back to index2022-03-03_The_Right_to_Transact_is_a_Human_Right
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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 00:14:32.860 |
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. 00:49:35.800 |
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