you can't have permanent war without fiat. And I also think there's a case to be made that you can't really have fiat without war. The following is a conversation with Seyfied Namous, one of the central and most impactful economists, philosophers, and educators in the world of Bitcoin. He's an Austrian economist, an anarchist, and the author of "The Bitcoin Standard" and the new book, "The Fiat Standard." Seyfied does not mince words in his criticism of economists and humans in general with whom he disagrees.

For example, Paul Krugman, who is a neo-Lackensian economist and a previous guest of this podcast. Seyfied's opinions are strong and often controversial. I do push back in this conversation, playing devil's advocate or trying to steal man each side. But as always, I do so in the service of exploring the rich space of ideas that safety has about human nature and human civilization.

I trust the intelligence of you, the listener, to come to your own conclusions. That is the burden of being a free-thinking human. It is on each of us individually to dive into this chaos of ideas, and from that chaos, discover long-lasting universal wisdom to live by. This is the Lex Friedman Podcast.

To support it, please check out our sponsors in the description. And now, dear friends, here's Safetine Amoos. Let's start with a big question. What is money? And what is the role of money in the history of human civilization? Money is a medium of exchange. The thing that defines money is that it is a good that you don't buy for its own sake, because you wanna consume it itself, or because you want to employ it in the production of other goods, which is what capital goods are.

So we have consumption goods, we have capital goods. Money is distinct from those two, because it is a good that is acquired purely to be exchanged later on for other goods. So it's not something that you acquire for its own sake. You acquire it so that you can then later on exchange it.

And that's a market good. That's a market good like all other goods. You acquire food because you eat it, you acquire a car to move you around, you acquire money so that you can exchange it for other goods. And that's something that many people have a hard time grasping, the concept of money as a market good.

But it is a market good, just like all others. And the importance of it is that it allows us to trade, it allows us to develop the division of labor, which would not be possible at any kind of sophisticated level without money. So if we live in a small society of 10 people, then think about all the things that we can make, all the things that we can produce.

If we're only 10 people isolated from the world, there's only very few things that we can make. And therefore we can exchange those things directly with one another. But as, you know, if we get in contact with other societies that have more people, then the opportunities for specialization increase.

You know, if there's 10 people, the only thing that you can make is the very basics you need for your survival. But if you're part of an economy of 10 million people, there's much more room for specialization. You can make a car, you can make a house that's very sophisticated.

And that relies on the division of labor. That relies on you specializing and doing one tiny little thing, which is not what you consume. You know, you trade that thing for all the things that you consume. So as the economy becomes more sophisticated and involves more people, and currently we're all part of an economy of almost 8 billion people, each one of us produces one tiny little thing, and they exchange that thing for all the things that they want.

So because we specialize, we become more productive in doing the thing that we're good at. So, you know, there's people out there who are engineers who are designing windshields in cars. It's a very specialized thing. They sell windshield design to Mercedes-Benz. And then from that, you know, that windshield design is added on to millions of cars around the world.

And from that, they're able to get enough money to meet all of their needs. So the division of labor is enhanced enormously with money, because without money, it's very difficult to be able to exchange a large number of goods. It's very difficult to have a sophisticated economy with a large degree of specialization, because it's very difficult to find people who want the thing that you have and have the thing that you want.

We call this the coincidence of wants. And that's really the problem that money solves. So you make apples and I make oranges. I'd like to have some of your apples, but you don't want my oranges. And that's, we have a problem of coincidence of wants. So what do I do?

You want bananas. I need to find somebody who has bananas, give them my oranges, take their bananas, give you their bananas, and then I take the apples. In that case, bananas are a medium of exchange. So it's natural that a medium of exchange will evolve and will emerge in an economy as an economy becomes more sophisticated.

As we move beyond 10 people and 10 goods, it's inevitable that we're going to come to a situation where we have the problem of coincidence of wants, and the way to solve that is to use a medium of exchange. And it can be anything. It can be a banana.

It can be food stuff. It can be any kind of good. As long as I acquire the good with the purpose of it passing it on to you, not for the purpose of me consuming it or using it, then that's a medium of exchange. - So when we look at the entirety of human society of millions of billions of people, you think of them just a bunch of individuals running around.

I love the term coincidence of wants. So each one of them, it's like a stochastic system. They have desires. It's like a random collection of desires somehow rooted in our evolutionary history, but mostly random in terms of preference of banana or apple, that kind of thing. And then they also have the capacity for competence and excellence in particular kind of labor.

So like specialization. They're able to be incredible at a particular set of tasks. So there's a bunch of ants running around with consciousness and intelligence. And they have desires and they have capabilities. And then there's a coincidence of both the wants they have and the capabilities they have. And you wanted to create a system that kind of exchanges those things.

So when you imagine what is a good, what is markets, when you imagine a market is like a hierarchical system, what do you imagine? What is a market? - A market is just the name for the naturally emergent phenomena of people voluntarily exchanging things. It's-- - At any scale.

- At any scale, yeah. Individual, it could be a market of two people on an island on their own. It could be 8 billion people across the planet. - Naturally emerging. - Yes, this is the thing I think that is very hard for many people who don't have a good understanding of economics to grasp that capitalism and markets are not something that you need a central planner or a government officer to make happen.

Capitalism is just what happens when people are left to their own devices. It's just our cognitive capacity allows us to develop tools that we can use for production. And that's what we do. That's what humans have been doing since they started making spears to hunt. That's the first capital good probably.

So we're constantly accumulating capital. We're constantly trading with one another. We find an opportunity. You've got a lot of oranges, I've got a lot of apples. Then I'll take some of yours, you'll take some of mine. We're both better off. This is just a naturally emergent thing. And money is what makes it enormously powerful.

Money is what allows it to scale really. Money is what allows it to go beyond small societies into just something that is global. Because with money, again, as I was saying earlier, all you need to do is specialize in doing one thing, the thing that you do best, and then you exchange that for money, and you don't have to worry about whether the other people involved in this want what you have and have what you want.

You just sell it for money to whoever wants it, and you buy whatever you want from whoever has it. And that's an enormous reduction in the mental burden of how a market economy functions. So the first thing that I would say about money is that it allows for the division of labor, and it allows for the market system to grow.

And the second thing is that money is a mechanism for storing value into the future. So again, as humans, we develop the capacity to think for the future. We make a spear so that we can hunt, and then we see that it works, and then we take it out of the animal that we hunted it with, and we keep it for the next day's hunt.

And then we start making a better spear, and we make a better fishing rod, and then we make a fishing net, and then we make a fishing boat. And that's our ability to think of the future. And as we start building durable goods, we start thinking more and more of the future.

We start becoming more and more future-oriented. And that's really the process of civilization, the process of denying our needs now in order to think for the future. So instead of spending all of our day on the beach, enjoying ourselves, we take time off from leisure on the beach and spend some time making a spear or making a fishing rod so that our productivity in hunting or fishing tomorrow is gonna be higher.

And so that ability to think for the future is enhanced by our ability to provide for the future. And we do that with durable goods. But then money ends up being the best mechanism for providing for the future because the future is uncertain. So you can save your apples and oranges, you can save the spears, you can save the animal that you hunted.

But these things, first they rot, they're not very good at holding onto their value over time. But even if they were, even if you have objects that are durable, the problem with them is that you don't know if you need them tomorrow or next month or next year. You're not sure if you're going to be needing them.

And you might end up not needing them. And you might end up not finding anybody who needs them or finding somebody who needs them but doesn't value them much and won't give you much in exchange. Money allows you the optionality of saving the most liquid good, the most saleable good.

So it's something that you can sell tomorrow with the least uncertainty. It has the most liquidity, the most ability to be sold without a loss in its value. So money is our most advanced technology and our best technology for moving value into the future. And so I think history really, I argue this in all my books, is that really history, we see, we can think of it as a process of our money gets harder.

And so our money gets better at holding onto its value for the future. And by harder, I mean harder to produce. We find things that are hard to produce that are better at holding onto their value. So they hold onto their value better for the future. And that allows us to plot and plan for the future.

That makes the future less uncertain. And that makes us more future-oriented. In other words, it lowers our time preference. And the harder the money is, the better it is allowing us to think of the future. - So people should know that you've written the book Bitcoin Standard from 2018, I believe.

- Yeah. - And then a new book called Fiat Standard. The Bitcoin Standard is considered kind of the Bible in the cryptocurrency space and the Bitcoin space of just a very rigorous systematic explanation of why Bitcoin, what is it, why should it be, why is it good? So you're describing in that book and in the new book, different implementations of the technology of money.

In the new book, you talk about fiat money, which is another way to do money. So obviously there's a lot of different ways to do money. And maybe you haven't discovered the best way to do money yet. Our conversation today is how to do money better. Maybe we'll go back to bananas eventually.

- Right. Very good reasons why we won't. - Well, we can disagree. We can agree to disagree on this. I'm open-minded to the bananas. One of the biggest source of joy to me when I first came to this country is eating bananas. And so maybe money, happiness, perishable happiness will eventually become the best medium of exchange.

I don't know. Open-minded. Anyway, so you mentioned hard money and soft money. So there's different ways to do money. What is hard money? What is soft money? - In the Bitcoin standard, I present the argument that money is always whatever is the hardest thing to make. Historically, I think we see many examples of that.

So for instance, in prison, people use cigarettes as money because nobody can make cigarettes in prison. In societies, we have the example of Yap Island, for instance. It's an island that doesn't have any limestone, but there's a nearby island that has a lot of limestone. And it's very expensive, obviously, with primitive technology to move limestone from Palau to Yap.

So on Yap, limestones were money. Seashells, rare seashells that are not easy to find end up serving as money in places where they're rare. Glass beads were money in West Africa where there was no glass-making technology because they were imported from abroad and they were very hard to make.

And I think there's a conscious effort of some people might recognize the hardness and the scarcity and choose this as money. But I think what's more important is just a natural evolutionary process whereby people choose all kinds of random things as money, bananas maybe even. But then the people who end up making these bad choices don't end up with any wealth left.

Whereas the people who store their wealth in the things that are hard to make end up acquiring, end up maintaining their wealth and maybe even increasing it over time. And of course, this culminated in the 19th century, in the end of the 19th century by basically the entire planet being on a gold standard.

- What is a gold standard? - The gold standard is basically when money is gold or at least government currencies backed by gold. But the reason gold became money and not copper, not nickel, not bananas is that gold is the hardest metal in the world and it is the hardest metal to increase the supply of.

And the reason for that is based in chemistry. So gold is indestructible. You can't destroy gold in any meaningful sense. It's been accumulating stockpiles for thousands of years. The gold that was worn by Nefertiti back in ancient Egypt is today probably in somebody's necklace or in somebody's gold coin, it's still there.

So for thousands of years, humans have been digging for gold. They dig it out of the ground, they refine it and then they put it in a jewelry or a coin and then it just stays there. It gets melted down into new other forms. The jewelry gets turned into coins or coins get turned into bars.

But it's just stockpiles that are accumulating. On the other hand, every year we get better at our technology of looking for gold. There's more people all over the world. The population increases, the technology improves. So we keep finding more and more gold and we keep making the stockpiles bigger.

However, because we're constantly adding to a stockpile that is not being devalued, sorry, that is not being consumed because there's no way of consuming gold. You can't eat it, you can't burn it, it doesn't rust. Because of that, we're constantly adding to a constantly growing stockpile. So if you look at the numbers, you see over the last 100 years, we've got pretty reliable data on gold production worldwide.

We see that pretty much gold stockpiles increase at around one and a half to 2% per year, every year. So yes, we're making more every year, but we're making more so we're adding to the stockpile. The stockpile grows more. So every year we're adding only around one and a half to 2%.

Compare that to the second hardest metal historically was silver. And that increased historically at around maybe 5% per year or so. Now it probably increases at something like closer to 30% because it's now getting used extensively in industrial uses. So when you use it in industry, you know, when you put silver in a laptop or in a camera or in a machine, effectively you are consuming the stockpile because it's not used as money.

It's taken out of the monetary stockpile. So over the last 150 years, since 1870 in particular, and I discussed this in detail in the Bitcoin standard, what happened in 1870 was Germany won the Franco-Prussian War and Germany was on a silver standard, but the value of silver was declining.

So Germany did something very smart, which is they took their indemnity from France in gold and used that big chunk of gold to switch to going on a gold standard. And since then, silver has been collapsing in value next to gold. So back then the price of an ounce of gold was around 15 ounces of silver.

Today it's closer to 100. It's just been declining for the last 150 years. And so because of that, because of the fact that it's lost its monetary role as people shifted toward gold, the value of silver went down. And so it became economical to use it in more and more industrial applications.

So the stockpile declines. And then as a result, that weakens its monetary properties more and more and more. So that's why by the end of the 19th century, I mean, at the beginning of the 19th century, gold and silver were money. By the end, it was basically only gold.

And the countries that were still on a silver standard, China and India in particular, suffered enormously from it because their money was devaluing very quickly next to gold. And so Europeans who would come to China or India were able to buy things at practically a big discount. - So I hope it's okay if I ask very simple, very basic questions.

There's few people in this world that are good, as good as you are at answering very basic, almost ridiculously basic questions. 'Cause I think exploring questions like what is money is a really great way to think from first principles, to really think deeply about this world. So I really appreciate you doing that.

When you say standard, what does it mean? When you say silver standard, gold standard, again, with the basic question. - The term really, I think, was based out of gold. The first time this came out was the gold standard. So I said gold was money at the end of the 19th century, but it wasn't just that everybody was using gold coins and trading with gold coins, because that's got a problem of divisibility.

So a lot of things are worth less than one gold coin. So how do you buy that thing? And the answer was that you created monetary instruments that were backed by gold. And so currencies, national currencies under the gold standard, were specific units of gold. And that's how a gold standard functioned.

Money was gold, but you had pieces of paper that were redeemable in gold. So you could go to the central bank, you'd give them the piece of paper, the $100 bill or the $10 bill, and they'll give you gold in exchange. And they give you a specific quantity of gold in exchange.

Effectively, the paper was just the receipt for gold. - So the paper exactly represented the amount of gold. - Exactly, that was the plan. Or that was what it's supposed to do. But arguably, we never had a pure gold standard because the nature of gold means that the people who are in charge of the gold, they have an enormous amount of power because the gold is concentrated with them.

And as long as not everybody shows up at the same time asking for their gold, then you can make more receipts than you have gold. - Sure, so there's always shady stuff going on, but at least that's the state of gold, is the receipts should exactly represent the amount of gold there.

And also when you say standard, it means that governments sort of publicly stated that this is the approved, the main way of making transactions that are monetary. So this is the money, this is the official money that you should be using if you live in this country. - Yes, although I would say it's more like the other way around.

It's not that the government's established gold as money. It's more like gold gave the governments the credibility for their currencies. So governments were not the ones that made gold money. Gold has been money before states were invented. States, if you have a government and you'd like to have some legitimacy and you'd like to be able to deal with other governments on an equal footing, you have to go by the gold standard.

You have to have a currency that was redeemable in gold so that you could trade with the rest of the world so that people could, in your country, use that currency. So it's not that governments were choosing gold. It's more like they were having to adapt their own currencies to gold in order to give their currencies credibility.

- So there's a dance there though, because if they had to, then why did they switch away from it after? So there is a dance where the governments, the people pressure. So first of all, the basic characteristics of the hard money pressures the governments and the people in terms of what should be used.

Then the people, based on their community, the network effects, the way they, the narratives they tell each other, all that kind of stuff, they pressure the governments to take on a particular money. And then the governments, you know, they like power, they like control, all those kinds of things.

They pressure the people and tell different kinds of narratives. So there's a dance going on in this evolution of what technology to use for a monetary system. So it's, the reason I, I don't know if governments had to, because they clearly didn't have to because they eventually moved away from it.

So it, but there was pressure probably. - Yeah, but I mean, even after they moved away from it, you know, central banks until today, they still hold a lot of gold reserves. In fact, if you look at 1914, when the world really went off the gold standard, the amount of gold reserves held by central banks was a tiny fraction of what it was.

As time went on, central banks accumulated more and more gold. What ended up happening is they prevented their citizens from using the gold, but they continued to use it. So gold continued to be money up until 1971, because effectively the world was on a dollar standard and the dollars were backed by gold.

But then after 1971, even then, you know, central banks continue to accumulate gold because why would you as a central bank want to accumulate pieces of paper effectively or credit liabilities of another central bank that can produce them infinitely? And it's a lesson that's becoming more and more obvious to governments today, you know, as we see US sanctions taking say Russian reserves or Afghanistan reserves.

And this is why, you know, we see China and Russia have accumulated a lot of gold over the last 10, 20 years. - So just to return to the question of definitions, so what is hard money versus soft money? - Yes, so hard, I mean, it's a relative thing, but the hardness refers to the difficulty of producing more units of the money supply.

So an easy money would be a money that is relatively easy to make. So you can increase the supply by 10, 20, 30, 40, 50%, or something like that. So pretty much all commodities, all market commodities, other than gold and silver, they're easy money and they're not suitable as a monetary medium because they're being consumed.

So if you look at, and in the Bitcoin standard, I mentioned this metric called the stock to flow ratio, which is the ratio of the annual production, the flow, to the stockpile, the existing stockpile. If you look at all the other metals, they're easy money because they're being consumed.

So think about how much stockpiles of copper there are in the world today. So copper companies obviously have some stockpiles of copper. Major copper consumers will have stockpiles of copper, but the vast majority of copper is essentially on a conveyor belt of production from the mine straight to the consumer good that it's being used for.

So the existing stockpiles are roughly in the range of one year's production. If you take all of the companies, I don't have exact statistics, and it's very difficult to get these, but it's roughly in the same range. Like if copper production were to stop completely today, we'll have about a year's production stored in various places.

So that makes copper terrible money because if you started using copper as money, and this is why a lot of people say, well, money is a collective illusion. Money is a social construct. If we all agree that something is money, then something is money. I think this is completely clueless, and it's usually Marxists who believe this, so obviously no understanding of economics.

It's completely clueless because even if everybody in society decided we wanted to make copper as money, even if we all decided to collectively take part in this hallucination or illusion, it would not make copper money. It would just make everybody who decides to take part in this hallucination poor, that's it.

It would make copper miners rich, it would make all of the people who chose copper as money poor, and copper would not be money. It can't work because what happens is because of the fact that the stockpiles are so small, if you buy, even if you get the 1,000 richest people in the world, all of the world's billionaires, they get together and they all dump all of the money that they have, all the stocks, all the bonds, all the gold, all of the Bitcoin, everything that they own, they dump it and they buy copper with it.

What's gonna happen? Price of copper is gonna go up a lot, but what's gonna stop copper miners from flooding the market with even more copper than what the billionaires bought? Nothing. They're gonna dump all of that extra copper production. If the price of copper is gonna go up, so there will be a lot more copper mining than all the other metals.

A lot of nickel companies and gold miners are gonna switch to focusing on copper. And then we're gonna dump an enormous amount of copper on the market. The value of copper is gonna crash, and the people who chose copper as money are just gonna end up with large warehouses of very cheap, rusting metal.

- So that's a brilliant description, and that kind of pushes towards gold, where the stock-to-flow ratio, I guess you would say, is 1.5 to 2%, like you mentioned earlier. - That would be like the inverse of the stock-to-flow. That's the supply growth rate, so the stock-to-flow's the inverse. It's around 60.

- 60, got it. But let me push back on, as somebody who likes human psychology, let me push back on the collective hallucination and the illusion. So that's for copper, but what about paper money? That's not, you can't smoke it, you can't eat it. It's supposed to represent, it's supposed to just be the medium of exchange.

In that sense, what role does collective hallucination play in the effectiveness of money? - Exactly zero, because all of the paper money, first of all, there's never been an instance, and again, this flies in the face of a lot of what, a lot of people like to think about money.

There's never been an instance where a government came out and said, all right, we're printing out these pieces of paper, use them as money. This one is worth 10 apples, or use it for buying things, and here's the piece of paper. This has never happened. They've always taken, fiat money, paper money, all of these things were always born out of fraud.

Initially, it was a receipt for gold, and then they told you, well, you don't need the gold anyway and you have to use this, and then if you don't use it, we throw you in jail. And then, so first of all, it doesn't, you can't enforce this thing, so it's never really just happened, and it's never been hallucinated into existence.

People can hallucinate this kind of nonsense in writing textbooks and books and in academia, but in the real world, people don't hallucinate money. People are very careful about what they put their money in. - For people listening, we're gonna have fun in this conversation, 'cause you're like, you already said Marxist, fraud, hallucination, just because we use these words doesn't mean they're true, but they're fun to talk about.

So you have a strong certainty about the way you talk, which I think is fun. But allow me in my dumb self to push back, to play devil's advocate, and I'll actually ask you sometimes to play devil's advocate if possible, 'cause you're smarter than me on all this stuff, so we want the smartest devil's advocate possible, and I'm certainly not that.

But anyway, but nevertheless, we are currently on the fiat standard, so money does have value, paper money, and the reason it has value is because we believe it has value. To what degree, if we put the hallucination word aside, the belief that something is worth value is actually value and is the thing that helps money work?

'Cause you're saying it's fraud, and the belief is almost valueless. But how much value, can we quantify the value of the belief, the collective belief? - I should say, all economics is subjective. I consider myself an Austrian school economist, and the starting point of all Austrian economics is that all value is subjective.

So obviously, value only exists because humans choose to make the valuation. However, the economic reality of the way that money works means that it's just the technology, like all others. And so, for me, when people say, well, if we hallucinate that this thing can be money, then it'll be money.

If we can hallucinate bananas to be money, then it'll be money. For me, it's like saying, well, if we hallucinate that bananas can be spaceships, they'll be spaceships. I mean, you can call them spaceships if you want, but a banana's not gonna get you to the moon. - But nevertheless, that's true.

So you're drawing a big distinction between physical reality and the space of belief. But it seems like so much power of human civilization, so much destruction, so much creativity, creation happens in our minds. - Absolutely. Everything does happen in the mind. You're not gonna get to the moon, but you might still have a significant impact on human civilization if a lot of people believe a thing.

- True, but economic reality exists in a way in which your beliefs are rewarded when they match up with economic reality. - With physical reality. - And they're punished when they don't. So if you ride a banana, jump off a cliff thinking you're gonna get to the moon, that solves the problem of people thinking that bananas are spaceships by killing people who think that bananas are spaceships.

And I think to go back to your question in terms of paper money, so yes, even though ignoring the original sin of the creation of fiat money and ignoring everything that happened before 1971, all right, well, here we are, people are using, well, it's not really paper money. We should say like fiat money is predominantly credit.

So it's also a digital currency. So more than 90% of dollars are digital, less than 10% of dollars are physical. So it is a digital currency. And all over the world, all these governments are using digital currencies effectively with some physical manifestations in paper. But yet even within these currencies, it's still the same analysis.

And I discussed this in chapter four of the Bitcoin Standard. You look at government monies, you see that the currencies that have held onto their value, the ones that have the biggest value, the ones that play the biggest role in global trade, the ones that are used as currency reserves all over the world, are the ones that have the lowest supply growth rate.

The ones that grow, whose central banks are the least inflationary. And on the other hand, the ones that who supplies more inflationary, similar to copper, end up failing. You look at Lebanon, Venezuela, Zimbabwe. These are currencies whose supply increases very quickly. And therefore their value collapses. Whereas the dollar, the Swiss franc, the Euro, the British pound, the Japanese yen, they increase at a much lower rate in general than these terrible currencies.

And that's why all over the world, you see people are looking to get more dollars and more of these harder currencies than the easier ones. So I think this analysis of the hardness of the money and the ease of money is pretty well supported empirically. - So like you said, you're at least in part or in whole, consider yourself an Austrian economist.

So you're perhaps a great person to ask about the basics. What is Austrian economics? What is Keynesian economics? How do you compare the two? What should people know? Some interesting, what is interesting, defining characteristics to you about these schools of thought? - So Austrian economics, the way that I say it, Austrian economics is economics.

We call it Austrian economics because economics has been hijacked by a bunch of frauds, really. - People who are wrong, okay. - Well, it's much worse than wrong, by people who are just essentially propagandists for inflation. - Right. - It's like your opinion, man. (laughing) - Well, that's also like your opinion, man.

- Yeah, that's true. Well, I also talked to Paul Krugman on this podcast, so he's, the O speaks enough, but he's one of the people that is perhaps most harshly criticized by folks in Austrian economics perspective and vice versa, which is a fascinating tension. - Yeah, he's done a great job as an actor who plays an economist on TV and the internet.

(laughing) - So anyway, now tell me what you really think. No, but so the basics of what is Austrian economics? What perspective does it take on the world? - Yeah, so I mean, Austrian economics really is the continuation of a tradition that it goes back to the ancient Greeks of studying economics.

Historically, it's really just economics and that has evolved over time and the establishment of the Austrian school per se came in 1871, 150 years ago, when Karl Menger, the father of the school, wrote a book called "Principles of Economics" and essentially invented marginal analysis, which is a big deal in economics.

Marginal analysis is the idea that in economics, individuals carry out decisions at the margin, that it's when you make a choice, you're not making it, for instance, if you're making a choice between what should I spend my money on, you're not making a choice whether it is, this thing is object A or B, which one is more valuable for me in general, which one is more valuable for me for the rest of my life.

You're choosing about the next unit right now, at this point, at this stage. And if you analyze economic decision-making at the margin, it makes a lot more sense and you can understand why people decide and make the decisions that they do. Whereas if you don't apply marginal analysis, things don't make sense.

The key thing that marginal analysis helps us solve is what is called the water diamond paradox. So you will die without water, we all need water, and yet water is dirt cheap. Whereas diamonds are extremely superfluous, nobody needs them, nobody's gonna live or die because they have a diamond, and yet they're extremely expensive.

So why is it that as human beings, we pay maybe say a dollar a liter for water, whereas we pay thousands of dollars for a few grams of diamonds. Why is this the case? Do we value water less than diamond? The answer is no, but at the margin, where we are right now, you live in a place where water is very abundant because cities are only built in places where water is abundant.

And you're only making a choice about the next unit of water. And so water is extremely abundant and you're choosing about whether to spend the next unit of money on water. The valuation that you give to water, given that you have a lot of water at home, and that you live in a place that has abundant water, is pretty low to the marginal unit.

But it's very high for water overall. So if I asked you, how much would you spend for water in general? How much would you pay for water for all of your life? It would be a lot higher than diamonds. If I told you you can only have water or diamonds for the rest of your life, you'd choose water, obviously.

But nobody's ever had to make that choice. You only make your choices at the margin. So at the margin, where we are, modern civilization, we have an abundance of water, that's why we have civilization, and diamonds are very rare and scarce. And people are only buying, you know, you buy your first diamond when you're gonna get married, you give it to your wife, and that's gonna be the first few grams of diamond that she's ever gonna own.

- I'm giving my wife water. (laughing) - Smart move. You should definitely give her Bitcoin instead of diamonds. I tell my wife, I occasionally remind her of how many Bitcoin we could have had if I'd bought her Bitcoin with the price of the diamond. - What's the downside, by the way, diamonds from the analysis of like gold and so on?

- Ah, that's a great question. Um, arguably diamonds are a scam. (laughing) Because they became popular as a thing in marriage, after gold was banned, after gold ownership was banned in the US in the 1930s, and in many places around the world. So before that you'd give gold, and the reason you'd give gold in a dowry, in a wedding, is because, you know, it wasn't just that it's pretty and shiny, it's because it's money.

So, you know, if you die, your wife can take the gold and she can live off of it. It's a demonstration that you're giving her something valuable. And that's because nobody can make a lot more gold that has the high stock to flow ratio. But then they banned gold ownership, or they allowed people to only own very tiny quantities of gold.

And that's when the diamond industry stepped in and marketed diamonds as, you know, the thing that you need to give. But the problem with it is, of course, that diamonds aren't like gold. They're not very hard to make more of. And the reason we have scarcity in diamonds is really artificial.

There's effectively a monopoly of diamond producers. They restrict the supply, and it's a pretty dirty business. And the way that they do it is, you know, all of the talk about blood diamonds is a way for them to ensure their monopoly. So if you're part of the monopoly of diamond producers, then it doesn't matter how many people get killed producing your diamonds.

If you're out of the monopoly, then human rights organizations descend on you and call for shutting you down for selling blood diamonds. And they're also restricting the production of artificial diamonds. This is the other thing. You can make artificial diamond, but you can't make artificial gold. So they restrict the production of artificial diamond, and they try and insist that, you know, you shouldn't take artificial diamonds, but they're indistinguishable from real diamonds.

So it's an artificial scarcity, and I think there's gonna come a point at some point that this monopoly's gonna break, and a lot of people are gonna be left with essentially highly devalued jewelry. - I'm gonna take this segment of the podcast, when I'm getting married, I'm gonna send it, and then instead you're getting water or Bitcoin.

- Yes, water and Bitcoin is all you need. - So marginal analysis, focusing on the margin is the thing that allows you to most accurately capture human nature, the actual day-to-day decisions that we humans make. - Yeah, that's really revolutionized economics, so 1870. And that was Menger's work. And then he had a student, Adrian Bomberg, who developed capital theory, and then he had a student, Ludwig von Mises, who is arguably the most important economist ever, and he developed a theory of money, and he wrote a book in 1912 called "The Theory of Money and Credit." And then in the '40s, he wrote "Human Action," which is a big treatise on economics.

And I think this is the correct tradition of economics. And before World War I, this was just known as economics. And then after what happened in World War I, and I discussed this in detail in "The Fiat Standard," is that the Bank of England essentially went off gold and tried to pass off their own credit as being as good as gold in order to finance the war.

And incidentally here, this is part of the history that is not discussed often. This is presented as an innovation. Later on, they needed essentially a propaganda school that would justify what they did. And later on, it's presented as, "Oh, hey, we realized that gold was not good, and now look, we've built this thing that is better than gold, where now the government can just print money whenever it wants, and now gold money is not an issue anymore," which is extremely idiotic, because the whole point of money is that it's not easy to make.

If it's easy to make, it's not money anymore. It's just destroying the entire function of money. And we've seen that happen extensively in the 20th century, after countries went off the gold standard. So essentially, Keynesian economics is just inflation apologia. It's just propaganda to justify inflationism. And it's profoundly nonsensical.

It's built on the idea that if you just make more money, you can stimulate economic production. And of course, this is very self-serving to the central banks and to the banks and to the governments who promote this nonsense. And this is also very pervasive. If you've had the misfortune of studying at a university over the last century, you were taught Keynesian garbage economics.

You were taught that if there's a problem in the economy, the way to fix it is that the government prints money, the government lowers the interest rate, and then that leads to more economic production, which is completely nonsensical. - So, (laughs) so you're, again, for the listener, you're using strong words, push back just to find, to please devil's advocate to hopefully one day arrive at a truth.

So, just because it's in the interest of the central banks and the government, the interests and the models of Keynesian economics and the government are aligned doesn't mean they're wrong. So let's give them a chance. So, the conventional wisdom, perhaps economics wisdom, is that inflation is good in moderation as it encourages spending, but too much is bad because it completely devalues, destroys people's savings.

So a little bit of inflation is good to stimulate spending. And I mean, I suppose this is one of the things that's supported by Keynesian economics. Why is that wrong? - This is basically the whole point of Keynesian economics, is to try and find an endless array of explanations to explain why inflation is a good thing.

- Well, the chicken and the egg. So that's the cynical take. This is a propaganda machine to sell the government's narrative. The less cynical take is this bunch of economists who-- - Who figured out this thing and it happens to be good for banks and governments. And just because it's good for them doesn't mean-- - And it justifies the existence of government and your basic, I don't think it's your basic assumption, but a foundational principle of your thought is that a lot of government is not a good thing.

Your first gut instinct, government bad. Like I mentioned, I live next door to Michael Malice who probably beats you on the intensity and how quickly he says government bad. So, but there's a potential argument for government good. Some government is good, maybe a lot of government is good. Maybe we need a lot of centralized management for resource allocation and so on because we humans specialize, we're too busy and so on.

So there's an argument for that that exists. You probably disagree with any possible argument in that side, but anyway, so why is that idea of Keynesian economics wrong? - I'm gonna focus for this on the money idea, the idea that a little bit of inflation is good. The idea here, I mean, the criticism is that without inflation, people wouldn't spend and then the economy would come to a grinding halt.

And that's nonsensical because people spend not because they wanna keep this magical monster called the economy going. People spend because they need to consume because that's how we live, that's how we survive. You need to eat, you need shelter, you need clothes to keep you warm. And as technology advances, the capabilities of the things that we can do with our time increases and so we wanna buy more things.

So people buy things because people want to consume. There's a limitless desire to consume. There's no shortage of reasons for people to consume, whether it's food or Ferraris or private jets. People just always wanna buy more. - Can I interrupt just really quick? What about the fear about the uncertainty of the future where they might want to buy things, but they're really afraid because it seems like there's a lot like a pandemic going on or whatever it is.

- Yeah, that's good. - So fear of uncertainty, can you have too much fear? - Here's the thing, what I was saying is I was making the point that we don't need to be motivated to consume. Like we have the insatiable desire to consume. Everybody would like to have more of all kinds of things.

Everybody would like to have a bigger house. Well, not everybody, some people have a big enough house, but everybody would like a house. Everybody would like a car, jet, all kinds of things, electronics, machines. So we don't need a desire to consume. But of course the limit on how much we consume is opportunity cost.

Why don't you buy a Ferrari? Well, because that's really expensive and it would mean that, well, maybe you do have a Ferrari, but I mean, most people don't buy a Ferrari because it's too expensive. They can't afford it. They'd have to work too hard to get it. And if they do get it, it might mean that, you know, they can't afford their house anymore.

So we have to economize. That's a good thing. And we have to also think of the future. And so humans consume, that we don't need more motivation to consume. We have to deal with the economic reality of the things that limit us from consuming more. So what Keynesians present is that when there is a problem in the economy, like there was after World War I, the problem is always caused by the inflation.

And what the Keynesian hucksters do is that they look at the consequences of inflation and blame it on people not spending enough. When people are doing the rational thing, you know, the money is, so there was inflation, caused an unsustainable boom, it caused a recession. And now a lot of people lost their jobs and they don't have enough money to go out and spend frivolously.

So they save for the future. The future is uncertain. That's a good thing. You know, that's how you fix things. You begin the recovery by, well, you know, you lost some wealth, so you spend less. Like if your business goes bust, if you lose your job, it's natural and smart that you stop spending money on the frivolous things that you used to spend.

And you save it for the future. You invest in something else, you get a new job. And then once you've recovered, you start spending more. This is very sane and very good. And it's the way to recovery. But essentially the Keynesians have used this as a justification for more inflation.

Because inflation is an addiction. Once the government gets down the path of spending money to solve its problems, then every problem looks like it can be solved by more inflation. And so this is where Keynesian economics comes in. And of course, the Keynesian economics is based on the work of Keynes, which came in the 1930s.

And this is the key point. Like it's portrayed in the textbook as if it's just this scientific breakthrough. That somebody in the 1930s, this genius, came about and realized that, oh, we don't actually need gold. We don't need hard money. We can actually just print all the money. And in reality, of course, it was just the very thin, flimsy, idiotic justification for what governments were already doing for 20 years.

They'd already gone off the gold standard. And they'd gone through 20 years in which they were lying to their population, telling their population, we're still on a gold standard, but there are problems caused by various random things. But don't worry, we're gonna be going back on the gold standard.

20 years later, after they went off the gold standard, they come up with this justification for why, oh, actually, the gold standard was bad. And this is the really pernicious thing about it is, the problems that were caused by us going off the gold standard, were caused by the gold standard.

And we're going to fix them by going off the gold standard even more. - Just because government is lying and it's shady and it does these kinds of things doesn't mean Keynesian economics is wrong. So just, 'cause I wanted to separate a few things you said. It could very well be very wrong.

And they could indeed be hucksters. All of these, such colorful language. I love you deeply for this. This is fun. - Yeah, but I mean, it's not like somebody like Krugman doesn't use this kind of language when discussing Austrians. It's just that when actors like him use it, it's presented as if it is legitimate because he's part of the major shows.

- So the case they make, and the criticism Keynesians make of Austrian economics, and the case they make for Keynesian economics is it's based on empirical evidence. So Austrian economists are pie in the sky, theorists about how human nature works, and it's just all theory. And just like you said, Keynesian economics kind of sell it as a science, data-driven science.

And so where's the data, bro? So one way of saying it is, how do you know if we get rid of inflation? How do you know if we get rid of central banks? If we push towards that direction, we will have a better world, a better functioning economy, better functioning markets, better functioning society.

- This is another inaccurate way in which they present the economics. They present it as if it's just theory and that the data doesn't matter, but that's not the case. What the Austrians say is that without guiding theory, data is mute, data is dumb, data can't say anything. So-- - Theory first, and then you have to have models.

To provide context for interpretation of the data. - Exactly, and it's a sign of just how little self-awareness they have that they think that they're just being led by the data when they're being led by Keynes' moronic theories. And they use the data to justify those theories and to stick by them.

And in fact, they are the ones whose theories cannot be refuted because it's just government-mandated religion. So according to Keynes' nonsense, so the way that the whole thing is, the way that they justify the inflationism is this, and I'm just using this to give an example of what you're talking about in terms of theory.

The way they justify the inflationism, to tie it back to the original point, they justify, all right, we need money to spend, and then the level of spending in the economy is what determines the state of the economy. And I've taught macroeconomics at university level for a while, so I know this.

I know Keynesian nonsense better than most Keynesians know Austrians, if not all of them, I guarantee you. So the way they see it is the level of spending in the economy is what determines the state of the economy. There's a level of output and there's a level of spending.

So there's like the factories on the one side that are churning out goods, and those goods have a certain quantity and value, market value, and it's completely nonsensical, of course, because how can the value of the goods produced be different from the value of the spending? But let's put that aside for a second.

So the amount of spending that happens in the economy determines the state of the economy. If the value of the production, which they call Y, is higher than the aggregate expenditure, so this is the production, and then the aggregate expenditure is lower, then we don't have enough spending to buy all the goods, and then that causes a recession.

The factories start laying off workers, and then the laid off workers start spending less, and then that leads to aggregate expenditure dropping even further, and so it's a vicious cycle where the economy gets into recession, and the only way out is for Keynes' bankster buddies and government buddies to print a lot of money to give to themselves, and then that will-- - That's one interpretation.

But to print more money to increase the expenditure that to match the supply-- - To match the level of output. - Sounds pretty good to me, I'm sold. (Lex laughing) - All right. - Even though you're saying Huckster, so-- - Yes. - You know, the way, I love you very much, but just for people who are listening, I think it's, I love the way you talk, and it's great, and keep doing it, but just for context, I don't know anything that involves human nature deserves this level of certainty.

At least my position is that we don't know what the hell we're doing on basically anything. - Perhaps, but I mean-- - And there's a lot, certainty can get us in trouble, is my worry. I don't know much about economics, I don't even know financial systems, monetary systems, but I've just seen us get in trouble with human psychology, certainty, certainty of ideologies in general.

You mentioned Marxism and so on, I came from the Soviet Union, there's a lot of people that are very certain throughout the history of the 20th century that communism is the utopia, that humanity should strive for. So I'm nervous around certainty. - I could be wrong, but you ask me for my opinion.

- Yes, yes, sorry, so it's that little bit of a caveat. - So to go back to the idea, then on the other hand, you have the level of, if the, the other situation is when the level of spending is higher than the amount of aggregate output. In that situation, you have too much spending, so therefore what ends up happening is inflation.

So according to the Keynesian worldview, this is really important, because this is a way that I'm gonna get to your point about empirical data and to show you why they're not correct. Yeah, they're not correct about what they say about empirical data. So then what this means is that there's a level of output and there's a level of aggregate expenditure.

The aggregate expenditure can either be higher or lower than the output or equal to it. If it's higher, we get inflation. If it's lower, we get recessions, okay? So is there any universe in this model? Is there any potential universe in which you can have both inflation and a recession?

According to the Keynesian model, you can't, right? Because aggregate expenditure cannot be both higher and lower than output. So therefore, if you were truly being an empirical person, if you were looking at evidence and trying to be, trying to analyze data, you'd look at this and say, one example, you just need one example of high inflation and high unemployment to refute this entire model, right?

And of course, the world is full of examples of high inflation and high unemployment. And that's what happened in the 19, and of course, they ignored it and when it happens in poor countries, because poor countries don't really matter. But then in the 1970s, that happened in the US and in the Western economies and the most advanced industrial economies.

So historically, before then, you had all these Keynesian central bankers talking about this model and saying, well, aggregate expenditure is too low now and that's why we have unemployment, so we need to print more money. And then they print more money, inflation goes up, but also unemployment goes up, because this model is broken.

That's not how the world works. That's not, the level of aggregate spending in the economy is not a lever with which you can control inflation and unemployment. So what would a scientist do? What would a non-Huckster do in this case? Admit the theory is wrong and find another way to reformulate it.

Have the Keynesians done that? No, still the same garbage in the textbook that is being taught until today. - So is it possible to have a non-Keynesian model or one that still supports moderate amount of inflation is good for the economy? - I mean, since the 1970s, since this has happened, yeah.

This is what basically most fiat economists, as I like to call them, essentially anybody at a university financed by governments, which is financed by central banks, which is financed-- - I will talk about that. - Yes. - The effect of fiat money on our life, as you write about in your book, fiat standard, one of them is education.

I'm sure we'll disagree there too. Not smart enough to disagree, but I'll disagree anyway. - So yeah, so a whole bunch of other models came up, but basically it's such an example of motivated reasoning. Anybody who's got a familiarity with the scientific method or who's got an engineering background who comes into economics immediately has a lot of red flags.

And I remember when I used to teach macroeconomics, I used to teach introductory macroeconomics, and it's a course that would be taken by econ majors as well as engineers. A lot of engineers would take it as an elective. And every time I'd explain, and I would just teach the Keynesian basic stuff, and every time I'd explain it, there's always that smart engineering kid who just looks at me and says, "Sir, this doesn't make any sense "because this and this and that." And I'm always like, "You get it, exactly, you're correct." Because if you have any kind of shred of scientific thinking you see that this is all motivated reasoning.

Like the answer is government needs to print money. And here's a whole bunch of models brought up by people for why government printing money is good. And the reason they're coming up to this conclusion is that you only get funded if you come up with this conclusion. If you come up with a conclusion that we need to shut down the central bank, you don't get funded by the central bank.

You don't get published in the journals. You don't get a job at the prestigious universities. You don't get quoted by fiat publications like the New York Times and CNN. They don't invite you on as an expert. - Well, that's a fundamental flaw with a lot of institutions we have today, and throughout human history.

Let me zoom out for just a second to the big question. What is economics in general? What's the goal? You said there's a bunch of models. Is any economist basically trying to throw a bunch of models about human behavior on the table and try to generalize it to the global scale so both dance between micro and macro somehow in order to determine public policy and explain the past, predict the future, prescribe policies that can control the future, those kinds of things?

That's the big, basic, ridiculous question of what is economics. - Economics is the study, the way the Austrians define it is the study of how humans make choices under the condition of scarcity. We begin with the starting point of economics is the fact that scarcity exists. And why does scarcity exist?

Well, because it's easier to want things than it is to make them. It's much easier to want a Ferrari than it is to make one. And so because we have wants and we have limited means to meet those wants, we need to economize. It's a permanent marker of the human condition.

We are always economizing at all times. And so how people make those decisions under the conditions of scarcity is what economists study. So to go back to your point on empiricism in Austrian school, so it isn't that the Austrians don't believe in data. On the contrary, it's that theory has to inform data.

And in fact, if you think about it as the example of the stagflation of the 1970 shows, if you have stagflation, that just completely refutes the Keynesian model. The Austrian way of thinking, which is think from first principles, understand how the world actually works, think about how humans act and understand that economics is really all about human action.

So it's not about aggregates of goods. This is really the key distinction in terms of methodology. For the Keynesians, it's physics envy. They look at the market economy, they look at individuals in the market economy, and they think that they can understand the market economy by looking at aggregates.

This is really the key point of what I think makes the certain branch of economics pseudoscientific is the introduction of aggregates. When you introduce those aggregates, how much production takes place, how many people are unemployed, the percentage of the inflation rate, and then you think that you can establish scientific relationship between those aggregates, it's purely physics envy.

In physics, for instance, or in chemistry, you put, let's say, a container which contains a gas, and you have the ideal gas law, PV equals to nRT, calculate the pressure, calculate the volume, and then the temperature. If you have the pressure and the volume, you can calculate the temperature because you have the nRT constants.

So there's a clear relationship that has been demonstrated in a laboratory, and that we can do it right now. We can measure it, and we can see it, and it continues to hold. And all it takes is one scientist to show that this relationship does not hold, to do an experiment that shows this does not hold, and it stops being a law of chemistry, and it's broken.

Whereas in economics, what they've done is they've copied the superficial shape of this without any of the scientific rigor that was used to build it. There's no experiments. You can't experiment on economies. We don't have the ability to establish laws, and all the laws that we establish are just models that get people published and get them on the media to say, my model says we need to print more money, but it's never subject to actual scientific scrutiny.

If it were, they would all be rejected in 15 minutes because the world is full of examples that contradict them. - Was it possible to do scientific scrutiny when it's human nature, when you can't, when there's a nearly infinite number of variables and you can't control them? Is it possible?

So what's the best thing you could possibly do? - You do thought experiments. - But the problem with thought experiments, you know, Freud thinks everybody wants to have sex with their mother. Is he right? - That's the problem with Freud. - I don't know, maybe he's right. Well, obviously, I'm joking on that front, but the-- - Freud is probably under the canes.

- Well, no, I think there's power to the thought experiment. Just like Einstein, you know, a lot of general relativity, special relativity, that's a thought experiment. It originates in a thought experiment. Now, is it true? You know, nice thing about physics, you can eventually have experimental validation. The downside of economics is you really can't have experimental, like definitive experimental scientific rigor of validation of a theory.

So a thought experiment is just a thought experiment. Using your intuition, it's the power of reasoning together about human nature. - And that's why economics cannot make the claims that physics can make. So with physics, you can predict that if you get this gas at this pressure, at this volume, the temperature will be that much.

And you can make that prediction and test it a million times and you'll always get the precisely correct answer. With economics, we can't make quantitative predictions. - On Twitter, and even today, you're very certain about the statements you're making. Do you-- - Yeah, but I don't make quantitatively certain statements.

That's the thing. In economics, we don't make quantitative predictions. We cannot do that because we don't have experiments. But we can understand how the world actually works with humility. This is really the key difference, that the Keynesians think they just wanna copy the methods of physics, and then that's just, you know, gonna give them the certainty of the results of physics, which is like me saying I'm just gonna put a red blanket on my back and jump from the fourth floor because I'm Superman.

Well, it's not the red blanket that's gonna make me Superman. There's a lot more to it. So humility manifests itself in economics as the belief in a free market, meaning like I can't centralize, I can't do centralized control on this thing. We're going to minimize the friction of the free exchange of goods.

- So Austrian economics puts priority in the market. - Yes, and you can arrive at it through two paths. The more practical path, which most scientific-minded people arrive at. You know, I came from an engineering background, so I initially had this idea that what is lacking in economics is mathematization.

We need to have better math models. We need to get all of those tools from engineering, apply them to economics, and then we'll be able to plan the world economy and make it work better. And then you start actually trying to solve problems, you know, trying to actually calculate them.

And you realize nobody can have that ability because the difference ultimately comes down to the fact we can't have experiments. And the reason we can't have experiments is that you can experiment on particles of a gas. You can't experiment on human beings and entire economies. And because particles of a gas are just dumb matter.

And so, you know, you kick matter in a certain way, you can calculate exactly how much it's going to fly. Human beings are much more complex. They have a will inside them. And this is really, this is the humility to understand that you are a human being and other people are also human being just like you.

And that the, you know, every person wakes up every morning and they have a million things in their mind, a million things they care about, a million things they wanna do. And you will never be able to make the decisions for somebody else, let alone for millions of other people.

So this is one path by which you arrive at the conclusion that free markets are better because you've realized that all of the people that think that they can centrally plan markets can't actually do that. And that there's really nothing scientific about them except essentially the rituals they ape of the scientific process.

And the other path I think that makes you arrive at the Austrian perspective or the libertarian perspective I should say is simply the notion of individuals as having their own inalienable right to decide what they want to do with themselves. If you, I mean, the only way that you can give yourself the idea that you get to be planner is ultimately you think you're better than other people.

You think your choice, your judgment overrides mine. And I don't think that's a defensible position. I think I'm in no position to want to force anybody ever. I will never want to force anybody to do anything they don't want. The Keynesian perspective, the central planning perspective is unlike physics, which is let's force a bunch of particles to sit in a lab so that we can study them.

In economics, you're forcing people to do things. Let's stop these people from doing this job because it's bad for the economy and let's get them to do that job. Let's force them to pay this price. Let's tax them this much. Let's prevent them from using gold as money and force them to use our credit as money.

So it has to rely on coercion. There's no central planning without coercion. And coercion is a crime in my opinion. There's no way that it is justifiable morally or ethically. - So from a politics, from an ethical perspective, your view is the, I mean, perhaps the broadly speaking the libertarian view is coercion is unethical.

Freedom is essential. What are the pros and cons of government intervention in the economy? So can you steal, can you provide pros? You just kind of provided arguments against. Is there any arguments to be made for government intervention, for the role of government in society? Speaking from a political or from an economics perspective, what is a positive role of government that you can imagine you can speak to?

- I can repeat many other cases, but I don't find any of them compelling for the reason that I mentioned, which is that ultimately they all rely on putting a gun to somebody's head and using the threat of force. So that's for me is can never be justifiable. Whatever the ends are, if the means are violence and the threat of violence, then the ends aren't justified.

Everything that's good, governments will use as an excuse to justify coercion. So, you know, what are you like? You like motherhood and apple pie. Well, government needs to ensure that motherhood works well and we need government central planning of birth. We need regulations on birth, for instance. We need regulations on how people give birth.

We need to ban people from giving birth in traditional ways that have been tried for thousands of years. We need to force people to do things in the modern scientific way. - Well, so what about things like that all of us use, so infrastructure, for example, or education, or well, the economy too, right?

Can you make a case for the role of some large-scale centralized systems, whether it's government or not, that do this kind of management? - I guess perhaps you could say there's the economies of scale argument that some things must exist at a very large scale and therefore you would want political accountability of the people who manage them.

This is kind of the argument that's given for infrastructure monopolies, you know, for instance, roads or electricity. That, let's say we live in a country, we need one power plant. The bigger the power plant, the better off we will all be, and there's a natural monopoly in the power plant business, so we're gonna have to have one power plant, and since it's only one power plant, then we can't just let anybody own it because then they're gonna make it too expensive, so we need to have the government own it so it can make it too expensive.

- And you don't find that case compelling? - Not at all. I used to believe in it. I was pretty much a Keynesian when I first started my graduate studies at Columbia, and no, I don't find that compelling at all because I think all these examples that they mention of natural monopolies or economies of scale that can only fit at a scale of government, it's always, you know, government bans people from opening power plants, and then there's only one power plant and they need to be in charge of it, but in reality, no, in reality, you know, power plants can exist at all kinds of manners of scales of operation, and yes, of course, there are benefits to centralization in power plants in particular because there's efficiency in generation.

You know, one big power plant is more efficient than 10 equivalent smaller power plants, but there's also inefficiencies in centralization because the more centralized and the bigger the plant is, the further away a lot of the population is going to be, so you're gonna be losing a lot of the electricity and transmission.

- And you believe the free market is best in managing that dance, that balance of centralization. - Exactly. Exactly, and if we do end up in a situation where there's one power plant for an area, then, you know, if the markets ends up centralizing all of it into one power plant, I don't see that as a problem.

There are places, you know, there's a small town with only one barbershop. Is that a catastrophe? No, because they don't need two barbershops. Now, if that barbershop started to take advantage of people, started to charge higher price, well, then that's just an opportunity for others to step in and put them in their place, and that's the same thing with power plants.

It's the same thing with everything. Ultimately, I think the key thing is this. From the central planning perspective, they'll present you the problem as it is, and they'll tell you, well, this is bad, so the fix, you know, and what we can do is better, so let's stop what's bad and do what is better.

Two problems here. Usually, the reason that the thing is bad in the first place is because it is a government monopoly, is because of government intervention, but the second thing is that this notion that we could just pass a law and fix what's wrong and make it better, is it ignores the fundamental underlying reality, which is that what you're doing is you're offering only one way for this problem to be solved and making all other solutions practically illegal.

You're taking taxpayer money, you're putting guns to people's heads to take their money, to use it to build, say, this one solution for a power plant, but you're preventing the free market process from providing us with other alternatives. - Well, so you phrased it sort of from that perspective, but in theory, there is a feedback accountability mechanism for the solution that you propose and enforce by, as you're saying, placing a gun to people's head.

You're accountable for that choice, for the quality of that solution by being voted out if the solution is actually bad. So it's just a different selection mechanism. And I think, I personally believe it is a selection mechanism that has worked in the past. It just often does not work nearly as well as a free market.

And the question is, are there domains in which the free market gets itself into trouble? So this theoretical view is that that's the point of a free market, is it doesn't, if there's trouble, that's a signal, and it will respond to that signal, and it will respond appropriately to make you try to maximize happiness.

The question is, is there a local optima that free markets get stuck in and you need governments to represent the broader scale of the people to get outside of that? - I think the fundamental problem here is the idea that there is a feedback mechanism when there is coercion in one party, when one party can employ coercion and the other one cannot.

So in other words, I'm gonna put a gun to your head, I'm gonna take your money, and I'm gonna use it to buy more guns for me to put against your head, but somehow you're gonna put a paper in a box and that's going to deactivate my guns. - Well, love requires a push and pull, a little bit of tension, a little spice in a relationship.

I think-- - Yeah, I mean-- - A little gun to the head, and that's sometimes-- - Good luck to anybody who's gonna be dating you if you think putting a gun to people's head is comparable to a relationship. - All jokes, but yes, I mean, people don't often think of it as government and the military as gun to the head, but that is sort of a libertarian perspective because ultimately when you, you know, turtles all the way down and at the bottom there's guns.

- Yeah, so-- - At the bottom, if you don't wanna pay, if you don't wanna, you know, all right, I don't wanna be part of your power plant, I wanna get my own generator, I don't wanna do it, and I don't wanna pay for it, you go to jail, you can't not pay for it.

That's really the asymmetry which the market doesn't have, which is why, in my opinion, it's not as if, you know, I'm being stubborn and stuck on the idea that I want a market and that the government can't work. It's presented as if, you know, we're choosing between two different machines, you know, should we use an Apple or a PC, and I'm just constantly choosing one of them and saying that the other one can't work.

It's not equivalent, it's not two machines. We're comparing between a machine and a gun to the head. We're comparing between a situation in which anybody, anywhere is free to provide the service or the good, and anybody anywhere is free to buy it from them or reject to buy it from them.

So anyone can build a power plant, anyone can succeed at it, anybody can fail at it, anybody can build it in a way that I can choose to take part in or not take part in. I can build my own. So we have a situation in which 10 million people, let's say, they each can freely choose to provide the good or to buy the good.

That cannot be considered an alternative on an equal footing to a situation where one person or one entity gets to decide for everybody and those who disagree go to jail. So the problem is that the alternative to governments is other large successful entities that have humans in them and human nature is such that there's corruption, manipulation, and so on.

I think free market depends on the honest communication of information as widely as possible so people can make great rational decisions. But sort of my fear is that like to propose is that in general there's manipulation, whether it's government, whether it's companies. They're going to manipulate, they're going to try to do propaganda, they're going to try to manipulate you.

Deceive you, shut down competition by playing games, human games of different kinds. And sometimes even meaning well. It's not like everybody thinks they're doing good and they're actually doing evil. So how do we prevent the worst of human nature coming out in a free market as well? - By not giving the worst of human nature a monopoly on violence in the institution of government.

- That little inkling of coercion, that little bit of asymmetry creates a gigantic like ripple effect of asymmetry in your view. - Yes, and it ends up just being the place where corporations, individuals, free markets, they can't coerce without the resort to government. So you think about all the examples of corrupt corporations doing bad things.

It's always because they have certain privileges from governments because as it exists, Coca-Cola, McDonald's, all of these giant corporations, they can't do anything to me without government. They can't take any of my money and they can't force me to buy their stuff. And so it doesn't matter to me.

So if Coca-Cola is corrupted, that's a problem for Coca-Cola customers, that's a problem for Coca-Cola shareholders, that's a problem for anybody who deals with Coca-Cola. But as somebody who doesn't drink their stuff and isn't a shareholder, I have absolutely no interest in what happens. They could all go bust tomorrow and I don't care.

I don't buy their product and I'm not a shareholder. So in this situation where you choose to voluntarily associate with people and you only give your money to people you want to voluntarily give the money to, so you either buy their product or invest in their production, in that situation, the only way that a company can get my money is if they build a product that I value or if they convince me that they are going to use it in a way that's profitable.

And I may be wrong, I may invest in a company that fails or I may invest in a company that turns out to be fraudulent but that's my fault. It's my fault that I gave them my money and then it turned out to be scoundrels. But it's a totally different problem when we make it mandatory.

It's violence, it's a crime to put a gun to my head and force me to subsidize companies and force me to come at certain conclusions. - Do you find an interesting distinction, mentioned by Kamalis, between anarchism and libertarianism? So this particular use of violence, this like last resort, this policing force that libertarianism is okay with and anarchism is not okay with.

So basically nation states that keep you safe from the worst of war. - Yeah, I think to be more accurate, the distinction is between anarchism and minarchism. I think libertarianism is kind of a vague term that can encompass both. - Means a lot of things, okay. - Yeah, but-- - On the Karl Marx to Michael Malice spectrum, where do you-- - No, no, I'm full anarchist.

- You're a full anarchist. - Yeah, full anarchist. I mean, I don't find any justification for the use of force and I think recently perhaps, maybe I'm getting old, maybe I'm getting senile, maybe I'm getting wise, who knows, but I'm beginning to become more sympathetic to monarchy. So I'm an anarchist-- - Which, what?

- Monarchy. - Which, what is that? - Kings. - Oh, monarchy. - Yeah. (laughing) And I think-- - Wait, can you, are you joking or not? - No, I'm not joking. And I think, I mean, I think, you know, morally and intellectually, I'm an anarchist, but it's, the reality is we find ourselves in a world in which a lot of people are not.

And the question is, what is the thing that is going to provide you with more freedom? And I think, I'm recently coming around to the idea that monarchy might be the best way to provide people with the largest amount of freedom because to have a free society, you need a majority perhaps or a plurality of people to have a very strong understanding of libertarian ideas, to have a low time preference, to have a preference for the future.

So you need a majority of the population to not decide to go and do something insane in order to continue to have a free society. You know, when a respiratory illness comes along, unfortunately, you know, the last couple of years showed that we, the vast majority of people are gonna freak out and lose their mind and support whatever their stupid TV tells them to support.

And, you know, there's always a current thing and the media is always telling you that we need this current thing as an excuse for more and more government power and more and more government coercion. - What's the role of kings and queens in that case of a monarchy? - The situation-- - What's the role of a leader?

- I think there might be a case that, so as I was saying, you need a majority of the population to get together and decide, nope, whatever is the case, you know, the answer is voluntary. No matter how bad the disease is, it doesn't justify forcing people to stay home.

You wanna stay home, stay home. You wanna wear a mask, take a vaccine, do whatever you want, but you can't force others to do that. So you need a majority of the people to strongly believe in this principle in order to get it in a democracy. Whereas in a monarchy, you just need the king to get it.

And I think the reason kings are more likely to get it is that kings have a low time preference where they think about things for many generations, whereas in a democratic system, your president is likely only going to be there for four years or eight years or 10 years or five years or whatever it is.

So the only way that, you know, all humans are self-interested. So the only way that your president in a democracy can provide for themselves is to maximize the amount of exploitation that they can do of the population during their brief stint. And then when he's out, you get a new one and then that one wants to start all over again.

So every four years you get a new robber. With monarchy, you sign up for a multi-generational subscription to the same family. And when they have the security of knowing that, you know, his great grandson is going to be taking money from your great grandson, suddenly his interest in yours align because they both want your great grandson to be prosperous and have enough money for his great grandson to take.

- So it's a monarchy with a tiny government. So anything required to really provide for a free market. So for maximizing individual freedom and the freedom of the economy. - Yeah, and if I were king, which is highly unlikely to ever happen, but I think, you know, if you look historically, the dynasties that have succeeded at lasting for a long time, the key thing that they managed to do is to basically be libertarian.

The key to being a good king is to just leave people alone, let them do whatever they want, don't rob them too much or rob them as little as possible, or maybe even don't rob them. And, you know, as a king, use your power only to punish people who aggress against others.

Don't use your power to enrich yourself and enrich your friends. And that's really, like, if you look at smart kings, this is what they do, this is what they teach their children and the cycle of kingdoms is that, you know, the first king understands this, builds the empire, and the first couple of generations, they get this and the society is free, the economy is free.

And because of that, you know, there's peace and prosperity, but then over time, the next generation of kids become a lot more high time preference. They haven't worked hard, they don't understand the meaning of hard work, so they become more likely to engage in destructive behavior. So raise taxes, pass laws that require people to do things, even when they're not hurting anybody.

And that ends up basically eventually destroying the kingdom. - Of course, power corrupts. - Yeah. - So you have to kind of create human institutions that prevent you as a king or any kind of leader from expanding. So going back on the original promises and the purposes of your position.

- Yeah. - And then distracting, using tools of technology and communication to distract the populace while you expand the power. - Exactly. - All right. You wrote the fiat standard. I think we danced around it quite a bit, but I don't know if we actually defined it. So what is fiat money?

What is the history of how it came to be? - The fascinating history of the birth of the fiat monetary system is something that really only got uncovered in 2017. This is extremely, extremely interesting. In 1914, Britain joined World War I. And if you remember your history books, it's famous that this was called the August Bank Holiday.

It was just going to be a few weeks where the British troops were gonna go and kick European ass and come back triumphant. And most European countries believed that. But then the war kept on dragging on. And of course, to finance the war, the government, this is what they used to do under the gold standard, governments would issue bonds.

So you'd issue the bonds, people would buy the bonds, the money would be used to finance the military, and then the government would pay off the bond over the next five or 10 or 20 years. So for World War I, the British government, the British treasury issued bonds for financing the war.

And this only came to light in 2017. Only a third of the bonds were actually subscribed. So people, British people, and this is perhaps the greatest thing that they've ever done, they decided fighting a war in Europe is just not my ideal way of investing my capital. It's a stupid thing.

Why should I go and fight? Because the Austrians and the Germans and the Serbians are at each other's throats. I'd rather invest in something else. So they only bought a third of the bond issue. And then the astonishing thing that happened, which really set the tone for the next century of war, murder, Keynesianism, and theft and inflation, was that the Bank of England went and got two of the high-ranking officials in the Bank of England to buy the other remaining outstanding two-third of the bonds under their own name, with a line of credit from the Bank of England.

So it wasn't their own money, but they took money essentially from the Bank of England, bought two-thirds of the bonds that financed the war. And that was how England was able to keep going into the war. So that's essentially what they did is what we today know as quantitative easing.

Back then, they just got, they printed money from the Bank of England, or credit, printed credit, gave it to those two employees. They bought the bonds. The government could fight the war. Sounds like it's a nice idea. And Keynes, of course, being a huckster himself, he himself said this was, he wrote a letter to the Bank of England that was uncovered recently, and he said, "I congratulate you "on this masterly manipulation." I quote it in the book.

Masterly manipulation is what he called it, that they basically managed to buy the bonds using the money of the government. And of course, he never had an idea of how economics works, because he never could ask the question of, okay, and then what? All right, so we just printed money to buy two-thirds of these government bonds.

What's gonna happen next? What could go wrong? Not a question Keynesians ask themselves, because their jobs depend on not thinking about what's going to go wrong. - So a quick question about war, and as somebody who's been nonstop reading and thinking about the wars of the 20th century, and thinking that most of those wars were unjust, unethical, and destructive, how else do you find, how would you finance a war?

So-- - Ideally, you don't. No, but I mean, of course, there are sometimes, you know, you wanna fight for self-defense, yeah, you finance it, taxation or bonds. - So the people really need to want a war, not just with their voices, their thoughts, their tweets, or their actual financial investment.

- Put up the bullets, and the cost of the bullets, and the bodies. - So their life and their financial well-being. That's how it was under the gold standard, mostly, because under the gold standard, the government couldn't print gold. And so they had a budget, and they had a certain amount of gold, and that wasn't just, you know, that they couldn't infinitely increase it.

They couldn't tax their population at will, and it's very difficult to take money from people. You know, you go knock on doors and search everybody's home, see where they're hiding their gold. It's very complicated. On the other hand, when you gave them paper money, which is what the case was in 1914, you could take their wealth just by printing the money.

And that's what changed everything when it comes to war. That's why the 20th century was the century of total war, because under the gold standard, governments fought until they ran out of their own gold. Under the fiat standard, with paper money, with credit money, governments fought until they ran out of liquid wealth in the hands of all of their citizens.

- So let's find flaws in this thinking, if there's any. Okay, there's a lot of pacifist type of thinking in World War II as Hitler was expanding and expanding. Hitler framed himself as a victim of the past, of history. He never attacked anybody. Everyone's always threatening to attack him.

That's kind of the narrative, and he keeps expanding. He keeps, we're talking with this charisma, all the countries around him, into sort of embracing pacifism. Stay out of the war until the war's on your doorstep. So France, just very suboptimal military strategy from the perspective of many European nations in response to Hitler.

They were basically hoodwinked by his words. So then there's Churchill, Winston Churchill, who stepped up and says, perhaps irrationally, from some kind of economics perspective, saying we're not going to back down. We're going to fight Germany. And perhaps that step alone is one of the biggest reasons that Hitler failed in his expansion.

That decision to fight back, what's the right way to do that? If you're Winston Churchill, what's the right way to do that? To fight back evil when violence is required. Now, you could argue that no war is just, but there is such a thing as a just war index, and a lot of people argue if there is a just war in the 20th century, it's World War II.

So how would you fund, if you were Britain, the war? Would you require Winston Churchill to convince the populace, like don't fight until they're fully convinced that this is the right thing to do. You can't just make a decision for them. You have to convince them fully so that they give their life and they give their money to support the war.

Is that the right way to do it? - I think so. And I think when you have a true threat and a true evil and a true force that people really do think is genuine, you don't need to convince them. I mean, when it's real, people will want to fight and people will want to pay to fight.

And I mean, I think though on this particular example, I think the best way to fight Hitler is to have not fought World War I and not take out the Kaiser of Germany. If Britain hadn't, and Britain and the US had not gotten involved in World War I, which really is the senseless war about nothing, like what was in it and what was the goal from anybody fighting that war?

If you look at it, after World War I, there were very minor adjustments in the borders of the countries that were participating. So Germany lost some land, Austria lost some land, but really it wasn't all that massive. And it wasn't like Britain wanted to take over Germany and move their people into Germany and kick the Germans out.

So there was no real value from that war. And that's why the British people didn't want to take part in it. And that's why if they hadn't done this enormously criminal manipulation of printing money to buy the bonds, Britain wouldn't have gotten into the war. Germany would still be a kingdom and Hitler wouldn't rise.

And yeah, there'd be small changes in the borders of various European countries. I struggle to see how it could have been worse. I mean, I struggle to see who benefited from four years of carnage in Europe. And this came at the height of civilization. Before that, the people of Europe had the golden era, 100th gold standard.

They were trading with one another, they traveled and technology was advancing. And they did not expect this war to last this long. And my favorite story from World War I is the Christmas truce football game, which I mentioned in my book. British and German soldiers at the height of the conflict, they stopped on Christmas day and they played a football game against each other.

I mean, this is not a real war where it's a war for survival. Britain didn't want to end Germany. Germany didn't want to end Britain. It was just kings who were emboldened by the fact that they had a printing press playing with the lives of the people. And take that away, take away the printing press, take away their ability to print money.

I think we'd have had a much, much, much better 20th century. - Yeah, the counterfactual history, Neil Ferguson is a historian who gets in quite a bit of trouble. Basically, well, he's a Brit, suggesting that if Britain stayed out of World War I, there would be no Hitler, there would be no World War II.

- Yep, I agree entirely. - But fiat money. - Yeah, so how fiat money was born. Yeah, let's get back to that. So they financed the war with that money. So what could go wrong? That's where we left off. Well, what could go wrong when you've just printed an enormous amount of credit and used it to buy bonds?

What goes wrong is that the value of the currency is going to go down, or in other words, prices of things are gonna go up. So during the war, prices keep going up. And this is, of course, it's gonna sound very familiar to victims of the 20th century. A government tells you it's because of the war, it's not our fault, it's because of the Germans, it's because of the foreigners, it's because of Putin, it's because of this, it's because of that.

This has always been the case. There's always, war is a very good cover for inflation, which is caused by monetary phenomena. So then the war ends, and inflation, prices have more than doubled over the past four years, over the four years of World War I, prices have more than doubled.

And then the British economy is in bad trouble. Obviously, lost a lot of the labor force for four years that was out there fighting. Now those workers come back, prices are up, and so people are requiring, are demanding that the government control prices, and the government is trying to fix the problem of inflation by doing price controls, which is what they always do, which is catastrophic because it makes things worse.

When you implement price controls, you say, all right, well, bread can't be sold for more than X price. Well, that's just preventing bread producers from producing a lot of bread, and that's just making the problem worse. If you let the price rise, the extra price, first of all, it makes people economize, so people will only buy what they need, and it provides the money for the bread producers to acquire the capital and the resources they need to produce more bread, which then brings the price of bread down, but price controls destroy that.

Then they also implement wage controls, so you wanna also make sure that people have high wages. So you raise people's wages artificially, you lower prices artificially, and you cause an economic problem. And this is basically, I use this historical example because it's the birth of fiat, because the Bank of England was the most important monetary system in the world at that time, and because it's the prototype that basically the entire planet copied over the last 100 years.

We've had this same thing happen. The government prints money because of a stupid reason, because somebody in power decided this was worth destroying everybody's livelihood and savings for, and then the consequences come in, and then they start covering up with price controls, wage controls, and then that makes things worse.

And then they, and of course, throughout all of that, they're promising that we're going to go, oh, and oh, so the other thing that they did, which I mentioned in the chapter is, they stopped people from using physical gold, and they confiscated the, well, they didn't confiscate it, but they took the physical gold and they gave people paper.

So I call it the fiat white paper. You know, in Bitcoin, we have the white paper. The fiat white paper was that the Bank of England announced to all of its banks and post offices that from now on, you should not make payment in gold, and you should take payment in gold, and you should encourage all your customers to turn in all of their gold and give them paper instead.

- Is there an actual document? - Oh, yeah, yeah, yeah. - Nice. - Yeah, it was, this is all new stuff. Obviously, nobody really likes to talk about this stuff because, you know, they're fiat economists, so they don't wanna talk about the original sin, but- - Well, you should like republish it as the fiat white paper or something like that.

(both laugh) - There's a fascinating book by a guy called John Osborne. So in the 1920s, I think his name was Montagu. He was the chief of the Bank of England. He commissioned one of his secretaries, John Osborne, to study what the bank did during World War I, and it was a study that was kept under wraps, confidential, in the Bank of England, only released in 2017, almost a century later.

And- - What was special about 2017, by the way? It's a year. It's just that it was a year on which some of this information was released. - Yeah, a bunch of people got into parts of the basements of the Bank of England and found this and published it, and now you can download it as a PDF and find all of the amazing details.

So they confiscated the gold, and they forced people to use the paper, and they promised people that as soon as the war is gonna be over, this is temporary, we're gonna be back to using gold. And of course, if you told people in Britain, this is the real scam about fiat.

If you told people in Britain in 1914, "Hey, we're gonna go off the gold standard "because it's better," I mean, there might have been lynchings of government officials because the British pound at that point, it had been the global currency of the whole world, and the fact that they'd managed, the Bank of England had kept the British pound at a fixed rate next to gold for, since Newton, the exchange rate, the value of the British pound was set by Isaac Newton himself.

He was the warden of the mint, and he made the pound a specific amount of gold, and since then, up until World War I, it was 4.25 pounds per ounce of gold. I think I might be wrong, but I have it in the book. So he'd set that price, and it was a matter of national pride for people in England.

The sterling is as good as gold because for two centuries, it has been stuck to gold. There was the exception of the Napoleonic Wars, but for two centuries, mostly it was stuck to that. And so they went off that, and then they couldn't go back because if they wanted to go back, they didn't have enough gold.

They shipped their gold to the US to finance the war, and they had printed a whole bunch of money that was out there. So this begins the problem for England, and that begins the end of England as the world's superpower. And the way they tried to fight that was to get more and more countries around the world to establish central banks and have unhold British pounds.

So they'd hold, basically dumping their bags like just any other shitcoin. If you get people to buy your shitcoin, that raises the value of your shitcoin. - Can you define shitcoin? - Shitcoin is, my definition of a shitcoin is that it's any form of money where somebody can produce it.

- So soft money? - Not necessarily, I guess. I think the difference, so there's easy money, but the shitcoin is something that someone can produce at a cost that is different from the market cost. So gold, nobody can make gold except that they dig for it, and the cost of mining gold is generally in the range of the price of gold.

Same is true for Bitcoin. - So gold is not a shitcoin? - Gold is not a shitcoin. - The copper is. - I'm not so sure, I wouldn't call copper a shitcoin as much as it is easy money, but I think government currencies and other altcoins, I think are shitcoins because somebody could click a button and make 10 times the supply.

- Would it be fair to say that this began with the will for war in World War I? So the march towards fiat began with a global desire for war in the 20th century. Did war start this, or was war a result? - It's difficult to say, really. I think it goes both ways.

I think you can't have permanent war without fiat, and I also think there's a case to be made that you can't really have fiat without war. So it's some kind of weird dynamical system with a chicken and egg situation, and they build on top of each other, and there's a few individuals that figured out there's a way to manipulate this to play this kind of game, and it escalates, and nothing gives you the ability to manipulate money quite like war.

When you have a war, you can declare an emergency, you can call all the people who oppose you, traitors, you can get people to support you, not because what you're doing is good, but because you play on their sense of tribalism. - In your book, you do cost-benefit analysis, so you do acknowledge or think about the pros of fiat currency.

Can you do just that, look at the benefit, and look at the cost just broadly at the highest level? - So the way that I write the fiat standard is that I try and analyze it as an engineering system in the same way that I wrote the Bitcoin standard.

So with the Bitcoin standard, I looked at Bitcoin from first principles and tried to explain how it works for a reader that doesn't really have much of a background in computer science, networks, or economics. And I thought I'll do the same with the fiat. Let's just ignore the official stories and look at how this thing actually works.

And I think it does have value in the fact that the reason that they were able to pull it off is because it was not possible for people who don't want to be part of it to use gold independently of governments. This is really the key thing. Gold is just very expensive to move around.

And the fact that it is expensive to move around means that there's inevitably going to emerge institutions where it is centralized in physical location. And then these institutions trade liabilities for the gold. So really the gold standard intrinsically must involve credit as becoming part of the monetary system. It has to be the credit.

And because it gets centralized, it can easily be captured by the government. So to be fair, the benefit of the fiat system is that it saves us on the cost of moving gold around, which is pretty significant. Generally, moving a bar of gold across the Atlantic is gonna cost somewhere between 0.1 to 1% of the cost of the gold bar.

So you move it 100 times back and forth between the Atlantic, you need to pay the whole gold bar. The cost of the whole gold bar to move it 100 times across. Well, with fiat money, it's essentially government credit. And so it's just sending a message from one central bank to another and you can move it halfway around the world.

- Is there also something to be said about the cost in time? So you're saving, you're reducing the friction of the communication as well. - Exactly. - Or the transactions as well. - Exactly, it's faster. - How big is that benefit? 'Cause wouldn't you argue that that potential is the thing that enables modern economy, both the speed and the low cost, so increasing the scale and the frequency, the speed of the transactions?

- Yeah, arguably it does help in that regard. However, it isn't as if you couldn't have fast transactions built on top of gold. So you could have gold being used for final settlement and you could have banks settling with one another, essentially using credit. - Can you define settlement just for people who are outside of this world?

'Cause we'll mention that word quite a bit probably. - Good question. So the way that it works is, let's say right now I'm gonna pay you $10 over PayPal or credit card. So it shows up in your PayPal or credit card within a few seconds that I've sent you the money and then that's yours.

But it didn't also happen in those 10 seconds that my bank, which could be in another country, sent the money to your bank into your account. There's a lot of infrastructure underneath that. So what actually happened is that I have an account with my bank and you have an account with your bank.

And when the message is communicated from my app to yours, my bank crosses out the money and your bank credits you with the money. And then at the end of the day, week or month, banks in the same city will settle with one another, banks in the same country will settle with one another, and banks from different countries will settle with one another.

So they won't move the $10 from my account to yours. At the end of the day or week or month, they'll tally all of the money that was sent from one bank to the other and then just settle the difference. So it turns out at the end of the month, my bank had sent $15 million to your bank and your bank had sent $14 million to my bank.

So they give them $1 million and that settles it, that finalizes the transaction. So final settlement really is like the, you can think about it as the infrastructure of the system. And then you can think of these things as being the higher layer levels. And you had a wonderful discussion about that with Michael Saylor.

- So the final settlement is like the moment when you paper an idea's connected physical reality. - Yeah. - Or to some representation of physical reality. - Yeah, and under gold, everything was tethered to physical reality because there was a market commodity at the bottom of all of this.

And nobody could print that market commodity. And so at the end of the month, if your bank made too many payments, if you made too many payments, there was a reckoning. If you were reckless, if you were insolvent, you went out of business. So there was no way to fool that.

But then we moved to the fiat century and everything is credit. At the end of the day, the final layer is government credit. And so as long as you're friends with the government, basically you never go bankrupt. So all kinds of hucksters managed to find their way into getting into position where they don't get bankrupt.

- So in part two of the Fiat Standard called Fiat Life, you describe the effects of fiat money on a bunch of things like life, food, science, education. What is the most pernicious effect of fiat money on our world, on our life? So it's taking a step outside of the monetary system, actually like how that affects our life from this book.

- I mean, there's a whole bunch of things and I won't be able to go over them and I highly recommend reading the book. But if I were to pick one, I would say it's the impact that it has on our time preference, on our valuation of the future.

So remember when we started the discussion, I said that a key function of money is that it serves as a store of value. And the harder the money is, the better it is at providing us with a way for providing for our future. And so the harder the money is, the less we discount the future.

We always discount the future compared to the present. So if I told you, I'm gonna give you something today versus giving it to you 10 years from now, the same thing, you would prefer to take it now 'cause then you'd get to enjoy it over the next 10 years.

So we always prefer the present to the future. There's always a discount on the future. And that discount is called time preference. The degree to which we prefer the present to the future is called our time preference. So the higher our time preference, the less we care about the future.

And the process of civilization is the process of lowering our time preference where we start caring more for the future, we start prioritizing the present less and less. So we start being able to not consume everything that we have and store it. And so money is essential for that.

And under the gold standard, everyone in the world had the ability to provide for their future by simply using the same money that they use. You know, you would work a day and you would get paid in a gold coin and you could take that gold coin and keep it safe for 10 years and know that at the end of those 10 years, that gold coin would buy you slightly more than what it bought you the day that you earned it.

So anybody could provide for their future and anybody could have very high degree of certainty that whatever they're saving is going to be there when they want it in the future. Because the money supply was only increasing at one and a half percent, whereas the production of goods and services was increasing for most cases, for most periods at a higher rate than that.

So you could buy more apples and oranges and houses and cars at the end of the 10 years than you could at the beginning of the 10 years. So everybody had a way of providing for the future. And with that, people lower their time preference. And that is reflected across all aspects of life.

I think it's not just the economic thing. You see it in the savings rate, you know, the ability to deny yourself gratification today. I could take the money that I have and throw a giant party, buy a sports car, buy a yacht. And yet you decide that I'm not gonna do that, I'm gonna keep it so that tomorrow I can throw a bigger party or buy a better yacht or have a better life or give my children a better life.

So all of human civilization really is the process of us lowering our time preference and finding harder monies that allow us to provide better for the future is how we really technologically we do that. I think of the hardness of money as being the control knob for our time preference.

And you can see this reflected in the 20th century where we go from the money supply increases at around one and a half percent under gold to this current situation where over the last 16 years I ran the numbers on money supply and fiat. The global fiat supply has increased at around 14% per year.

So we've done a 10X in the increase in the supply of money annually. And 14% is a weighted average. So if you take a basic numerical average for all fiat currencies, you get something like 30%. The average fiat currency increases by 30%. But if you value it by the volume of each currency so that you're not giving equal weight to the Venezuelan bolivar increasing at 500% a year and the dollar increasing at 8% a year.

If you do it by value of the currencies so that you get the total supply fiat, it's something like 14%. - Unweighted is 30% you said? - Yeah, 30%. It's insane. - I'd like to see the worst ones, the people that are tracking that average up. - Yeah. - Yeah.

But 14% is still an incredibly high, high number. And so you're saying that, sorry, that's the average over the century or the past 100 years? - Over the past 60 years, 1960 to 2020. We get World Bank data on that, pretty reliable data on World Bank and European Union OECD data.

I ran the numbers on that weighted average, something like 14%. - And what effect that has on time preference? - The effect is now it's much, much, much harder for everybody to provide for their future. Everywhere in the world, it's much harder. So how do I get the equivalent of the old gold coin that I could just put under my mattress and expect it to be there 10 years from now?

Well, gold itself isn't cutting it. Gold can't keep up with inflation. And the reason for that is that gold is not being used as a money anymore in that you can't send it internationally, you can't use it to settle trade internationally, which therefore means demand for it monetarily is limited.

And so it's becoming more and more an industrial metal. And as a result of the fact that its value doesn't keep up with inflation, it becomes economical to use it in industry. So we're seeing gold become like silver in that it gets used in industry. So the stockpile declines.

And so the stock to flow ratio declines as well. And it becomes more and more of an industrial metal. And it can't protect your wealth over time very well. So what do you do? Well, you could invest. And this is kind of the obvious answer that Keynesians will give you is, well, you just put your money in an investment.

But investment is different from saving. Saving, the whole point of saving is that the thing is liquid and that the thing carries little uncertainty. You just held the gold coin and it just sat there. It did nothing, it didn't take risk. You knew that it was gonna be there in 10 years.

Investment means you give the gold coin to somebody to go and do something with it. And it could work, it could not work. If it works, you get a positive return, you get more gold back. If it fails, you might not get any of your gold back. So taking on risk is something very different from saving.

Saving is just a way of buying the future. Investing is taking on a risk and you could lose everything with it. So what ends up happening, and this is the Keynesian objection, I think is very wrong and bad because investment is a job in itself. To figure out what to do with your money in order to beat inflation is something that there are professionals out there on Wall Street that have PhDs in finance, that have enormous computers, and they have enormous staffs of PhDs and master's degrees and math nerds that are crunching numbers and figuring out how to allocate your portfolio so that you can beat inflation.

And guess what? The majority of them don't beat inflation. The majority of them can't beat inflation. Not as measured by CPI, which is completely fraudulent, but if you remember- - 14%. - Yeah, that 14% or even the 7%. Like if you look at just the increase in the money supply, which I think is a much better metric, and this is what's reflected on the desirable goods.

Like if you look at the price of real estate in Miami Beach, as Michael Saylor mentioned in your example, it goes up at around 6, 7% per year on average over the last century. So that's, if you wanna live in a nice area, that's what happening to real estate.

If you wanna go to the good universities, that's what's going up. It's going up at a rate that's similar to the increase in the money supply. And you can beat CPI, but CPI is designed so you can beat it, but you can't really beat the appreciation in the things that you actually want to buy, in the price of good food, the price of good real estate.

So, and most investment professionals fail at doing that. So what hope does a doctor or an engineer or a scientist or an athlete have in doing those things? - Investment is hard and saving should be easy. - Exactly. Saving is essential for us as a civilization. And what fiat did is it took that away from us.

And then it forced everybody to become an investor or more accurately a gambler, because you're not just even, because the money itself is broken, because the money itself is constantly changing in value. Investing is becoming more of a crapshoot. I mean, value investing is completely underperforming compared to market analysis.

You listen to the Fed and you, what matters to the price of individual companies is monetary policy much more than it is their own performance. So basically you need to be a junkie watching the Fed and following all of the world's central banks. And you need to learn macroeconomics and you need to learn what all the central banks are doing.

And you need to understand how commodity markets work. And you need to understand how equity markets work and bond markets and real estate markets. You need to do all of those things just in order to be able to save and earn and keep the money that you've already earned.

That's the criminal thing about it. Like I've already earned that money being a doctor, being a dentist, being an athlete, being an engineer. I built a house for somebody and I got that money. And all I wanna do is just make sure that I can have it 10 years from now.

The only way to do so is to become a crappy engineer because you have to spend half your time not doing engineering and instead spend half of that time learning about Japanese central bank monetary policy and commodity markets and what's gonna happen to copper and what's gonna happen to oil and what's happening in the wars and what's happening with foreign policy and Russia and the US and all of those things.

Under the gold standard, you didn't care about any of that stuff. Your gold coin worked regardless of all of those things. So what this means is the future. So first of all, we have all of the problems I mentioned, but also it means that the future becomes much more uncertain.

So you're far less likely to provide for yourself 10 years from now, far less likely to find an easy way to give yourself value 10 years from now. And so you become more short termist. And that is reflected economically in a lower savings rate and we see savings rates decline, but it is also reflected in all manners of decision making.

And I think if you really wanna see what it is, take a look at a society that goes through hyperinflation and look at what happens there. How do people change under hyperinflation and compare that to essentially what we see in the 20th century all over under, not hyperinflation, but under low inflation.

10, 15% that you see across the board most of the time is just slow motion hyperinflation. So what happens in hyperinflation? Everybody gets their paychecks, they run straight to the supermarket, they spend all of their money. Nobody thinks about savings. Nobody thinks about the future. Survival until the end of this month is highly uncertain.

How likely are you to be planning for what you're going to be doing five years from now? Very unlikely, but also it's reflected not just economically, it's also reflected in all aspects of morality and all the way in which we deal with each other as human beings. When your survival is precarious, how much are you invested in the notion of being a good citizen, on caring about your reputation, on caring about not getting caught in a crime?

All of these things become harder to value. So people start committing crime, people start caring less and less about the future. And we see it reflected in everything. And I argue, you see it reflected in architecture. You know, we used to build houses in the 19th century that last until today.

And then in the 20th century, we build essentially disposable cardboard boxes that get scrapped in 20 years. - So what can you say about potential positive effects of lower time preferences? So, I mean, it's a balance. Like, basically, you're talking about an average kind of time preference, but there's some things in life where low time preference could be a negative thing.

So like, if I want to take on risk, not for investment, or a kind of investment, but say I wanna start a business, I wanna take something crazy, take a leap into the unknown, be an entrepreneur. What can you say about that kind of leap? Taking on debt. What's the value of that within the current system?

What's the right approach to that within the current system? What's the right approach overall from an economics perspective? So it's not saving for the future. It's doing something wild, taking the money from your mattress, taking on debt, and having a dream in your heart that you somehow just want to do.

Maybe it's not the wisest investment decision, but it's something, you know, it's being human. It's taking a leap into the unknown, because something in your heart says to do it. - I think you're more likely to be taking the leap in the unknown when you have a little bit of gold in the mattress than when you don't.

I think this is the thing. Like, if you look at the late 19th century, and I discussed this in the Bitcoin Standard, that was the, arguably, the most innovative period in human history. You know, there's qualitative evidence. You know, look at the world around you today. Pretty much everything that we use was invented in that period.

The car, the airplane, the telegraph, the telephone, the camera. Pretty much modern life as late 19th century. You know, the period between 1870 and 1914, 'cause the whole world was practically on a gold standard. The whole world was using the same money, and the whole world could save in the same currency.

That meant that a bicycle shop owner, two bicycle shop owning brothers in North Carolina could go and try and fly, even as all the scientific experts in 1903 were confirming that the possibility of flight has been debunked as unscientific. You know, Lord Kelvin said, "Not in a million years we're going to be flying." Thomas Edison said, "It's never gonna happen." No, I think it was Edison who said a million years, but Kelvin also said, "It's never gonna happen." The New York Times said, "It's never gonna happen," the same month in which the Wright brothers did it.

And they continued to deny that it was gonna happen even two years after they did it. But that's, why could they do that? Because they had savings in gold. They had the security with something that you know is gonna be there, and then you can take a risk with the stuff that is extra.

You know, I have say three years expenditures in gold under my mattress. And I know that I could take a risk with everything else because whatever bad things happen with all of my dreams, like even, you know, flying, think about how insane that is. I still can go back to the three years of gold that I have saved.

- Is it okay to take on debt, given the stuff, the gold and the mattress? - Well, this is the thing, under the gold standard, the way that people finance things was predominantly with capital, with equity. So you would, because you had gold savings, I had gold savings, everybody had gold savings.

When you wanted to start a business, you could use your own savings or somebody else's savings. So you didn't need to get into debt. Well, you could get equity from others, and you could also get debt from others. So there was- - So it's directly mapped to physical reality.

- Yeah, it's directly mapped to economic reality in that there's a hard money out there, that, you know, what you're spending money, you know, you wanna build your airplane factory, you need to get actual resources. So you get actual gold, either yours or somebody else's, you borrow it or you give them equity, but there's real resources.

Now, what happened with the fiat system, and this is, you know, the first part of the book, where I'd look at it from an engineering kind of perspective, is essentially, and I think this is like the breakthrough inside of the book, what fiat does is that it replaces gold mining with credit creation.

The way that we make fiat money, the way that fiat is mined into existence is through credit creation. Most people think of fiat money as being something that happens when government prints money, and we still use the term government's printing money, but the vast majority of fiat is not physical.

And in fact, fiat is not created when it is printed physically, it's created when it is lent. So when you go to a bank to get a $1 million loan to buy a house, that bank is not gonna give you $1 million from their own money or from their depositors' money.

They're gonna make a fresh new million dollars. When you walk out of that bank, the money supply has increased by $1 million to finance your home. So what fiat does is, I mean, it was basically born out of government credit and the credit of banks that are backed by the central bank and the government.

- So if you're part of the institutions that are allowed fiat privilege, where you can just issue loans backed by the central bank, backed by the currency, you are effectively creating new currency, new money, every time you issue the loan. - That's fiat mining is credit creation, I love it.

So can you say something, I mean, you can't really have credit without a demand for credit. You can't really have an increase in supply without a demand for it. Is there any value you place in the humans wanting it? Basically, people wanting to do something with that credit, wanting to take big leaps, big risks, big entrepreneurial decisions.

So is it all credit bad? - No, I think what's bad is, anything in my opinion, anything that is consensual, I wanna borrow money from you and we agree the terms, I can't object to that. As long as you and I both agree, I can't object to that. But in the case of the fiat system, it's not just you and the bank who come to an agreement.

Everybody who uses the currency is forced to be part of that agreement. Because if you default, effectively what's protecting the bank from you is the fact that the government can just print a bunch of money and make the bank whole. So effectively-- - Interesting, so that little agreement between the bank and you is actually an agreement between the bank, you and the entire populace that's using the currency.

- Exactly, they're forced to provide the safety net for you and me to go and make that loan. And that safety net is the devaluation of the currency. That's how the whole thing actually works. So this is why, I wrote the Bitcoin standard explaining Bitcoin and then basically the takeaway message of the Bitcoin standard is you need to stack as much Bitcoin as you can, 'cause this is the best money that has ever been invented.

- And we'll talk about that, why Bitcoin is the hardest money. - But with fiat, the conclusion of the fiat standard, and again, this is not financial advice, I'm a lowly academic, you shouldn't listen to me on issues of money, but I think theoretically and intellectually, the conclusion of the fiat system is you need to be short fiat as much as you can.

That's the smart winning move. So human wisdom over thousands of years is to save, try and not borrow as much as you can, try and accumulate as much savings as you can. That's reversed under fiat. If you're saving money, you're just subsidizing everybody else taking on loans. If you're taking on loans, you're benefiting from all the people that are borrowing.

So the winning move under the fiat system, and this is what rich people do, is you borrow. Rich people under the fiat monetary system, they don't hold assets. If you're worth a billion dollars today, you don't have a billion dollars in a checking account. You've got maybe 100,000, a million, five million or something like that.

A tiny fraction of your money is held in cash. The majority is going to be held in all kinds of other hard assets. And you're gonna be borrowing. The richest people in the world are the biggest borrowers in the world. The most powerful entities in the world, the governments, are the biggest borrowers in the world.

And that's how they are the richest and the most powerful. Because every time you're borrowing, you're giving the bank an excuse to print new money. So you're devaluing everybody else's money and you're getting a bit of the cut. If you were going to buy a house with your savings, you're accumulating the savings and they're losing value.

And if I were to go to buy the same house with credit, I'm getting the bank to print money for me. So obviously they can cut me in on that deal. And that's why it's much cheaper for everybody to buy with credit. That's why everybody buys everything on credit.

- So when we look at the global monetary system, the thing you wanna do as a government is be the sexiest currency out there. So the main currency, like the dollar currently is, is the one that has the most power in that kind of context. So if you were to try to summarize what is the global monetary system as it is today, it's a bunch of fiat currencies battling for position, for use outside their nation, and in so doing trying to gain power in the geopolitical sense.

Is that if we just zoom out, what is the global monetary system? Like what is it currently? So outside of the United States, the whole thing. - Yeah, you could say that, but I think it's more realistic looking at how it has actually evolved over the past few decades.

It's really a dollar system. It's not a system of currencies buying with one another. It's a dollar system. And all other currencies are just basically, I like to call them dollar plus country risk. So each-- - It always returns home to the dollar. - Yeah, there is no competition.

There is no second best, as Michael Saylor would say. And money is like that. Gold was a winner take all by the end of the 19th century. The global monetary market is effectively a winner take all for the dollar. And if we get it to Bitcoin, you'll know I also think digital currencies are also gonna be a winner take all situation.

So money wants to be won. In fact, there is no such thing as multiple currencies. Multiple currencies is just a step back to barter. Money is won. If you go back to a system of several currencies, you're just reinventing barter. So in the case of the dollar system, the global dollar system is built around the dollar because all central banks have dollar reserves and because all central banks use the dollar's clearing mechanisms.

So that's why you're basically playing in the dollar system. This seems to have changed over the last couple of months with the sanctions on Russia and the confiscation of Russian reserves. It remains to be seen what that's going to do and how that's going to change. But it is looking like this dollar system is clearly unsustainable.

It's not sustainable for the US. It's not sustainable for anybody. - Speaking of which, so you do an amazing podcast called the Bitcoin Standard Podcast. So episode 108 of that podcast is about the very thing you just mentioned. And allow me please to read the description of that and then ask you a couple of questions about your thoughts in general.

The description reads, after the Russian invasion of Ukraine, the US confiscated the Russian central bank's significant monetary reserves and banned some Russian banks from the SWIFT network. Serious questions are being asked about the survival of the post-war dollar based world monetary order. Will Russia, China, and other countries actually build an alternative international settlement system after years of threatening to do so?

Will global central banks stop accumulating US treasury bonds and replace them with gold and commodities? Will we witness the birth of a new commodity gold-based monetary order? In this seminar, we use the insights from the Bitcoin Standard and the fiat standard on temporal and spatial salability to explain why reports of the death of the dollar and the emergence of a new gold standard may be exaggerated.

So I would love to get your analysis on this situation. What are the fundamentals of it? What is SWIFT? What are the possible future evolutions of the global monetary system? - Yeah, so SWIFT is the network that the US Federal Reserve uses for moving money around the world. So basically, the US government can sanction you off of SWIFT, as they've done with Russian banks, as they've done with Iran, and as they've done with Afghanistan.

So effectively, I mean, this is really the catastrophe of the current monetary system, is that in order to be able to trade as a member, as a citizen of your country, you need your monopoly, local central bank, to be on good terms with the US government so that they would let them operate it.

And this is really, like, on top of the aspect of the hardness of money, this is the other really powerful thing about Bitcoin, which is that it's just purely a technological thing. It doesn't matter if you're Russian, if you're Iranian, if you're American, if you're Chinese, it's a technology.

And so it's like a spoon or a knife or a car. You operate it properly and it works. And so with Bitcoin, it's the same thing. It doesn't care about your passport. If you have the private key, you click send, and the money goes, well, it doesn't really go, but effectively it does go anywhere it wants, and the money can move without having to abide by political situations.

And the point here is not to bash US foreign policy much as that might be deserved. I'm just going to discuss it from a kind of technical perspective. It has to be a political system with fiat, because ultimately it relies on credit, and then the government is the one that has the guns, and the government is going to decide who gets to pay their loans anyway, and the government's going to have to make its own rules about who gets to play and who doesn't.

And so it has to be political as this kind of fiat system. And when I wrote "The Bitcoin Standard," initially I used to be much more of a gold bug. And in my mind, gold bugs have spent the last 50 years saying the global monetary system is going to collapse next week, and we're going to go back to a gold standard.

And writing "The Fiat Standard" gave me a very good appreciation for why this hasn't happened, and why it's not very likely to happen. I think the reason is, as I said earlier, it's just gold is very expensive to move around, and perhaps more importantly, it's very expensive to verify.

That's really the problem with it. It's very expensive to verify that the gold that you're receiving is original gold. So the only way to do this properly, it's to melt the gold bars down and recast them, which is pretty expensive. So we have this situation now where Russia, which is one of the biggest economies in the world, has been kicked off to varying degrees off of the global monetary system, and the US has confiscated their reserves.

I don't have political opinions about the war. It's not something I'm very familiar with. It's outside of my area of expertise. I'm just analyzing the monetary aspects of it. It is, on the one hand, whether you think the war is justified or the sanctions are justified is not something I can opine on, but the implication of this is that effectively, the US might be shooting itself in the foot because it's telling everybody in the world, your money in our system is not really your money.

It's just a token to play in our arcade, and any point in time, if you misbehave, we kick you away out of the arcade and we take your tokens. And so, I mean, this is something that China, Russia, Iran, and many countries have made a lot of noise about over the past decades.

It got real this year, but it's been decades of China, Iran, and Russia, to some extent, saying that we wanna build an alternative to the US dollar-based system, and yet they haven't, and I think there's very good reasons they haven't, and the reason is, what do you do with it based on?

How do you build it? So you can do a credit-based system based on, but then who's going to be the big boss? Is it gonna be China, is it gonna be Russia, is it gonna be Iran, is it gonna be India? None of these countries wants to be, they don't wanna jump out of the US-based system to get into somebody else's base system.

So China doesn't wanna use a Russian system. Russia doesn't wanna use a Chinese system, and so therefore, you can't use their own central banks' currencies. - Don't you think they have enough leverage, India, China, Russia combined, with several other nations, have enough leverage and incentive to create their own system?

So any one player, yes, but if they collaborate. - Yeah, but then, okay, so what are you basing it on? Who's going to be the boss? Who's going to be the one who can-- - Well, in this case, China, right? 'Cause China's becoming increasingly an economic power in the world that's hard to deny.

- Yes, it's true, and it's the most likely scenario, perhaps, if we were to witness something like this, is going to be a Chinese-based system. - So is it possible to have a split in what is the driving currency of the world? - It's possible, but I don't think it's sustainable.

Again, money wants to be won, and that's the kind of thing that I argue in that seminar. So we could see this emerge based around the yuan, and likely, I mean, Russia is obviously going to hurt economically from what happened, from the confiscation of the reserves and from the sanctions.

So it's not going to be in a position, and of course, because it's outside of the US-based system, it's not in the strongest negotiating position with the Chinese, so the Chinese might be able to get them to join their yuan-based system. But I don't think that's sustainable in the long run because these governments can issue their laws and make their designs and then make their monetary systems, but ultimately, there are billions of Chinese people and billions of dollar-based people, and they're gonna wanna trade with one another.

And the power to want to trade with one another is too strong. We can't just split the world economy into two monetary systems that don't trade with one another. So then, they're gonna wanna trade with one another. - Or the dark possibility is it, the inability to trade as opposed to being a forcing function for trade, it become a forcing function for conflict in cyberspace and potentially hot war.

- Yes, this is the scary part of it. And this is basically how World War II happened, because there's an old historian who used to say when, oh, I think his name is Otto Mallory, and I quote him in "The Bitcoin Standard," "If goods don't cross borders, then bombs will." If people trade with one another, they have an incentive for each other's well-being, and then they have less of an incentive to fight.

And it was the death of global trade in the 1930s because of the failure of the fiat system that brought about the rise of the populism and the rise of all those leaders that hated each other and helped finance the war and bring it about. So that is the scary possibility.

And of course, you can't discount that with all of the escalation that you see, that is a possibility that it could turn into a real war. But then even so, I think ultimately, you can't fight wars forever. It's gonna end at some point. And we're gonna be back at square one, or well, not square one, we're gonna be back at the same dilemma of who's going to have the global monetary system.

And so one alternative is that what the Chinese and the Russians could do is they could base it on a commodity. So a lot of people are now saying, well, they're gonna base it on copper and corn and agricultural commodities. And that's the analysis of salability that we discuss in "The Bitcoin Standard" and the fiat standard.

I don't think that's workable. If you end up basing the monetary system on copper, as we said earlier, doesn't matter how many governments say that we're gonna make a new monetary system based on copper grains and nickel and iron and so on, doesn't matter. You're just gonna stockpile, you're gonna have to stockpile those things in order to make a market in them.

And then if you stockpile those things, you're just raising their value, inviting the producers to make more, flood the market. I hope they don't try this because it's going to be a devastating, devastating impact on the world economy. You're gonna have central banks bidding up the price of essential commodities that people need for real uses in order to back their currencies with them.

And then just incentivizing the producers to make more and more and more of it, and then bringing the price back down. So it's gonna be a very expensive mistake where we raise the price of copper, destroy a lot of industries dependent on copper. And it's not just copper, but also food.

And then increase the supply beyond what we need. And the end result is copper miners make out well, governments go broke, and we end up with a lot of rusting copper in government warehouses. That's why I don't think it works for the, to use commodities that are not monetary commodities.

Then the question is maybe gold. Can we go back on another gold standard? And I mean, Russia seems to have done that. I'm not so sure. It's very difficult to get reliable information. I'm trying to look into this more. But they seem to have said that they're fixing the price of gold in rubles.

So they will buy and sell gold at a fixed ruble rate, which effectively means you're on a gold standard. Now I'm not sure how much, how serious this is, how they managed to stick to it, but it seems to have stabilized the ruble, and in fact brought it back to its pre-war level, which I found absolutely astonishing, considering all the sanctions going on.

But in the short run, it's obviously much better than having your currency pegged to nothing. But in the long run, I also don't think gold is gonna cut it in the 21st century. - Do you think there's any chance they go full gangster move and go into the digital space on the blockchain, and go with Bitcoin?

- I think, you know, the point of this discussion is that we run through all these other options. You know, a Chinese-based system, why it probably won't work. A commodity-based system, why it won't work. And a gold-based system, why it won't work. I think they might have to learn this the wrong way, I mean, the hard way.

But eventually, I don't see them doing it now, but eventually I think the winning move is going to be to go on a Bitcoin-based monetary system. - Well, I don't know if everything always has to be the hard way. - I'd love it not to be, but I mean, it doesn't look like there is any kind of desire in China or in Russia to switch to a Bitcoin-based system.

- It's a leap to Bitcoin. - So unfortunately, I think we're gonna go through a few years, maybe many years, of learning the lesson the hard way, of trying to accumulate these commodities and seeing the limitations that make them unsuitable as money today. - One of the things I'm really concerned about is the tension, the amount, the increasing amount of hate in the world.

- Yes. - And the increasing amount of power centers in the world between which hate is making a regular appearance and because the weapons of war are becoming more and more powerful as they have been in the past many decades, I'm really concerned about nuclear war. So let us see if Bitcoin can fix this.

- Yes, Bitcoin fixes all of this. (Lex laughing) First rule of Bitcoin is if it's a problem, Bitcoin fixes it. - All right, well, I have some personal questions for Bitcoin then 'cause I have some, my life is pretty fucked up, so I'll have to try to see. A quick pause for bathroom break, you need anything?

- Sure. - Let's return to the basics. What is Bitcoin? We started with what is money, what is Bitcoin? We talked about hard money, inflation, fiat, the history of money, the history of war in the 20th century, and that takes us into the 21st century. What is Bitcoin? - Bitcoin is a software, and it's a distributed software to operate the peer-to-peer network between members who are all equal on the network, they're all peers.

And what this software does is that it allows you to operate a payment network between those peers. And that payment network has its own currency. And that seems like just a simple software game, but the reason this is such a big deal is I believe Bitcoin is the most advanced form of money ever invented.

And the reason for that comes from two properties that this network has. The first one is that the currency is the hardest money ever invented. It's the money whose supply is the most resistant to inflation, it's the first monetary asset that we've ever invented that is guaranteed to be fixed in its supply, that cannot be increased beyond a certain number.

So there's only ever gonna be 21 million Bitcoins. And that's a qualitative leap forward in our technologies of money. All of our monies leak essentially, because people can always make more and more and more of them, you know, the best money is the one that leaks the least, which is gold, because it only leaks one and a half percent.

In other words, your share of the gold stock is diluted by one and a half percent every year. Ideally, you'd like it to be zero. Bitcoin is currently at around 1.8% headed towards zero. So it's the first money that we've ever had that goes to zero in terms of terminal supply.

So there'll never be more than 21 million Bitcoin. And I think that's a huge deal because, you know, as I said earlier, money is always whatever is the hardest to make, and now Bitcoin is the hardest thing to make. And then the second property, which is extremely important as well, is the fact that it operates without the need to trust in anybody.

It doesn't have a party that is in charge of it. It doesn't have a central authority that can, you know, it's, as I said, it's peer to peer. So there's, it only has users. It doesn't have any admins. There's no authority in charge of Bitcoin that can take your Bitcoin, that can stop you from using Bitcoin, that can change the rules of Bitcoin.

They can't make more of it. So it's fixed, it's available for anybody in the world. It's the hardest money ever invented. And it is absolutely, I think, an enormously, enormously significant invention, because if you read the fiat standard and the Bitcoin standard as well, you'll see my perspective for why I think a very large number of problems on the world, in the world are caused by easy money, are caused by inflation, and caused by government having access to essentially an infinite recourse to people's wealth.

And I think Bitcoin fixes this, because it allows us to have money that has the salability of gold across time, meaning it holds its value across time, like gold, but much better than gold. But also it has similar to, it is similar to fiat in that fiat can travel quickly, but Bitcoin can travel even faster than fiat.

So it combines gold's salability across time with fiat salability across space in one immutable package that nobody can change and nobody can control. - Can you define the word salability? - Salability is the essential property of money. It's the ability of a good to be sold easily on the market, specifically to be sold without much loss in its value.

So houses are great for living in, but they're not very salable. If you wanna sell a house, you can't just click a button and sell a house and have a giant market of people buying houses from you. You need to find somebody who wants the exact house that you have with the exact specifications that you have.

And because houses are not identical, there's no liquid giant market for people to just buy and sell identical houses from. So gold, for instance, has a good salability as money because it's a liquid good, it's uniform, and people are always buying it. Fiat dollars have great salability because everybody's always buying and exchanging dollars for other goods.

So if you have a hundred dollar bill, you can easily get rid of it and you'll get a hundred dollars worth of stuff for it. If you have a hundred dollars worth of stuff, it's harder to get rid of it. If you have a hundred dollar worth of phone, it's not as easy to spend it as a hundred dollar bill.

That's salability. - What do you mean that Bitcoin, I understand that Bitcoin has the salability of gold across time. - Better even, yeah. - Better, yes. Like an order or whatever. And then has the salability of fiat across space. What does that mean? - So if you remember when you asked me what is the advantage of fiat?

What is the advantage it offers us? It's cheaper to move fiat across space than it is to move gold. You know, with the current fiat monetary system for all of its flaws, you know, you can send money, you know, I could send money from my bank account in the US to a bank account in China in a couple of days or in Britain, in France, in a day or two, which is, you know, much faster than you could do with gold and much cheaper than you could do with gold.

But in reality with fiat, you know, the reason Bitcoin improves on that is that with Bitcoin, you're actually selling, you're sending final settlement in a couple of hours. So you send the Bitcoin transaction, you get six confirmations in an hour, you get about 12 confirmations in two hours on average.

With 12 confirmations, you know, you're pretty definitely clearly safe on this. So within a couple of hours, you could send a billion dollars across the ocean and have final settlement on them. It's not just that you've sent a credit obligation that's gonna need weeks and months to settle, which is the case with fiat.

So it is faster than fiat effectively. So it's harder than gold and faster than fiat. That's a good way of putting it. - One other aspect of Bitcoin I have to ask, to me on a human level, it's fascinating, is it was founded by Satoshi Nakamoto, an anonymous founder.

There's no leader. So that's another aspect of the decentralization, it's leaderless. - Yeah. - So unfortunately it's not a monarchy. - Fortunately. - Or fortunately, yes. Who is Satoshi Nakamoto do you think? And first of all, is it you? - It definitely is not me. I don't know who it is.

- If it was, would you tell me? (laughing) - It's a trick question. - Yeah, I know, trick question. But I mean, everybody who knows me knows I can't really code. So you would say that even if you could. (laughing) - That's true. - Do you think it's one person?

Do you think it's multiple people? Is it interesting to you? Do you think it's fundamental to the coin itself, to not the coin, the entirety of the concept, that it's founders and anonymous? And how much guts do you think it takes if it's one person to just walk away from so much money?

- I've considered all these questions many times. It's very hard to formulate a definitive answer to all of them. I don't know who it is, and I don't know why he or them or she are not spending the coins that they most likely have. I think what really matters in Bitcoin about Satoshi is the fact that he's not there.

And this is what's truly astonishing about it. The fact, the most important fact in Bitcoin is the fact that the creator has disappeared and the thing has continued to operate now for almost 12 years without him being there, or 11 years I think it's been since he's left. And this is really the most important thing.

And maybe he died or she died, or they got into an accident on a road trip or whatever, and that's why they haven't accessed their coins. Maybe they're incapacitated for some reason. But whatever reason it is, I really think it's fate or serendipity that is giving us this very vital, very, very, very vital building ingredient in Bitcoin, which no other digital currency would ever recreate, which is that, because it was the first, it was the one that was able to establish the first mover advantage and get all of the people who are interested in the technology to get into it.

And so that's an enormous advantage, but the cherry on top or what made the whole thing really function well is the fact that the guy who made it disappeared and that it continued to operate, which is just a clear illustration that this is a network with no admins. And I'm tempted to think that they're incapacitated in some way, probably dead or gone, because I can't believe the, I don't believe any human being would have this level of self-control to not get into, not want to meddle with their invention so much.

Even if they, you know, they might've had the self-control to like mine the first million coins to get the network going and then throw away the coins or send them to an address that they don't have the key to, because they really just wanted the network to take off.

They may have no access to the coins and that's why they can't move them. I could see that happening, but I find it harder to believe that they would resist the temptation to mess with the network. - You know, it's funny. I find that the founders of ideas are often principled and have the integrity that the eventual users of those ideas don't fully have.

I tend to, you know, we have the kind of cynical view, power corrupts, absolute power corrupts absolutely. And we tend to, in our mind, generalize that all humans are corruptible. And perhaps that's true to some degree, but I think that some people are more corruptible than others. And I find that there is, I mean, I like to think that Satoshi Nakamoto is out there and, you know, just like George Washington chose to walk away.

And it's a principle and the principle is more powerful than the financial reward or any of those kinds of things. It's a principle that stands for freedom. And there's a lot of people throughout history, even recent history, that are willing to die for these principles or live a life full of suffering and sacrifice because they're still living a life of principle and choosing that day after day after day.

So, I mean, there's power to that. Money, what's the worth of money in the end? In terms of just personal financial gain versus knowing how much positive impact there is. So the person that chooses to walk away like that, I think is the same kind of person that chooses to live by that principle.

You have people like that, you know, in Grigori Grisha-Perelman in mathematics who turned down the Fields Medal because he was-- - Yeah, that's a medal, not $50 billion of Bitcoin. - Well, that's-- - No, I know, I know, I'm joking. - Well, that's actually an interesting, just a brief comment.

You know, when people talk about Bitcoin in the cryptocurrency space, it's often mixed up financial interest and ideas. And I think those are often correlated, but that good feeling you get when you win or number go up or you just, just somebody, you know, I found 20 bucks on the street the other day.

And just that feeling of just like, ooh, like more money, that positive feeling, that's correlated, but it is distinct from the power of the idea to change the world for the better, for the, to alleviate, it's like Alex Gladstein in the case of Bitcoin, that decreased the amount of suffering in the world because of the authoritarian regimes.

And just because your number goes up, like that gambling feeling of like, yes, yes, this is good. And I mean, short-term number go up. If there's a long-term number go up, that's more like investment and so on. And there's a short-term number go up, it's just a good feeling that you can't, you have to, in your mind, keep those distinct from the power of the idea to transform the world.

And if you focus on the power of the idea, maybe a billion or billions of dollars don't matter as much. At least that's what I would like to believe. - Perhaps, but what matters ultimately is that the thing works without him. The thing's worked for 11 years without him.

And I think this is the really important thing. If they had stuck around for whatever reason and they had continued to meddle with it, it's not clear to me how decentralized it could have been. This is the problem with the other currencies. It's like, how do you lose control of the Frankenstein that you've created?

The only way that this Frankenstein continues to survive is if the person in charge of it continues to feed it. And so it continues to be yours. And that's the problem with all the other digital currencies. If you've heard about any of the other 16,000 digital currencies out there, you've only heard about it because there's a small group of people behind it that are working on it, that are promoting it.

And that's why, and I think, you know, Michael Saylor's discussion with you was a magnificent illustration of the difference between Bitcoin and altcoins in that they are securities. And I think he makes a very compelling, brilliant case for why this makes them categorically different from Bitcoin. Bitcoin, you're buying property.

- I think he mentioned he's a huge fan of Dogecoin, but I might be misremembering. - You are misremembering. - Okay, me too. Maybe I'm quoting him out of context. - Yes. - Okay. Let me just ask you about some possible criticisms of Bitcoin. So on centralization, so there's a criticism on the, so on the mining and on the node side, or the node is not really the criticism, but Bitcoin mining is not fully decentralized because a small number of miners control a majority of the hashing power.

I looked it up, there's 10,000, 15,000, whatever the number is of computers that are full nodes, that have the full, that are actively connected to the network. So you could argue that's decentralized 'cause it's global, it's all across the world, but the miners, they're still, it's more centralized. So if you're thinking of making a case for Bitcoin being decentralized, do you worry about the miners being somewhat centralized?

Is the nodes the important thing to think about? - Yeah. - And what number of nodes counts as centralized and not? - The nodes are what matters because the nodes are what determines Bitcoin's consensus parameters. I think the best way to think about it is that miners simply sell a commodity to the nodes and that commodity is Bitcoin blocks.

So what a miner does is they solve the proof of work problem. So they keep operating their computers until they can get a solution to the problem. And then they attach that to a bunch of transactions and present it to the nodes for the nodes to ratify and approve it.

So therefore, this is, and this is, I strongly recommend people learn about the 2017 block size war to understand why miners don't control Bitcoin. I discussed this briefly in my "Bitcoin Standard," but there's a recent book that discusses this in detail called "The Block Size War" by Jonathan Beer.

It's a great description of, in 2017, essentially the miners thought that they could control Bitcoin. You know, they had, there was one mining company that produced the majority of the machines that were on the network. And they, and their allies had a control of the machines that were out there and they controlled the majority of the hash rate.

And they thought that they could change Bitcoin's supply, not supply, sorry, they could change Bitcoin's block size, which is a tiny little detail, technical parameter. It's not even all that big of a deal for the economics of it. But they thought that they could pass this change. They could force this change on the network.

And the members of the network rejected it and they weren't able to do it. So the nodes are what is sovereign. The nodes are what determine the rules of the game. The miners are a service provider. The miners invest capital upfront. You know, they buy the machines, they buy the electricity, they buy the storage, they buy the locations, they pay the rent, and they invest all of that money.

Based on the idea that if they behave according to what the nodes want, the nodes will reward them with Bitcoin. So the miners are in no position to dictate terms for anyone. You know, they've put up their capital upfront and they will only recoup it if they do what the nodes want.

So therefore, what really matters is the decentralization of the nodes. So you wanna have as many nodes as possible. You wanna have a system where there's a large number of nodes. And this is of course the biggest problem with other digital currencies is that, you know, because basically Bitcoin has cornered the market on a digital currency, the only way that you can really get fraction is to generate a whole bunch of buzzwords, but you know, we're doing this and we're doing that.

And so other digital currencies are optimized for bells and whistles and buzzwords. And that means adding a computational load, which makes the nodes bigger, harder to operate, and therefore you have a very small number of nodes. In fact, very few digital currencies are keen to publicize how many nodes there are, and they don't have full nodes in the true sense.

And it doesn't even matter how many nodes they have because de facto, you know, you can spin up a million nodes tomorrow on AWS. Doesn't really matter. What matters is de facto, do the nodes dictate the rules of consensus? And the fact that with most digital currencies, you can have hard forks very frequently and they can change the supply all the time means that there's a small group of people who agree amongst themselves how to move forward.

- Yeah, so you threw in a few criticism of all coins there, but so one is the small group. That one we could talk about, it's a tricky one. And we talked about that with Satoshi Nakamoto, but the other one is small number of nodes sort of to push back on that.

As computational power increases, you can argue that that enables more and more cheap computers to serve as nodes. So at least it paints a future where nodes are always increasing because computational power is always increasing and getting cheaper and cheaper and cheaper. So at least there's a hope for the future for greater and greater decentralization on the node front.

- Yeah, but I mean, ultimately, again, it doesn't really matter how many nodes you have. If you have a, you know, if the way that the currency is run is that you're gonna have a hard fork every few months, which is the case with most other currencies, Bitcoin is the only one that's not have a hard fork.

Basically, the unique thing about Bitcoin in a technical sense is that you could get the original software that Satoshi himself ran in 2009 to start the network, and you could run it today and it would sync with the blockchain. There's one bug you need to fix. One mistake that would have only appeared, I think in around 2013 or '14 or something like that, as that he wasn't aware of back then.

So you just need to fix this one tiny little bug. And then the consensus parameters are still the same. So you're able to sync to it. This is not true for most other digital currencies. I'd say probably all of them, because they've all had many hard forks, which they think of as upgrades.

And, you know, they market this thing as, you know, well, Bitcoin can't upgrade, but we upgrade all the time. Well, yeah, you know what else upgrades all the time? Facebook, Apple, Amazon, anything that centralizes is very easy to upgrade. And that's precisely why, as Michael Saylor says, these things are somebody's liability.

They are security. You're carrying on somebody's technical and economic liability. They can, hard fork, they can 10X the supply tomorrow. - Yeah. They can fall victim to the same corrupting forces that governments fall victim to. Sure, and for people who don't know, yeah, hard fork is a reverse incompatible change to the underlying function of a cryptocurrency.

Of course, there is hard forks of Bitcoin as well. I'm sure all of which you love dearly. Anyway, but that doesn't matter. The original Bitcoin, for the most part, has not undergone any changes. And that's one of the... - I mean, it has undergone changes, but none in the important parameters of the network.

- So another criticism is about energy. So the proof of work, the assessments mechanism uses a lot of energy. What's the response to that criticism of Bitcoin? - Yes, because it's worth it. - Okay. - The airplane uses a lot more energy than a kayak. You know, when you're gonna cross the Atlantic next time, what are you gonna take?

A kayak that is environmentally friendly, according to this insane definition? Or are you gonna take an airplane that consumes a lot of energy? - So the cost benefit analysis here, essentially you have to consider both the cost and the benefit. - Exactly. And I think it's an astonishing testament to just how far backward people's scientific and technological thinking has devolved to the point where we think of energy consumption as a bad thing.

I think it's just... And in the fiat standard, I discussed the whole hysteria around energy. And I think it's a product of fiat inflation because it's a way of trying to covering up the fact that energy is fuels that are reliable and necessary for the current world are becoming more and more expensive because of inflation.

And so governments are always looking for excuses for why you should not be using those things. And so they promote all kinds of stupid pseudosciences to tell you about why these things are bad. But really, you know, all technology is, well, not all, but the vast majority of technological innovations involve economizing on human time and judgment and replacing it with machines, with reliable machines that spend a lot of energy.

So that's what a telephone does. Instead of having to send somebody across the world to tell somebody something else or send a letter, a telephone allows you to do it. The car is like that. You could walk, but a car consumes a lot more energy, but it allows you to travel much faster and safer and more reliably.

An airplane is like that. Modern telecommunication, human prosperity is an increase in the consumption of energy. And I think it is an absolutely criminal thing. And I genuinely mean the word criminal to portray energy consumption as a bad thing because it is truly depriving people of the chance to live a life that makes life better.

You know, it's truly criminal to tell poor countries that they should not consume the same energy sources that are being used in rich countries on which our modern infrastructure and modern life relies. That's what life is. You know, if you reduce the consumption of energy in the US to the levels that you have in poor countries today, the US would become desperately poor.

A lot of people would die. Cities would collapse. - The quality of life would decrease significantly. A high quality of life often requires, given the current technology, a high expenditure of energy. - Yeah, and I should be clear, you know, it's not a quality of life in the sense of, many people think of this as, oh yeah, well, you know, taking needless flights for vacations.

No, no, these are the cherries on top of the cake. But the substance of the cake and the real benefits of energy is the fact that children, premature babies survive in countries that have reliable 24-hour cheap electricity. If your child is born premature, that you put him in an incubator or her, they're highly likely to survive.

If you don't have 24-hour electricity, that child is not gonna make it. And you see it, you know, the level of energy consumption per capita has highly correlated not just to income, but also to health outcomes, to infant mortality, to all of the things that you care about. And Bitcoin is just another technology.

It does consume a lot more energy than central banks. A lot of Bitcoiners like to take a cop out of this by saying, well, you know, central banks consume money and ATMs consume energy. And I think if you calculate how much central banks and banks consume, I think it's a rounding error next to what Bitcoin consumes.

I think Bitcoin is just, maybe not a rounding error, but it's still, Bitcoin is, I think, is going to consume a lot more, and that's a good thing. - You know, what's humbling is to look, 'cause even just looking into this forces me to look at the energy expenditures for many of the things we take for granted.

Obviously, computers and our digital lives are just, Bitcoin becomes a rounding error relative to how much energy is spent on all the computers in our world. But also, like, things like home appliances, microwaves, and hair dryers and stuff. - Yeah. (Lex laughing) Yeah, I mean, this is-- - This starts being hilarious.

It's like, oh, these things that are just part of our modern life, they're either the same order, at least the same order of magnitude as Bitcoin, and they seem like trivial parts of life. - Yeah, and this is the thing. All of the people that complain about Bitcoin's energy consumption, I presume they use washing machines.

Now, why should their desire for clean and dry clothes get to consume energy? And I mean, I used to live in Lebanon. Lebanon had hyperinflation. I escaped from hyperinflation. I escaped, I prevented. My life could have been ruined by hyperinflation, and the reason that it wasn't ruined is because I have Bitcoin.

So, I don't know, am I allowed to swear on your podcast? - Yes, please. - So, fuck your washing machine. (both laughing) Given a choice between my washing machine and my Bitcoin, I'll choose Bitcoin. It's a technology that has already saved my life, and I think it's gonna save the lives of many, many, many, many more people.

But of course, I don't have to choose between my Bitcoin and my washing machine, because we're just constantly consuming more energy, and we're gonna continue to consume more energy in this world, and that's just what progress is. And a small remark, so in principle, I don't think this is a problem, but the other thing about Bitcoin, where it is different from washing machines, Bitcoin is truly unique in this.

It's the only thing whose energy consumption can be produced absolutely anywhere. Your washing machine needs to be in your house where you live, and you live in a city surrounded by 10 million people, and they all have their washing machines, and they're all connected to the grid, and they generally tend to do their laundry around the same time, and so you have to put the load of the washing machine on the grid at the same time.

There needs to be one power plant, and all of the infrastructure needs to work at the same time, and the electricity is pretty expensive because it's being done in a place with high demand. Bitcoin does not need to buy electricity from places where it has high demand, because it can buy electricity from anywhere.

This is what's truly mind-blowing about it. You can buy, you know, what you need, the electricity that you need for mining can be done anywhere. So you can mine, you know, you can have a waterfall in the north of Canada, 300 miles away from any population center. There's water falling, there's energy.

You can put a hydroelectric dam there, and then you can use that energy to operate the miners, and then the miners just need a satellite internet connection, and effectively, you're selling that energy that is isolated to the grid, and because of the way the Bitcoin functions, because of the difficulty adjustment, the only profitable miners are the ones who can get cheap electricity.

Basically, if you're mining at grid cost, if you're mining at around, the average electricity price in the world is around 14 cents. If you're mining at 14 cents in Bitcoin, you're most likely not gonna make it. If you're running your miners at 14 cents, 'cause everybody could mine at 14 cents, and so what happens is if everybody's mining at 14 cents, 14 cents stops being profitable, and then only the people mining at a lower price are profitable, so that's why Bitcoin mining is not competing with your washing machine.

This is the absurd thing about this kind of energy scarcity viewpoint where, oh no, it's a catastrophe, Bitcoin is taking all the electricity, as if the electricity is just one fixed pie that we all have to share and fight over, and this is, that's how I keep making fun of these stupid headlines.

They put out where Bitcoin's consuming more electricity than Portugal. All right, well, maybe we should shut down Portugal then. What the hell has Portugal given us? Obviously, it's not-- - No, he doesn't mean that. I've gotten so much criticism for saying Cristiano Ronaldo's not in the top five. I apologize.

I love Portugal. - That's another discussion we should get into. - What we should do, 'cause you posted a few soccer things. I'm not, I realize how passionate people are about this. Listen, it was a joke, all right? - He deserves to be a potential in the top five.

- Yeah, I love Portugal. And even though I'm a Liverpool fan, I still respect Cristiano Ronaldo a lot. In fact, I hold a very unpopular opinion where I think Cristiano Ronaldo's the greatest football player ever. - Number one, over Pelé and Maradona, Messi, better than Messi. - Yes, he's been doing it for 20 years at the top.

Nobody's ever done that. He's won everything everywhere. Everywhere he goes, at the top, at the Champions League. Really strong argument to be made for him. Messi's never done anything outside of Barcelona. That's the thing. - So you appreciate performance, long-term, versus the genius of the actual play on the field?

- I mean, the genius is, Ronaldo's the top scorer of all time. He scores more goals. - So the genius is in the scoring, not the actual dance of the play, the creativity. - Well, I mean, I don't know. Messi's been absolutely mediocre since he's left Barcelona. - These are strong words.

- He scored, what, two goals in PSG's season this year? They're out of the Champions League. - What about Mohamed Salah? You've posted about him. - Oh yeah, he's my boy. - Is he climbing up to be somewhere in the-- - I think he should win the Ballon d'Or this year.

He probably should have won it last year as well. He's been absolutely outstanding. But I mean, just people are so crazy about Messi, they keep giving him accolades. He hasn't deserved, I think, Messi the last couple of Ballon d'Ors that he got. I mean, he's a great player and everything, but no, he did not deserve it last year.

(sighs) We can agree to disagree. There's something-- - Are you a Barca fan or a Messi fan? - I would say, no, I wouldn't say I'm a Barca fan, but a Barca fan because of Messi. And I just, I think it's like, there's certain things. So when I was growing up in the Soviet Union, Russia, I remember Maradona, he was the first person I saw that I was like, oh wow, this could be, this is greatness in sport, not just football and sport.

And for some reason, I mean, it's something about like Diego Armando Maradona, like the way they were commentating, the genius of his play, the mix of ego, and again, the performance, but being able to carry a team on his shoulders, that I just fell in love with whatever he represented, and then by that, Argentina.

And then Messi, I saw when he was like 16, 17, when he was just like, in the early days. And when you first see a person and you see the genius and you notice that, and then it turns out to be actually a great player, for some reason, you're invested.

You're emotionally invested, you're, I don't know. So you kind of just fall in love and then you pick sides. I mean, that's the thing about football. Part of the fun things about football, soccer is like, you pick a guy, you pick a team and fuck everyone else. And you just have fun talking shit.

I mean, that's part of it. - It's great, it's great because I think, obviously it's a very stupid thing to do, but I think if you don't do it in football, you're gonna do it in real life. - Elsewhere, that's right. - That's why it's very good. That's it, instead of hating people for their religion and for their skin color, hate them because they support Manchester United.

- Exactly. (laughs) So you're a Liverpool fan, that's-- - Yes, yes, hardcore long-term. But yeah, so to go back to the original point on Portugal-- - Energy. - Yeah, energy. Bitcoin is not competing with Portugal because Bitcoin is buying energy from places where we can't buy it. Because all the places where we can buy energy for our washing machines, we're bidding up the price enough to make it non-viable for Bitcoin.

That's why, you'll see those headlines about Bitcoin consuming more energy than Portugal. Well, if you look at Portugal, I mean, they've got giant power plants in Portugal, they've got millions of people and they've got enormous amounts of infrastructure. Where are all of these infrastructure for Bitcoin mining? You don't see it in the cities.

It's all isolated, it's all out away from the cities, or it's connected to grids that have serious overcapacity. So Bitcoin is not out there buying the expensive energy, taking energy away from people who can't afford it. It's out there buying its own energy because it doesn't need to buy the expensive energy that people really need.

- So one other criticism from an investment perspective, from a gambling perspective that people see is the volatility of Bitcoin. Of course, has been somewhat decreasing over time, but what's your answer to the sort of criticism that Bitcoin is too volatile, I wanna stay away, it doesn't seem like a safe place for me to invest either short-term or long-term?

- There's no denying there's a volatility and there's a high oscillation in the value in the short term. So I think the safe way to approach that is in terms of position sizing. If the volatility bothers you, then you're over-invested perhaps. So maybe you should reduce the size of your position so that the volatility doesn't bother you.

This is the short answer that, you know, like stack as much as your conviction will allow you to tolerate the volatility. And of course, the reason you should try and consider tolerating the volatility more is the options are you hold fiat assets, which only go down stable, you know, relatively stable, not a lot of volatility day to day, you know, value of your dollar doesn't change 40% overnight, 20% overnight or something like that, but it does go down reliably, it's gonna go down 40%.

You can count on it, it might take a year, two years, five years, 10 years, compared to the things that you want to buy, it's gonna go down by 40% and it's not gonna come back and it's gonna go down another 40% and then another 40% and then another 40%.

So the option really is relatively short term stability with long term decline or short term volatility with long term rise. And so that's another way in which Bitcoin teaches people to have a low time preference and think about the long term. So stack, accumulate and think of it in the long term.

It's a function of the fact that Bitcoin is new. Bitcoin is currently less than 1% of the global money market so there's about $100 trillion of money out there in the world. $100 trillion roughly of fiat and about $10 trillion of gold and Bitcoin is less than $1 trillion.

So one rich guy decides to get into Bitcoin, that's gonna show up on the Bitcoin chart. You look at it, Elon Musk decides to buy Bitcoin, you see the buy, you see the news, it happens and you see the pump. Elon Musk decides that he doesn't like Bitcoin, you see the drop.

But a few years ago, it used to be that one random millionaire would cause that pump. Now you have to be the richest guy in the world to do that. In a few years, you're gonna have to be the richest country in the world to be able to do that to the Bitcoin price, maybe many years, maybe not a few years.

But as Bitcoin grows, think about it as a liquid pool of money. Currently it's a small pool next to a much larger ocean, which is the entire money market. And so one person jumps from that to this small pool, they can make a big splash. As the pool grows, essentially the salability increases and the likelihood of one individual purchase affecting the price so violently decreases.

And so over time, as the size of the market increases, I think we're gonna see the volatility decline more and more. Ultimately, if you look at gold, historically gold has been very, very stable. It did not achieve its stability because the central bank was in charge of gold supply or because there was a gold committee that decided how much gold gets produced.

It achieved that stability because it became the most salable good. And so therefore it became the good that contains the most cash balances in the world. And the end of the 19th century, everybody held cash balances in gold and new production was a tiny little addition to global production, to the supply.

So that's what made gold the most relatively, I shouldn't say stable because nothing is stable in economics, but relatively it holds onto its value and it's much less volatile than digital currency, than national currencies. That's because it has the highest stock to flow ratio. And that's because its supply is a tiny fraction of the liquid market.

And as the liquid market grows, as the size of cash balances grows and trades in Bitcoin cancel each other out, you get only slight changes in value. So I think as Bitcoin matures, that's going to decline. So effectively, I think the end game is Bitcoin is huge. Bitcoin is worth something like, I think the total addressable market for Bitcoin is not just national currencies and gold's addressable market, but also government bonds.

That's the really big one. - So how do banks compare to gold? So you're saying it'll surpass gold with the 10 trillion? - Yeah. - What's bonds? Where's bonds stand? - So then there's also national currencies, which are about a hundred trillion and there's government bonds, which are around $120 billion.

And sorry, trillion dollars, trillion. - Trillion, sorry. - Yes, trillion. - If we were saying billion, we meant trillion. - Yeah. (laughing) - So you think bonds can move to Bitcoin? - I've always held, this is the prize. This is the main dish. Gold is the appetizer. Bonds are the main dish.

Because bonds have replaced gold. - It's a hell of an appetizer. (laughing) - Yeah. I mean, bonds have replaced gold in people's portfolio. People, you remember when we were saying gold was, you'd hold it as a saving, as the secure part of your portfolio, and then you take risk with the equity.

Currently people do that by holding a part of their portfolio in bonds. That's the part that they treat as their saving account. And then the rest they use for speculation, not speculation, for investment, within which they take risk. Yeah, speculation. And that's stocks and equity and other high-risk assets.

I think Bitcoin is not gonna replace equity. There will always be equity. There will always be companies and people who wanna have equity. But it'll probably replace a big chunk of current equity markets. Because right now, if you want to save, it used to be that you hold bonds.

Now, if you wanna save, you go into stock indexes. So I think Bitcoin likely eats a big chunk of equity markets because currently people are using it as saving. And I think it eats all the bonds. That's my most ambitious statement. - The question is the scale of time that happens across.

But the most important statement you're making is about trend. - Yeah, and also, I mean, let's also remember, currently bonds nominally don't beat inflation. And in real terms, they don't come close to beating inflation. So currently, with bonds, you're taking on credit default risk to buy a bond and also getting less money back in real terms.

Well, Bitcoin doesn't offer you returns, but in real terms, it appreciates much more. And it has, I believe, a lot less risk associated with it than any company or government. - So let's make things spicy and ask, if Bitcoin fails in the long-term future, as Alt, you just said, economics, volatility, things happen in this world.

Well, the human civilization might end in this century. I hope it doesn't, but it might. There could be catastrophic events. If Bitcoin fails, it goes to zero, loses its number one spot, what would be the reason? If you're an alien visiting Earth 100 years from now and just were to analyze the situation, Bitcoin is a pretty new thing.

So the possible trajectories of how the world evolves together with this new monetary technology is nearly infinite. So if it fails, one of those trajectories surely involves Bitcoin failing. What would be the reason? - I think the most likely reason that it could fail, I don't think this is likely in general, but I think it is the most likely of all the unlikely things that could destroy Bitcoin is governments go back on a gold standard.

- So they make, in your view, a better decision than the current system, just not the best decision. - Yeah. - I thought you would go much darker. (laughing) So that's, okay, interesting. So maybe because of Russia, because of China and so on, because of the current war, they might reconsider the power that America holds because of the monetary, because it being the primary currency, and they'll start thinking about going on a gold standard.

- Yeah, but it would also require the US and the Europeans and everybody to want to join in this system and sing Kumbaya and play nice with each other around the gold standard. I think, you know, given that gold already is about 10 times larger than Bitcoin, so it has a first mover advantage.

- Yes. - If governments were to go and peg their currencies to gold again, the price of gold would shoot up, five, 10x, and it would rise in value a lot more. - Of course, that doesn't necessarily kill Bitcoin. - No, again, I'm not saying it's likely to happen.

I'm saying it's, I imagine, less likely, less unlikely than all the other unlikely scenarios because, you know, even with a nuclear war, like 90% of the planet is destroyed, the 10% continue to run Bitcoin. (Lex laughing) - There's a quote. Okay, there's a movement, a community of people referred to as Bitcoin maximalists.

I've seen you referred, at least in the past, as the leader of the Bitcoin maximalists, probably because of your book, you know, "Bitcoin Standard," consider the Bible in general, you're one of the leaders in this space. Do you regret any of the toxicity and derision that often, or perhaps sometimes, originates from this community?

- Definitely not. I'm not in the position to regret other people's actions, so let's just be clear. I think the rhetoric of community is, I reject this rhetoric because I think it's a way for kind of political manipulation and subversion to try and portray people as part of a community and hold people responsible for other people's actions, which I think is ridiculous.

So, you know, some guy on the internet said something mean to somebody, and then, this is very common, and I always try and not get involved in these things. So some guy who identifies as a Bitcoiner says something to somebody that's very wrong. Of course it happens. Tens of millions of people use Bitcoin around the world.

And a lot of these, I'd say parasites, people who don't have anything productive to do with their life, outrage merchants, they'll come out and say something along the lines of, the Bitcoin maximalists are toxic, they're holding Bitcoin back, and they need, and of course it's manipulative. The point behind it is they wanna get to you, they wanna get people who are, not that nobody with 300 followers who said something silly, they wanna get the notable people to basically change their message.

So the idea is, you know, I'm supposed to apologize because somebody with 300 followers I've never met in my life who calls themselves a Bitcoiner said a mean word, and then I need to apologize, and I also need to cut down on my rhetoric about other digital currencies, and I need to do that.

So I'm only responsible for my own actions, and I don't recall regretting anything. - Okay, well let me push back or push further into that direction. Fine, let's leave community aside, labels suck for sure. But you have a spicy way about you on Twitter. Even in this conversation, you had some good, strong words to say about Brookman.

- Yeah, I mean, I've always believed life is too short to mince words. One day I'm gonna be dead, and on my deathbed, I'm not gonna look back and say, I wish I was a little bit more circumspect in expressing my opinions. I'm far more likely to think, you know what, I wish I said what I really think.

- Yes, life is too short to hold back your opinion. The question is, what is really your opinion? 'Cause you're many people in one. So there's a person that loves, there's kindness for other human beings, there's a person that gets annoyed, there's a person that enjoys disagreement, there's a person that enjoys collaboration.

And you can emphasize all of those different things, each of those different things, weigh it differently in your online interaction. There's some aspects of online interaction that encourages, in different communities, online interaction is one community that encourages kinda derision and mockery and so on. So you can choose if you want to engage that part of yourself or some other part of yourself.

Economics is another community that enjoys being very straightforward about their disagreements, pretty harsh. It's fun to watch 'cause it feels like you arrive at the truth much faster 'cause you tear each other apart. But that's a choice, that's a deliberate choice. And I don't want to label an entire community of people by its extremes, I don't think you should do that.

But there's cultural characteristics you start to notice. When you go to France, it's a certain way. When you go to Britain, London is different than rural Britain and New York is different than Iowa. You start to notice things. I mean, you don't wanna generalize, there's all kinds of people everywhere, but there's a certain way of communication on crypto, Twitter in general, but also Bitcoin maximalists that I even early on received a bunch of heat.

I was like, what the hell? (laughing) So listen, there's definitely a difference when I go to the computer science community, machine learning community, it's way friendlier than the cryptocurrency community. I have much more freedom to actually be what I enjoy being, which is asking simple, dumb questions. Even when I've already spent years, sometimes decades with an idea, I like asking dumb questions anyway.

Crypto folks punish you for this, for curiosity, for exploration. I understand the mechanism because so many other people come into that community and they might masquerade as curious, but really they're trying to inject, they're trying to sell some kind of altcoin, there's some scheme, there's some scheme to make money.

And so I understand, maybe that's just the dynamics of the community by nature. It's not like you respond appropriately to the amount of charlatans in the community. So if the fraction of charlatans is low, maybe you can afford to be more loving and kind and so on. And when the fraction of charlatans is high, you have to be harsher.

Perhaps, perhaps, but-- - I think also the stakes are extremely high in this situation. And I think if you don't like Bitcoiners, if you think Bitcoiners are toxic, wait till you meet Fiaters. The Fiat community has financed world wars and genocides and tyrants and the mass death and destruction.

The Fiat community, if you wanna use that term, I don't believe you should, but I mean, Fiat has destroyed the savings of pretty much anybody who's lived through the last 20th century. Pretty much anybody who's lived through the 20th century, no matter where you lived, Switzerland, US, Ethiopia, Russia, you've gone through Fiat problems.

You've had hyperinflation, you've had bank confiscation. There isn't a family in the world today that hasn't had its wealth destroyed over the last century. They all have a story about the inflation and the hyperinflation. And Bitcoin offers us a way out of this. And shitcoins, altcoins, are essentially Fiat world's last gasp attempt to try and salvage Fiat, to try and salvage the idea that some people will continue to be able to print money and other people will have to use that money.

You know, this is Twitter, it's a free market, it's the internet. You don't have to follow anybody, that's the thing. Like, so what I find really objectionable about the people who are so butthurt always about Bitcoin maximalists is, you don't have to click follow on people you don't like.

There are 300 million Twitter accounts. And if you choose to follow the accounts that say things that annoy you and then complain about the fact that they say things that annoy you, I'm sorry, but you're an idiot and you don't know how to use Twitter. Just follow the accounts that you like.

You know, you don't have to be part of this. You don't have to listen to those people. You can choose, there are a lot of Bitcoiners that don't act like this. You can just unfollow the ones that you don't like and block. - Since in the past year, man, time flies, I've met a lot of them and I enjoy them a lot.

And you build that community of people that you enjoy. There are lots that communicate in the way you enjoy. And it's become a meme at this point that I block with love, I think. - Yes. - 'Cause I did not. - I block very prolifically and I strongly recommend people continue to block.

I think Twitter is, you know, you're not gonna get to interact with 300 million accounts anyway. So you wanna be constantly curating the experience by getting rid of people you don't like and following people that you like. And that's just how, you know, after 10 years of using Twitter, you know, you accumulate a block list, which is very big, which I'm very happy for.

I'm gonna pass on to my children. (laughing) - On your deathbed, the grandchildren will gather around and your grandfather can finally share the full list. Yeah. - Again, it's just the Twitter account. If it bothers you so much, ask yourself why it bothers you that some people are so, I'm not referring to you obviously, but I mean the people that are constantly aggravated about this, I don't get bothered by anything on Twitter.

I just block immediately. And I get to curate the experience that I enjoy. And I recommend people do that. It's really a lot less pathetic than complaining about strangers, saying things you don't like, which a lot of, and of course the reason for it is, you know, I mean, when I say it's stupid, it's not really stupid.

There's an ulterior motive there. And the ulterior motive is, hey, I have this shit coin that I made with five other friends of mine. And I'd like you to, I'd like to ride your coattails, Bitcoiners, and I'd like you to please help me promote this shit coin. Like this is, I get this practically every week, whether through email or through Twitter, where, hey, you know, this is our shit coin.

You know, it's just like Bitcoin, but it's better because it does this and this and that. And, you know, basically how can we get you to promote this shit coin for us? And being straightforward and forthright is a great productivity hack because, you know, you just tell those people, no, I'm not interested.

It's a stupid shit coin. And I wish you a quick and swift failure before you take a lot of people's money. And that's what I genuinely think. - Well, but I'll just be upfront with the fact, at least for my taste, just labeling everything as a shit coin, worries me.

So this is my own preference. It's not a judgment on you. It's just my own preference that I'm afraid I'll miss good ideas. I think when you're, me personally, when I'm too certain about things, when I'm too tribal about things, I'll miss actually really strong ideas, outlier ideas, totally new ideas.

So that worries me. One of the downsides of the way Bitcoin is, how much is at stake financially, is that it's less open to good, actually by design, that it's not changing, like with the hard forks and so on, that there's not a kind of curiosity about exploration of ideas.

Of course, in some way, that curiosity can start getting ejected when you start talking about other layers built on top of Bitcoin, you start talking about applications or different things like lightning network. That's where the curiosity can emerge. But still, that's why with cryptocurrency in general, I just try to keep an open mind.

And just the shitcoin as a term is just like a statement that I'm gonna close my mind to it. That's the way I hear it. And, but coming out of your mouth, 'cause you say a lot of other edgy stuff, it's just more you having fun. That's the way I hear it.

But if I said something like that, that's, I feel like, I would feel like I'm closing my mind. - I mean, let me give you the counter argument to that. How much time do you spend emailing back all of these Nigerian Prince email scams that you know email you, tell you, "Send me $5,000 "and I'll send you $15 million." - None.

- None. Why are you being closed-minded to all of these great ideas? - Well, no, but I'm also-- (Lex laughing) - You know, maybe one of them will actually send you $15 million. - But I don't know if I know the difference between the Nigerian Prince and many other people I do talk to who are colleagues and so on, that are also emailing me.

And they're also offering me things, but they don't sound as ridiculously spammy. - Yeah, but I mean, the moment that somebody tells you, "Hey, I'm gonna give you $15 million for nothing. "Just if you send me $5,000," you know, you're getting something for nothing. And essentially with all of the digital currencies, it's the same pitch.

Say, "Hey, you know, come use this thing "that'll allow you to do things that," all of the things that they pretend that they can do, that can be done with computers without having digital currencies. You know, we already have AWS that does cloud computing, that does everything that shit coins pretend to do.

The only difference is AWS doesn't have its own monetary system tacked on top of it to allow Jeff Bezos to basically print his own money. - But don't you think there's some gray area? So let me go for the historical record and let's see if you've changed as a philosopher, economist, human being.

You tweeted three years ago. - Oh, well. - "Anyone who believes proof of stake can work "is either one, completely clueless "at how and why Bitcoin works at all, "or two, a con artist using it as a buzzword "to promote a worthless scam like Ethereum." Do you still believe that Ethereum is a scam and in general, proof of stake?

You're either clueless if you think it's interesting. - Yeah, no, I still stand by that. I think the-- - Would you classify Ethereum as a shit coin? - For sure, it's the mother asshole from which the shit coins spring. - The royal, the king of Bitcoin? - Yeah. I think the key thing is, you know, the way to think about it, there's another tweet from a couple of years ago, which is, essentially proof of work was like the invention of flight.

Like we've got in this machine and we managed to get it to fly off the ground. And proof of stake is, hey, we found a great way to make airplanes cheaper and faster by not making them fly. (laughs) By keeping them on the ground. Like the invention of proof of work, the reason the entire digital currency space exists is because Bitcoin operates based on proof of work.

If Bitcoin was based on proof of stake, it would have died or been shut down from day one. - But that's a hypothesis. And a lot of people believe that. And I think they have a lot of strong support, but basically proof of work is grounded in physics. In the real world, the proof of stake is more about-- - It's politics.

It's the Federal Reserve. It's exactly what we have. It's exactly what we have. It's just a group of people who get to decide the rules. And it's essentially a system that is, you know, it's a security, it's a company. So it's not an innovation in any sense. It's a step backward to what we already had, which is you get a bunch of people in charge of the money.

Now, the only reason it survives in this, and the reason I call these things a scam, and I have no problem with calling them a scam, is because they fraudulently present themselves as being decentralized. They present themselves as just being a different way of doing decentralization than Bitcoin, when it's not.

It's just they're riding Bitcoin's coattails, and they're riding the fact that most people don't quite understand what Bitcoin is and how it works, to portray themselves as a cheaper, better, more efficient way of doing what Bitcoin does. It's not. It's a less legally accountable way of doing what central banks do.

- Right, so, and the basic criticism is that there's a group of people, sometimes a very small group of people that can control the parameters of the operation of the system. So over time, you can't trust, it's not gold under the mattress. It doesn't have that kind of hardness.

- It's not property, and I really, very strongly recommend your discussion with Saylor for people who wanna elaborate more on this. There's a bunch of people in charge, which means that, you know, legally, they should be doing this under securities law, but even as an anarchist, if I don't wanna care about that, the technical implication of it is, this is never going to be adopted as a neutral way of transferring value on the internet, because you need something that enemies can trade with one another.

You can't have something that has a small group of people in charge, because A, this small group of people themselves can be corrupted, and B, they can be coerced. You know, you can put a bunch of people in a room, put a gun to their head, and you can change everything in any of these digital currencies.

And that's why I think, you know, you'll find a lot more sympathy among theaters to shitcoins. The Keynesian economist to Ethereum fanboy pipeline is a very strong one, I think because it's the same thing. It's like, I mean, you like the idea of people being in charge of money, and you think you're gonna be the one who's gonna be in charge of money.

So you see a lot of this phenomena, and you see the same people that want gold and don't like central banking, they get into Bitcoin. - Yeah, so just to actually push back a couple of things. So one is theater. It sounds like I'm trying to be a sophisticated Brit talking about theater, but for many reasons, it's not making me feel good about that.

So, you know, day by day, things change. You used to be one of those. So people evolve, people learn. People that are supporters of Bitcoin might eventually become supporters of Ethereum or go back to supporting fiat. We don't know. People evolve for different reasons. You grow up, you mature, or you become enlightened.

So I think every single person sort of, as this technology is evolving, as this world is evolving, as wars break out and geopolitics change, as the monetary system is constantly put under stress, people will evolve. So we're trying to all figure it out together. That's why open-mindedness here, I think, for people like me at least, seems essential.

- I know, so I expect you to be answering all of the spam emails you get. - I will, print by print by print. But no, I don't have a clear understanding. What is a good investment of my time? What is a good investment of my money? That doesn't seem clear, because things are good at promoting themselves.

I'm not talking about the different kinds of things like Ethereum, altcoins, and so on. I just mean life, like dating, jobs, friendships. Like everybody's advertising themselves as a great investment, right? But you don't know, and you have to keep an open mind. And also, I don't, and be sort of self-introspective about what, how, like biases I operate under, and ways I delude myself, like hallucinations that I'm living under.

It's like breaking out of all these hallucinations. It's very hard to introspect, thinking like, what are the assumptions under which I lived my entire life that might be actually false assumptions? That's a really difficult thought process to take. It's a dangerous one. It's you, the Nietzsche, if you gaze long into the abyss, the abyss gazes into you.

It's like Alex Jones talks about this. I mean, he's living, he's got demons in his head. So he has like all these conspiracy theories that it holds in his head, but it begins to really destroy him. So it's a psychological burden to carry. So if you question authority, if you question government, if you question culture, the way things have been done, it's really difficult.

And the biases you operate under, it's really difficult to question them. So I think like being constantly open-minded and self-critical, not constantly, but a little bit every day is important, I think. - Yeah, but I mean, you're talking to somebody, I grew up in Ramallah in Palestine in the West Bank.

I've changed my mind on all kinds of different things. The fact that I was even open to the idea of Bitcoin has required an enormous, enormous amount of, it's a heck of a journey. So I'd much rather appreciate direct arguments rather than these kind of general fluffy, you should be, oh, of course, yes, you should be open-minded, but also you come up with conclusions and you delete spam email sometimes when you know that it is spam because you have to move on with your life.

You can't, there's an opportunity cost to considering every spam email. - Well, to me, okay, so I'll just say from my relatively sort of shallow perspective, almost like a technical person, mostly, my understanding of economics is weak. Proof of stake is not obviously a weak consensus mechanism relative to proof of work.

So that's not obvious to me that that goes wrong and becomes corrupted in the way that governments get corrupted because it still seems decentralized. Now, your criticism of governance is an interesting one, but if you put that aside, it still is a decentralized mechanism and it's more transparent than the mechanism that governments operate on.

- It isn't. - This is exactly what the Federal Reserve is. The Federal Reserve is a proof of stake system. The Federal Reserve is owned by its constituent banks. And so the rules of the Federal Reserve and the regulations are determined by the ownership, which is the banks. So it's exactly what the Federal Reserve is, but it's too backdoor.

The agreements between the banks and the Federal Reserve, it feels like a lot of those agreements are made between individuals that sort of behind the scenes. It's not hard to, it's opaque. - Yes, but the only way that a proof of stake system will take off is if you have a military to force people to use it.

That's the thing. Ultimately, there's no way that it's going to take off on a free market. And that's why, for all of the bluster about wanting to move to a proof of stake system, Ethereum have been saying this since 2014. It's now been eight years, they've been talking about it.

We still haven't seen the proof of stake system operational in the wild. It's vaporware for all practical-- - Or Dano's proof of stake. - It's potential. I mean, you can do it in a centralized way, but like, can it survive? Can it last for a long time? I don't think so.

And I think, you know, it can last perhaps initially with marketing, with centralized marketing, you can promote it, but ultimately, user demand, the people that are not interested in speculating because they want to get rich on this, the people that are going to use it, they're going to want to use it because they can trust that it is not going to be messed with.

- Yes. But there's also applications on top, so Lightning Network, but there's applications on top. Like, well, the reason I'm interested in things like Ethereum is you might think it's ridiculous. I thought it was ridiculous, but NFTs. You can have NFTs probably on top of Bitcoin, but you don't because there's no marketing on Bitcoin because all of these ideas get promoted on proprietary shit coins because, yes.

- But there's the network effects of ideas, of applications. So they just take off for some reason. And human civilization is such that you get excited about stuff and large amounts of people believe a thing and they start to get excited and it actually has impact. Like the fact that NFTs can have an impact on the art world or the world in general is wild to me, but it worked.

So the question is- - David Rothkaw has an impact on the art world. Doesn't say much. - Well, I'm saying these ideas have, we're collective intelligent beings and we can believe a thing and that has power. That has led to major wars and all those kinds of things. So it's interesting to me that NFTs took hold.

And the question is, is there distributed dApps, is there distributed apps built on top of different blockchains that might somehow transform the world? You have to kind of keep an open mind to that because right now it's like, it's like I'm the same place with that as I am with like virtual reality.

It's like, all right, this seems like a really intellectually promising set of ideas here, but there's something either technically or socially not quite taking hold. Why? And I don't know what the right answer is. So with virtual reality, what's the right answer? Is it just technically the latency is too high or the games are not good enough or is it a fundamentally flawed idea that you can live in a virtual world and enjoy it?

That the physical world is just orders of magnitude better or a two dimensional display is just as good as a three dimensional world? I don't know. Why is virtual reality not taking off? It's been since the 80s, right? - I don't have strong opinions on it, on the prospects of the technology.

Personally, I don't wanna ever imagine myself having something on my eyes. I'd rather just go out into the real world. But I don't have strong opinions on virtual reality. I do have on DAPS and NFTs. - Yeah, what's your criticism of DAPS and NFTs? Is it a distraction? It's a way to sell a flawed technology?

- The problem with DAPS is, I mean, it's just, the economics of it makes no sense in the sense that, you know, currently, if you wanted to run an application, whatever the application is, you wanna run it on AWS, you pay a specific amount of money. You wanna run it on your own laptop, you pay a specific amount of money per kilobyte of data.

If you wanted to run the same thing on a distributed ledger, where you're distributing the data over thousands of computers worldwide, it's infinitely more expensive. And that's why we haven't seen any of these DAPS take off. And that's why I've said this many years ago, the only working application of blockchain technology is Bitcoin, because with Bitcoin, you know, you're with a few hundred bytes of data, with a few bytes of data, you could move a billion dollars worth of economic value from here to China and move it safely and reliably.

So that power, I can't see it being justified for anything that is not as mission critical as moving large amounts of value, which require very little amount of information. So when you look at all of the buzzwords that the Ethereum and other altcoin marketing people like to use, and you know, if you wanna wonder really why we come to this kind of aggression, it's because we've heard all of this.

You know, I've had all of these hucksters come to me for years, you know, it's been, I've had, you know, people in 2016 talk to me about how Ethereum blockchain technology is gonna revolutionize real estate deeds in India. I remember this guy, I'm not gonna mention his name, but this guy was, you know, 2016, and he sold a lot of shit coins and he made a lot of money off of shit coins based on all these silly ideas.

We're gonna have blackjack on a distributed ledger. We're gonna have Indian real estate on a distributed ledger. And it's just, it's concern trolling marketing. You know, oh, there's a problem with real estate in India, real estate deeds, blockchain fixes this, buy my shit coin. And then people buy the shit coin, Indian real estate isn't fixed, and the guy gets rich and they move on.

But I mean, I'm still waiting for a dApp to actually emerge. Like, you know, it's, the promise that we keep hearing is something completely world-changing, world-transforming. And the reality is not one app. Like there's one of my good friends, Jimmy Song, eventually they refused to go ahead with it, but he wanted to bet with one of the Ethereum people about these dApps.

You know, the Ethereum people are constantly saying those dApps are gonna grow and they're gonna have so many applications and they're gonna have so many ideas. And the reality is all the apps that work are centralized apps, you know. So there is no Uber on the blockchain, there is no Twitter on the blockchain, there is no social media on the blockchain, because these are businesses and businesses require a centralized authority to make decisions.

You can't have it be decentralized. - Yeah, listen, you're frustrated, and I could see it over a few years of just having dealt with a humongous influx of charlatans. - I wouldn't say frustrated, I'm amused. It's water off my back. - No, but a man that uses, and a community that uses the word shitcoin is a little bit, you call it amusement, and I think amusement is the way to deal with the frustration, it's a channeling of frustration.

Like sometimes when you have to deal with bullshit, the best way is just to laugh at the absurdity of it all, and that's what you mean by amusement. But the fact is, there's things like artificial intelligence for, what is it, how many decades, six, seven decades, has been off and on promising to change everything.

And it has failed time and time again to deliver to the promise, but that doesn't mean there's something fundamental and really powerful about both the small and the big things going on within the actual research and development within those communities. There's a lot of exciting developments, and the scale at which those developments might actually have a transformative impact, the timescale, is unclear.

It seems like we're certainly overpromising. We dream too big and too aggressively in the AI community, but in a lot of communities. - Yeah, and I'm happy to give people the benefit of the doubt when they're overpromising, but not when they're making their own money. When you start making your own currency, then you don't get the benefit of the doubt.

Because if your idea needs you to have a new currency that you print when Bitcoin is out there, then I'm gonna go ahead and assume that you're doing this for the money printing. - It's a good time to mention that I am actually launching my new coin called LexCoin.

- You mean shit coin. - Yes. (laughing) - Oh, God. I'm gonna have to block you with love. (laughing) Okay, one thing I wanted to ask you about is the Fed's, this paper they released in January 20th on the potential central bank digital currency, CBDC. What are your thoughts about that?

Is it just another, like, is there pros and cons to this? Is it at all interesting to you that they're even considering this kind of thing? - I used to think that it's just basically a waffle. It's meaningless. Because as it exists, the dollar is a central bank digital currency.

- Right. - And the majority of dollars are digital. And, but I think the way that over the last couple of years I've changed my mind on this. I think this is, there's some serious substance behind these ideas. And what they mean effectively is the disintermediation of the banking system and giving everybody an account at the Federal Reserve.

This is kind of the really dangerous idea. And I think this is enormously significant. Effectively, as somebody who's lived in the Soviet Union, what this is is the return of the Gosbank on a global scale with modern technology. So under the Soviet Union, there was something called the Gosbank or People's Bank.

And that was the only bank in the country. And you had an account with the National Bank. And, you know, if you said something wrong, your money got terminated from the Gosbank. Now imagine that combined with the power of digital technology. And you can see that this could be an enormously powerful technology really, because if banks are out of the picture, then we change the fundamental reality of fiat as being the creation of money through lending.

And then it becomes the creation of money truly by fiat, by government fiat. So we move to a system in which money is just basically, it's like we have money that is pieces of paper. And every time we've had money, we've had fiat money that was just pieces of paper, it collapsed very quickly.

With the current system, money is credit. And the creation of credit is restricted to some point. And the creation of credit is self-correcting. I discussed this in the fiat standard. If the central bank allows banks to create too much credit, that creates a bubble. And then there's a collapse in the money supply, which prevents hyperinflation from happening because the money creation is self-destructive, it's self-correcting.

So you end up with an average of like 7% per year increase because you have 10% for five years and then you get negative 20% for one year and it's correcting. But now if you get rid of the credit creation mechanism and it's just assigning money directly, we're likely gonna get much faster inflation.

And I think that's obviously a huge problem and perhaps the even bigger problem is the enormous amount of power that it gives to governments. It allows them to create an awful dystopia where you've got your money on your phone and anything you do is completely supervised and controlled through your spending.

So they wanna introduce a new lockdown, then they'll just make your money not work. Your money's broken today, you can't spend money. Or you can only spend money in your local supermarket for the next three months because you can't leave your neighborhood, your money stops working outside of your neighborhood.

The Chinese social credit score system is an example of this. And I think, I don't know, I don't have a crystal ball. So I don't know what the likelihood is of implementing something like this in the US. I've discussed it with Michael Saylor. He thinks it's highly unlikely. He thinks the people who've been pushing this are very far from the position of power and the traditional monetary and financial system is going to survive intact.

I certainly hope so. I think this would be a terrible thing if it comes to pass. But I don't think, many people think that it is something that would undermine Bitcoin. Like a lot of common objection to Bitcoin is, well, governments are just gonna launch their own digital currencies and then Bitcoin is gonna die.

And I think this is completely missing the point. People think Bitcoin is important because it's digital. It's not. National currencies can be digital. Bitcoin is important because it's not inflationary and because nobody controls it. Central bank digital currencies are likely to be very inflationary and they're likely to have very strong control at the top.

So if anything, they are an advertisement for Bitcoin rather than a replacement for it. - If it's Bitcoin, if it's gold, it's a way for multiple nations to partake. So if you were to imagine a future where we move from the fiat standard back to the gold standard and then to the Bitcoin standard or skipping that, going directly to the Bitcoin standard, what would it take?

Is it gradual, is it immediate? What are possible trajectories that take us? Well, basically where the final sort of empirical observation is that you overtake, Bitcoin overtakes first gold and then bonds in terms of its monetary power in the world. But like just specifically from a government perspective, how do we move the United States, China, Russia, India, European Union to a Bitcoin standard?

- I'm not entirely concerned about whether governments move or not. In fact, I'd be very happy for them not to move as long as possible so that individuals can accumulate more and more Bitcoin while it's still cheap. - So the people will move and the governments will catch up.

- Yeah, and I think this is kind of what I allude to. I mean, the point of the fiat standard, the fiat standard is really a Bitcoin book and it talks about fiat most of the time, but it's does so to analyze Bitcoin and the rise of Bitcoin. In the final chapter, I discuss how I think this relationship plays out.

The way that I tend to think of it is that most likely what's going to happen is we're gonna have the kind of financial apartheid where there's going to be two monetary systems. One is government controlled and it comes with increasing amounts of surveillance and inflation. And then if you want, you can just opt out of that and get into Bitcoin.

And it's likely going to be difficult for governments to stop people from getting into Bitcoin for all of the technical reasons that make it very hard to stop Bitcoin. So then we have this alternative that is Bitcoin, which is not inflationary and does not have a central authority that can censor it.

I think gradually is my hope. And I also think my most likely scenario, but maybe I am biased because everybody thinks what they want is what's gonna happen. I think we're just gonna witness the same relationship because governments make their currency so that they can devalue them. And Bitcoin thrives on that.

And more and more people are gonna learn, more and more people are gonna find out. And whether it's through curiosity or self-interest or through the destruction of the national currency, all roads lead to Bitcoin. So more and more people are gonna buy Bitcoin. The price of Bitcoin is going to go up.

And as it goes up, Bitcoin becomes a more significant part of the world economy. And this is something that skeptics don't get. Like a lot of the academic skeptics to Bitcoin, they offer up all of these theories about why they think Bitcoin can't work. And then they present it and they think, they've delivered the knockout blow as if Bitcoin needs their permission or the world is going to need their permission.

Well, the reality is people are gonna join Bitcoin out of greed, out of self-interest. Number go up technology is really what's going to get everybody in. And that's really the Trojan horse for fixing the world. Come for the greed and stay for the revolution. It's gonna keep going up because people don't like to be poor, except for most economists and academics.

People don't like to be poor. People don't enjoy getting their wealth destroyed. And they care more about their self-interest than they care about economic theories about whether this works as money or not. They see their cousin escaped hyperinflation and managed to get a bigger house because they bought Bitcoin five years ago.

They realized maybe I should stop mocking my cousin and start buying more Bitcoin. And this is, I think, an indomitable force that's going to continue. And one thing, most Bitcoiners tend to lean toward an apocalyptic transition. Fiat's gonna collapse, we're gonna get hyperinflation, everything's gonna be terrible, and then we're gonna move to Bitcoin.

And I present the case for why I think maybe that might not be the case. Maybe we won't get this kind of apocalyptic scenario. And this was like the conclusion of the Fiat standard, which is once you realize that mining Fiat is creating debt, and Bitcoin is allowing, so in order to have Fiat money, we need to have people borrow.

We need to have people make loans. And the problem that Fiat money runs into today is that if you wanna save money, if you wanna hold savings, you have a problem. Where do you put your savings? So you put your savings in debt, in the creation of more bonds.

Wherever you take your savings, you create a bubble in those things. And this is why we see a bubble in the stock market, a bubble in the bond market, a bubble in housing. It's because people are looking for savings, looking for a place where they can save. All of those things are crappy saving instruments because they're like copper, in that there's nothing to stop the people behind them to make more of them.

House builders can build more houses. Governments can issue more bonds. The crappy fraudulent companies can list on the stock market and make more stocks. Well, Bitcoin finally offers us an outlet. We don't need to keep creating more debt. We can invest in this asset that is hard, and that is internationally liquid, and that nobody can make more of.

So there is no bubble in it. There is no mechanism for somebody to increase the supply and bring the price crashing down, like with copper and real estate and bonds. So Bitcoin is the way out. And this is why I think there's a good case to be made for why the fiat authorities might embrace Bitcoin, because they'll see it is their way out of this enormous debt bubble that everybody is stuck in.

Particularly, the richest and most powerful people in the world, and the richest and most powerful governments in the world are the world's biggest borrowers. They're the ones in a lot of debt. So a continuous slow devaluation of the value of that debt as people upgrade and move on to a hard asset that continues to appreciate is the peaceful way that we wind down the fiat Ponzi, I think.

You could see it being like a political, part of a political platform for future people that run for president, those kinds of things to address. Obviously, it's not just for the powerful and the rich. The people are bothered by the debt. The people are bothered by everything that you described with fiat.

And if you wanna sell yourself in a democracy as a good leader, you might want to make that part of the platform. You mentioned you know Michael Malice. He just texted me asking me to ask you, what do you like best about Michael Malice? If you can spend five to 10 to 20 to an hour talking about the genius of Michael Malice.

What do you like, where does one even start? Well, obviously the haircut first. - Yeah, he just gets sexier with age, that's for sure. That's good. - Yes. - Do you, you know, his ideas, his trolling and humor, have you gotten a chance to interact with him? - Yes, yes, I've met Michael maybe 10, 12 years ago in New York.

I used to live in New York when he used to live in New York. I met him a couple of times. There was a bunch of anarchists in New York used to throw a happy hour once a month. It was called the High Time Preference Hoppe Hour in honor of Hans-Hermann Hoppe.

So I met him there a couple of times and we followed each other on Twitter for a while. - Is there interesting that you're aware of philosophical differences in your world views? - No, I think we pretty much see eye to eye. I think the difference is mainly that he spends a lot of time focusing on American politics and American pop culture, which I don't pay much attention to, I guess.

- So you look more at the monetary system, the economics of it all, and just the history, and just looking at it, zooming out at the big picture of it all. Although recently he's working on a book called "The White Pill" and he's been, every time I see him, I mean, he's in some dark aspect of the 20th century.

He's just like, "I just finished writing about Hollydom." As you might imagine, he's not taking much, I believe, of a monetary perspective on things. His book, his writing, at least for time, has a kind of philosophical ideology perspective that's outside of the monetary system. But you argue that those are actually inextricably linked.

- Yeah, and I don't think he would disagree. - He would. But a book has to be, can only be so long, I suppose. It can only focus on so many things. - If you can put on your wise sage hat and give some advice to young people, I mean, the past four hours have been a kind of advice, but if you can focus, and if somebody in high school or college is thinking about what to do with their career, can have a successful career, or to have a life they can be proud of, what would you tell them?

- I'd say probably the most important advice that I would give is to find a way to give value to other people. This is really the key thing. You need to wake up every morning and figure out how to serve others. This is the key to everything you want in life.

Everything that you want is on the other side of you serving others. So figure out how you can serve others in a good way, how you can do it in a way that they value, and you've got an incredible mechanism for figuring that out, which is the market. Go out there and do things for other people.

- The market will tell you. - The market will tell you, exactly. If you're young, you have the enormous advantage of being able to make mistakes, essentially, and learn from them. So go out there, do things of value for others, figuring out how you can do something that, what is it that you can do that contributes the most value to other people's lives?

And increasingly, I think with the modern technology, this is increasingly becoming online, and it's, I think you should consider how you can create value online, because that scales beyond anything that you can do in the physical world, in a very, very, well, maybe not beyond, obviously, there are profitable businesses in the physical world, but I think online is enormous potential, and coding, I think, is enormously powerful.

I'm not a coder myself, but I strongly recommend people get into learning how to code, and I think it's probably the thing that carries the most power. So initially, we were working with our hands. We started working with machines. Machines are much more productive. Well, code is an even higher level of productivity, where you basically program the machines to produce things.

So, you know, few clicks of a keyboard, and you can move millions of machines around the world in certain ways. So it carries an enormous amount of value. I think I always tell all young people to learn to code. It's the best thing. I used to tell it to my students when I was at university.

Tell them to drop out and go learn to code. It's probably a better use of their time and money. - Well, you could probably do both. - Yeah. - University has an interesting function. I mean, probably you and I have different perspective on this, probably has to do with a little bit of a different journey in terms of fields, 'cause I'm so, I've stayed engineering-focused for a long time, and there's less, some of the troubles you might highlight in the education system, there's less troubles of that kind in engineering, 'cause math hasn't changed for a long time, so.

- Yeah. - A lot of it is just doing hard things, being forced to do hard things, and becoming a bit of a generalist, while on the side, you're also becoming a specialist based on your own passion, driven by your own passion. So school, at least high school, I don't know about the university, but high school, that's a really nice, one of the only times in your life, at least in my life, I was forced, but now I see, given the opportunity to spend my entire day learning broadly.

And that's something, I don't know, the way time works, it just runs away from you, and you never really get a chance to learn quite that broadly again. That's the curse of specialization, is you never get a chance to study biology, chemistry, if you're a physicist, time runs away from you.

So enjoy the broad education, but yeah, like you said, find the things that valued by the market. And on the other side of it, you said all the good stuff, so that's also a way to get happiness. - Yeah, and I'll also add that the horse that I like to whip all the time is the low time preference aspect of things, saving with Bitcoin.

So I think my advice to young people is, when you're young, you think of the world in the very short term generally. You're focused on the present, and you think that everything that's happening in the present is the most important thing that's ever gonna happen in the history of humanity.

Lower your time preference, think about the future, think further down the line, think about the consequences of the things you do, and then what? And so you do this now, it feels good today, but then what happens tomorrow? You go out, you drink, you enjoy yourself, well, think about the hangover.

But more in long term, think about the implication of living this kind of life. Think about every decision that you make, the long term implication of it. And part of that is Bitcoin, part of that is save in Bitcoin. I urge everybody to put savings in Bitcoin for the long term.

Don't buy Bitcoin for the short term, don't buy Bitcoin today so that you can sell it. You don't put your savings in Bitcoin today so that you can sell it all next month and buy a house. Put money in Bitcoin that you expect to keep in Bitcoin for another five, 10 years or so, at least four years is what I recommend for people.

So keep a low time preference, focus on the future and save in Bitcoin. - And learn about how to buy Bitcoin, how to learn about all this technology. Part of this is this conversation, but there's so much awesome material out there. And thank you, by the way, for this gift of a hardware wallet.

- Nice. - So you should definitely invest in it yourself. And what would you call this? These are-- - Open dimes. - Open dimes, yeah. So this is like USB that you can, like a hardware device that stores Bitcoin. - Yeah, so you don't have to worry about knowing the password.

It contains the password within it and it's tamper-proof. So you can save the Bitcoin on it and-- - So when the apocalypse comes, you need the value to be stored on an actual thing that you can have in your physical possession. - Yeah, that's exactly what this is. You've had a heck of a life.

You've been in a bunch of places in this world. - A lot of places. - Life is not easy in some of those places. What has been, if we can take a step to maybe a bit of a dark step for a short time, what has been maybe darkest time, period, place you've ever gone in your mind, a dark period of your life, a struggle you had to overcome, you had to survive?

- Well, I'm Palestinian, so that is the tragedy of my life. I'm Palestinian-Jordanian. My family's suffered a lot because of this historically. I grew up in Ramallah in the West Bank. It wasn't ideal to see that. People like to think of it as this intractable conflict between two bitter enemies, but the reality of the matter is that it's not.

A foreign ideology came in with the idea that this country needs to be occupied by people from only one religion, and the existing population, which, I mean, Jews had always lived in Palestine historically, and at the turn of the 20th century, they were only 10% of the population, but then with the birth of fiat money, incidentally, the link with all of this is that when the Bank of England went off gold, a big reason why they were able to pull that off was that the Rothschild banking family supported them, and in exchange, the Rothschilds got Palestine.

The Balfour Declaration was written by the government of Britain to the Rothschild family, telling them that they'd like to make Palestine a homeland for Jews. So obviously, that's not very convenient for people who are not Jewish, for whom that is a homeland, and the past 80 years has been a very painful struggle if you happen to not be Jewish, and obviously, you know, obviously, Palestinians have done all kinds of things, trying to fight back, and they've done all kinds of wrong things, but I don't think you can escape the fundamental reality underlying this, which is that if you're not Jewish, you are being moved out of the land, and so it's happened in 1947, '48, it happened in 1976, '67, more land was taken over by Israel, now you see it with the settlements.

You know, if you ignore the day-to-day headlines, and you ignore the media propaganda, and you ignore all of this, there's a very clear thing that is happening, which is more land owned by an exclusive ideology that believes this land needs to be owned by people from one religion, and everybody else is being kicked out, and so that is the tragedy of my life, and my wife is also a Palestinian refugee from Lebanon, and her family was evicted from Jaffa, which is today on the outskirts of Tel Aviv.

They still have their homes in Jaffa, their homes are being, you know, they got kicked out of their homes, and their lands, and their property, they became refugees in Lebanon. So my children, you know, and it's an ongoing tragedy, it's not something that is, a lot of the people that think of it as, you know, they think Palestinians are just out there to get Israelis because they hate them, but it's an inescapable tragedy.

I don't have a home anywhere. Is there an escape from this tragedy in the future that you see? If you zoom out across the scale of decades, will we see, I hesitate to say peace, but a significant decrease in human suffering in this part of the region? - I certainly hope so.

And I think, you know, my interest in Bitcoin comes from, came from a place of desperation with the situation there. Traditional politics is a dead end. I don't see what I can be doing to make things better there using traditional politics. And I think a good friend of mine, Pierre Rochard, you may know him on Twitter, one of the brightest minds in Bitcoin, in my opinion, he told me his theory is that Bitcoin is gonna bring peace to the Middle East because land is a shit coin.

(laughing) - And land is a shit coin, I love it. - And I think he's got a very good point there, that this fixation with land and the bitterness with which people have to live land is likely to decline when people are gonna have a form of property that they can keep.

And so hopefully that will help in one way. And of course, the more obvious way is that this is a conflict of governments and it's a conflict that is financed by fiat. From day one, you know, the entirely insane notion that you could build a national, an ethnic homeland.

And of course, you know, this is the early 20th century. So the idea behind Zionism is coming from the same place where all these other ethnic nationalisms of Europe were emerging and we saw how well, how horribly these worked out. But the idea that you could, you know, it's one thing to say we wanna build a homeland for Germans in Germany.

It's one thing to say we wanna build a homelands for Germans somewhere else. And that was Palestine, that was Zionism. And that was only possible thanks to fiat, thanks to the ability of the British government and all these other governments to continue to finance this colonialist effort over time.

And, you know, it continues to finance war and it continues, you know, we see war all over the world continue to escalate because the people who'd make the decision to escalate the war are not the ones who are paying for it and they're not the ones who are fighting.

They're the ones who sit in offices. And in the case of, you know, most of Middle Eastern conflict, it's people who live abroad, you know, it's people who are abroad or not part of it who just are emotionally charged to it because they watch it on TV. So, you know, you have billions of Muslims around the world and Jews around the world who feel extremely emotionally attached to it.

They're not the ones fighting, they're not the ones paying their own money. They're just getting governments to send money and to send weapons and to take part. And it's fun as a spectator sport for most of these people because they don't get to live in it. But I got to live in it, I saw it.

I grew up there. I saw the settlement expansion. And, you know, recently, a few weeks ago, I went back to Ramallah and it's just, it's amazing every time you go, the settlements are just growing in an astonishing way. Like it's not just housing units that are going up, it's an entire attempt to build, to basically suffocate Palestinian areas and force Palestinians to leave or keep them living in horrific conditions.

- And if I may, just because I have family in Ukraine, I have family in Russia, since this war, echoes of similar things are happening in that part of the world too. And I shudder to think about the decades to come of the hate that is brewing, the suffering that is brewing based on decisions and pressures and from not always people directly impacted by this.

So again, it feels like that military conflict is not just a creation of like people on the ground. It's a creation of leaders, power centers. And perhaps, again, I'm not smart enough, but even the monetary system probably has a role to play. - I absolutely think it does. Monetary system is what allows, is what allows people to just continue to treat war as a spectator sport.

That's really what it comes down to. And it starts with World War I and it's continued. And this is why I really, I think I've said this before, I've tweeted this before and it was a pretty popular tweet, but it also got a lot of people to dismiss the idea with mockery, of course.

But I really think Bitcoin is the only technology that's going to end World War I. Once World War I started, we got into this endless conflict that's been ongoing since then. If you look at all the world's conflicts today, pretty much they all trace back to World War I.

And it's because when that Pandora's box of government control of money was opened, there was no longer a real restraint on war, except complete defeat and complete destruction and complete death. The war had to be total. Before that, under the gold standard, kings would send professional armies to fight each other in battlefields.

And as soon as it became clear that one side was establishing an advantage, the fighting would stop and the kings would settle, would agree to new terms, because it was extremely expensive to build a professional army and you ran out of money. So it was always the smartest thing to do is to just stop fighting whenever you could.

And wars would take place, countries would fight each other in the battlefield. But in the cities, life went on as normal. And people within the same cities, within the cities of the two countries would be trading with one another. Life would go on, but the war would be there.

And it was just an independent part of politics that, all right, we have a problem over this piece of land. Let's take it outside. We don't fight in the civilian areas. We go to the battlefield, we fight with professional armies. And in fact, sometimes the conflicts would be, the armies would line up and they would just have a small contingent of the two armies fight with one another.

And as soon as one of them establishes an advantage, then all right, well, you won, let's move on with it. Governments were far, far, far more careful about their monetary policy and their, sorry, their war policy when they couldn't print their money. And that has changed with fiat. And that has allowed this new emergence of this class of what I like to call chicken hawks, of people who sit in offices, like the entire foreign policy establishment in Washington, DC, people who have never fought a war, whose children will never fight a war, who will never pay to fight a war, who will never suffer a broken window in their house because of war, sitting there and based on these fucking moronic garbage that they teach at moronic fiat universities about politics and geopolitics, making decisions about, we need to invade that country and we need to send war there.

And they can do that because they have this endless money printer. And that's why, back under gold, if you were a warrior, you went and actually joined the war. And the people who pontificated about war were the people who had experience with war, the people who were sending their own children to war, the people who were fighting with their own money.

Now you have all these fat parasitics come, sitting in Washington, DC, deciding, and Washington's just an example, but all over the world, this exists. People who have never fought, who will never carry the consequences, who are going to devalue the world's money in order to go and have other people's children fight each other because of stupid garbage they learned about politics in university.

- You said you value low time preference, but I have news for you that one day you will die, as far as we know, you're a mortal being. Do you think about your death? Do you think about your mortality? Are you afraid of it? - I've spent a lot of time introspecting and thinking about these things, and I value life a lot.

I value my time on Earth a lot. And you'll see this in my dealings with people. Go back to Twitter, why am I so brash and straightforward? It really is because life is short, because I don't wanna waste, I think on my, I've said this before, on my tombstone, let it be written, he never let anyone waste his time twice in his life.

- His life is short. - Yeah, you can waste my time once, you can get me to do something, and then I realize that was a waste of time, you will never get me to waste my time twice. And so you show up in my Twitter with something stupid, you're never showing up in my Twitter ever again.

- So you're a fast learner. You give people a chance, but you're a fast learner. - Yeah, so I try and use my time very wisely, and I'm unapologetic about it. My time is the most precious thing, and the way to get on my shit list forever is to try and take away my time, and to abuse my time.

If you do that, it's the one unforgivable sin for me. And I think that's really, I think that's my way of coming to terms with mortality. We're all gonna die, and so let's make the most out of it while we're still here. And of course, the other way you come to terms with mortality is you have children.

- Given what you just said, doubly so, it's a huge honor that you would spend your valuable time with me. This is the first time you did it, so you probably regret all of it, so we'll probably never see each other again. But I'm glad you at least took the chance to do it.

It's a huge honor, and I've been a huge fan of yours. - Thank you, sir. - I think you have impact on the world that you probably are not even aware of. It's tremendous. And a lot of people love you, and your work is important. Even, you know, I disagree with some things you say, and there's people that disagree with you, but everybody respects you.

And thank you so much for spending your really valuable time with me today, brother. - Thank you, sir. I really appreciate it. This was not a waste of time, and I'd be happy to do it again. - Thanks for listening to this conversation with "Save Deena Moose." To support this podcast, please check out our sponsors in the description.

And now, let me leave you with some words from the Austrian economist, Friedrich Hayek. Economic control is not merely control of a sector of human life, which can be separated from the rest. It is the control of the means for all our ends. Thank you for listening, and hope to see you next time.

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