:37

next century or so. So Bitcoin

31:40

supply is completely inelastic, completely irresponsible

31:43

to demand. And then in

31:45

the FINA standards, I compare also the salability of

31:48

Bitcoin across space. Well, with Bitcoin,

31:50

you can move the equivalent of

31:52

a gold bar, which is around $700,000 right

31:55

now. You can move $700,000

31:57

across the Atlantic with Bitcoin currently for $500,000.

32:00

a few cents. I know

32:02

this is going to go up, but it still

32:04

has an enormous, enormous, enormous margin to

32:06

go up before it hits anywhere near the

32:08

cost of moving gold around. So I think

32:10

there will be solutions

32:13

for scaling Bitcoin that are going to improve

32:17

the cost of moving Bitcoin

32:20

around, but still, it's so much

32:22

cheaper than gold,

32:24

and it's so much harder to confiscate than gold.

32:27

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32:30

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32:32

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Okay, so now

35:47

that I think we've laid the groundwork for

35:49

people understanding what the Fiat

35:51

standard is, what

35:53

I liked about your book is there's two,

35:55

you can sort of break the

35:58

human experience. I'm not sure what the right. word is

36:00

for it, down into really two big

36:02

chunks. You've got financial and cultural. And

36:05

in the book you detail the

36:08

ways in which both of those are

36:10

tremendously impacted. I have a

36:13

quote that covers each section from

36:15

your book, and I want to read the

36:17

first one now, which was just,

36:21

it literally stopped me in my tracks.

36:24

And this, I'm going to read, it's a

36:26

long quote, but I want to read the

36:28

whole thing so that people understand the financial

36:31

side of this, the implication of having a

36:33

system that inflates over

36:35

time and uses boom and

36:37

bust cycle versus something that

36:41

deflates over time. And

36:44

when you hear that, I'm just

36:46

going to read the quote, because the first time

36:49

you hear the numbers, the one that

36:51

is bad sounds good, and the one

36:53

that is good sounds bad. And it's,

36:56

I think, a huge part of how people end up

36:58

getting lost in all of this. All

37:00

right, this is a quote from the book.

37:02

The average US house price in 1915 was $3,500. In 2021,

37:08

it was $269,039. That is a compound annual growth rate in the price of the house at a

37:10

rate of 4.18% over

37:17

107 years. Had the Fiat

37:19

standard adopted a fixed supply in 1914,

37:21

so not inflating, and prices declined

37:26

by 2% per year instead, the average American

37:28

house today would cost $411. And I can

37:32

hear people panicking because that sounds terrible. With

37:34

a much smaller supply of the dollar,

37:36

prices would be far lower than they

37:39

are today. Incomes would, of course, also

37:41

be much lower, but the decreasing price

37:43

of goods means that they become more

37:45

affordable over time, and that saved money

37:47

buys more goods every year. $411 in

37:49

1915 could have bought your great grandfather

37:51

12% of a house, but

37:58

if he had saved it and passed it on to you, you,

38:00

it would buy you an entire house

38:02

today. Your grandfather's pocket change would be

38:04

enough for you to live off of

38:07

today. A world of

38:09

decreasing prices would provide people with a

38:11

strong reason to save for the future

38:13

and one can only imagine how much

38:16

better living standards would be today had

38:18

humanity not been afflicted by inflationary fiat.

38:22

All right. People understand

38:24

why on earth they would want their

38:26

house to be worth $411 today. That

38:31

just seems so impossible and so counterintuitive

38:33

and so zero sum. Like if Bitcoin

38:36

can't be inflated, then if I get

38:38

some Bitcoin, it means, yeah, motherfuckers, you

38:40

get no Bitcoin or at least not

38:42

those. So it

38:44

seems to somebody who grew up in

38:46

a fiat system, it seems

38:49

bad. Why isn't it bad? Well,

38:51

I mean, if you think it's bad, then why

38:53

don't you just go move to Venezuela or Lebanon

38:55

where your house is going to be worth $10

38:58

billion of the local currency.

39:01

So if you're trying to collect zeros next

39:04

to your house valuation, move

39:06

to Zimbabwe, Lebanon, Venezuela, go where

39:09

the hyperinflation is and you'll have

39:11

the most valuable house. Obviously, people

39:13

don't care about how many zeros

39:15

you attach to their prices of

39:18

goods. People care about

39:20

the purchasing power of money. And this

39:22

is really one of those very,

39:24

very, very obvious insights.

39:27

But you have to basically be

39:31

part of or subscribe to the

39:33

ideas of the Austrian School of Economics to be

39:36

willing to just accept this very obvious thing

39:38

that any human being with half a brain

39:40

will accept. You

39:44

have to, like, what do you prefer? Would you rather have $10 or 100

39:46

yen? Well,

39:48

100 yen is worth a lot less than $10. So

39:51

people prefer to have the $10. It doesn't matter

39:53

the exact number. What matters is the purchasing power. What

39:55

can you buy with it? And

39:57

so the choice is not between having a... In

40:00

a world in which your house would

40:02

have been worth $400, your day-to-day transaction

40:06

would be done in cents, more or less. We'd

40:09

have a $0.01 bill, and it

40:11

would be probably worth something like the $100 bill today.

40:14

And then we'd have units

40:17

that are smaller, and then the cent would be divided

40:19

into smaller and smaller units. And

40:21

that's fine. So then you could have your house be worth

40:23

$400 million of the smaller unit of the cent, or

40:29

whatever it is. But

40:32

the point is that in that world

40:34

where the money appreciates, every

40:36

year, you know, four generations of your family,

40:38

going back to 107 years ago, every

40:41

one of your family for the last four

40:43

generations, every year they had the choice of

40:45

saving money that every year was going to

40:47

be worth slightly more in the next year.

40:50

So think about your family over the last four generations,

40:52

and I think pretty much everybody, no matter where you

40:55

are in the world, everybody's family has

40:57

gone through a period in which they

41:00

witnessed their savings essentially

41:04

get wiped out. Either it happened suddenly,

41:06

you know, bank failure or bank collapse

41:09

or the financial crisis,

41:11

or it happened gradually through inflation.

41:14

But everybody has seen this, and everybody has learned

41:16

their lesson not to save. Everybody has accepted the

41:18

idea that you shouldn't be saving. And

41:21

so everybody has been living in debt, and everybody's

41:23

been financially insecure. And then because of that... That

41:25

doesn't seem true. Now, I obviously have read your

41:27

book, so I know what the punchline is, but

41:29

I think it's worth explaining to people, because I

41:31

was taught to save, my mom taught me to

41:33

save. And

41:35

yet, as you... And

41:37

I think a lot of people will feel that way. But

41:39

as you actually look at what society does

41:41

versus what your mother may have told you

41:43

to do, the evidence starts to

41:45

mount that people really, really discount the future.

41:48

But give us a couple examples of how

41:50

we can see that the statement that we've

41:52

all been taught not to save is true.

41:56

Well, I think a lot of parents teach their kids to

41:58

save, but it's pretty bad.

42:00

advice. Like if you save in the

42:02

fiat standard, I mean

42:04

if you save money, if you hold on to

42:06

money, you're witnessing it basically lose its value by

42:08

5, 10, 15% per year. And you know

42:13

the kind of actionable information from understanding the fiat.

42:15

So you know when you read the Bitcoin standard

42:17

you come up with the conclusion, the inescapable conclusion

42:19

that you need to buy Bitcoin, you need to

42:21

be long Bitcoin because there's only so many and

42:23

the world is going to find out and the

42:25

price is going to go up. Well

42:27

when you read fiat you come up with a conclusion that you need to

42:30

be short fiat. In fact you

42:32

realize that that's basically how people get rich on

42:34

a fiat standard. In fact you know you listen

42:36

to people like say Kiyosaki,

42:39

who wrote Rich Man, Poor Man. You

42:41

look at a lot of the successful

42:43

businessmen, the way to get rich is

42:46

to accumulate hard assets and accumulate cash

42:48

yielding assets while accumulating

42:50

also debt. You want to have your

42:52

liabilities be things that are

42:54

scarce and you want to have your

42:56

assets be things that are scarce, houses,

42:59

companies, real estate, stocks, bonds

43:01

etc. And then

43:03

you want to have your liabilities

43:05

be fiat. You

43:07

want to owe dollars. So in

43:10

fact it turns out you know saving is good

43:12

for building character for young people but really once

43:14

you get into the real world you know you

43:16

don't just save up to buy your house and

43:18

people who do that end up

43:20

really paying a lot more than if you

43:22

just take a loan. When you take a

43:24

loan to pay the house you're

43:26

shorting the dollar and then you benefit

43:28

from the inflation because the value of

43:31

your loan repayment goes down. And

43:33

especially true in the case of hyperinflation you know I

43:35

have friends in Lebanon who had the loans to buy

43:37

houses and then with the collapse

43:39

of the lira, collapse of the local currency now

43:41

their loans are 95% discounted. They have to pay

43:44

them back in a currency that is so

43:46

they keep the house and they just have to pay very

43:49

very little amount of money. So

43:51

the people who didn't take out loans and saved

43:53

money in the bank got marked out and

43:56

that's happened all over the world. It happens very

43:58

quickly during the case of the of hyperinflation,

44:00

but it's happening slowly today around you. Like,

44:02

imagine if you have your money in the

44:04

bank, if you've been saving, what is

44:06

your bank giving you in terms of interest? 0.2%, 1%,

44:08

2% best case scenario? Well,

44:13

you're losing every year 5% or 10% or

44:16

so because look at the price of the house

44:18

that you want to buy, especially if

44:20

you want to buy a nice house in a nice neighborhood. Look

44:23

at the price. Can you save up? Here's

44:26

the question. Can you actually save up to

44:28

buy a house in Miami Beach? Think

44:30

about how much income you need in order to

44:32

save up to buy a house in Miami Beach

44:34

versus how much income you'd need to buy it

44:36

in debt. If you buy it with

44:38

debt, you get

44:40

the short contract on the US

44:42

dollar and then your

44:45

repayments are going down over time.

44:47

And so the house is just continuously getting cheaper

44:49

and cheaper. You live in it

44:51

today and then it gets cheaper. If you try

44:53

to save up for it, I mean, you'd need

44:55

to have astronomically high income to

44:57

be able to save in

45:00

a saving account that appreciates at 1% while

45:02

the Miami Beach house that you want is

45:04

appreciating at 5%, 10%, 15% per year. So

45:08

help me understand something because as you're saying this,

45:10

I'm starting to think, okay, what do I need

45:13

to take loans out on? Like how do I

45:15

get myself in a better situation? The

45:17

catch is though that if I'm still

45:20

getting paid in the

45:22

fiat, the two are tied.

45:25

So it's going down, like my purchasing power is

45:27

going down at the same rate that my loan

45:29

is technically getting cheaper. So it ends up feeling

45:31

like a wash. So I guess

45:34

I'm going back to then your earlier point. I have

45:36

to have a hard asset that's going up in value.

45:39

So I've got that. I can't just have

45:41

my short on the

45:43

dollar. I have to have something over here that's

45:46

going up. So as this goes down, I'm laughing

45:48

because it's getting easier and easier for me to

45:50

pay it. But the key is

45:52

to have both. You can't just have one or

45:54

you can't just have the debt. This

45:57

was like the kind of breakthrough insight that.

46:00

made me tie the book together when Michael

46:02

Saylor came into the Bitcoin world and started

46:04

talking about how he's

46:06

really, what his strategy is and his idea

46:08

of why he's borrowing in order to hold

46:11

Bitcoin. And when he explained, you know, this

46:13

is what rich people do. If you're rich,

46:15

you have hard assets, you have an old

46:17

building, you have real estate, you have a

46:19

factory. You don't need to

46:21

work in a fiat system. You just

46:23

are constantly refinancing and your loans

46:25

continue to get cheaper and you continue to

46:27

take out money and the goal is

46:30

to die with a lot of debt. This

46:32

is how you win in the fiat game. You

46:34

win by accumulating the most debt. But

46:37

you have to always, and this is the tricky part,

46:39

like this is, alright, so this is the kind of

46:42

great side of it is

46:44

that you just keep flocking up more debt

46:46

and running up a bigger tab on the

46:48

bar and then you die and

46:51

you win basically. But of course the

46:53

risky part, and that's why I think,

46:56

you know, it's

46:58

not a university good thing. The

47:00

risky part is that at

47:03

any month you miss a payment,

47:06

you risk losing all of your assets. So

47:09

well, not any month, you know, it's going to be

47:11

a few months, but if your business has a few

47:13

bad months, you might miss the payments. You

47:15

could lose the business. And that's why basically

47:17

I think, you know, everybody

47:20

is just massively insecure and everybody is

47:22

heavily discounting the future because the future

47:24

is so much more uncertain in this

47:26

world. I have a postal

47:28

world in which we just accumulate savings that appreciate.

47:30

Because in that world where you're trying to accumulate

47:33

a positive score, you

47:35

know, you're running up a score in terms

47:37

of let's get as much gold coins as we can.

47:40

The more gold coins that you have, the better you

47:42

sleep at night, the more secure you are, the less

47:44

you have to worry about whether your business is going

47:46

to make it this month or not or whether you're

47:48

going to end up being homeless or whether you're going

47:50

to lose your business. And

47:52

the world

47:55

in which you have debt and you're just running up

47:57

more and more and more debt, the more debt you're

47:59

going to lose. you're running up the more insecure you are.

48:04

Yeah. This

48:06

game is a very complicated game.

48:10

I never thought that I would need

48:12

to pay attention to this and now I'm

48:15

realizing how important it is to really understand

48:17

how money works and finances, which

48:19

is why I've been doing more and more shows around it. Okay,

48:22

so I think we're starting

48:24

to understand the financial implications

48:26

of fiat and

48:28

how people have

48:30

to really understand how the system

48:32

works in terms of inflation, being

48:35

problematic, your purchasing power is going down, the

48:37

sort of ultimate dichotomy of what you're talking

48:39

about, but it's a risky game. In

48:42

the end, now I wanna start getting

48:44

into the cultural implications. You make a

48:47

really strong case in the book that,

48:50

in fact, earlier you alluded to it and you were

48:52

like, yeah, that's the 20th century for you. I

48:56

wanna read another quote from the book around

48:58

the cultural implications. It just happened to be

49:00

one specific example that you were giving and

49:02

then we can sort of extrapolate beyond that,

49:06

but reading your book really impressed upon

49:08

me how much of

49:11

what I, again, think of culturally as just

49:13

being the reality of the way that the

49:15

human world works and that there is no

49:17

alternative and seeing that, hey,

49:19

a lot of things can be traced

49:21

back to having an easy

49:24

money system, basically. So here's the quote.

49:27

Again, it's lengthy, but I think worth reading. "'Perhaps

49:30

the most pernicious effect of the

49:32

theotization of the modern university is

49:34

the destruction of the scientific method.

49:37

What passes for science now is

49:39

a mix of government propaganda, corporate

49:41

advertising, make work welfare programs for

49:43

nerds and research papers

49:45

that amount to meaning-free irrelevant

49:47

gibberish. This sad state of affairs

49:49

persists and survives because government intervention has removed

49:51

the market test for success, with funding for

49:53

research primarily

49:56

coming from government." bureaucrats,

50:00

academics don't need to worry

50:02

about real-world profitable applications of

50:04

their work. Irrelevant research

50:06

bears no cost for the researcher

50:08

or his institution, and with

50:11

universities afforded an effective subsidy through

50:13

subsidized loans for their consumers, the

50:15

market test for success is removed,

50:17

and universities and the geeks populating

50:19

their offices are free to drift

50:21

into a world of insignificance and

50:23

corruption, a world with little regard

50:25

for truth. The most obvious

50:28

manifestation of this is the mushrooming of

50:30

entire fields and departments specialized

50:32

in producing completely inconsequential and

50:34

incoherent noises and marketing them

50:37

as scholarship. What passes

50:39

for humanities and the modern university

50:41

has degenerated into an endless sea

50:43

of angry grievances and robed victimology,

50:45

consisting almost entirely of politically corrupt

50:47

platitudes and zero substance. The end

50:49

result is heaps of graduates with

50:52

zero marketable skills but a strong

50:54

talent for finding ways to take

50:56

offense at everything. These departments continue

50:58

to grow and the professors in

51:00

them continue to get paid because

51:02

they face no real market test

51:04

and can continue to secure financing

51:07

from the world's biggest money printer

51:09

while railing against inconsequential, imaginary, and

51:11

historical evils. How

51:13

is that? Let's

51:16

assume that we can get people to agree, some people.

51:19

How is that the result of fiat money? Well,

51:22

it's obviously the result of fiat money

51:25

in my mind because universities

51:27

today don't operate in the market and that's

51:29

really the key point. In

51:31

a free market part- Which college they want to go

51:33

to, how's that not the free market? Well

51:36

because their choice, the choice is

51:38

not which college they go to. The choice really is whether

51:40

they should go to college or not. And

51:42

that's a choice that's heavily skewed by

51:45

two ways in which the money printer

51:47

intervenes. The first is that

51:49

the money printer heavily subsidizes student loans

51:52

which sounds like one of these,

51:54

you know, motherhood and apple-

52:01

motherhood and apple pie kind of ideas which

52:03

are just always, you know, how could you

52:05

be against it? You know, universities are great.

52:08

And the reality is no, you can actually be against

52:10

university. I taught at university and I've been to universities

52:12

and I spent a lot of time. And

52:15

I'll tell you, I've spoken to many students

52:17

where I asked them when they're finishing their

52:19

university, you know, you've just spent all this

52:22

amount of money of your father's money on

52:24

university. And you still have no idea what you want to

52:26

do, you know, you could have just gone

52:29

and worked in this field where you're interested for

52:31

four years earning whatever you could have made and

52:33

saved your father's money. And now you'd have all

52:35

of that money to start a business. Wouldn't you

52:37

better off? Wouldn't you be better off? And many

52:39

of them have said, yeah, I would. And the

52:41

same thing applies, obviously, if you take on loans,

52:43

you know, you end up with four years of

52:45

no marketable skills or little marketable skills and then

52:48

a big loan. So the

52:50

reason this is, this

52:52

seems like a good idea is because the

52:55

concept of opportunity cost is destroyed by fiat.

52:57

And this is a theme that I keep

52:59

returning to throughout the book. The

53:01

idea of opportunity cost is central to

53:04

all economics. Everything has an opportunity cost.

53:06

Everything sounds, everything is a great idea

53:08

if you don't think of the opportunity

53:10

cost. You know, going to university for

53:12

all of your life, collecting university degrees

53:14

until you're 90 years old is a

53:16

great idea. You know, yeah, let's

53:19

do a PhD in physics and in mathematics

53:21

and in linguistics and in chemistry and and

53:23

and and and do them all. You know,

53:25

who could hate knowledge? Well, but

53:27

there is an opportunity cost. Every time you're doing

53:29

a PhD, you're not doing other things. You're not

53:31

starting a business. You're not earning

53:34

money. You're not having a job. So

53:37

you see, fiat allows

53:39

us to basically suspend our conception

53:41

of what opportunity cost is instead

53:43

of because it's removing the market.

53:45

Like how is it? How

53:48

is it doing that? What is the mechanism by

53:50

which it creates that incentive structure? A,

53:53

we can't save our own money. So you your

53:56

money, if you just put it in the bank, it's

53:58

losing value. So you don't want to save money. B,

54:00

the government can just basically

54:03

bring money into existence if you

54:05

just give them a good idea

54:07

that appeals to them. So if

54:09

you do something that sounds good

54:11

for the government, you can

54:13

get infinite amounts of money for it, and there's really no

54:15

cost to it. So

54:17

they're able to make more

54:20

money out of thin air, and

54:22

that's really what distorts all of those

54:24

things. In a free market with hard

54:26

money, the universities can't just continue to

54:28

teach irrelevant nonsense. All of these econ

54:31

departments teaching fantasy economics, Keynesian economics, they

54:33

can't continue to teach all of this

54:35

nonsense because you're clearly producing people with

54:37

a very delusional perspective on the world,

54:39

and then when they get out into

54:41

the world, they can't succeed

54:44

with these ideas. But

54:46

if you're being paid to do it

54:48

by somebody who has a money printer

54:51

who can just make as much money as is

54:53

possible as is needed in order

54:55

to continue to keep this out happening, nobody's

54:57

really paying the cost, or the people who

54:59

are paying the cost are society at large.

55:02

I'm not tracking this. How

55:07

is the government paying the

55:09

schools? Does this only count

55:11

for governmental schools? Does this

55:13

also cover private schools? Is

55:15

it because the loans are easy to get? In

55:18

what way is the government paying the schools? Two

55:20

main ways. The first one is loans to students.

55:22

So this is enormously subsidized, very low interest rates,

55:25

and that's just massively tempting for people

55:27

to get in because you can take

55:29

out essentially a couple hundred thousand dollars

55:31

when you're 18 years old. That's

55:34

the government mining for fiat to get people

55:36

in debt. That's the government mining fiat because education

55:38

is motherhood and apple pie.

55:42

The other aspect of it is that the majority of

55:44

university income comes from research

55:46

grants, government research

55:49

grants. The role of the

55:51

government in financing universities is

55:54

enormous. Education fees are

55:56

only a small chunk of university income, and

55:59

universities that rely rely on tuition fees are just

56:01

– they can't

56:03

compete with the big universities that get

56:05

government money for research. So

56:07

that's – and I discussed this

56:10

in detail in the chapter on

56:12

fiat science. I think if you

56:14

wonder why is it that every

56:16

day there's a new headline about

56:19

coffee causing cancer but also protecting

56:21

from cancer and wine causes cancer

56:23

while also protecting from cancer and

56:25

tomatoes can cause this while actually

56:28

protecting – there's an interesting infinite

56:30

supply of money to be churning out these

56:32

studies because people think

56:34

that this science is a good thing. So if

56:38

you're in an academic position, there's

56:41

no cost to publishing something that is

56:43

wrong but there's a very high cost

56:45

for not publishing. And

56:47

so because – Why is there a high cost for not

56:50

publishing? Because you lose your job. You

56:52

have to publish in order to keep your job. So

56:54

everybody's just – it's a big giant

56:58

rat race where everybody's – they're running

57:00

on this mill where they're producing all these

57:03

papers that nobody reads and nobody

57:05

cares if they're right or wrong. There's no sense of

57:08

let's actually figure out is coffee good for you

57:10

or is it not? Does it cause or protect

57:12

from cancer? Does it make you live forever or

57:15

does it kill you on the

57:17

spot? Nobody cares. You

57:19

can publish papers with all of

57:21

these conclusions as long as you are – as long

57:25

as you're just basically adhering by the

57:27

kind of superficial standards of these papers.

57:30

So there's no sane kind of sense

57:32

of what's the real opportunity cost because

57:34

there's no market test. There's no test

57:38

of all right, well, this guy said this in

57:40

this paper. Let's take this out into the real

57:42

world and see if it actually works in that

57:44

way. You

57:46

don't have to have the market test. The market test

57:49

does not apply to this and that's why you

57:51

can get all these insane ideas come out of universities

57:53

today. I begin

57:55

by knocking on humanities because

57:57

that's easy and everybody does it. But

58:00

I think, you know, humanity is not much better

58:02

than the natural sciences because really, I

58:04

mean, people are freaking out about

58:07

the idea that cow farts are

58:09

going to boil oceans, and that's

58:11

university research. And they're

58:13

freaking out about all kinds of things. It's

58:15

a constant stream of hysteria because if

58:17

you have concerning hysterical findings that suggest,

58:19

oh, no, you know, the Earth is

58:22

going to be destroyed, then

58:24

you are more likely

58:26

to get funding. There's no opportunity

58:28

cost to the people providing financing. They

58:30

don't have to think about whether

58:33

we are better off directing our resources

58:35

toward this researcher or that

58:37

researcher in the sense of which one is

58:40

going to give us a more accurate answer.

58:42

They are thinking about it from the perspective of,

58:47

you know, if this is concerning, we need to give all

58:49

the resources that we can. And that's why research

58:52

budgets just continue to mushroom, and

58:54

the amount of research that is produced continues

58:57

to mushroom, and the research is always headed

58:59

in the way of more hysteria and more

59:01

concern and more calamities. You

59:03

know, it's chicken

59:05

literalism, basically, as an idea

59:08

because that's

59:10

the motivation. If you go

59:12

into research and say, well, I've looked

59:14

into cow farts and I've concluded cow

59:16

farts are not going to destroy planet

59:18

Earth, well, guess what? You

59:20

don't need more funding to study cow farts anymore.

59:22

That's it. That's done. If I look into cow

59:25

farts and I think, oh, no, cow farts are

59:27

going to destroy the planet, well,

59:29

now I need a much bigger research budget to look

59:31

into them, and I need a research center and I

59:33

need to hire a whole bunch of people to look

59:35

into it with me. And

59:37

so we see how this is

59:40

reflected in many fields where we go all

59:42

through these hysterias where everybody

59:44

is always fascinated by this.

59:48

And of course, that also helps with

59:50

the – that also will inevitably

59:53

be driven by the agendas of

59:55

the people funding. It's ultimately political. It's ultimately

59:58

government money. that

1:00:01

have political goals and objectives. And so

1:00:03

they push funding towards

1:00:06

the kind of hysteria that

1:00:09

they want to hear about. Ooh,

1:00:13

okay, so I'm going to see if

1:00:16

I can reiterate all of this. There are some

1:00:18

pretty aggressive claims.

1:00:21

So, all right, you've

1:00:23

got, the government is printing

1:00:26

money. They can print as much as they

1:00:28

want. They mine fiat

1:00:31

by getting people in debt. One

1:00:34

of, because we're talking about universities, but it really is just one

1:00:36

of the examples you use in the book. So

1:00:38

we're just going through this example as

1:00:41

one-way fiat distorts incentives, which then have

1:00:43

these huge knock-on effects. So

1:00:46

they mine for fiat by

1:00:48

getting people in debt. One of the sort

1:00:51

of easy targets because it's motherhood

1:00:53

and apple pie is education. So

1:00:55

let's make education nice and cheap.

1:00:57

So we subsidize the loans. So

1:00:59

the loans have a very low

1:01:02

cost. Students

1:01:04

take out then these massive loans

1:01:06

to go to school, but which

1:01:08

could be a good thing were it

1:01:10

turning out people that are extraordinarily

1:01:12

gifted at things that the world

1:01:14

cares about deeply. And that really matter

1:01:16

and move the needle in a meaningful way for

1:01:18

humanity. But we

1:01:21

don't end up with that result

1:01:23

because there

1:01:25

is an incentive that I don't

1:01:27

know if it was originally tied to fiat

1:01:29

or not, but a decision was made that

1:01:32

publishing is good. Okay, so to keep your

1:01:34

job, you must publish. I'll

1:01:36

say the issue here is that, think

1:01:38

about the example of Soviet cars.

1:01:40

Why did Soviet cars suck? Because

1:01:44

they were produced in the same way that

1:01:46

modern research in modern American universities is produced.

1:01:49

It's from the top down. Imagine, it's

1:01:51

the same thing. You have a committee of people that

1:01:53

decide which car factory is going to get funding. And

1:01:56

then they allocate the cars to the consumers.

1:02:00

Because in non-Soviet countries, compare East

1:02:02

German cars to West German cars.

1:02:04

In West Germany, Mercedes or

1:02:06

BMW, they have to make their own cars and

1:02:08

they have to come up with their own decisions

1:02:10

and they have to then get the consumer to

1:02:12

willingly take money out of their own pocket to

1:02:14

pay for the car. So that

1:02:16

forces them to make cars that are good, that

1:02:18

don't suck, that convince the consumer to come up

1:02:21

with something that – to come

1:02:23

up with valuable money and pay for it. But

1:02:25

in the Soviet Union, when the money comes from

1:02:27

above, the – you don't even

1:02:29

have to pause it and this is kind of the

1:02:31

key insight from Austrian economics when it comes to

1:02:34

socialism, is that socialism is not

1:02:36

an incentive problem. It's not just that you have

1:02:38

corrupt people. It's not that you have lazy people.

1:02:41

Socialism is a calculation problem. This is the

1:02:43

economic problem of socialism and it's something that

1:02:45

most socialists cannot come to terms

1:02:47

with. Even if you solve the incentive

1:02:49

problem of socialism, it is

1:02:52

not a workable system because it's not

1:02:55

possible for the East German

1:02:57

car factory to figure out how to

1:02:59

make cars properly unless

1:03:01

they get feedback from the customer. Unless

1:03:04

they put the cars out and the customers

1:03:06

willingly pay for them and the customers have

1:03:09

a choice between their car and all the

1:03:11

other cars and they choose this model rather

1:03:13

than that model and then the producer asks

1:03:15

themselves, why is it that they like this

1:03:18

over that one? Well, let's focus

1:03:20

on the things that they like. Let's get rid of

1:03:22

the things that they don't like. Let's focus on the

1:03:24

things that we can make profitably. If you

1:03:26

can make something profitably, that's telling you that

1:03:28

you're using your capital productively. When

1:03:31

you sever that process so that the money doesn't

1:03:33

come from the consumer, the money comes from above,

1:03:35

from basically the money printer, you

1:03:37

end up with shitty East

1:03:40

German cars and you end

1:03:42

up with shitty academic journals that produce

1:03:44

all this pseudoscience and babble basically. Wow.

1:03:47

That was a really good way of

1:03:50

explaining that. That

1:03:52

certainly hits home. Central

1:03:55

planning is an idea that runs through the book. Why

1:04:01

do we have the temptation towards

1:04:03

central planning and how is a

1:04:06

hard money like Bitcoin or

1:04:08

maybe to you Bitcoin is the only thing

1:04:10

that's going to make this happen? How

1:04:14

is that going to solve the problem? Does it

1:04:16

shift incentive structures? What does that look like? Yeah,

1:04:19

I think it's all about the figurative

1:04:21

printing process. It's all about the ability

1:04:23

to make debt into money. So

1:04:26

what happened in World War I and the first couple chapters of

1:04:28

the book are a little bit more history which

1:04:31

looks at the way in which that monetary

1:04:33

system was installed in the West during

1:04:36

World War I. Later

1:04:40

on in the 1930s, a con

1:04:42

artist by the name of John Maynard Keynes came

1:04:44

along and wrote a bunch of stupid books about

1:04:47

why this actually is a better

1:04:49

way of running the monetary system. But

1:04:52

this is really just like the

1:04:54

fake excuse that you come up with after you've already –

1:04:56

so you've totaled your father's car and then you go to your dad

1:04:59

and you tell them that actually I think

1:05:01

this is better for you. You don't need the headlights.

1:05:03

Let me explain to you why cars are better without

1:05:05

headlights. But they

1:05:07

went off the gold standard in 1914, 15, 16. There

1:05:11

was never an admission. It

1:05:14

was totally surreptitious. It was manipulative. It

1:05:17

was a lie. It was done by the central banks behind

1:05:19

people's back. And there was never an

1:05:21

honest admission that, hey, we're going off the gold

1:05:23

standard. There was always no we're on the gold

1:05:25

standard. We're coming back to the gold standard. We're

1:05:27

just suspending redeemability for a bit. Don't worry about

1:05:29

it. Everything's going to be fine. We're just fighting

1:05:32

a war. And what example did he give for

1:05:34

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and conditions apply. Well,

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basically, it's

1:08:16

extremely stupid, I have to say, and

1:08:18

I mean this not just to throw

1:08:20

away a gratuitous insult, it's a very

1:08:22

well-earned insult. It's the idea that if

1:08:25

you have a recession, which was the case in the

1:08:27

1930s because they'd gone off the

1:08:29

gold standard for 20 years and have been

1:08:32

trying to basically pretend that they

1:08:35

were still on the gold standard while they were

1:08:37

off the gold standard, that causes recessions.

1:08:41

You have complete dislocation

1:08:44

in the labor market and in all kinds of

1:08:46

products markets where people are unable to invest

1:08:48

and spend money in a way that meets market

1:08:53

demands. And

1:08:58

so you have, just like if you

1:09:00

had price controls in anything, you get shortages

1:09:02

and surpluses, you have

1:09:05

price controls over wages and labor

1:09:07

and so that's what led to

1:09:09

unemployment. So the same

1:09:12

answer would have been get rid

1:09:14

of those shortages and stop the inflation and

1:09:16

then it's going to, prices will adjust and

1:09:18

people will go back to work just like

1:09:20

they were working before 1914 when you had

1:09:22

the gold standard for 50, 60 years and

1:09:24

you didn't

1:09:27

have these massive economic

1:09:30

problems that occurred after abandoning

1:09:33

the gold standard. But effectively

1:09:36

what they did is they broke the gold

1:09:38

standard and they blamed the gold standard for

1:09:40

why it didn't work. So what

1:09:42

he said was this unemployment

1:09:45

is caused by an insufficient

1:09:47

amount of demand. People

1:09:49

are just not spending enough money and they're

1:09:51

not spending enough money because we're on the gold standard

1:09:53

and the way to fix it is for the government

1:09:56

to print a whole bunch of money and hand it

1:09:58

out to people and then that, you know, It's

1:10:00

like getting an engine going. You

1:10:02

crank the engine and then it gets going. So if we

1:10:04

just throw in a whole bunch of spending, the engine will

1:10:06

get going, and then we'll

1:10:08

have more money circulating

1:10:11

in the economy, and then that leads to more

1:10:13

people being hired. And then when people start getting

1:10:15

hired more and more, they'll start spending more and

1:10:17

more, and then the economy kicks into gear. Isn't

1:10:21

that true though? Like I

1:10:23

get how it devalues the money, but

1:10:26

if you're, if you, so

1:10:28

you made an argument earlier that I completely buy into,

1:10:30

which is when you go to a Fiat standard, you

1:10:32

discount the future and therefore people spend money. So

1:10:35

it may be a horrible reason to do

1:10:37

it, but if you do

1:10:40

create this thing where people are discounting the future, the

1:10:42

money's going down in value, money's

1:10:44

already be spent, you will create until

1:10:47

the bubble burst, you will

1:10:49

create this sense of like, word, I've got money,

1:10:51

I'm gonna spend it. So didn't

1:10:53

it get the engine going just at

1:10:56

a huge cost? It

1:10:59

gets a destructive engine going. It

1:11:01

gets an engine going where we

1:11:03

save less, we destroy capital, we

1:11:05

consume capital. It's basically eating the

1:11:07

seed corn. That's the thing. So

1:11:10

if you sold all of your properties today,

1:11:12

yeah, you could spend a lot of money

1:11:15

this week. Like you could throw the sickest

1:11:17

party of your life if you sold everything

1:11:19

you owned. And

1:11:21

that's really the logic there. So the same

1:11:23

kind of classical economists, what they were saying

1:11:25

is, get back on the gold standard and

1:11:27

then prices will fall where they, will

1:11:30

adjust to where they need to be and people will

1:11:32

spend money as much as

1:11:34

they need to. And markets will

1:11:36

clear and the world will

1:11:38

work as it did. Did

1:11:41

you look at it closely enough to know why

1:11:43

the unemployment actually was happening? Yeah,

1:11:46

the reason the unemployment was happening was because

1:11:48

of the inflation. So the

1:11:51

part that the Keynesians skip is

1:11:54

the part of the history, which I

1:11:56

focus on in chapter one, which is

1:11:58

that the money supply in England. more

1:12:00

than doubled during the period between 1914 and 1920. So

1:12:04

the money supply doubled and the

1:12:07

redemption of gold, the redemption of the

1:12:10

British pound into gold was suspended. So

1:12:12

you couldn't buy

1:12:15

gold from the central bank. You couldn't just go

1:12:17

and give them their paper and take gold because

1:12:19

they had so much paper outstanding. So

1:12:21

they'd inflate the money supply and they wanted

1:12:24

people to believe that they didn't inflate the

1:12:26

money supply. So they wanted to

1:12:28

keep wages and prices as they were. But

1:12:30

obviously that's impossible. That's like trying to

1:12:33

square a circle because people are,

1:12:36

you know, there's more money out there

1:12:38

so prices are rising. And

1:12:40

then because prices are rising, people are

1:12:42

unable to buy a lot of the things that they

1:12:45

want to buy. And so you

1:12:47

end up with shortages, you end up with

1:12:49

surpluses, you end up with problems

1:12:51

in the labor market. Businesses

1:12:54

can't hire workers because they can't sell their goods.

1:12:56

So all of this would have been solved if Bank

1:12:59

of England just said, you know what, sorry, we messed

1:13:01

up. We were fighting a war with the evil Germans.

1:13:03

We had to do this. We

1:13:07

did an inflation. We're sorry. Let's

1:13:09

revalue the pound. You know, if they just revalued

1:13:11

the pound, they said, all right, let's go back

1:13:13

to a gold standard but we have to reevaluate

1:13:16

it. Like I think it would have been 20,

1:13:18

30% less. Revalued

1:13:20

compared to gold? Exactly. The

1:13:23

price of gold, one ounce

1:13:25

of gold was about four pounds at that time, four

1:13:27

and a quarter pounds, 425. So

1:13:30

if they'd just gone back

1:13:32

to a gold standard at one

1:13:34

ounce of gold at five pounds, then

1:13:37

it would have sucked for people who

1:13:39

had savings. But

1:13:42

it would have been just a one-time hit and

1:13:44

then you're back to building on a solid foundation.

1:13:46

You're back to having a

1:13:49

free market economy where prices

1:13:51

reflect fundamentals and where

1:13:53

wages will adjust

1:13:55

in a way that gets everybody working.

1:13:58

But as long as they were trying to manipulate this. I

1:14:00

want to try to hide that deception

1:14:03

they continue to suffer from the problem one

1:14:05

employment. And then i'm

1:14:07

like the really the really scammy thing

1:14:09

about it is that what

1:14:11

you're doing by printing money is the same thing

1:14:13

as you would do if you just let the

1:14:15

wages fall. And

1:14:18

canesians are the only people

1:14:20

stupid enough to think that people

1:14:23

people would rather earn less money

1:14:25

with more numbers less

1:14:28

value with more numbers than

1:14:31

you know the same amount of value with

1:14:34

small numbers. It's ridiculous it's the

1:14:36

same example that we were mentioning earlier about the house like canesians

1:14:39

are the only people who would tell you know it's better to

1:14:41

live in a house that has a lot of zeros next to

1:14:43

its valuation. There's only people who would

1:14:45

move to a higher inflationary economy because that would

1:14:47

mean that they could buy a house that's worth

1:14:49

a lot of trillions of dollars. It's

1:14:52

it's nonsense so you know the

1:14:54

workers needed to take a pay cut and

1:14:56

that was the result of the inflation if you didn't

1:14:58

want the workers to take a pay cut you shouldn't

1:15:00

have done the inflation. But the government

1:15:03

because they was a democracy they had elections

1:15:05

they didn't know president or prime minister anywhere

1:15:07

in the world wanted to be the one

1:15:09

to go up and say hey guys sorry

1:15:11

the minimum wage has to go down. You

1:15:14

have to start earning less that's just

1:15:16

political suicide so what you do

1:15:18

is you print a lot of money and

1:15:21

then the real wage drops even

1:15:24

though the nominal wage stays the same and so

1:15:26

you know your salary was a hundred dollars let's

1:15:28

say. And it used to be that

1:15:30

well if you just take eighty dollars everything would

1:15:32

go back to normal and the economy would revive

1:15:35

and we'd be back on a gold standard well

1:15:37

let's just bring twenty percent more money and

1:15:39

now your hundred dollars are worth eighty dollars

1:15:42

and now we didn't give you a pay you still

1:15:44

get the hundred dollars. Exactly you

1:15:47

still get a hundred dollars of value exactly

1:15:49

that's really all that's the canesians

1:15:51

cam in a nutshell unlike canes

1:15:53

admits and it's. It's

1:15:55

the book i think is is is

1:15:58

an absolutely pathetic. intellectual

1:16:00

exercise of just equivocating and

1:16:03

trying to justify this and trying to

1:16:05

find ways of making

1:16:08

this explainable and acceptable

1:16:10

by somebody who just clearly had

1:16:13

no understanding of economics in any

1:16:15

meaningful sense. It's

1:16:20

really interesting. So I buy the

1:16:22

argument. What I will

1:16:24

say is that, as you have

1:16:26

pointed out, it will be more palatable.

1:16:32

I know virtually nothing about

1:16:34

Austrian economics, but the little

1:16:37

thing that I do know, which is that

1:16:39

it's an acknowledgment that humans derive

1:16:41

value subjectively in their minds. Now, it

1:16:43

might be based on something, but

1:16:46

ultimately, you need that subjective layer.

1:16:49

It seems to me, again, I know even less

1:16:52

about Keynesian economics than I know about Austrian

1:16:56

economics, but it

1:16:58

does seem to, even though it's gross

1:17:00

and I don't like it, that they're

1:17:03

taking advantage of this, that

1:17:05

Keynesian economists are saying,

1:17:07

look, it's just reality. People

1:17:09

aren't going to respond to that, and people would, whether

1:17:12

they should or not, they would rather have a house

1:17:14

that's valued at $269,000 than $411. It

1:17:18

just is. If

1:17:20

you ignore that fact, you're going to ignore it

1:17:22

at your own peril. While

1:17:27

I actually think they are wrong

1:17:29

and I, in my limited ability

1:17:33

to understand economics, find

1:17:36

myself gravitating towards your argument, I

1:17:39

can't help, even as I invest into

1:17:42

Bitcoin, I cannot help but have

1:17:44

unease about what happens

1:17:46

societally, at least

1:17:49

through the transition. Maybe

1:17:51

just like you said, hey, just suck it

1:17:53

up. We're getting $100. You're

1:17:56

going to get $80 in value no matter what, so let's just call it $80.

1:18:00

I worry that in that moment, there

1:18:02

is, in that moment, I don't know if that's a year,

1:18:04

I don't know if it's 10 years, but as

1:18:07

we transition to a hard money standard,

1:18:09

because you've said over time, societies

1:18:12

that can always do move

1:18:14

towards hard money, and it certainly

1:18:17

seems like we're moving towards hard money now,

1:18:20

but that there will be a reaction,

1:18:23

and there will be a reaction from some people,

1:18:25

there will be a reaction from governments, and

1:18:28

while it's

1:18:30

gross, at least as you present

1:18:32

the Keynesian side, that is gross, I'm with you,

1:18:34

I don't like it, doesn't feel right, but

1:18:37

they are hinting at a truth of

1:18:39

human nature that we are

1:18:41

going to have to deal

1:18:43

with, reconcile something

1:18:45

when people start getting real

1:18:47

upset that their money isn't worth what they thought it

1:18:50

was. I

1:18:52

think that's incorrect, because the reality is, they

1:18:54

try and present it, the Keynesians always try

1:18:56

and present it as if they're out there

1:18:58

looking for the little guy, but the reality

1:19:00

is they're just looking out for the big

1:19:02

banks and the government, they're looking out for

1:19:05

the people in power. To

1:19:07

keep everybody quiet, like hey, let's just keep

1:19:09

everybody quiet. Not even that, not even that,

1:19:11

not even that, because the people who would

1:19:13

really get hurt from this, the

1:19:15

people who would really get hurt from the kind of... So

1:19:19

what we're arguing against is, here's

1:19:22

the thing, again, it's the fiat

1:19:24

idea of opportunity cost not existing

1:19:26

that even makes the

1:19:29

debate frameable in these terms.

1:19:32

If you're going to inflate, if you're going to have

1:19:34

the ability of the government to just get off the

1:19:36

gold standard and continue to inflate, it's not like you're

1:19:38

just going to solve this problem once and for all

1:19:40

and then it's over. Then

1:19:42

this inflation is going to

1:19:45

lay the groundwork for the

1:19:47

next bubble with the

1:19:49

next credit expansion when then we

1:19:51

get the next crash and then

1:19:53

that would require the next set

1:19:55

of adjustments which is going to

1:19:57

require more credit expansion. The

1:20:00

choice is not, you know, we just take the pain once

1:20:04

and then we solve this problem and

1:20:06

we prevent social unrest. It's we get

1:20:08

into this problem, we get into this

1:20:10

world where government and the banking system

1:20:12

have the ability to constantly make more

1:20:14

and more money to their benefit while

1:20:16

presenting it as if it is to

1:20:18

the benefit of the working class, while

1:20:20

constantly screwing over the working class, who

1:20:22

are constantly getting laid off and going

1:20:24

through these business cycles. That's

1:20:26

one side of it. On the other hand,

1:20:28

we have an actual example of what happened

1:20:30

when, you know, this kind of unpopular, supposedly

1:20:34

catastrophic and apocalyptic path

1:20:36

was taken. And

1:20:38

that was what happened in the US. The US did not do

1:20:40

what the British did in 1920 after the war. The

1:20:43

US actually did go through a recession

1:20:45

in 1920. The US went back

1:20:47

on the gold standard in 1921 or 22. I'm

1:20:50

not sure exactly how I mentioned it in the book. And

1:20:53

then it suffered a short and sharp

1:20:55

recession. And fortunately for

1:20:58

the US, apparently at that time, President

1:21:00

Calvin Coolidge was a guy

1:21:03

who knew how to have fun and had

1:21:05

more pressing things to do than go

1:21:07

and destroy the economy with Keynesian insanity.

1:21:10

So he was throwing parties and enjoying

1:21:13

himself in the White House while

1:21:15

the recession basically it was a

1:21:18

painful recession that went on for a

1:21:20

few months. But then after that

1:21:22

recession was over, the economy recovered and

1:21:24

then you had a massive boom in the 1920s. So

1:21:28

Britain, on the other hand, continued

1:21:30

to suffer through this pain

1:21:32

of constantly seeking to lie

1:21:34

about the fact that they went

1:21:37

off the gold standard and couldn't go back on the

1:21:39

gold standard throughout the 1920s. And

1:21:41

so its problems continued to get exacerbated throughout the

1:21:43

1920s. And then what

1:21:45

they did effectively was

1:21:48

export their inflation problem to the US.

1:21:51

And I discussed this in detail in the

1:21:53

book. The British Central Bank of England

1:21:56

basically convinced the French and the American

1:21:58

Central Banks to inflate. their own money

1:22:00

supply in order to

1:22:02

prevent the flight of gold from England

1:22:05

to the US because in the US

1:22:07

and England, okay, you couldn't redeem your

1:22:10

pounds for gold, but

1:22:12

you could redeem your pounds for dollars,

1:22:14

which you could then redeem for gold in the

1:22:17

US and then ship your dollars to England. So

1:22:19

people continue to do that and they would sell

1:22:22

there and that would cause the gold to leave

1:22:25

England. And so the

1:22:27

English somehow convinced the poor American really

1:22:31

simpleton central long term that

1:22:34

the way to fix the problems of England

1:22:37

was to have inflation in the US. And

1:22:39

that's what led to the big inflation of the

1:22:41

1920s, which led to the Great Depression, which led to

1:22:44

the stock market crash of 1929 and then

1:22:46

the Great Depression. So we

1:22:48

have the test of that. We've had

1:22:50

these examples many times across history where you have

1:22:53

the quick, sharp, painful recession for a few months

1:22:55

and then life goes back to normal and everybody

1:22:57

recovers. And on

1:22:59

the other hand, you have the system where

1:23:01

we're constantly inflating more and more,

1:23:04

which is what happened in the 1930s,

1:23:06

both in Britain and in the US. And that serves

1:23:08

people in power, people in government, and

1:23:10

of course it serves banks because the

1:23:13

biggest creditors are banks. The

1:23:15

biggest borrowers are banks. They're the

1:23:17

ones who benefit the most from the devaluation of the currency because

1:23:20

they're the ones who owe the biggest amounts of money. Wow.

1:23:24

Okay. So the plot thickens. As

1:23:28

you were explaining all that, I thought,

1:23:30

okay, then if people

1:23:32

have been playing all these games with money

1:23:34

this whole time and smart people already sort

1:23:37

of understand the game, and Bitcoin

1:23:39

is a better gold, then that all

1:23:41

sort of fingers point to gold as

1:23:44

being a... It should give

1:23:46

us examples of what Bitcoin is going to look like

1:23:48

in terms of how it settles into the basket

1:23:51

of offerings, if you will. So if

1:23:54

we know that we're deflating the

1:23:57

currency over time, it's value, and

1:23:59

that we want hard assets. Why isn't

1:24:01

gold? Because there's a picture

1:24:03

being presented of like, yo, Bitcoin is going

1:24:06

to be worth a gazillion dollars. This is

1:24:08

crazy. Just hold it. But

1:24:10

that didn't happen to gold. It hit some sort

1:24:12

of threshold and then it just sort of wavers.

1:24:15

So is that because

1:24:19

gold is still deflationary at 2%

1:24:21

a year and that creates, that

1:24:24

gives it that sort of ceiling?

1:24:27

Or is it that Bitcoin is only

1:24:29

ever going to match gold? And so we're just

1:24:31

replacing that. And it's, you know, I mean, look,

1:24:33

it's interesting. It's very valuable to be trillions of

1:24:35

dollars, but it's not

1:24:37

going to be that thing that just like keeps eating

1:24:39

more and more asset classes. Because if

1:24:42

people didn't react to gold, like must have it,

1:24:44

why would they react like that to Bitcoin? Because

1:24:47

again, it goes back to the point about

1:24:49

gold's spatial salability. Gold just can't play the

1:24:51

role of money as long as governments don't

1:24:53

let it play that role. It needs central

1:24:55

banks. It needs complicated

1:24:58

settlement infrastructure.

1:25:00

And all of that, in order for that to happen,

1:25:03

you know, you need the permission of governments. You

1:25:05

need physical infrastructure

1:25:08

to allow governments, that in

1:25:11

physical infrastructure to be allowed by governments to

1:25:13

operate. And so that's why today, you know,

1:25:17

in the fiat standard, you know, I look at where, if you

1:25:19

want to think about what is gold's, what

1:25:21

is Bitcoin's potential, gold

1:25:24

is just the first, the

1:25:27

first rung of the ladder, really, because

1:25:29

gold is not what people use as

1:25:31

cash today. Like how much of your

1:25:33

portfolio, or the average person's portfolio is

1:25:36

in gold today? Very little. Some

1:25:38

people hold significant amounts of gold, but the

1:25:41

vast majority don't. And you still hold cash.

1:25:44

But your cash really, in a sense, there are

1:25:46

two things that you can hold in your portfolio.

1:25:48

You can hold cash, or you can hold investments.

1:25:51

Investments are equity that yield a

1:25:54

return, and they have a risk. So that's

1:25:56

the risk part of your portfolio. Cash

1:25:59

is something where you... You are trying to be

1:26:01

conservative. You don't want to take a risk with it.

1:26:03

You want to just hold onto it. The point of

1:26:05

it is that it holds onto value. So

1:26:08

what do people use today that is

1:26:10

not meant to offer risk, that is

1:26:12

meant to hold onto value? Physical

1:26:15

cash is one thing. Saving count

1:26:17

is another. Gold is one

1:26:19

small thing. But the major

1:26:21

one, the major part of people's portfolio

1:26:24

that plays the role of cash is

1:26:26

bonds. That's because

1:26:28

they don't have equity risk.

1:26:30

So you have senior creditor.

1:26:34

If the company that is issuing a

1:26:36

bond goes bankrupt, the bond holders get

1:26:38

paid before the stockholders. So

1:26:41

that's why people want to hold bonds. And

1:26:43

of course, government bonds, you get the

1:26:45

government being able to print money, which makes things easier for

1:26:47

you. So

1:26:51

in a sense, gold can't fulfill these

1:26:54

functions because governments want their bonds to replace

1:26:56

the function of gold. That's really the kind

1:26:58

of scam. They want you to hold their

1:27:00

bonds because that just gives them money, allows

1:27:02

them to print money, allows them to finance

1:27:04

themselves, allows them to finance all the stupid

1:27:06

bullshit that they like. And

1:27:08

so we have, you

1:27:10

know, the total gold market

1:27:13

in the world is something in the range of around

1:27:15

$10 trillion. But

1:27:17

the total bond market is somewhere in the range of

1:27:19

$100 to $140 trillion or something like

1:27:22

that. So exactly. Man,

1:27:25

maybe I just have not been paying close enough

1:27:27

attention, but the bond

1:27:29

as the governmental dirty

1:27:32

trick of creating a

1:27:34

gold-like safe thing.

1:27:37

Whoa. Okay. That's

1:27:41

one that's exciting from a, there's a bigger asset class

1:27:43

that people are already using for this thing because when

1:27:45

I, I listened to Michael

1:27:47

Saylor a lot and again, maybe I just never heard

1:27:49

him say it or wasn't paying attention somehow. But

1:27:52

haven't thought about that. And

1:27:54

so we'll often talk about, you know, is it going to start

1:27:56

eating into real estate because real estate is used as a hard

1:27:58

asset. I was always like,

1:28:01

but real estate you can live in. So there's like

1:28:03

a thing, I just can't

1:28:05

see real estate ceasing to be a thing. But

1:28:09

bonds, I can see

1:28:11

bonds ceasing to be a thing. Yes. That's

1:28:13

kind of one of the, one

1:28:16

of my conclusions of my analysis in the book

1:28:18

that I have in one

1:28:20

of the final chapters, I basically argue Bitcoin's

1:28:22

going to end this entire

1:28:25

barbaric idiotic practice of bonds. I think

1:28:27

Bitcoin's going to eat the bond market.

1:28:29

I see no reason for bonds to

1:28:31

exist in the Bitcoin world. I think

1:28:33

bonds exist because borrowing is

1:28:35

the equivalent of mining and

1:28:37

bonds are debt and that's why bond

1:28:40

issuance is so profitable. But this

1:28:43

has just been abused to a point right

1:28:46

now where I mean, you

1:28:48

know, governments, highly,

1:28:52

highly irresponsible governments have

1:28:54

bonds that are trading in

1:28:56

the billions and it's insane that people give

1:28:58

them this money and it shouldn't be the

1:29:00

case. If you look at say,

1:29:02

for instance, you know, the US government is a AAA rating,

1:29:06

but if you looked at its balance sheet and you were,

1:29:08

if you treated it as a corporation and you looked at

1:29:10

its balance sheets and I discussed the

1:29:12

details of this, you know, like what a bond

1:29:14

holder. If you told them, all right, look at

1:29:17

the numbers. Let's say you knocked out three zeros

1:29:19

from the numbers and you

1:29:21

turned it from trillions to billions and he told them, here's

1:29:23

a corporation. Let me see what you think of their rating.

1:29:27

They would not be a AAA rated bond.

1:29:30

They would be junk bond. They'd be, you

1:29:33

know, B plus, sorry, B minus or double B

1:29:35

or something like that, depending on which rating, but

1:29:37

they'd be junk firmly in the junk category. And

1:29:39

that's the US government. And then, you know, you

1:29:41

look at the rest of the other governments, they

1:29:43

all be subjunk. They would

1:29:46

not even get on the bond market if

1:29:48

it was like that. And I think simply

1:29:51

because they spend so much more than they make. Exactly.

1:29:53

And the only reason that they can get

1:29:56

into bonds is because Everybody is

1:29:58

counting on their ability to inflate their. The

1:30:00

money supply and devalue their people. So the

1:30:02

Bond market has just. It's

1:30:04

evil through and through. Wow.

1:30:08

Ah, when you say it like that, it

1:30:10

is. It

1:30:12

doesn't sound good. Man This crazy.

1:30:15

This is crazy. I have stepped

1:30:17

through a door that I did

1:30:19

not see coming. So.

1:30:23

As I walked through the store and I

1:30:26

have more and more realizations like this at

1:30:28

the Bond Market is. I'll say

1:30:30

potentially evil I Have Dogs is so

1:30:32

new to me as a concept. Abbott

1:30:34

Lew, I don't have any arguments against

1:30:36

it as you explain it, but I'm

1:30:38

a A at it is today. You know,

1:30:40

years, even the best bonds arden not

1:30:42

keeping up with inflation. Like even if

1:30:44

you're taken on risk with lawns and you're

1:30:47

getting high interest rate, you're not keeping

1:30:49

up with inflation. Sauce that the entire

1:30:51

practice as just falling apart and holding on

1:30:53

bitcoin is so infinitely better. And it's

1:30:55

so much more secure. And it doesn't

1:30:57

have default risk at Son. That's that's

1:30:59

it. That's the real jackpot. You know gold

1:31:01

is just going to be the small

1:31:03

little appetizer the we have before devouring

1:31:05

the bond market. I think. Well.

1:31:09

I'll. Be turning that do a clip

1:31:11

Ah sees as man. Okay

1:31:14

so now my next question and

1:31:17

this is the one that I.

1:31:19

Think. About maybe more than I want to. This.

1:31:26

Does this happen? Peacefully? Because.

1:31:28

It doesn't seem like the government

1:31:30

is gonna let go of their

1:31:32

ability to create bonds. Ah, And.

1:31:36

Other things just the ability to

1:31:38

print the a built like saying

1:31:40

out loud that the government or

1:31:43

anybody is using debt as a

1:31:45

mining mechanism to bring value to

1:31:47

themselves like whoa, don't you think

1:31:49

at some point that there is

1:31:51

going to be i'm in China's

1:31:54

of a Crt said fuck this

1:31:56

light The know Crypto for you

1:31:58

or at least node. In

1:32:00

governmental crypto ah Does

1:32:02

Bitcoin take over peacefully.

1:32:07

You know, I don't have a I

1:32:09

don't have a. Crystal

1:32:12

Ball? I don't know. The

1:32:15

the kind of. Conclusion

1:32:18

of the book. Is and

1:32:21

and the really powerful thing about remember

1:32:23

one will reward started this discussion I

1:32:25

told you know approaching of see at

1:32:27

from the lenses the how I analyze

1:32:29

bitcoin would be the best way to

1:32:32

try and on appreciate this question of

1:32:34

how is it that bitcoin com. Arises

1:32:37

and I think it came up with

1:32:39

a very very important conclusion. From this

1:32:41

was I think as month to the

1:32:44

original hide autistic. Anybody else has mentioned

1:32:46

this before which is that what we're

1:32:48

doing with see on is that where

1:32:51

monetizing depth and what bitcoin is doing

1:32:53

is it as monetizing a hard assets

1:32:55

to my gold but with wings is

1:32:57

can fly very easily. So this means

1:33:00

that with a as as cool as

1:33:02

bitcoin to do to get monetize. We

1:33:05

are demand for holding on to death

1:33:07

and on demand for needing to get

1:33:09

into debt are both. Reduced.

1:33:12

So. People think,

1:33:14

all right. well. Bitcoin rises. That means

1:33:16

that everybody dumps the dollar. A dollar

1:33:18

goes to zero. But that's only

1:33:21

one side of the story. The. Other side

1:33:23

of the stories that as bitcoin

1:33:25

rises, people don't get into debt

1:33:27

and therefore don't issue debts and

1:33:29

therefore the issuance of the dollar

1:33:31

declines as well. So not

1:33:33

only does the dollars demand declined, but also

1:33:36

the zola supply declines. And.

1:33:38

So. I. Think

1:33:40

there's a case to be made?

1:33:42

that this is. An

1:33:45

upgrade this is this is a technological

1:33:47

upgrade. This is the free market coming

1:33:49

up with a genius solution to the

1:33:51

problem that is this field cancer that

1:33:53

the world as because it's going to

1:33:55

when I would just the bitcoin economy

1:33:57

appreciate more and more. And. We're

1:33:59

going to witness the on the out

1:34:01

economy. Ah, I'm

1:34:03

basically just into more and more

1:34:06

has relevance. Had the supply of

1:34:08

Seattle gonna contract because people are

1:34:10

going to be issuing fewer deaths?

1:34:13

Less that. Fewer. Bonds. You know

1:34:15

people are going to want to hold on

1:34:17

to Bond Sweets You think? he knows you?

1:34:19

extrapolate. Michael Sailor. And

1:34:22

he extrapolate El Salvador extrapolate or

1:34:24

Bitcoin holders. They're taking our bond's

1:34:26

from their portfolio and they're buying

1:34:28

Bitcoin so they're reducing the demand

1:34:31

for this was of bond there,

1:34:33

reducing demand for the issuance of

1:34:35

more debt, and they're causing. Ah,

1:34:37

so there's no one reason that

1:34:39

that should lead to a massive

1:34:41

collapse in sea otter. It's is

1:34:44

just going to lead to the

1:34:46

bitcoin economy growing and appreciating. One

1:34:48

of the economy stagnates and the

1:34:50

value of. Feel continues to do

1:34:52

what it is only supposed to,

1:34:54

which is shrinking real terms and

1:34:56

in fact. The reason why? think

1:34:58

I mean I If I were to make

1:35:01

it the optimistic case and I have known

1:35:03

to be delusion, the optimistic this one. I'm

1:35:05

a Liverpool fan who spent thirty years thinking

1:35:07

the report them to win the league every

1:35:09

year and but then they did when it's

1:35:11

after thirty years. So I'm not entirely right.

1:35:13

Now is right there. So

1:35:16

as to make the kind of the

1:35:18

losing the optimistic to case here is

1:35:20

that. The

1:35:22

people who have power in the world

1:35:25

are all in death. The people of

1:35:27

money. The people have wealth or all

1:35:29

and debt and perhaps. You

1:35:32

know, maybe bitcoin is taken away

1:35:34

their ability to. Print

1:35:36

money, but Bitcoin also devalue

1:35:39

their debts and that's a

1:35:41

great things So. If

1:35:44

this. Enough we

1:35:46

just the next twenty years, I just a continuation what

1:35:48

we saw in the next in the last ten years.

1:35:51

All. The world's most powerful people on

1:35:53

going to witness their deaths, liabilities, Com.

1:35:56

Wither away into tiny fraction of what they

1:35:58

are in real terms. And

1:36:00

the best way for them to do that?

1:36:02

I know that that's a great thanks. So

1:36:04

they will old, less lasts, and they can

1:36:07

accumulate dollars or so they can accumulate bitcoin.

1:36:09

And as they accumulate bitcoin, you know the

1:36:11

benefit from the bitcoin appreciating. and they benefit

1:36:13

from their debt devaluing. That's the Michael Sailor

1:36:15

strategy. So as more and more people do

1:36:18

this. We

1:36:20

reduce the supply of dollars, We

1:36:22

reduce the demand for dollars and

1:36:24

reduce the value of dollars and

1:36:26

that works out fine for. The

1:36:30

people who have power and to be

1:36:32

than live influence in the people of

1:36:34

money and the government's events are like

1:36:36

you're basically giving everybody a that jubilee.

1:36:38

That's kind of the argument that I

1:36:40

put in the last chapter. Bitcoin can

1:36:42

be the global that jubilee. Because it's

1:36:44

I'm just gonna make death worth less

1:36:46

and less and less hand. It's going

1:36:49

to. Allow us all

1:36:51

to upgrades. Of. One at

1:36:53

a time, you know, as we. Grasp.

1:36:56

What is going on? One by one

1:36:58

we upgrade ah into a superior technology

1:37:00

I think we'll have you know will

1:37:02

have hyperinflation will always be having I've

1:37:04

been placed only do have those it

1:37:06

or not going to be caused by

1:37:09

bitcoin are going to be caused by

1:37:11

insane and governments and like the Lebanese

1:37:13

and Venezuelan government's doing one, insane governments

1:37:15

have always done. But

1:37:17

com. And I

1:37:19

think the long term perspective here is that

1:37:22

town in the long run, I think Bitcoin

1:37:24

just continues to grow and Seok contains to

1:37:26

wither away. But I

1:37:28

have to say that was the

1:37:30

kind of my deal with which

1:37:32

I started writing the book. But

1:37:34

then on the whole covert the

1:37:36

insanity happened and now. I

1:37:39

think with all this noise being

1:37:41

made about the central bank digital

1:37:43

currencies that makes me less delusion

1:37:45

the optimistic about that scenario because

1:37:47

I think. Central

1:37:49

My digital currencies take away that property of

1:37:52

the art has been debt and turns it

1:37:54

into just basically the equivalent of the money

1:37:56

printing. Remember, I was saying earlier that when

1:37:58

you get high profile. It's always when

1:38:01

we was, when it's always been a

1:38:03

government just pops arm muscles when the

1:38:05

government shifts to cranking out new physical

1:38:07

piece of money or several by digital

1:38:09

currencies are the equivalent of running the

1:38:11

printer. But. Digital Printer and

1:38:13

in there is no restraint. Terms

1:38:15

of the credit creation that goes

1:38:17

on. Than. There's it's.

1:38:19

just straight up inflation with credit creation.

1:38:21

was credit money see up money. You

1:38:24

know that that credit creation leads to

1:38:26

a boom and then there's a bus

1:38:28

than the money supply contracts. and so

1:38:30

that is a restraint on the growth

1:38:32

in the money supply. But if you're

1:38:34

just putting our money and handing it

1:38:36

to people and. Buying

1:38:39

their votes essentially which seems to be

1:38:41

the case of was going to happen

1:38:43

I think things are likely to get

1:38:45

uglier incest. Why would that

1:38:47

make things uglier? Because

1:38:49

there's no business cycle, there's no

1:38:51

restraint. There's no, ah, there's no

1:38:53

that we won't get the bus.

1:38:55

It will just be Inflation. Inflation

1:38:57

Inflation Inflation. Exactly. So.

1:39:02

Since most of the money that's

1:39:04

injected back into the system is

1:39:07

done digitally anywhere, think earlier you

1:39:09

said temper census ago: Ninety percent

1:39:11

digital. Why is removing the ten

1:39:13

percent of the physical so potent?

1:39:16

potentially that I don't understand them?

1:39:20

And as is not about the physical

1:39:22

it's it's about the fact is it's

1:39:24

as not as removing the physical part

1:39:26

at some and that that don't is

1:39:28

converting the physical to digital is in

1:39:31

consequence of this the fact that ah

1:39:33

well as it's and consequence on itself

1:39:35

but it's and the important part of

1:39:37

that it allows you to replace the

1:39:39

credit. Daughter. Who is.

1:39:42

Straight up ah, Central

1:39:44

Bank digital currency And

1:39:46

so that currency now

1:39:48

exists. It's basically physical,

1:39:50

but it's. I see

1:39:53

so before because the money wasn't real

1:39:55

anyway when the value disappeared because you

1:39:57

can pay your house proof that money.

1:40:00

How out of the system? And.

1:40:02

So there was like consul sort of

1:40:04

rebalancing, but now we're making a physical

1:40:07

digital, but it now exists. I can

1:40:09

track it. It's a it's a thing

1:40:11

on a block chain, presumably that now

1:40:13

will go on forever, so there's no