Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics

00:00:00.000 | you can't have permanent war without fiat.

00:00:04.200 | And I also think there's a case to be made

00:00:07.600 | that you can't really have fiat without war.

00:00:10.380 | The following is a conversation with Seyfied Namous,

00:00:15.520 | one of the central and most impactful economists,

00:00:17.880 | philosophers, and educators in the world of Bitcoin.

00:00:21.600 | He's an Austrian economist, an anarchist,

00:00:24.480 | and the author of "The Bitcoin Standard"

00:00:27.000 | and the new book, "The Fiat Standard."

00:00:29.640 | Seyfied does not mince words in his criticism of economists

00:00:33.760 | and humans in general with whom he disagrees.

00:00:36.800 | For example, Paul Krugman,

00:00:39.000 | who is a neo-Lackensian economist

00:00:41.560 | and a previous guest of this podcast.

00:00:43.620 | Seyfied's opinions are strong and often controversial.

00:00:48.760 | I do push back in this conversation,

00:00:50.760 | playing devil's advocate or trying to steal man each side.

00:00:54.360 | But as always, I do so in the service of exploring

00:00:57.960 | the rich space of ideas that safety has about human nature

00:01:01.680 | and human civilization.

00:01:03.680 | I trust the intelligence of you, the listener,

00:01:06.700 | to come to your own conclusions.

00:01:09.160 | That is the burden of being a free-thinking human.

00:01:12.600 | It is on each of us individually

00:01:14.820 | to dive into this chaos of ideas,

00:01:17.840 | and from that chaos,

00:01:19.120 | discover long-lasting universal wisdom to live by.

00:01:23.220 | This is the Lex Friedman Podcast.

00:01:26.120 | To support it, please check out our sponsors

00:01:28.120 | in the description.

00:01:29.480 | And now, dear friends, here's Safetine Amoos.

00:01:32.880 | Let's start with a big question.

00:01:35.720 | What is money?

00:01:37.600 | And what is the role of money

00:01:39.040 | in the history of human civilization?

00:01:40.680 | Money is a medium of exchange.

00:01:42.400 | The thing that defines money is that it is a good

00:01:44.660 | that you don't buy for its own sake,

00:01:46.820 | because you wanna consume it itself,

00:01:48.440 | or because you want to employ it

00:01:50.840 | in the production of other goods,

00:01:51.900 | which is what capital goods are.

00:01:53.440 | So we have consumption goods, we have capital goods.

00:01:55.840 | Money is distinct from those two,

00:01:57.520 | because it is a good that is acquired

00:01:59.400 | purely to be exchanged later on for other goods.

00:02:01.920 | So it's not something that you acquire for its own sake.

00:02:05.160 | You acquire it so that you can then later on exchange it.

00:02:07.800 | And that's a market good.

00:02:09.720 | That's a market good like all other goods.

00:02:12.000 | You acquire food because you eat it,

00:02:14.080 | you acquire a car to move you around,

00:02:16.120 | you acquire money so that you can exchange it

00:02:17.880 | for other goods.

00:02:19.480 | And that's something that many people

00:02:21.640 | have a hard time grasping,

00:02:23.040 | the concept of money as a market good.

00:02:25.040 | But it is a market good, just like all others.

00:02:27.880 | And the importance of it is that it allows us to trade,

00:02:31.440 | it allows us to develop the division of labor,

00:02:35.760 | which would not be possible

00:02:37.280 | at any kind of sophisticated level without money.

00:02:39.920 | So if we live in a small society of 10 people,

00:02:44.360 | then think about all the things that we can make,

00:02:46.560 | all the things that we can produce.

00:02:49.040 | If we're only 10 people isolated from the world,

00:02:51.800 | there's only very few things that we can make.

00:02:53.520 | And therefore we can exchange those things

00:02:56.280 | directly with one another.

00:02:57.880 | But as, you know, if we get in contact with other societies

00:03:02.720 | that have more people,

00:03:04.160 | then the opportunities for specialization increase.

00:03:06.640 | You know, if there's 10 people,

00:03:07.760 | the only thing that you can make is the very basics

00:03:10.880 | you need for your survival.

00:03:12.120 | But if you're part of an economy of 10 million people,

00:03:15.680 | there's much more room for specialization.

00:03:17.440 | You can make a car, you can make a house

00:03:19.820 | that's very sophisticated.

00:03:22.000 | And that relies on the division of labor.

00:03:24.440 | That relies on you specializing

00:03:26.640 | and doing one tiny little thing,

00:03:28.960 | which is not what you consume.

00:03:30.760 | You know, you trade that thing

00:03:33.280 | for all the things that you consume.

00:03:34.680 | So as the economy becomes more sophisticated

00:03:37.600 | and involves more people,

00:03:38.920 | and currently we're all part of an economy

00:03:41.200 | of almost 8 billion people,

00:03:43.680 | each one of us produces one tiny little thing,

00:03:46.600 | and they exchange that thing

00:03:48.960 | for all the things that they want.

00:03:50.800 | So because we specialize,

00:03:52.400 | we become more productive

00:03:53.600 | in doing the thing that we're good at.

00:03:55.480 | So, you know, there's people out there who are engineers

00:03:57.920 | who are designing windshields in cars.

00:04:00.000 | It's a very specialized thing.

00:04:01.680 | They sell windshield design to Mercedes-Benz.

00:04:05.200 | And then from that, you know,

00:04:07.200 | that windshield design is added on

00:04:09.600 | to millions of cars around the world.

00:04:11.480 | And from that, they're able to get enough money

00:04:14.240 | to meet all of their needs.

00:04:16.020 | So the division of labor is enhanced enormously with money,

00:04:19.440 | because without money,

00:04:20.840 | it's very difficult to be able to exchange

00:04:23.720 | a large number of goods.

00:04:24.800 | It's very difficult to have a sophisticated economy

00:04:27.320 | with a large degree of specialization,

00:04:29.160 | because it's very difficult to find people

00:04:33.560 | who want the thing that you have

00:04:36.040 | and have the thing that you want.

00:04:37.760 | We call this the coincidence of wants.

00:04:40.640 | And that's really the problem that money solves.

00:04:42.720 | So you make apples and I make oranges.

00:04:46.720 | I'd like to have some of your apples,

00:04:48.400 | but you don't want my oranges.

00:04:50.080 | And that's, we have a problem of coincidence of wants.

00:04:52.240 | So what do I do?

00:04:53.080 | You want bananas.

00:04:54.120 | I need to find somebody who has bananas,

00:04:56.280 | give them my oranges, take their bananas,

00:04:58.240 | give you their bananas, and then I take the apples.

00:05:00.880 | In that case, bananas are a medium of exchange.

00:05:03.440 | So it's natural that a medium of exchange will evolve

00:05:06.400 | and will emerge in an economy

00:05:07.840 | as an economy becomes more sophisticated.

00:05:09.680 | As we move beyond 10 people and 10 goods,

00:05:12.920 | it's inevitable that we're going to come to a situation

00:05:15.760 | where we have the problem of coincidence of wants,

00:05:18.360 | and the way to solve that is to use a medium of exchange.

00:05:21.640 | And it can be anything.

00:05:22.480 | It can be a banana.

00:05:23.320 | It can be food stuff.

00:05:25.880 | It can be any kind of good.

00:05:28.160 | As long as I acquire the good

00:05:29.840 | with the purpose of it passing it on to you,

00:05:32.520 | not for the purpose of me consuming it or using it,

00:05:35.200 | then that's a medium of exchange.

00:05:36.840 | - So when we look at the entirety of human society

00:05:39.920 | of millions of billions of people,

00:05:42.520 | you think of them just a bunch of individuals

00:05:44.920 | running around.

00:05:46.360 | I love the term coincidence of wants.

00:05:49.520 | So each one of them, it's like a stochastic system.

00:05:52.680 | They have desires.

00:05:54.320 | It's like a random collection of desires

00:05:56.520 | somehow rooted in our evolutionary history,

00:05:59.000 | but mostly random in terms of preference

00:06:01.600 | of banana or apple, that kind of thing.

00:06:04.240 | And then they also have the capacity

00:06:07.360 | for competence and excellence in particular kind of labor.

00:06:11.880 | So like specialization.

00:06:14.320 | They're able to be incredible at a particular set of tasks.

00:06:18.120 | So there's a bunch of ants running around

00:06:20.760 | with consciousness and intelligence.

00:06:23.160 | And they have desires and they have capabilities.

00:06:26.520 | And then there's a coincidence of both the wants they have

00:06:31.520 | and the capabilities they have.

00:06:34.520 | And you wanted to create a system

00:06:36.300 | that kind of exchanges those things.

00:06:39.280 | So when you imagine what is a good,

00:06:44.120 | what is markets, when you imagine a market

00:06:46.280 | is like a hierarchical system, what do you imagine?

00:06:50.880 | What is a market?

00:06:51.900 | - A market is just the name

00:06:53.920 | for the naturally emergent phenomena

00:06:55.680 | of people voluntarily exchanging things.

00:06:58.280 | It's-- - At any scale.

00:07:00.040 | - At any scale, yeah.

00:07:01.240 | Individual, it could be a market of two people

00:07:03.160 | on an island on their own.

00:07:04.560 | It could be 8 billion people across the planet.

00:07:07.040 | - Naturally emerging.

00:07:09.440 | - Yes, this is the thing I think that is very hard

00:07:12.440 | for many people who don't have a good understanding

00:07:15.440 | of economics to grasp that capitalism and markets

00:07:18.880 | are not something that you need a central planner

00:07:23.480 | or a government officer to make happen.

00:07:26.840 | Capitalism is just what happens

00:07:28.280 | when people are left to their own devices.

00:07:30.040 | It's just our cognitive capacity allows us to develop tools

00:07:34.400 | that we can use for production.

00:07:36.200 | And that's what we do.

00:07:37.880 | That's what humans have been doing

00:07:39.000 | since they started making spears to hunt.

00:07:42.120 | That's the first capital good probably.

00:07:44.240 | So we're constantly accumulating capital.

00:07:46.240 | We're constantly trading with one another.

00:07:47.680 | We find an opportunity.

00:07:49.200 | You've got a lot of oranges, I've got a lot of apples.

00:07:52.480 | Then I'll take some of yours, you'll take some of mine.

00:07:54.600 | We're both better off.

00:07:56.000 | This is just a naturally emergent thing.

00:07:58.880 | And money is what makes it enormously powerful.

00:08:03.040 | Money is what allows it to scale really.

00:08:05.280 | Money is what allows it to go beyond small societies

00:08:09.200 | into just something that is global.

00:08:11.280 | Because with money, again, as I was saying earlier,

00:08:14.880 | all you need to do is specialize in doing one thing,

00:08:17.040 | the thing that you do best,

00:08:18.280 | and then you exchange that for money,

00:08:19.760 | and you don't have to worry

00:08:21.240 | about whether the other people involved in this

00:08:24.280 | want what you have and have what you want.

00:08:26.560 | You just sell it for money to whoever wants it,

00:08:29.920 | and you buy whatever you want from whoever has it.

00:08:32.800 | And that's an enormous reduction in the mental burden

00:08:37.160 | of how a market economy functions.

00:08:39.400 | So the first thing that I would say about money

00:08:40.880 | is that it allows for the division of labor,

00:08:43.120 | and it allows for the market system to grow.

00:08:45.360 | And the second thing is that money is a mechanism

00:08:47.960 | for storing value into the future.

00:08:50.560 | So again, as humans, we develop the capacity

00:08:53.720 | to think for the future.

00:08:55.840 | We make a spear so that we can hunt,

00:08:58.600 | and then we see that it works,

00:09:00.320 | and then we take it out of the animal

00:09:01.640 | that we hunted it with,

00:09:02.920 | and we keep it for the next day's hunt.

00:09:05.560 | And then we start making a better spear,

00:09:07.080 | and we make a better fishing rod,

00:09:08.480 | and then we make a fishing net,

00:09:09.680 | and then we make a fishing boat.

00:09:11.320 | And that's our ability to think of the future.

00:09:15.160 | And as we start building durable goods,

00:09:17.960 | we start thinking more and more of the future.

00:09:19.800 | We start becoming more and more future-oriented.

00:09:22.920 | And that's really the process of civilization,

00:09:26.560 | the process of denying our needs now

00:09:29.440 | in order to think for the future.

00:09:31.120 | So instead of spending all of our day on the beach,

00:09:33.720 | enjoying ourselves, we take time off from leisure

00:09:38.040 | on the beach and spend some time making a spear

00:09:42.480 | or making a fishing rod so that our productivity

00:09:45.280 | in hunting or fishing tomorrow is gonna be higher.

00:09:48.120 | And so that ability to think for the future

00:09:51.800 | is enhanced by our ability to provide for the future.

00:09:54.640 | And we do that with durable goods.

00:09:56.800 | But then money ends up being the best mechanism

00:10:00.720 | for providing for the future

00:10:02.120 | because the future is uncertain.

00:10:04.400 | So you can save your apples and oranges,

00:10:07.920 | you can save the spears,

00:10:09.560 | you can save the animal that you hunted.

00:10:12.080 | But these things, first they rot,

00:10:15.200 | they're not very good at holding onto their value over time.

00:10:17.560 | But even if they were,

00:10:19.120 | even if you have objects that are durable,

00:10:22.400 | the problem with them is that you don't know

00:10:24.360 | if you need them tomorrow or next month or next year.

00:10:28.160 | You're not sure if you're going to be needing them.

00:10:30.280 | And you might end up not needing them.

00:10:31.880 | And you might end up not finding anybody who needs them

00:10:33.920 | or finding somebody who needs them

00:10:35.160 | but doesn't value them much

00:10:36.440 | and won't give you much in exchange.

00:10:38.360 | Money allows you the optionality

00:10:40.040 | of saving the most liquid good, the most saleable good.

00:10:43.760 | So it's something that you can sell tomorrow

00:10:46.000 | with the least uncertainty.

00:10:47.720 | It has the most liquidity,

00:10:48.760 | the most ability to be sold without a loss in its value.

00:10:52.520 | So money is our most advanced technology

00:10:55.480 | and our best technology for moving value into the future.

00:10:58.480 | And so I think history really,

00:11:01.360 | I argue this in all my books,

00:11:03.680 | is that really history, we see,

00:11:06.400 | we can think of it as a process of our money gets harder.

00:11:10.640 | And so our money gets better

00:11:12.880 | at holding onto its value for the future.

00:11:16.040 | And by harder, I mean harder to produce.

00:11:18.560 | We find things that are hard to produce

00:11:20.760 | that are better at holding onto their value.

00:11:23.080 | So they hold onto their value better for the future.

00:11:25.400 | And that allows us to plot and plan for the future.

00:11:28.280 | That makes the future less uncertain.

00:11:31.160 | And that makes us more future-oriented.

00:11:33.960 | In other words, it lowers our time preference.

00:11:36.600 | And the harder the money is,

00:11:38.800 | the better it is allowing us to think of the future.

00:11:41.480 | - So people should know that you've written the book

00:11:45.040 | Bitcoin Standard from 2018, I believe.

00:11:48.440 | - Yeah.

00:11:49.280 | - And then a new book called Fiat Standard.

00:11:51.200 | The Bitcoin Standard is considered kind of the Bible

00:11:55.400 | in the cryptocurrency space and the Bitcoin space

00:11:57.760 | of just a very rigorous systematic explanation

00:12:01.720 | of why Bitcoin, what is it, why should it be,

00:12:06.360 | why is it good?

00:12:07.440 | So you're describing in that book and in the new book,

00:12:10.760 | different implementations of the technology of money.

00:12:13.600 | In the new book, you talk about fiat money,

00:12:17.520 | which is another way to do money.

00:12:19.480 | So obviously there's a lot of different ways to do money.

00:12:22.600 | And maybe you haven't discovered the best way to do money yet.

00:12:25.680 | Our conversation today is how to do money better.

00:12:28.240 | Maybe we'll go back to bananas eventually.

00:12:32.240 | - Right.

00:12:33.080 | Very good reasons why we won't.

00:12:34.960 | - Well, we can disagree.

00:12:37.160 | We can agree to disagree on this.

00:12:39.320 | I'm open-minded to the bananas.

00:12:41.280 | One of the biggest source of joy to me

00:12:44.040 | when I first came to this country is eating bananas.

00:12:47.960 | And so maybe money, happiness, perishable happiness

00:12:54.720 | will eventually become the best medium of exchange.

00:12:58.360 | I don't know.

00:12:59.280 | Open-minded.

00:13:00.120 | Anyway, so you mentioned hard money and soft money.

00:13:03.120 | So there's different ways to do money.

00:13:05.400 | What is hard money?

00:13:06.480 | What is soft money?

00:13:08.280 | - In the Bitcoin standard, I present the argument

00:13:10.280 | that money is always whatever is the hardest thing to make.

00:13:14.760 | Historically, I think we see many examples of that.

00:13:17.400 | So for instance, in prison, people use cigarettes as money

00:13:20.040 | because nobody can make cigarettes in prison.

00:13:22.240 | In societies, we have the example of Yap Island,

00:13:25.160 | for instance.

00:13:26.040 | It's an island that doesn't have any limestone,

00:13:28.000 | but there's a nearby island that has a lot of limestone.

00:13:31.280 | And it's very expensive, obviously,

00:13:33.520 | with primitive technology to move limestone

00:13:35.560 | from Palau to Yap.

00:13:38.120 | So on Yap, limestones were money.

00:13:41.560 | Seashells, rare seashells that are not easy to find

00:13:43.960 | end up serving as money in places where they're rare.

00:13:48.160 | Glass beads were money in West Africa

00:13:50.640 | where there was no glass-making technology

00:13:52.640 | because they were imported from abroad

00:13:54.600 | and they were very hard to make.

00:13:56.200 | And I think there's a conscious effort

00:13:59.320 | of some people might recognize the hardness

00:14:02.200 | and the scarcity and choose this as money.

00:14:04.400 | But I think what's more important

00:14:05.840 | is just a natural evolutionary process

00:14:08.400 | whereby people choose all kinds of random things as money,

00:14:12.840 | bananas maybe even.

00:14:14.520 | But then the people who end up making these bad choices

00:14:17.280 | don't end up with any wealth left.

00:14:18.880 | Whereas the people who store their wealth

00:14:21.280 | in the things that are hard to make

00:14:24.000 | end up acquiring, end up maintaining their wealth

00:14:26.840 | and maybe even increasing it over time.

00:14:29.080 | And of course, this culminated in the 19th century,

00:14:31.960 | in the end of the 19th century

00:14:33.120 | by basically the entire planet being on a gold standard.

00:14:36.880 | - What is a gold standard?

00:14:38.600 | - The gold standard is basically when money is gold

00:14:41.760 | or at least government currencies backed by gold.

00:14:44.680 | But the reason gold became money

00:14:46.840 | and not copper, not nickel, not bananas

00:14:49.080 | is that gold is the hardest metal in the world

00:14:52.120 | and it is the hardest metal to increase the supply of.

00:14:55.880 | And the reason for that is based in chemistry.

00:14:57.960 | So gold is indestructible.

00:15:01.040 | You can't destroy gold in any meaningful sense.

00:15:03.640 | It's been accumulating stockpiles for thousands of years.

00:15:08.640 | The gold that was worn by Nefertiti back in ancient Egypt

00:15:12.360 | is today probably in somebody's necklace

00:15:16.000 | or in somebody's gold coin, it's still there.

00:15:17.840 | So for thousands of years, humans have been digging for gold.

00:15:21.000 | They dig it out of the ground, they refine it

00:15:23.240 | and then they put it in a jewelry or a coin

00:15:25.840 | and then it just stays there.

00:15:27.400 | It gets melted down into new other forms.

00:15:29.880 | The jewelry gets turned into coins

00:15:31.480 | or coins get turned into bars.

00:15:33.160 | But it's just stockpiles that are accumulating.

00:15:38.520 | On the other hand, every year we get better

00:15:41.920 | at our technology of looking for gold.

00:15:43.880 | There's more people all over the world.

00:15:45.360 | The population increases, the technology improves.

00:15:47.840 | So we keep finding more and more gold

00:15:49.920 | and we keep making the stockpiles bigger.

00:15:52.040 | However, because we're constantly adding to a stockpile

00:15:55.200 | that is not being devalued, sorry,

00:15:57.880 | that is not being consumed

00:15:59.240 | because there's no way of consuming gold.

00:16:00.560 | You can't eat it, you can't burn it, it doesn't rust.

00:16:04.740 | Because of that, we're constantly adding

00:16:07.280 | to a constantly growing stockpile.

00:16:08.880 | So if you look at the numbers,

00:16:10.960 | you see over the last 100 years,

00:16:13.200 | we've got pretty reliable data

00:16:14.600 | on gold production worldwide.

00:16:16.320 | We see that pretty much gold stockpiles

00:16:18.680 | increase at around one and a half to 2% per year,

00:16:21.400 | every year.

00:16:22.440 | So yes, we're making more every year,

00:16:25.120 | but we're making more so we're adding to the stockpile.

00:16:28.040 | The stockpile grows more.

00:16:29.160 | So every year we're adding only around one and a half

00:16:31.520 | to 2%.

00:16:32.360 | Compare that to the second hardest metal

00:16:37.520 | historically was silver.

00:16:39.120 | And that increased historically

00:16:40.880 | at around maybe 5% per year or so.

00:16:43.680 | Now it probably increases at something like closer to 30%

00:16:46.800 | because it's now getting used extensively

00:16:49.120 | in industrial uses.

00:16:50.800 | So when you use it in industry,

00:16:53.680 | you know, when you put silver in a laptop

00:16:55.360 | or in a camera or in a machine,

00:16:58.200 | effectively you are consuming the stockpile

00:17:01.000 | because it's not used as money.

00:17:02.560 | It's taken out of the monetary stockpile.

00:17:04.880 | So over the last 150 years, since 1870 in particular,

00:17:08.280 | and I discussed this in detail in the Bitcoin standard,

00:17:11.960 | what happened in 1870 was Germany won

00:17:14.600 | the Franco-Prussian War

00:17:16.440 | and Germany was on a silver standard,

00:17:18.960 | but the value of silver was declining.

00:17:21.160 | So Germany did something very smart,

00:17:22.640 | which is they took their indemnity from France

00:17:25.640 | in gold and used that big chunk of gold

00:17:30.480 | to switch to going on a gold standard.

00:17:33.040 | And since then, silver has been collapsing in value

00:17:36.720 | next to gold.

00:17:37.560 | So back then the price of an ounce of gold

00:17:40.160 | was around 15 ounces of silver.

00:17:42.160 | Today it's closer to 100.

00:17:43.440 | It's just been declining for the last 150 years.

00:17:46.560 | And so because of that,

00:17:47.520 | because of the fact that it's lost its monetary role

00:17:50.760 | as people shifted toward gold,

00:17:52.920 | the value of silver went down.

00:17:54.600 | And so it became economical to use it

00:17:56.160 | in more and more industrial applications.

00:17:58.320 | So the stockpile declines.

00:18:00.360 | And then as a result,

00:18:01.920 | that weakens its monetary properties

00:18:05.240 | more and more and more.

00:18:06.800 | So that's why by the end of the 19th century,

00:18:09.560 | I mean, at the beginning of the 19th century,

00:18:10.880 | gold and silver were money.

00:18:12.160 | By the end, it was basically only gold.

00:18:14.440 | And the countries that were still on a silver standard,

00:18:16.840 | China and India in particular,

00:18:18.440 | suffered enormously from it

00:18:19.720 | because their money was devaluing very quickly next to gold.

00:18:23.600 | And so Europeans who would come to China or India

00:18:26.880 | were able to buy things at practically a big discount.

00:18:30.320 | - So I hope it's okay if I ask very simple,

00:18:33.560 | very basic questions.

00:18:34.600 | There's few people in this world that are good,

00:18:37.720 | as good as you are at answering very basic,

00:18:41.200 | almost ridiculously basic questions.

00:18:42.960 | 'Cause I think exploring questions like what is money

00:18:46.000 | is a really great way to think from first principles,

00:18:49.120 | to really think deeply about this world.

00:18:50.800 | So I really appreciate you doing that.

00:18:52.680 | When you say standard, what does it mean?

00:18:55.600 | When you say silver standard, gold standard,

00:18:57.600 | again, with the basic question.

00:18:59.960 | - The term really, I think, was based out of gold.

00:19:03.840 | The first time this came out was the gold standard.

00:19:06.400 | So I said gold was money at the end of the 19th century,

00:19:11.000 | but it wasn't just that everybody was using gold coins

00:19:13.560 | and trading with gold coins,

00:19:15.080 | because that's got a problem of divisibility.

00:19:19.360 | So a lot of things are worth less than one gold coin.

00:19:23.440 | So how do you buy that thing?

00:19:25.200 | And the answer was that you created monetary instruments

00:19:28.120 | that were backed by gold.

00:19:30.200 | And so currencies, national currencies

00:19:32.640 | under the gold standard, were specific units of gold.

00:19:36.800 | And that's how a gold standard functioned.

00:19:39.000 | Money was gold, but you had pieces of paper

00:19:42.000 | that were redeemable in gold.

00:19:43.920 | So you could go to the central bank,

00:19:45.080 | you'd give them the piece of paper,

00:19:46.960 | the $100 bill or the $10 bill,

00:19:49.160 | and they'll give you gold in exchange.

00:19:51.000 | And they give you a specific quantity of gold in exchange.

00:19:53.760 | Effectively, the paper was just the receipt for gold.

00:19:56.240 | - So the paper exactly represented the amount of gold.

00:19:59.480 | - Exactly, that was the plan.

00:20:00.920 | Or that was what it's supposed to do.

00:20:03.200 | But arguably, we never had a pure gold standard

00:20:07.280 | because the nature of gold means that the people

00:20:09.680 | who are in charge of the gold,

00:20:12.040 | they have an enormous amount of power

00:20:13.520 | because the gold is concentrated with them.

00:20:15.160 | And as long as not everybody shows up at the same time

00:20:17.840 | asking for their gold,

00:20:18.880 | then you can make more receipts than you have gold.

00:20:20.920 | - Sure, so there's always shady stuff going on,

00:20:24.200 | but at least that's the state of gold,

00:20:26.160 | is the receipts should exactly represent

00:20:28.360 | the amount of gold there.

00:20:29.880 | And also when you say standard,

00:20:31.760 | it means that governments sort of publicly stated

00:20:36.760 | that this is the approved,

00:20:40.520 | the main way of making transactions that are monetary.

00:20:44.080 | So this is the money, this is the official money

00:20:46.760 | that you should be using if you live in this country.

00:20:48.800 | - Yes, although I would say it's more like

00:20:51.360 | the other way around.

00:20:52.180 | It's not that the government's established gold as money.

00:20:55.440 | It's more like gold gave the governments

00:21:00.040 | the credibility for their currencies.

00:21:01.920 | So governments were not the ones that made gold money.

00:21:06.320 | Gold has been money before states were invented.

00:21:09.480 | States, if you have a government

00:21:12.240 | and you'd like to have some legitimacy

00:21:14.200 | and you'd like to be able to deal with other governments

00:21:16.600 | on an equal footing, you have to go by the gold standard.

00:21:19.800 | You have to have a currency that was redeemable in gold

00:21:22.480 | so that you could trade with the rest of the world

00:21:24.120 | so that people could, in your country, use that currency.

00:21:28.160 | So it's not that governments were choosing gold.

00:21:32.120 | It's more like they were having to adapt

00:21:35.480 | their own currencies to gold

00:21:37.760 | in order to give their currencies credibility.

00:21:39.400 | - So there's a dance there though,

00:21:41.000 | because if they had to,

00:21:43.580 | then why did they switch away from it after?

00:21:46.520 | So there is a dance where the governments,

00:21:49.640 | the people pressure.

00:21:52.160 | So first of all, the basic characteristics of the hard money

00:21:57.160 | pressures the governments and the people

00:22:00.880 | in terms of what should be used.

00:22:02.740 | Then the people, based on their community,

00:22:05.200 | the network effects, the way they,

00:22:07.200 | the narratives they tell each other,

00:22:09.240 | all that kind of stuff,

00:22:10.400 | they pressure the governments

00:22:12.420 | to take on a particular money.

00:22:14.080 | And then the governments, you know,

00:22:16.900 | they like power, they like control,

00:22:18.800 | all those kinds of things.

00:22:19.760 | They pressure the people

00:22:21.120 | and tell different kinds of narratives.

00:22:22.320 | So there's a dance going on in this evolution

00:22:24.880 | of what technology to use for a monetary system.

00:22:27.360 | So it's, the reason I,

00:22:29.900 | I don't know if governments had to,

00:22:32.360 | because they clearly didn't have to

00:22:34.240 | because they eventually moved away from it.

00:22:36.640 | So it, but there was pressure probably.

00:22:39.040 | - Yeah, but I mean, even after they moved away from it,

00:22:41.120 | you know, central banks until today,

00:22:42.520 | they still hold a lot of gold reserves.

00:22:45.000 | In fact, if you look at 1914,

00:22:47.440 | when the world really went off the gold standard,

00:22:51.080 | the amount of gold reserves held by central banks

00:22:53.720 | was a tiny fraction of what it was.

00:22:55.720 | As time went on, central banks accumulated

00:22:58.480 | more and more gold.

00:22:59.840 | What ended up happening is they prevented their citizens

00:23:02.160 | from using the gold, but they continued to use it.

00:23:04.240 | So gold continued to be money up until 1971,

00:23:07.560 | because effectively the world was on a dollar standard

00:23:10.800 | and the dollars were backed by gold.

00:23:12.960 | But then after 1971, even then, you know,

00:23:15.600 | central banks continue to accumulate gold

00:23:17.280 | because why would you as a central bank

00:23:19.960 | want to accumulate pieces of paper effectively

00:23:22.480 | or credit liabilities of another central bank

00:23:25.200 | that can produce them infinitely?

00:23:27.920 | And it's a lesson that's becoming more and more obvious

00:23:31.760 | to governments today, you know, as we see US sanctions

00:23:35.040 | taking say Russian reserves or Afghanistan reserves.

00:23:37.920 | And this is why, you know, we see China and Russia

00:23:40.800 | have accumulated a lot of gold over the last 10, 20 years.

00:23:44.040 | - So just to return to the question of definitions,

00:23:48.360 | so what is hard money versus soft money?

00:23:50.960 | - Yes, so hard, I mean, it's a relative thing,

00:23:54.080 | but the hardness refers to the difficulty

00:23:56.520 | of producing more units of the money supply.

00:23:59.480 | So an easy money would be a money

00:24:01.600 | that is relatively easy to make.

00:24:04.400 | So you can increase the supply by 10, 20, 30, 40, 50%,

00:24:08.760 | or something like that.

00:24:09.600 | So pretty much all commodities, all market commodities,

00:24:12.600 | other than gold and silver, they're easy money

00:24:15.480 | and they're not suitable as a monetary medium

00:24:18.840 | because they're being consumed.

00:24:20.120 | So if you look at, and in the Bitcoin standard,

00:24:22.280 | I mentioned this metric called the stock to flow ratio,

00:24:25.020 | which is the ratio of the annual production, the flow,

00:24:28.780 | to the stockpile, the existing stockpile.

00:24:31.440 | If you look at all the other metals,

00:24:33.080 | they're easy money because they're being consumed.

00:24:36.120 | So think about how much stockpiles of copper

00:24:38.320 | there are in the world today.

00:24:40.080 | So copper companies obviously have

00:24:41.880 | some stockpiles of copper.

00:24:44.000 | Major copper consumers will have stockpiles of copper,

00:24:47.040 | but the vast majority of copper is essentially

00:24:49.840 | on a conveyor belt of production from the mine

00:24:54.440 | straight to the consumer good that it's being used for.

00:24:58.440 | So the existing stockpiles are roughly in the range

00:25:02.740 | of one year's production.

00:25:04.880 | If you take all of the companies,

00:25:06.760 | I don't have exact statistics,

00:25:08.960 | and it's very difficult to get these,

00:25:10.420 | but it's roughly in the same range.

00:25:12.740 | Like if copper production were to stop completely today,

00:25:17.240 | we'll have about a year's production

00:25:19.480 | stored in various places.

00:25:22.000 | So that makes copper terrible money

00:25:24.720 | because if you started using copper as money,

00:25:27.360 | and this is why a lot of people say,

00:25:28.920 | well, money is a collective illusion.

00:25:30.680 | Money is a social construct.

00:25:34.260 | If we all agree that something is money,

00:25:35.960 | then something is money.

00:25:36.800 | I think this is completely clueless,

00:25:37.880 | and it's usually Marxists who believe this,

00:25:39.760 | so obviously no understanding of economics.

00:25:42.260 | It's completely clueless because even if everybody

00:25:44.640 | in society decided we wanted to make copper as money,

00:25:47.880 | even if we all decided to collectively take part

00:25:50.960 | in this hallucination or illusion,

00:25:53.320 | it would not make copper money.

00:25:54.980 | It would just make everybody who decides to take part

00:25:57.240 | in this hallucination poor, that's it.

00:25:59.500 | It would make copper miners rich,

00:26:01.040 | it would make all of the people

00:26:02.240 | who chose copper as money poor,

00:26:04.160 | and copper would not be money.

00:26:05.640 | It can't work because what happens is

00:26:07.720 | because of the fact that the stockpiles are so small,

00:26:10.260 | if you buy, even if you get the 1,000 richest people

00:26:13.660 | in the world, all of the world's billionaires,

00:26:16.260 | they get together and they all dump all of the money

00:26:19.260 | that they have, all the stocks, all the bonds,

00:26:20.960 | all the gold, all of the Bitcoin, everything that they own,

00:26:24.460 | they dump it and they buy copper with it.

00:26:27.500 | What's gonna happen?

00:26:28.340 | Price of copper is gonna go up a lot,

00:26:30.840 | but what's gonna stop copper miners from flooding the market

00:26:34.660 | with even more copper than what the billionaires bought?

00:26:37.780 | Nothing.

00:26:38.620 | They're gonna dump all of that extra copper production.

00:26:41.900 | If the price of copper is gonna go up,

00:26:43.080 | so there will be a lot more copper mining

00:26:45.700 | than all the other metals.

00:26:47.140 | A lot of nickel companies and gold miners

00:26:51.140 | are gonna switch to focusing on copper.

00:26:53.540 | And then we're gonna dump an enormous amount

00:26:55.740 | of copper on the market.

00:26:57.060 | The value of copper is gonna crash,

00:26:59.060 | and the people who chose copper as money

00:27:01.620 | are just gonna end up with large warehouses

00:27:03.820 | of very cheap, rusting metal.

00:27:06.540 | - So that's a brilliant description,

00:27:07.980 | and that kind of pushes towards gold,

00:27:09.940 | where the stock-to-flow ratio, I guess you would say,

00:27:14.020 | is 1.5 to 2%, like you mentioned earlier.

00:27:16.900 | - That would be like the inverse of the stock-to-flow.

00:27:18.740 | That's the supply growth rate,

00:27:20.020 | so the stock-to-flow's the inverse.

00:27:21.340 | It's around 60.

00:27:22.620 | - 60, got it.

00:27:23.740 | But let me push back on,

00:27:26.060 | as somebody who likes human psychology,

00:27:27.900 | let me push back on the collective hallucination

00:27:31.020 | and the illusion.

00:27:32.180 | So that's for copper, but what about paper money?

00:27:37.340 | That's not, you can't smoke it, you can't eat it.

00:27:42.340 | It's supposed to represent,

00:27:44.820 | it's supposed to just be the medium of exchange.

00:27:47.220 | In that sense, what role does collective hallucination play

00:27:53.580 | in the effectiveness of money?

00:27:56.020 | - Exactly zero, because all of the paper money,

00:27:59.060 | first of all, there's never been an instance,

00:28:00.900 | and again, this flies in the face of a lot of what,

00:28:06.260 | a lot of people like to think about money.

00:28:08.140 | There's never been an instance

00:28:09.420 | where a government came out and said,

00:28:11.940 | all right, we're printing out these pieces of paper,

00:28:13.700 | use them as money.

00:28:14.540 | This one is worth 10 apples, or use it for buying things,

00:28:19.020 | and here's the piece of paper.

00:28:19.900 | This has never happened.

00:28:21.340 | They've always taken, fiat money, paper money,

00:28:26.340 | all of these things were always born out of fraud.

00:28:30.660 | Initially, it was a receipt for gold,

00:28:32.700 | and then they told you, well, you don't need the gold anyway

00:28:36.020 | and you have to use this, and then if you don't use it,

00:28:37.820 | we throw you in jail.

00:28:39.420 | And then, so first of all, it doesn't,

00:28:41.580 | you can't enforce this thing,

00:28:44.340 | so it's never really just happened,

00:28:45.660 | and it's never been hallucinated into existence.

00:28:48.320 | People can hallucinate this kind of nonsense

00:28:50.080 | in writing textbooks and books and in academia,

00:28:54.340 | but in the real world, people don't hallucinate money.

00:28:57.540 | People are very careful about what they put their money in.

00:29:00.140 | - For people listening,

00:29:01.500 | we're gonna have fun in this conversation,

00:29:03.100 | 'cause you're like, you already said Marxist,

00:29:06.580 | fraud, hallucination, just because we use these words

00:29:09.780 | doesn't mean they're true, but they're fun to talk about.

00:29:12.900 | So you have a strong certainty about the way you talk,

00:29:17.220 | which I think is fun.

00:29:20.100 | But allow me in my dumb self to push back,

00:29:22.420 | to play devil's advocate, and I'll actually ask you

00:29:24.740 | sometimes to play devil's advocate if possible,

00:29:27.180 | 'cause you're smarter than me on all this stuff,

00:29:28.880 | so we want the smartest devil's advocate possible,

00:29:33.520 | and I'm certainly not that.

00:29:34.960 | But anyway, but nevertheless,

00:29:36.960 | we are currently on the fiat standard,

00:29:41.440 | so money does have value, paper money,

00:29:46.440 | and the reason it has value

00:29:51.880 | is because we believe it has value.

00:29:53.760 | To what degree, if we put the hallucination word aside,

00:29:57.760 | the belief that something is worth value

00:30:01.240 | is actually value and is the thing that helps money work?

00:30:06.080 | 'Cause you're saying it's fraud,

00:30:09.240 | and the belief is almost valueless.

00:30:13.780 | But how much value, can we quantify the value

00:30:16.280 | of the belief, the collective belief?

00:30:18.440 | - I should say, all economics is subjective.

00:30:21.680 | I consider myself an Austrian school economist,

00:30:24.160 | and the starting point of all Austrian economics

00:30:26.740 | is that all value is subjective.

00:30:28.880 | So obviously, value only exists

00:30:33.280 | because humans choose to make the valuation.

00:30:35.880 | However, the economic reality of the way that money works

00:30:40.000 | means that it's just the technology, like all others.

00:30:42.640 | And so, for me, when people say,

00:30:45.040 | well, if we hallucinate that this thing can be money,

00:30:47.200 | then it'll be money.

00:30:48.200 | If we can hallucinate bananas to be money,

00:30:49.880 | then it'll be money.

00:30:50.840 | For me, it's like saying, well, if we hallucinate

00:30:52.360 | that bananas can be spaceships, they'll be spaceships.

00:30:54.920 | I mean, you can call them spaceships if you want,

00:30:56.940 | but a banana's not gonna get you to the moon.

00:30:59.660 | - But nevertheless, that's true.

00:31:03.060 | So you're drawing a big distinction

00:31:05.040 | between physical reality and the space of belief.

00:31:09.300 | But it seems like so much power of human civilization,

00:31:14.300 | so much destruction, so much creativity,

00:31:17.980 | creation happens in our minds.

00:31:21.180 | - Absolutely.

00:31:22.180 | Everything does happen in the mind.

00:31:23.500 | You're not gonna get to the moon,

00:31:24.960 | but you might still have a significant impact

00:31:27.580 | on human civilization if a lot of people believe a thing.

00:31:31.540 | - True, but economic reality exists in a way

00:31:35.420 | in which your beliefs are rewarded

00:31:37.940 | when they match up with economic reality.

00:31:39.740 | - With physical reality.

00:31:40.620 | - And they're punished when they don't.

00:31:41.900 | So if you ride a banana, jump off a cliff

00:31:44.740 | thinking you're gonna get to the moon,

00:31:46.940 | that solves the problem of people thinking

00:31:48.620 | that bananas are spaceships by killing people

00:31:50.620 | who think that bananas are spaceships.

00:31:53.060 | And I think to go back to your question

00:31:55.020 | in terms of paper money, so yes,

00:31:56.820 | even though ignoring the original sin

00:32:01.380 | of the creation of fiat money

00:32:02.980 | and ignoring everything that happened before 1971,

00:32:05.420 | all right, well, here we are, people are using,

00:32:07.860 | well, it's not really paper money.

00:32:09.340 | We should say like fiat money is predominantly credit.

00:32:12.820 | So it's also a digital currency.

00:32:15.020 | So more than 90% of dollars are digital,

00:32:18.780 | less than 10% of dollars are physical.

00:32:21.380 | So it is a digital currency.

00:32:22.760 | And all over the world, all these governments

00:32:24.740 | are using digital currencies effectively

00:32:26.460 | with some physical manifestations in paper.

00:32:29.520 | But yet even within these currencies,

00:32:32.420 | it's still the same analysis.

00:32:33.780 | And I discussed this in chapter four of the Bitcoin Standard.

00:32:36.320 | You look at government monies,

00:32:37.740 | you see that the currencies that have held onto their value,

00:32:40.180 | the ones that have the biggest value,

00:32:42.220 | the ones that play the biggest role in global trade,

00:32:44.700 | the ones that are used as currency reserves

00:32:46.940 | all over the world,

00:32:48.140 | are the ones that have the lowest supply growth rate.

00:32:50.900 | The ones that grow,

00:32:52.640 | whose central banks are the least inflationary.

00:32:55.420 | And on the other hand,

00:32:56.460 | the ones that who supplies more inflationary,

00:32:58.920 | similar to copper, end up failing.

00:33:00.940 | You look at Lebanon, Venezuela, Zimbabwe.

00:33:03.500 | These are currencies whose supply increases very quickly.

00:33:06.560 | And therefore their value collapses.

00:33:09.060 | Whereas the dollar, the Swiss franc, the Euro,

00:33:12.540 | the British pound, the Japanese yen,

00:33:14.940 | they increase at a much lower rate in general

00:33:17.180 | than these terrible currencies.

00:33:20.260 | And that's why all over the world,

00:33:21.980 | you see people are looking to get more dollars

00:33:24.220 | and more of these harder currencies than the easier ones.

00:33:28.220 | So I think this analysis of the hardness of the money

00:33:32.420 | and the ease of money is pretty well supported empirically.

00:33:37.420 | - So like you said, you're at least in part or in whole,

00:33:41.840 | consider yourself an Austrian economist.

00:33:43.840 | So you're perhaps a great person to ask about the basics.

00:33:49.020 | What is Austrian economics?

00:33:50.540 | What is Keynesian economics?

00:33:52.260 | How do you compare the two?

00:33:54.700 | What should people know?

00:33:55.740 | Some interesting, what is interesting,

00:33:58.300 | defining characteristics to you about these schools of thought?

00:34:01.740 | - So Austrian economics, the way that I say it,

00:34:03.380 | Austrian economics is economics.

00:34:04.980 | We call it Austrian economics

00:34:07.680 | because economics has been hijacked

00:34:09.440 | by a bunch of frauds, really.

00:34:11.460 | - People who are wrong, okay.

00:34:12.880 | - Well, it's much worse than wrong,

00:34:14.540 | by people who are just essentially propagandists

00:34:16.660 | for inflation.

00:34:17.500 | - Right.

00:34:18.500 | - It's like your opinion, man.

00:34:20.340 | (laughing)

00:34:21.940 | - Well, that's also like your opinion, man.

00:34:23.860 | - Yeah, that's true.

00:34:25.740 | Well, I also talked to Paul Krugman on this podcast,

00:34:28.620 | so he's, the O speaks enough,

00:34:32.780 | but he's one of the people that is perhaps

00:34:36.660 | most harshly criticized by folks

00:34:39.860 | in Austrian economics perspective and vice versa,

00:34:44.340 | which is a fascinating tension.

00:34:45.780 | - Yeah, he's done a great job as an actor

00:34:48.980 | who plays an economist on TV and the internet.

00:34:51.380 | (laughing)

00:34:52.460 | - So anyway, now tell me what you really think.

00:34:55.460 | No, but so the basics of what is Austrian economics?

00:34:58.620 | What perspective does it take on the world?

00:35:00.620 | - Yeah, so I mean, Austrian economics really is

00:35:03.020 | the continuation of a tradition that it goes back

00:35:06.940 | to the ancient Greeks of studying economics.

00:35:09.700 | Historically, it's really just economics

00:35:13.300 | and that has evolved over time

00:35:14.660 | and the establishment of the Austrian school per se

00:35:19.660 | came in 1871, 150 years ago,

00:35:23.540 | when Karl Menger, the father of the school,

00:35:25.540 | wrote a book called "Principles of Economics"

00:35:28.140 | and essentially invented marginal analysis,

00:35:30.860 | which is a big deal in economics.

00:35:32.820 | Marginal analysis is the idea that in economics,

00:35:35.340 | individuals carry out decisions at the margin,

00:35:37.820 | that it's when you make a choice, you're not making it,

00:35:42.700 | for instance, if you're making a choice

00:35:44.020 | between what should I spend my money on,

00:35:46.780 | you're not making a choice whether it is,

00:35:49.740 | this thing is object A or B,

00:35:51.860 | which one is more valuable for me in general,

00:35:53.900 | which one is more valuable for me for the rest of my life.

00:35:56.780 | You're choosing about the next unit right now,

00:35:59.420 | at this point, at this stage.

00:36:00.980 | And if you analyze economic decision-making at the margin,

00:36:04.100 | it makes a lot more sense and you can understand

00:36:06.060 | why people decide and make the decisions that they do.

00:36:08.760 | Whereas if you don't apply marginal analysis,

00:36:12.580 | things don't make sense.

00:36:14.360 | The key thing that marginal analysis helps us solve

00:36:17.260 | is what is called the water diamond paradox.

00:36:19.820 | So you will die without water, we all need water,

00:36:23.460 | and yet water is dirt cheap.

00:36:25.860 | Whereas diamonds are extremely superfluous,

00:36:29.300 | nobody needs them, nobody's gonna live or die

00:36:32.340 | because they have a diamond,

00:36:33.680 | and yet they're extremely expensive.

00:36:35.500 | So why is it that as human beings,

00:36:37.040 | we pay maybe say a dollar a liter for water,

00:36:41.720 | whereas we pay thousands of dollars

00:36:43.180 | for a few grams of diamonds.

00:36:44.980 | Why is this the case?

00:36:46.180 | Do we value water less than diamond?

00:36:49.260 | The answer is no, but at the margin,

00:36:52.360 | where we are right now,

00:36:53.980 | you live in a place where water is very abundant

00:36:55.900 | because cities are only built in places

00:36:57.900 | where water is abundant.

00:36:59.620 | And you're only making a choice

00:37:03.520 | about the next unit of water.

00:37:05.340 | And so water is extremely abundant

00:37:07.300 | and you're choosing about whether to spend

00:37:10.420 | the next unit of money on water.

00:37:14.620 | The valuation that you give to water,

00:37:16.460 | given that you have a lot of water at home,

00:37:18.940 | and that you live in a place that has abundant water,

00:37:21.440 | is pretty low to the marginal unit.

00:37:24.700 | But it's very high for water overall.

00:37:27.000 | So if I asked you,

00:37:28.460 | how much would you spend for water in general?

00:37:32.020 | How much would you pay for water for all of your life?

00:37:35.000 | It would be a lot higher than diamonds.

00:37:37.020 | If I told you you can only have water or diamonds

00:37:39.220 | for the rest of your life, you'd choose water, obviously.

00:37:42.380 | But nobody's ever had to make that choice.

00:37:44.980 | You only make your choices at the margin.

00:37:47.280 | So at the margin, where we are, modern civilization,

00:37:50.320 | we have an abundance of water,

00:37:51.580 | that's why we have civilization,

00:37:53.140 | and diamonds are very rare and scarce.

00:37:55.020 | And people are only buying,

00:37:58.100 | you know, you buy your first diamond

00:38:00.100 | when you're gonna get married,

00:38:01.820 | you give it to your wife,

00:38:03.340 | and that's gonna be the first few grams of diamond

00:38:06.700 | that she's ever gonna own.

00:38:07.540 | - I'm giving my wife water.

00:38:09.180 | (laughing)

00:38:10.060 | - Smart move.

00:38:10.900 | You should definitely give her Bitcoin instead of diamonds.

00:38:13.260 | I tell my wife, I occasionally remind her

00:38:15.700 | of how many Bitcoin we could have had

00:38:18.140 | if I'd bought her Bitcoin with the price of the diamond.

00:38:20.380 | - What's the downside, by the way,

00:38:21.940 | diamonds from the analysis of like gold and so on?

00:38:25.700 | - Ah, that's a great question.

00:38:27.200 | Um, arguably diamonds are a scam.

00:38:30.540 | (laughing)

00:38:32.860 | Because they became popular as a thing in marriage,

00:38:37.500 | after gold was banned,

00:38:39.060 | after gold ownership was banned in the US in the 1930s,

00:38:41.780 | and in many places around the world.

00:38:43.460 | So before that you'd give gold,

00:38:44.900 | and the reason you'd give gold in a dowry, in a wedding,

00:38:49.180 | is because, you know, it wasn't just that it's pretty

00:38:52.020 | and shiny, it's because it's money.

00:38:53.740 | So, you know, if you die,

00:38:56.780 | your wife can take the gold and she can live off of it.

00:39:00.460 | It's a demonstration that you're giving her

00:39:01.860 | something valuable.

00:39:03.180 | And that's because nobody can make a lot more gold

00:39:05.780 | that has the high stock to flow ratio.

00:39:07.140 | But then they banned gold ownership,

00:39:09.700 | or they allowed people to only own

00:39:11.100 | very tiny quantities of gold.

00:39:12.780 | And that's when the diamond industry stepped in

00:39:15.400 | and marketed diamonds as, you know,

00:39:18.340 | the thing that you need to give.

00:39:19.940 | But the problem with it is, of course,

00:39:21.500 | that diamonds aren't like gold.

00:39:23.780 | They're not very hard to make more of.

00:39:27.100 | And the reason we have scarcity in diamonds

00:39:29.700 | is really artificial.

00:39:30.580 | There's effectively a monopoly of diamond producers.

00:39:34.420 | They restrict the supply,

00:39:36.580 | and it's a pretty dirty business.

00:39:39.060 | And the way that they do it is, you know,

00:39:40.300 | all of the talk about blood diamonds

00:39:44.140 | is a way for them to ensure their monopoly.

00:39:46.300 | So if you're part of the monopoly of diamond producers,

00:39:51.180 | then it doesn't matter how many people get killed

00:39:53.340 | producing your diamonds.

00:39:54.380 | If you're out of the monopoly,

00:39:55.860 | then human rights organizations descend on you

00:39:58.660 | and call for shutting you down for selling blood diamonds.

00:40:02.220 | And they're also restricting the production

00:40:03.620 | of artificial diamonds.

00:40:04.460 | This is the other thing.

00:40:05.300 | You can make artificial diamond,

00:40:06.460 | but you can't make artificial gold.

00:40:08.460 | So they restrict the production of artificial diamond,

00:40:11.060 | and they try and insist that, you know,

00:40:13.540 | you shouldn't take artificial diamonds,

00:40:15.460 | but they're indistinguishable from real diamonds.

00:40:18.860 | So it's an artificial scarcity,

00:40:20.340 | and I think there's gonna come a point at some point

00:40:22.140 | that this monopoly's gonna break,

00:40:23.380 | and a lot of people are gonna be left

00:40:24.900 | with essentially highly devalued jewelry.

00:40:29.900 | - I'm gonna take this segment of the podcast,

00:40:32.780 | when I'm getting married, I'm gonna send it,

00:40:34.580 | and then instead you're getting water or Bitcoin.

00:40:38.660 | - Yes, water and Bitcoin is all you need.

00:40:40.660 | - So marginal analysis, focusing on the margin

00:40:44.140 | is the thing that allows you

00:40:45.380 | to most accurately capture human nature,

00:40:47.900 | the actual day-to-day decisions that we humans make.

00:40:50.820 | - Yeah, that's really revolutionized economics, so 1870.

00:40:55.620 | And that was Menger's work.

00:40:59.220 | And then he had a student, Adrian Bomberg,

00:41:02.620 | who developed capital theory,

00:41:05.060 | and then he had a student, Ludwig von Mises,

00:41:07.100 | who is arguably the most important economist ever,

00:41:10.660 | and he developed a theory of money,

00:41:12.660 | and he wrote a book in 1912

00:41:15.020 | called "The Theory of Money and Credit."

00:41:17.460 | And then in the '40s, he wrote "Human Action,"

00:41:20.220 | which is a big treatise on economics.

00:41:23.340 | And I think this is the correct tradition of economics.

00:41:27.380 | And before World War I, this was just known as economics.

00:41:32.380 | And then after what happened in World War I,

00:41:35.620 | and I discussed this in detail in "The Fiat Standard,"

00:41:37.780 | is that the Bank of England essentially went off gold

00:41:42.260 | and tried to pass off their own credit

00:41:45.260 | as being as good as gold in order to finance the war.

00:41:49.820 | And incidentally here, this is part of the history

00:41:52.780 | that is not discussed often.

00:41:54.140 | This is presented as an innovation.

00:41:56.400 | Later on, they needed essentially a propaganda school

00:42:00.900 | that would justify what they did.

00:42:03.300 | And later on, it's presented as,

00:42:05.380 | "Oh, hey, we realized that gold was not good,

00:42:08.180 | and now look, we've built this thing

00:42:10.900 | that is better than gold,

00:42:11.900 | where now the government can just print money

00:42:13.520 | whenever it wants,

00:42:14.380 | and now gold money is not an issue anymore,"

00:42:18.000 | which is extremely idiotic,

00:42:20.060 | because the whole point of money

00:42:22.140 | is that it's not easy to make.

00:42:23.400 | If it's easy to make, it's not money anymore.

00:42:24.940 | It's just destroying the entire function of money.

00:42:27.540 | And we've seen that happen extensively

00:42:28.980 | in the 20th century,

00:42:30.420 | after countries went off the gold standard.

00:42:32.900 | So essentially, Keynesian economics

00:42:35.140 | is just inflation apologia.

00:42:36.740 | It's just propaganda to justify inflationism.

00:42:39.980 | And it's profoundly nonsensical.

00:42:43.260 | It's built on the idea that if you just make more money,

00:42:47.260 | you can stimulate economic production.

00:42:49.500 | And of course, this is very self-serving

00:42:51.460 | to the central banks and to the banks

00:42:53.220 | and to the governments who promote this nonsense.

00:42:56.300 | And this is also very pervasive.

00:42:58.740 | If you've had the misfortune of studying at a university

00:43:01.340 | over the last century,

00:43:02.740 | you were taught Keynesian garbage economics.

00:43:04.860 | You were taught that if there's a problem in the economy,

00:43:09.060 | the way to fix it is that the government prints money,

00:43:11.620 | the government lowers the interest rate,

00:43:13.460 | and then that leads to more economic production,

00:43:17.340 | which is completely nonsensical.

00:43:18.900 | - So, (laughs)

00:43:21.260 | so you're, again, for the listener,

00:43:23.480 | you're using strong words,

00:43:25.220 | push back just to find,

00:43:27.940 | to please devil's advocate

00:43:30.460 | to hopefully one day arrive at a truth.

00:43:33.420 | So, just because it's in the interest

00:43:37.060 | of the central banks and the government,

00:43:39.060 | the interests and the models of Keynesian economics

00:43:43.860 | and the government are aligned doesn't mean they're wrong.

00:43:47.460 | So let's give them a chance.

00:43:49.860 | So, the conventional wisdom, perhaps economics wisdom,

00:43:54.260 | is that inflation is good in moderation

00:43:58.420 | as it encourages spending,

00:44:00.060 | but too much is bad because it completely devalues,

00:44:03.740 | destroys people's savings.

00:44:05.260 | So a little bit of inflation is good to stimulate spending.

00:44:08.740 | And I mean, I suppose this is one of the things

00:44:13.160 | that's supported by Keynesian economics.

00:44:17.100 | Why is that wrong? - This is basically

00:44:18.020 | the whole point of Keynesian economics,

00:44:19.620 | is to try and find an endless array of explanations

00:44:23.420 | to explain why inflation is a good thing.

00:44:25.780 | - Well, the chicken and the egg.

00:44:28.340 | So that's the cynical take.

00:44:30.540 | This is a propaganda machine

00:44:32.000 | to sell the government's narrative.

00:44:34.060 | The less cynical take is this bunch of economists who--

00:44:37.300 | - Who figured out this thing

00:44:39.820 | and it happens to be good for banks and governments.

00:44:42.340 | And just because it's good for them doesn't mean--

00:44:43.860 | - And it justifies the existence of government

00:44:45.980 | and your basic, I don't think it's your basic assumption,

00:44:50.620 | but a foundational principle of your thought

00:44:53.660 | is that a lot of government is not a good thing.

00:44:56.660 | Your first gut instinct, government bad.

00:45:00.440 | Like I mentioned, I live next door to Michael Malice

00:45:02.940 | who probably beats you on the intensity

00:45:07.140 | and how quickly he says government bad.

00:45:10.060 | So, but there's a potential argument for government good.

00:45:15.060 | Some government is good, maybe a lot of government is good.

00:45:19.020 | Maybe we need a lot of centralized management

00:45:22.260 | for resource allocation and so on

00:45:23.860 | because we humans specialize, we're too busy and so on.

00:45:26.900 | So there's an argument for that that exists.

00:45:29.980 | You probably disagree with any possible argument

00:45:32.140 | in that side, but anyway,

00:45:33.220 | so why is that idea of Keynesian economics wrong?

00:45:36.780 | - I'm gonna focus for this on the money idea,

00:45:39.540 | the idea that a little bit of inflation is good.

00:45:42.340 | The idea here, I mean, the criticism is that

00:45:46.220 | without inflation, people wouldn't spend

00:45:48.260 | and then the economy would come to a grinding halt.

00:45:50.900 | And that's nonsensical because people spend

00:45:53.180 | not because they wanna keep this magical monster

00:45:56.020 | called the economy going.

00:45:58.020 | People spend because they need to consume

00:45:59.900 | because that's how we live, that's how we survive.

00:46:02.540 | You need to eat, you need shelter,

00:46:04.300 | you need clothes to keep you warm.

00:46:06.500 | And as technology advances,

00:46:08.740 | the capabilities of the things that we can do

00:46:11.020 | with our time increases and so we wanna buy more things.

00:46:16.620 | So people buy things because people want to consume.

00:46:19.340 | There's a limitless desire to consume.

00:46:21.580 | There's no shortage of reasons for people to consume,

00:46:26.580 | whether it's food or Ferraris or private jets.

00:46:33.380 | People just always wanna buy more.

00:46:35.340 | - Can I interrupt just really quick?

00:46:36.980 | What about the fear about the uncertainty of the future

00:46:40.020 | where they might want to buy things,

00:46:45.940 | but they're really afraid because it seems like

00:46:48.140 | there's a lot like a pandemic going on or whatever it is.

00:46:50.340 | - Yeah, that's good.

00:46:51.700 | - So fear of uncertainty, can you have too much fear?

00:46:55.780 | - Here's the thing, what I was saying is

00:46:57.660 | I was making the point that we don't need

00:47:00.460 | to be motivated to consume.

00:47:02.140 | Like we have the insatiable desire to consume.

00:47:05.180 | Everybody would like to have more of all kinds of things.

00:47:08.500 | Everybody would like to have a bigger house.

00:47:10.420 | Well, not everybody, some people have a big enough house,

00:47:12.300 | but everybody would like a house.

00:47:14.220 | Everybody would like a car, jet, all kinds of things,

00:47:18.780 | electronics, machines.

00:47:20.940 | So we don't need a desire to consume.

00:47:23.980 | But of course the limit on how much we consume

00:47:26.540 | is opportunity cost.

00:47:29.340 | Why don't you buy a Ferrari?

00:47:30.860 | Well, because that's really expensive

00:47:32.340 | and it would mean that, well, maybe you do have a Ferrari,

00:47:35.180 | but I mean, most people don't buy a Ferrari

00:47:36.940 | because it's too expensive.

00:47:38.740 | They can't afford it.

00:47:39.900 | They'd have to work too hard to get it.

00:47:42.820 | And if they do get it, it might mean that, you know,

00:47:45.140 | they can't afford their house anymore.

00:47:46.540 | So we have to economize.

00:47:48.500 | That's a good thing.

00:47:49.700 | And we have to also think of the future.

00:47:51.940 | And so humans consume,

00:47:53.980 | that we don't need more motivation to consume.

00:47:57.100 | We have to deal with the economic reality

00:47:59.540 | of the things that limit us from consuming more.

00:48:03.020 | So what Keynesians present is that

00:48:06.740 | when there is a problem in the economy,

00:48:08.700 | like there was after World War I,

00:48:11.740 | the problem is always caused by the inflation.

00:48:16.740 | And what the Keynesian hucksters do

00:48:18.900 | is that they look at the consequences of inflation

00:48:23.300 | and blame it on people not spending enough.

00:48:25.580 | When people are doing the rational thing,

00:48:27.180 | you know, the money is,

00:48:28.340 | so there was inflation,

00:48:30.500 | caused an unsustainable boom, it caused a recession.

00:48:34.380 | And now a lot of people lost their jobs

00:48:36.060 | and they don't have enough money to go out

00:48:37.500 | and spend frivolously.

00:48:39.940 | So they save for the future.

00:48:41.380 | The future is uncertain.

00:48:42.700 | That's a good thing.

00:48:43.860 | You know, that's how you fix things.

00:48:46.380 | You begin the recovery by,

00:48:48.300 | well, you know, you lost some wealth,

00:48:49.900 | so you spend less.

00:48:50.740 | Like if your business goes bust,

00:48:52.780 | if you lose your job,

00:48:54.580 | it's natural and smart that you stop spending money

00:48:57.740 | on the frivolous things that you used to spend.

00:49:00.180 | And you save it for the future.

00:49:01.500 | You invest in something else, you get a new job.

00:49:04.220 | And then once you've recovered, you start spending more.

00:49:06.340 | This is very sane and very good.

00:49:08.900 | And it's the way to recovery.

00:49:11.260 | But essentially the Keynesians have used this

00:49:14.660 | as a justification for more inflation.

00:49:17.420 | Because inflation is an addiction.

00:49:19.300 | Once the government gets down the path

00:49:21.300 | of spending money to solve its problems,

00:49:23.780 | then every problem looks like it can be solved

00:49:26.820 | by more inflation.

00:49:27.780 | And so this is where Keynesian economics comes in.

00:49:31.420 | And of course, the Keynesian economics

00:49:33.300 | is based on the work of Keynes,

00:49:36.540 | which came in the 1930s.

00:49:38.940 | And this is the key point.

00:49:40.100 | Like it's portrayed in the textbook

00:49:42.740 | as if it's just this scientific breakthrough.

00:49:46.620 | That somebody in the 1930s, this genius,

00:49:49.300 | came about and realized that,

00:49:50.860 | oh, we don't actually need gold.

00:49:53.300 | We don't need hard money.

00:49:54.300 | We can actually just print all the money.

00:49:56.660 | And in reality, of course,

00:49:57.940 | it was just the very thin, flimsy, idiotic justification

00:50:02.500 | for what governments were already doing for 20 years.

00:50:05.140 | They'd already gone off the gold standard.

00:50:07.580 | And they'd gone through 20 years

00:50:09.900 | in which they were lying to their population,

00:50:11.900 | telling their population,

00:50:12.740 | we're still on a gold standard,

00:50:14.020 | but there are problems caused by various random things.

00:50:18.460 | But don't worry,

00:50:19.300 | we're gonna be going back on the gold standard.

00:50:20.780 | 20 years later, after they went off the gold standard,

00:50:23.980 | they come up with this justification for why,

00:50:27.060 | oh, actually, the gold standard was bad.

00:50:29.860 | And this is the really pernicious thing about it is,

00:50:32.900 | the problems that were caused by us

00:50:34.500 | going off the gold standard,

00:50:36.340 | were caused by the gold standard.

00:50:39.020 | And we're going to fix them

00:50:40.620 | by going off the gold standard even more.

00:50:42.820 | - Just because government is lying and it's shady

00:50:45.900 | and it does these kinds of things

00:50:47.220 | doesn't mean Keynesian economics is wrong.

00:50:49.620 | So just, 'cause I wanted to separate a few things you said.

00:50:53.100 | It could very well be very wrong.

00:50:55.260 | And they could indeed be hucksters.

00:50:57.020 | All of these, such colorful language.

00:51:00.800 | I love you deeply for this.

00:51:02.660 | This is fun.

00:51:03.500 | - Yeah, but I mean, it's not like somebody like Krugman

00:51:05.300 | doesn't use this kind of language when discussing Austrians.

00:51:07.940 | It's just that when actors like him use it,

00:51:10.700 | it's presented as if it is legitimate

00:51:13.260 | because he's part of the major shows.

00:51:15.640 | - So the case they make,

00:51:19.820 | and the criticism Keynesians make of Austrian economics,

00:51:24.060 | and the case they make for Keynesian economics

00:51:25.700 | is it's based on empirical evidence.

00:51:28.140 | So Austrian economists are pie in the sky,

00:51:32.900 | theorists about how human nature works,

00:51:37.340 | and it's just all theory.

00:51:39.460 | And just like you said,

00:51:40.660 | Keynesian economics kind of sell it as a science,

00:51:43.100 | data-driven science.

00:51:44.740 | And so where's the data, bro?

00:51:49.060 | So one way of saying it is,

00:51:52.920 | how do you know if we get rid of inflation?

00:51:57.940 | How do you know if we get rid of central banks?

00:51:59.980 | If we push towards that direction,

00:52:02.580 | we will have a better world,

00:52:05.020 | a better functioning economy, better functioning markets,

00:52:08.420 | better functioning society.

00:52:10.900 | - This is another inaccurate way

00:52:13.400 | in which they present the economics.

00:52:15.140 | They present it as if it's just theory

00:52:16.620 | and that the data doesn't matter, but that's not the case.

00:52:19.780 | What the Austrians say is that without guiding theory,

00:52:23.140 | data is mute, data is dumb, data can't say anything.

00:52:26.420 | So-- - Theory first,

00:52:28.100 | and then you have to have models.

00:52:32.260 | To provide context for interpretation of the data.

00:52:35.260 | - Exactly, and it's a sign

00:52:36.700 | of just how little self-awareness they have

00:52:38.780 | that they think that they're just being led by the data

00:52:42.260 | when they're being led by Keynes' moronic theories.

00:52:47.260 | And they use the data to justify those theories

00:52:50.900 | and to stick by them.

00:52:52.380 | And in fact, they are the ones

00:52:54.100 | whose theories cannot be refuted

00:52:56.260 | because it's just government-mandated religion.

00:53:00.360 | So according to Keynes' nonsense,

00:53:03.060 | so the way that the whole thing is,

00:53:07.380 | the way that they justify the inflationism is this,

00:53:10.660 | and I'm just using this to give an example

00:53:12.380 | of what you're talking about in terms of theory.

00:53:14.580 | The way they justify the inflationism,

00:53:15.980 | to tie it back to the original point,

00:53:17.780 | they justify, all right, we need money to spend,

00:53:20.100 | and then the level of spending in the economy

00:53:22.140 | is what determines the state of the economy.

00:53:23.700 | And I've taught macroeconomics

00:53:25.140 | at university level for a while, so I know this.

00:53:27.500 | I know Keynesian nonsense better than most Keynesians

00:53:31.280 | know Austrians, if not all of them, I guarantee you.

00:53:34.000 | So the way they see it is the level of spending

00:53:38.200 | in the economy is what determines the state of the economy.

00:53:40.400 | There's a level of output and there's a level of spending.

00:53:42.720 | So there's like the factories on the one side

00:53:44.480 | that are churning out goods,

00:53:46.000 | and those goods have a certain quantity and value,

00:53:48.800 | market value, and it's completely nonsensical, of course,

00:53:51.680 | because how can the value of the goods produced

00:53:54.880 | be different from the value of the spending?

00:53:56.720 | But let's put that aside for a second.

00:53:59.060 | So the amount of spending that happens in the economy

00:54:02.480 | determines the state of the economy.

00:54:04.160 | If the value of the production, which they call Y,

00:54:07.860 | is higher than the aggregate expenditure,

00:54:10.320 | so this is the production,

00:54:11.320 | and then the aggregate expenditure is lower,

00:54:13.460 | then we don't have enough spending to buy all the goods,

00:54:16.720 | and then that causes a recession.

00:54:18.280 | The factories start laying off workers,

00:54:20.760 | and then the laid off workers start spending less,

00:54:23.320 | and then that leads to aggregate expenditure

00:54:25.560 | dropping even further, and so it's a vicious cycle

00:54:28.320 | where the economy gets into recession,

00:54:30.600 | and the only way out is for Keynes' bankster buddies

00:54:34.000 | and government buddies to print a lot of money

00:54:36.080 | to give to themselves, and then that will--

00:54:39.480 | - That's one interpretation.

00:54:40.720 | But to print more money to increase the expenditure

00:54:44.920 | that to match the supply-- - To match the level of output.

00:54:47.360 | - Sounds pretty good to me, I'm sold.

00:54:49.160 | (Lex laughing)

00:54:50.000 | - All right.

00:54:50.840 | - Even though you're saying Huckster, so--

00:54:52.600 | - Yes.

00:54:53.440 | - You know, the way, I love you very much,

00:54:56.520 | but just for people who are listening,

00:54:59.680 | I think it's, I love the way you talk,

00:55:02.920 | and it's great, and keep doing it,

00:55:04.520 | but just for context,

00:55:05.920 | I don't know anything that involves human nature

00:55:10.880 | deserves this level of certainty.

00:55:12.720 | At least my position is that we don't know

00:55:15.320 | what the hell we're doing on basically anything.

00:55:18.240 | - Perhaps, but I mean--

00:55:19.080 | - And there's a lot,

00:55:21.000 | certainty can get us in trouble, is my worry.

00:55:24.560 | I don't know much about economics,

00:55:27.200 | I don't even know financial systems, monetary systems,

00:55:30.740 | but I've just seen us get in trouble with human psychology,

00:55:35.400 | certainty, certainty of ideologies in general.

00:55:38.400 | You mentioned Marxism and so on,

00:55:40.360 | I came from the Soviet Union,

00:55:42.200 | there's a lot of people that are very certain

00:55:44.440 | throughout the history of the 20th century

00:55:46.600 | that communism is the utopia,

00:55:49.860 | that humanity should strive for.

00:55:52.560 | So I'm nervous around certainty.

00:55:54.400 | - I could be wrong, but you ask me for my opinion.

00:55:57.200 | - Yes, yes, sorry, so it's that little bit of a caveat.

00:56:00.240 | - So to go back to the idea,

00:56:02.160 | then on the other hand, you have the level of,

00:56:04.480 | if the, the other situation is when the level of spending

00:56:07.120 | is higher than the amount of aggregate output.

00:56:10.000 | In that situation, you have too much spending,

00:56:11.800 | so therefore what ends up happening is inflation.

00:56:14.600 | So according to the Keynesian worldview,

00:56:16.160 | this is really important,

00:56:17.080 | because this is a way that I'm gonna get to your point

00:56:19.600 | about empirical data and to show you why

00:56:22.000 | they're not correct.

00:56:26.560 | Yeah, they're not correct about what they say

00:56:28.320 | about empirical data.

00:56:29.600 | So then what this means is that there's a level of output

00:56:32.600 | and there's a level of aggregate expenditure.

00:56:34.200 | The aggregate expenditure can either be higher

00:56:36.080 | or lower than the output or equal to it.

00:56:38.640 | If it's higher, we get inflation.

00:56:41.680 | If it's lower, we get recessions, okay?

00:56:46.640 | So is there any universe in this model?

00:56:50.040 | Is there any potential universe in which you can have

00:56:53.360 | both inflation and a recession?

00:56:56.300 | According to the Keynesian model, you can't, right?

00:56:59.400 | Because aggregate expenditure cannot be both higher

00:57:02.680 | and lower than output.

00:57:04.980 | So therefore, if you were truly being an empirical person,

00:57:08.460 | if you were looking at evidence and trying to be,

00:57:11.480 | trying to analyze data, you'd look at this and say,

00:57:14.800 | one example, you just need one example of high inflation

00:57:18.760 | and high unemployment to refute this entire model, right?

00:57:23.720 | And of course, the world is full of examples

00:57:25.960 | of high inflation and high unemployment.

00:57:28.120 | And that's what happened in the 19, and of course,

00:57:30.040 | they ignored it and when it happens in poor countries,

00:57:32.240 | because poor countries don't really matter.

00:57:34.480 | But then in the 1970s, that happened in the US

00:57:37.200 | and in the Western economies

00:57:38.260 | and the most advanced industrial economies.

00:57:40.380 | So historically, before then,

00:57:42.440 | you had all these Keynesian central bankers

00:57:45.720 | talking about this model and saying,

00:57:49.000 | well, aggregate expenditure is too low now

00:57:51.060 | and that's why we have unemployment,

00:57:52.440 | so we need to print more money.

00:57:53.600 | And then they print more money, inflation goes up,

00:57:56.520 | but also unemployment goes up,

00:57:58.440 | because this model is broken.

00:58:01.880 | That's not how the world works.

00:58:03.240 | That's not, the level of aggregate spending in the economy

00:58:06.320 | is not a lever with which you can control inflation

00:58:09.560 | and unemployment.

00:58:10.800 | So what would a scientist do?

00:58:12.880 | What would a non-Huckster do in this case?

00:58:15.400 | Admit the theory is wrong

00:58:18.660 | and find another way to reformulate it.

00:58:21.240 | Have the Keynesians done that?

00:58:23.040 | No, still the same garbage in the textbook

00:58:25.560 | that is being taught until today.

00:58:27.120 | - So is it possible to have a non-Keynesian model

00:58:29.680 | or one that still supports moderate amount of inflation

00:58:33.360 | is good for the economy?

00:58:34.560 | - I mean, since the 1970s, since this has happened, yeah.

00:58:37.440 | This is what basically most fiat economists,

00:58:42.440 | as I like to call them,

00:58:44.120 | essentially anybody at a university financed by governments,

00:58:46.520 | which is financed by central banks, which is financed--

00:58:48.400 | - I will talk about that.

00:58:49.600 | - Yes. - The effect of fiat money

00:58:52.840 | on our life, as you write about in your book,

00:58:56.080 | fiat standard, one of them is education.

00:58:58.440 | I'm sure we'll disagree there too.

00:59:00.140 | Not smart enough to disagree, but I'll disagree anyway.

00:59:04.000 | - So yeah, so a whole bunch of other models came up,

00:59:06.200 | but basically it's such an example of motivated reasoning.

00:59:10.800 | Anybody who's got a familiarity with the scientific method

00:59:13.380 | or who's got an engineering background

00:59:14.880 | who comes into economics immediately has a lot of red flags.

00:59:18.560 | And I remember when I used to teach macroeconomics,

00:59:22.320 | I used to teach introductory macroeconomics,

00:59:24.520 | and it's a course that would be taken by econ majors

00:59:26.580 | as well as engineers.

00:59:27.640 | A lot of engineers would take it as an elective.

00:59:29.600 | And every time I'd explain,

00:59:31.040 | and I would just teach the Keynesian basic stuff,

00:59:33.240 | and every time I'd explain it,

00:59:34.160 | there's always that smart engineering kid

00:59:35.960 | who just looks at me and says,

00:59:38.000 | "Sir, this doesn't make any sense

00:59:39.560 | "because this and this and that."

00:59:41.240 | And I'm always like, "You get it, exactly, you're correct."

00:59:44.720 | Because if you have any kind of shred of scientific thinking

00:59:47.560 | you see that this is all motivated reasoning.

00:59:50.200 | Like the answer is government needs to print money.

00:59:52.820 | And here's a whole bunch of models brought up by people

00:59:56.720 | for why government printing money is good.

00:59:59.080 | And the reason they're coming up to this conclusion

01:00:01.960 | is that you only get funded

01:00:03.040 | if you come up with this conclusion.

01:00:04.320 | If you come up with a conclusion that we need to

01:00:06.720 | shut down the central bank,

01:00:08.280 | you don't get funded by the central bank.

01:00:10.120 | You don't get published in the journals.

01:00:11.640 | You don't get a job at the prestigious universities.

01:00:14.560 | You don't get quoted by fiat publications

01:00:17.020 | like the New York Times and CNN.

01:00:18.840 | They don't invite you on as an expert.

01:00:21.360 | - Well, that's a fundamental flaw

01:00:22.560 | with a lot of institutions we have today,

01:00:24.680 | and throughout human history.

01:00:27.000 | Let me zoom out for just a second to the big question.

01:00:29.520 | What is economics in general?

01:00:32.440 | What's the goal?

01:00:33.280 | You said there's a bunch of models.

01:00:34.920 | Is any economist basically trying to throw a bunch of models

01:00:38.160 | about human behavior on the table

01:00:40.040 | and try to generalize it to the global scale

01:00:43.920 | so both dance between micro and macro somehow

01:00:47.080 | in order to determine public policy

01:00:49.200 | and explain the past, predict the future,

01:00:53.080 | prescribe policies that can control the future,

01:00:56.960 | those kinds of things?

01:00:57.900 | That's the big, basic, ridiculous question

01:01:00.160 | of what is economics.

01:01:02.080 | - Economics is the study,

01:01:03.320 | the way the Austrians define it is the study

01:01:05.360 | of how humans make choices under the condition of scarcity.

01:01:09.080 | We begin with the starting point of economics

01:01:11.000 | is the fact that scarcity exists.

01:01:14.100 | And why does scarcity exist?

01:01:16.480 | Well, because it's easier to want things

01:01:18.320 | than it is to make them.

01:01:19.400 | It's much easier to want a Ferrari than it is to make one.

01:01:23.240 | And so because we have wants

01:01:27.600 | and we have limited means to meet those wants,

01:01:30.960 | we need to economize.

01:01:32.200 | It's a permanent marker of the human condition.

01:01:37.200 | We are always economizing at all times.

01:01:39.960 | And so how people make those decisions

01:01:43.020 | under the conditions of scarcity is what economists study.

01:01:47.520 | So to go back to your point on empiricism

01:01:49.880 | in Austrian school,

01:01:51.320 | so it isn't that the Austrians don't believe in data.

01:01:55.660 | On the contrary, it's that theory has to inform data.

01:02:00.480 | And in fact, if you think about it

01:02:02.440 | as the example of the stagflation of the 1970 shows,

01:02:06.660 | if you have stagflation,

01:02:10.600 | that just completely refutes the Keynesian model.

01:02:13.440 | The Austrian way of thinking,

01:02:15.480 | which is think from first principles,

01:02:17.860 | understand how the world actually works,

01:02:19.880 | think about how humans act

01:02:21.360 | and understand that economics

01:02:22.600 | is really all about human action.

01:02:23.920 | So it's not about aggregates of goods.

01:02:26.620 | This is really the key distinction in terms of methodology.

01:02:29.480 | For the Keynesians, it's physics envy.

01:02:32.800 | They look at the market economy,

01:02:34.320 | they look at individuals in the market economy,

01:02:36.680 | and they think that they can understand the market economy

01:02:39.200 | by looking at aggregates.

01:02:40.760 | This is really the key point of what I think makes

01:02:44.560 | the certain branch of economics pseudoscientific

01:02:48.080 | is the introduction of aggregates.

01:02:49.800 | When you introduce those aggregates,

01:02:52.480 | how much production takes place,

01:02:54.440 | how many people are unemployed,

01:02:56.560 | the percentage of the inflation rate,

01:02:59.560 | and then you think that you can establish

01:03:01.520 | scientific relationship between those aggregates,

01:03:04.840 | it's purely physics envy.

01:03:07.480 | In physics, for instance, or in chemistry,

01:03:09.960 | you put, let's say, a container which contains a gas,

01:03:13.880 | and you have the ideal gas law, PV equals to nRT,

01:03:18.360 | calculate the pressure, calculate the volume,

01:03:20.920 | and then the temperature.

01:03:23.760 | If you have the pressure and the volume,

01:03:25.600 | you can calculate the temperature

01:03:26.600 | because you have the nRT constants.

01:03:30.040 | So there's a clear relationship

01:03:32.720 | that has been demonstrated in a laboratory,

01:03:34.600 | and that we can do it right now.

01:03:36.600 | We can measure it, and we can see it,

01:03:38.240 | and it continues to hold.

01:03:40.040 | And all it takes is one scientist

01:03:42.760 | to show that this relationship does not hold,

01:03:44.800 | to do an experiment that shows this does not hold,

01:03:48.000 | and it stops being a law of chemistry, and it's broken.

01:03:53.720 | Whereas in economics, what they've done

01:03:56.400 | is they've copied the superficial shape of this

01:04:00.200 | without any of the scientific rigor

01:04:02.860 | that was used to build it.

01:04:04.840 | There's no experiments.

01:04:05.880 | You can't experiment on economies.

01:04:08.120 | We don't have the ability to establish laws,

01:04:11.760 | and all the laws that we establish

01:04:13.360 | are just models that get people published

01:04:15.400 | and get them on the media to say,

01:04:18.160 | my model says we need to print more money,

01:04:20.560 | but it's never subject to actual scientific scrutiny.

01:04:23.440 | If it were, they would all be rejected in 15 minutes

01:04:25.600 | because the world is full of examples that contradict them.

01:04:28.200 | - Was it possible to do scientific scrutiny

01:04:30.200 | when it's human nature, when you can't,

01:04:32.080 | when there's a nearly infinite number of variables

01:04:34.640 | and you can't control them?

01:04:36.000 | Is it possible?

01:04:36.840 | So what's the best thing you could possibly do?

01:04:40.180 | - You do thought experiments.

01:04:42.180 | - But the problem with thought experiments,

01:04:45.920 | you know, Freud thinks everybody wants

01:04:47.800 | to have sex with their mother.

01:04:49.840 | Is he right? - That's the problem

01:04:50.680 | with Freud.

01:04:51.800 | - I don't know, maybe he's right.

01:04:53.800 | Well, obviously, I'm joking on that front, but the--

01:04:57.000 | - Freud is probably under the canes.

01:04:59.040 | - Well, no, I think there's power to the thought experiment.

01:05:03.680 | Just like Einstein, you know, a lot of general relativity,

01:05:06.440 | special relativity, that's a thought experiment.

01:05:09.280 | It originates in a thought experiment.

01:05:10.880 | Now, is it true?

01:05:12.080 | You know, nice thing about physics,

01:05:14.680 | you can eventually have experimental validation.

01:05:17.440 | The downside of economics is you really can't have

01:05:20.880 | experimental, like definitive experimental scientific rigor

01:05:25.640 | of validation of a theory.

01:05:27.080 | So a thought experiment is just a thought experiment.

01:05:29.160 | Using your intuition, it's the power of reasoning together

01:05:32.760 | about human nature.

01:05:33.680 | - And that's why economics cannot make the claims

01:05:36.520 | that physics can make.

01:05:37.360 | So with physics, you can predict that if you get this gas

01:05:40.720 | at this pressure, at this volume,

01:05:42.320 | the temperature will be that much.

01:05:44.000 | And you can make that prediction

01:05:46.320 | and test it a million times

01:05:47.840 | and you'll always get the precisely correct answer.

01:05:50.360 | With economics, we can't make quantitative predictions.

01:05:53.080 | - On Twitter, and even today,

01:05:54.880 | you're very certain about the statements you're making.

01:05:57.680 | Do you--

01:05:58.520 | - Yeah, but I don't make quantitatively certain statements.

01:06:00.480 | That's the thing.

01:06:01.320 | In economics, we don't make quantitative predictions.

01:06:03.360 | We cannot do that because we don't have experiments.

01:06:06.120 | But we can understand how the world actually works

01:06:09.640 | with humility.

01:06:10.480 | This is really the key difference,

01:06:11.660 | that the Keynesians think they just wanna copy

01:06:13.960 | the methods of physics, and then that's just, you know,

01:06:17.280 | gonna give them the certainty of the results of physics,

01:06:19.400 | which is like me saying I'm just gonna put a red blanket

01:06:23.040 | on my back and jump from the fourth floor

01:06:24.840 | because I'm Superman.

01:06:26.160 | Well, it's not the red blanket

01:06:27.480 | that's gonna make me Superman.

01:06:29.000 | There's a lot more to it.

01:06:30.160 | So humility manifests itself in economics

01:06:33.480 | as the belief in a free market,

01:06:35.600 | meaning like I can't centralize,

01:06:37.380 | I can't do centralized control on this thing.

01:06:41.160 | We're going to minimize the friction

01:06:44.480 | of the free exchange of goods.

01:06:47.440 | - So Austrian economics puts priority in the market.

01:06:52.280 | - Yes, and you can arrive at it through two paths.

01:06:55.640 | The more practical path,

01:06:59.900 | which most scientific-minded people arrive at.

01:07:02.080 | You know, I came from an engineering background,

01:07:03.520 | so I initially had this idea

01:07:05.020 | that what is lacking in economics is mathematization.

01:07:09.180 | We need to have better math models.

01:07:11.260 | We need to get all of those tools from engineering,

01:07:13.120 | apply them to economics,

01:07:14.160 | and then we'll be able to plan the world economy

01:07:17.100 | and make it work better.

01:07:18.320 | And then you start actually trying to solve problems,

01:07:20.880 | you know, trying to actually calculate them.

01:07:22.320 | And you realize nobody can have that ability

01:07:24.720 | because the difference ultimately comes down to the fact

01:07:28.480 | we can't have experiments.

01:07:29.780 | And the reason we can't have experiments

01:07:31.080 | is that you can experiment on particles of a gas.

01:07:33.900 | You can't experiment on human beings and entire economies.

01:07:37.440 | And because particles of a gas are just dumb matter.

01:07:42.160 | And so, you know, you kick matter in a certain way,

01:07:46.000 | you can calculate exactly how much it's going to fly.

01:07:48.800 | Human beings are much more complex.

01:07:50.360 | They have a will inside them.

01:07:51.680 | And this is really, this is the humility to understand

01:07:55.400 | that you are a human being

01:07:56.560 | and other people are also human being just like you.

01:07:59.400 | And that the, you know, every person wakes up every morning

01:08:03.600 | and they have a million things in their mind,

01:08:06.400 | a million things they care about,

01:08:07.680 | a million things they wanna do.

01:08:09.480 | And you will never be able to make the decisions

01:08:13.220 | for somebody else, let alone for millions of other people.

01:08:16.680 | So this is one path by which you arrive at the conclusion

01:08:19.000 | that free markets are better

01:08:20.020 | because you've realized that all of the people

01:08:21.760 | that think that they can centrally plan markets

01:08:24.680 | can't actually do that.

01:08:26.900 | And that there's really nothing scientific about them

01:08:30.560 | except essentially the rituals they ape

01:08:33.160 | of the scientific process.

01:08:35.300 | And the other path I think that makes you arrive

01:08:38.140 | at the Austrian perspective

01:08:40.200 | or the libertarian perspective I should say

01:08:42.420 | is simply the notion of individuals

01:08:47.000 | as having their own inalienable right

01:08:49.700 | to decide what they want to do with themselves.

01:08:51.800 | If you, I mean, the only way that you can give yourself

01:08:55.700 | the idea that you get to be planner

01:08:59.280 | is ultimately you think you're better than other people.

01:09:02.520 | You think your choice, your judgment overrides mine.

01:09:05.800 | And I don't think that's a defensible position.

01:09:08.080 | I think I'm in no position to want to force anybody ever.

01:09:11.640 | I will never want to force anybody

01:09:13.500 | to do anything they don't want.

01:09:15.840 | The Keynesian perspective,

01:09:16.960 | the central planning perspective is unlike physics,

01:09:21.320 | which is let's force a bunch of particles

01:09:23.240 | to sit in a lab so that we can study them.

01:09:26.120 | In economics, you're forcing people to do things.

01:09:28.520 | Let's stop these people from doing this job

01:09:31.120 | because it's bad for the economy

01:09:32.400 | and let's get them to do that job.

01:09:34.060 | Let's force them to pay this price.

01:09:35.720 | Let's tax them this much.

01:09:37.520 | Let's prevent them from using gold as money

01:09:39.480 | and force them to use our credit as money.

01:09:42.280 | So it has to rely on coercion.

01:09:44.560 | There's no central planning without coercion.

01:09:46.640 | And coercion is a crime in my opinion.

01:09:49.200 | There's no way that it is justifiable morally or ethically.

01:09:51.760 | - So from a politics, from an ethical perspective,

01:09:54.260 | your view is the, I mean, perhaps the broadly speaking

01:09:58.720 | the libertarian view is coercion is unethical.

01:10:03.720 | Freedom is essential.

01:10:07.400 | What are the pros and cons of government intervention

01:10:11.360 | in the economy?

01:10:12.360 | So can you steal, can you provide pros?

01:10:14.880 | You just kind of provided arguments against.

01:10:18.260 | Is there any arguments to be made

01:10:20.880 | for government intervention,

01:10:22.580 | for the role of government in society?

01:10:25.240 | Speaking from a political or from an economics perspective,

01:10:28.640 | what is a positive role of government

01:10:31.440 | that you can imagine you can speak to?

01:10:33.480 | - I can repeat many other cases,

01:10:34.920 | but I don't find any of them compelling

01:10:37.040 | for the reason that I mentioned,

01:10:38.080 | which is that ultimately they all rely

01:10:40.480 | on putting a gun to somebody's head

01:10:42.520 | and using the threat of force.

01:10:43.800 | So that's for me is can never be justifiable.

01:10:46.080 | Whatever the ends are, if the means are violence

01:10:50.680 | and the threat of violence, then the ends aren't justified.

01:10:55.080 | Everything that's good, governments will use as an excuse

01:10:58.360 | to justify coercion.

01:10:59.880 | So, you know, what are you like?

01:11:01.480 | You like motherhood and apple pie.

01:11:03.040 | Well, government needs to ensure that motherhood works well

01:11:06.040 | and we need government central planning of birth.

01:11:09.520 | We need regulations on birth, for instance.

01:11:11.400 | We need regulations on how people give birth.

01:11:14.480 | We need to ban people from giving birth

01:11:16.160 | in traditional ways that have been tried

01:11:18.120 | for thousands of years.

01:11:18.960 | We need to force people to do things

01:11:20.980 | in the modern scientific way.

01:11:22.840 | - Well, so what about things like that all of us use,

01:11:26.520 | so infrastructure, for example, or education,

01:11:29.520 | or well, the economy too, right?

01:11:35.160 | Can you make a case for the role

01:11:38.480 | of some large-scale centralized systems,

01:11:42.120 | whether it's government or not,

01:11:43.600 | that do this kind of management?

01:11:45.360 | - I guess perhaps you could say

01:11:46.720 | there's the economies of scale argument

01:11:48.840 | that some things must exist at a very large scale

01:11:52.280 | and therefore you would want political accountability

01:11:56.840 | of the people who manage them.

01:11:58.100 | This is kind of the argument that's given

01:11:59.520 | for infrastructure monopolies, you know,

01:12:01.440 | for instance, roads or electricity.

01:12:05.000 | That, let's say we live in a country,

01:12:07.080 | we need one power plant.

01:12:08.200 | The bigger the power plant, the better off we will all be,

01:12:11.160 | and there's a natural monopoly in the power plant business,

01:12:15.000 | so we're gonna have to have one power plant,

01:12:17.160 | and since it's only one power plant,

01:12:19.360 | then we can't just let anybody own it

01:12:22.080 | because then they're gonna make it too expensive,

01:12:24.380 | so we need to have the government own it

01:12:26.240 | so it can make it too expensive.

01:12:28.200 | - And you don't find that case compelling?

01:12:29.920 | - Not at all.

01:12:30.740 | I used to believe in it.

01:12:31.580 | I was pretty much a Keynesian

01:12:33.600 | when I first started my graduate studies at Columbia,

01:12:36.360 | and no, I don't find that compelling at all

01:12:40.160 | because I think all these examples that they mention

01:12:42.700 | of natural monopolies or economies of scale

01:12:45.540 | that can only fit at a scale of government,

01:12:47.640 | it's always, you know, government bans people

01:12:52.520 | from opening power plants,

01:12:54.400 | and then there's only one power plant

01:12:56.120 | and they need to be in charge of it,

01:12:58.160 | but in reality, no, in reality,

01:13:02.440 | you know, power plants can exist

01:13:03.640 | at all kinds of manners of scales of operation,

01:13:06.400 | and yes, of course, there are benefits to centralization

01:13:08.840 | in power plants in particular

01:13:10.280 | because there's efficiency in generation.

01:13:12.520 | You know, one big power plant is more efficient

01:13:17.080 | than 10 equivalent smaller power plants,

01:13:20.000 | but there's also inefficiencies in centralization

01:13:22.260 | because the more centralized and the bigger the plant is,

01:13:25.520 | the further away a lot of the population is going to be,

01:13:29.920 | so you're gonna be losing a lot of the electricity

01:13:31.960 | and transmission.

01:13:33.560 | - And you believe the free market is best

01:13:35.240 | in managing that dance,

01:13:36.920 | that balance of centralization. - Exactly.

01:13:39.240 | Exactly, and if we do end up in a situation

01:13:41.560 | where there's one power plant for an area,

01:13:44.360 | then, you know, if the markets ends up centralizing

01:13:48.480 | all of it into one power plant,

01:13:50.440 | I don't see that as a problem.

01:13:52.760 | There are places, you know,

01:13:54.040 | there's a small town with only one barbershop.

01:13:56.080 | Is that a catastrophe?

01:13:57.480 | No, because they don't need two barbershops.

01:14:00.920 | Now, if that barbershop started to take advantage of people,

01:14:03.520 | started to charge higher price,

01:14:05.400 | well, then that's just an opportunity for others to step in

01:14:08.000 | and put them in their place,

01:14:10.040 | and that's the same thing with power plants.

01:14:11.440 | It's the same thing with everything.

01:14:13.600 | Ultimately, I think the key thing is this.

01:14:17.320 | From the central planning perspective,

01:14:20.160 | they'll present you the problem as it is,

01:14:22.720 | and they'll tell you, well, this is bad,

01:14:24.600 | so the fix, you know, and what we can do is better,

01:14:28.120 | so let's stop what's bad and do what is better.

01:14:31.880 | Two problems here.

01:14:32.720 | Usually, the reason that the thing is bad in the first place

01:14:35.600 | is because it is a government monopoly,

01:14:37.080 | is because of government intervention,

01:14:39.120 | but the second thing is that this notion

01:14:41.960 | that we could just pass a law and fix what's wrong

01:14:44.120 | and make it better,

01:14:45.680 | is it ignores the fundamental underlying reality,

01:14:49.720 | which is that what you're doing is

01:14:51.840 | you're offering only one way for this problem to be solved

01:14:55.480 | and making all other solutions practically illegal.

01:14:58.320 | You're taking taxpayer money,

01:15:00.120 | you're putting guns to people's heads to take their money,

01:15:02.920 | to use it to build, say, this one solution for a power plant,

01:15:06.040 | but you're preventing the free market process

01:15:08.440 | from providing us with other alternatives.

01:15:11.280 | - Well, so you phrased it sort of from that perspective,

01:15:13.640 | but in theory, there is a feedback accountability mechanism

01:15:18.440 | for the solution that you propose and enforce by,

01:15:22.800 | as you're saying, placing a gun to people's head.

01:15:25.800 | You're accountable for that choice,

01:15:29.120 | for the quality of that solution by being voted out

01:15:32.600 | if the solution is actually bad.

01:15:34.680 | So it's just a different selection mechanism.

01:15:37.320 | And I think, I personally believe

01:15:39.800 | it is a selection mechanism that has worked in the past.

01:15:43.520 | It just often does not work nearly as well as a free market.

01:15:48.520 | And the question is, are there domains

01:15:52.000 | in which the free market gets itself into trouble?

01:15:54.760 | So this theoretical view is that

01:15:58.040 | that's the point of a free market,

01:16:00.040 | is it doesn't, if there's trouble, that's a signal,

01:16:04.080 | and it will respond to that signal,

01:16:05.800 | and it will respond appropriately

01:16:07.880 | to make you try to maximize happiness.

01:16:10.360 | The question is, is there a local optima

01:16:12.480 | that free markets get stuck in and you need governments

01:16:15.640 | to represent the broader scale of the people

01:16:19.080 | to get outside of that?

01:16:20.520 | - I think the fundamental problem here

01:16:23.160 | is the idea that there is a feedback mechanism

01:16:26.120 | when there is coercion in one party,

01:16:28.960 | when one party can employ coercion and the other one cannot.

01:16:31.760 | So in other words, I'm gonna put a gun to your head,

01:16:34.840 | I'm gonna take your money,

01:16:36.280 | and I'm gonna use it to buy more guns

01:16:37.680 | for me to put against your head,

01:16:39.960 | but somehow you're gonna put a paper in a box

01:16:43.000 | and that's going to deactivate my guns.

01:16:44.960 | - Well, love requires a push and pull,

01:16:48.040 | a little bit of tension, a little spice in a relationship.

01:16:50.360 | I think-- - Yeah, I mean--

01:16:52.400 | - A little gun to the head,

01:16:53.320 | and that's sometimes-- - Good luck to anybody

01:16:54.560 | who's gonna be dating you if you think

01:16:56.120 | putting a gun to people's head

01:16:57.200 | is comparable to a relationship.

01:16:58.860 | - All jokes, but yes, I mean,

01:17:02.720 | people don't often think of it as government

01:17:06.720 | and the military as gun to the head,

01:17:10.440 | but that is sort of a libertarian perspective

01:17:13.720 | because ultimately when you, you know,

01:17:15.760 | turtles all the way down and at the bottom there's guns.

01:17:18.720 | - Yeah, so-- - At the bottom,

01:17:20.120 | if you don't wanna pay, if you don't wanna,

01:17:21.320 | you know, all right, I don't wanna be part

01:17:22.560 | of your power plant, I wanna get my own generator,

01:17:24.320 | I don't wanna do it, and I don't wanna pay for it,

01:17:26.720 | you go to jail, you can't not pay for it.

01:17:28.580 | That's really the asymmetry which the market doesn't have,

01:17:30.600 | which is why, in my opinion, it's not as if, you know,

01:17:33.960 | I'm being stubborn and stuck on the idea

01:17:36.200 | that I want a market and that the government can't work.

01:17:39.400 | It's presented as if, you know,

01:17:40.480 | we're choosing between two different machines,

01:17:42.720 | you know, should we use an Apple or a PC,

01:17:45.800 | and I'm just constantly choosing one of them

01:17:48.560 | and saying that the other one can't work.

01:17:50.480 | It's not equivalent, it's not two machines.

01:17:52.320 | We're comparing between a machine and a gun to the head.

01:17:56.600 | We're comparing between a situation in which anybody,

01:17:59.440 | anywhere is free to provide the service or the good,

01:18:02.640 | and anybody anywhere is free to buy it from them

01:18:04.960 | or reject to buy it from them.

01:18:06.760 | So anyone can build a power plant,

01:18:08.680 | anyone can succeed at it, anybody can fail at it,

01:18:11.040 | anybody can build it in a way that I can choose

01:18:13.440 | to take part in or not take part in.

01:18:15.800 | I can build my own.

01:18:17.080 | So we have a situation in which 10 million people,

01:18:19.240 | let's say, they each can freely choose

01:18:22.760 | to provide the good or to buy the good.

01:18:25.400 | That cannot be considered an alternative on an equal footing

01:18:29.920 | to a situation where one person or one entity

01:18:32.920 | gets to decide for everybody

01:18:34.680 | and those who disagree go to jail.

01:18:37.040 | So the problem is that the alternative to governments

01:18:41.720 | is other large successful entities that have humans in them

01:18:45.640 | and human nature is such that there's corruption,

01:18:48.000 | manipulation, and so on.

01:18:50.000 | I think free market depends on the honest communication

01:18:55.000 | of information as widely as possible

01:18:59.840 | so people can make great rational decisions.

01:19:02.440 | But sort of my fear is that like to propose

01:19:06.040 | is that in general there's manipulation,

01:19:08.000 | whether it's government, whether it's companies.

01:19:10.080 | They're going to manipulate,

01:19:11.320 | they're going to try to do propaganda,

01:19:13.000 | they're going to try to manipulate you.

01:19:15.360 | Deceive you, shut down competition by playing games,

01:19:19.880 | human games of different kinds.

01:19:21.560 | And sometimes even meaning well.

01:19:24.320 | It's not like everybody thinks they're doing good

01:19:26.080 | and they're actually doing evil.

01:19:27.560 | So how do we prevent the worst of human nature coming out

01:19:31.440 | in a free market as well?

01:19:34.960 | - By not giving the worst of human nature

01:19:37.480 | a monopoly on violence in the institution of government.

01:19:40.680 | - That little inkling of coercion,

01:19:42.880 | that little bit of asymmetry creates a gigantic

01:19:47.040 | like ripple effect of asymmetry in your view.

01:19:49.880 | - Yes, and it ends up just being the place

01:19:51.640 | where corporations, individuals, free markets,

01:19:55.120 | they can't coerce without the resort to government.

01:19:57.760 | So you think about all the examples

01:19:59.400 | of corrupt corporations doing bad things.

01:20:02.680 | It's always because they have certain privileges

01:20:06.380 | from governments because as it exists,

01:20:10.040 | Coca-Cola, McDonald's, all of these giant corporations,

01:20:13.040 | they can't do anything to me without government.

01:20:15.820 | They can't take any of my money

01:20:17.100 | and they can't force me to buy their stuff.

01:20:19.240 | And so it doesn't matter to me.

01:20:21.400 | So if Coca-Cola is corrupted,

01:20:24.000 | that's a problem for Coca-Cola customers,

01:20:25.800 | that's a problem for Coca-Cola shareholders,

01:20:27.920 | that's a problem for anybody who deals with Coca-Cola.

01:20:30.920 | But as somebody who doesn't drink their stuff

01:20:32.440 | and isn't a shareholder,

01:20:34.360 | I have absolutely no interest in what happens.

01:20:36.520 | They could all go bust tomorrow and I don't care.

01:20:39.000 | I don't buy their product and I'm not a shareholder.

01:20:43.200 | So in this situation where you choose

01:20:45.200 | to voluntarily associate with people

01:20:48.760 | and you only give your money to people

01:20:50.560 | you want to voluntarily give the money to,

01:20:52.440 | so you either buy their product

01:20:54.280 | or invest in their production,

01:20:55.880 | in that situation, the only way that a company

01:20:58.760 | can get my money is if they build a product

01:21:00.920 | that I value or if they convince me

01:21:05.000 | that they are going to use it in a way that's profitable.

01:21:08.640 | And I may be wrong, I may invest in a company that fails

01:21:12.680 | or I may invest in a company that turns out to be fraudulent

01:21:17.280 | but that's my fault.

01:21:19.480 | It's my fault that I gave them my money

01:21:24.720 | and then it turned out to be scoundrels.

01:21:26.840 | But it's a totally different problem

01:21:28.960 | when we make it mandatory.

01:21:32.240 | It's violence, it's a crime to put a gun to my head

01:21:36.080 | and force me to subsidize companies

01:21:38.520 | and force me to come at certain conclusions.

01:21:41.280 | - Do you find an interesting distinction,

01:21:43.160 | mentioned by Kamalis, between anarchism and libertarianism?

01:21:46.720 | So this particular use of violence,

01:21:49.800 | this like last resort, this policing force

01:21:53.680 | that libertarianism is okay with

01:21:56.200 | and anarchism is not okay with.

01:21:58.720 | So basically nation states that keep you safe

01:22:02.480 | from the worst of war.

01:22:05.320 | - Yeah, I think to be more accurate,

01:22:06.560 | the distinction is between anarchism and minarchism.

01:22:09.040 | I think libertarianism is kind of a vague term

01:22:11.640 | that can encompass both.

01:22:13.360 | - Means a lot of things, okay.

01:22:14.400 | - Yeah, but--

01:22:15.520 | - On the Karl Marx to Michael Malice spectrum,

01:22:19.880 | where do you--

01:22:20.720 | - No, no, I'm full anarchist.

01:22:22.160 | - You're a full anarchist.

01:22:23.000 | - Yeah, full anarchist.

01:22:23.840 | I mean, I don't find any justification for the use of force

01:22:27.720 | and I think recently perhaps, maybe I'm getting old,

01:22:32.680 | maybe I'm getting senile, maybe I'm getting wise,

01:22:35.120 | who knows, but I'm beginning to become

01:22:37.480 | more sympathetic to monarchy.

01:22:39.640 | So I'm an anarchist--

01:22:41.760 | - Which, what?

01:22:42.600 | - Monarchy.

01:22:43.440 | - Which, what is that?

01:22:44.440 | - Kings.

01:22:45.280 | - Oh, monarchy.

01:22:46.120 | - Yeah.

01:22:46.940 | (laughing)

01:22:48.240 | And I think--

01:22:49.080 | - Wait, can you, are you joking or not?

01:22:51.840 | - No, I'm not joking.

01:22:53.120 | And I think, I mean, I think, you know,

01:22:57.000 | morally and intellectually, I'm an anarchist,

01:22:59.320 | but it's, the reality is we find ourselves

01:23:02.360 | in a world in which a lot of people are not.

01:23:05.560 | And the question is, what is the thing

01:23:09.360 | that is going to provide you with more freedom?

01:23:12.760 | And I think, I'm recently coming around to the idea

01:23:16.740 | that monarchy might be the best way to provide people

01:23:21.040 | with the largest amount of freedom

01:23:22.080 | because to have a free society,

01:23:24.840 | you need a majority perhaps or a plurality of people

01:23:28.060 | to have a very strong understanding of libertarian ideas,

01:23:31.880 | to have a low time preference,

01:23:33.120 | to have a preference for the future.

01:23:35.720 | So you need a majority of the population

01:23:37.480 | to not decide to go and do something insane

01:23:41.280 | in order to continue to have a free society.

01:23:44.400 | You know, when a respiratory illness comes along,

01:23:48.040 | unfortunately, you know, the last couple of years

01:23:51.120 | showed that we, the vast majority of people

01:23:53.640 | are gonna freak out and lose their mind

01:23:57.320 | and support whatever their stupid TV tells them to support.

01:24:00.480 | And, you know, there's always a current thing

01:24:03.560 | and the media is always telling you

01:24:05.840 | that we need this current thing

01:24:07.760 | as an excuse for more and more government power

01:24:10.240 | and more and more government coercion.

01:24:11.640 | - What's the role of kings and queens

01:24:13.080 | in that case of a monarchy?

01:24:15.200 | - The situation-- - What's the role of a leader?

01:24:17.720 | - I think there might be a case that,

01:24:21.720 | so as I was saying, you need a majority of the population

01:24:24.340 | to get together and decide, nope, whatever is the case,

01:24:28.320 | you know, the answer is voluntary.

01:24:30.500 | No matter how bad the disease is,

01:24:34.120 | it doesn't justify forcing people to stay home.

01:24:36.320 | You wanna stay home, stay home.

01:24:37.520 | You wanna wear a mask, take a vaccine, do whatever you want,

01:24:40.600 | but you can't force others to do that.

01:24:42.460 | So you need a majority of the people

01:24:43.920 | to strongly believe in this principle

01:24:46.440 | in order to get it in a democracy.

01:24:50.380 | Whereas in a monarchy, you just need the king to get it.

01:24:54.440 | And I think the reason kings are more likely to get it

01:24:57.400 | is that kings have a low time preference

01:25:00.000 | where they think about things for many generations,

01:25:03.520 | whereas in a democratic system,

01:25:05.440 | your president is likely only going to be there

01:25:08.240 | for four years or eight years or 10 years

01:25:10.640 | or five years or whatever it is.

01:25:12.600 | So the only way that, you know,

01:25:14.560 | all humans are self-interested.

01:25:15.920 | So the only way that your president in a democracy

01:25:17.940 | can provide for themselves

01:25:19.840 | is to maximize the amount of exploitation

01:25:22.440 | that they can do of the population

01:25:24.120 | during their brief stint.

01:25:26.400 | And then when he's out, you get a new one

01:25:28.680 | and then that one wants to start all over again.

01:25:30.520 | So every four years you get a new robber.

01:25:33.040 | With monarchy, you sign up for a multi-generational

01:25:38.040 | subscription to the same family.

01:25:41.360 | And when they have the security of knowing that,

01:25:44.160 | you know, his great grandson is going to be taking money

01:25:48.560 | from your great grandson,

01:25:50.860 | suddenly his interest in yours align

01:25:54.360 | because they both want your great grandson to be prosperous

01:25:57.800 | and have enough money for his great grandson to take.

01:25:59.880 | - So it's a monarchy with a tiny government.

01:26:02.320 | So anything required to really provide for a free market.

01:26:07.320 | So for maximizing individual freedom

01:26:11.000 | and the freedom of the economy.

01:26:12.440 | - Yeah, and if I were king,

01:26:13.720 | which is highly unlikely to ever happen,

01:26:16.080 | but I think, you know, if you look historically,

01:26:18.240 | the dynasties that have succeeded

01:26:21.120 | at lasting for a long time,

01:26:23.160 | the key thing that they managed to do

01:26:24.920 | is to basically be libertarian.

01:26:26.900 | The key to being a good king is to just leave people alone,

01:26:29.760 | let them do whatever they want,

01:26:31.160 | don't rob them too much or rob them as little as possible,

01:26:34.200 | or maybe even don't rob them.

01:26:36.100 | And, you know, as a king, use your power only

01:26:40.520 | to punish people who aggress against others.

01:26:43.160 | Don't use your power to enrich yourself

01:26:44.840 | and enrich your friends.

01:26:46.280 | And that's really, like, if you look at smart kings,

01:26:49.680 | this is what they do, this is what they teach their children

01:26:51.680 | and the cycle of kingdoms is that, you know,

01:26:54.120 | the first king understands this, builds the empire,

01:26:57.500 | and the first couple of generations,

01:26:59.680 | they get this and the society is free, the economy is free.

01:27:04.620 | And because of that, you know,

01:27:06.240 | there's peace and prosperity, but then over time,

01:27:10.720 | the next generation of kids

01:27:12.400 | become a lot more high time preference.

01:27:14.720 | They haven't worked hard,

01:27:17.240 | they don't understand the meaning of hard work,

01:27:19.940 | so they become more likely to engage in destructive behavior.

01:27:24.880 | So raise taxes, pass laws that require people to do things,

01:27:29.880 | even when they're not hurting anybody.

01:27:33.800 | And that ends up basically eventually destroying the kingdom.

01:27:36.840 | - Of course, power corrupts.

01:27:40.000 | - Yeah. - So you have to kind of

01:27:41.080 | create human institutions that prevent you as a king

01:27:44.960 | or any kind of leader from expanding.

01:27:48.280 | So going back on the original promises

01:27:52.120 | and the purposes of your position.

01:27:54.280 | - Yeah. - And then distracting,

01:27:56.240 | using tools of technology and communication

01:27:58.760 | to distract the populace while you expand the power.

01:28:01.240 | - Exactly. - All right.

01:28:03.320 | You wrote the fiat standard.

01:28:05.720 | I think we danced around it quite a bit,

01:28:08.520 | but I don't know if we actually defined it.

01:28:10.120 | So what is fiat money?

01:28:11.800 | What is the history of how it came to be?

01:28:14.620 | - The fascinating history of the birth

01:28:16.060 | of the fiat monetary system is something

01:28:18.400 | that really only got uncovered in 2017.

01:28:21.640 | This is extremely, extremely interesting.

01:28:25.040 | In 1914, Britain joined World War I.

01:28:29.620 | And if you remember your history books,

01:28:31.680 | it's famous that this was called the August Bank Holiday.

01:28:35.280 | It was just going to be a few weeks

01:28:36.720 | where the British troops were gonna go

01:28:38.280 | and kick European ass and come back triumphant.

01:28:41.720 | And most European countries believed that.

01:28:44.020 | But then the war kept on dragging on.

01:28:46.360 | And of course, to finance the war,

01:28:48.320 | the government, this is what they used to do

01:28:49.920 | under the gold standard, governments would issue bonds.

01:28:52.920 | So you'd issue the bonds, people would buy the bonds,

01:28:55.600 | the money would be used to finance the military,

01:28:57.920 | and then the government would pay off the bond

01:29:00.640 | over the next five or 10 or 20 years.

01:29:02.960 | So for World War I, the British government,

01:29:06.200 | the British treasury issued bonds for financing the war.

01:29:10.160 | And this only came to light in 2017.

01:29:13.360 | Only a third of the bonds were actually subscribed.

01:29:15.780 | So people, British people,

01:29:17.180 | and this is perhaps the greatest thing

01:29:19.100 | that they've ever done,

01:29:20.260 | they decided fighting a war in Europe

01:29:22.180 | is just not my ideal way of investing my capital.

01:29:25.220 | It's a stupid thing.

01:29:26.060 | Why should I go and fight?

01:29:27.220 | Because the Austrians and the Germans and the Serbians

01:29:30.100 | are at each other's throats.

01:29:34.140 | I'd rather invest in something else.

01:29:36.100 | So they only bought a third of the bond issue.

01:29:38.860 | And then the astonishing thing that happened,

01:29:42.060 | which really set the tone for the next century

01:29:44.100 | of war, murder, Keynesianism, and theft and inflation,

01:29:49.060 | was that the Bank of England went and got

01:29:52.660 | two of the high-ranking officials in the Bank of England

01:29:56.620 | to buy the other remaining outstanding two-third of the bonds

01:30:00.220 | under their own name,

01:30:01.500 | with a line of credit from the Bank of England.

01:30:03.140 | So it wasn't their own money,

01:30:04.660 | but they took money essentially from the Bank of England,

01:30:06.620 | bought two-thirds of the bonds that financed the war.

01:30:10.340 | And that was how England was able

01:30:12.620 | to keep going into the war.

01:30:14.820 | So that's essentially what they did

01:30:17.060 | is what we today know as quantitative easing.

01:30:20.100 | Back then, they just got,

01:30:22.860 | they printed money from the Bank of England,

01:30:24.460 | or credit, printed credit,

01:30:26.140 | gave it to those two employees.

01:30:28.940 | They bought the bonds.

01:30:29.940 | The government could fight the war.

01:30:32.340 | Sounds like it's a nice idea.

01:30:34.460 | And Keynes, of course, being a huckster himself,

01:30:38.100 | he himself said this was,

01:30:41.340 | he wrote a letter to the Bank of England

01:30:42.860 | that was uncovered recently,

01:30:43.980 | and he said, "I congratulate you

01:30:45.780 | "on this masterly manipulation."

01:30:48.020 | I quote it in the book.

01:30:49.380 | Masterly manipulation is what he called it,

01:30:51.660 | that they basically managed to buy the bonds

01:30:54.700 | using the money of the government.

01:30:56.380 | And of course, he never had an idea of how economics works,

01:30:59.980 | because he never could ask the question of,

01:31:01.580 | okay, and then what?

01:31:02.740 | All right, so we just printed money

01:31:04.340 | to buy two-thirds of these government bonds.

01:31:07.300 | What's gonna happen next?

01:31:09.020 | What could go wrong?

01:31:10.380 | Not a question Keynesians ask themselves,

01:31:12.940 | because their jobs depend on not thinking

01:31:16.740 | about what's going to go wrong.

01:31:18.300 | - So a quick question about war,

01:31:20.660 | and as somebody who's been nonstop reading

01:31:23.660 | and thinking about the wars of the 20th century,

01:31:26.700 | and thinking that most of those wars

01:31:31.660 | were unjust, unethical, and destructive,

01:31:37.060 | how else do you find, how would you finance a war?

01:31:40.140 | So-- - Ideally, you don't.

01:31:41.940 | No, but I mean, of course, there are sometimes,

01:31:43.460 | you know, you wanna fight for self-defense,

01:31:45.140 | yeah, you finance it, taxation or bonds.

01:31:48.540 | - So the people really need to want a war,

01:31:51.140 | not just with their voices, their thoughts,

01:31:54.020 | their tweets, or their actual financial investment.

01:31:56.780 | - Put up the bullets, and the cost of the bullets,

01:31:59.260 | and the bodies.

01:32:00.420 | - So their life and their financial well-being.

01:32:05.540 | That's how it was under the gold standard, mostly,

01:32:07.460 | because under the gold standard,

01:32:09.260 | the government couldn't print gold.

01:32:10.660 | And so they had a budget,

01:32:12.060 | and they had a certain amount of gold,

01:32:13.500 | and that wasn't just, you know,

01:32:15.020 | that they couldn't infinitely increase it.

01:32:16.860 | They couldn't tax their population at will,

01:32:20.220 | and it's very difficult to take money from people.

01:32:22.900 | You know, you go knock on doors and search everybody's home,

01:32:25.620 | see where they're hiding their gold.

01:32:27.300 | It's very complicated.

01:32:28.620 | On the other hand, when you gave them paper money,

01:32:30.220 | which is what the case was in 1914,

01:32:33.220 | you could take their wealth just by printing the money.

01:32:36.220 | And that's what changed everything when it comes to war.

01:32:38.780 | That's why the 20th century was the century of total war,

01:32:41.980 | because under the gold standard,

01:32:43.220 | governments fought until they ran out of their own gold.

01:32:46.420 | Under the fiat standard, with paper money,

01:32:48.700 | with credit money, governments fought

01:32:50.900 | until they ran out of liquid wealth

01:32:53.460 | in the hands of all of their citizens.

01:32:55.860 | - So let's find flaws in this thinking, if there's any.

01:33:01.460 | Okay, there's a lot of pacifist type of thinking

01:33:06.460 | in World War II as Hitler was expanding and expanding.

01:33:10.020 | Hitler framed himself as a victim of the past, of history.

01:33:14.620 | He never attacked anybody.

01:33:16.580 | Everyone's always threatening to attack him.

01:33:18.940 | That's kind of the narrative, and he keeps expanding.

01:33:21.580 | He keeps, we're talking with this charisma,

01:33:23.660 | all the countries around him,

01:33:25.940 | into sort of embracing pacifism.

01:33:28.820 | Stay out of the war until the war's on your doorstep.

01:33:31.820 | So France, just very suboptimal military strategy

01:33:36.820 | from the perspective of many European nations

01:33:39.940 | in response to Hitler.

01:33:41.860 | They were basically hoodwinked by his words.

01:33:45.620 | So then there's Churchill, Winston Churchill,

01:33:50.220 | who stepped up and says, perhaps irrationally,

01:33:55.220 | from some kind of economics perspective,

01:33:57.880 | saying we're not going to back down.

01:33:59.900 | We're going to fight Germany.

01:34:01.540 | And perhaps that step alone is one of the biggest reasons

01:34:05.220 | that Hitler failed in his expansion.

01:34:09.140 | That decision to fight back,

01:34:13.560 | what's the right way to do that?

01:34:18.780 | If you're Winston Churchill,

01:34:20.400 | what's the right way to do that?

01:34:26.600 | To fight back evil when violence is required.

01:34:30.420 | Now, you could argue that no war is just,

01:34:35.420 | but there is such a thing as a just war index,

01:34:38.840 | and a lot of people argue if there is a just war

01:34:41.920 | in the 20th century, it's World War II.

01:34:44.880 | So how would you fund, if you were Britain, the war?

01:34:49.800 | Would you require Winston Churchill

01:34:52.200 | to convince the populace,

01:34:54.560 | like don't fight until they're fully convinced

01:34:57.480 | that this is the right thing to do.

01:34:59.100 | You can't just make a decision for them.

01:35:01.200 | You have to convince them fully

01:35:02.900 | so that they give their life

01:35:04.340 | and they give their money to support the war.

01:35:07.720 | Is that the right way to do it?

01:35:08.700 | - I think so.

01:35:09.540 | And I think when you have a true threat

01:35:13.240 | and a true evil and a true force

01:35:14.720 | that people really do think is genuine,

01:35:18.280 | you don't need to convince them.

01:35:19.340 | I mean, when it's real, people will want to fight

01:35:22.720 | and people will want to pay to fight.

01:35:24.380 | And I mean, I think though on this particular example,

01:35:28.860 | I think the best way to fight Hitler

01:35:30.700 | is to have not fought World War I

01:35:32.540 | and not take out the Kaiser of Germany.

01:35:36.060 | If Britain hadn't,

01:35:38.300 | and Britain and the US had not gotten involved

01:35:40.100 | in World War I, which really is the senseless war

01:35:44.560 | about nothing, like what was in it

01:35:46.580 | and what was the goal from anybody fighting that war?

01:35:49.580 | If you look at it, after World War I,

01:35:52.360 | there were very minor adjustments in the borders

01:35:56.080 | of the countries that were participating.

01:35:57.660 | So Germany lost some land, Austria lost some land,

01:36:00.840 | but really it wasn't all that massive.

01:36:04.340 | And it wasn't like Britain wanted to take over Germany

01:36:09.300 | and move their people into Germany and kick the Germans out.

01:36:12.020 | So there was no real value from that war.

01:36:17.020 | And that's why the British people

01:36:18.100 | didn't want to take part in it.

01:36:19.980 | And that's why if they hadn't done

01:36:22.760 | this enormously criminal manipulation

01:36:25.560 | of printing money to buy the bonds,

01:36:28.520 | Britain wouldn't have gotten into the war.

01:36:30.720 | Germany would still be a kingdom and Hitler wouldn't rise.

01:36:34.520 | And yeah, there'd be small changes

01:36:37.240 | in the borders of various European countries.

01:36:41.440 | I struggle to see how it could have been worse.

01:36:44.800 | I mean, I struggle to see who benefited

01:36:47.880 | from four years of carnage in Europe.

01:36:50.800 | And this came at the height of civilization.

01:36:53.620 | Before that, the people of Europe had the golden era,

01:36:58.620 | 100th gold standard.

01:37:00.180 | They were trading with one another,

01:37:01.220 | they traveled and technology was advancing.

01:37:04.400 | And they did not expect this war to last this long.

01:37:08.760 | And my favorite story from World War I

01:37:11.360 | is the Christmas truce football game,

01:37:14.840 | which I mentioned in my book.

01:37:16.480 | British and German soldiers at the height of the conflict,

01:37:19.640 | they stopped on Christmas day

01:37:20.720 | and they played a football game against each other.

01:37:23.120 | I mean, this is not a real war

01:37:25.080 | where it's a war for survival.

01:37:27.720 | Britain didn't want to end Germany.

01:37:30.340 | Germany didn't want to end Britain.

01:37:31.840 | It was just kings who were emboldened

01:37:35.920 | by the fact that they had a printing press

01:37:38.440 | playing with the lives of the people.

01:37:40.280 | And take that away, take away the printing press,

01:37:44.640 | take away their ability to print money.

01:37:46.360 | I think we'd have had a much, much,

01:37:48.880 | much better 20th century.

01:37:50.960 | - Yeah, the counterfactual history,

01:37:52.520 | Neil Ferguson is a historian

01:37:54.080 | who gets in quite a bit of trouble.

01:37:56.060 | Basically, well, he's a Brit,

01:38:00.240 | suggesting that if Britain stayed out of World War I,

01:38:03.440 | there would be no Hitler, there would be no World War II.

01:38:06.000 | - Yep, I agree entirely.

01:38:07.520 | - But fiat money.

01:38:10.640 | - Yeah, so how fiat money was born.

01:38:12.280 | Yeah, let's get back to that.

01:38:13.560 | So they financed the war with that money.

01:38:16.160 | So what could go wrong?

01:38:18.000 | That's where we left off.

01:38:19.260 | Well, what could go wrong when you've just printed

01:38:21.320 | an enormous amount of credit and used it to buy bonds?

01:38:26.320 | What goes wrong is that the value of the currency

01:38:28.600 | is going to go down, or in other words,

01:38:30.880 | prices of things are gonna go up.

01:38:32.920 | So during the war, prices keep going up.

01:38:35.280 | And this is, of course,

01:38:38.080 | it's gonna sound very familiar

01:38:39.240 | to victims of the 20th century.

01:38:41.600 | A government tells you it's because of the war,

01:38:43.440 | it's not our fault, it's because of the Germans,

01:38:45.280 | it's because of the foreigners, it's because of Putin,

01:38:47.160 | it's because of this, it's because of that.

01:38:49.160 | This has always been the case.

01:38:50.320 | There's always, war is a very good cover for inflation,

01:38:55.120 | which is caused by monetary phenomena.

01:38:57.920 | So then the war ends, and inflation,

01:39:01.300 | prices have more than doubled over the past four years,

01:39:04.800 | over the four years of World War I,

01:39:07.680 | prices have more than doubled.

01:39:09.460 | And then the British economy is in bad trouble.

01:39:12.840 | Obviously, lost a lot of the labor force for four years

01:39:16.440 | that was out there fighting.

01:39:18.360 | Now those workers come back,

01:39:19.960 | prices are up, and so people are requiring,

01:39:25.160 | are demanding that the government control prices,

01:39:27.360 | and the government is trying to fix the problem of inflation

01:39:30.080 | by doing price controls, which is what they always do,

01:39:32.920 | which is catastrophic because it makes things worse.

01:39:36.120 | When you implement price controls,

01:39:40.440 | you say, all right, well, bread can't be sold

01:39:42.640 | for more than X price.

01:39:45.440 | Well, that's just preventing bread producers

01:39:48.240 | from producing a lot of bread,

01:39:49.960 | and that's just making the problem worse.

01:39:51.600 | If you let the price rise, the extra price,

01:39:55.200 | first of all, it makes people economize,

01:39:56.880 | so people will only buy what they need,

01:39:58.800 | and it provides the money for the bread producers

01:40:00.840 | to acquire the capital and the resources they need

01:40:03.640 | to produce more bread,

01:40:04.880 | which then brings the price of bread down,

01:40:06.520 | but price controls destroy that.

01:40:08.520 | Then they also implement wage controls,

01:40:10.680 | so you wanna also make sure that people have high wages.

01:40:15.200 | So you raise people's wages artificially,

01:40:17.120 | you lower prices artificially,

01:40:18.640 | and you cause an economic problem.

01:40:21.280 | And this is basically, I use this historical example

01:40:25.000 | because it's the birth of fiat,

01:40:26.720 | because the Bank of England was the most important

01:40:28.600 | monetary system in the world at that time,

01:40:30.640 | and because it's the prototype

01:40:33.600 | that basically the entire planet copied

01:40:35.160 | over the last 100 years.

01:40:36.240 | We've had this same thing happen.

01:40:38.160 | The government prints money because of a stupid reason,

01:40:40.320 | because somebody in power decided this was worth

01:40:43.080 | destroying everybody's livelihood and savings for,

01:40:46.240 | and then the consequences come in,

01:40:47.640 | and then they start covering up

01:40:48.880 | with price controls, wage controls,

01:40:50.680 | and then that makes things worse.

01:40:52.800 | And then they, and of course, throughout all of that,

01:40:57.520 | they're promising that we're going to go,

01:40:58.880 | oh, and oh, so the other thing that they did,

01:41:01.280 | which I mentioned in the chapter is,

01:41:03.120 | they stopped people from using physical gold,

01:41:05.360 | and they confiscated the, well, they didn't confiscate it,

01:41:07.520 | but they took the physical gold

01:41:08.640 | and they gave people paper.

01:41:10.080 | So I call it the fiat white paper.

01:41:12.240 | You know, in Bitcoin, we have the white paper.

01:41:15.000 | The fiat white paper was that the Bank of England

01:41:17.400 | announced to all of its banks and post offices

01:41:20.040 | that from now on, you should not make payment in gold,

01:41:23.240 | and you should take payment in gold,

01:41:24.960 | and you should encourage all your customers

01:41:26.360 | to turn in all of their gold and give them paper instead.

01:41:28.680 | - Is there an actual document?

01:41:30.080 | - Oh, yeah, yeah, yeah.

01:41:30.920 | - Nice.

01:41:31.760 | - Yeah, it was, this is all new stuff.

01:41:33.440 | Obviously, nobody really likes to talk about this stuff

01:41:35.400 | because, you know, they're fiat economists,

01:41:36.960 | so they don't wanna talk about the original sin, but-

01:41:41.200 | - Well, you should like republish it

01:41:42.920 | as the fiat white paper or something like that.

01:41:45.160 | (both laugh)

01:41:46.800 | - There's a fascinating book by a guy called John Osborne.

01:41:49.720 | So in the 1920s, I think his name was Montagu.

01:41:53.160 | He was the chief of the Bank of England.

01:41:54.840 | He commissioned one of his secretaries, John Osborne,

01:41:58.640 | to study what the bank did during World War I,

01:42:02.560 | and it was a study that was kept under wraps,

01:42:05.600 | confidential, in the Bank of England,

01:42:07.720 | only released in 2017, almost a century later.

01:42:12.160 | And-

01:42:13.000 | - What was special about 2017, by the way?

01:42:15.040 | It's a year.

01:42:15.880 | It's just that it was a year on which

01:42:18.240 | some of this information was released.

01:42:19.840 | - Yeah, a bunch of people got into parts of the basements

01:42:22.320 | of the Bank of England and found this and published it,

01:42:24.360 | and now you can download it as a PDF

01:42:26.160 | and find all of the amazing details.

01:42:29.520 | So they confiscated the gold,

01:42:31.480 | and they forced people to use the paper,

01:42:32.960 | and they promised people that as soon as the war

01:42:34.560 | is gonna be over, this is temporary,

01:42:36.320 | we're gonna be back to using gold.

01:42:38.200 | And of course, if you told people in Britain,

01:42:41.680 | this is the real scam about fiat.

01:42:43.880 | If you told people in Britain in 1914,

01:42:46.920 | "Hey, we're gonna go off the gold standard

01:42:48.960 | "because it's better," I mean,

01:42:50.960 | there might have been lynchings of government officials

01:42:54.600 | because the British pound at that point,

01:42:57.720 | it had been the global currency of the whole world,

01:43:01.560 | and the fact that they'd managed,

01:43:04.720 | the Bank of England had kept the British pound

01:43:07.040 | at a fixed rate next to gold for,

01:43:09.840 | since Newton, the exchange rate,

01:43:12.040 | the value of the British pound

01:43:13.960 | was set by Isaac Newton himself.

01:43:16.360 | He was the warden of the mint,

01:43:18.520 | and he made the pound a specific amount of gold,

01:43:22.080 | and since then, up until World War I,

01:43:24.680 | it was 4.25 pounds per ounce of gold.

01:43:28.520 | I think I might be wrong, but I have it in the book.

01:43:31.400 | So he'd set that price,

01:43:32.680 | and it was a matter of national pride

01:43:34.160 | for people in England.

01:43:35.880 | The sterling is as good as gold

01:43:37.520 | because for two centuries, it has been stuck to gold.

01:43:40.280 | There was the exception of the Napoleonic Wars,

01:43:42.360 | but for two centuries, mostly it was stuck to that.

01:43:45.160 | And so they went off that, and then they couldn't go back

01:43:49.080 | because if they wanted to go back,

01:43:50.200 | they didn't have enough gold.

01:43:51.200 | They shipped their gold to the US to finance the war,

01:43:54.600 | and they had printed a whole bunch of money

01:43:56.720 | that was out there.

01:43:57.980 | So this begins the problem for England,

01:44:01.200 | and that begins the end of England

01:44:03.120 | as the world's superpower.

01:44:05.120 | And the way they tried to fight that

01:44:06.560 | was to get more and more countries around the world

01:44:08.560 | to establish central banks

01:44:09.800 | and have unhold British pounds.

01:44:12.200 | So they'd hold, basically dumping their bags

01:44:15.640 | like just any other shitcoin.

01:44:17.840 | If you get people to buy your shitcoin,

01:44:20.280 | that raises the value of your shitcoin.

01:44:22.280 | - Can you define shitcoin?

01:44:23.960 | - Shitcoin is, my definition of a shitcoin

01:44:27.000 | is that it's any form of money

01:44:28.720 | where somebody can produce it.

01:44:31.360 | - So soft money?

01:44:32.360 | - Not necessarily, I guess.

01:44:35.080 | I think the difference, so there's easy money,

01:44:38.200 | but the shitcoin is something that someone can produce

01:44:42.120 | at a cost that is different from the market cost.

01:44:46.520 | So gold, nobody can make gold except that they dig for it,

01:44:49.520 | and the cost of mining gold

01:44:51.220 | is generally in the range of the price of gold.

01:44:53.660 | Same is true for Bitcoin.

01:44:56.400 | - So gold is not a shitcoin?

01:44:57.800 | - Gold is not a shitcoin.

01:44:59.400 | - The copper is.

01:45:00.480 | - I'm not so sure, I wouldn't call copper a shitcoin

01:45:04.360 | as much as it is easy money,

01:45:05.840 | but I think government currencies and other altcoins,

01:45:09.840 | I think are shitcoins because somebody could click a button

01:45:13.120 | and make 10 times the supply.

01:45:15.000 | - Would it be fair to say that this began

01:45:18.040 | with the will for war in World War I?

01:45:23.160 | So the march towards fiat began

01:45:28.160 | with a global desire for war in the 20th century.

01:45:35.200 | Did war start this, or was war a result?

01:45:39.720 | - It's difficult to say, really.

01:45:40.880 | I think it goes both ways.

01:45:42.240 | I think you can't have permanent war without fiat,

01:45:47.240 | and I also think there's a case to be made

01:45:51.720 | that you can't really have fiat without war.

01:45:54.680 | So it's some kind of weird dynamical system

01:45:57.480 | with a chicken and egg situation,

01:45:59.360 | and they build on top of each other,

01:46:00.800 | and there's a few individuals that figured out

01:46:03.000 | there's a way to manipulate this to play this kind of game,

01:46:05.840 | and it escalates, and nothing gives you the ability

01:46:08.800 | to manipulate money quite like war.

01:46:12.200 | When you have a war, you can declare an emergency,

01:46:15.520 | you can call all the people who oppose you,

01:46:18.680 | traitors, you can get people to support you,

01:46:23.680 | not because what you're doing is good,

01:46:25.400 | but because you play on their sense of tribalism.

01:46:28.280 | - In your book, you do cost-benefit analysis,

01:46:31.000 | so you do acknowledge or think about

01:46:33.240 | the pros of fiat currency.

01:46:35.480 | Can you do just that, look at the benefit,

01:46:40.480 | and look at the cost just broadly at the highest level?

01:46:43.900 | - So the way that I write the fiat standard

01:46:45.640 | is that I try and analyze it as an engineering system

01:46:49.440 | in the same way that I wrote the Bitcoin standard.

01:46:51.480 | So with the Bitcoin standard,

01:46:52.320 | I looked at Bitcoin from first principles

01:46:54.040 | and tried to explain how it works for a reader

01:46:57.320 | that doesn't really have much of a background

01:46:59.320 | in computer science, networks, or economics.

01:47:03.760 | And I thought I'll do the same with the fiat.

01:47:05.520 | Let's just ignore the official stories

01:47:07.480 | and look at how this thing actually works.

01:47:10.280 | And I think it does have value in the fact

01:47:14.480 | that the reason that they were able to pull it off

01:47:19.360 | is because it was not possible for people

01:47:22.120 | who don't want to be part of it

01:47:25.560 | to use gold independently of governments.

01:47:28.040 | This is really the key thing.

01:47:29.520 | Gold is just very expensive to move around.

01:47:31.880 | And the fact that it is expensive to move around

01:47:36.080 | means that there's inevitably going to emerge

01:47:41.320 | institutions where it is centralized in physical location.

01:47:45.120 | And then these institutions trade liabilities for the gold.

01:47:48.640 | So really the gold standard intrinsically

01:47:51.640 | must involve credit as becoming part of the monetary system.

01:47:58.920 | It has to be the credit.

01:48:00.080 | And because it gets centralized,

01:48:01.640 | it can easily be captured by the government.

01:48:03.920 | So to be fair, the benefit of the fiat system

01:48:07.720 | is that it saves us on the cost of moving gold around,

01:48:10.320 | which is pretty significant.

01:48:11.960 | Generally, moving a bar of gold across the Atlantic

01:48:15.680 | is gonna cost somewhere between 0.1 to 1%

01:48:18.840 | of the cost of the gold bar.

01:48:20.600 | So you move it 100 times back and forth

01:48:23.320 | between the Atlantic, you need to pay the whole gold bar.

01:48:26.000 | The cost of the whole gold bar to move it 100 times across.

01:48:29.080 | Well, with fiat money, it's essentially government credit.

01:48:31.920 | And so it's just sending a message

01:48:34.280 | from one central bank to another

01:48:36.800 | and you can move it halfway around the world.

01:48:38.840 | - Is there also something to be said

01:48:40.280 | about the cost in time?

01:48:42.000 | So you're saving, you're reducing the friction

01:48:45.160 | of the communication as well.

01:48:46.560 | - Exactly.

01:48:47.400 | - Or the transactions as well.

01:48:48.560 | - Exactly, it's faster.

01:48:49.800 | - How big is that benefit?

01:48:52.760 | 'Cause wouldn't you argue that that potential

01:48:55.000 | is the thing that enables modern economy,

01:48:57.400 | both the speed and the low cost,

01:48:59.120 | so increasing the scale and the frequency,

01:49:02.000 | the speed of the transactions?

01:49:03.920 | - Yeah, arguably it does help in that regard.

01:49:07.400 | However, it isn't as if you couldn't have

01:49:10.200 | fast transactions built on top of gold.

01:49:12.440 | So you could have gold being used for final settlement

01:49:15.400 | and you could have banks settling with one another,

01:49:19.600 | essentially using credit.

01:49:21.080 | - Can you define settlement

01:49:22.960 | just for people who are outside of this world?

01:49:25.400 | 'Cause we'll mention that word quite a bit probably.

01:49:27.400 | - Good question.

01:49:28.240 | So the way that it works is,

01:49:29.080 | let's say right now I'm gonna pay you $10

01:49:32.080 | over PayPal or credit card.

01:49:35.120 | So it shows up in your PayPal or credit card

01:49:37.080 | within a few seconds that I've sent you the money

01:49:40.000 | and then that's yours.

01:49:41.240 | But it didn't also happen in those 10 seconds

01:49:46.240 | that my bank, which could be in another country,

01:49:49.880 | sent the money to your bank into your account.

01:49:53.040 | There's a lot of infrastructure underneath that.

01:49:57.180 | So what actually happened is that I have an account

01:49:59.200 | with my bank and you have an account with your bank.

01:50:01.620 | And when the message is communicated from my app to yours,

01:50:05.560 | my bank crosses out the money

01:50:07.560 | and your bank credits you with the money.

01:50:10.080 | And then at the end of the day, week or month,

01:50:13.420 | banks in the same city will settle with one another,

01:50:16.560 | banks in the same country will settle with one another,

01:50:19.480 | and banks from different countries

01:50:21.720 | will settle with one another.

01:50:22.880 | So they won't move the $10 from my account to yours.

01:50:27.040 | At the end of the day or week or month,

01:50:29.600 | they'll tally all of the money that was sent

01:50:32.160 | from one bank to the other

01:50:33.880 | and then just settle the difference.

01:50:35.320 | So it turns out at the end of the month,

01:50:37.080 | my bank had sent $15 million to your bank

01:50:40.480 | and your bank had sent $14 million to my bank.

01:50:43.480 | So they give them $1 million and that settles it,

01:50:46.840 | that finalizes the transaction.

01:50:48.920 | So final settlement really is like the,

01:50:51.680 | you can think about it as the infrastructure of the system.

01:50:54.640 | And then you can think of these things

01:50:56.840 | as being the higher layer levels.

01:50:59.360 | And you had a wonderful discussion about that

01:51:01.120 | with Michael Saylor.

01:51:02.740 | - So the final settlement is like the moment

01:51:06.000 | when you paper an idea's connected physical reality.

01:51:09.980 | - Yeah.

01:51:12.360 | - Or to some representation of physical reality.

01:51:13.800 | - Yeah, and under gold,

01:51:15.560 | everything was tethered to physical reality

01:51:17.760 | because there was a market commodity

01:51:19.080 | at the bottom of all of this.

01:51:20.560 | And nobody could print that market commodity.

01:51:22.480 | And so at the end of the month,

01:51:24.000 | if your bank made too many payments,

01:51:26.280 | if you made too many payments, there was a reckoning.

01:51:29.720 | If you were reckless, if you were insolvent,

01:51:33.100 | you went out of business.

01:51:34.500 | So there was no way to fool that.

01:51:37.720 | But then we moved to the fiat century

01:51:39.900 | and everything is credit.

01:51:41.940 | At the end of the day,

01:51:42.780 | the final layer is government credit.

01:51:45.740 | And so as long as you're friends with the government,

01:51:48.660 | basically you never go bankrupt.

01:51:50.340 | So all kinds of hucksters managed to find their way

01:51:54.260 | into getting into position where they don't get bankrupt.

01:51:58.880 | - So in part two of the Fiat Standard called Fiat Life,

01:52:03.020 | you describe the effects of fiat money on a bunch of things

01:52:05.680 | like life, food, science, education.

01:52:08.900 | What is the most pernicious effect of fiat money

01:52:14.060 | on our world, on our life?

01:52:15.500 | So it's taking a step outside of the monetary system,

01:52:18.200 | actually like how that affects our life from this book.

01:52:21.820 | - I mean, there's a whole bunch of things

01:52:23.500 | and I won't be able to go over them

01:52:25.460 | and I highly recommend reading the book.

01:52:26.880 | But if I were to pick one,

01:52:28.540 | I would say it's the impact that it has

01:52:29.860 | on our time preference, on our valuation of the future.

01:52:33.660 | So remember when we started the discussion,

01:52:35.660 | I said that a key function of money

01:52:38.860 | is that it serves as a store of value.

01:52:41.380 | And the harder the money is,

01:52:42.900 | the better it is at providing us

01:52:45.220 | with a way for providing for our future.

01:52:48.140 | And so the harder the money is,

01:52:49.820 | the less we discount the future.

01:52:51.300 | We always discount the future compared to the present.

01:52:53.180 | So if I told you, I'm gonna give you something today

01:52:56.180 | versus giving it to you 10 years from now,

01:52:58.620 | the same thing, you would prefer to take it now

01:53:00.860 | 'cause then you'd get to enjoy it over the next 10 years.

01:53:03.260 | So we always prefer the present to the future.

01:53:06.500 | There's always a discount on the future.

01:53:09.100 | And that discount is called time preference.

01:53:10.900 | The degree to which we prefer the present to the future

01:53:13.580 | is called our time preference.

01:53:15.380 | So the higher our time preference,

01:53:18.940 | the less we care about the future.

01:53:20.820 | And the process of civilization

01:53:22.180 | is the process of lowering our time preference

01:53:24.660 | where we start caring more for the future,

01:53:26.580 | we start prioritizing the present less and less.

01:53:29.700 | So we start being able to not consume everything

01:53:32.860 | that we have and store it.

01:53:34.780 | And so money is essential for that.

01:53:36.620 | And under the gold standard,

01:53:38.640 | everyone in the world had the ability

01:53:40.660 | to provide for their future

01:53:42.340 | by simply using the same money that they use.

01:53:44.220 | You know, you would work a day

01:53:45.740 | and you would get paid in a gold coin

01:53:47.540 | and you could take that gold coin

01:53:49.060 | and keep it safe for 10 years

01:53:51.740 | and know that at the end of those 10 years,

01:53:53.980 | that gold coin would buy you slightly more

01:53:56.700 | than what it bought you the day that you earned it.

01:53:59.380 | So anybody could provide for their future

01:54:01.460 | and anybody could have very high degree of certainty

01:54:04.620 | that whatever they're saving is going to be there

01:54:08.180 | when they want it in the future.

01:54:10.300 | Because the money supply was only increasing

01:54:11.980 | at one and a half percent,

01:54:13.480 | whereas the production of goods and services

01:54:16.860 | was increasing for most cases,

01:54:20.100 | for most periods at a higher rate than that.

01:54:22.140 | So you could buy more apples and oranges

01:54:24.460 | and houses and cars at the end of the 10 years

01:54:27.700 | than you could at the beginning of the 10 years.

01:54:29.220 | So everybody had a way of providing for the future.

01:54:31.180 | And with that, people lower their time preference.

01:54:34.300 | And that is reflected across all aspects of life.

01:54:38.260 | I think it's not just the economic thing.

01:54:40.060 | You see it in the savings rate,

01:54:41.260 | you know, the ability to deny yourself gratification today.

01:54:44.940 | I could take the money that I have

01:54:46.420 | and throw a giant party, buy a sports car, buy a yacht.

01:54:50.580 | And yet you decide that I'm not gonna do that,

01:54:52.980 | I'm gonna keep it so that tomorrow

01:54:54.380 | I can throw a bigger party or buy a better yacht

01:54:57.260 | or have a better life or give my children a better life.

01:55:01.300 | So all of human civilization really is the process

01:55:04.500 | of us lowering our time preference

01:55:06.680 | and finding harder monies that allow us

01:55:09.140 | to provide better for the future

01:55:10.980 | is how we really technologically we do that.

01:55:15.220 | I think of the hardness of money

01:55:17.740 | as being the control knob for our time preference.

01:55:20.740 | And you can see this reflected in the 20th century

01:55:23.540 | where we go from the money supply increases

01:55:26.180 | at around one and a half percent under gold

01:55:28.880 | to this current situation where over the last 16 years

01:55:31.480 | I ran the numbers on money supply and fiat.

01:55:34.460 | The global fiat supply has increased

01:55:36.380 | at around 14% per year.

01:55:38.020 | So we've done a 10X in the increase

01:55:40.300 | in the supply of money annually.

01:55:43.220 | And 14% is a weighted average.

01:55:45.340 | So if you take a basic numerical average

01:55:48.460 | for all fiat currencies, you get something like 30%.

01:55:52.020 | The average fiat currency increases by 30%.

01:55:55.060 | But if you value it by the volume of each currency

01:55:57.780 | so that you're not giving equal weight

01:56:00.180 | to the Venezuelan bolivar increasing at 500% a year

01:56:04.920 | and the dollar increasing at 8% a year.

01:56:07.040 | If you do it by value of the currencies

01:56:10.500 | so that you get the total supply fiat,

01:56:12.140 | it's something like 14%.

01:56:13.420 | - Unweighted is 30% you said?

01:56:15.460 | - Yeah, 30%.

01:56:16.900 | It's insane.

01:56:17.740 | - I'd like to see the worst ones,

01:56:19.020 | the people that are tracking that average up.

01:56:22.300 | - Yeah. - Yeah.

01:56:23.140 | But 14% is still an incredibly high, high number.

01:56:25.580 | And so you're saying that,

01:56:27.420 | sorry, that's the average over the century

01:56:29.260 | or the past 100 years?

01:56:30.080 | - Over the past 60 years, 1960 to 2020.

01:56:32.180 | We get World Bank data on that,

01:56:34.020 | pretty reliable data on World Bank

01:56:35.660 | and European Union OECD data.

01:56:38.640 | I ran the numbers on that weighted average,

01:56:40.660 | something like 14%.

01:56:42.140 | - And what effect that has on time preference?

01:56:45.220 | - The effect is now it's much, much, much harder

01:56:47.860 | for everybody to provide for their future.

01:56:50.060 | Everywhere in the world, it's much harder.

01:56:52.220 | So how do I get the equivalent of the old gold coin

01:56:56.620 | that I could just put under my mattress

01:56:58.060 | and expect it to be there 10 years from now?

01:56:59.700 | Well, gold itself isn't cutting it.

01:57:01.420 | Gold can't keep up with inflation.

01:57:03.380 | And the reason for that is that gold is not being used

01:57:06.220 | as a money anymore in that you can't send it internationally,

01:57:11.840 | you can't use it to settle trade internationally,

01:57:14.740 | which therefore means demand for it monetarily is limited.

01:57:18.660 | And so it's becoming more and more an industrial metal.

01:57:23.340 | And as a result of the fact that its value

01:57:26.820 | doesn't keep up with inflation,

01:57:28.000 | it becomes economical to use it in industry.

01:57:30.060 | So we're seeing gold become like silver

01:57:32.700 | in that it gets used in industry.

01:57:34.360 | So the stockpile declines.

01:57:36.220 | And so the stock to flow ratio declines as well.

01:57:38.660 | And it becomes more and more of an industrial metal.

01:57:40.960 | And it can't protect your wealth over time very well.

01:57:44.940 | So what do you do?

01:57:45.920 | Well, you could invest.

01:57:47.340 | And this is kind of the obvious answer

01:57:49.020 | that Keynesians will give you is,

01:57:50.500 | well, you just put your money in an investment.

01:57:52.920 | But investment is different from saving.

01:57:55.060 | Saving, the whole point of saving

01:57:56.520 | is that the thing is liquid

01:57:57.800 | and that the thing carries little uncertainty.

01:57:59.940 | You just held the gold coin and it just sat there.

01:58:03.760 | It did nothing, it didn't take risk.

01:58:05.800 | You knew that it was gonna be there in 10 years.

01:58:07.660 | Investment means you give the gold coin to somebody

01:58:10.800 | to go and do something with it.

01:58:12.980 | And it could work, it could not work.

01:58:14.420 | If it works, you get a positive return,

01:58:16.540 | you get more gold back.

01:58:18.100 | If it fails, you might not get any of your gold back.

01:58:21.160 | So taking on risk is something very different from saving.

01:58:24.420 | Saving is just a way of buying the future.

01:58:26.940 | Investing is taking on a risk

01:58:29.420 | and you could lose everything with it.

01:58:31.220 | So what ends up happening,

01:58:33.220 | and this is the Keynesian objection,

01:58:35.260 | I think is very wrong and bad

01:58:39.700 | because investment is a job in itself.

01:58:44.040 | To figure out what to do with your money

01:58:45.960 | in order to beat inflation

01:58:48.280 | is something that there are professionals out there

01:58:51.440 | on Wall Street that have PhDs in finance,

01:58:53.640 | that have enormous computers,

01:58:55.640 | and they have enormous staffs of PhDs and master's degrees

01:58:59.580 | and math nerds that are crunching numbers

01:59:01.520 | and figuring out how to allocate your portfolio

01:59:04.160 | so that you can beat inflation.

01:59:05.440 | And guess what?

01:59:06.280 | The majority of them don't beat inflation.

01:59:08.480 | The majority of them can't beat inflation.

01:59:10.380 | Not as measured by CPI, which is completely fraudulent,

01:59:13.420 | but if you remember-

01:59:14.740 | - 14%.

01:59:15.580 | - Yeah, that 14% or even the 7%.

01:59:18.860 | Like if you look at just the increase in the money supply,

01:59:21.060 | which I think is a much better metric,

01:59:23.100 | and this is what's reflected on the desirable goods.

01:59:25.380 | Like if you look at the price of real estate in Miami Beach,

01:59:28.260 | as Michael Saylor mentioned in your example,

01:59:30.140 | it goes up at around 6, 7% per year

01:59:32.220 | on average over the last century.

01:59:34.580 | So that's, if you wanna live in a nice area,

01:59:38.100 | that's what happening to real estate.

01:59:39.400 | If you wanna go to the good universities,

01:59:40.920 | that's what's going up.

01:59:41.760 | It's going up at a rate that's similar

01:59:43.040 | to the increase in the money supply.

01:59:44.880 | And you can beat CPI,

01:59:47.240 | but CPI is designed so you can beat it,

01:59:50.280 | but you can't really beat the appreciation

01:59:52.680 | in the things that you actually want to buy,

01:59:54.400 | in the price of good food, the price of good real estate.

01:59:57.040 | So, and most investment professionals fail at doing that.

02:00:01.640 | So what hope does a doctor or an engineer or a scientist

02:00:06.440 | or an athlete have in doing those things?

02:00:08.740 | - Investment is hard and saving should be easy.

02:00:11.700 | - Exactly.

02:00:12.540 | Saving is essential for us as a civilization.

02:00:15.700 | And what fiat did is it took that away from us.

02:00:18.840 | And then it forced everybody to become an investor

02:00:22.180 | or more accurately a gambler,

02:00:23.620 | because you're not just even,

02:00:25.660 | because the money itself is broken,

02:00:27.500 | because the money itself is constantly changing in value.

02:00:30.220 | Investing is becoming more of a crapshoot.

02:00:32.940 | I mean, value investing is completely underperforming

02:00:36.320 | compared to market analysis.

02:00:38.340 | You listen to the Fed and you,

02:00:41.680 | what matters to the price of individual companies

02:00:47.000 | is monetary policy much more

02:00:48.440 | than it is their own performance.

02:00:50.100 | So basically you need to be a junkie watching the Fed

02:00:52.420 | and following all of the world's central banks.

02:00:54.020 | And you need to learn macroeconomics

02:00:55.740 | and you need to learn what all the central banks are doing.

02:00:58.860 | And you need to understand how commodity markets work.

02:01:00.820 | And you need to understand how equity markets work

02:01:02.720 | and bond markets and real estate markets.

02:01:05.300 | You need to do all of those things

02:01:07.020 | just in order to be able to save and earn

02:01:10.300 | and keep the money that you've already earned.

02:01:13.220 | That's the criminal thing about it.

02:01:14.740 | Like I've already earned that money being a doctor,

02:01:17.580 | being a dentist, being an athlete, being an engineer.

02:01:19.580 | I built a house for somebody and I got that money.

02:01:22.540 | And all I wanna do is just make sure

02:01:24.180 | that I can have it 10 years from now.

02:01:26.740 | The only way to do so is to become a crappy engineer

02:01:29.220 | because you have to spend half your time

02:01:30.700 | not doing engineering and instead spend half of that time

02:01:34.580 | learning about Japanese central bank monetary policy

02:01:37.260 | and commodity markets and what's gonna happen to copper

02:01:40.100 | and what's gonna happen to oil

02:01:41.660 | and what's happening in the wars

02:01:44.540 | and what's happening with foreign policy

02:01:46.300 | and Russia and the US and all of those things.

02:01:50.040 | Under the gold standard,

02:01:52.860 | you didn't care about any of that stuff.

02:01:54.340 | Your gold coin worked regardless of all of those things.

02:01:56.780 | So what this means is the future.

02:01:59.060 | So first of all, we have all of the problems I mentioned,

02:02:01.340 | but also it means that the future

02:02:04.420 | becomes much more uncertain.

02:02:05.620 | So you're far less likely to provide for yourself

02:02:08.780 | 10 years from now, far less likely to find an easy way

02:02:11.140 | to give yourself value 10 years from now.

02:02:14.820 | And so you become more short termist.

02:02:17.060 | And that is reflected economically in a lower savings rate

02:02:19.780 | and we see savings rates decline,

02:02:22.060 | but it is also reflected in all manners of decision making.

02:02:25.140 | And I think if you really wanna see what it is,

02:02:27.540 | take a look at a society that goes through hyperinflation

02:02:30.780 | and look at what happens there.

02:02:32.540 | How do people change under hyperinflation

02:02:36.660 | and compare that to essentially what we see

02:02:39.780 | in the 20th century all over under,

02:02:42.420 | not hyperinflation, but under low inflation.

02:02:45.100 | 10, 15% that you see across the board most of the time

02:02:49.580 | is just slow motion hyperinflation.

02:02:51.820 | So what happens in hyperinflation?

02:02:53.420 | Everybody gets their paychecks,

02:02:54.940 | they run straight to the supermarket,

02:02:56.860 | they spend all of their money.

02:02:58.540 | Nobody thinks about savings.

02:03:00.220 | Nobody thinks about the future.

02:03:01.820 | Survival until the end of this month is highly uncertain.

02:03:05.980 | How likely are you to be planning

02:03:07.540 | for what you're going to be doing five years from now?

02:03:11.100 | Very unlikely, but also it's reflected

02:03:14.260 | not just economically,

02:03:15.300 | it's also reflected in all aspects of morality

02:03:17.580 | and all the way in which we deal with each other

02:03:19.660 | as human beings.

02:03:20.940 | When your survival is precarious,

02:03:23.540 | how much are you invested in the notion

02:03:26.260 | of being a good citizen, on caring about your reputation,

02:03:29.740 | on caring about not getting caught in a crime?

02:03:32.780 | All of these things become harder to value.

02:03:35.780 | So people start committing crime,

02:03:37.140 | people start caring less and less about the future.

02:03:39.820 | And we see it reflected in everything.

02:03:41.300 | And I argue, you see it reflected in architecture.

02:03:43.700 | You know, we used to build houses in the 19th century

02:03:45.780 | that last until today.

02:03:47.580 | And then in the 20th century,

02:03:48.700 | we build essentially disposable cardboard boxes

02:03:51.700 | that get scrapped in 20 years.

02:03:54.420 | - So what can you say about potential positive effects

02:03:57.740 | of lower time preferences?

02:03:59.100 | So, I mean, it's a balance.

02:04:00.500 | Like, basically, you're talking about

02:04:04.380 | an average kind of time preference,

02:04:05.740 | but there's some things in life

02:04:07.340 | where low time preference could be a negative thing.

02:04:10.580 | So like, if I want to take on risk,

02:04:13.660 | not for investment, or a kind of investment,

02:04:15.900 | but say I wanna start a business,

02:04:18.140 | I wanna take something crazy,

02:04:20.660 | take a leap into the unknown, be an entrepreneur.

02:04:23.980 | What can you say about that kind of leap?

02:04:26.820 | Taking on debt.

02:04:28.860 | What's the value of that within the current system?

02:04:31.820 | What's the right approach to that within the current system?

02:04:33.860 | What's the right approach overall

02:04:35.380 | from an economics perspective?

02:04:37.060 | So it's not saving for the future.

02:04:39.380 | It's doing something wild,

02:04:43.540 | taking the money from your mattress,

02:04:45.380 | taking on debt, and having a dream in your heart

02:04:48.660 | that you somehow just want to do.

02:04:50.780 | Maybe it's not the wisest investment decision,

02:04:52.940 | but it's something, you know, it's being human.

02:04:55.700 | It's taking a leap into the unknown,

02:04:58.580 | because something in your heart says to do it.

02:05:00.700 | - I think you're more likely to be taking the leap

02:05:02.260 | in the unknown when you have a little bit of gold

02:05:04.420 | in the mattress than when you don't.

02:05:06.340 | I think this is the thing.

02:05:07.380 | Like, if you look at the late 19th century,

02:05:10.060 | and I discussed this in the Bitcoin Standard,

02:05:11.940 | that was the, arguably,

02:05:13.620 | the most innovative period in human history.

02:05:16.300 | You know, there's qualitative evidence.

02:05:17.980 | You know, look at the world around you today.

02:05:20.260 | Pretty much everything that we use

02:05:21.620 | was invented in that period.

02:05:23.220 | The car, the airplane, the telegraph,

02:05:29.100 | the telephone, the camera.

02:05:31.900 | Pretty much modern life as late 19th century.

02:05:35.820 | You know, the period between 1870 and 1914,

02:05:38.820 | 'cause the whole world was practically on a gold standard.

02:05:41.540 | The whole world was using the same money,

02:05:43.740 | and the whole world could save in the same currency.

02:05:46.460 | That meant that a bicycle shop owner,

02:05:48.980 | two bicycle shop owning brothers in North Carolina

02:05:52.140 | could go and try and fly,

02:05:53.860 | even as all the scientific experts in 1903

02:05:57.300 | were confirming that the possibility of flight

02:06:01.340 | has been debunked as unscientific.

02:06:03.740 | You know, Lord Kelvin said,

02:06:05.260 | "Not in a million years we're going to be flying."

02:06:07.620 | Thomas Edison said, "It's never gonna happen."

02:06:09.500 | No, I think it was Edison who said a million years,

02:06:11.180 | but Kelvin also said, "It's never gonna happen."

02:06:14.020 | The New York Times said, "It's never gonna happen,"

02:06:16.420 | the same month in which the Wright brothers did it.

02:06:19.860 | And they continued to deny that it was gonna happen

02:06:22.380 | even two years after they did it.

02:06:25.220 | But that's, why could they do that?

02:06:27.860 | Because they had savings in gold.

02:06:29.460 | They had the security with something that you know

02:06:33.380 | is gonna be there,

02:06:34.620 | and then you can take a risk with the stuff that is extra.

02:06:37.060 | You know, I have say three years expenditures

02:06:40.140 | in gold under my mattress.

02:06:42.220 | And I know that I could take a risk with everything else

02:06:44.980 | because whatever bad things happen with all of my dreams,

02:06:48.300 | like even, you know, flying,

02:06:49.700 | think about how insane that is.

02:06:51.640 | I still can go back to the three years of gold

02:06:54.300 | that I have saved.

02:06:55.120 | - Is it okay to take on debt,

02:06:56.980 | given the stuff, the gold and the mattress?

02:06:58.860 | - Well, this is the thing, under the gold standard,

02:07:00.940 | the way that people finance things

02:07:02.540 | was predominantly with capital, with equity.

02:07:04.860 | So you would, because you had gold savings,

02:07:07.340 | I had gold savings, everybody had gold savings.

02:07:09.720 | When you wanted to start a business,

02:07:11.840 | you could use your own savings or somebody else's savings.

02:07:14.460 | So you didn't need to get into debt.

02:07:18.020 | Well, you could get equity from others,

02:07:19.980 | and you could also get debt from others.

02:07:21.660 | So there was-

02:07:22.500 | - So it's directly mapped to physical reality.

02:07:25.440 | - Yeah, it's directly mapped to economic reality

02:07:27.500 | in that there's a hard money out there,

02:07:28.920 | that, you know, what you're spending money,

02:07:31.120 | you know, you wanna build your airplane factory,

02:07:34.000 | you need to get actual resources.

02:07:35.640 | So you get actual gold,

02:07:36.800 | either yours or somebody else's,

02:07:38.320 | you borrow it or you give them equity,

02:07:40.360 | but there's real resources.

02:07:42.200 | Now, what happened with the fiat system,

02:07:43.640 | and this is, you know, the first part of the book,

02:07:45.760 | where I'd look at it

02:07:46.600 | from an engineering kind of perspective,

02:07:48.380 | is essentially,

02:07:49.680 | and I think this is like the breakthrough

02:07:50.840 | inside of the book,

02:07:52.120 | what fiat does is that it replaces gold mining

02:07:56.260 | with credit creation.

02:07:58.200 | The way that we make fiat money,

02:08:01.560 | the way that fiat is mined into existence

02:08:04.060 | is through credit creation.

02:08:05.200 | Most people think of fiat money

02:08:06.400 | as being something that happens

02:08:07.320 | when government prints money,

02:08:08.680 | and we still use the term government's printing money,

02:08:11.420 | but the vast majority of fiat is not physical.

02:08:14.480 | And in fact, fiat is not created

02:08:16.200 | when it is printed physically,

02:08:18.080 | it's created when it is lent.

02:08:19.960 | So when you go to a bank

02:08:21.560 | to get a $1 million loan to buy a house,

02:08:24.160 | that bank is not gonna give you $1 million

02:08:26.640 | from their own money or from their depositors' money.

02:08:29.480 | They're gonna make a fresh new million dollars.

02:08:32.060 | When you walk out of that bank,

02:08:34.320 | the money supply has increased by $1 million

02:08:36.760 | to finance your home.

02:08:38.680 | So what fiat does is,

02:08:41.320 | I mean, it was basically born out of government credit

02:08:44.520 | and the credit of banks

02:08:46.280 | that are backed by the central bank and the government.

02:08:48.960 | - So if you're part of the institutions

02:08:51.240 | that are allowed fiat privilege,

02:08:53.300 | where you can just issue loans

02:08:55.400 | backed by the central bank, backed by the currency,

02:08:57.960 | you are effectively creating new currency, new money,

02:09:00.600 | every time you issue the loan.

02:09:02.360 | - That's fiat mining is credit creation, I love it.

02:09:05.360 | So can you say something,

02:09:07.100 | I mean, you can't really have credit

02:09:09.000 | without a demand for credit.

02:09:10.720 | You can't really have an increase in supply

02:09:12.480 | without a demand for it.

02:09:14.120 | Is there any value you place in the humans wanting it?

02:09:18.920 | Basically, people wanting to do something with that credit,

02:09:22.740 | wanting to take big leaps, big risks,

02:09:25.300 | big entrepreneurial decisions.

02:09:27.840 | So is it all credit bad?

02:09:31.220 | - No, I think what's bad is,

02:09:34.360 | anything in my opinion, anything that is consensual,

02:09:38.400 | I wanna borrow money from you and we agree the terms,

02:09:40.600 | I can't object to that.

02:09:41.840 | As long as you and I both agree, I can't object to that.

02:09:46.080 | But in the case of the fiat system,

02:09:48.800 | it's not just you and the bank who come to an agreement.

02:09:51.960 | Everybody who uses the currency

02:09:53.600 | is forced to be part of that agreement.

02:09:55.800 | Because if you default,

02:09:57.640 | effectively what's protecting the bank from you

02:10:00.400 | is the fact that the government

02:10:01.760 | can just print a bunch of money and make the bank whole.

02:10:04.720 | So effectively--

02:10:06.480 | - Interesting, so that little agreement

02:10:09.360 | between the bank and you is actually an agreement

02:10:13.120 | between the bank, you and the entire populace

02:10:15.440 | that's using the currency.

02:10:16.480 | - Exactly, they're forced to provide the safety net

02:10:19.040 | for you and me to go and make that loan.

02:10:21.400 | And that safety net is the devaluation of the currency.

02:10:24.080 | That's how the whole thing actually works.

02:10:28.240 | So this is why, I wrote the Bitcoin standard

02:10:31.000 | explaining Bitcoin and then basically

02:10:32.320 | the takeaway message of the Bitcoin standard

02:10:34.200 | is you need to stack as much Bitcoin as you can,

02:10:36.640 | 'cause this is the best money that has ever been invented.

02:10:38.800 | - And we'll talk about that,

02:10:40.000 | why Bitcoin is the hardest money.

02:10:43.280 | - But with fiat, the conclusion of the fiat standard,

02:10:45.640 | and again, this is not financial advice,

02:10:47.600 | I'm a lowly academic, you shouldn't listen to me

02:10:50.920 | on issues of money, but I think theoretically

02:10:53.280 | and intellectually, the conclusion of the fiat system

02:10:55.720 | is you need to be short fiat as much as you can.

02:10:58.920 | That's the smart winning move.

02:11:00.240 | So human wisdom over thousands of years

02:11:03.320 | is to save, try and not borrow as much as you can,

02:11:06.240 | try and accumulate as much savings as you can.

02:11:08.520 | That's reversed under fiat.

02:11:09.880 | If you're saving money, you're just subsidizing

02:11:12.760 | everybody else taking on loans.

02:11:14.800 | If you're taking on loans, you're benefiting

02:11:17.440 | from all the people that are borrowing.

02:11:19.000 | So the winning move under the fiat system,

02:11:21.080 | and this is what rich people do, is you borrow.

02:11:23.800 | Rich people under the fiat monetary system,

02:11:25.660 | they don't hold assets.

02:11:27.320 | If you're worth a billion dollars today,

02:11:30.760 | you don't have a billion dollars in a checking account.

02:11:33.540 | You've got maybe 100,000, a million,

02:11:36.400 | five million or something like that.

02:11:39.360 | A tiny fraction of your money is held in cash.

02:11:41.800 | The majority is going to be held

02:11:43.720 | in all kinds of other hard assets.

02:11:46.200 | And you're gonna be borrowing.

02:11:48.160 | The richest people in the world

02:11:49.680 | are the biggest borrowers in the world.

02:11:51.000 | The most powerful entities in the world,

02:11:52.480 | the governments, are the biggest borrowers in the world.

02:11:55.000 | And that's how they are the richest and the most powerful.

02:11:57.980 | Because every time you're borrowing,

02:12:00.180 | you're giving the bank an excuse to print new money.

02:12:03.720 | So you're devaluing everybody else's money

02:12:05.560 | and you're getting a bit of the cut.

02:12:06.940 | If you were going to buy a house with your savings,

02:12:10.360 | you're accumulating the savings and they're losing value.

02:12:13.120 | And if I were to go to buy the same house with credit,

02:12:17.960 | I'm getting the bank to print money for me.

02:12:21.440 | So obviously they can cut me in on that deal.

02:12:23.720 | And that's why it's much cheaper

02:12:24.960 | for everybody to buy with credit.

02:12:26.420 | That's why everybody buys everything on credit.

02:12:29.160 | - So when we look at the global monetary system,

02:12:31.440 | the thing you wanna do as a government

02:12:34.320 | is be the sexiest currency out there.

02:12:37.520 | So the main currency, like the dollar currently is,

02:12:42.760 | is the one that has the most power in that kind of context.

02:12:46.040 | So if you were to try to summarize

02:12:49.040 | what is the global monetary system as it is today,

02:12:53.080 | it's a bunch of fiat currencies battling for position,

02:12:57.440 | for use outside their nation,

02:13:03.120 | and in so doing trying to gain power

02:13:05.360 | in the geopolitical sense.

02:13:06.560 | Is that if we just zoom out,

02:13:08.400 | what is the global monetary system?

02:13:11.080 | Like what is it currently?

02:13:13.960 | So outside of the United States, the whole thing.

02:13:15.960 | - Yeah, you could say that,

02:13:17.320 | but I think it's more realistic looking

02:13:18.760 | at how it has actually evolved over the past few decades.

02:13:21.600 | It's really a dollar system.

02:13:23.160 | It's not a system of currencies buying with one another.

02:13:26.400 | It's a dollar system.

02:13:27.320 | And all other currencies are just basically,

02:13:29.160 | I like to call them dollar plus country risk.

02:13:32.000 | So each--

02:13:34.120 | - It always returns home to the dollar.

02:13:36.360 | - Yeah, there is no competition.

02:13:37.920 | There is no second best, as Michael Saylor would say.

02:13:41.400 | And money is like that.

02:13:42.640 | Gold was a winner take all by the end of the 19th century.

02:13:46.560 | The global monetary market is effectively

02:13:49.200 | a winner take all for the dollar.

02:13:51.560 | And if we get it to Bitcoin,

02:13:53.600 | you'll know I also think digital currencies

02:13:56.640 | are also gonna be a winner take all situation.

02:13:59.320 | So money wants to be won.

02:14:01.880 | In fact, there is no such thing as multiple currencies.

02:14:04.160 | Multiple currencies is just a step back to barter.

02:14:07.320 | Money is won.

02:14:08.840 | If you go back to a system of several currencies,

02:14:11.080 | you're just reinventing barter.

02:14:13.160 | So in the case of the dollar system,

02:14:16.000 | the global dollar system is built around the dollar

02:14:19.800 | because all central banks have dollar reserves

02:14:23.280 | and because all central banks

02:14:24.600 | use the dollar's clearing mechanisms.

02:14:26.680 | So that's why you're basically playing in the dollar system.

02:14:30.440 | This seems to have changed over the last couple of months

02:14:33.640 | with the sanctions on Russia

02:14:35.560 | and the confiscation of Russian reserves.

02:14:37.760 | It remains to be seen what that's going to do

02:14:40.840 | and how that's going to change.

02:14:42.520 | But it is looking like this dollar system

02:14:47.280 | is clearly unsustainable.

02:14:48.720 | It's not sustainable for the US.

02:14:49.920 | It's not sustainable for anybody.

02:14:51.840 | - Speaking of which,

02:14:53.080 | so you do an amazing podcast

02:14:56.480 | called the Bitcoin Standard Podcast.

02:14:58.720 | So episode 108 of that podcast

02:15:01.680 | is about the very thing you just mentioned.

02:15:03.960 | And allow me please to read the description of that

02:15:06.520 | and then ask you a couple of questions

02:15:08.040 | about your thoughts in general.

02:15:09.760 | The description reads,

02:15:11.200 | after the Russian invasion of Ukraine,

02:15:13.680 | the US confiscated the Russian central bank's

02:15:15.920 | significant monetary reserves

02:15:17.720 | and banned some Russian banks from the SWIFT network.

02:15:20.680 | Serious questions are being asked

02:15:22.480 | about the survival of the post-war dollar

02:15:25.200 | based world monetary order.

02:15:28.120 | Will Russia, China, and other countries

02:15:30.160 | actually build an alternative international settlement system

02:15:33.400 | after years of threatening to do so?

02:15:36.440 | Will global central banks

02:15:37.640 | stop accumulating US treasury bonds

02:15:40.080 | and replace them with gold and commodities?

02:15:43.000 | Will we witness the birth of a new commodity

02:15:45.280 | gold-based monetary order?

02:15:47.400 | In this seminar,

02:15:48.560 | we use the insights from the Bitcoin Standard

02:15:50.680 | and the fiat standard on temporal and spatial salability

02:15:54.840 | to explain why reports of the death of the dollar

02:15:57.680 | and the emergence of a new gold standard may be exaggerated.

02:16:00.880 | So I would love to get your analysis on this situation.

02:16:04.720 | What are the fundamentals of it?

02:16:06.200 | What is SWIFT?

02:16:07.320 | What are the possible future evolutions

02:16:09.120 | of the global monetary system?

02:16:11.280 | - Yeah, so SWIFT is the network

02:16:12.480 | that the US Federal Reserve uses

02:16:14.720 | for moving money around the world.

02:16:17.880 | So basically, the US government can sanction you

02:16:20.120 | off of SWIFT, as they've done with Russian banks,

02:16:22.760 | as they've done with Iran,

02:16:24.640 | and as they've done with Afghanistan.

02:16:27.240 | So effectively, I mean, this is really the catastrophe

02:16:31.000 | of the current monetary system,

02:16:32.120 | is that in order to be able to trade as a member,

02:16:35.480 | as a citizen of your country,

02:16:37.360 | you need your monopoly, local central bank,

02:16:40.400 | to be on good terms with the US government

02:16:42.600 | so that they would let them operate it.

02:16:44.120 | And this is really, like,

02:16:46.360 | on top of the aspect of the hardness of money,

02:16:49.560 | this is the other really powerful thing about Bitcoin,

02:16:52.920 | which is that it's just purely a technological thing.

02:16:55.000 | It doesn't matter if you're Russian, if you're Iranian,

02:16:57.600 | if you're American, if you're Chinese, it's a technology.

02:17:00.240 | And so it's like a spoon or a knife or a car.

02:17:03.600 | You operate it properly and it works.

02:17:06.200 | And so with Bitcoin, it's the same thing.

02:17:07.560 | It doesn't care about your passport.

02:17:09.380 | If you have the private key, you click send,

02:17:11.840 | and the money goes, well, it doesn't really go,

02:17:14.760 | but effectively it does go anywhere it wants,

02:17:18.080 | and the money can move

02:17:19.440 | without having to abide by political situations.

02:17:22.520 | And the point here is not to bash US foreign policy

02:17:26.080 | much as that might be deserved.

02:17:27.680 | I'm just going to discuss it

02:17:28.600 | from a kind of technical perspective.

02:17:31.120 | It has to be a political system with fiat,

02:17:33.160 | because ultimately it relies on credit,

02:17:35.280 | and then the government is the one that has the guns,

02:17:37.520 | and the government is going to decide

02:17:38.820 | who gets to pay their loans anyway,

02:17:40.560 | and the government's going to have to make its own rules

02:17:45.560 | about who gets to play and who doesn't.

02:17:47.920 | And so it has to be political as this kind of fiat system.

02:17:51.400 | And when I wrote "The Bitcoin Standard,"

02:17:56.280 | initially I used to be much more of a gold bug.

02:17:58.680 | And in my mind, gold bugs have spent the last 50 years

02:18:02.640 | saying the global monetary system

02:18:04.480 | is going to collapse next week,

02:18:05.640 | and we're going to go back to a gold standard.

02:18:07.760 | And writing "The Fiat Standard"

02:18:10.240 | gave me a very good appreciation

02:18:11.880 | for why this hasn't happened,

02:18:13.600 | and why it's not very likely to happen.

02:18:15.720 | I think the reason is, as I said earlier,

02:18:18.840 | it's just gold is very expensive to move around,

02:18:20.800 | and perhaps more importantly,

02:18:22.480 | it's very expensive to verify.

02:18:24.180 | That's really the problem with it.

02:18:25.480 | It's very expensive to verify

02:18:27.180 | that the gold that you're receiving is original gold.

02:18:29.520 | So the only way to do this properly,

02:18:32.520 | it's to melt the gold bars down and recast them,

02:18:35.960 | which is pretty expensive.

02:18:37.560 | So we have this situation now where Russia,

02:18:40.440 | which is one of the biggest economies in the world,

02:18:42.760 | has been kicked off to varying degrees

02:18:45.720 | off of the global monetary system,

02:18:47.400 | and the US has confiscated their reserves.

02:18:49.320 | I don't have political opinions about the war.

02:18:52.640 | It's not something I'm very familiar with.

02:18:54.640 | It's outside of my area of expertise.

02:18:56.480 | I'm just analyzing the monetary aspects of it.

02:18:58.880 | It is, on the one hand,

02:19:00.800 | whether you think the war is justified or the sanctions

02:19:03.520 | are justified is not something I can opine on,

02:19:07.040 | but the implication of this is that effectively,

02:19:11.040 | the US might be shooting itself in the foot

02:19:13.000 | because it's telling everybody in the world,

02:19:15.480 | your money in our system is not really your money.

02:19:18.040 | It's just a token to play in our arcade,

02:19:22.120 | and any point in time, if you misbehave,

02:19:23.800 | we kick you away out of the arcade and we take your tokens.

02:19:27.680 | And so, I mean, this is something

02:19:29.680 | that China, Russia, Iran, and many countries

02:19:32.720 | have made a lot of noise about over the past decades.

02:19:35.080 | It got real this year,

02:19:38.280 | but it's been decades of China, Iran, and Russia,

02:19:43.280 | to some extent, saying that we wanna build an alternative

02:19:45.980 | to the US dollar-based system, and yet they haven't,

02:19:50.080 | and I think there's very good reasons they haven't,

02:19:51.600 | and the reason is, what do you do with it based on?

02:19:54.040 | How do you build it?

02:19:55.160 | So you can do a credit-based system based on,

02:19:57.780 | but then who's going to be the big boss?

02:20:00.480 | Is it gonna be China, is it gonna be Russia,

02:20:02.120 | is it gonna be Iran, is it gonna be India?

02:20:04.180 | None of these countries wants to be,

02:20:06.840 | they don't wanna jump out of the US-based system

02:20:10.400 | to get into somebody else's base system.

02:20:12.560 | So China doesn't wanna use a Russian system.

02:20:14.440 | Russia doesn't wanna use a Chinese system,

02:20:16.520 | and so therefore, you can't use

02:20:17.840 | their own central banks' currencies.

02:20:19.520 | - Don't you think they have enough leverage,

02:20:23.220 | India, China, Russia combined, with several other nations,

02:20:27.800 | have enough leverage and incentive

02:20:29.920 | to create their own system?

02:20:32.040 | So any one player, yes, but if they collaborate.

02:20:35.600 | - Yeah, but then, okay, so what are you basing it on?

02:20:38.200 | Who's going to be the boss?

02:20:39.640 | Who's going to be the one who can--

02:20:40.480 | - Well, in this case, China, right?

02:20:42.500 | 'Cause China's becoming increasingly

02:20:45.880 | an economic power in the world that's hard to deny.

02:20:49.520 | - Yes, it's true, and it's the most likely scenario,

02:20:51.880 | perhaps, if we were to witness something like this,

02:20:54.600 | is going to be a Chinese-based system.

02:20:57.240 | - So is it possible to have a split

02:21:00.520 | in what is the driving currency of the world?

02:21:04.680 | - It's possible, but I don't think it's sustainable.

02:21:06.840 | Again, money wants to be won,

02:21:08.160 | and that's the kind of thing that I argue in that seminar.

02:21:10.560 | So we could see this emerge based around the yuan,

02:21:13.480 | and likely, I mean, Russia is obviously

02:21:17.480 | going to hurt economically from what happened,

02:21:19.600 | from the confiscation of the reserves

02:21:20.920 | and from the sanctions.

02:21:22.120 | So it's not going to be in a position,

02:21:24.560 | and of course, because it's outside of the US-based system,

02:21:27.660 | it's not in the strongest negotiating position

02:21:29.720 | with the Chinese, so the Chinese might be able

02:21:31.640 | to get them to join their yuan-based system.

02:21:34.920 | But I don't think that's sustainable in the long run

02:21:36.880 | because these governments can issue their laws

02:21:41.080 | and make their designs and then make their monetary systems,

02:21:45.040 | but ultimately, there are billions of Chinese people

02:21:50.240 | and billions of dollar-based people,

02:21:52.040 | and they're gonna wanna trade with one another.

02:21:53.680 | And the power to want to trade with one another

02:21:55.560 | is too strong.

02:21:56.400 | We can't just split the world economy

02:21:58.200 | into two monetary systems that don't trade with one another.

02:22:00.720 | So then, they're gonna wanna trade with one another.

02:22:02.920 | - Or the dark possibility is it,

02:22:07.920 | the inability to trade as opposed to being

02:22:12.640 | a forcing function for trade,

02:22:14.400 | it become a forcing function for conflict

02:22:17.720 | in cyberspace and potentially hot war.

02:22:20.280 | - Yes, this is the scary part of it.

02:22:22.560 | And this is basically how World War II happened,

02:22:24.800 | because there's an old historian who used to say when,

02:22:29.040 | oh, I think his name is Otto Mallory,

02:22:30.400 | and I quote him in "The Bitcoin Standard,"

02:22:31.960 | "If goods don't cross borders, then bombs will."

02:22:35.600 | If people trade with one another,

02:22:36.760 | they have an incentive for each other's well-being,

02:22:39.280 | and then they have less of an incentive to fight.

02:22:42.520 | And it was the death of global trade in the 1930s

02:22:45.480 | because of the failure of the fiat system

02:22:48.680 | that brought about the rise of the populism

02:22:52.040 | and the rise of all those leaders that hated each other

02:22:54.120 | and helped finance the war and bring it about.

02:22:56.240 | So that is the scary possibility.

02:22:58.100 | And of course, you can't discount that

02:23:00.960 | with all of the escalation that you see,

02:23:02.560 | that is a possibility that it could turn into a real war.

02:23:05.520 | But then even so, I think ultimately,

02:23:09.120 | you can't fight wars forever.

02:23:10.680 | It's gonna end at some point.

02:23:13.840 | And we're gonna be back at square one,

02:23:15.640 | or well, not square one,

02:23:16.920 | we're gonna be back at the same dilemma

02:23:18.240 | of who's going to have the global monetary system.

02:23:21.800 | And so one alternative is that what the Chinese

02:23:24.560 | and the Russians could do

02:23:25.440 | is they could base it on a commodity.

02:23:28.240 | So a lot of people are now saying,

02:23:29.320 | well, they're gonna base it on copper

02:23:30.880 | and corn and agricultural commodities.

02:23:35.480 | And that's the analysis of salability

02:23:38.160 | that we discuss in "The Bitcoin Standard"

02:23:39.720 | and the fiat standard.

02:23:40.880 | I don't think that's workable.

02:23:42.200 | If you end up basing the monetary system on copper,

02:23:44.760 | as we said earlier,

02:23:46.080 | doesn't matter how many governments say

02:23:47.500 | that we're gonna make a new monetary system

02:23:50.120 | based on copper grains and nickel and iron and so on,

02:23:55.120 | doesn't matter.

02:23:57.260 | You're just gonna stockpile,

02:23:58.240 | you're gonna have to stockpile those things

02:24:00.000 | in order to make a market in them.

02:24:02.400 | And then if you stockpile those things,

02:24:03.720 | you're just raising their value,

02:24:05.420 | inviting the producers to make more, flood the market.

02:24:08.800 | I hope they don't try this

02:24:09.940 | because it's going to be a devastating,

02:24:11.580 | devastating impact on the world economy.

02:24:15.220 | You're gonna have central banks bidding up the price

02:24:17.960 | of essential commodities that people need for real uses

02:24:20.800 | in order to back their currencies with them.

02:24:22.980 | And then just incentivizing the producers

02:24:24.800 | to make more and more and more of it,

02:24:26.600 | and then bringing the price back down.

02:24:28.060 | So it's gonna be a very expensive mistake

02:24:29.840 | where we raise the price of copper,

02:24:31.660 | destroy a lot of industries dependent on copper.

02:24:33.840 | And it's not just copper, but also food.

02:24:35.620 | And then increase the supply beyond what we need.

02:24:38.260 | And the end result is copper miners make out well,

02:24:41.700 | governments go broke,

02:24:43.740 | and we end up with a lot of rusting copper

02:24:46.220 | in government warehouses.

02:24:49.540 | That's why I don't think it works for the,

02:24:51.640 | to use commodities that are not monetary commodities.

02:24:56.360 | Then the question is maybe gold.

02:24:58.540 | Can we go back on another gold standard?

02:25:00.780 | And I mean, Russia seems to have done that.

02:25:04.500 | I'm not so sure.

02:25:05.620 | It's very difficult to get reliable information.

02:25:07.660 | I'm trying to look into this more.

02:25:09.320 | But they seem to have said that

02:25:11.500 | they're fixing the price of gold in rubles.

02:25:15.180 | So they will buy and sell gold at a fixed ruble rate,

02:25:18.660 | which effectively means you're on a gold standard.

02:25:20.900 | Now I'm not sure how much, how serious this is,

02:25:24.660 | how they managed to stick to it,

02:25:26.440 | but it seems to have stabilized the ruble,

02:25:28.860 | and in fact brought it back to its pre-war level,

02:25:31.000 | which I found absolutely astonishing,

02:25:33.300 | considering all the sanctions going on.

02:25:35.900 | But in the short run, it's obviously much better

02:25:39.700 | than having your currency pegged to nothing.

02:25:41.740 | But in the long run, I also don't think gold

02:25:44.460 | is gonna cut it in the 21st century.

02:25:46.740 | - Do you think there's any chance they go full gangster move

02:25:50.580 | and go into the digital space on the blockchain,

02:25:54.700 | and go with Bitcoin?

02:25:55.820 | - I think, you know, the point of this discussion

02:25:58.980 | is that we run through all these other options.

02:26:01.380 | You know, a Chinese-based system,

02:26:03.140 | why it probably won't work.

02:26:04.880 | A commodity-based system, why it won't work.

02:26:06.380 | And a gold-based system, why it won't work.

02:26:08.700 | I think they might have to learn this the wrong way,

02:26:12.060 | I mean, the hard way.

02:26:13.580 | But eventually, I don't see them doing it now,

02:26:16.020 | but eventually I think the winning move

02:26:18.740 | is going to be to go on a Bitcoin-based monetary system.

02:26:21.460 | - Well, I don't know if everything

02:26:22.900 | always has to be the hard way.

02:26:25.780 | - I'd love it not to be, but I mean,

02:26:27.620 | it doesn't look like there is any kind of desire

02:26:31.980 | in China or in Russia to switch to a Bitcoin-based system.

02:26:34.580 | - It's a leap to Bitcoin.

02:26:36.160 | - So unfortunately, I think we're gonna go through

02:26:39.740 | a few years, maybe many years,

02:26:42.260 | of learning the lesson the hard way,

02:26:44.820 | of trying to accumulate these commodities

02:26:46.820 | and seeing the limitations that make them

02:26:48.600 | unsuitable as money today.

02:26:50.460 | - One of the things I'm really concerned about

02:26:52.260 | is the tension, the amount,

02:26:53.880 | the increasing amount of hate in the world.

02:26:58.020 | - Yes.

02:26:58.900 | - And the increasing amount of power centers in the world

02:27:04.500 | between which hate is making a regular appearance

02:27:09.500 | and because the weapons of war are becoming

02:27:14.500 | more and more powerful as they have been

02:27:16.060 | in the past many decades,

02:27:19.680 | I'm really concerned about nuclear war.

02:27:22.300 | So let us see if Bitcoin can fix this.

02:27:25.180 | - Yes, Bitcoin fixes all of this.

02:27:27.380 | (Lex laughing)

02:27:29.060 | First rule of Bitcoin is if it's a problem,

02:27:31.060 | Bitcoin fixes it.

02:27:33.220 | - All right, well, I have some personal questions

02:27:35.060 | for Bitcoin then 'cause I have some,

02:27:37.100 | my life is pretty fucked up, so I'll have to try to see.

02:27:40.020 | A quick pause for bathroom break, you need anything?

02:27:41.700 | - Sure.

02:27:43.100 | - Let's return to the basics.

02:27:44.820 | What is Bitcoin?

02:27:46.380 | We started with what is money, what is Bitcoin?

02:27:49.340 | We talked about hard money, inflation, fiat,

02:27:53.420 | the history of money, the history of war

02:27:56.820 | in the 20th century, and that takes us

02:27:58.640 | into the 21st century.

02:28:00.300 | What is Bitcoin?

02:28:02.100 | - Bitcoin is a software, and it's a distributed software

02:28:05.820 | to operate the peer-to-peer network

02:28:07.380 | between members who are all equal on the network,

02:28:10.580 | they're all peers.

02:28:11.780 | And what this software does is that it allows you

02:28:14.500 | to operate a payment network between those peers.

02:28:19.380 | And that payment network has its own currency.

02:28:22.340 | And that seems like just a simple software game,

02:28:26.300 | but the reason this is such a big deal is I believe

02:28:29.340 | Bitcoin is the most advanced form of money ever invented.

02:28:32.420 | And the reason for that comes from two properties

02:28:34.860 | that this network has.

02:28:36.840 | The first one is that the currency

02:28:39.300 | is the hardest money ever invented.

02:28:41.700 | It's the money whose supply is the most resistant

02:28:44.780 | to inflation, it's the first monetary asset

02:28:48.080 | that we've ever invented that is guaranteed

02:28:50.260 | to be fixed in its supply, that cannot be increased

02:28:53.300 | beyond a certain number.

02:28:54.580 | So there's only ever gonna be 21 million Bitcoins.

02:28:56.940 | And that's a qualitative leap forward

02:29:00.620 | in our technologies of money.

02:29:02.660 | All of our monies leak essentially,

02:29:05.580 | because people can always make more and more and more

02:29:08.180 | of them, you know, the best money is the one

02:29:09.640 | that leaks the least, which is gold,

02:29:11.780 | because it only leaks one and a half percent.

02:29:13.780 | In other words, your share of the gold stock

02:29:17.820 | is diluted by one and a half percent every year.

02:29:21.220 | Ideally, you'd like it to be zero.

02:29:23.220 | Bitcoin is currently at around 1.8%

02:29:26.180 | headed towards zero.

02:29:27.460 | So it's the first money that we've ever had

02:29:29.180 | that goes to zero in terms of terminal supply.

02:29:31.940 | So there'll never be more than 21 million Bitcoin.

02:29:34.620 | And I think that's a huge deal because, you know,

02:29:36.900 | as I said earlier, money is always whatever

02:29:39.540 | is the hardest to make, and now Bitcoin

02:29:41.260 | is the hardest thing to make.

02:29:43.220 | And then the second property, which is extremely important

02:29:45.900 | as well, is the fact that it operates

02:29:48.900 | without the need to trust in anybody.

02:29:51.560 | It doesn't have a party that is in charge of it.

02:29:54.060 | It doesn't have a central authority

02:29:55.580 | that can, you know, it's, as I said, it's peer to peer.

02:29:58.780 | So there's, it only has users.

02:30:00.620 | It doesn't have any admins.

02:30:02.460 | There's no authority in charge of Bitcoin

02:30:04.780 | that can take your Bitcoin, that can stop you

02:30:06.540 | from using Bitcoin, that can change the rules of Bitcoin.

02:30:09.620 | They can't make more of it.

02:30:11.100 | So it's fixed, it's available for anybody in the world.

02:30:15.180 | It's the hardest money ever invented.

02:30:17.220 | And it is absolutely, I think, an enormously,

02:30:21.940 | enormously significant invention,

02:30:23.540 | because if you read the fiat standard

02:30:26.500 | and the Bitcoin standard as well,

02:30:28.620 | you'll see my perspective for why I think

02:30:31.220 | a very large number of problems on the world,

02:30:34.060 | in the world are caused by easy money,

02:30:36.060 | are caused by inflation, and caused by government

02:30:40.660 | having access to essentially an infinite recourse

02:30:44.220 | to people's wealth.

02:30:45.900 | And I think Bitcoin fixes this,

02:30:47.820 | because it allows us to have money

02:30:51.420 | that has the salability of gold across time,

02:30:54.420 | meaning it holds its value across time,

02:30:56.780 | like gold, but much better than gold.

02:30:58.700 | But also it has similar to, it is similar to fiat

02:31:01.780 | in that fiat can travel quickly,

02:31:03.820 | but Bitcoin can travel even faster than fiat.

02:31:06.100 | So it combines gold's salability across time

02:31:11.100 | with fiat salability across space

02:31:13.980 | in one immutable package that nobody can change

02:31:17.180 | and nobody can control.

02:31:18.260 | - Can you define the word salability?

02:31:20.100 | - Salability is the essential property of money.

02:31:22.940 | It's the ability of a good to be sold easily on the market,

02:31:27.940 | specifically to be sold without much loss in its value.

02:31:31.180 | So houses are great for living in,

02:31:33.580 | but they're not very salable.

02:31:35.020 | If you wanna sell a house,

02:31:36.660 | you can't just click a button and sell a house

02:31:38.620 | and have a giant market of people buying houses from you.

02:31:41.860 | You need to find somebody who wants the exact house

02:31:46.180 | that you have with the exact specifications that you have.

02:31:48.780 | And because houses are not identical,

02:31:50.500 | there's no liquid giant market for people to just buy

02:31:52.980 | and sell identical houses from.

02:31:55.380 | So gold, for instance, has a good salability as money

02:32:01.420 | because it's a liquid good, it's uniform,

02:32:03.900 | and people are always buying it.

02:32:05.780 | Fiat dollars have great salability

02:32:08.180 | because everybody's always buying

02:32:09.860 | and exchanging dollars for other goods.

02:32:11.940 | So if you have a hundred dollar bill,

02:32:13.740 | you can easily get rid of it

02:32:15.300 | and you'll get a hundred dollars worth of stuff for it.

02:32:17.980 | If you have a hundred dollars worth of stuff,

02:32:20.860 | it's harder to get rid of it.

02:32:21.980 | If you have a hundred dollar worth of phone,

02:32:24.580 | it's not as easy to spend it as a hundred dollar bill.

02:32:26.940 | That's salability.

02:32:28.380 | - What do you mean that Bitcoin,

02:32:30.980 | I understand that Bitcoin has the salability

02:32:33.260 | of gold across time.

02:32:35.260 | - Better even, yeah.

02:32:36.340 | - Better, yes.

02:32:37.180 | Like an order or whatever.

02:32:39.380 | And then has the salability of fiat across space.

02:32:42.900 | What does that mean?

02:32:43.820 | - So if you remember when you asked me

02:32:44.780 | what is the advantage of fiat?

02:32:46.220 | What is the advantage it offers us?

02:32:48.140 | It's cheaper to move fiat across space

02:32:50.860 | than it is to move gold.

02:32:52.140 | You know, with the current fiat monetary system

02:32:54.800 | for all of its flaws, you know, you can send money,

02:32:58.180 | you know, I could send money from my bank account

02:33:00.100 | in the US to a bank account in China in a couple of days

02:33:05.100 | or in Britain, in France, in a day or two,

02:33:08.900 | which is, you know, much faster than you could do with gold

02:33:10.940 | and much cheaper than you could do with gold.

02:33:13.460 | But in reality with fiat, you know,

02:33:16.380 | the reason Bitcoin improves on that

02:33:17.780 | is that with Bitcoin, you're actually selling,

02:33:19.540 | you're sending final settlement in a couple of hours.

02:33:22.980 | So you send the Bitcoin transaction,

02:33:24.340 | you get six confirmations in an hour,

02:33:26.460 | you get about 12 confirmations in two hours on average.

02:33:29.780 | With 12 confirmations, you know,

02:33:31.240 | you're pretty definitely clearly safe on this.

02:33:36.240 | So within a couple of hours,

02:33:38.360 | you could send a billion dollars across the ocean

02:33:41.140 | and have final settlement on them.

02:33:44.060 | It's not just that you've sent a credit obligation

02:33:46.620 | that's gonna need weeks and months to settle,

02:33:49.140 | which is the case with fiat.

02:33:51.060 | So it is faster than fiat effectively.

02:33:54.080 | So it's harder than gold and faster than fiat.

02:33:56.980 | That's a good way of putting it.

02:33:58.580 | - One other aspect of Bitcoin I have to ask,

02:34:04.060 | to me on a human level, it's fascinating,

02:34:06.720 | is it was founded by Satoshi Nakamoto,

02:34:09.780 | an anonymous founder.

02:34:10.740 | There's no leader.

02:34:12.060 | So that's another aspect of the decentralization,

02:34:15.020 | it's leaderless.

02:34:16.340 | - Yeah.

02:34:17.180 | - So unfortunately it's not a monarchy.

02:34:19.580 | - Fortunately.

02:34:20.420 | - Or fortunately, yes.

02:34:22.180 | Who is Satoshi Nakamoto do you think?

02:34:24.580 | And first of all, is it you?

02:34:26.700 | - It definitely is not me.

02:34:28.240 | I don't know who it is.

02:34:30.460 | - If it was, would you tell me?

02:34:32.020 | (laughing)

02:34:33.460 | - It's a trick question.

02:34:34.380 | - Yeah, I know, trick question.

02:34:35.580 | But I mean, everybody who knows me knows I can't really code.

02:34:38.060 | So you would say that even if you could.

02:34:41.120 | (laughing)

02:34:42.420 | - That's true.

02:34:43.340 | - Do you think it's one person?

02:34:44.180 | Do you think it's multiple people?

02:34:45.620 | Is it interesting to you?

02:34:47.020 | Do you think it's fundamental to the coin itself,

02:34:49.540 | to not the coin, the entirety of the concept,

02:34:54.100 | that it's founders and anonymous?

02:34:56.220 | And how much guts do you think it takes

02:34:58.620 | if it's one person to just walk away from so much money?

02:35:02.300 | - I've considered all these questions many times.

02:35:04.700 | It's very hard to formulate a definitive answer

02:35:07.700 | to all of them.

02:35:09.140 | I don't know who it is, and I don't know why he or them

02:35:14.140 | or she are not spending the coins that they most likely have.

02:35:19.540 | I think what really matters in Bitcoin about Satoshi

02:35:22.980 | is the fact that he's not there.

02:35:24.860 | And this is what's truly astonishing about it.

02:35:27.140 | The fact, the most important fact in Bitcoin

02:35:29.660 | is the fact that the creator has disappeared

02:35:31.740 | and the thing has continued to operate now

02:35:33.420 | for almost 12 years without him being there,

02:35:35.540 | or 11 years I think it's been since he's left.

02:35:38.860 | And this is really the most important thing.

02:35:41.140 | And maybe he died or she died,

02:35:44.500 | or they got into an accident on a road trip or whatever,

02:35:49.420 | and that's why they haven't accessed their coins.

02:35:51.220 | Maybe they're incapacitated for some reason.

02:35:54.020 | But whatever reason it is,

02:35:55.980 | I really think it's fate or serendipity

02:36:00.580 | that is giving us this very vital,

02:36:04.540 | very, very, very vital building ingredient in Bitcoin,

02:36:07.980 | which no other digital currency would ever recreate,

02:36:11.160 | which is that, because it was the first,

02:36:14.780 | it was the one that was able to establish

02:36:17.380 | the first mover advantage and get all of the people

02:36:19.540 | who are interested in the technology to get into it.

02:36:22.220 | And so that's an enormous advantage,

02:36:23.780 | but the cherry on top

02:36:27.300 | or what made the whole thing really function well

02:36:31.540 | is the fact that the guy who made it disappeared

02:36:34.020 | and that it continued to operate,

02:36:35.540 | which is just a clear illustration

02:36:37.700 | that this is a network with no admins.

02:36:40.020 | And I'm tempted to think that they're incapacitated

02:36:42.620 | in some way, probably dead or gone,

02:36:44.420 | because I can't believe the,

02:36:48.620 | I don't believe any human being would have this level

02:36:51.780 | of self-control to not get into,

02:36:54.740 | not want to meddle with their invention so much.

02:36:58.040 | Even if they, you know,

02:37:00.740 | they might've had the self-control

02:37:01.860 | to like mine the first million coins

02:37:03.460 | to get the network going and then throw away the coins

02:37:05.820 | or send them to an address that they don't have the key to,

02:37:08.720 | because they really just wanted the network to take off.

02:37:12.140 | They may have no access to the coins

02:37:14.180 | and that's why they can't move them.

02:37:15.440 | I could see that happening,

02:37:16.940 | but I find it harder to believe that they would resist

02:37:19.700 | the temptation to mess with the network.

02:37:21.820 | - You know, it's funny.

02:37:23.220 | I find that the founders of ideas are often principled

02:37:27.620 | and have the integrity that the eventual users

02:37:31.420 | of those ideas don't fully have.

02:37:35.540 | I tend to, you know, we have the kind of cynical view,

02:37:38.420 | power corrupts, absolute power corrupts absolutely.

02:37:41.300 | And we tend to, in our mind,

02:37:42.660 | generalize that all humans are corruptible.

02:37:45.580 | And perhaps that's true to some degree,

02:37:47.620 | but I think that some people are more corruptible

02:37:50.060 | than others.

02:37:51.180 | And I find that there is,

02:37:52.700 | I mean, I like to think that Satoshi Nakamoto is out there

02:37:57.700 | and, you know, just like George Washington

02:38:00.700 | chose to walk away.

02:38:02.180 | And it's a principle and the principle is more powerful

02:38:05.140 | than the financial reward or any of those kinds of things.

02:38:09.080 | It's a principle that stands for freedom.

02:38:12.340 | And there's a lot of people throughout history,

02:38:13.980 | even recent history,

02:38:14.900 | that are willing to die for these principles

02:38:18.100 | or live a life full of suffering and sacrifice

02:38:23.100 | because they're still living a life of principle

02:38:26.980 | and choosing that day after day after day.

02:38:29.140 | So, I mean, there's power to that.

02:38:31.380 | Money, what's the worth of money in the end?

02:38:34.000 | In terms of just personal financial gain

02:38:37.940 | versus knowing how much positive impact there is.

02:38:42.940 | So the person that chooses to walk away like that,

02:38:46.220 | I think is the same kind of person

02:38:47.580 | that chooses to live by that principle.

02:38:52.580 | You have people like that, you know,

02:38:54.140 | in Grigori Grisha-Perelman in mathematics

02:38:58.260 | who turned down the Fields Medal because he was--

02:39:01.780 | - Yeah, that's a medal, not $50 billion of Bitcoin.

02:39:05.640 | - Well, that's--

02:39:06.480 | - No, I know, I know, I'm joking.

02:39:08.240 | - Well, that's actually an interesting,

02:39:09.580 | just a brief comment.

02:39:10.900 | You know, when people talk about Bitcoin

02:39:12.620 | in the cryptocurrency space,

02:39:15.020 | it's often mixed up financial interest and ideas.

02:39:20.020 | And I think those are often correlated,

02:39:24.380 | but that good feeling you get when you win

02:39:27.620 | or number go up or you just, just somebody,

02:39:32.540 | you know, I found 20 bucks on the street the other day.

02:39:35.820 | And just that feeling of just like, ooh, like more money,

02:39:39.860 | that positive feeling, that's correlated,

02:39:42.980 | but it is distinct from the power of the idea

02:39:45.820 | to change the world for the better,

02:39:49.100 | for the, to alleviate, it's like Alex Gladstein

02:39:51.540 | in the case of Bitcoin,

02:39:52.980 | that decreased the amount of suffering in the world

02:39:55.200 | because of the authoritarian regimes.

02:39:56.780 | And just because your number goes up,

02:40:00.340 | like that gambling feeling of like, yes, yes, this is good.

02:40:04.220 | And I mean, short-term number go up.

02:40:07.140 | If there's a long-term number go up,

02:40:08.540 | that's more like investment and so on.

02:40:10.800 | And there's a short-term number go up,

02:40:12.140 | it's just a good feeling that you can't,

02:40:14.540 | you have to, in your mind, keep those distinct

02:40:16.740 | from the power of the idea to transform the world.

02:40:21.300 | And if you focus on the power of the idea,

02:40:24.180 | maybe a billion or billions of dollars don't matter as much.

02:40:28.860 | At least that's what I would like to believe.

02:40:30.420 | - Perhaps, but what matters ultimately

02:40:32.620 | is that the thing works without him.

02:40:34.260 | The thing's worked for 11 years without him.

02:40:35.900 | And I think this is the really important thing.

02:40:38.740 | If they had stuck around for whatever reason

02:40:41.680 | and they had continued to meddle with it,

02:40:43.780 | it's not clear to me how decentralized it could have been.

02:40:47.780 | This is the problem with the other currencies.

02:40:49.340 | It's like, how do you lose control of the Frankenstein

02:40:53.500 | that you've created?

02:40:54.700 | The only way that this Frankenstein continues to survive

02:40:57.180 | is if the person in charge of it continues to feed it.

02:41:00.220 | And so it continues to be yours.

02:41:02.620 | And that's the problem

02:41:03.540 | with all the other digital currencies.

02:41:05.200 | If you've heard about any of the other 16,000

02:41:07.300 | digital currencies out there, you've only heard about it

02:41:10.060 | because there's a small group of people behind it

02:41:11.920 | that are working on it, that are promoting it.

02:41:14.440 | And that's why, and I think, you know,

02:41:16.080 | Michael Saylor's discussion with you

02:41:17.360 | was a magnificent illustration of the difference

02:41:21.240 | between Bitcoin and altcoins in that they are securities.

02:41:24.840 | And I think he makes a very compelling, brilliant case

02:41:27.280 | for why this makes them categorically different from Bitcoin.

02:41:32.280 | Bitcoin, you're buying property.

02:41:34.720 | - I think he mentioned he's a huge fan of Dogecoin,

02:41:36.880 | but I might be misremembering.

02:41:38.160 | - You are misremembering.

02:41:39.240 | - Okay, me too.

02:41:40.540 | Maybe I'm quoting him out of context.

02:41:42.620 | - Yes. - Okay.

02:41:43.460 | Let me just ask you about some possible criticisms

02:41:47.840 | of Bitcoin.

02:41:49.120 | So on centralization, so there's a criticism on the,

02:41:52.920 | so on the mining and on the node side,

02:41:56.000 | or the node is not really the criticism,

02:41:58.020 | but Bitcoin mining is not fully decentralized

02:42:00.940 | because a small number of miners control a majority

02:42:04.640 | of the hashing power.

02:42:06.200 | I looked it up, there's 10,000, 15,000,

02:42:08.400 | whatever the number is of computers that are full nodes,

02:42:11.920 | that have the full,

02:42:13.000 | that are actively connected to the network.

02:42:16.680 | So you could argue that's decentralized

02:42:18.360 | 'cause it's global, it's all across the world,

02:42:20.480 | but the miners, they're still, it's more centralized.

02:42:25.480 | So if you're thinking of making a case

02:42:27.400 | for Bitcoin being decentralized,

02:42:30.240 | do you worry about the miners being somewhat centralized?

02:42:34.440 | Is the nodes the important thing to think about?

02:42:37.440 | - Yeah. - And what number

02:42:38.800 | of nodes counts as centralized and not?

02:42:41.360 | - The nodes are what matters

02:42:43.480 | because the nodes are what determines

02:42:45.280 | Bitcoin's consensus parameters.

02:42:46.800 | I think the best way to think about it

02:42:50.800 | is that miners simply sell a commodity to the nodes

02:42:54.800 | and that commodity is Bitcoin blocks.

02:42:56.960 | So what a miner does is they solve

02:42:59.000 | the proof of work problem.

02:43:00.440 | So they keep operating their computers

02:43:02.360 | until they can get a solution to the problem.

02:43:04.920 | And then they attach that to a bunch of transactions

02:43:07.080 | and present it to the nodes

02:43:08.840 | for the nodes to ratify and approve it.

02:43:11.520 | So therefore, this is, and this is,

02:43:14.320 | I strongly recommend people learn

02:43:16.320 | about the 2017 block size war

02:43:18.800 | to understand why miners don't control Bitcoin.

02:43:21.720 | I discussed this briefly in my "Bitcoin Standard,"

02:43:25.120 | but there's a recent book that discusses this in detail

02:43:27.760 | called "The Block Size War" by Jonathan Beer.

02:43:30.680 | It's a great description of, in 2017,

02:43:33.840 | essentially the miners thought

02:43:35.040 | that they could control Bitcoin.

02:43:36.240 | You know, they had, there was one mining company

02:43:39.680 | that produced the majority of the machines

02:43:42.400 | that were on the network.

02:43:43.720 | And they, and their allies had a control

02:43:47.200 | of the machines that were out there

02:43:49.640 | and they controlled the majority of the hash rate.

02:43:51.840 | And they thought that they could change Bitcoin's supply,

02:43:55.200 | not supply, sorry, they could change Bitcoin's block size,

02:43:57.800 | which is a tiny little detail, technical parameter.

02:44:01.840 | It's not even all that big of a deal

02:44:04.080 | for the economics of it.

02:44:05.440 | But they thought that they could pass this change.

02:44:08.320 | They could force this change on the network.

02:44:10.600 | And the members of the network rejected it

02:44:13.800 | and they weren't able to do it.

02:44:15.200 | So the nodes are what is sovereign.

02:44:17.560 | The nodes are what determine the rules of the game.

02:44:20.400 | The miners are a service provider.

02:44:23.560 | The miners invest capital upfront.

02:44:25.960 | You know, they buy the machines,

02:44:27.760 | they buy the electricity,

02:44:29.000 | they buy the storage, they buy the locations,

02:44:31.600 | they pay the rent,

02:44:33.200 | and they invest all of that money.

02:44:35.660 | Based on the idea that if they behave

02:44:37.940 | according to what the nodes want,

02:44:39.860 | the nodes will reward them with Bitcoin.

02:44:42.180 | So the miners are in no position

02:44:43.580 | to dictate terms for anyone.

02:44:45.020 | You know, they've put up their capital upfront

02:44:47.820 | and they will only recoup it

02:44:49.460 | if they do what the nodes want.

02:44:51.660 | So therefore, what really matters

02:44:53.340 | is the decentralization of the nodes.

02:44:54.900 | So you wanna have as many nodes as possible.

02:44:58.700 | You wanna have a system where

02:45:00.540 | there's a large number of nodes.

02:45:01.940 | And this is of course the biggest problem

02:45:04.380 | with other digital currencies

02:45:07.740 | is that, you know,

02:45:08.700 | because basically Bitcoin has cornered the market

02:45:11.180 | on a digital currency,

02:45:13.020 | the only way that you can really get fraction

02:45:15.340 | is to generate a whole bunch of buzzwords,

02:45:18.100 | but you know, we're doing this and we're doing that.

02:45:20.460 | And so other digital currencies are optimized

02:45:23.780 | for bells and whistles and buzzwords.

02:45:27.940 | And that means adding a computational load,

02:45:30.740 | which makes the nodes bigger, harder to operate,

02:45:33.660 | and therefore you have a very small number of nodes.

02:45:35.660 | In fact, very few digital currencies

02:45:38.380 | are keen to publicize how many nodes there are,

02:45:42.060 | and they don't have full nodes in the true sense.

02:45:44.340 | And it doesn't even matter how many nodes they have

02:45:46.540 | because de facto, you know,

02:45:50.260 | you can spin up a million nodes tomorrow on AWS.

02:45:54.660 | Doesn't really matter.

02:45:57.140 | What matters is de facto,

02:45:59.020 | do the nodes dictate the rules of consensus?

02:46:02.220 | And the fact that with most digital currencies,

02:46:03.940 | you can have hard forks very frequently

02:46:06.140 | and they can change the supply all the time

02:46:08.180 | means that there's a small group of people

02:46:09.540 | who agree amongst themselves how to move forward.

02:46:11.860 | - Yeah, so you threw in a few criticism of all coins there,

02:46:15.180 | but so one is the small group.

02:46:17.180 | That one we could talk about, it's a tricky one.

02:46:19.740 | And we talked about that with Satoshi Nakamoto,

02:46:22.660 | but the other one is small number of nodes

02:46:25.660 | sort of to push back on that.

02:46:27.300 | As computational power increases,

02:46:29.020 | you can argue that that enables more and more cheap computers

02:46:33.580 | to serve as nodes.

02:46:35.740 | So at least it paints a future

02:46:38.020 | where nodes are always increasing

02:46:40.140 | because computational power is always increasing

02:46:42.420 | and getting cheaper and cheaper and cheaper.

02:46:44.580 | So at least there's a hope for the future

02:46:46.180 | for greater and greater decentralization

02:46:49.140 | on the node front.

02:46:50.460 | - Yeah, but I mean, ultimately, again,

02:46:52.860 | it doesn't really matter how many nodes you have.

02:46:55.460 | If you have a, you know,

02:46:57.700 | if the way that the currency is run

02:46:59.540 | is that you're gonna have a hard fork every few months,

02:47:01.740 | which is the case with most other currencies,

02:47:03.540 | Bitcoin is the only one that's not have a hard fork.

02:47:06.100 | Basically, the unique thing about Bitcoin

02:47:10.180 | in a technical sense is that you could get

02:47:12.220 | the original software that Satoshi himself ran in 2009

02:47:16.860 | to start the network, and you could run it today

02:47:21.700 | and it would sync with the blockchain.

02:47:23.180 | There's one bug you need to fix.

02:47:25.420 | One mistake that would have only appeared,

02:47:28.460 | I think in around 2013 or '14 or something like that,

02:47:31.380 | as that he wasn't aware of back then.

02:47:33.020 | So you just need to fix this one tiny little bug.

02:47:35.500 | And then the consensus parameters are still the same.

02:47:37.660 | So you're able to sync to it.

02:47:39.380 | This is not true for most other digital currencies.

02:47:41.500 | I'd say probably all of them,

02:47:42.900 | because they've all had many hard forks,

02:47:44.860 | which they think of as upgrades.

02:47:46.380 | And, you know, they market this thing as, you know,

02:47:49.420 | well, Bitcoin can't upgrade, but we upgrade all the time.

02:47:52.460 | Well, yeah, you know what else upgrades all the time?

02:47:55.300 | Facebook, Apple, Amazon,

02:47:57.220 | anything that centralizes is very easy to upgrade.

02:47:59.420 | And that's precisely why, as Michael Saylor says,

02:48:01.460 | these things are somebody's liability.

02:48:03.700 | They are security.

02:48:04.620 | You're carrying on somebody's technical

02:48:07.180 | and economic liability.

02:48:08.780 | They can, hard fork, they can 10X the supply tomorrow.

02:48:12.740 | - Yeah.

02:48:13.980 | They can fall victim to the same corrupting forces

02:48:18.980 | that governments fall victim to.

02:48:21.860 | Sure, and for people who don't know,

02:48:23.020 | yeah, hard fork is a reverse incompatible change

02:48:28.020 | to the underlying function of a cryptocurrency.

02:48:34.260 | Of course, there is hard forks of Bitcoin as well.

02:48:40.140 | I'm sure all of which you love dearly.

02:48:43.300 | Anyway, but that doesn't matter.

02:48:44.860 | The original Bitcoin, for the most part,

02:48:47.580 | has not undergone any changes.

02:48:49.980 | And that's one of the...

02:48:50.820 | - I mean, it has undergone changes,

02:48:51.980 | but none in the important parameters of the network.

02:48:56.980 | - So another criticism is about energy.

02:49:00.020 | So the proof of work,

02:49:02.700 | the assessments mechanism uses a lot of energy.

02:49:05.160 | What's the response to that criticism of Bitcoin?

02:49:08.700 | - Yes, because it's worth it.

02:49:10.740 | - Okay.

02:49:13.060 | - The airplane uses a lot more energy than a kayak.

02:49:14.740 | You know, when you're gonna cross the Atlantic next time,

02:49:16.820 | what are you gonna take?

02:49:17.660 | A kayak that is environmentally friendly,

02:49:19.660 | according to this insane definition?

02:49:21.620 | Or are you gonna take an airplane

02:49:22.820 | that consumes a lot of energy?

02:49:24.020 | - So the cost benefit analysis here,

02:49:26.780 | essentially you have to consider

02:49:29.540 | both the cost and the benefit.

02:49:31.340 | - Exactly.

02:49:32.180 | And I think it's an astonishing testament

02:49:34.900 | to just how far backward people's scientific

02:49:38.540 | and technological thinking has devolved

02:49:41.380 | to the point where we think of energy consumption

02:49:43.340 | as a bad thing.

02:49:44.180 | I think it's just...

02:49:45.020 | And in the fiat standard,

02:49:46.260 | I discussed the whole hysteria around energy.

02:49:48.900 | And I think it's a product of fiat inflation

02:49:52.780 | because it's a way of trying to covering up the fact

02:49:55.620 | that energy is fuels that are reliable

02:49:58.420 | and necessary for the current world

02:50:00.580 | are becoming more and more expensive because of inflation.

02:50:03.660 | And so governments are always looking for excuses

02:50:05.820 | for why you should not be using those things.

02:50:07.900 | And so they promote all kinds of stupid pseudosciences

02:50:10.180 | to tell you about why these things are bad.

02:50:13.340 | But really, you know, all technology is,

02:50:16.980 | well, not all, but the vast majority

02:50:19.780 | of technological innovations involve

02:50:22.180 | economizing on human time and judgment

02:50:24.540 | and replacing it with machines,

02:50:26.020 | with reliable machines that spend a lot of energy.

02:50:28.420 | So that's what a telephone does.

02:50:31.060 | Instead of having to send somebody across the world

02:50:33.180 | to tell somebody something else or send a letter,

02:50:36.100 | a telephone allows you to do it.

02:50:38.780 | The car is like that.

02:50:39.820 | You could walk, but a car consumes a lot more energy,

02:50:43.020 | but it allows you to travel much faster

02:50:44.740 | and safer and more reliably.

02:50:47.260 | An airplane is like that.

02:50:48.740 | Modern telecommunication, human prosperity

02:50:52.460 | is an increase in the consumption of energy.

02:50:54.700 | And I think it is an absolutely criminal thing.

02:50:58.820 | And I genuinely mean the word criminal

02:51:01.660 | to portray energy consumption as a bad thing

02:51:04.860 | because it is truly depriving people of the chance

02:51:07.300 | to live a life that makes life better.

02:51:09.140 | You know, it's truly criminal to tell poor countries

02:51:12.500 | that they should not consume the same energy sources

02:51:15.460 | that are being used in rich countries

02:51:17.060 | on which our modern infrastructure and modern life relies.

02:51:21.900 | That's what life is.

02:51:22.820 | You know, if you reduce the consumption of energy in the US

02:51:25.780 | to the levels that you have in poor countries today,

02:51:28.540 | the US would become desperately poor.

02:51:30.340 | A lot of people would die.

02:51:31.420 | Cities would collapse.

02:51:32.540 | - The quality of life would decrease significantly.

02:51:34.580 | A high quality of life often requires,

02:51:37.100 | given the current technology, a high expenditure of energy.

02:51:39.620 | - Yeah, and I should be clear, you know,

02:51:41.060 | it's not a quality of life in the sense of,

02:51:42.740 | many people think of this as, oh yeah, well, you know,

02:51:45.380 | taking needless flights for vacations.

02:51:50.220 | No, no, these are the cherries on top of the cake.

02:51:53.420 | But the substance of the cake

02:51:54.940 | and the real benefits of energy is the fact that children,

02:51:59.860 | premature babies survive in countries

02:52:02.780 | that have reliable 24-hour cheap electricity.

02:52:05.540 | If your child is born premature,

02:52:07.180 | that you put him in an incubator or her,

02:52:10.440 | they're highly likely to survive.

02:52:11.860 | If you don't have 24-hour electricity,

02:52:14.220 | that child is not gonna make it.

02:52:16.020 | And you see it, you know,

02:52:18.940 | the level of energy consumption per capita

02:52:20.780 | has highly correlated not just to income,

02:52:23.420 | but also to health outcomes, to infant mortality,

02:52:26.280 | to all of the things that you care about.

02:52:28.460 | And Bitcoin is just another technology.

02:52:31.860 | It does consume a lot more energy than central banks.

02:52:34.660 | A lot of Bitcoiners like to take a cop out of this

02:52:37.860 | by saying, well, you know, central banks consume money

02:52:40.100 | and ATMs consume energy.

02:52:42.740 | And I think if you calculate

02:52:44.200 | how much central banks and banks consume,

02:52:45.900 | I think it's a rounding error next to what Bitcoin consumes.

02:52:49.660 | I think Bitcoin is just, maybe not a rounding error,

02:52:52.160 | but it's still, Bitcoin is, I think,

02:52:53.820 | is going to consume a lot more, and that's a good thing.

02:52:56.220 | - You know, what's humbling is to look,

02:52:58.140 | 'cause even just looking into this

02:53:00.100 | forces me to look at the energy expenditures

02:53:02.440 | for many of the things we take for granted.

02:53:04.660 | Obviously, computers and our digital lives

02:53:08.900 | are just, Bitcoin becomes a rounding error

02:53:12.020 | relative to how much energy is spent

02:53:15.060 | on all the computers in our world.

02:53:16.860 | But also, like, things like home appliances,

02:53:19.820 | microwaves, and hair dryers and stuff.

02:53:22.660 | - Yeah.

02:53:23.500 | (Lex laughing)

02:53:24.380 | Yeah, I mean, this is--

02:53:25.220 | - This starts being hilarious.

02:53:26.740 | It's like, oh, these things that are just part

02:53:29.520 | of our modern life, they're either the same order,

02:53:33.260 | at least the same order of magnitude as Bitcoin,

02:53:35.900 | and they seem like trivial parts of life.

02:53:39.340 | - Yeah, and this is the thing.

02:53:40.620 | All of the people that complain

02:53:41.780 | about Bitcoin's energy consumption,

02:53:43.220 | I presume they use washing machines.

02:53:45.140 | Now, why should their desire for clean and dry clothes

02:53:49.980 | get to consume energy?

02:53:52.180 | And I mean, I used to live in Lebanon.

02:53:54.980 | Lebanon had hyperinflation.

02:53:56.340 | I escaped from hyperinflation.

02:53:58.940 | I escaped, I prevented.

02:54:00.600 | My life could have been ruined by hyperinflation,

02:54:03.620 | and the reason that it wasn't ruined

02:54:04.740 | is because I have Bitcoin.

02:54:06.220 | So, I don't know, am I allowed to swear on your podcast?

02:54:10.180 | - Yes, please.

02:54:11.020 | - So, fuck your washing machine.

02:54:12.140 | (both laughing)

02:54:14.820 | Given a choice between my washing machine and my Bitcoin,

02:54:17.460 | I'll choose Bitcoin.

02:54:19.100 | It's a technology that has already saved my life,

02:54:21.700 | and I think it's gonna save the lives

02:54:22.820 | of many, many, many, many more people.

02:54:24.660 | But of course, I don't have to choose

02:54:27.520 | between my Bitcoin and my washing machine,

02:54:31.180 | because we're just constantly consuming more energy,

02:54:35.220 | and we're gonna continue to consume more energy

02:54:36.700 | in this world, and that's just what progress is.

02:54:39.900 | And a small remark, so in principle,

02:54:42.700 | I don't think this is a problem,

02:54:43.860 | but the other thing about Bitcoin,

02:54:45.020 | where it is different from washing machines,

02:54:47.380 | Bitcoin is truly unique in this.

02:54:48.900 | It's the only thing whose energy consumption

02:54:52.860 | can be produced absolutely anywhere.

02:54:55.240 | Your washing machine needs to be in your house

02:54:57.300 | where you live, and you live in a city

02:54:58.980 | surrounded by 10 million people,

02:55:00.780 | and they all have their washing machines,

02:55:02.940 | and they're all connected to the grid,

02:55:04.540 | and they generally tend to do their laundry

02:55:06.540 | around the same time, and so you have to put

02:55:10.100 | the load of the washing machine on the grid

02:55:13.100 | at the same time.

02:55:14.380 | There needs to be one power plant,

02:55:16.360 | and all of the infrastructure needs to work

02:55:17.980 | at the same time, and the electricity is pretty expensive

02:55:20.060 | because it's being done in a place with high demand.

02:55:23.380 | Bitcoin does not need to buy electricity

02:55:26.260 | from places where it has high demand,

02:55:28.380 | because it can buy electricity from anywhere.

02:55:30.340 | This is what's truly mind-blowing about it.

02:55:32.340 | You can buy, you know, what you need,

02:55:35.620 | the electricity that you need for mining

02:55:37.220 | can be done anywhere.

02:55:38.280 | So you can mine, you know, you can have a waterfall

02:55:42.140 | in the north of Canada, 300 miles away

02:55:44.580 | from any population center.

02:55:46.500 | There's water falling, there's energy.

02:55:48.540 | You can put a hydroelectric dam there,

02:55:51.140 | and then you can use that energy to operate the miners,

02:55:53.500 | and then the miners just need a satellite

02:55:55.580 | internet connection, and effectively,

02:55:57.340 | you're selling that energy that is isolated

02:56:00.060 | to the grid, and because of the way the Bitcoin functions,

02:56:02.900 | because of the difficulty adjustment,

02:56:04.820 | the only profitable miners are the ones

02:56:07.260 | who can get cheap electricity.

02:56:09.260 | Basically, if you're mining at grid cost,

02:56:11.660 | if you're mining at around, the average electricity price

02:56:14.540 | in the world is around 14 cents.

02:56:16.740 | If you're mining at 14 cents in Bitcoin,

02:56:19.140 | you're most likely not gonna make it.

02:56:21.340 | If you're running your miners at 14 cents,

02:56:23.900 | 'cause everybody could mine at 14 cents,

02:56:26.020 | and so what happens is if everybody's mining at 14 cents,

02:56:30.420 | 14 cents stops being profitable,

02:56:32.740 | and then only the people mining at a lower price

02:56:34.780 | are profitable, so that's why Bitcoin mining

02:56:37.500 | is not competing with your washing machine.

02:56:39.340 | This is the absurd thing about this kind of

02:56:42.180 | energy scarcity viewpoint where,

02:56:45.780 | oh no, it's a catastrophe, Bitcoin is taking

02:56:47.700 | all the electricity, as if the electricity

02:56:49.420 | is just one fixed pie that we all have to share

02:56:51.900 | and fight over, and this is,

02:56:53.940 | that's how I keep making fun of these stupid headlines.

02:56:55.900 | They put out where Bitcoin's consuming

02:56:57.700 | more electricity than Portugal.

02:56:59.740 | All right, well, maybe we should shut down Portugal then.

02:57:03.100 | What the hell has Portugal given us?

02:57:05.220 | Obviously, it's not--

02:57:07.060 | - No, he doesn't mean that.

02:57:08.100 | I've gotten so much criticism for saying

02:57:09.780 | Cristiano Ronaldo's not in the top five.

02:57:12.540 | I apologize.

02:57:14.100 | I love Portugal.

02:57:16.180 | - That's another discussion we should get into.

02:57:17.980 | - What we should do, 'cause you posted a few soccer things.

02:57:20.460 | I'm not, I realize how passionate people are about this.

02:57:23.460 | Listen, it was a joke, all right?

02:57:25.020 | - He deserves to be a potential in the top five.

02:57:27.500 | - Yeah, I love Portugal.

02:57:28.940 | And even though I'm a Liverpool fan,

02:57:30.420 | I still respect Cristiano Ronaldo a lot.

02:57:32.460 | In fact, I hold a very unpopular opinion

02:57:35.540 | where I think Cristiano Ronaldo's

02:57:37.700 | the greatest football player ever.

02:57:39.060 | - Number one, over Pelé and Maradona,

02:57:41.100 | Messi, better than Messi.

02:57:42.380 | - Yes, he's been doing it for 20 years at the top.

02:57:44.140 | Nobody's ever done that.

02:57:44.980 | He's won everything everywhere.

02:57:46.540 | Everywhere he goes, at the top, at the Champions League.

02:57:49.340 | Really strong argument to be made for him.

02:57:53.060 | Messi's never done anything outside of Barcelona.

02:57:55.140 | That's the thing.

02:57:55.980 | - So you appreciate performance, long-term,

02:57:59.340 | versus the genius of the actual play on the field?

02:58:03.540 | - I mean, the genius is,

02:58:05.700 | Ronaldo's the top scorer of all time.

02:58:07.540 | He scores more goals. - So the genius

02:58:08.380 | is in the scoring, not the actual dance of the play,

02:58:11.980 | the creativity.

02:58:13.380 | - Well, I mean, I don't know.

02:58:14.580 | Messi's been absolutely mediocre since he's left Barcelona.

02:58:18.140 | - These are strong words.

02:58:20.020 | - He scored, what, two goals in PSG's season this year?

02:58:23.140 | They're out of the Champions League.

02:58:24.900 | - What about Mohamed Salah?

02:58:26.220 | You've posted about him. - Oh yeah, he's my boy.

02:58:29.060 | - Is he climbing up to be somewhere in the--

02:58:31.460 | - I think he should win the Ballon d'Or this year.

02:58:33.020 | He probably should have won it last year as well.

02:58:34.740 | He's been absolutely outstanding.

02:58:36.180 | But I mean, just people are so crazy about Messi,

02:58:39.700 | they keep giving him accolades.

02:58:40.780 | He hasn't deserved, I think, Messi

02:58:42.140 | the last couple of Ballon d'Ors that he got.

02:58:44.980 | I mean, he's a great player and everything,

02:58:46.340 | but no, he did not deserve it last year.

02:58:49.700 | (sighs)

02:58:51.820 | We can agree to disagree.

02:58:53.940 | There's something--

02:58:54.760 | - Are you a Barca fan or a Messi fan?

02:58:56.820 | - I would say, no, I wouldn't say I'm a Barca fan,

02:58:59.580 | but a Barca fan because of Messi.

02:59:01.260 | And I just, I think it's like, there's certain things.

02:59:04.700 | So when I was growing up in the Soviet Union, Russia,

02:59:09.860 | I remember Maradona, he was the first person

02:59:14.460 | I saw that I was like, oh wow, this could be,

02:59:18.600 | this is greatness in sport, not just football and sport.

02:59:22.840 | And for some reason, I mean, it's something about

02:59:24.840 | like Diego Armando Maradona,

02:59:26.520 | like the way they were commentating,

02:59:28.280 | the genius of his play, the mix of ego,

02:59:31.640 | and again, the performance,

02:59:32.920 | but being able to carry a team on his shoulders,

02:59:35.360 | that I just fell in love with whatever he represented,

02:59:38.640 | and then by that, Argentina.

02:59:40.600 | And then Messi, I saw when he was like 16, 17,

02:59:44.200 | when he was just like, in the early days.

02:59:46.080 | And when you first see a person and you see the genius

02:59:49.520 | and you notice that, and then it turns out to be

02:59:51.960 | actually a great player, for some reason, you're invested.

02:59:55.280 | You're emotionally invested, you're, I don't know.

02:59:59.320 | So you kind of just fall in love and then you pick sides.

03:00:03.040 | I mean, that's the thing about football.

03:00:04.520 | Part of the fun things about football, soccer is like,

03:00:08.720 | you pick a guy, you pick a team and fuck everyone else.

03:00:12.240 | And you just have fun talking shit.

03:00:13.760 | I mean, that's part of it.

03:00:15.440 | - It's great, it's great because I think,

03:00:18.360 | obviously it's a very stupid thing to do,

03:00:19.760 | but I think if you don't do it in football,

03:00:21.800 | you're gonna do it in real life.

03:00:22.640 | - Elsewhere, that's right.

03:00:23.800 | - That's why it's very good.

03:00:25.120 | That's it, instead of hating people for their religion

03:00:28.360 | and for their skin color,

03:00:30.520 | hate them because they support Manchester United.

03:00:32.440 | - Exactly. (laughs)

03:00:33.960 | So you're a Liverpool fan, that's--

03:00:35.160 | - Yes, yes, hardcore long-term.

03:00:37.280 | But yeah, so to go back to the original point on Portugal--

03:00:41.800 | - Energy. - Yeah, energy.

03:00:43.520 | Bitcoin is not competing with Portugal

03:00:45.920 | because Bitcoin is buying energy

03:00:47.400 | from places where we can't buy it.

03:00:49.240 | Because all the places where we can buy energy

03:00:52.280 | for our washing machines,

03:00:53.640 | we're bidding up the price enough

03:00:55.720 | to make it non-viable for Bitcoin.

03:00:58.000 | That's why, you'll see those headlines

03:01:00.280 | about Bitcoin consuming more energy than Portugal.

03:01:02.360 | Well, if you look at Portugal,

03:01:03.480 | I mean, they've got giant power plants in Portugal,

03:01:06.120 | they've got millions of people

03:01:07.400 | and they've got enormous amounts of infrastructure.

03:01:09.720 | Where are all of these infrastructure for Bitcoin mining?

03:01:13.240 | You don't see it in the cities.

03:01:14.880 | It's all isolated, it's all out away from the cities,

03:01:18.840 | or it's connected to grids that have serious overcapacity.

03:01:21.960 | So Bitcoin is not out there buying the expensive energy,

03:01:25.200 | taking energy away from people who can't afford it.

03:01:29.160 | It's out there buying its own energy

03:01:30.920 | because it doesn't need to buy the expensive energy

03:01:32.680 | that people really need.

03:01:34.440 | - So one other criticism from an investment perspective,

03:01:37.480 | from a gambling perspective that people see

03:01:39.480 | is the volatility of Bitcoin.

03:01:41.600 | Of course, has been somewhat decreasing over time,

03:01:44.040 | but what's your answer to the sort of criticism

03:01:48.680 | that Bitcoin is too volatile, I wanna stay away,

03:01:51.400 | it doesn't seem like a safe place for me

03:01:53.360 | to invest either short-term or long-term?

03:01:57.040 | - There's no denying there's a volatility

03:01:58.560 | and there's a high oscillation in the value

03:02:00.360 | in the short term.

03:02:01.200 | So I think the safe way to approach that

03:02:05.400 | is in terms of position sizing.

03:02:07.800 | If the volatility bothers you,

03:02:10.600 | then you're over-invested perhaps.

03:02:12.720 | So maybe you should reduce the size of your position

03:02:17.480 | so that the volatility doesn't bother you.

03:02:19.580 | This is the short answer that, you know,

03:02:23.240 | like stack as much as your conviction

03:02:26.680 | will allow you to tolerate the volatility.

03:02:28.900 | And of course, the reason you should try

03:02:33.360 | and consider tolerating the volatility more

03:02:36.160 | is the options are you hold fiat assets,

03:02:40.440 | which only go down stable, you know, relatively stable,

03:02:43.800 | not a lot of volatility day to day,

03:02:45.840 | you know, value of your dollar doesn't change 40% overnight,

03:02:50.520 | 20% overnight or something like that,

03:02:52.880 | but it does go down reliably, it's gonna go down 40%.

03:02:56.100 | You can count on it, it might take a year,

03:02:58.040 | two years, five years, 10 years,

03:02:59.880 | compared to the things that you want to buy,

03:03:01.760 | it's gonna go down by 40% and it's not gonna come back

03:03:05.960 | and it's gonna go down another 40%

03:03:07.560 | and then another 40% and then another 40%.

03:03:09.720 | So the option really is relatively short term stability

03:03:14.720 | with long term decline or short term volatility

03:03:18.040 | with long term rise.

03:03:19.800 | And so that's another way in which Bitcoin

03:03:22.240 | teaches people to have a low time preference

03:03:24.000 | and think about the long term.

03:03:24.920 | So stack, accumulate and think of it in the long term.

03:03:29.360 | It's a function of the fact that Bitcoin is new.

03:03:31.320 | Bitcoin is currently less than 1% of the global money market

03:03:34.320 | so there's about $100 trillion of money

03:03:36.680 | out there in the world.

03:03:38.860 | $100 trillion roughly of fiat

03:03:40.760 | and about $10 trillion of gold

03:03:42.960 | and Bitcoin is less than $1 trillion.

03:03:44.920 | So one rich guy decides to get into Bitcoin,

03:03:48.440 | that's gonna show up on the Bitcoin chart.

03:03:50.200 | You look at it, Elon Musk decides to buy Bitcoin,

03:03:53.000 | you see the buy, you see the news,

03:03:55.200 | it happens and you see the pump.

03:03:57.080 | Elon Musk decides that he doesn't like Bitcoin,

03:03:59.920 | you see the drop.

03:04:01.240 | But a few years ago, it used to be that

03:04:03.480 | one random millionaire would cause that pump.

03:04:07.200 | Now you have to be the richest guy in the world to do that.

03:04:09.840 | In a few years, you're gonna have to be

03:04:11.660 | the richest country in the world

03:04:12.900 | to be able to do that to the Bitcoin price,

03:04:15.000 | maybe many years, maybe not a few years.

03:04:17.180 | But as Bitcoin grows,

03:04:18.660 | think about it as a liquid pool of money.

03:04:22.260 | Currently it's a small pool next to a much larger ocean,

03:04:25.340 | which is the entire money market.

03:04:26.820 | And so one person jumps from that to this small pool,

03:04:30.580 | they can make a big splash.

03:04:32.220 | As the pool grows, essentially the salability increases

03:04:36.140 | and the likelihood of one individual purchase

03:04:38.860 | affecting the price so violently decreases.

03:04:43.320 | And so over time, as the size of the market increases,

03:04:46.780 | I think we're gonna see the volatility decline

03:04:48.900 | more and more.

03:04:49.740 | Ultimately, if you look at gold,

03:04:52.340 | historically gold has been very, very stable.

03:04:54.700 | It did not achieve its stability

03:04:56.340 | because the central bank was in charge of gold supply

03:04:58.620 | or because there was a gold committee

03:05:00.860 | that decided how much gold gets produced.

03:05:02.900 | It achieved that stability

03:05:05.620 | because it became the most salable good.

03:05:08.260 | And so therefore it became the good

03:05:09.860 | that contains the most cash balances in the world.

03:05:12.860 | And the end of the 19th century,

03:05:14.060 | everybody held cash balances in gold

03:05:16.820 | and new production was a tiny little addition

03:05:20.700 | to global production, to the supply.

03:05:23.660 | So that's what made gold the most relatively,

03:05:26.900 | I shouldn't say stable

03:05:27.900 | because nothing is stable in economics,

03:05:29.820 | but relatively it holds onto its value

03:05:31.900 | and it's much less volatile than digital currency,

03:05:35.140 | than national currencies.

03:05:36.380 | That's because it has the highest stock to flow ratio.

03:05:41.340 | And that's because its supply

03:05:43.500 | is a tiny fraction of the liquid market.

03:05:47.420 | And as the liquid market grows,

03:05:48.900 | as the size of cash balances grows

03:05:50.460 | and trades in Bitcoin cancel each other out,

03:05:52.960 | you get only slight changes in value.

03:05:56.980 | So I think as Bitcoin matures, that's going to decline.

03:06:01.100 | So effectively, I think the end game is

03:06:03.900 | Bitcoin is huge.

03:06:07.460 | Bitcoin is worth something like,

03:06:08.820 | I think the total addressable market for Bitcoin

03:06:11.780 | is not just national currencies

03:06:14.060 | and gold's addressable market, but also government bonds.

03:06:16.620 | That's the really big one.

03:06:17.980 | - So how do banks compare to gold?

03:06:20.220 | So you're saying it'll surpass gold with the 10 trillion?

03:06:23.300 | - Yeah.

03:06:24.140 | - What's bonds?

03:06:25.300 | Where's bonds stand?

03:06:26.940 | - So then there's also national currencies,

03:06:28.900 | which are about a hundred trillion

03:06:30.100 | and there's government bonds,

03:06:31.180 | which are around $120 billion.

03:06:33.540 | And sorry, trillion dollars, trillion.

03:06:37.020 | - Trillion, sorry.

03:06:37.860 | - Yes, trillion.

03:06:38.700 | - If we were saying billion, we meant trillion.

03:06:40.420 | - Yeah.

03:06:41.260 | (laughing)

03:06:42.820 | - So you think bonds can move to Bitcoin?

03:06:46.260 | - I've always held, this is the prize.

03:06:48.520 | This is the main dish.

03:06:50.140 | Gold is the appetizer.

03:06:51.820 | Bonds are the main dish.

03:06:52.740 | Because bonds have replaced gold.

03:06:53.580 | - It's a hell of an appetizer.

03:06:54.740 | (laughing)

03:06:56.100 | - Yeah.

03:06:56.940 | I mean, bonds have replaced gold in people's portfolio.

03:06:59.900 | People, you remember when we were saying gold was,

03:07:02.540 | you'd hold it as a saving,

03:07:04.100 | as the secure part of your portfolio,

03:07:05.580 | and then you take risk with the equity.

03:07:08.100 | Currently people do that by holding a part

03:07:10.220 | of their portfolio in bonds.

03:07:11.520 | That's the part that they treat as their saving account.

03:07:14.740 | And then the rest they use for speculation,

03:07:17.580 | not speculation, for investment,

03:07:18.740 | within which they take risk.

03:07:19.940 | Yeah, speculation.

03:07:21.380 | And that's stocks and equity and other high-risk assets.

03:07:26.380 | I think Bitcoin is not gonna replace equity.

03:07:29.740 | There will always be equity.

03:07:30.860 | There will always be companies

03:07:31.780 | and people who wanna have equity.

03:07:34.180 | But it'll probably replace a big chunk

03:07:35.700 | of current equity markets.

03:07:36.920 | Because right now, if you want to save,

03:07:39.160 | it used to be that you hold bonds.

03:07:40.580 | Now, if you wanna save, you go into stock indexes.

03:07:43.440 | So I think Bitcoin likely eats a big chunk of equity markets

03:07:47.380 | because currently people are using it as saving.

03:07:51.140 | And I think it eats all the bonds.

03:07:53.460 | That's my most ambitious statement.

03:07:56.780 | - The question is the scale of time

03:07:59.680 | that happens across.

03:08:00.620 | But the most important statement you're making

03:08:02.340 | is about trend.

03:08:03.580 | - Yeah, and also, I mean, let's also remember,

03:08:05.660 | currently bonds nominally don't beat inflation.

03:08:08.940 | And in real terms,

03:08:09.940 | they don't come close to beating inflation.

03:08:13.380 | So currently, with bonds,

03:08:15.860 | you're taking on credit default risk to buy a bond

03:08:19.720 | and also getting less money back in real terms.

03:08:23.780 | Well, Bitcoin doesn't offer you returns,

03:08:26.180 | but in real terms, it appreciates much more.

03:08:28.220 | And it has, I believe, a lot less risk associated with it

03:08:31.340 | than any company or government.

03:08:34.020 | - So let's make things spicy and ask,

03:08:36.420 | if Bitcoin fails in the long-term future,

03:08:39.380 | as Alt, you just said, economics, volatility,

03:08:43.220 | things happen in this world.

03:08:44.740 | Well, the human civilization might end in this century.

03:08:48.420 | I hope it doesn't, but it might.

03:08:50.220 | There could be catastrophic events.

03:08:52.100 | If Bitcoin fails, it goes to zero,

03:08:55.300 | loses its number one spot,

03:08:57.340 | what would be the reason?

03:08:58.820 | If you're an alien visiting Earth 100 years from now

03:09:03.820 | and just were to analyze the situation,

03:09:05.820 | Bitcoin is a pretty new thing.

03:09:07.900 | So the possible trajectories of how the world evolves

03:09:10.460 | together with this new monetary technology

03:09:13.180 | is nearly infinite.

03:09:15.060 | So if it fails, one of those trajectories

03:09:17.260 | surely involves Bitcoin failing.

03:09:19.340 | What would be the reason?

03:09:21.340 | - I think the most likely reason that it could fail,

03:09:23.660 | I don't think this is likely in general,

03:09:25.780 | but I think it is the most likely

03:09:27.300 | of all the unlikely things that could destroy Bitcoin

03:09:30.460 | is governments go back on a gold standard.

03:09:33.220 | - So they make, in your view, a better decision

03:09:38.340 | than the current system, just not the best decision.

03:09:41.420 | - Yeah.

03:09:42.260 | - I thought you would go much darker.

03:09:43.980 | (laughing)

03:09:45.540 | So that's, okay, interesting.

03:09:47.420 | So maybe because of Russia, because of China and so on,

03:09:50.020 | because of the current war,

03:09:52.160 | they might reconsider the power that America holds

03:09:57.160 | because of the monetary,

03:09:59.240 | because it being the primary currency,

03:10:01.120 | and they'll start thinking about going on a gold standard.

03:10:05.520 | - Yeah, but it would also require the US

03:10:07.320 | and the Europeans and everybody to want to join

03:10:09.520 | in this system and sing Kumbaya

03:10:11.280 | and play nice with each other around the gold standard.

03:10:15.280 | I think, you know, given that gold already

03:10:17.160 | is about 10 times larger than Bitcoin,

03:10:19.560 | so it has a first mover advantage.

03:10:21.160 | - Yes.

03:10:22.000 | - If governments were to go and peg their currencies

03:10:25.600 | to gold again, the price of gold would shoot up,

03:10:28.040 | five, 10x, and it would rise in value a lot more.

03:10:33.440 | - Of course, that doesn't necessarily kill Bitcoin.

03:10:36.100 | - No, again, I'm not saying it's likely to happen.

03:10:37.760 | I'm saying it's, I imagine, less likely,

03:10:41.360 | less unlikely than all the other unlikely scenarios

03:10:44.240 | because, you know, even with a nuclear war,

03:10:46.520 | like 90% of the planet is destroyed,

03:10:50.320 | the 10% continue to run Bitcoin.

03:10:52.980 | (Lex laughing)

03:10:55.920 | - There's a quote.

03:10:57.200 | Okay, there's a movement, a community of people

03:11:00.720 | referred to as Bitcoin maximalists.

03:11:03.560 | I've seen you referred, at least in the past,

03:11:05.680 | as the leader of the Bitcoin maximalists,

03:11:10.200 | probably because of your book, you know,

03:11:12.280 | "Bitcoin Standard," consider the Bible in general,

03:11:14.760 | you're one of the leaders in this space.

03:11:18.220 | Do you regret any of the toxicity and derision

03:11:22.020 | that often, or perhaps sometimes,

03:11:25.180 | originates from this community?

03:11:26.780 | - Definitely not.

03:11:28.940 | I'm not in the position to regret other people's actions,

03:11:31.660 | so let's just be clear.

03:11:33.300 | I think the rhetoric of community is,

03:11:36.280 | I reject this rhetoric because I think it's a way

03:11:41.180 | for kind of political manipulation and subversion

03:11:45.860 | to try and portray people as part of a community

03:11:49.620 | and hold people responsible for other people's actions,

03:11:52.100 | which I think is ridiculous.

03:11:53.460 | So, you know, some guy on the internet

03:11:55.700 | said something mean to somebody,

03:11:57.500 | and then, this is very common,

03:11:59.420 | and I always try and not get involved in these things.

03:12:03.460 | So some guy who identifies as a Bitcoiner

03:12:05.500 | says something to somebody that's very wrong.

03:12:08.360 | Of course it happens.

03:12:09.500 | Tens of millions of people use Bitcoin around the world.

03:12:13.420 | And a lot of these, I'd say parasites,

03:12:16.660 | people who don't have anything productive

03:12:18.260 | to do with their life, outrage merchants,

03:12:21.580 | they'll come out and say something along the lines of,

03:12:24.820 | the Bitcoin maximalists are toxic,

03:12:27.860 | they're holding Bitcoin back, and they need,

03:12:30.340 | and of course it's manipulative.

03:12:31.420 | The point behind it is they wanna get to you,

03:12:34.420 | they wanna get people who are,

03:12:36.260 | not that nobody with 300 followers

03:12:38.220 | who said something silly,

03:12:40.340 | they wanna get the notable people

03:12:42.780 | to basically change their message.

03:12:44.620 | So the idea is, you know, I'm supposed to apologize

03:12:47.700 | because somebody with 300 followers I've never met

03:12:49.700 | in my life who calls themselves a Bitcoiner

03:12:52.500 | said a mean word, and then I need to apologize,

03:12:55.100 | and I also need to cut down on my rhetoric

03:12:57.180 | about other digital currencies, and I need to do that.

03:13:00.500 | So I'm only responsible for my own actions,

03:13:03.620 | and I don't recall regretting anything.

03:13:07.020 | - Okay, well let me push back

03:13:08.580 | or push further into that direction.

03:13:10.220 | Fine, let's leave community aside, labels suck for sure.

03:13:14.300 | But you have a spicy way about you on Twitter.

03:13:19.300 | Even in this conversation, you had some good, strong words

03:13:24.660 | to say about Brookman. - Yeah, I mean,

03:13:26.060 | I've always believed life is too short to mince words.

03:13:29.460 | One day I'm gonna be dead, and on my deathbed,

03:13:32.700 | I'm not gonna look back and say,

03:13:35.140 | I wish I was a little bit more circumspect

03:13:37.980 | in expressing my opinions.

03:13:39.140 | I'm far more likely to think, you know what,

03:13:40.860 | I wish I said what I really think.

03:13:43.340 | - Yes, life is too short to hold back your opinion.

03:13:47.540 | The question is, what is really your opinion?

03:13:50.460 | 'Cause you're many people in one.

03:13:55.300 | So there's a person that loves,

03:13:56.740 | there's kindness for other human beings,

03:13:58.300 | there's a person that gets annoyed,

03:14:00.100 | there's a person that enjoys disagreement,

03:14:03.180 | there's a person that enjoys collaboration.

03:14:05.700 | And you can emphasize all of those different things,

03:14:07.860 | each of those different things,

03:14:09.380 | weigh it differently in your online interaction.

03:14:12.220 | There's some aspects of online interaction

03:14:15.100 | that encourages, in different communities,

03:14:18.060 | online interaction is one community

03:14:20.540 | that encourages kinda derision and mockery and so on.

03:14:24.500 | So you can choose if you want to engage

03:14:26.780 | that part of yourself or some other part of yourself.

03:14:29.260 | Economics is another community that enjoys

03:14:33.340 | being very straightforward about their disagreements,

03:14:37.620 | pretty harsh.

03:14:38.940 | It's fun to watch 'cause it feels like

03:14:41.060 | you arrive at the truth much faster

03:14:43.300 | 'cause you tear each other apart.

03:14:44.940 | But that's a choice, that's a deliberate choice.

03:14:49.740 | And I don't want to label an entire community of people

03:14:53.700 | by its extremes, I don't think you should do that.

03:14:56.460 | But there's cultural characteristics you start to notice.

03:14:59.140 | When you go to France, it's a certain way.

03:15:00.780 | When you go to Britain, London is different than rural Britain

03:15:04.420 | and New York is different than Iowa.

03:15:08.140 | You start to notice things.

03:15:09.180 | I mean, you don't wanna generalize,

03:15:10.580 | there's all kinds of people everywhere,

03:15:12.020 | but there's a certain way of communication

03:15:15.100 | on crypto, Twitter in general,

03:15:16.780 | but also Bitcoin maximalists

03:15:19.260 | that I even early on received a bunch of heat.

03:15:21.900 | I was like, what the hell?

03:15:23.220 | (laughing)

03:15:24.060 | So listen, there's definitely a difference

03:15:27.040 | when I go to the computer science community,

03:15:28.980 | machine learning community,

03:15:31.340 | it's way friendlier than the cryptocurrency community.

03:15:35.020 | I have much more freedom to actually be what I enjoy being,

03:15:39.940 | which is asking simple, dumb questions.

03:15:42.680 | Even when I've already spent years,

03:15:44.860 | sometimes decades with an idea,

03:15:46.300 | I like asking dumb questions anyway.

03:15:48.160 | Crypto folks punish you for this,

03:15:51.980 | for curiosity, for exploration.

03:15:56.420 | I understand the mechanism

03:15:57.780 | because so many other people come into that community

03:16:00.900 | and they might masquerade as curious,

03:16:04.260 | but really they're trying to inject,

03:16:06.420 | they're trying to sell some kind of altcoin,

03:16:08.060 | there's some scheme, there's some scheme to make money.

03:16:10.900 | And so I understand,

03:16:12.460 | maybe that's just the dynamics of the community by nature.

03:16:14.900 | It's not like you respond appropriately

03:16:18.180 | to the amount of charlatans in the community.

03:16:22.220 | So if the fraction of charlatans is low,

03:16:25.320 | maybe you can afford to be more loving and kind and so on.

03:16:27.980 | And when the fraction of charlatans is high,

03:16:30.860 | you have to be harsher.

03:16:32.740 | Perhaps, perhaps, but--

03:16:35.020 | - I think also the stakes

03:16:36.460 | are extremely high in this situation.

03:16:38.260 | And I think if you don't like Bitcoiners,

03:16:40.340 | if you think Bitcoiners are toxic,

03:16:41.820 | wait till you meet Fiaters.

03:16:43.220 | The Fiat community has financed world wars and genocides

03:16:49.100 | and tyrants and the mass death and destruction.

03:16:53.900 | The Fiat community, if you wanna use that term,

03:16:56.540 | I don't believe you should,

03:16:57.820 | but I mean, Fiat has destroyed the savings

03:17:00.980 | of pretty much anybody

03:17:02.020 | who's lived through the last 20th century.

03:17:03.900 | Pretty much anybody who's lived through the 20th century,

03:17:05.780 | no matter where you lived,

03:17:07.020 | Switzerland, US, Ethiopia, Russia,

03:17:09.940 | you've gone through Fiat problems.

03:17:12.500 | You've had hyperinflation, you've had bank confiscation.

03:17:15.540 | There isn't a family in the world today

03:17:17.340 | that hasn't had its wealth destroyed over the last century.

03:17:21.340 | They all have a story

03:17:22.740 | about the inflation and the hyperinflation.

03:17:25.860 | And Bitcoin offers us a way out of this.

03:17:27.740 | And shitcoins, altcoins,

03:17:31.060 | are essentially Fiat world's last gasp attempt

03:17:36.060 | to try and salvage Fiat,

03:17:39.260 | to try and salvage the idea

03:17:40.460 | that some people will continue to be able to print money

03:17:43.540 | and other people will have to use that money.

03:17:46.220 | You know, this is Twitter, it's a free market,

03:17:49.020 | it's the internet.

03:17:50.260 | You don't have to follow anybody, that's the thing.

03:17:52.380 | Like, so what I find really objectionable

03:17:56.900 | about the people who are so butthurt

03:17:58.740 | always about Bitcoin maximalists is,

03:18:01.300 | you don't have to click follow on people you don't like.

03:18:04.140 | There are 300 million Twitter accounts.

03:18:06.700 | And if you choose to follow the accounts

03:18:09.460 | that say things that annoy you

03:18:11.260 | and then complain about the fact

03:18:12.700 | that they say things that annoy you,

03:18:15.380 | I'm sorry, but you're an idiot

03:18:16.540 | and you don't know how to use Twitter.

03:18:18.300 | Just follow the accounts that you like.

03:18:20.540 | You know, you don't have to be part of this.

03:18:24.020 | You don't have to listen to those people.

03:18:25.340 | You can choose, there are a lot of Bitcoiners

03:18:27.180 | that don't act like this.

03:18:28.260 | You can just unfollow the ones that you don't like and block.

03:18:30.420 | - Since in the past year, man, time flies,

03:18:33.840 | I've met a lot of them and I enjoy them a lot.

03:18:36.380 | And you build that community of people that you enjoy.

03:18:38.420 | There are lots that communicate in the way you enjoy.

03:18:40.740 | And it's become a meme at this point

03:18:42.660 | that I block with love, I think.

03:18:44.820 | - Yes.

03:18:45.660 | - 'Cause I did not.

03:18:47.140 | - I block very prolifically

03:18:48.620 | and I strongly recommend people continue to block.

03:18:51.200 | I think Twitter is, you know,

03:18:52.540 | you're not gonna get to interact

03:18:53.780 | with 300 million accounts anyway.

03:18:55.460 | So you wanna be constantly curating the experience

03:18:58.540 | by getting rid of people you don't like

03:19:00.460 | and following people that you like.

03:19:02.380 | And that's just how, you know,

03:19:03.900 | after 10 years of using Twitter, you know,

03:19:05.700 | you accumulate a block list, which is very big,

03:19:08.700 | which I'm very happy for.

03:19:09.860 | I'm gonna pass on to my children.

03:19:11.540 | (laughing)

03:19:13.980 | - On your deathbed, the grandchildren will gather around

03:19:17.620 | and your grandfather can finally share the full list.

03:19:22.540 | Yeah.

03:19:23.380 | - Again, it's just the Twitter account.

03:19:25.300 | If it bothers you so much,

03:19:26.660 | ask yourself why it bothers you that some people are so,

03:19:29.900 | I'm not referring to you obviously,

03:19:31.620 | but I mean the people that are constantly aggravated

03:19:34.260 | about this, I don't get bothered by anything on Twitter.

03:19:36.540 | I just block immediately.

03:19:38.220 | And I get to curate the experience that I enjoy.

03:19:40.940 | And I recommend people do that.

03:19:43.220 | It's really a lot less pathetic

03:19:44.980 | than complaining about strangers,

03:19:46.980 | saying things you don't like, which a lot of,

03:19:49.820 | and of course the reason for it is, you know,

03:19:52.060 | I mean, when I say it's stupid, it's not really stupid.

03:19:54.980 | There's an ulterior motive there.

03:19:56.340 | And the ulterior motive is, hey, I have this shit coin

03:19:59.420 | that I made with five other friends of mine.

03:20:01.620 | And I'd like you to, I'd like to ride your coattails,

03:20:04.700 | Bitcoiners, and I'd like you to please help me promote

03:20:06.980 | this shit coin.

03:20:07.820 | Like this is, I get this practically every week,

03:20:10.260 | whether through email or through Twitter,

03:20:12.540 | where, hey, you know, this is our shit coin.

03:20:14.940 | You know, it's just like Bitcoin,

03:20:17.460 | but it's better because it does this and this and that.

03:20:19.540 | And, you know, basically how can we get you

03:20:22.540 | to promote this shit coin for us?

03:20:24.620 | And being straightforward and forthright

03:20:27.380 | is a great productivity hack because, you know,

03:20:31.340 | you just tell those people, no, I'm not interested.

03:20:33.220 | It's a stupid shit coin.

03:20:34.060 | And I wish you a quick and swift failure

03:20:36.180 | before you take a lot of people's money.

03:20:38.660 | And that's what I genuinely think.

03:20:41.780 | - Well, but I'll just be upfront with the fact,

03:20:44.260 | at least for my taste,

03:20:45.660 | just labeling everything as a shit coin,

03:20:49.220 | worries me.

03:20:50.900 | So this is my own preference.

03:20:52.140 | It's not a judgment on you.

03:20:53.420 | It's just my own preference that I'm afraid

03:20:56.020 | I'll miss good ideas.

03:20:57.860 | I think when you're, me personally,

03:20:59.460 | when I'm too certain about things,

03:21:01.620 | when I'm too tribal about things,

03:21:03.860 | I'll miss actually really strong ideas,

03:21:06.660 | outlier ideas, totally new ideas.

03:21:09.380 | So that worries me.

03:21:10.660 | One of the downsides of the way Bitcoin is,

03:21:15.660 | how much is at stake financially,

03:21:18.580 | is that it's less open to good,

03:21:20.740 | actually by design, that it's not changing,

03:21:23.580 | like with the hard forks and so on,

03:21:25.460 | that there's not a kind of curiosity

03:21:28.060 | about exploration of ideas.

03:21:29.920 | Of course, in some way,

03:21:33.180 | that curiosity can start getting ejected

03:21:35.700 | when you start talking about other layers

03:21:37.500 | built on top of Bitcoin,

03:21:39.460 | you start talking about applications

03:21:40.900 | or different things like lightning network.

03:21:43.300 | That's where the curiosity can emerge.

03:21:45.460 | But still, that's why with cryptocurrency in general,

03:21:48.060 | I just try to keep an open mind.

03:21:49.420 | And just the shitcoin as a term

03:21:52.420 | is just like a statement

03:21:53.500 | that I'm gonna close my mind to it.

03:21:54.940 | That's the way I hear it.

03:21:56.620 | And, but coming out of your mouth,

03:21:59.340 | 'cause you say a lot of other edgy stuff,

03:22:01.060 | it's just more you having fun.

03:22:02.980 | That's the way I hear it.

03:22:03.820 | But if I said something like that,

03:22:05.180 | that's, I feel like,

03:22:06.780 | I would feel like I'm closing my mind.

03:22:08.420 | - I mean, let me give you the counter argument to that.

03:22:10.620 | How much time do you spend emailing back

03:22:13.060 | all of these Nigerian Prince email scams

03:22:15.500 | that you know email you,

03:22:16.340 | tell you, "Send me $5,000

03:22:17.900 | "and I'll send you $15 million."

03:22:19.820 | - None.

03:22:20.660 | - None.

03:22:21.500 | Why are you being closed-minded to all of these great ideas?

03:22:23.900 | - Well, no, but I'm also--

03:22:24.740 | (Lex laughing)

03:22:25.900 | - You know, maybe one of them

03:22:26.820 | will actually send you $15 million.

03:22:28.420 | - But I don't know if I know the difference

03:22:29.860 | between the Nigerian Prince

03:22:32.020 | and many other people I do talk to

03:22:34.140 | who are colleagues and so on,

03:22:35.660 | that are also emailing me.

03:22:37.380 | And they're also offering me things,

03:22:39.820 | but they don't sound as ridiculously spammy.

03:22:42.340 | - Yeah, but I mean, the moment that somebody tells you,

03:22:44.020 | "Hey, I'm gonna give you $15 million for nothing.

03:22:46.420 | "Just if you send me $5,000,"

03:22:48.500 | you know, you're getting something for nothing.

03:22:49.940 | And essentially with all of the digital currencies,

03:22:53.060 | it's the same pitch.

03:22:53.940 | Say, "Hey, you know, come use this thing

03:22:56.400 | "that'll allow you to do things that,"

03:22:58.220 | all of the things that they pretend that they can do,

03:23:00.380 | that can be done with computers

03:23:01.860 | without having digital currencies.

03:23:03.260 | You know, we already have AWS that does cloud computing,

03:23:06.420 | that does everything that shit coins pretend to do.

03:23:09.540 | The only difference is AWS doesn't have

03:23:11.300 | its own monetary system tacked on top of it

03:23:13.380 | to allow Jeff Bezos to basically print his own money.

03:23:17.460 | - But don't you think there's some gray area?

03:23:19.500 | So let me go for the historical record

03:23:22.100 | and let's see if you've changed

03:23:23.540 | as a philosopher, economist, human being.

03:23:27.660 | You tweeted three years ago.

03:23:29.580 | - Oh, well.

03:23:30.700 | - "Anyone who believes proof of stake can work

03:23:32.900 | "is either one, completely clueless

03:23:35.700 | "at how and why Bitcoin works at all,

03:23:38.020 | "or two, a con artist using it as a buzzword

03:23:41.460 | "to promote a worthless scam like Ethereum."

03:23:44.660 | Do you still believe that Ethereum is a scam

03:23:49.660 | and in general, proof of stake?

03:23:51.660 | You're either clueless if you think it's interesting.

03:23:55.240 | - Yeah, no, I still stand by that.

03:23:57.280 | I think the--

03:23:58.120 | - Would you classify Ethereum as a shit coin?

03:24:00.220 | - For sure, it's the mother asshole

03:24:03.140 | from which the shit coins spring.

03:24:05.460 | - The royal, the king of Bitcoin?

03:24:07.220 | - Yeah.

03:24:08.060 | I think the key thing is, you know,

03:24:09.920 | the way to think about it, there's another tweet

03:24:11.380 | from a couple of years ago, which is,

03:24:13.140 | essentially proof of work was like the invention of flight.

03:24:16.260 | Like we've got in this machine

03:24:17.340 | and we managed to get it to fly off the ground.

03:24:19.860 | And proof of stake is, hey, we found a great way

03:24:23.300 | to make airplanes cheaper and faster by not making them fly.

03:24:27.860 | (laughs)

03:24:29.980 | By keeping them on the ground.

03:24:31.600 | Like the invention of proof of work,

03:24:33.980 | the reason the entire digital currency space exists

03:24:38.020 | is because Bitcoin operates based on proof of work.

03:24:40.860 | If Bitcoin was based on proof of stake,

03:24:43.020 | it would have died or been shut down from day one.

03:24:45.660 | - But that's a hypothesis.

03:24:47.420 | And a lot of people believe that.

03:24:49.240 | And I think they have a lot of strong support,

03:24:51.300 | but basically proof of work is grounded in physics.

03:24:55.900 | In the real world, the proof of stake is more about--

03:24:58.940 | - It's politics.

03:24:59.780 | It's the Federal Reserve.

03:25:00.860 | It's exactly what we have.

03:25:02.220 | It's exactly what we have.

03:25:03.460 | It's just a group of people who get to decide the rules.

03:25:06.860 | And it's essentially a system that is, you know,

03:25:09.740 | it's a security, it's a company.

03:25:11.060 | So it's not an innovation in any sense.

03:25:13.640 | It's a step backward to what we already had,

03:25:15.940 | which is you get a bunch of people in charge of the money.

03:25:18.580 | Now, the only reason it survives in this,

03:25:22.580 | and the reason I call these things a scam,

03:25:24.420 | and I have no problem with calling them a scam,

03:25:25.860 | is because they fraudulently present themselves

03:25:29.500 | as being decentralized.

03:25:31.060 | They present themselves as just being a different way

03:25:33.180 | of doing decentralization than Bitcoin, when it's not.

03:25:36.540 | It's just they're riding Bitcoin's coattails,

03:25:39.140 | and they're riding the fact that most people

03:25:40.900 | don't quite understand what Bitcoin is and how it works,

03:25:43.460 | to portray themselves as a cheaper, better,

03:25:45.580 | more efficient way of doing what Bitcoin does.

03:25:48.380 | It's not.

03:25:49.300 | It's a less legally accountable way

03:25:52.660 | of doing what central banks do.

03:25:54.900 | - Right, so, and the basic criticism

03:25:56.620 | is that there's a group of people,

03:25:58.080 | sometimes a very small group of people

03:25:59.700 | that can control the parameters

03:26:01.780 | of the operation of the system.

03:26:03.340 | So over time, you can't trust,

03:26:06.820 | it's not gold under the mattress.

03:26:09.100 | It doesn't have that kind of hardness.

03:26:10.620 | - It's not property, and I really, very strongly

03:26:13.020 | recommend your discussion with Saylor

03:26:14.700 | for people who wanna elaborate more on this.

03:26:16.500 | There's a bunch of people in charge,

03:26:17.820 | which means that, you know, legally,

03:26:20.140 | they should be doing this under securities law,

03:26:23.060 | but even as an anarchist,

03:26:24.460 | if I don't wanna care about that,

03:26:26.320 | the technical implication of it is,

03:26:28.660 | this is never going to be adopted

03:26:30.220 | as a neutral way of transferring value on the internet,

03:26:33.100 | because you need something

03:26:35.460 | that enemies can trade with one another.

03:26:37.460 | You can't have something that has a small group

03:26:39.580 | of people in charge, because A,

03:26:41.500 | this small group of people themselves can be corrupted,

03:26:44.140 | and B, they can be coerced.

03:26:46.940 | You know, you can put a bunch of people in a room,

03:26:49.140 | put a gun to their head,

03:26:50.140 | and you can change everything

03:26:52.580 | in any of these digital currencies.

03:26:53.980 | And that's why I think, you know,

03:26:55.820 | you'll find a lot more sympathy among theaters to shitcoins.

03:27:00.820 | The Keynesian economist to Ethereum fanboy pipeline

03:27:05.580 | is a very strong one,

03:27:06.820 | I think because it's the same thing.

03:27:09.940 | It's like, I mean, you like the idea

03:27:11.420 | of people being in charge of money,

03:27:13.100 | and you think you're gonna be the one

03:27:14.460 | who's gonna be in charge of money.

03:27:15.620 | So you see a lot of this phenomena,

03:27:18.100 | and you see the same people that want gold

03:27:20.500 | and don't like central banking, they get into Bitcoin.

03:27:23.700 | - Yeah, so just to actually push back a couple of things.

03:27:27.540 | So one is theater.

03:27:29.780 | It sounds like I'm trying to be a sophisticated Brit

03:27:32.760 | talking about theater,

03:27:34.160 | but for many reasons, it's not making me feel good

03:27:37.820 | about that.

03:27:38.780 | So, you know, day by day, things change.

03:27:41.980 | You used to be one of those.

03:27:43.740 | So people evolve, people learn.

03:27:46.700 | People that are supporters of Bitcoin

03:27:48.140 | might eventually become supporters of Ethereum

03:27:51.860 | or go back to supporting fiat.

03:27:53.540 | We don't know.

03:27:54.380 | People evolve for different reasons.

03:27:56.380 | You grow up, you mature, or you become enlightened.

03:28:00.500 | So I think every single person sort of,

03:28:03.820 | as this technology is evolving, as this world is evolving,

03:28:07.540 | as wars break out and geopolitics change,

03:28:10.260 | as the monetary system is constantly put under stress,

03:28:14.140 | people will evolve.

03:28:15.060 | So we're trying to all figure it out together.

03:28:17.360 | That's why open-mindedness here, I think,

03:28:20.260 | for people like me at least, seems essential.

03:28:23.060 | - I know, so I expect you to be answering

03:28:25.400 | all of the spam emails you get.

03:28:27.580 | - I will, print by print by print.

03:28:29.620 | But no, I don't have a clear understanding.

03:28:32.860 | What is a good investment of my time?

03:28:34.180 | What is a good investment of my money?

03:28:36.380 | That doesn't seem clear,

03:28:37.900 | because things are good at promoting themselves.

03:28:42.060 | I'm not talking about the different kinds of things

03:28:45.260 | like Ethereum, altcoins, and so on.

03:28:47.320 | I just mean life, like dating, jobs, friendships.

03:28:52.320 | Like everybody's advertising themselves

03:28:56.900 | as a great investment, right?

03:28:59.340 | But you don't know, and you have to keep an open mind.

03:29:02.040 | And also, I don't, and be sort of self-introspective

03:29:06.840 | about what, how, like biases I operate under,

03:29:11.840 | and ways I delude myself,

03:29:14.860 | like hallucinations that I'm living under.

03:29:16.800 | It's like breaking out of all these hallucinations.

03:29:19.880 | It's very hard to introspect, thinking like,

03:29:22.900 | what are the assumptions under which I lived my entire life

03:29:25.900 | that might be actually false assumptions?

03:29:27.900 | That's a really difficult thought process to take.

03:29:31.060 | It's a dangerous one.

03:29:32.500 | It's you, the Nietzsche, if you gaze long into the abyss,

03:29:35.300 | the abyss gazes into you.

03:29:37.260 | It's like Alex Jones talks about this.

03:29:39.160 | I mean, he's living, he's got demons in his head.

03:29:43.660 | So he has like all these conspiracy theories

03:29:45.780 | that it holds in his head,

03:29:46.700 | but it begins to really destroy him.

03:29:48.820 | So it's a psychological burden to carry.

03:29:51.120 | So if you question authority, if you question government,

03:29:54.380 | if you question culture, the way things have been done,

03:29:57.020 | it's really difficult.

03:29:59.880 | And the biases you operate under,

03:30:02.320 | it's really difficult to question them.

03:30:03.720 | So I think like being constantly open-minded

03:30:07.640 | and self-critical, not constantly,

03:30:10.060 | but a little bit every day is important, I think.

03:30:12.760 | - Yeah, but I mean, you're talking to somebody,

03:30:15.160 | I grew up in Ramallah in Palestine in the West Bank.

03:30:18.680 | I've changed my mind on all kinds of different things.

03:30:22.200 | The fact that I was even open to the idea of Bitcoin

03:30:25.160 | has required an enormous, enormous amount of,

03:30:29.160 | it's a heck of a journey.

03:30:30.160 | So I'd much rather appreciate direct arguments

03:30:34.760 | rather than these kind of general fluffy,

03:30:37.580 | you should be, oh, of course, yes,

03:30:39.120 | you should be open-minded,

03:30:40.040 | but also you come up with conclusions

03:30:42.600 | and you delete spam email sometimes

03:30:44.240 | when you know that it is spam

03:30:45.400 | because you have to move on with your life.

03:30:46.760 | You can't, there's an opportunity cost

03:30:48.360 | to considering every spam email.

03:30:50.160 | - Well, to me, okay, so I'll just say

03:30:52.360 | from my relatively sort of shallow perspective,

03:30:56.360 | almost like a technical person, mostly,

03:30:59.280 | my understanding of economics is weak.

03:31:01.280 | Proof of stake is not obviously

03:31:05.080 | a weak consensus mechanism relative to proof of work.

03:31:10.980 | So that's not obvious to me that that goes wrong

03:31:14.840 | and becomes corrupted in the way

03:31:16.440 | that governments get corrupted

03:31:18.160 | because it still seems decentralized.

03:31:21.680 | Now, your criticism of governance is an interesting one,

03:31:24.800 | but if you put that aside,

03:31:26.680 | it still is a decentralized mechanism

03:31:29.300 | and it's more transparent than the mechanism

03:31:32.680 | that governments operate on.

03:31:33.800 | - It isn't.

03:31:34.640 | - This is exactly what the Federal Reserve is.

03:31:35.800 | The Federal Reserve is a proof of stake system.

03:31:37.680 | The Federal Reserve is owned by its constituent banks.

03:31:40.720 | And so the rules of the Federal Reserve

03:31:42.400 | and the regulations are determined by the ownership,

03:31:44.800 | which is the banks.

03:31:45.640 | So it's exactly what the Federal Reserve is,

03:31:47.800 | but it's too backdoor.

03:31:49.560 | The agreements between the banks and the Federal Reserve,

03:31:53.780 | it feels like a lot of those agreements are made

03:31:55.960 | between individuals that sort of behind the scenes.

03:31:58.760 | It's not hard to, it's opaque.

03:32:01.160 | - Yes, but the only way that a proof of stake system

03:32:03.600 | will take off is if you have a military

03:32:05.560 | to force people to use it.

03:32:07.280 | That's the thing.

03:32:08.120 | Ultimately, there's no way that it's going to take off

03:32:10.360 | on a free market.

03:32:11.760 | And that's why, for all of the bluster

03:32:14.080 | about wanting to move to a proof of stake system,

03:32:16.280 | Ethereum have been saying this since 2014.

03:32:19.080 | It's now been eight years,

03:32:21.040 | they've been talking about it.

03:32:22.880 | We still haven't seen the proof of stake system

03:32:25.420 | operational in the wild.

03:32:26.460 | It's vaporware for all practical--

03:32:28.180 | - Or Dano's proof of stake.

03:32:30.020 | - It's potential.

03:32:31.620 | I mean, you can do it in a centralized way,

03:32:33.620 | but like, can it survive?

03:32:36.760 | Can it last for a long time?

03:32:38.820 | I don't think so.

03:32:39.660 | And I think, you know, it can last perhaps initially

03:32:43.540 | with marketing, with centralized marketing,

03:32:45.340 | you can promote it, but ultimately,

03:32:48.420 | user demand, the people that are not interested

03:32:51.860 | in speculating because they want to get rich on this,

03:32:54.460 | the people that are going to use it,

03:32:55.840 | they're going to want to use it because they can trust

03:32:58.300 | that it is not going to be messed with.

03:33:00.820 | - Yes.

03:33:01.660 | But there's also applications on top,

03:33:03.580 | so Lightning Network, but there's applications on top.

03:33:06.120 | Like, well, the reason I'm interested in things

03:33:08.640 | like Ethereum is you might think it's ridiculous.

03:33:11.820 | I thought it was ridiculous, but NFTs.

03:33:14.120 | You can have NFTs probably on top of Bitcoin,

03:33:18.180 | but you don't because there's no marketing on Bitcoin

03:33:20.460 | because all of these ideas get promoted

03:33:22.980 | on proprietary shit coins because, yes.

03:33:25.440 | - But there's the network effects of ideas, of applications.

03:33:28.780 | So they just take off for some reason.

03:33:30.460 | And human civilization is such that you get excited

03:33:33.420 | about stuff and large amounts of people believe a thing

03:33:35.620 | and they start to get excited and it actually has impact.

03:33:38.180 | Like the fact that NFTs can have an impact on the art world

03:33:41.580 | or the world in general is wild to me, but it worked.

03:33:46.580 | So the question is-

03:33:47.820 | - David Rothkaw has an impact on the art world.

03:33:50.780 | Doesn't say much.

03:33:51.980 | - Well, I'm saying these ideas have,

03:33:54.060 | we're collective intelligent beings

03:33:56.260 | and we can believe a thing and that has power.

03:33:59.820 | That has led to major wars and all those kinds of things.

03:34:02.820 | So it's interesting to me that NFTs took hold.

03:34:07.300 | And the question is, is there distributed dApps,

03:34:09.820 | is there distributed apps built on top

03:34:11.420 | of different blockchains that might somehow

03:34:13.900 | transform the world?

03:34:14.940 | You have to kind of keep an open mind to that

03:34:17.700 | because right now it's like,

03:34:19.460 | it's like I'm the same place with that

03:34:21.300 | as I am with like virtual reality.

03:34:23.340 | It's like, all right, this seems like a really

03:34:26.580 | intellectually promising set of ideas here,

03:34:29.860 | but there's something either technically

03:34:31.580 | or socially not quite taking hold.

03:34:33.940 | Why?

03:34:35.500 | And I don't know what the right answer is.

03:34:37.420 | So with virtual reality, what's the right answer?

03:34:39.820 | Is it just technically the latency is too high

03:34:43.940 | or the games are not good enough

03:34:46.580 | or is it a fundamentally flawed idea

03:34:48.540 | that you can live in a virtual world and enjoy it?

03:34:51.240 | That the physical world is just orders of magnitude better

03:34:54.340 | or a two dimensional display is just as good

03:34:57.700 | as a three dimensional world?

03:34:59.180 | I don't know.

03:35:00.000 | Why is virtual reality not taking off?

03:35:01.220 | It's been since the 80s, right?

03:35:03.260 | - I don't have strong opinions on it,

03:35:05.100 | on the prospects of the technology.

03:35:07.700 | Personally, I don't wanna ever imagine myself

03:35:10.580 | having something on my eyes.

03:35:12.220 | I'd rather just go out into the real world.

03:35:15.220 | But I don't have strong opinions on virtual reality.

03:35:17.760 | I do have on DAPS and NFTs.

03:35:19.980 | - Yeah, what's your criticism of DAPS and NFTs?

03:35:22.660 | Is it a distraction?

03:35:23.700 | It's a way to sell a flawed technology?

03:35:27.740 | - The problem with DAPS is, I mean, it's just,

03:35:30.100 | the economics of it makes no sense in the sense that,

03:35:33.180 | you know, currently, if you wanted to run an application,

03:35:37.820 | whatever the application is, you wanna run it on AWS,

03:35:41.660 | you pay a specific amount of money.

03:35:43.020 | You wanna run it on your own laptop,

03:35:44.820 | you pay a specific amount of money per kilobyte of data.

03:35:48.300 | If you wanted to run the same thing on a distributed ledger,

03:35:50.940 | where you're distributing the data

03:35:52.220 | over thousands of computers worldwide,

03:35:54.740 | it's infinitely more expensive.

03:35:56.500 | And that's why we haven't seen any of these DAPS take off.

03:36:00.540 | And that's why I've said this many years ago,

03:36:03.260 | the only working application of blockchain technology

03:36:06.380 | is Bitcoin, because with Bitcoin,

03:36:08.620 | you know, you're with a few hundred bytes of data,

03:36:11.340 | with a few bytes of data,

03:36:12.380 | you could move a billion dollars worth of economic value

03:36:17.380 | from here to China and move it safely and reliably.

03:36:21.300 | So that power, I can't see it being justified

03:36:26.300 | for anything that is not as mission critical

03:36:29.340 | as moving large amounts of value,

03:36:32.260 | which require very little amount of information.

03:36:34.940 | So when you look at all of the buzzwords

03:36:36.460 | that the Ethereum and other altcoin marketing people

03:36:40.380 | like to use, and you know,

03:36:43.140 | if you wanna wonder really why we come

03:36:45.140 | to this kind of aggression,

03:36:46.820 | it's because we've heard all of this.

03:36:48.100 | You know, I've had all of these hucksters come to me

03:36:50.100 | for years, you know, it's been,

03:36:51.900 | I've had, you know, people in 2016 talk to me

03:36:55.140 | about how Ethereum blockchain technology

03:36:59.340 | is gonna revolutionize real estate deeds in India.

03:37:02.860 | I remember this guy, I'm not gonna mention his name,

03:37:07.700 | but this guy was, you know, 2016,

03:37:09.540 | and he sold a lot of shit coins

03:37:11.260 | and he made a lot of money off of shit coins

03:37:13.380 | based on all these silly ideas.

03:37:15.780 | We're gonna have blackjack on a distributed ledger.

03:37:18.980 | We're gonna have Indian real estate

03:37:20.340 | on a distributed ledger.

03:37:22.180 | And it's just, it's concern trolling marketing.

03:37:25.020 | You know, oh, there's a problem with real estate in India,

03:37:28.060 | real estate deeds, blockchain fixes this, buy my shit coin.

03:37:32.100 | And then people buy the shit coin,

03:37:33.900 | Indian real estate isn't fixed,

03:37:35.740 | and the guy gets rich and they move on.

03:37:38.500 | But I mean, I'm still waiting for a dApp

03:37:41.580 | to actually emerge.

03:37:42.460 | Like, you know, it's, the promise that we keep hearing

03:37:46.740 | is something completely world-changing, world-transforming.

03:37:50.980 | And the reality is not one app.

03:37:53.220 | Like there's one of my good friends, Jimmy Song,

03:37:56.100 | eventually they refused to go ahead with it,

03:37:57.700 | but he wanted to bet with one of the Ethereum people

03:38:00.500 | about these dApps.

03:38:02.780 | You know, the Ethereum people are constantly saying

03:38:04.300 | those dApps are gonna grow

03:38:05.340 | and they're gonna have so many applications

03:38:07.460 | and they're gonna have so many ideas.

03:38:09.140 | And the reality is all the apps that work

03:38:11.700 | are centralized apps, you know.

03:38:13.060 | So there is no Uber on the blockchain,

03:38:16.540 | there is no Twitter on the blockchain,

03:38:20.380 | there is no social media on the blockchain,

03:38:21.620 | because these are businesses

03:38:23.220 | and businesses require a centralized authority

03:38:25.540 | to make decisions.

03:38:26.780 | You can't have it be decentralized.

03:38:28.780 | - Yeah, listen, you're frustrated,

03:38:30.660 | and I could see it over a few years

03:38:32.980 | of just having dealt with a humongous influx of charlatans.

03:38:37.940 | - I wouldn't say frustrated, I'm amused.

03:38:39.940 | It's water off my back.

03:38:43.460 | - No, but a man that uses,

03:38:45.060 | and a community that uses the word shitcoin

03:38:47.900 | is a little bit, you call it amusement,

03:38:50.780 | and I think amusement is the way

03:38:52.540 | to deal with the frustration,

03:38:55.860 | it's a channeling of frustration.

03:38:57.660 | Like sometimes when you have to deal with bullshit,

03:39:01.660 | the best way is just to laugh at the absurdity of it all,

03:39:04.180 | and that's what you mean by amusement.

03:39:07.140 | But the fact is, there's things like artificial intelligence

03:39:12.140 | for, what is it, how many decades, six, seven decades,

03:39:17.580 | has been off and on promising to change everything.

03:39:23.380 | And it has failed time and time again

03:39:28.060 | to deliver to the promise,

03:39:30.300 | but that doesn't mean there's something fundamental

03:39:32.540 | and really powerful about both the small

03:39:34.700 | and the big things going on

03:39:36.500 | within the actual research and development

03:39:39.300 | within those communities.

03:39:40.340 | There's a lot of exciting developments,

03:39:41.940 | and the scale at which those developments

03:39:44.300 | might actually have a transformative impact,

03:39:46.700 | the timescale, is unclear.

03:39:48.940 | It seems like we're certainly overpromising.

03:39:51.740 | We dream too big and too aggressively

03:39:54.380 | in the AI community, but in a lot of communities.

03:39:55.900 | - Yeah, and I'm happy to give people

03:39:57.420 | the benefit of the doubt when they're overpromising,

03:39:59.820 | but not when they're making their own money.

03:40:01.700 | When you start making your own currency,

03:40:03.660 | then you don't get the benefit of the doubt.

03:40:05.660 | Because if your idea needs you to have a new currency

03:40:08.420 | that you print when Bitcoin is out there,

03:40:10.580 | then I'm gonna go ahead and assume

03:40:12.580 | that you're doing this for the money printing.

03:40:13.420 | - It's a good time to mention that I am actually launching

03:40:16.260 | my new coin called LexCoin.

03:40:19.100 | - You mean shit coin.

03:40:19.980 | - Yes.

03:40:20.820 | (laughing)

03:40:21.660 | - Oh, God.

03:40:22.500 | I'm gonna have to block you with love.

03:40:24.020 | (laughing)

03:40:26.100 | Okay, one thing I wanted to ask you about

03:40:28.180 | is the Fed's, this paper they released in January 20th

03:40:33.180 | on the potential central bank digital currency, CBDC.

03:40:39.180 | What are your thoughts about that?

03:40:40.340 | Is it just another, like, is there pros and cons to this?

03:40:43.580 | Is it at all interesting to you

03:40:45.180 | that they're even considering this kind of thing?

03:40:47.180 | - I used to think that it's just basically a waffle.

03:40:51.780 | It's meaningless.

03:40:53.340 | Because as it exists, the dollar

03:40:55.580 | is a central bank digital currency.

03:40:57.260 | - Right.

03:40:58.100 | - And the majority of dollars are digital.

03:40:59.540 | And, but I think the way that over the last couple of years

03:41:03.300 | I've changed my mind on this.

03:41:04.260 | I think this is, there's some serious substance

03:41:06.660 | behind these ideas.

03:41:08.380 | And what they mean effectively is the disintermediation

03:41:12.620 | of the banking system and giving everybody an account

03:41:15.900 | at the Federal Reserve.

03:41:17.060 | This is kind of the really dangerous idea.

03:41:21.340 | And I think this is enormously significant.

03:41:22.940 | Effectively, as somebody who's lived in the Soviet Union,

03:41:25.900 | what this is is the return of the Gosbank

03:41:27.980 | on a global scale with modern technology.

03:41:30.780 | So under the Soviet Union,

03:41:31.860 | there was something called the Gosbank or People's Bank.

03:41:34.860 | And that was the only bank in the country.

03:41:36.340 | And you had an account with the National Bank.

03:41:39.500 | And, you know, if you said something wrong,

03:41:42.860 | your money got terminated from the Gosbank.

03:41:45.980 | Now imagine that combined with the power

03:41:48.460 | of digital technology.

03:41:50.580 | And you can see that this could be

03:41:52.420 | an enormously powerful technology really,

03:41:56.140 | because if banks are out of the picture,

03:41:58.900 | then we change the fundamental reality of fiat

03:42:03.220 | as being the creation of money through lending.

03:42:05.900 | And then it becomes the creation of money truly by fiat,

03:42:08.860 | by government fiat.

03:42:10.140 | So we move to a system in which money is just basically,

03:42:13.240 | it's like we have money that is pieces of paper.

03:42:16.620 | And every time we've had money,

03:42:18.100 | we've had fiat money that was just pieces of paper,

03:42:20.500 | it collapsed very quickly.

03:42:21.960 | With the current system, money is credit.

03:42:25.220 | And the creation of credit is restricted to some point.

03:42:28.280 | And the creation of credit is self-correcting.

03:42:30.200 | I discussed this in the fiat standard.

03:42:32.080 | If the central bank allows banks to create too much credit,

03:42:35.180 | that creates a bubble.

03:42:36.040 | And then there's a collapse in the money supply,

03:42:38.340 | which prevents hyperinflation from happening

03:42:40.340 | because the money creation is self-destructive,

03:42:44.220 | it's self-correcting.

03:42:45.860 | So you end up with an average of like 7% per year increase

03:42:49.940 | because you have 10% for five years

03:42:52.900 | and then you get negative 20% for one year

03:42:55.940 | and it's correcting.

03:42:57.820 | But now if you get rid of the credit creation mechanism

03:43:00.060 | and it's just assigning money directly,

03:43:02.320 | we're likely gonna get much faster inflation.

03:43:04.900 | And I think that's obviously a huge problem

03:43:08.260 | and perhaps the even bigger problem

03:43:10.260 | is the enormous amount of power

03:43:12.460 | that it gives to governments.

03:43:14.180 | It allows them to create an awful dystopia

03:43:18.020 | where you've got your money on your phone

03:43:22.540 | and anything you do is completely supervised

03:43:27.180 | and controlled through your spending.

03:43:28.700 | So they wanna introduce a new lockdown,

03:43:31.900 | then they'll just make your money not work.

03:43:34.060 | Your money's broken today, you can't spend money.

03:43:36.980 | Or you can only spend money in your local supermarket

03:43:39.460 | for the next three months

03:43:40.380 | because you can't leave your neighborhood,

03:43:42.600 | your money stops working outside of your neighborhood.

03:43:45.220 | The Chinese social credit score system

03:43:48.100 | is an example of this.

03:43:50.100 | And I think, I don't know, I don't have a crystal ball.

03:43:53.700 | So I don't know what the likelihood is

03:43:55.180 | of implementing something like this in the US.

03:43:57.420 | I've discussed it with Michael Saylor.

03:43:59.980 | He thinks it's highly unlikely.

03:44:02.060 | He thinks the people who've been pushing this

03:44:05.340 | are very far from the position of power

03:44:07.180 | and the traditional monetary and financial system

03:44:10.700 | is going to survive intact.

03:44:13.660 | I certainly hope so.

03:44:15.540 | I think this would be a terrible thing if it comes to pass.

03:44:17.980 | But I don't think, many people think

03:44:19.140 | that it is something that would undermine Bitcoin.

03:44:21.420 | Like a lot of common objection to Bitcoin is,

03:44:24.580 | well, governments are just gonna launch

03:44:26.180 | their own digital currencies

03:44:27.620 | and then Bitcoin is gonna die.

03:44:28.940 | And I think this is completely missing the point.

03:44:31.060 | People think Bitcoin is important because it's digital.

03:44:33.580 | It's not.

03:44:34.700 | National currencies can be digital.

03:44:36.940 | Bitcoin is important because it's not inflationary

03:44:39.580 | and because nobody controls it.

03:44:41.420 | Central bank digital currencies

03:44:42.760 | are likely to be very inflationary

03:44:44.880 | and they're likely to have very strong control at the top.

03:44:47.840 | So if anything, they are an advertisement for Bitcoin

03:44:50.540 | rather than a replacement for it.

03:44:52.780 | - If it's Bitcoin, if it's gold,

03:44:54.100 | it's a way for multiple nations to partake.

03:44:56.980 | So if you were to imagine a future

03:44:59.620 | where we move from the fiat standard

03:45:03.760 | back to the gold standard and then to the Bitcoin standard

03:45:06.800 | or skipping that, going directly to the Bitcoin standard,

03:45:10.380 | what would it take?

03:45:12.220 | Is it gradual, is it immediate?

03:45:13.980 | What are possible trajectories that take us?

03:45:17.540 | Well, basically where the final sort of empirical observation

03:45:20.540 | is that you overtake,

03:45:22.200 | Bitcoin overtakes first gold and then bonds

03:45:26.660 | in terms of its monetary power in the world.

03:45:31.660 | But like just specifically from a government perspective,

03:45:34.820 | how do we move the United States, China, Russia, India,

03:45:39.020 | European Union to a Bitcoin standard?

03:45:43.340 | - I'm not entirely concerned

03:45:44.820 | about whether governments move or not.

03:45:46.220 | In fact, I'd be very happy for them not to move

03:45:49.860 | as long as possible so that individuals

03:45:52.700 | can accumulate more and more Bitcoin while it's still cheap.

03:45:56.420 | - So the people will move

03:45:58.560 | and the governments will catch up.

03:46:01.340 | - Yeah, and I think this is kind of what I allude to.

03:46:03.980 | I mean, the point of the fiat standard,

03:46:05.700 | the fiat standard is really a Bitcoin book

03:46:07.900 | and it talks about fiat most of the time,

03:46:10.060 | but it's does so to analyze Bitcoin

03:46:13.180 | and the rise of Bitcoin.

03:46:14.020 | In the final chapter,

03:46:14.840 | I discuss how I think this relationship plays out.

03:46:18.040 | The way that I tend to think of it is that most likely

03:46:24.340 | what's going to happen is we're gonna have

03:46:26.580 | the kind of financial apartheid

03:46:28.720 | where there's going to be two monetary systems.

03:46:31.060 | One is government controlled

03:46:33.620 | and it comes with increasing amounts

03:46:35.500 | of surveillance and inflation.

03:46:37.700 | And then if you want,

03:46:39.140 | you can just opt out of that and get into Bitcoin.

03:46:42.820 | And it's likely going to be difficult for governments

03:46:45.660 | to stop people from getting into Bitcoin

03:46:48.340 | for all of the technical reasons

03:46:49.820 | that make it very hard to stop Bitcoin.

03:46:52.260 | So then we have this alternative that is Bitcoin,

03:46:54.100 | which is not inflationary

03:46:56.020 | and does not have a central authority that can censor it.

03:47:00.820 | I think gradually is my hope.

03:47:04.780 | And I also think my most likely scenario,

03:47:07.300 | but maybe I am biased because everybody thinks

03:47:10.940 | what they want is what's gonna happen.

03:47:12.980 | I think we're just gonna witness the same relationship

03:47:16.260 | because governments make their currency

03:47:18.780 | so that they can devalue them.

03:47:20.700 | And Bitcoin thrives on that.

03:47:22.540 | And more and more people are gonna learn,

03:47:24.100 | more and more people are gonna find out.

03:47:26.100 | And whether it's through curiosity or self-interest

03:47:29.860 | or through the destruction of the national currency,

03:47:32.380 | all roads lead to Bitcoin.

03:47:34.820 | So more and more people are gonna buy Bitcoin.

03:47:36.500 | The price of Bitcoin is going to go up.

03:47:38.020 | And as it goes up,

03:47:39.060 | Bitcoin becomes a more significant part of the world economy.

03:47:42.060 | And this is something that skeptics don't get.

03:47:45.380 | Like a lot of the academic skeptics to Bitcoin,

03:47:48.820 | they offer up all of these theories

03:47:50.860 | about why they think Bitcoin can't work.

03:47:53.540 | And then they present it and they think,

03:47:56.140 | they've delivered the knockout blow

03:47:58.060 | as if Bitcoin needs their permission

03:47:59.660 | or the world is going to need their permission.

03:48:01.220 | Well, the reality is people are gonna join Bitcoin

03:48:02.900 | out of greed, out of self-interest.

03:48:05.020 | Number go up technology is really what's going

03:48:08.260 | to get everybody in.

03:48:10.020 | And that's really the Trojan horse for fixing the world.

03:48:14.540 | Come for the greed and stay for the revolution.

03:48:16.900 | It's gonna keep going up

03:48:18.660 | because people don't like to be poor,

03:48:21.260 | except for most economists and academics.

03:48:23.600 | People don't like to be poor.

03:48:25.780 | People don't enjoy getting their wealth destroyed.

03:48:28.460 | And they care more about their self-interest

03:48:30.460 | than they care about economic theories

03:48:32.580 | about whether this works as money or not.

03:48:34.620 | They see their cousin escaped hyperinflation

03:48:37.300 | and managed to get a bigger house

03:48:38.540 | because they bought Bitcoin five years ago.

03:48:40.340 | They realized maybe I should stop mocking my cousin

03:48:43.740 | and start buying more Bitcoin.

03:48:45.180 | And this is, I think, an indomitable force

03:48:47.580 | that's going to continue.

03:48:49.260 | And one thing, most Bitcoiners tend to lean

03:48:53.940 | toward an apocalyptic transition.

03:48:57.220 | Fiat's gonna collapse, we're gonna get hyperinflation,

03:48:59.060 | everything's gonna be terrible,

03:49:00.300 | and then we're gonna move to Bitcoin.

03:49:02.660 | And I present the case for why I think

03:49:05.420 | maybe that might not be the case.

03:49:07.020 | Maybe we won't get this kind of apocalyptic scenario.

03:49:10.860 | And this was like the conclusion of the Fiat standard,

03:49:14.460 | which is once you realize that mining Fiat

03:49:16.820 | is creating debt, and Bitcoin is allowing,

03:49:20.940 | so in order to have Fiat money,

03:49:22.380 | we need to have people borrow.

03:49:23.980 | We need to have people make loans.

03:49:26.100 | And the problem that Fiat money runs into today

03:49:29.820 | is that if you wanna save money,

03:49:31.920 | if you wanna hold savings, you have a problem.

03:49:35.340 | Where do you put your savings?

03:49:36.740 | So you put your savings in debt,

03:49:38.820 | in the creation of more bonds.

03:49:41.020 | Wherever you take your savings,

03:49:42.580 | you create a bubble in those things.

03:49:44.220 | And this is why we see a bubble in the stock market,

03:49:46.020 | a bubble in the bond market, a bubble in housing.

03:49:48.840 | It's because people are looking for savings,

03:49:51.100 | looking for a place where they can save.

03:49:52.380 | All of those things are crappy saving instruments

03:49:54.780 | because they're like copper,

03:49:58.460 | in that there's nothing to stop the people behind them

03:50:00.720 | to make more of them.

03:50:01.820 | House builders can build more houses.

03:50:05.220 | Governments can issue more bonds.

03:50:06.860 | The crappy fraudulent companies

03:50:09.500 | can list on the stock market and make more stocks.

03:50:12.320 | Well, Bitcoin finally offers us an outlet.

03:50:14.500 | We don't need to keep creating more debt.

03:50:16.780 | We can invest in this asset that is hard,

03:50:20.560 | and that is internationally liquid,

03:50:23.020 | and that nobody can make more of.

03:50:25.140 | So there is no bubble in it.

03:50:26.820 | There is no mechanism for somebody to increase the supply

03:50:30.140 | and bring the price crashing down,

03:50:31.900 | like with copper and real estate and bonds.

03:50:34.500 | So Bitcoin is the way out.

03:50:36.420 | And this is why I think there's a good case to be made

03:50:38.840 | for why the fiat authorities might embrace Bitcoin,

03:50:42.540 | because they'll see it is their way out

03:50:44.420 | of this enormous debt bubble that everybody is stuck in.

03:50:49.040 | Particularly, the richest and most powerful people

03:50:51.060 | in the world, and the richest

03:50:53.220 | and most powerful governments in the world

03:50:54.540 | are the world's biggest borrowers.

03:50:56.300 | They're the ones in a lot of debt.

03:50:57.820 | So a continuous slow devaluation of the value of that debt

03:51:02.820 | as people upgrade and move on to a hard asset

03:51:05.420 | that continues to appreciate is the peaceful way

03:51:10.420 | that we wind down the fiat Ponzi, I think.

03:51:12.960 | You could see it being like a political,

03:51:15.300 | part of a political platform for future people

03:51:18.240 | that run for president, those kinds of things to address.

03:51:21.880 | Obviously, it's not just for the powerful and the rich.

03:51:26.100 | The people are bothered by the debt.

03:51:28.220 | The people are bothered by everything

03:51:30.220 | that you described with fiat.

03:51:31.900 | And if you wanna sell yourself in a democracy

03:51:35.460 | as a good leader, you might want to make that part

03:51:38.540 | of the platform.

03:51:39.660 | You mentioned you know Michael Malice.

03:51:41.420 | He just texted me asking me to ask you,

03:51:46.340 | what do you like best about Michael Malice?

03:51:49.020 | If you can spend five to 10 to 20 to an hour

03:51:52.820 | talking about the genius of Michael Malice.

03:51:55.260 | What do you like, where does one even start?

03:51:58.420 | Well, obviously the haircut first.

03:52:00.180 | - Yeah, he just gets sexier with age, that's for sure.

03:52:03.980 | That's good.

03:52:04.820 | - Yes.

03:52:05.660 | - Do you, you know, his ideas, his trolling and humor,

03:52:10.660 | have you gotten a chance to interact with him?

03:52:12.980 | - Yes, yes, I've met Michael maybe 10, 12 years ago

03:52:16.380 | in New York.

03:52:17.380 | I used to live in New York when he used to live in New York.

03:52:19.940 | I met him a couple of times.

03:52:21.140 | There was a bunch of anarchists in New York

03:52:24.460 | used to throw a happy hour once a month.

03:52:27.340 | It was called the High Time Preference Hoppe Hour

03:52:30.820 | in honor of Hans-Hermann Hoppe.

03:52:34.020 | So I met him there a couple of times

03:52:35.460 | and we followed each other on Twitter for a while.

03:52:39.340 | - Is there interesting that you're aware

03:52:41.260 | of philosophical differences in your world views?

03:52:43.960 | - No, I think we pretty much see eye to eye.

03:52:47.380 | I think the difference is mainly that he spends a lot of time

03:52:52.460 | focusing on American politics and American pop culture,

03:52:55.380 | which I don't pay much attention to, I guess.

03:52:57.860 | - So you look more at the monetary system,

03:53:00.420 | the economics of it all, and just the history,

03:53:02.700 | and just looking at it, zooming out

03:53:04.980 | at the big picture of it all.

03:53:07.340 | Although recently he's working on a book

03:53:08.860 | called "The White Pill" and he's been,

03:53:11.680 | every time I see him, I mean,

03:53:14.380 | he's in some dark aspect of the 20th century.

03:53:18.780 | He's just like, "I just finished writing about Hollydom."

03:53:22.140 | As you might imagine, he's not taking much, I believe,

03:53:25.460 | of a monetary perspective on things.

03:53:27.860 | His book, his writing, at least for time,

03:53:30.580 | has a kind of philosophical ideology perspective

03:53:34.220 | that's outside of the monetary system.

03:53:37.100 | But you argue that those are actually inextricably linked.

03:53:41.580 | - Yeah, and I don't think he would disagree.

03:53:43.740 | - He would.

03:53:44.580 | But a book has to be, can only be so long, I suppose.

03:53:49.140 | It can only focus on so many things.

03:53:52.660 | - If you can put on your wise sage hat

03:53:56.180 | and give some advice to young people,

03:53:58.540 | I mean, the past four hours have been a kind of advice,

03:54:01.980 | but if you can focus, and if somebody in high school

03:54:05.300 | or college is thinking about what to do with their career,

03:54:09.380 | can have a successful career, or to have a life

03:54:11.660 | they can be proud of, what would you tell them?

03:54:13.620 | - I'd say probably the most important advice

03:54:15.580 | that I would give is to find a way to give value

03:54:19.060 | to other people.

03:54:20.100 | This is really the key thing.

03:54:21.620 | You need to wake up every morning

03:54:23.620 | and figure out how to serve others.

03:54:25.580 | This is the key to everything you want in life.

03:54:30.140 | Everything that you want is on the other side

03:54:32.420 | of you serving others.

03:54:34.380 | So figure out how you can serve others in a good way,

03:54:37.460 | how you can do it in a way that they value,

03:54:39.540 | and you've got an incredible mechanism

03:54:42.260 | for figuring that out, which is the market.

03:54:44.980 | Go out there and do things for other people.

03:54:48.420 | - The market will tell you.

03:54:49.740 | - The market will tell you, exactly.

03:54:51.580 | If you're young, you have the enormous advantage

03:54:53.500 | of being able to make mistakes, essentially,

03:54:56.820 | and learn from them.

03:54:58.140 | So go out there, do things of value for others,

03:55:02.140 | figuring out how you can do something that,

03:55:05.580 | what is it that you can do that contributes

03:55:07.940 | the most value to other people's lives?

03:55:10.140 | And increasingly, I think with the modern technology,

03:55:13.220 | this is increasingly becoming online,

03:55:15.540 | and it's, I think you should consider

03:55:18.820 | how you can create value online,

03:55:21.380 | because that scales beyond anything that you can do

03:55:25.300 | in the physical world, in a very, very,

03:55:27.900 | well, maybe not beyond, obviously,

03:55:29.300 | there are profitable businesses in the physical world,

03:55:33.180 | but I think online is enormous potential,

03:55:36.620 | and coding, I think, is enormously powerful.

03:55:39.060 | I'm not a coder myself, but I strongly recommend

03:55:41.060 | people get into learning how to code,

03:55:44.140 | and I think it's probably the thing

03:55:46.380 | that carries the most power.

03:55:48.700 | So initially, we were working with our hands.

03:55:51.540 | We started working with machines.

03:55:52.780 | Machines are much more productive.

03:55:54.500 | Well, code is an even higher level of productivity,

03:55:57.580 | where you basically program the machines to produce things.

03:56:00.900 | So, you know, few clicks of a keyboard,

03:56:05.220 | and you can move millions of machines

03:56:07.420 | around the world in certain ways.

03:56:09.220 | So it carries an enormous amount of value.

03:56:11.300 | I think I always tell all young people to learn to code.

03:56:15.220 | It's the best thing.

03:56:16.380 | I used to tell it to my students when I was at university.

03:56:19.140 | Tell them to drop out and go learn to code.

03:56:21.620 | It's probably a better use of their time and money.

03:56:23.660 | - Well, you could probably do both.

03:56:25.420 | - Yeah.

03:56:26.260 | - University has an interesting function.

03:56:28.060 | I mean, probably you and I have different perspective

03:56:30.420 | on this, probably has to do with a little bit

03:56:32.220 | of a different journey in terms of fields,

03:56:35.740 | 'cause I'm so, I've stayed engineering-focused

03:56:38.380 | for a long time, and there's less,

03:56:40.380 | some of the troubles you might highlight

03:56:41.780 | in the education system, there's less troubles

03:56:44.220 | of that kind in engineering, 'cause math hasn't changed

03:56:48.580 | for a long time, so.

03:56:50.540 | - Yeah.

03:56:51.380 | - A lot of it is just doing hard things,

03:56:53.340 | being forced to do hard things,

03:56:55.380 | and becoming a bit of a generalist,

03:56:57.700 | while on the side, you're also becoming a specialist

03:57:00.580 | based on your own passion, driven by your own passion.

03:57:04.340 | So school, at least high school,

03:57:06.700 | I don't know about the university,

03:57:07.660 | but high school, that's a really nice,

03:57:11.420 | one of the only times in your life,

03:57:13.580 | at least in my life, I was forced,

03:57:17.260 | but now I see, given the opportunity

03:57:20.820 | to spend my entire day learning broadly.

03:57:24.460 | And that's something, I don't know,

03:57:25.980 | the way time works, it just runs away from you,

03:57:28.020 | and you never really get a chance

03:57:29.220 | to learn quite that broadly again.

03:57:33.740 | That's the curse of specialization,

03:57:35.340 | is you never get a chance to study biology, chemistry,

03:57:39.220 | if you're a physicist, time runs away from you.

03:57:42.740 | So enjoy the broad education,

03:57:46.980 | but yeah, like you said,

03:57:48.780 | find the things that valued by the market.

03:57:52.240 | And on the other side of it, you said all the good stuff,

03:57:56.220 | so that's also a way to get happiness.

03:57:58.540 | - Yeah, and I'll also add that the horse

03:58:00.580 | that I like to whip all the time

03:58:01.820 | is the low time preference aspect of things,

03:58:04.260 | saving with Bitcoin.

03:58:06.100 | So I think my advice to young people is,

03:58:08.660 | when you're young, you think of the world

03:58:11.140 | in the very short term generally.

03:58:13.760 | You're focused on the present,

03:58:15.860 | and you think that everything that's happening

03:58:17.420 | in the present is the most important thing

03:58:18.980 | that's ever gonna happen in the history of humanity.

03:58:21.700 | Lower your time preference, think about the future,

03:58:23.660 | think further down the line,

03:58:25.660 | think about the consequences of the things you do,

03:58:28.380 | and then what?

03:58:29.220 | And so you do this now, it feels good today,

03:58:31.160 | but then what happens tomorrow?

03:58:33.540 | You go out, you drink, you enjoy yourself,

03:58:35.300 | well, think about the hangover.

03:58:37.380 | But more in long term, think about the implication

03:58:40.300 | of living this kind of life.

03:58:42.340 | Think about every decision that you make,

03:58:44.300 | the long term implication of it.

03:58:46.100 | And part of that is Bitcoin, part of that is save in Bitcoin.

03:58:49.580 | I urge everybody to put savings in Bitcoin for the long term.

03:58:54.520 | Don't buy Bitcoin for the short term,

03:58:56.380 | don't buy Bitcoin today so that you can sell it.

03:58:59.100 | You don't put your savings in Bitcoin today

03:59:00.780 | so that you can sell it all next month and buy a house.

03:59:04.220 | Put money in Bitcoin that you expect to keep in Bitcoin

03:59:07.580 | for another five, 10 years or so, at least four years

03:59:12.580 | is what I recommend for people.

03:59:13.980 | So keep a low time preference,

03:59:15.980 | focus on the future and save in Bitcoin.

03:59:18.340 | - And learn about how to buy Bitcoin,

03:59:21.300 | how to learn about all this technology.

03:59:23.420 | Part of this is this conversation,

03:59:24.780 | but there's so much awesome material out there.

03:59:26.620 | And thank you, by the way,

03:59:28.240 | for this gift of a hardware wallet.

03:59:30.520 | - Nice.

03:59:31.360 | - So you should definitely invest in it yourself.

03:59:33.860 | And what would you call this?

03:59:36.740 | These are--

03:59:37.580 | - Open dimes.

03:59:38.420 | - Open dimes, yeah.

03:59:39.380 | So this is like USB that you can,

03:59:41.780 | like a hardware device that stores Bitcoin.

03:59:44.100 | - Yeah, so you don't have to worry about

03:59:46.780 | knowing the password.

03:59:47.740 | It contains the password within it and it's tamper-proof.

03:59:50.420 | So you can save the Bitcoin on it and--

03:59:52.260 | - So when the apocalypse comes,

03:59:54.380 | you need the value to be stored on an actual thing

03:59:57.860 | that you can have in your physical possession.

03:59:59.860 | - Yeah, that's exactly what this is.

04:00:02.220 | You've had a heck of a life.

04:00:04.660 | You've been in a bunch of places in this world.

04:00:07.900 | - A lot of places.

04:00:08.940 | - Life is not easy in some of those places.

04:00:12.820 | What has been, if we can take a step to maybe

04:00:17.260 | a bit of a dark step for a short time,

04:00:19.300 | what has been maybe darkest time, period,

04:00:23.720 | place you've ever gone in your mind,

04:00:26.020 | a dark period of your life, a struggle

04:00:29.500 | you had to overcome, you had to survive?

04:00:32.180 | - Well, I'm Palestinian, so that is the tragedy of my life.

04:00:36.580 | I'm Palestinian-Jordanian.

04:00:37.960 | My family's suffered a lot because of this historically.

04:00:43.900 | I grew up in Ramallah in the West Bank.

04:00:47.020 | It wasn't ideal to see that.

04:00:50.480 | People like to think of it as this intractable conflict

04:00:54.220 | between two bitter enemies,

04:00:55.840 | but the reality of the matter is that it's not.

04:00:59.800 | A foreign ideology came in with the idea

04:01:02.020 | that this country needs to be occupied

04:01:04.480 | by people from only one religion,

04:01:06.840 | and the existing population, which,

04:01:09.720 | I mean, Jews had always lived in Palestine historically,

04:01:12.600 | and at the turn of the 20th century,

04:01:15.040 | they were only 10% of the population,

04:01:16.920 | but then with the birth of fiat money,

04:01:19.600 | incidentally, the link with all of this

04:01:21.880 | is that when the Bank of England went off gold,

04:01:25.680 | a big reason why they were able to pull that off

04:01:28.200 | was that the Rothschild banking family supported them,

04:01:31.040 | and in exchange, the Rothschilds got Palestine.

04:01:33.480 | The Balfour Declaration was written

04:01:37.640 | by the government of Britain to the Rothschild family,

04:01:42.640 | telling them that they'd like to make Palestine

04:01:47.600 | a homeland for Jews.

04:01:49.480 | So obviously, that's not very convenient

04:01:51.880 | for people who are not Jewish,

04:01:53.320 | for whom that is a homeland,

04:01:54.680 | and the past 80 years has been a very painful struggle

04:01:59.680 | if you happen to not be Jewish,

04:02:01.360 | and obviously, you know,

04:02:03.680 | obviously, Palestinians have done all kinds of things,

04:02:05.700 | trying to fight back,

04:02:06.680 | and they've done all kinds of wrong things,

04:02:09.080 | but I don't think you can escape

04:02:10.620 | the fundamental reality underlying this,

04:02:12.860 | which is that if you're not Jewish,

04:02:15.040 | you are being moved out of the land,

04:02:18.120 | and so it's happened in 1947, '48,

04:02:21.120 | it happened in 1976, '67,

04:02:24.640 | more land was taken over by Israel,

04:02:26.520 | now you see it with the settlements.

04:02:29.000 | You know, if you ignore the day-to-day headlines,

04:02:31.080 | and you ignore the media propaganda,

04:02:33.120 | and you ignore all of this,

04:02:34.760 | there's a very clear thing that is happening,

04:02:36.600 | which is more land owned by an exclusive ideology

04:02:41.600 | that believes this land needs to be owned

04:02:43.920 | by people from one religion,

04:02:45.480 | and everybody else is being kicked out,

04:02:47.840 | and so that is the tragedy of my life,

04:02:52.600 | and my wife is also a Palestinian refugee from Lebanon,

04:02:55.920 | and her family was evicted from Jaffa,

04:02:59.520 | which is today on the outskirts of Tel Aviv.

04:03:02.880 | They still have their homes in Jaffa,

04:03:05.480 | their homes are being,

04:03:06.480 | you know, they got kicked out of their homes,

04:03:08.120 | and their lands, and their property,

04:03:09.720 | they became refugees in Lebanon.

04:03:11.600 | So my children, you know,

04:03:13.120 | and it's an ongoing tragedy,

04:03:14.920 | it's not something that is,

04:03:17.400 | a lot of the people that think of it as,

04:03:20.920 | you know, they think Palestinians are just out there

04:03:22.760 | to get Israelis because they hate them,

04:03:25.120 | but it's an inescapable tragedy.

04:03:27.760 | I don't have a home anywhere.

04:03:29.200 | Is there an escape from this tragedy

04:03:31.600 | in the future that you see?

04:03:33.520 | If you zoom out across the scale of decades,

04:03:36.640 | will we see,

04:03:39.960 | I hesitate to say peace,

04:03:44.360 | but a significant decrease in human suffering

04:03:49.360 | in this part of the region?

04:03:52.160 | - I certainly hope so.

04:03:53.360 | And I think, you know, my interest in Bitcoin comes from,

04:03:58.120 | came from a place of desperation with the situation there.

04:04:02.000 | Traditional politics is a dead end.

04:04:04.920 | I don't see what I can be doing

04:04:08.080 | to make things better there using traditional politics.

04:04:11.880 | And I think a good friend of mine, Pierre Rochard,

04:04:14.600 | you may know him on Twitter,

04:04:16.120 | one of the brightest minds in Bitcoin, in my opinion,

04:04:18.800 | he told me his theory is that Bitcoin

04:04:21.000 | is gonna bring peace to the Middle East

04:04:22.560 | because land is a shit coin.

04:04:24.080 | (laughing)

04:04:25.960 | - And land is a shit coin, I love it.

04:04:28.160 | - And I think he's got a very good point there,

04:04:30.040 | that this fixation with land and the bitterness

04:04:33.440 | with which people have to live land is likely to decline

04:04:38.440 | when people are gonna have a form of property

04:04:40.800 | that they can keep.

04:04:42.240 | And so hopefully that will help in one way.

04:04:45.000 | And of course, the more obvious way is that

04:04:47.680 | this is a conflict of governments

04:04:50.080 | and it's a conflict that is financed by fiat.

04:04:52.960 | From day one, you know, the entirely insane notion

04:04:56.560 | that you could build a national, an ethnic homeland.

04:05:01.560 | And of course, you know, this is the early 20th century.

04:05:03.880 | So the idea behind Zionism is coming from the same place

04:05:09.000 | where all these other ethnic nationalisms of Europe

04:05:11.720 | were emerging and we saw how well,

04:05:14.640 | how horribly these worked out.

04:05:16.520 | But the idea that you could, you know,

04:05:19.280 | it's one thing to say we wanna build a homeland

04:05:21.240 | for Germans in Germany.

04:05:23.600 | It's one thing to say we wanna build a homelands

04:05:25.240 | for Germans somewhere else.

04:05:28.040 | And that was Palestine, that was Zionism.

04:05:32.400 | And that was only possible thanks to fiat,

04:05:34.640 | thanks to the ability of the British government

04:05:36.600 | and all these other governments

04:05:38.480 | to continue to finance this colonialist effort over time.

04:05:42.120 | And, you know, it continues to finance war

04:05:45.880 | and it continues, you know, we see war all over the world

04:05:48.680 | continue to escalate because the people

04:05:52.600 | who'd make the decision to escalate the war

04:05:54.360 | are not the ones who are paying for it

04:05:55.760 | and they're not the ones who are fighting.

04:05:57.160 | They're the ones who sit in offices.

04:05:58.960 | And in the case of, you know,

04:06:00.320 | most of Middle Eastern conflict,

04:06:02.000 | it's people who live abroad, you know,

04:06:04.960 | it's people who are abroad or not part of it

04:06:07.040 | who just are emotionally charged to it

04:06:09.200 | because they watch it on TV.

04:06:11.200 | So, you know, you have billions of Muslims around the world

04:06:14.320 | and Jews around the world

04:06:16.560 | who feel extremely emotionally attached to it.

04:06:19.400 | They're not the ones fighting,

04:06:20.360 | they're not the ones paying their own money.

04:06:22.520 | They're just getting governments to send money

04:06:24.880 | and to send weapons and to take part.

04:06:27.520 | And it's fun as a spectator sport

04:06:32.520 | for most of these people

04:06:33.960 | because they don't get to live in it.

04:06:35.440 | But I got to live in it, I saw it.

04:06:37.040 | I grew up there.

04:06:37.880 | I saw the settlement expansion.

04:06:40.760 | And, you know, recently, a few weeks ago,

04:06:42.320 | I went back to Ramallah and it's just,

04:06:45.240 | it's amazing every time you go,

04:06:47.320 | the settlements are just growing in an astonishing way.

04:06:50.840 | Like it's not just housing units that are going up,

04:06:55.160 | it's an entire attempt to build,

04:06:57.480 | to basically suffocate Palestinian areas

04:07:01.520 | and force Palestinians to leave

04:07:02.960 | or keep them living in horrific conditions.

04:07:06.240 | - And if I may, just because I have family in Ukraine,

04:07:11.720 | I have family in Russia,

04:07:13.840 | since this war, echoes of similar things are happening

04:07:17.720 | in that part of the world too.

04:07:19.560 | And I shudder to think about the decades to come

04:07:23.560 | of the hate that is brewing,

04:07:25.360 | the suffering that is brewing

04:07:27.160 | based on decisions and pressures

04:07:30.080 | and from not always people directly impacted by this.

04:07:35.080 | So again, it feels like that military conflict

04:07:40.920 | is not just a creation of like people on the ground.

04:07:45.360 | It's a creation of leaders, power centers.

04:07:48.160 | And perhaps, again, I'm not smart enough,

04:07:52.440 | but even the monetary system probably has a role to play.

04:07:55.600 | - I absolutely think it does.

04:07:56.880 | Monetary system is what allows,

04:07:59.840 | is what allows people to just continue

04:08:01.560 | to treat war as a spectator sport.

04:08:04.200 | That's really what it comes down to.

04:08:06.000 | And it starts with World War I and it's continued.

04:08:09.120 | And this is why I really, I think I've said this before,

04:08:13.320 | I've tweeted this before and it was a pretty popular tweet,

04:08:15.720 | but it also got a lot of people to dismiss the idea

04:08:20.160 | with mockery, of course.

04:08:22.080 | But I really think Bitcoin is the only technology

04:08:24.320 | that's going to end World War I.

04:08:26.400 | Once World War I started,

04:08:28.440 | we got into this endless conflict

04:08:30.120 | that's been ongoing since then.

04:08:32.240 | If you look at all the world's conflicts today,

04:08:33.800 | pretty much they all trace back to World War I.

04:08:36.400 | And it's because when that Pandora's box

04:08:39.760 | of government control of money was opened,

04:08:42.560 | there was no longer a real restraint on war,

04:08:44.920 | except complete defeat and complete destruction

04:08:47.640 | and complete death.

04:08:48.480 | The war had to be total.

04:08:50.200 | Before that, under the gold standard,

04:08:53.220 | kings would send professional armies

04:08:57.020 | to fight each other in battlefields.

04:08:59.720 | And as soon as it became clear

04:09:02.040 | that one side was establishing an advantage,

04:09:04.640 | the fighting would stop and the kings would settle,

04:09:09.640 | would agree to new terms,

04:09:12.240 | because it was extremely expensive

04:09:13.400 | to build a professional army and you ran out of money.

04:09:16.440 | So it was always the smartest thing to do

04:09:18.240 | is to just stop fighting whenever you could.

04:09:20.920 | And wars would take place,

04:09:23.000 | countries would fight each other in the battlefield.

04:09:25.340 | But in the cities, life went on as normal.

04:09:28.160 | And people within the same cities,

04:09:30.020 | within the cities of the two countries

04:09:31.640 | would be trading with one another.

04:09:33.720 | Life would go on, but the war would be there.

04:09:35.460 | And it was just an independent part of politics

04:09:40.460 | that, all right, we have a problem over this piece of land.

04:09:43.880 | Let's take it outside.

04:09:46.160 | We don't fight in the civilian areas.

04:09:48.660 | We go to the battlefield, we fight with professional armies.

04:09:51.480 | And in fact, sometimes the conflicts would be,

04:09:53.920 | the armies would line up

04:09:55.760 | and they would just have a small contingent

04:09:59.060 | of the two armies fight with one another.

04:10:00.720 | And as soon as one of them establishes an advantage,

04:10:03.140 | then all right, well, you won, let's move on with it.

04:10:07.100 | Governments were far, far, far more careful

04:10:10.320 | about their monetary policy and their,

04:10:14.800 | sorry, their war policy

04:10:15.960 | when they couldn't print their money.

04:10:17.600 | And that has changed with fiat.

04:10:19.640 | And that has allowed this new emergence of this class

04:10:22.880 | of what I like to call chicken hawks,

04:10:24.960 | of people who sit in offices,

04:10:26.720 | like the entire foreign policy establishment

04:10:29.440 | in Washington, DC,

04:10:31.280 | people who have never fought a war,

04:10:33.080 | whose children will never fight a war,

04:10:35.120 | who will never pay to fight a war,

04:10:37.120 | who will never suffer a broken window in their house

04:10:40.380 | because of war,

04:10:41.760 | sitting there and based on these fucking moronic garbage

04:10:45.600 | that they teach at moronic fiat universities

04:10:48.560 | about politics and geopolitics,

04:10:50.560 | making decisions about,

04:10:51.840 | we need to invade that country

04:10:53.400 | and we need to send war there.

04:10:54.520 | And they can do that

04:10:55.920 | because they have this endless money printer.

04:10:58.320 | And that's why, back under gold,

04:11:01.520 | if you were a warrior,

04:11:03.200 | you went and actually joined the war.

04:11:05.480 | And the people who pontificated about war

04:11:09.360 | were the people who had experience with war,

04:11:10.920 | the people who were sending their own children to war,

04:11:13.600 | the people who were fighting with their own money.

04:11:15.840 | Now you have all these fat parasitics come,

04:11:18.720 | sitting in Washington, DC,

04:11:20.080 | deciding, and Washington's just an example,

04:11:22.320 | but all over the world, this exists.

04:11:24.160 | People who have never fought,

04:11:25.120 | who will never carry the consequences,

04:11:26.800 | who are going to devalue the world's money

04:11:30.000 | in order to go and have other people's children

04:11:33.200 | fight each other because of stupid garbage

04:11:36.080 | they learned about politics in university.

04:11:39.240 | - You said you value low time preference,

04:11:44.360 | but I have news for you

04:11:45.760 | that one day you will die,

04:11:48.160 | as far as we know, you're a mortal being.

04:11:50.260 | Do you think about your death?

04:11:52.560 | Do you think about your mortality?

04:11:54.320 | Are you afraid of it?

04:11:56.400 | - I've spent a lot of time introspecting

04:12:02.560 | and thinking about these things,

04:12:03.680 | and I value life a lot.

04:12:06.080 | I value my time on Earth a lot.

04:12:08.320 | And you'll see this in my dealings with people.

04:12:11.240 | Go back to Twitter,

04:12:13.120 | why am I so brash and straightforward?

04:12:15.360 | It really is because life is short,

04:12:17.440 | because I don't wanna waste,

04:12:19.120 | I think on my,

04:12:20.720 | I've said this before,

04:12:25.080 | on my tombstone, let it be written,

04:12:27.600 | he never let anyone waste his time twice in his life.

04:12:30.720 | - His life is short.

04:12:33.360 | - Yeah, you can waste my time once,

04:12:35.000 | you can get me to do something,

04:12:36.280 | and then I realize that was a waste of time,

04:12:37.680 | you will never get me to waste my time twice.

04:12:39.760 | And so you show up in my Twitter with something stupid,

04:12:42.880 | you're never showing up in my Twitter ever again.

04:12:43.720 | - So you're a fast learner.

04:12:45.440 | You give people a chance, but you're a fast learner.

04:12:47.640 | - Yeah, so I try and use my time very wisely,

04:12:50.760 | and I'm unapologetic about it.

04:12:52.840 | My time is the most precious thing,

04:12:54.320 | and the way to get on my shit list forever

04:12:58.360 | is to try and take away my time,

04:13:01.080 | and to abuse my time.

04:13:02.240 | If you do that,

04:13:03.160 | it's the one unforgivable sin for me.

04:13:08.680 | And I think that's really,

04:13:09.880 | I think that's my way of coming to terms with mortality.

04:13:13.000 | We're all gonna die,

04:13:14.280 | and so let's make the most out of it

04:13:15.640 | while we're still here.

04:13:16.600 | And of course, the other way you come to terms

04:13:18.000 | with mortality is you have children.

04:13:19.800 | - Given what you just said,

04:13:23.160 | doubly so, it's a huge honor

04:13:26.920 | that you would spend your valuable time with me.

04:13:29.460 | This is the first time you did it,

04:13:30.920 | so you probably regret all of it,

04:13:32.840 | so we'll probably never see each other again.

04:13:35.200 | But I'm glad you at least took the chance to do it.

04:13:38.280 | It's a huge honor, and I've been a huge fan of yours.

04:13:40.880 | - Thank you, sir. - I think you have

04:13:42.800 | impact on the world that you probably

04:13:45.080 | are not even aware of.

04:13:46.040 | It's tremendous.

04:13:47.640 | And a lot of people love you,

04:13:49.200 | and your work is important.

04:13:50.280 | Even, you know, I disagree with some things you say,

04:13:53.600 | and there's people that disagree with you,

04:13:55.120 | but everybody respects you.

04:13:57.000 | And thank you so much for spending

04:13:58.240 | your really valuable time with me today, brother.

04:14:00.160 | - Thank you, sir.

04:14:01.000 | I really appreciate it.

04:14:01.820 | This was not a waste of time,

04:14:02.760 | and I'd be happy to do it again.

04:14:04.840 | - Thanks for listening to this conversation

04:14:06.400 | with "Save Deena Moose."

04:14:07.800 | To support this podcast,

04:14:09.040 | please check out our sponsors in the description.

04:14:11.560 | And now, let me leave you with some words

04:14:13.720 | from the Austrian economist, Friedrich Hayek.

04:14:16.560 | Economic control is not merely control

04:14:19.960 | of a sector of human life,

04:14:21.500 | which can be separated from the rest.

04:14:23.520 | It is the control of the means for all our ends.

04:14:27.660 | Thank you for listening, and hope to see you next time.

04:14:31.680 | (upbeat music)

04:14:34.260 | (upbeat music)

04:14:36.840 | [BLANK_AUDIO]

Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics | Lex Fridman Podcast #284

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