2022-03-03_The_Right_to_Transact_is_a_Human_Right
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00:00:30.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,
00:00:34.000 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:38.800 | building a plan for financial freedom in 10 years or less. My name is Josh Rascheitz,
00:00:43.200 | and today we're going to talk about money. Rather apropos for a personal finance podcast,
00:00:50.320 | but on a deeper level than what we usually talk. We're going to talk about what money
00:00:54.760 | means, your right to money, and what happens if money doesn't mean anything.
00:01:03.680 | This week, my friend Gabriel Custodiat and I are launching a brand new course. You can
00:01:08.400 | buy it now at BitcoinPrivacyCourse.com. But I want to read to you our intro for the course
00:01:14.600 | because we're going to be talking extensively about these topics. And today, we're going
00:01:18.280 | to be talking about your right to transact, your right to access money. Here's what we
00:01:24.260 | wrote as the teaser to get you to come and buy the course.
00:01:29.240 | Imagine this. Your bank accounts are frozen. You must flee the country with only what you
00:01:34.440 | carry. Gold is suspicious and cash has limits. You cross the world and find a public computer,
00:01:42.200 | download a single program, and type from memory a private key. You now have access to $2 million
00:01:49.120 | worth of Bitcoin, unattached to your identity, tucked away for just this scenario, and the
00:01:55.620 | knowledge to buy, trade, and convert it into any local currency in the world. Cryptocurrencies
00:02:03.160 | are the ultimate exit strategy for inflation, social collapse, and other disasters, but
00:02:08.300 | only if you acquire and use them correctly, which 99% of people fail to do. In this two-part
00:02:14.300 | course, privacy consultant Gabriel Custodiat explains step-by-step multiple ways to legally
00:02:18.620 | buy Bitcoin with no attachment to personal information. He then explains how to use it,
00:02:23.460 | how to protect it, and how to convert to other crypto for speculation or added privacy. The
00:02:29.380 | course includes everything you need to understand this process from A to Z, no prior knowledge
00:02:34.300 | required. As authorities crack down on cryptocurrencies, it is critical to have up-to-date, tested
00:02:40.720 | methods for private Bitcoin. There is much confusion about this process. The aim of this
00:02:46.000 | course is to give you all of the information you need with minimal diversion. No confusing
00:02:50.920 | tech vocabulary, no moralizing, no hacker-level computer skills, only the focused steps to
00:02:56.140 | teach you how to make the most radical personal finance decision of your life. That is our
00:03:02.060 | new course. If you'd like details on it, go to BitcoinPrivacyCourse.com. But we're living
00:03:07.700 | in quite interesting times, where I feel it would be appropriate to talk about why would
00:03:13.960 | a guy like me or a guy like Gabriel even put out the information? Because after all, why
00:03:21.100 | should people need something, some way to transact? Why should people need some way
00:03:28.880 | to exchange value? In a little bit, we're going to get to an article that was published
00:03:37.140 | today in the Wall Street Journal called "If Russian Currency Reserves Aren't Really Money,
00:03:42.540 | The World Is In For A Shock." And it is a shocking article, but I want to begin with
00:03:48.300 | an argument about why you and I fundamentally have the right and freedom to transact with
00:03:57.580 | one another, regardless of what "they" might say. There's a thread that came to the internet
00:04:05.620 | a few weeks ago, written by @punk6529 on Twitter. Here is his Twitter thread. This
00:04:17.780 | was written when the Canadian government a few weeks ago was systematically freezing
00:04:23.140 | people's bank accounts with no judicial process, no oversight, not even involving law enforcement,
00:04:30.620 | but simply giving carte blanche permission to financial institutions to freeze the bank
00:04:36.180 | accounts and funds of anybody that that financial institution suspected of being involved with
00:04:43.220 | the Freedom Convoy. And in that context, 6529 wrote this on Twitter. And we're going to
00:04:50.260 | go through this, because I believe this is an important thing for you to think about
00:04:54.020 | with regard to money. "There are no other constitutional rights in substance without
00:05:02.060 | freedom to transact." I've been meaning to write this for six months, but the Canadian
00:05:06.980 | response to the Trucker protests is illustrating this so vividly that today is the day. I assume
00:05:14.780 | we are in agreement that constitutional democracies are a good form of government, or at least
00:05:20.940 | a better form of government than the other methods we have found to date. This means
00:05:26.180 | that I am taking for granted the following assumptions. People have fundamental rights
00:05:32.300 | to speech, assembly, religion, and so on. People are innocent until proven guilty. The
00:05:43.300 | state cannot punish people without due process, which generally means that, in a court of
00:05:49.660 | law, the state has to prove you have broken some specific law. If you disagree with the
00:05:56.580 | principles above, I guess that's fine, but weird, but probably you can safely exit this
00:06:02.500 | thread now, because it is unlikely that we are going to agree on anything else. People
00:06:08.220 | who know me in real life know that I have been harassing them for years that, without
00:06:13.540 | the freedom to transact, you have no other constitutional rights. And mostly they look
00:06:20.540 | at me strangely and I look at them strangely because it seems obvious to me. Freedom of
00:06:25.500 | speech might require such activities like a website, a pamphlet, an advertisement, paying
00:06:31.860 | a graphic designer, traveling to a different location, all of which cost money. Freedom
00:06:38.620 | of assembly might require such activities like taking a train to Washington DC, booking
00:06:43.540 | a hotel room, hiring a taxi, buying a hot dog with mustard while you assemble, all of
00:06:49.140 | which cost money. Freedom of religion might require such activities like renting a space
00:06:55.460 | for a facility, paying the salaries of religious officials, buying food and consumables, all
00:07:01.100 | of which cost money. I can go on but I think the point is clear, the exercise of rights
00:07:08.620 | costs money. Historically, the risk of financial censorship has been much lower because for
00:07:18.340 | the literally whole of human history, until approximately 2001, it was mostly uncontroversial
00:07:26.940 | that people could have decentralized, non-custodial mediums of exchange. For hundreds of thousands
00:07:35.140 | of years, humans used commodity money, from cowry shells to gold. And then in the last
00:07:40.500 | few hundred years, we have had various forms of cash-based instruments as well. All of
00:07:45.180 | these are non-custodial, decentralized, and not KYC'd. KYC of course is know your customer,
00:07:53.620 | which requires individuals interacting with banks or other financial institutions to turn
00:07:59.580 | over all of their private information so that their identity be verified and to make sure
00:08:04.780 | that they're not associated with any activities that are forbidden by the government that
00:08:09.140 | is controlling the KYC institutions. Or they're not on some bad list of some kind, some naughty
00:08:14.620 | list. Over the last 20 years, the institutional environment has shifted to a posture that
00:08:21.300 | non-custodial money is default suspicious. Central banks who want the death of cash,
00:08:30.740 | Patriot Act and derivatives thereof, geopolitical pressure points via the banking system (pay
00:08:36.740 | attention to that one because we're going to be coming to some genuinely unprecedented
00:08:42.420 | moves in a moment). But 6529, the goal is preventing money laundering, stopping terrorism,
00:08:48.740 | and reducing tax evasion. I agree that these are a) the stated goals and b) an actual subset
00:08:57.700 | of the actual goals. I am also against money laundering, terrorism, and tax evasion. The
00:09:05.940 | problem however is that there is both short-term and long-term goal creep. In the United States
00:09:13.860 | and EU, banks and payment processors have been pressured to cut off accounts to gun
00:09:21.220 | shops, adult businesses, crypto businesses, and other perfectly legal businesses. I consider
00:09:28.500 | this to be undemocratic. If a country would like to make pornography or guns or cryptocurrency
00:09:35.300 | illegal, it has every right to pass laws to do so, and then the citizens can re-elect
00:09:40.980 | or de-elect the politicians who voted for it and/or challenge it in court. What happens
00:09:47.900 | instead is hidden deep bureaucracy type BS where the banks point to their regulators
00:09:54.700 | and say "well they told us to close high-risk accounts" and the regulators point to the
00:09:59.140 | banks and say "we never said that, just be careful". And the net effect is that
00:10:04.660 | you don't have a bank account anymore and there is no recourse, no due process, not
00:10:09.900 | even an actual law that says you should not have an account. It is deep bureaucracy running
00:10:16.900 | a parallel, opaque, unwritten legal system. Deeply undemocratic.
00:10:24.300 | Even in the current system, being unbanked and having to rely on cash is more or less
00:10:29.020 | ejecting you from the modern economy. Paying bills, getting a paycheck, paying vendors,
00:10:34.700 | investing in a 401k, buying crypto even, all require access to traditional payment rails.
00:10:41.020 | But guess what? It's getting worse. Many central banks have stated goals for their
00:10:48.660 | CBDCs to eliminate cash, allow global transaction censorship, apply deeply negative
00:11:04.420 | interest rates. A system of this kind would be the most powerful system of centralized
00:11:10.900 | control the world has ever known. Even Stalin, Hitler, Mao did not have the ability to apply
00:11:17.780 | global transaction censorship across their empires at the touch of a button. What will
00:11:24.620 | happen is some aspiring dictator will censor their opponents' spending during an election
00:11:30.700 | period and they won't be able to buy a tomato, let alone run a campaign. With such power
00:11:36.180 | and no due process, it's a certainty. Power hungry people tend to run for office.
00:11:44.020 | Notice that the third goal is mission creep. Nobody started this process in 2001 saying
00:11:51.100 | the goal is to be able to apply negative interest rates to your savings. And yet here we are.
00:11:57.860 | Below a certain negative rate, people will withdraw their money. So let's prevent them.
00:12:03.740 | The way this process has been working is that we are the frog and we are being boiled slowly.
00:12:11.780 | Every year, the reporting requirements get a little broader, the penalties steeper, the
00:12:18.460 | restrictions on cash withdrawals more severe. And most of all, the presumption of innocence
00:12:25.180 | is turning into a presumption of guilt. Sir, why do you want to withdraw $5,000 in cash?
00:12:34.060 | If you've got nothing to hide, why do you need non-custodial instruments? Non-custodial
00:12:39.140 | is dangerous. I remind you that, literally, for the whole of human history, non-custodial
00:12:49.140 | was the main form of the mediums of exchange. It is a very recent concept that this is a
00:12:58.060 | bad thing. It is effectively a quiet power grab by the state. This is why one of the
00:13:06.580 | reasons that crypto has been generally disliked by central banks in particular. Here they
00:13:13.260 | are closing in on the end of cash and now a new form of digital cash emerges. And in
00:13:21.260 | their view, they need to reel that in too for the rest to work.
00:13:26.660 | So back to constitutional rights. I would generally prefer the term myself. I'm going
00:13:34.460 | to read 6259's post the way that he or she has written it. But I would generally prefer
00:13:40.980 | human rights. I don't think much of constitutional rights. I think a lot of human rights guaranteed
00:13:48.700 | by a constitution. A constitution being something that limits the government's ability to remove
00:13:57.100 | your rights. The rights exist whether they are constitutionally protected or not. But
00:14:02.940 | when a people gives in a constitutional democratic society, when a people gives a government
00:14:09.260 | a charter and they give a government a monopoly on the use of force, they do so with a clear
00:14:16.260 | document stating the domain in which that government can act and restricting that government's
00:14:23.060 | permissions. And that's how I see constitutional rights. So you can think of them as constitutional
00:14:27.540 | rights if you like. You can think of them as human rights. I believe they are human
00:14:31.580 | rights.
00:14:32.860 | So back to constitutional rights. One, you have constitutional rights. Two, you need
00:14:37.380 | money to exercise them. Three, the state acquires the power to cut off funding. What might happen
00:14:43.980 | next? I know what happens. All of 6529's friends think he's overreacting. At which I present
00:14:53.060 | to you the liberal prime minister of G7 country known for its extreme good nature and general
00:15:00.140 | easygoingness. Herein we have a picture of Prime Minister Justin Trudeau. Prime Minister
00:15:09.500 | Trudeau has a political problem. The specific political problem is some truck drivers have
00:15:16.440 | blocked part of Canadian cities and highways to protest his COVID-19 policies. This is
00:15:23.340 | A, annoying him, B, annoying his voters, and C, probably bad for the economy. I don't
00:15:30.780 | actually have a view on the substance of the trucker protests and if Canada's COVID policies
00:15:35.700 | are good, bad, or neutral. I would further guess that the truckers are probably violating
00:15:40.560 | a variety of Canadian laws relating to how they can protest. What would be a normal constitutional
00:15:46.580 | democracy political response to a problem like this is either A, let it play out if
00:15:51.860 | you think it is in good faith, or B, encourage the local authorities to arrest them and try
00:15:56.520 | them in a court if you think it is not. Either is fine. The right to assembly in Canada probably
00:16:02.180 | does not allow you to block the highway for days for everyone else. I assume Canada still
00:16:07.100 | has police and courts so they could presumably arrest the highway blockers and take them
00:16:12.080 | to court. When you go to court in a democracy the following typically applies. You are innocent
00:16:19.220 | until proven guilty. The state has to be specific about which law you have violated. The state
00:16:25.780 | has to prove it, usually beyond a reasonable doubt. I understand that at times this is
00:16:32.780 | annoying for the state. You have to collect evidence. The defendants will get their own
00:16:38.180 | lawyers. There is time and expense involved and sometimes you might not win. This is the
00:16:43.760 | price of a free country. But this is not what is happening today in Canada. The state has
00:16:49.440 | invoked its Emergencies Act, which is defined below. It seems a bit ambiguous to imagine
00:16:56.640 | that the protests exceed the capacity of a province to deal with it or threaten the sovereignty
00:17:02.940 | of Canada but, let me read the Emergencies Act language. What constitutes a national
00:17:11.060 | emergency? The Act defines a national emergency as "an urgent and critical situation of
00:17:16.660 | a temporary nature that "seriously endangers the lives, health, or safety of Canadians
00:17:23.460 | and is of such proportions or nature as to exceed the capacity or authority of a province
00:17:29.300 | to deal with it" or "seriously threatens the ability of the Government of Canada to
00:17:36.180 | preserve the sovereignty, security, and territorial integrity of Canada." The emergency also
00:17:43.540 | "cannot be effectively dealt with under any other law of Canada." The Act outlines
00:17:50.860 | four different types of national emergencies, a war emergency, an international emergency,
00:17:57.780 | a public welfare emergency, and a public order emergency. In this case, the government is
00:18:03.500 | invoking a public order emergency. I'm even willing to stretch and say, "OK, maybe
00:18:11.860 | it was correct to invoke the Act and let's see what he plans to do with it." What was
00:18:16.580 | done with the Act made my jaw drop, however. It is my "oh, this might happen in the future"
00:18:24.500 | scenario, but today. Canada has asked every single financial system provider, from banks
00:18:32.180 | to credit card companies to investment firms to crowdfunding platforms to crypto companies
00:18:36.620 | to insurance companies to freeze the accounts of anyone directly or indirectly supporting
00:18:46.140 | the protests. Given the powers of the Emergency Act, there is no due process on these actions
00:18:52.780 | and no civil liability for this freezing. In the short term, the goal is to shut down
00:18:58.360 | the protests by nuking the protesters' financial infrastructure. I have to say, this is not
00:19:04.220 | the model of criminal justice I expect to see in a constitutional democracy. You can't
00:19:09.060 | just go around freezing people's savings instead of, I don't know, arresting them
00:19:14.100 | and charging them with a crime. Even worse, the indirect supporters. The indirect supporters
00:19:21.000 | have been very fuzzily defined in the press releases. It might include the crowdfunders,
00:19:26.100 | but it might include a family member who sends money to someone protesting in order for them
00:19:29.660 | to buy a meal. They are being treated as terrorist financiers. But 6529, these guys are terrorists.
00:19:37.060 | They are trying to overthrow the government. I don't know. I am not so sure about this.
00:19:41.740 | I do not live in Canada, but Canada has a pretty advanced security infrastructure. I
00:19:46.220 | do not think it is at any real risk of being taken over. But what is a real risk is that
00:19:52.740 | constitutional rights will be curtailed, not through laws or court cases, but through weaponization
00:19:58.500 | of the financial system. Today, you are on Trudeau's side and dislike the truckers.
00:20:03.580 | But it is not always this way. Would you feel the same if Donald Trump were freezing all
00:20:08.940 | the financial infrastructure of BLM and all their indirect supporters? It is a terrible
00:20:16.580 | precedent to set. In politics, you must always, always, always invert. The way to judge an
00:20:24.420 | idea is not if your team in power should do it. The way to judge the idea is if you think
00:20:29.940 | your worst political enemy should have this power and if you feel comfortable that the
00:20:34.020 | team you hate won't abuse it. It is a mistake to roll out the whole anti-terrorism infrastructure
00:20:41.140 | for political protesters and their indirect supporters. The next time around, the other
00:20:47.100 | team will use it against you, and this begets a cycle of political violence that ends badly.
00:20:54.460 | I have just been discussing the immediate term effects. The long-term effects will be
00:20:59.020 | worse. I suspect, without explicit action, many of the people unbanked now will not be
00:21:06.740 | re-banked because financial institutions won't want the headache of doing so. So, this is
00:21:12.420 | not just a short-term thing, but an uncertain duration ejection from the financial system.
00:21:19.620 | No banking, no credit cards, no investments, no insurance (which for truckers means no
00:21:26.820 | job) this type of punishment requires due process. This can get so, so, so much worse
00:21:36.340 | though. If we end up with a fully custodial system, no cash, no non-custodial crypto,
00:21:45.580 | full control digital currency, then these types of actions can happen at the push of
00:21:51.060 | a button, instantly, across large groups of people. "Oh 6529, we would never abuse this
00:21:59.020 | power!" Right, of course not. And yet here we are with Canada, close to my least likely
00:22:07.340 | test case for weaponization of the financial system against domestic dissent. Every day,
00:22:14.540 | every month, every year, I am here to say the same thing. The internet, computers, big
00:22:20.020 | data, machine learning allow us to centralize information flows in a way that we could never
00:22:24.620 | have had before. It is exciting, but it is also dangerous. It is critically important
00:22:34.260 | that we don't sleepwalk into an economic, digital, and metaverse architecture that is
00:22:38.740 | completely centralized. Whether it is on the corporate or state systems, it will eventually
00:22:43.660 | end up under state control because states control the exercise of power. Joshua Sheets
00:22:50.860 | would add, "Violence." But what about criminals 6529? Do you think I do not worry
00:22:57.260 | about criminals? I worry about criminals more than you do. Unlike you, I think criminals
00:23:02.460 | are smart and can read and plan. Wait, what do you mean? If you centralize the greatest
00:23:08.340 | honeypot of power and money in history in the hands of a handful of companies in the
00:23:12.820 | state, the really smart criminals won't be running around robbing banks. They will
00:23:17.460 | aim for corporate or political leadership. And then they can win everything. Criminals
00:23:23.900 | working in their private capacity have done a lot of damage and we should try to stop
00:23:27.540 | them. But they are minor players relative to the arch-criminals who grabbed power, launched
00:23:34.020 | world wars, destroyed countries, economies, cultural heritage, and killed tens of millions.
00:23:40.060 | TLDR, financial systems underpin everything, including our constitutional rights. Weaponizing
00:23:50.100 | the financial system to resolve domestic dissent or even criminal justice issues is a terrible
00:23:56.420 | precedent to set. We must preserve non-custodial wallets at all costs.
00:24:05.100 | Finally, I would like to thank the Government of Canada for providing a sneak preview of
00:24:10.660 | what I have been worried about. A lot of you will still think I'm a bit of a conspiracy
00:24:14.140 | theorist. I'm not. But fewer of you than a week ago will think that. I would like to
00:24:19.380 | end by wishing our Canadian friends good luck in resolving this issue. I do not think this
00:24:24.140 | is the end of democracy in Canada or anything dramatic like that. I think things will eventually
00:24:28.540 | resolve, but this is not the way to do it. Bad precedents should not be normalized. In
00:24:35.540 | any case, if this is your first time here, we love the open metaverse and believe in
00:24:39.140 | interoperable, decentralized internet architecture. See more here. So if you're interested, you
00:24:45.660 | can go to Twitter and you can follow @punk6529 if you appreciated his comments on that particular
00:24:54.700 | issue. I'm going to try to be thoughtful in this episode about how much I add because
00:25:00.260 | I don't want to muddy the water by adding excess commentary. I think 6529 did a great
00:25:09.020 | job of laying out the points. The point is that you, as a human being, have fundamental
00:25:18.140 | human rights. These are your rights regardless of your citizenship. These are your rights
00:25:24.620 | regardless of where you live. These are your rights regardless of whether you are Ukrainian
00:25:31.380 | or Russian or Canadian or American. These are your rights. Now you can be deprived of
00:25:40.500 | your rights with due process when you commit a moral crime. In that case, you can be deprived
00:25:51.000 | of your rights. But absent such a trial, you must not be deprived of your rights. That's
00:26:00.060 | why the Canadian situation was so shocking, so absolutely shocking for the precedent that
00:26:07.620 | it sets. Your ability to exercise your human rights is fundamentally tied in to your ability
00:26:16.820 | to transact. In order for you to transact, you need to have some form of money, some
00:26:24.380 | ability to transact. Yet the direction, as outlined by 6529, is very much in the direction
00:26:31.060 | of control. This is centralized control and custodial control. This is fundamentally new
00:26:38.820 | in human history. This is fundamentally new and as such, it requires tremendous analysis
00:26:47.220 | and tremendous safeguards to make sure that it's not abused. So this is why I personally,
00:26:56.100 | I've talked for some time now, while I missed the Bitcoin train earlier in regards to making
00:27:05.060 | a fortune with a run up in the price of Bitcoin, I am ideologically very committed to seeing
00:27:12.220 | Bitcoin and/or other expressions of abilities of people to exchange value in decentralized
00:27:19.260 | ways. I'm very ideologically committed to wanting these things to succeed because they
00:27:24.580 | are a very important component. That's one of the reasons why I am doing this new class,
00:27:32.020 | BitcoinPrivacyCourse.com, because you need to have the ability to stockpile your own
00:27:40.140 | assets, to protect your own things. You can do this today with physical currency, but
00:27:45.580 | with all the currency controls, that's hard to do. Also with inflation, that's hard to
00:27:50.260 | do. You can do this with physical assets, such as precious metals. Those work, but they
00:27:55.660 | have certain disadvantages. It's hard to bring those back into the financial system in an
00:28:00.340 | effective way, especially in an increasing digital world. This is why it's so important
00:28:05.020 | that we need some form of decentralized digital currency or currencies, and we need to be
00:28:12.380 | able to transact with one another with privacy. Now, here's where things are passing quickly,
00:28:19.740 | quickly, quickly. There's a quote by Vladimir Lenin. He says, "There are decades where nothing
00:28:24.940 | happens, and there are weeks where decades happen." Friends, we are living in some of
00:28:29.540 | those weeks where decades happen. What I just read to you was published on February 14,
00:28:36.420 | just over two weeks ago. But now, all of that has been pushed to the rear by a brand new
00:28:43.980 | crisis, a genuine legitimate crisis, with the invasion of Ukraine by the Russian government.
00:28:50.980 | Now here at Radical Personal Finance, I want to stay as close to exclusively focused on
00:28:56.820 | the financial aspects of this, the things that might affect your life and my life. There
00:29:02.220 | is a lot to cover. In days to come, I will try to cover the collapse of the Russian stock
00:29:07.740 | market, the closure of the Russian stock market. I will cover the situation of the Ukrainians
00:29:16.020 | fleeing Ukraine, Russians fleeing Russia, the devastation of property, the horrible
00:29:26.460 | loss of life, etc. But today, this morning, I saw this article in the Wall Street Journal,
00:29:32.460 | and I thought, "We have to talk about this." The headline is this, "If Russian currency
00:29:37.600 | reserves aren't really money, the world is in for a shock." We'll come back to that in
00:29:42.180 | a moment. First thing you need to know, though, is that some of the sanctions that have been
00:29:47.100 | passed on Russia by so many other governments around the world are fundamentally new in
00:29:57.860 | many ways. So let me go back about four or five days to when the sanctions were announced.
00:30:03.460 | This is a Wall Street Journal article headline, "Sanctions on Russia's Central Bank Deal Direct
00:30:08.540 | Blow to Country's Financial Strength." "Targeting the reserves held by Russia's
00:30:14.100 | central bank is potentially the most powerful weapon in the West's financial arsenal and
00:30:19.500 | takes aim at the heart of Russia's financial system. It is a move with few precedents that
00:30:25.820 | amplifies other Western sanctions but also carries risks. The United States, Europe,
00:30:33.180 | and Canada pledged Saturday to prevent the Bank of Russia from deploying its $630 billion
00:30:43.140 | stockpile of international reserve, quote, "in ways that undermine the impact of our
00:30:49.300 | sanctions," they said in a joint statement Saturday. The move directly targets the war
00:30:55.460 | chest that President Vladimir Putin has built up in recent years to help insulate Russia's
00:31:01.540 | economy from outside pressures. "The move could be a hammer blow to Russia's financial
00:31:07.660 | system, limiting the government's ability to defend the ruble in currency markets, to
00:31:13.100 | make overseas purchases, and to backstop banks that have been hurt by international sanctions,"
00:31:19.140 | economists and central bank officials said. "Russia spent years building up its reserves,
00:31:29.260 | converting revenue its oil and gas companies generate through sales abroad, into a massive
00:31:34.860 | mountain of securities, bank deposits, and gold. Foreign reserves are, by their nature,
00:31:41.460 | held abroad, often in government bonds of other nations, and at accounts with commercial
00:31:46.660 | banks and other nations' central banks. The moves announced Saturday would affect
00:31:51.300 | close to 40 percent of Russia's reserves that were held in North America and Europe
00:31:57.100 | as of last June, according to a recent report by Russia's central bank."
00:32:02.540 | Now for the rest of the article you can of course pull up wallstreetjournal.com and find
00:32:07.900 | "Sanctions on Russia's Central Bank Deal Direct Blow to Country's Financial Strength."
00:32:12.980 | I don't know, of course, none of us do, I don't know what was in President Putin's
00:32:20.060 | mind and what was not, but it would seem to me that this, I would guess that this blindsided
00:32:27.740 | him. I don't think he planned for his country's foreign reserves to be frozen. The reason
00:32:35.780 | I want to point this out to you is that it's a lesson of exactly what we just talked about
00:32:42.020 | at a small scale at a larger scale. We talked about Canada freezing truckers' credit cards
00:32:51.820 | and their wives' credit cards and bank accounts and such. And now here we're talking about
00:32:58.300 | some of the most powerful, the most powerful country in the world, the United States, together
00:33:03.780 | with many European countries and Canada, freezing the assets of another sovereign government.
00:33:13.540 | Now I pray that this move has the desired effect to bring peace, to stop violence, war,
00:33:22.780 | etc. But this is fundamentally as here we go. Here's the quote, I was about to say it's
00:33:31.260 | a nuclear bomb in finance and here it's quote, "symbolically speaking, it's a nuclear bomb
00:33:37.060 | in the world of global finance," said Soni Kapoor, a finance professor and CEO of the
00:33:43.740 | Nordic Institute for Finance, Technology and Sustainability, an Oslo-based think tank.
00:33:51.700 | This is an absolute nuclear bomb in international finance. Which brings me to today's article.
00:34:01.220 | Headline "If Russian Currency Reserves Aren't Really Money, The World Is In For
00:34:07.300 | A Shock." Sanctions have shown that currency reserves accumulated by central banks can
00:34:13.140 | be taken away. With China taking note, this may reshape geopolitics, economic management,
00:34:21.100 | and even the international role of the US dollar.
00:34:25.580 | What is money is a question that economists have pondered for centuries, but the blocking
00:34:29.340 | of Russia's central bank reserves has revived its relevance for the world's biggest nations,
00:34:34.820 | particularly China. In a world in which accumulating foreign assets is seen as risky, military
00:34:40.420 | and economic blocks are set to drift farther apart. After Moscow attacked Ukraine last
00:34:46.780 | week, the US and its allies shut off the Russian central bank's access to most of its $630
00:34:52.380 | billion of foreign reserves. Weaponizing the monetary system against a group of 20 countries
00:34:57.900 | will have lasting repercussions. The 1997 Asian financial crisis scared developing countries
00:35:03.740 | into accumulating more funds to shield their currencies from crashes, pushing official
00:35:08.340 | reserves from less than $2 trillion to a record $14.9 trillion in 2021, according to the International
00:35:16.340 | Monetary Fund. While central banks have lately sought to "buy" and "repatriate" gold,
00:35:25.180 | it only makes up 13% of their assets. Foreign currencies are 78%. The rest is positions
00:35:31.900 | that the IMF and Special Drawing Rights (SDR) and IMF created claim on hard currencies.
00:35:39.260 | Many economists have long equated this money to "savings in a piggy bank," which in
00:35:44.700 | turn correspond to investments made abroad in the real economy. Recent events highlight
00:35:50.460 | the error in this thinking. Barring gold, these assets are someone else's liability.
00:36:08.380 | Last year, the IMF suspended Taliban-controlled Afghanistan's access to funds and SDR. Sanctions
00:36:15.800 | on Iran have confirmed that holding reserves offshore doesn't stop the US Treasury from
00:36:21.820 | taking action. As New England law professor Christine Abely points out, the 2017 settlement
00:36:28.300 | with Singapore's CSE TransTel shows that the "mere use" of the dollar abroad can
00:36:37.100 | violate sanctions on the premise that some payment clearing ultimately happens on US
00:36:43.420 | dollars. To be sure, the West has frozen Russia's
00:36:46.740 | stock of foreign exchange, but hasn't blocked the inflow of new dollars and euros. The country's
00:36:53.380 | current account surplus is estimated at $20 billion a month due to exports of oil and
00:36:58.820 | gas, which the US and the European Union want to keep buying. While these balances go to
00:37:06.220 | the private sector, officials have mobilized them. Stopping major banks like Sberbank from
00:37:12.320 | using dollars, and excluding others from the swift messaging system, still plunges the
00:37:18.020 | economy into chaos, especially if foreign businesses are afraid to buy Russian energy,
00:37:25.100 | despite the sector's explicit exclusion from sanctions. But hard currency will probably
00:37:31.220 | keep gushing in through energy-focused lenders like Gazprom Bank, and can theoretically be
00:37:36.500 | used to pay for imports and buy the ruble. Yet the entire artifice of "money" as
00:37:43.360 | a universal store of value risks being eroded by the banning of key exports to Russia, and
00:37:51.920 | boycotts of the kind corporations like Apple and Nike announced this week. If currency
00:37:57.700 | balances were to become worthless computer entries, and didn't guarantee buying essential
00:38:04.060 | stuff, Moscow would be rational to stop accumulating them and stockpile physical wealth in oil
00:38:11.060 | barrels, rather than sell them to the West. At the very least, more of Russia's money
00:38:17.420 | will likely shift into gold and Chinese assets. Indeed, the case levied against China's
00:38:25.340 | attempts to internationalize the renminbi has been that, unlike the dollar, access to
00:38:33.660 | it is always at risk of being revoked by political considerations. It is now apparent that, to
00:38:42.980 | a point, this is true of all currencies. The risk to "king dollars" status is still
00:38:52.540 | limited due to most nations' alignment with the West and Beijing's capital controls.
00:39:00.020 | But financial and economic linkages between China and sanctioned countries that are only
00:39:06.740 | allowed to accumulate reserves and, crucially, spend them, there will necessarily strengthen.
00:39:16.500 | Even nations that aren't sanctioned may want to diversify their geopolitical risk.
00:39:21.860 | It seems set to further the "de-globalization" trend and entrench two separate spheres of
00:39:28.860 | technological, monetary, and military power. China itself owns $3.3 trillion in currency
00:39:38.100 | reserves. Unlike Russia, it cannot usefully hold them in renminbi, a currency it prints.
00:39:46.780 | Stockpiling commodities is an alternative. The conundrum creates another incentive for
00:39:51.540 | Beijing to reduce its trade surplus by reorienting its economy toward domestic consumption, though
00:39:57.860 | it has proven challenging. What can investors do? For once, the old trope may not be ill-advised.
00:40:06.860 | Buy gold. Many of the world's central banks will surely be doing it.
00:40:16.780 | Here you have insight into the largest of systems. I wanted to juxtapose these two scenarios
00:40:26.660 | because at its core, both are dealing with the same fundamental problem—the ability
00:40:33.740 | of an outside actor to unilaterally remove access to your money. In Canada, it's the
00:40:43.100 | large and powerful nation-state expressing its ability to unilaterally remove access
00:40:49.380 | to those political dissidents who are causing it an annoyance and embarrassment. The big
00:40:58.180 | government against the little people. Here in the story of Russia, you have a massive
00:41:12.580 | plurality of the world's governments, especially the large and powerful ones, coming against
00:41:26.820 | Russia and saying, "You're not allowed to invade Ukraine, and we're going to take
00:41:31.860 | your stuff." It's shocking to see the stories that are coming out. I have been trying desperately
00:41:41.060 | to figure out how the system of the Russian oligarchs works, and why governments are seemingly
00:41:52.800 | seizing the yachts of the Russian oligarchs and seizing their other property. I've
00:41:57.420 | been trying to figure out if there's been some kind of rule of law and some kind of
00:42:01.980 | adjudication of personal guilt. I think that in most cases, there probably is a lot of
00:42:07.740 | guilt. My understanding of the collapse of the Soviet Union led to just a lawless situation
00:42:16.940 | in which the strongest came in, both from the West and also within Russia, and took
00:42:22.020 | over and created fortunes for themselves. But I've not seen where there's actually
00:42:28.180 | been any kind of trial, and yet you're seeing news articles come out about yachts
00:42:37.480 | being seized around the world, property being seized, etc. I haven't been able to figure
00:42:43.220 | that out yet, as far as has there been any proper due process of law or not. So I don't
00:42:50.540 | know that yet. But the point is, at either end, you certainly see these nations coming
00:42:56.060 | together and saying, "We are going to freeze billions and billions and billions of dollars
00:43:03.580 | of the Russian government." And again, I'm hoping that it has the desired effect to restrain
00:43:11.080 | Putin in his bellicose ways and cause him to not be able to perpetuate loss of life,
00:43:18.880 | etc. But I'm concerned about the precedent, because I don't particularly consider that
00:43:27.660 | any nation should have that power. And we live in a world right now where the United
00:43:32.940 | States is the world's sole superpower, able to express and to impose its will upon
00:43:40.400 | clearly any nation on the earth. And now it's power in the financial system as well. And
00:43:48.360 | the United States is not a righteous nation in any way. It is not an upright nation that
00:43:55.160 | knows how to follow rule of law. It makes it up as it goes along with the "might
00:44:00.200 | make right" philosophy. But at this point in time, being so powerful, it doesn't need
00:44:05.520 | to do things that needlessly harm others by going and invading. It's built its empire,
00:44:17.600 | and so now it can proceed forward with that empire. So it's deeply concerning as a point.
00:44:23.760 | Now, what do you do about it? As I said, number one, try to keep your nose clean. Do your
00:44:30.400 | best to follow the laws, do your best to not run afoul of anything, do your best not to
00:44:35.960 | protest, not to do those things, etc. So keep your nose clean and do your best not to anger
00:44:43.880 | powerful people, because they have powerful people, powerful governments especially, have
00:44:48.800 | the ability to have vast power. In addition, it makes you see why there are certain attributes
00:44:57.200 | of financial assets that are powerful. In the Wall Street Journal article, what did
00:45:01.560 | you see here? You saw how, what are the solutions, right? Well, Russia could stockpile barrels
00:45:09.020 | of oil. It's a commodity. Gold is a commodity. Why do central banks have it? Because it's
00:45:14.440 | a store of value, but it's one of the few stores of value that's not somebody else's
00:45:20.160 | liability, as the article itself talked about. You can do the same thing. You can store physical
00:45:25.960 | assets, and that works. Physical assets are not passed. Any Canadian trucker that had
00:45:35.920 | $10,000 Canadian physical currency, unless they were physically arrested and the money
00:45:43.200 | seized upon their arrest, they weren't barred from transacting. They could go out and they
00:45:48.280 | could spend their currency. What was frozen was digital money. Anything that's digits
00:45:57.240 | on a screen. So possession here is very, very important. Currency still works. It doesn't
00:46:02.320 | work for necessarily a government. It's on a sanction list or a criminal who's on a most
00:46:07.400 | wanted list. It's very hard in those cases, but currency still works. Problem is, there's
00:46:12.480 | war on cash, global war on cash. So the ability or the right to accept currency is diminished.
00:46:21.840 | Other commodities have their value as well. So there's the reason why you have the classics
00:46:27.740 | of gold, gold and silver coins. Other commodities may work. It's just depending on the other
00:46:35.000 | commodity, you wind up with bulkiness of some commodities. You wind up with obsolescence
00:46:40.680 | of other commodities. And as you think about commodity planning, as I've covered previously,
00:46:47.360 | most commodities, meaning physical things, things that people desire, they have problems
00:46:54.360 | that gold and silver or precious metals generally don't have. So you could store your wealth
00:47:03.720 | in apples, bushels of apples, but it takes an awful lot of space to store your wealth
00:47:08.960 | and the product itself is perishable. You could store your wealth in container loads
00:47:16.400 | of sneakers, but it's bulky and the product itself will eventually deteriorate. The glue
00:47:27.320 | will deteriorate. Everything will break down even if it's not exposed to anything and it
00:47:33.660 | runs the risk of becoming obsolete in terms of style. Other commodities have unique problems.
00:47:40.840 | You could store your wealth in the form of guns. Guns are generally attractive and valuable,
00:47:46.440 | but now you run additional legal risk that a government may declare that your legally
00:47:54.180 | purchased, legally owned guns are suddenly contraband. You can own your wealth in the
00:48:00.000 | form of gold and silver coins. Recently I talked about when the United States seized
00:48:06.680 | gold coins from its citizens and then devalued gold, stealing 40% of the value from its own
00:48:13.280 | citizenry. So gold and silver coins are not without risk, but they are some of the lower
00:48:19.560 | risk options. All of these things have the limitation of being physical assets though,
00:48:28.440 | which is what brings us to Bitcoin, where when you look at Bitcoin, it provides a glimmer
00:48:34.000 | of hope that perhaps we could have a decentralized store of value that is not subject to the
00:48:43.680 | actions of a nation state. And if you can do that anonymously, it's even better. That's
00:48:51.880 | the point. So I would ask you to consider signing up for my class. Go to BitcoinPrivacyCourse.com
00:49:00.120 | to sign up. BitcoinPrivacyCourse.com. I think you will love it. I think you will learn a
00:49:06.000 | lot and I hope that you see the value for it, the need for it. Obviously I don't expect
00:49:12.640 | that any of us will necessarily have to do what we put in that snazzy little intro, but
00:49:21.320 | if you ever did need it, it would be really nice to have. Go to BitcoinPrivacyCourse.com,
00:49:27.480 | sign up today. BitcoinPrivacyCourse.com. BitcoinPrivacyCourse.com. Go there now. BitcoinPrivacyCourse.com.
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