Kind: captions
Language: en
oxygen
pretty important for human life there's
no price on it why it's not scarce
something like diamonds not that
important to human existence yet has a
huge price because the demand weigh
outstrips the supply the unique thing
about scarcity and money is that money
is always scarce right I want to walk
through one thread that I all of this is
me taking liberally from you so tell me
where I go astray here
um but this was a chain of events that I
was like oh my God I now actually
understand what's going on and this is
terrifying so you've got
um
World War II happens and you've got
people
invading countries and raiding their
gold stores because why would you invade
if you're not going to get something if
you can't steal something these are your
words so you invade a country you steal
their gold so people like [ __ ] I don't
want to get invaded so they started or
if I do I don't want them to be able to
steal my gold so they started sending
gold to the US
ends up storing all this gold for people
has a massive amount of gold and gold
historically basically money as we think
of it the the tangible dollars and bills
you would store gold in a protected
Warehouse somewhere and they would give
you a paper that represented the amount
of gold so people being Savvy started
trading that because it's as good as
gold because you can go and cash it in
so now the US Post World War II has all
this gold coming in and we then after
World War II have a the Bretton Woods uh
convention I'm not sure what it was
exactly but they say hey we've got all
this gold now we're gonna make the
dollar the central Reserve currency
Global Reserve currency excuse me and
but it's all backed by all this gold
that we have so hey we're good but in
1971 for reasons that you will have to
explain uh Nixon decided to take us off
of the gold standard so previously to
that if you had a dollar you could
actually go Redeemer for gold yes now
you couldn't and it was Fiat it was by
decree I say that this dollar has value
and therefore it has value uh the
problem is that's married to something
that happened at some point in the early
1900s that you will have to explain the
beast from Jekyll Island where we
decided uh to create a central bank
which isn't owned by the government
right correct which I still can't
believe is true the Federal Reserve yeah
is not the federal federal and has no
Reserve something crazy like this is
where I'm like language matters well
played that's a very good way to get me
think that this is a government all
right so we now break with the gold
standard and so it's we can literally
print money so as me the ignorant guy
that's been his whole life trying to
make money knows nothing about investing
I make the money I think I am safe
actually putting it under my bed only to
realize that there's actually somebody
that has the ability to go prone to go
Burr right and they can press a button
and it just makes more money and
therefore with more money floating
around you've got more people competing
to buy that loaf of bread or whatever so
the cost goes up as one would naturally
expect and so now
even though I theoretically have my
assets are going up and yeah I have more
money but I I either have the same
buying power so it's just an illusion or
I actually have less buying power and
it's actually devastating and so now we
get into this crazy making Loop of it
seems like I should be getting ahead but
I'm not getting ahead I think of
inflation as being a natural act but
really in the background are people
making these decisions and and we will
grant them that they are being kind
they're trying to do something nice
they're trying to level out volatility
if I had to guess is actually their
motivation but they level out that
volatility by
um creating debt cycles and devaluing
the currency which you are saying
mechanistically it just isn't different
than theft
um
but when people think of
redistribution of wealth as a good thing
is that just another crazy making thing
or are people right to think that no
this is good we should be redistributing
the wealth well
that's a good long question
um I would start with a long question
yeah so let's do this
wall three distribution first of all no
one ever thinks it's a good thing when
they're the target
no one ever no one ever wants to be
redistributed from no one ever
voluntarily gets redistributed from that
would be
giving up value or wealth or capital for
nothing in exchange I don't think anyone
I don't say no one ever but typically no
one ever will enter that
um agreement let's say so maybe we'll
track this Arc we'll do what is gold how
did we get gold
why and how Central Banking was
introduced and then we'll get into
um
really what's happened post 1971. so
and I love this question by the way what
is money right this is the name of the
show and this is the I think the key to
incepting these ideas into people or at
least getting people to question their
socioeconomic reality such that they can
peel back the layers of this onion and
see through some of these euphemisms
we've been getting to or we've been
given
and
one definition of money this is the
Austrian economic definition is that
it's a Universal Medium of Exchange
so again capitalism is built on free
exchange it's built on voluntary action
right self-ownership you go out into the
world create things of value you trade
them with other cell phone people the
result is we create more output per unit
of input we become more efficient acting
in concert than we do acting in
isolation this is the division of labor
this is the reason wealth and riches
exist because we specialize and we trade
with one another
in that process
something necessarily becomes most
exchangeable or most treatable right by
definition for all trading with one
another there's going to be a single
asset of that uh flurry of trading
activity that is the most liquid asset
the most treatable or exchangeable asset
that is money that's how money emerges
in the marketplace it is not a
government creation has nothing to do
with government other than the fact that
they monopolize it and try to control it
to control people
um and when you look at money from that
first principle standpoint
and this is from the Austrian School
there's a deep Long literature on this
you'll see that money needs to exhibit
five Key properties and this is an
important point
we typically think that we want the
thing right we want the table we want
the car whatever
but we don't we want the services the
thing renders to us so you could think
almost in the world of Economics there
are no such thing as Goods if you will I
know there are Goods I know they're
Stables I know there's cars but what we
are after is what services those goods
provide to us
so when we look at money the five
properties that market actors
voluntarily favor
you could also think of as the five
Services we seek from money
are divisibility durability
recognizability portability scarcity so
I'll walk through each one of these
money needs to be divisible pretty
obvious you want to transact at
different scales you want to buy coffee
and the same day you go and buy a house
right so you'd like to be able to give
someone a coin or send someone a wire
for 10 million bucks to buy a house
pretty obvious
um money needs to be durable
in that it's not going to corrode over
time if you put a bunch of gold in a
safe it's not going to decompose right
the half-life on gold is way longer than
uh matters to any of us if you put a
bunch of oranges in the safe and you're
using that as money that's gonna rot
pretty quickly so clearly durability
matters
money needs to be recognizable
which means that each trading party can
verify its authenticity so at every
transaction and I'm handing you dollars
you can certify either with that little
pin they mark on dollars to make sure
it's uh a legitimate you know U.S
federal reserve issued dollar or if it
was gold back in the day
they had different techniques for a
saying uh the Gold's authenticity making
sure it wasn't LED plated with gold in
fact the name sound money which you've
probably heard in your explorations of
the rabbit hole that referred to the
sound a gold coin made when dropped a
certain way so you could verify its
authenticity by the sound it would
create
and this is another reason we introduced
coinage and currency because
to verify money at every transaction is
a very significant transaction cost
transaction costs are dissipative to
trade right if we want to increase trade
and increase wealth we want to reduce
transaction costs so by abstracting into
currency or putting it in a warehouse
and trusting the warehouse custodian we
can now trade much more quickly and more
efficiently
so
that I mean that's that's one aspect of
money that coinage and currency helped
was recognizability
money also needs to be portable
pretty obvious you want to be able to
move it across space right if I'm buying
something in another city I need to get
my gold or dollars to the other City to
give it to the recipient
finally and most importantly
money has to be scarce
and now we typically think scarce is
purely a supply side function that's not
what scarcity means
scarcity occurs when demand outstrips
Supply so when there is more appetite
for the thing then there is a supply of
the thing
okay so oxygen
pretty important for human life there's
no price on it why
not scary it's not scarce the supply way
outstrips the Demand right
um something like diamonds not that
important to human existence yet it has
a huge price because the demand way
outstrips the supply the unique thing
about scarcity and money is that money
is always scarce
because it's a call option on everything
all the capital all the savings humans
can produce the heart of man is Never
Satisfied we always want more therefore
money is always scarce by definition
so what Market actors tend to favor is
the money that has the most inelastic
supply so this means the supply that is
least subject to change
uh by The Willpower of others
that is what
Market actors will Zero in on and here
there's another number of ways to think
about this
um
time
energy
second law of Thermodynamics we cannot
create in order to store energy right
we're sacrificing time and energy to
earn money
you would naturally want the thing
you're sacrificing this absolutely
scarce time and energy for to be
similarly absolutely scarce that would
be the ideal money right something that
can't be created or destroyed
um
with
money
to gloss over a little bit of History
monetary Metals best satisfied
divisibility durability recognizability
portability those were just and we've
tried a lot of experiments we've had
seashells we've had glass beads we've
had cattle we've we've used all kinds of
things as money right
Natural Market processes determine that
monetary metals were the most
satisfactory across the first four
properties or services that money can
render to us
of the monetary Metals gold was the most
scarce meaning specifically its Supply
was the least vulnerable to change no
matter how much effort time energy we
poured into producing gold its Supply
increased the slowest and the most
predictably
so this gave us a medium into which we
could store economic value
and we would know with relative
certainty that it would only change by
about two percent year over year so this
gave gold the store value function we
traditionally associate with it
um that's great right gold is great gold
is good money it's been good money 5 000
years
uh served a lot of purposes but the big
hang up with gold is lack of portability
right we talked about this a little bit
earlier you want to be able to move
across space obviously but Gold's heavy
it's physical right it's very expensive
to secure
um it actually in one way it's
beneficial and that you can store a lot
of economic value in a small area and
sort of uh amortize the security costs
around it but when you need to move it
that's when there's a lot of risk
involved
and this was the impetus for introducing
what you alluded to earlier were the
warehousing businesses so a private
Enterprise a free market function came
to be where a warehouse would take
custody of the gold give you the
warehouse receipt you can go and
transact it it's as good as gold right
you have a call option on gold
effectively
this wasn't introduced to augment the
portability of gold
well those warehouses became Banks
those Banks became central banks and
this is all again I'm not laying out a
nefarious scheme here this is the
economics
the economies of scale associated with
gold
it is more efficient to centralize
custody of this heavy bulky metal and
issue abstractions in it
it's more efficient to transact in that
model than it is with physical gold so
that's what drives this process the
problem is
you now have to trust the custodian
you've introduced what we call
counterparty risk there's a counterparty
to that trade I can trade this paper
with everyone and it's as good as gold
until I go to redeem the gold from the
warehouse and there's the Gold's not
there or they won't redeem it or a
fraction of what this paper represents
is available
um so that is kind of the history of
gold into Central Banking
and I guess
the history of Central Banking is quite
interesting
um
I would say that you know
maybe this is an important Point too
that people were all seeking something
for nothing
I think this is kind of unavoidable this
is the entrepreneurial path right you've
got a problem you've got an itch
you want to scratch that itch or solve
that problem with less effort
right the the really successful
entrepreneur is almost brilliantly lazy
right he's identifying a problem and
finding the quicker way a better way to
solve it
when he makes that Discovery he can now
sell that product or that service or
that method whatever it is into the
marketplace and because everyone wants
something for nothing they will reward
him right this is the entrepreneurial
process
so that's great we all want something
for nothing and it's a valid Noble
Pursuit the problem I think is when we
cross that line of self-ownership or of
morality
and we start seeking something
for nothing from others right someone
else has planted the garden someone else
has built the business someone else's
mind the gold
and instead of me performing the work
to create that value or earn that value
I figured that I can just go out and
co-opt or coerce or take that property
or that asset from that person that's a
path for me to get something for nothing
but it's the immoral path right so I see
this
as kind of like the driving force in
most Human Action we're trying to get
something for nothing but there's a line
that can be crossed
and we talked earlier about
self-ownership I think that's the line
when you violate the self-ownership of
someone else that's the problem
Central Banking sort of came about as
this natural institution to augment the
technological limitations of gold it
wasn't portable right
but when you put that much power you
concentrate that much power into one
Institution
it becomes noxious
it becomes corrupting it becomes uh
irresistible for some people of lower
Scruples anywhere in the world to seek
that seat of power
and this is what I think has really
started to deteriorate the monetary
system and if you look at the history of
Central Banking
it's a lot of
leveraging one another right you know
you talked about a lot of the gold
ending up in the United States this was
also pre-World War II A lot of it has to
do with
the balance of payments among countries
which are just inflows and outflows of
capital but particularly when things got
hot in Europe a lot of gold started
coming into the U.S and again with when
we with that much power or money in one
place
we became the world superpower and so we
stepped on to the the theater of war at
the end of World War II and we
declared ourselves Victorious
rightfully or wrongfully so you can make
your own judgments about that and then
we rewrote the rules of global banking
to favor the United States where the
dollar is pegged to gold
all of the currencies are pegged to the
dollar
so what this gave the United States is
the infamous exorbitant privilege as has
been called to be able to print money
we could send these paper certificates
out into the world and have them send us
goods and services in exchange
add infinitum right until the system
breaks down
countries had the option to call our
Bluff though they could accept these
dollars but they could redeem them for
gold if they thought were being
irresponsible with a monetary policy for
printing too much money
well countries started calling our Bluff
after 1944. uh we had this huge economic
boom and then again glossing over some
history I think it was Germany that
tried to repatriate some gold so they
tried to redeem dollars for gold and
then we had the infamous 1971 Nixon
shock that said no more gold redemptions
and from that point on and it was said
to be a temporary measure as governments
so often and infamously say
who was it that said that there's
nothing more permanent than a temporary
government solution
here we are exactly 50 years later in
[Music]
um
deep into this Global fiat currency
experiment led by the United States
and things have really come off the
hinges I've Point people on this topic
to this website WTF happened in 1971.com
this is not just economic right this is
it's socioeconomic there's you know
obesity rates have spiked
um drug addiction suicide clearly
indebtedness right when you think this
is tied to coming off the gold standard
as the austrians wrote a long time ago
the monetary standard and the moral
standard are inexorably linked
that and this gets into back into
property and time preference
um
when money's losing its value over time
we're all incentivized to be more
short-term thinking this is a
de-civilizing force
and I think it is at I don't want to say
it's the sole cause for a lot of the
cultural malaise we see in the world
today but I think it's a significant
contributor
okay that gets really complicated so
while very interesting I think we pushed
that down there's a line that I've heard
you say that I think is really important
for people to understand because I'm I'm
thinking of myself as I first started to
Grapple with this idea of inflation as
theft and I just couldn't make the words
even it seemed like such a non-sequitur
to me
and that is that there's no difference
between I had a realization when I first
got introduced to the stock market I
couldn't make it make sense until I was
like wait this is like baseball cards
right these unless it pays you a
dividend if it pays you a dividend it's
different because it's actually giving
you cash but if it doesn't it is
literally baseball cards it only has the
value that people agree that it has and
once they stop agreeing that it has that
value then it stops having that value in
any real way
when I think about inflation the
following sense that I heard you say
makes all the sense in the world which
is that there is no difference between
counterfeiting and inflating the amount
of dollars in the system absolutely it's
just that one we say is fine because the
Federal Reserve is doing it with the
sort of implicit um okay of the US
government and the other is uh person in
their basement you know that's right uh
doing it on the down low but it's the
same thing yeah and then I heard you
talk about there was a time where um
when
um Africa was being colonized that I
forget what region but they use glass
beads as a form of payment and the
people coming in were like word we've
got glass manufacturing places you know
back home we'll just make more of these
beads yeah and when you think about the
things that that money represents our
time and our energy right you do
something you you specialize as you said
your specialization
create something and then somebody who
doesn't want to specialize in that that
specialize in something else gives you
money it's a call on that good or
service and you give them that thing so
if you can just go make these glass
beads back home and bring you know ships
full of them you can slowly milk the
efforts of the people that you're
counterfeiting their money and when I
heard it said and again I also don't
imply I don't think that I choose to
look at this with no negative uh
Viewpoint that they're they're not doing
anything negative on purpose if this is
all good intentions just potentially
gone awry but when I heard it explained
how you would do it if you were
nefarious I was like oh my God because
you suddenly understand that that
there's this extractive nature of I'm
either getting you to do this for free
or because if nobody ever realizes that
the glass beads are fake then you just
have inflation right if you give me that
thing in exchange for glass beads the
next person goes but these are
counterfeit then you really lost that's
right but if I'm just slowly devaluing
it because every the prices are going up
because wow there's just so many glass
beads everywhere
um which first would feel like an
embarrassment of riches and then
suddenly you'd realize wait everything
is just re-normalized and either I can
afford the same thing or again I can
afford less
um
then I was like oh my God now I
understand how inflation is theft and
then you really do get into I think it
was Andrew Jackson punching a banker in
the face you have to understand what
happened on Jekyll Island so it's like
before we get to the sort of
morality side of all this was just
[ __ ] fascinating and I really hope
that we don't run out of time before we
get to it I want to understand Jekyll
Island why would Andrew Jackson punch a
central Banker in the face like because
I grew up in this system it seems
natural yeah
but there was a time where this was like
governments even by government agencies
or or government actors were like met
with such suspicion and the founding
fathers and how they were like yo you
have to be so careful of governmental
overreach it's like we don't have that
same Vibe today yes what happened on
Jekyll Island yes okay
great question
um I'd like to First reinforce the point
you just made that inflation
is legalized counterfeiting
counterfeiting is criminalized inflation
this is yup not my opinion this is in
fact mechanically how it works
and in the piece you're referring to
Masters and slaves of money I wrote
about this debacle in 16th century
western Africa where they were using
glass beads as money and I think
this history gives you a good foundation
for understanding what's happening today
it was really technologically difficult
to make glass beads at that time in
Western Africa so they they had reliable
and predictable scarcity a la gold as we
described earlier but only specific to
that region
European explorers arrive and they
quickly notice hey these glass beads are
being used as money
to you know as a call option on all the
wealth this area is producing
we can produce these glass beads in bulk
back in uh European glass making
facilities
very low cost
uh to the point where they started
packing ship holes full of glass beads
and this occurred over uh it was over a
300 year period they were shipping in
these glass beads so kind of doing it
slowly and surreptitiously enough there
was resistance actually
Africans could identify the counterfeit
beads they would try to only use the
authentic ones Europeans would introduce
you know more indistinguishably
counterfeit beads so there was back and
forth but over time what happened was
this
multi-century usurpation of African
wealth by European explorers through the
counterfeiting of money and what I mean
specifically here by counterfeiting is
that Delta
in cost of production right the cost of
production was high for glass beads in
Africa therefore they had reliable
scarcity therefore they had reliable
market value and utility as money the
cost of production in Europe was low so
they could inflate the supply really
quickly and use it to basically disrupt
uh the hard money system if you will in
Africa when I say hard money I mean it's
hard to produce but it was not hard to
produce for Europeans so therefore they
could usurp the wealth
um and this this points to a keep
property of money is that the market
value of the money is going to converge
to its cost of production over time
so if I can mine an ounce of gold for
nineteen hundred dollars and it's
selling on the market for two thousand
I'm gonna mine gold as hard as I can all
the way up until my cost of production
is
1999.99 right so long as there's a
profit margin baked in there and this
also points towards why fiat currency
always goes to zero the cost of fiat
currency production is effectively zero
again it's an entry on the federal
reserve's database right control enter
another 10 trillion dollars added to the
money supply so it's almost intuitive
through that lens why the market value
of fiat currency historically has always
converged to zero which we call
hyperinflation
so
that's all
I think a good way to look at it and
that's
um and that's happened many times
historically so it's not just
it's not purely that these Europeans are
set out with nefarious purposes per se
but if there's a dynamic in money where
you it needs to be costly to produce to
support its market value and therefore
support a sustainable trading economy if
it's cheap to produce then it will be uh
the market will be flooded with the
money in a hyperinflate essentially and
so that process again is why people
settled on gold it was the most
difficult thing to produce
so
the other thing that happens here is
that
when you're increasing the money supply
um like it's very common today in the US
we think oh there's not much inflation
you know food hasn't gone up a lot
whatever whatever but what you're not
seeing is that markets if they're
functioning properly we should actually
have price deflation over time as we get
smarter and better and more efficient at
making things or providing Services
prices should be coming down so the fact
that we're targeting price increases of
two percent is shadowing over what may
be we don't know right we don't know
what
um the increase in market efficiency
would actually do to prices absent the
Central Bank intervention so I think
this is a very important Point too that
you know people try to argue that the
degree of it is such that it can be
ignored or not worried about the two
percent's not that big of a deal you
know let them take what they need but
it's overshadowing the opportunity costs
of people that's being lost like we
would have five percent price deflation
or more in certain sectors
and so
to get to the why did Andrew Jackson
punch a central Banker in the face which
he is
as someone that grew up in Tennessee
he's my favorite Tennessean for this
very reason I think he also called them
a den of vipers and he said he would
route them out he resisted
um or at least he was instrumental in
the resistance of the first two
attempted implementations of a central
bank in the United States the Federal
Reserve being the successful third
is because this country was founded on
the principles of which we inherited
from the Magna Carta life
Liberty
property
as we've touched on earlier the central
bank is antithetical specifically to the
third one property right it's
arbitrarily violating the property
rights of some to enhance the property
rights of others is another way to look
at it
so what is that what is life liberty and
property
our life is our future
right these are the
to take to lose your life is to lose
your future let's say right
Liberty is your present it's your
present freedom right to lose your
Liberty is to become a slave right and
the the Spectrum to slavery is very
important too
zero percent tax or theft is a free man
right completely owns himself 100
taxation or theft is a slave all the
fruits of your labor go to someone else
and then
so you've got your life as your future
Liberty is your present
property is your past actually
it's how you've spent your past infusing
nature with your life and Liberty right
your self-ownership you've accumulated
fruits of Labor that becomes your
property
and so
the central that those are the kind of
the three tenets not only of natural law
but also basic morality right I don't
think anyone would sit here and argue
with you face to face and say no I have
a claim on you more than you do
I don't like it's a non-reasonable
argument and again this is this is a
priori right this is only you can move
your left arm
there's no argument that I can formulate
that says no I have some claim over your
left arm and the actions that it takes
yet we have that implemented in this
system that can violate property rights
if I can violate your property rights
I'm effectively saying your
self-ownership is limited and that I
have a higher claim on your life than
you do
this is like the rotten core
at the heart of modern uh statism we
call it capitalism but it's not it's
state marginalized capitalism with a
communistic institution at its core
called the central bank
so Andrew Jackson was a man that
understood these principles he
understood the importance of adhering to
life liberty and property for a not only
uh is it pragmatically the most wealth
generative model of human organization
but it's also the most humanitarian and
ethical right it offers the greatest
equality of opportunity to actually have
property rights in yourself in your time
in your labor
so
and it's you know thank goodness it's
that way thank goodness the ethical
humanitarian choice is also the most
wealth producing Choice otherwise we'd
have a really
ugly Dilemma on our hands
uh
I think Andrew Jackson and our founding
fathers understood these three pillars
of life liberty and property
as the most
important
components of human
organization that if we adhere to them
we can actually create
modes of being that increase our wealth
which is to say increase our
satisfactions right the heart of man is
never satisfied but this is the way to
optimize the satisfactions of human
beings
and create a mode of being that's
focused on trade cooperation
interdependence as opposed to Warfare or
fighting so it's to boil it all the way
down it's like
we can either cooperate and trade
let's say cooperate and compete it's
very important part of Entrepreneurship
right it's competition and trade
voluntarily with inviolable property and
we generate wealth
that's a positive sum game the pie is
growing or
we can violate the property of one
another and fight over it
and this gets to that old basket saying
that when goods and services don't cross
borders soldiers will
all right we need we're all seeking
something for nothing if we don't
channel that Human Action into these uh
productive channels of trade and
Entrepreneurship then we end up over
here uh in violence coercion and
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friend back to today's episode
okay so you've got Andrew Jackson trying
to root out the Vipers
I'm assuming he thought of them as
vipers because they can redistribute
wealth which is a violation of your
property that's right why then do we end
up creating the central bank and
why did they meet in secret like what
give us a little bit of background on
that meeting on Jekyll Island I know
they were pretending that they were
going on a hunting trip
there's it's such a weird Confluence of
things that are happening right now you
have this sense of like distrust of
people are working behind the scenes
against you but you also have the sense
of redistribution of wealth is good like
it's it's a very confusing time right
now and this is a still confusing to
this day people will argue with you
um that this you know the Fed was set up
with very good intentions and that this
whole which by the way this book The
Creature From Jekyll Island by G Edward
Griffin this was formative to my
understanding of Central Banking and
this is pre-bitcoin that I got into this
so I would really just encourage
audience to go check out that book uh
it's a it's a big book though you can
also read an Abridged version
called dishonest money I think was one
that I gave to my family and friends and
it sort of encapsulates the gist of it
um but to your question
I think
based on my study of that book that it
was done in secret and it was done over
a holiday weekend because this was a
time when people still understood the
ideological importance of life liberty
and property we learned a lot of lessons
from Central Banking and it's failure
and it's tyranny in England and even
before that so it was still fresh enough
on the human mind that we we were
resistant to its implementation
um but as far as why it got pushed again
it's just something for nothing
principle right there
if you could found an institution or a
business
and by the way all organizations are
businesses right governments or
businesses institutions or businesses
they're all property strategies as I
call them
if you could establish an institution
that could generate Perpetual profits
and be able to paper over its own losses
or you can never sustain a loss
would you not have a pretty large
incentive to establish that organization
I mean the equivalent question is if you
could magically wish for a money
printing machine right here on your
table
like wouldn't you want that wouldn't you
once you had it wouldn't you run that
machine until it was absolutely blowing
smoke and Sparks out the side of it I
mean that's Central Banking in a
nutshell is it human beings
in this pursuit of something for nothing
or in this pursuit of
um pursuit of wealth frankly right the
most powerful incentive in the world we
have tried to rationalize and formulate
different ways of creating socioeconomic
structures that favored the few that
could understand it and create that
privilege for themselves at the expense
of others
I think this is where Bitcoin needs to
enter a stage left here so I have a
quote from you
um actually I'm going to start with a
paraphrase from Alan Greenspan this is
you paraphrasing Alan Greenspan
um that sets us up then for a fewer
quote so Alan Greenspan again this is a
paraphrase a sound store value must be
made illegal otherwise fiat currency
would not be competitive
so you've got this idea of so a sound
store of money you talked about you
dropped that coin but basically that
it's the amount of it is fixed in
flexible Supply okay so that's sound now
this is your quote which uh I love and I
think sets us up for understanding why
the Bitcoin guy who has Bitcoin tattooed
on the inside of his arm like the most
painful place to get a tattoo uh says
this this entire system we've built is a
complex of unintended consequences and
Bitcoin is an immune response from the
collective economy
so if we buy into the idea that
they didn't have bad intentions to
create the central bank they don't have
bad intentions to make the printer go
Burr they just like they're trying to
they're trying to policy their way to
something that's far more stable which I
actually get and when I put like my they
don't have bad intentions hat on and I'm
like word like I get what they're trying
to do and I'm grateful that I've grown
up in a super stable environment where I
was able to go from you know sort of
lower middle class to generating real
wealth in my life so for me it worked
right I was able to jump class like all
the things that I was promised with the
American dream I was actually able to do
and so I'm like yo that stability is
amazing
um I didn't ever have to use weapons to
build my company which is a whole side
thing that I've talked about before
where I had former drug dealers working
for me long story there's a whole reason
why I think it's amazing to give people
second chance so
anyway they were telling me stories of
like people trying to confiscate their
product right which for me would have
been protein bars so I was like whoa the
thought of somebody showing up with
shotguns to take my protein was like
that's crazy that's a hard way to do
things yeah right so it's like okay this
is all work for me I like the stability
so when I have that hat on I'm like I
get what they're at least trying to do
but when you try to engineer a system
whoa like the number of things that go
wrong where you can change whether it's
ecological and you're trying to do
something and it has you know 10
different knock-on effects or whether
it's with money and it has different
knock-on effects
um
why though is Bitcoin the immune
response
yes
um it's funny you read that line I don't
barely remember you said while you I
heard you say it so whether you've read
it or written it or not I can't say but
in a podcast you said
um
so these principles that the United
States was founded upon again that have
been refined from the past from like the
Magna Carta
one of the most important if not the
most important is the principle of
inviolable property meaning again
property is the relationship between
yourself
and the value you create or the fruits
of your labor which is the foundation of
the scaffolding that lets you climb the
socioeconomic hierarchy right from as
you said lower middle class to where you
are today was because
you knew that you could hold the value
of the value you created and use it to
scaffold yourself upward if that
Foundation were not stable
right at least to some extent there
would be no way for you to have upward
Mobility so again it's we're back to
property rights being the basis of
civilization itself
they're pretty good here they're pretty
good in the US you can open a bank
account you can put dollars in it
your property audits will be violated by
inflation when the Federal Reserve is
printing money you're going to now need
to outpace inflation with some other
investment otherwise your property will
be diluted you don't have full property
in that money because if you try and
wire it to you know I don't know what
countries are on the ofac list today
Iran or something they'll block you and
say no you can't do it so you don't have
full rights in that property you are
being surveyed you don't have full
privacy but you have pretty good
property rights right relative to the
rest of the world
Bitcoin is the first permanent
implementation of this principle we've
been refining throughout human history
of inviolable property it actually
cannot be violated in any way
no one can produce more than 21 million
Bitcoin so it's
and I've argued this in some of my
writing that although it's an invention
we've actually discovered something with
Bitcoin we've discovered
absolute scarcity for money so if we're
back to those five properties of money
in terms of scarcity Bitcoin is absolute
it's not relative right it doesn't
change we know with
you know nothing's
um
people argue with me about this it's not
absolute everything's probabilistic true
uh Bitcoin has proven itself over 13
years of flawless operation that it does
two things essentially perfectly what's
your turn out a block on uh one block of
transactions on average every 10 minutes
and adhere to a supply cap of 21 million
so it's the first fixed Supply money
there has ever been
and I don't think you can recreate that
because by definition
money is a centripetal Network effect so
it we tend towards one so for the same
reasons we had one analog gold we're
likely only to have one digital gold
um
this so your property rights cannot be
violated by inflation because no one can
change the supply cap if you hold a
thousand Bitcoin you hold one thousand
of a possible 21 million forever right
you have a guaranteed fraction of the
total money supply
you cannot get that level of assurance
with any other asset in the world full
stop doesn't exist even with gold you
can hold all the physical gold you want
you're still not immune to
some technological breakthrough we
figured out figure out how to produce
gold in the lab very cheaply we mine an
asteroid we mind the ocean floor we find
a new South American Bonanza whatever
you're not immune to any of that but
with Bitcoin and again it's a bit of a
bet because it's only 13 years in but
it's done these things perfectly so far
if it continues to do what it's been
doing for 13 years you have a guaranteed
fraction of Total Money Supply so you
have an inviolable property right
further
this is again property is the
relationship right we've historically
always needed an enforcer
so you need the police force you need
the military to make sure no one comes
into your house and violates your
relationship with your house
we needed if maybe not necessarily a
monopoly on violence but you needed a
protection-producing Enterprise which
historically is the role of government
to enshrine your property rights
the problem of course is that they
willed the power to violate your
property rights as well which
historically has been very tempting for
governments and bureaucrats they
typically give into it and governments
get overthrown over time that's been the
cycle we're locked into
bitcoin's the first property
right independent of the Monopoly on
violence or independent of uh physical
protection production
it's an informational property right
it's just an alphanumeric string you can
store it in any information bearing
medium put in your mind put on your
computer put it in a song do whatever
you want with it and there's no the
enforcement is done by the mining
Network so the algorithm and the free
market competition that's going into
Bitcoin mining is effectively displacing
the protection that government was
historically necessary to provide in
Bitcoin itself so it's this radical new
you know some people call it a
metaphysical property right and that
it's just
an information Bearer asset so gold was
really good as a bear asset and that you
know assets equal liabilities plus
Equity the accounting equation gold was
pure Equity if I hold gold it's no one
else's liability that's really important
right I have no counterparty risk if I
hold physical gold
if I hold dollars that's not true right
I have this liability to the Federal
Reserve to the bank whoever whatever
counterparties are involved
bitcoin's the same as physical gold but
it's non-physical right it's
informational so it opens up this entire
new
sphere of possibilities and how you
custody it you can custody Bitcoin in
these multi-signature schemas that are
all but immune to theft you can chop the
key into a bunch of pieces and
distribute it geographically you have
these military-grade protocols wrapped
around it and it gives you an absence it
it is the highest implementation
of human self-ownership we've ever had
right in the past it's been scribbles on
the American Constitution or the Magna
Carta and like We'll always adhere to
this document no matter what but then
you know a few hundred years go by I'm
like well you know let's tweak this or
change that or add this
bitcoin's taken those principles we've
used with foundational documents
historically and it's permanently
emblazoned them in computer code
an unbreakable code basically is another
way to think about it so
it's the invention of inviolable
property right it's no longer a
principle we've grabbed this principle
out of
the space of ideas and we've anchored it
into reality via the thermodynamic
competition of Bitcoin mining
and it is so radically new and hard to
get your head around that it's
shattering World Views worldwide Bitcoin
I think you would agree with this I view
Bitcoin as a deflating currency fix
Supply
correct but as more people want it its
value is going to go up which if that is
true then the longer I hold it the more
pizza that same single Bitcoin will buy
exactly so that has changed my behavior
I think of dollars as like whatever like
spend it but when I have a Bitcoin I'm
like I don't want to mess with it this
is time preference yeah I want to hold
it so
because of that my base assumption is
that if you have a deflating currency
that thusly buys you more over time
it's so counterintuitive because
deflating makes it sound like it's bad
it's getting smaller but it's actually
growing more powerful exactly it's
buying me monetary dilution as inflation
and monetary enrichment as deflation
yeah the inflation deflation is a
Keynesian euphemism actually to sell the
idea of infections well played because
my brain is having a very hard time okay
so my Bitcoin is growing in purchasing
power over time and that has already
changed my behavior so I know that it's
going to change more people's behavior
my base assumption is that will cause a
decrease in Innovation because people
are like dude your iPhone is cool but
like uh I'd really rather wait and see
what my growing powered Bitcoin that's
the leap I want to challenge right there
where we say less we say more saving
equates to less Innovation yeah you can
see exact Ops
why the the nature of saving itself is
that we are delaying present consumption
and looking further into the future and
engaging in longer term production
processes yep now the austrians describe
this as the more round about the
production process which is equivalent
to saying the more finely we engage in
the division of labor so you have one
long production process to produce a
thing the more finely we chop that up
amongst ourselves the more productive we
become
so that
um
effort that impetus to push into longer
production processes that are more more
roundabout and more finely divided that
is innovation that is how we we become
more than some of our parts we
accomplish great doesn't feel true to me
with less efforts when I that's it
there's you actually think inflation
drives Innovation can I give anything
uh well so I'll tell you why I think
inflation and look trust me when I say I
am at the edge of I am thinking through
this in real time so this is not me
saying I believe this but this feels
right to me so when I think about what
gets people to innovate it is if I bust
my ass and I come up with something
better than other people I get more
value from people in a very fair
exchange where they think they're taking
advantage of me because they'd rather
have this thing that I've created than
they would they want the money as do you
have them exactly and so I'm like the
word this is amazing so now where what
we get into is right now with an
inflating currency people have just a
sense of like oh this money is it's it's
inconsequential it it God this is going
to sound stupid but a dollar is only
worth a dollar
whereas a Bitcoin to me feels very
precious it's like this gets becomes two
dollars three dollars ten dollars a
hundred so now I'm like uh I don't
really want to spend this okay because
of that I don't have the ease of like
buying that I would so now my evaluation
of the thing that you've created I'm way
more scrutinous
so I mean maybe just raises the bar on
Innovation but it it I think you're
saying it feels like it turn to Value
investing perhaps
so
for a long time
people would only invest in projects
that created real economic value
right and if your money is holding
purchasing power over time that's a good
bar
you can think about it like this
imagine we're on a world run by Bitcoin
so there's one hard money fixed Supply
everyone uses it in the world
every successful economic project every
entrepreneur every Innovation that
successfully increases productivity
that accretes to the purchasing power of
everyone's money
so
in a world where your money's constantly
losing purchasing power that is not
happening so you get more junk I guess
there's more of a there's there's
actually
the incentive and this is related more
directly to the violation of property
but there is an increased incentive to
consume rather than invest the more
rapidly you you violate property rights
and the more that it's permanent rather
than intermittent so if I know the high
degree of certainty that you keep 20 of
whatever that I make that I have a 20
less incentive to engage in investment
rather than consumption activities
and again that's what we're doing when
we print money we're actually inducing
or incentivizing consumption actions
over investment actions and investment
actions are what Drive Innovation it's
savings that underpin Investments
investments in that long-term production
structure I I suggested there's also r d
in their experimentation right we're
trying new things that is what creates
innovation in the real world
so if anything The Innovation that we've
seen in the 20th century has been in
spite of Central Banking not because of
it but it gets very murky here because
it's very easy
you could swap someone else into the
seat right now some canes and economists
and they'll give you a completely
different interpretation of economic
history right they can go through the
historical facts and Trace their own
Arrow of causality and say here's what
happened and we're back to Copernicus
back to Copernicus but here's what the
libertarian philosophers did they said
you can't mistake economic history for
actual economics economics is more of a
rationalistic science you you have
axioms man must act man prefers present
satisfaction to later satisfaction all
other things being equal like these
axioms it's like geometry I I so I
didn't understand why can't I take
economic history as economics if you
take economic history you can because
t