Kind: captions
Language: en
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
safety in a moose 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
safety 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-mckenzie economist and a previous
guest at this podcast
safety'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
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and now dear friends here's safety and
moose
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 want to 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 know it's uh you 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 um many people
have a hard time grasping of the concept
of money as a market could 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
to develop the division of labor which
would not be possible at any kind of
sophisticated level without money so
if um you know 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
um 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 in doing one tiny little
thing
which is not what you consume you know
you can and 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 a of an
economy of almost eight billion people
um each one of us produces one tiny
little thing and they exchange that
thing
for all the things that they want and 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 and 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 that's we have
a problem of coincidence of one 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 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
the term coincidence of wants so each
one of them it's like a stochastic
system
they have desires it's like random
collection of desires some 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
uh for competence and excellence in
particular kind of labor it's like uh
specialization they're able to be like
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 um there's a
coincidence
of both the the wants they have and the
capabilities they have and you wanted to
create a system that kind of um
exchanges those things so when you
imagine
like uh what is a good what is markets
when you imagine a market is like a
hierarchical
system like 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 eight billion
people across the planet um naturally
emerging
yes this is the thing i think that is uh
very hard for many uh
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 um that's what we do
that's what humans have been doing since
they started
you know 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 know 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 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 you know
all you need to do is specialize in
doing one thing the things 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 um 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 you know we 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 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 going to 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
you the future is uncertain so you know
you can um save your apples and oranges
you can save the spears you can save the
animal that you hunted
but these things um you know first they
rot and they're not very good at holding
on to their value over time but even if
they wear
even if you know 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
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
um we can think of it as a process of
our money gets harder
and so our money is gets better at
holding on to its value for the future
and by harder i mean harder to produce
we we find things that are hard to
produce that are better at holding on to
their value so they hold on to 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 the book bitcoin standard
from 2018
i believe yeah and then a new book
called fiat standard uh the bitcoin
standard just considered kind of the
bible uh in the cryptocurrency space in
the bitcoin space of uh 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 um maybe we'll go
back to bananas eventually uh right
very good reasons why we won't well we
can disagree uh we can agree to disagree
on this
now i'm open-minded to the bananas they
uh they're one of the biggest sources of
joy to me when i first came to this
country
is uh eating bananas and so
i'm
maybe money
happiness
perishable happiness will eventually
become
the the best medium of exchange i don't
know open-minded anyway so you mentioned
hard money and soft money says 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 um
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 the uh from palau to yap so on yap
limestones were money uh 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 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 um don't end up with
any wealth left whereas the people who
store the 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 the basically
the entire planet being on a gold
standard
and what is the 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
um gold is indestructible you can't
destroy gold in any meaningful sense
it's um it's it's it's been accumulating
stockpiles for thousands of years you
know the gold that was worn by nefertiti
back in ancient egypt is
today um 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 um it gets
melted down into new other forms you
know the jewelry gets turned into coins
or coins get turned into bars
but it's um it's just
stockpiles that are accumulating on the
other hand
every year we get better at our
technology of looking for gold you know
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 uh being devalued
sorry that it's not being consumed
because there's no way of consuming gold
you can't eat it you can't burn it you
can't it doesn't rust
um 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 two percent per year every year
so yes we 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 two percent
compare that to the second
highest the second hardest metal
historically was silver and that
increased historically around maybe five
percent per year or so now it probably
increases something like closer to 30
percent because it's now getting used
extensively in industrial uses so when
you use it in the in industry um you
know when you put silver in a laptop or
in a camera or in a machine
effectively
you are consuming the stockpot 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 uh the
bitcoin standard
what happened in 1870 was uh germany won
the franco-prussian war
and germany was on a silver standard but
the value of silvers was declining so
germany did something very smart which
is they took their indemnity from france
in uh silver and gold and used that big
chunk of gold to switch to going on a
gold standard and since then silver's
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
uh 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
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
uh almost ridiculously basic questions
because i think
exploring questions like what is money
is a really great way to uh to think
from first principles to really think
deeply about this world so i really
appreciate you doing that um 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 because um so i 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 um 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 wear 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
that was 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
um 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 this is there's
always uh shady stuff going on but at
least that's the state of goal is the
receipt should exactly represent the
amount of gold there and also when you
say standard
it means that uh 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 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 uh
established gold as money it's more like
the
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
um 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 had
to go by the gold standard you had to
have a currency that was redeemable in
gold so that you could trade with the
rest of the world so that people could
um in your country use that currency um
so it's it's 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
government's
you know the people
pressure so first of all the the
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 the narratives they tell each other
all that kind of stuff they pressure the
governments to uh take on a particular
money and then the governments
um you know they like power they like
control all those kinds of things they
pressure the people until 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 i the reason i
it 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 they 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 central bank
want to accumulate pieces of paper
effectively or credit liabilities of
another central bank that can produce
them infinitely
and it's it's it's a lesson that's
becoming uh more and more obvious to
governments today you know as we see u.s
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 um
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
on 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 stockpiles
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
on a conveyor belt of production
from the mine straight to the uh
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 i don't have exact
statistics
it's very difficult to get these but you
know 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 you know a lot of
people say well money is a collective
illusion money is a
social construct um if we all agree that
something is money then something is
money i think it's 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 you
know even if you get the 1 000 richest
people in the world all the world's
billionaires
they get together 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 going to dump all of
that
extra copper production if the price of
copper is going to go up so you know
there will be a lot more copper mining
than all the other metals a lot of
you know nickel companies and gold
miners are going to switch to focusing
on copper
and then we're going to dump an enormous
amount of copper on the market the value
of copper is going to crash
and the people who chose copper as money
are just going to end up with large
warehouses of very cheap rusting metal
so that's a brilliant description and
that that kind of pushes towards gold
where the
um stock to flow ratio i guess you would
say is 1.5 to 2 like you mentioned
earlier well that would be like the
inverse of the stock to flow that's the
supply growth rate so the stock to flow
is the inverse it's around 60.
60. got it but let me push back on uh
somebody who likes human psychology let
me push back on the collective
hallucination
uh and the illusion so that's for copper
but what about paper money
uh
that you know that that's not you can't
smoke it you can't eat it it's just it's
supposed to represent it's supposed to
just be the medium of exchanging and
[Music]
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 um
this is uh 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 uh well you know 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 um
it it ca you can't enforce this thing so
it's never really just happened and it's
never been hallucinated into existence
um people can hallucinate this kind of
nonsense in uh writing textbooks and
books and uh in academia but in the real
world people don't hallucinate uh money
people are very careful about what they
put their money in for people listening
we're gonna have fun in this
conversation because 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 you
have a strong certainty about the way
you talk which i think is
fun
um 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 because
you're smarter than me and all this
stuff so if we we want the smartest
devil's advocate possible
and i'm certainly not that but anyway so
but nevertheless we are currently
on the fiat standard
so
money
does
have
value
paper money
and the reason it has values 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
because 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 like
all economics is subjective i i consider
myself an austrian school economist and
the starting point of all austrian
economics is that all value is
subjective
so
[Music]
obviously you know value only exists
because humans choose to make the
valuation however um the economic
reality of the way that money works
means that it's just the technology like
all others and so
if we 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
we'll leave money for me it's like
saying well if we hallucinate the
bananas can be spaceships there'll be
spaceships i mean you can call them
spaceships if you want but a banana is
not going to get you to the moon with it
nevertheless
that's true there's 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
uh so much destruction so much
creativity creation happens in in our
minds
so absolutely everything does happen in
the mind you're not going to 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 um economic reality exists in a
way in which your beliefs are rewarded
when they match up with economic
reactions reality and they're punished
when they don't so if you ride a banana
jump off a cliff thinking you're going
to get to the moon
you know and that solves the problem of
people thinking the bananas are
spaceships by killing people who think
that bananas are spaceships and i think
to go back to your question on in terms
of paper monies so yes even though you
know ignoring the
um
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 and we should say
like
fiat money is predominantly credit so
like the it's also digital currency so
more than 90 percent of dollars
are digital less than 10 percent 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 on to 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
whose supply is 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 the uh 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
kenzian economic how do you compare the
two
what should people know some interest
what are
interesting defining characteristics to
you about these schools yeah
so austrian economics the way that i
said austrian economics is economics
it's um it we call it austrian economics
because economics has been hijacked by a
bunch of frauds really people who are
wrong
well it's much worse than wrong by
people who are just essentially
propagandists for inflation right um so
it's like your opinion man
all right
yeah well that's also like your opinion
man yeah but
that's true well i also talked to paul
krugman on this podcast so he's uh
the o speaks enough but he is uh 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 intention
yeah he's um he's done a great job as an
actor who plays an economist on tv and
the internet
so anyway uh now tell me what you really
think no but so the basics of what is
austrian economics what is the what
perspective does it take in the world
yeah so i mean austrian economics really
is
uh 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
um
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 um
when you when you make choice you're not
making it for instance if you're making
a choice between uh what should i spend
my money on you're not making a choice
whether it is
um 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 going to 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 um
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 then 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 you know 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
choose water obviously
but you 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 um
people are only buying you know you buy
your first diamond when you're going to
get married and you give it to your wife
and that's it's going to be the first
few grams of diamond that she's ever
going to giving my wife water
smart move you should definitely give
her bitcoin instead of diamonds i tell
my wife i occasionally remind her what
uh what we how many bitcoin we could
have had if i bought her bitcoin with
the price of the diamond what's the
downside of by the way diamonds for from
the analysis of like gold and so on
that's a great question um
arguably diamonds are scam
[Laughter]
because they became popular as a thing
in uh 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
uh wedding
is because you know it wasn't just that
it's pretty and shiny it's because it's
money and so um you know you die and
your wife can take the gold and she can
live off of it um it's 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 um
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 a there's effectively
a monopoly of diamond producers they
restrict the supply
and um it's a pretty dirty business and
the way that they do it is you know all
the um all of the talk about
blood diamonds is a way for them to
ensure their monopoly so
um
if you're part of the monopoly of
diamond producers then 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
dimes this is the other thing you can
make artificial diamond you can't make
artificial gold
so they restrict the production of
artificial diamond and they try and um
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 going to come a point at some
point that this monopoly is going to
break and a lot of people are going to
be left with uh
essentially uh
highly devalued uh jewelry i'm going to
take this segment of the podcast when
i'm getting married i'm going to send it
and then instead you're getting
uh water or bitcoin yes and water and
bitcoin is all you need so so marginal
analysis guessing and 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's um that was
menger's
work
and then um he had a student um agent
bombard who developed um 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 um 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 um this is the correct tradition
of economics and before uh world war one
this was just known as economics and
then
um after what happened in world war one
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 you know this is
presented as an innovation
um 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 goldware now the
government can just print money whenever
it wants and now
um 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 is 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
so you're
again for the listener you're using
strong words you know push back just to
uh find
uh to please devil the devil's advocate
to hopefully one day arrive at the 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 let's give them a chance
so the conventional wisdom
perhaps economics wisdom is that
inflation is good
uh in moderation as it encourages
spending but too much is bad because
you know it completely devalues destroys
people's savings so a little bit of
inflation is good to stimulate spending
um
and
i mean i suppose this is one of the
things that's supported by uh kenzi in
economics
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 it could the chicken and the egg so
that's that's the cynical take yeah this
is a propaganda machine to solve the
government's narrative
the less cynical take is this a bunch of
economists who are telling who um
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 uh 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 lived next door to
michael malus who probably beats you on
the intensity
and how quickly he says government bad
so
so but there you know there's a
potential argument for government good
go 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 uh that exists
you probably disagree with any possible
argument in that side but anyway so why
is that idea yeah of kensington
economics wrong i'm going to focus for
this on the uh
money idea the idea that a little bit of
inflation is good
um 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 want to keep this
magical monster called the economy going
people spend because they need to
consume because you know 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 um
with our time increases and so we want
to buy more things so people buy things
because people want to consume there's a
limitless desire to consume you know
that there's no
there's no uh shortage of reasons for
people to consume whether it's food or
ferraris or
uh
private jets people just always want to
buy more can i interrupt just really
quick what about the fear about the
uncertainty of the future where they
might want to they might want to
uh
buy things but they're really afraid
because it seems like there's a lot like
a pandemic going on or whatever it is
that's good so so fear of uncertainty is
yeah but 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 you know 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 you know well maybe you do
have a ferrari but i mean most people
don't buy ferrari because
it's too expensive they don't they can't
afford it they'd have to work too hard
to get it
um 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 one
the problem is always
a result caused by the inflation
and what the keynesian hucksters do is
that they look at the inflation
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
the so there was inflation caused
an unsustainable boom it caused the
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 you you know 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 this is very
sane and very good and it's 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 this scientific
breakthrough that you know 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 you
know
there are problems caused by various
random things but don't worry we're
going to 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 and and this
is a 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 kenzie and economics is wrong so
just because 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 colorful such colorful language
uh i love you deeply for this this this
is fun yeah but i mean you know 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 um legitimate because he's you know
he's part of the major shows
[Laughter]
so
the case they make and the criticism uh
kenzians make of austrian economics and
the case to make for kensington
economics is it's based on empirical
evidence
so
uh austrian economists are pie in the
sky theorists about
like how human nature works and it's
just all theory uh and just like you
said kenzie and economics kind of sell
it as a science data driven science
and so um
where's the data bro
on the uh so one way of saying it is um
how do you know if we get rid of
inflation
how do you know if we get rid of central
banks if we push toes that direction
uh 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 uh the economics they present as
if it's just theory and 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
exact data 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's moronic theories
and it's 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 uh it's just government mandated
religion so according to keynes's
nonsense
um you know
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 just find it 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 i know keynesian nonsense better
than
most keynesians know austrians if not
all of them i i guarantee you and 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
it's completely nonsensical of course
because
um how can the value of the goods
produced be different from the value of
the spending but let's put that aside
for a sentence 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 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's bankster buddies and
government buddies to print a lot of
money to give to themselves
and then um that will that's one
interpretation so but to uh so to print
more money to increase the expenditure
that to to match the stimulus the level
of sounds pretty good to me i'm sold
all right but even though you're saying
huckster so yes i just you know like the
way i i love you very much but like uh
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 um
like i don't know anything that involves
human nature
deserves this level of certainty i at
least my position is that we don't know
what the hell we're doing on basically
anything and perhaps but i mean like
there's a lot
like certainty can get us in trouble
it's my worry i don't know
much about economics i don't even know
you know financial systems monetary
systems
um
but i 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 i'm nervous around
certain i could be wrong but you know
you you asked 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 yes 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 going to get to your
point about empirical data and to show
you why
um
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 expenditures
cannot be both higher and lower than
output
so therefore if you were truly being an
empirical uh person if you were looking
at evidence and trying to be
and like trying to analyze data you'd
look at this and say
one example you know one 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 you know they
ignored it and when it happens in poor
countries because you know poor
countries don't really matter but then
in the 1970s that happened in the u.s
and in the western economies in the most
advanced industrial economies so
historically before then you had all
these keynesian
central bankers
talking about this model and saying you
know well aggregate expenditures 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-kenzia motto well
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 um
uh
basically most uh
fiat economists as i like to call them
essentially anybody at a university
financed by governments which is
financed by central banks which is fine
we'll talk about
the effect of
fiat
money on our life as you write about in
your book
uh fiat standard one of them is
education i'm sure we'll disagree there
too
um i'm 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 i mean it's it's such an
example of motivated reasoning like
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 uh macroeconomics i used to teach
you know 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 explained
and i just teach you know the keynesian
basic stuff and every time i 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 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
uh huma 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 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 ex 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 as the fact that
scarcity exists
and
now 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 um because it's you know we have
once and we have limited means to meet
those ones we need to economize it's a
permanent
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
and for the keynesians
it's physics envy they look at the
market economy very good 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
when you introduce those aggregates you
know 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 you you know in
physics
for instance or in chemistry you put
let's say a container with contains uh a
gas and you have the
ideal gas law pv equals to nrt
calculate the pressure calculate the
volume
and then
and and then the temperature you can you
if you have the pressure and volume you
can calculate the temperature because
you have the um ni
constants so there's a
clear relationship that has been
demonstrated in a laboratory and that
can you know 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 um then it's and it's broken
where
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 it's a par 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
uh is the right 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 keynes
well no i i think there's power to the
orthotics man just like einstein you
know a lot of general relativity special
relativity that that's a thought
experiment it originates in a thought
experiment now is it true
you know a nice thing about physics you
can't eventually have experimental
validation then 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 you it's
the power of reasoning together 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 want to copy the methods of
physics and then that's just you know
uh gonna give them the certainty of the
results of physics which is like me
saying i'm just gonna put a red um
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 uh minimize the friction
of the free exchange of goods
so um austrian economics puts priority
in in the market
yes and you could you could you could
arrive at it through two paths the the
the more um
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
mathematicization we need to have better
math models we need to get all 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 on
entire economies and because
particles of a gas are just dumb matter
and so you know you you kick matter in a
certain way you can calculate exactly
how much is going to fly human beings
are much more complex they have a will
inside them and this is really
the this is the humility to understand
that you are a human being and other
people are also a human being just like
you
and that
the 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
want to 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 realize that all 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 iran
makes you arrive at the austrian
perspective or the libertarian
perspective i should say
is
simply the the 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 um 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
um the keynesian perspective the central
planning perspective is unlike physics
you know 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 you know that'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 so from our
politics from an ethical perspective
uh your view is the i mean perhaps the
broadly speaking of the libertarian view
is uh coercion is unethical
freedom is is essential
what is what are the pros and cons of
government intervention in the economy
so can you steal man 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 economic
perspective what is a positive role of
government
that you could imagine you can speak to
i can repeat many other cases but i 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 it 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 do 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 uh 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
um or well the economy too right
uh
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 hard a very large scale
and therefore you would want um 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
um
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 going to
have to have one power plant and since
there's only one power plant then we
can't just let anybody
own it because then they're going to
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 colombia
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 it's 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
um
no in reality the 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 uh generation you
know one
big uh 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
going to 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 and if we do end up in a
situation where there's one power plant
for an area
then i you know if the markets uh ends
up centralizing all of it into one power
plant i don't see that as a problem um
there are places you know there's a
small town with only one barber shop is
that a catastrophe no because
um 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
um 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 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 there 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 the uh for that
choice for the quality of that solution
by being voted out
if you 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
and nearly as well as a free market and
the question is are there
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 yeah well here's out 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 going to put a gun to your
head
i'm going to take your money and i'm
going to use it to buy more guns for me
to put against your head
but somehow
you're going to 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 uh yeah i mean uh
a little gun to the head now some good
luck to anybody who's going to be dating
you if you think you're putting a gun to
people's head is comparable to a
relationship uh
all jokes but yes i i mean the people
don't often think of it as gun to the as
government and the military
as gun to the head
um 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 bottom if you don't want to pay
if you don't want to you know all right
i don't want to be part of your power
plant i want to get my own generator i
don't want to do it i don't want to pay
for it go to jail you can't not pay for
it that's really the symmetry 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 and
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 that 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 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 i'd like to propose
is that in general there's manipulation
whether it's government where there'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 uh 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 governments that 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 you know
corporations individuals free markets
they can't coerce without the resort to
government so you know you think about
all the examples of corrupt corporations
doing bad things
it's always because they have certain
privileges from governments because you
know that
as it exists you know 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 you know so if
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 i they could
all go bust tomorrow and i don't care i
don't buy their product and i don't uh
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 the product that they
uh that i value or if they
convince me that they are
going to use it in a way that's
profitable and they they might i may be
wrong you know i may invest in a company
that fails or i may invest in a company
that is turns out to be um
fraudulent but that's
my fault you know and
it's
it's 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 um mandatory you
know it's
it's violence it's um 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 we mentioned
michael malus between anarchism and
libertarianism
so this particular use of violence
this like last resort this policing
force that libertarianism is okay with
and uh anarchism is not okay with it so
basically nation states that
uh keep you safe from the worst of of
war
yeah i think to be more accurate the
distinctions between anarchism and
monarchism i think libertarianism is
kind of a vague term that can encompass
both these a lot of things okay yeah um
but on the uh karl marx to michael malus
spectrum uh where do you know i'm full
anarchist
you're fully anarchist yeah full
anarchist i mean
i don't find any justification for the
use of force and i think um
recently perhaps i've 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
i'm an anarchist monarchy which what is
that kings oh monarchy yeah
[Laughter]
and i think wait can you
are you joking or not no i'm not joking
and i think um
i mean i i think you know morally and
intellectually i'm an anarchist but it's
what the reality is we find ourselves in
a world in which um a lot of people are
not
and the question is um
what is the thing that is going to
provide you with more freedom
and um 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 load 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
um 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 uh power and
more and more government coercion what's
the role of kings in queens and that's
in that case of a monarchy what's the
role of a leader
i think uh there might be a case that
so as i was saying you need the 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 want to stay home stay home you
want to 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
uh strongly believe in this principle in
order to get it in a um in a democracy
whereas in a monarchy
really 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 the
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 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 they you know his
great grandson is going to be taking
money from your your great grandson
suddenly
his interests and 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 the tiny government so
yeah uh so anything required to really
provide for a free market so for
maximize individual freedom and the
freedom of the economy yeah and if i
were king which is not highly unlikely
to ever happen but i think you know if
you look historically the the the 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 um 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 you 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
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
the society is free the economy is free
and because of that you know the the
p there's peace and prosperity but then
over time
the next generation of kids become a lot
more high time preference they um
they haven't worked hard they don't
understand the meaning of
hard work so they become more likely to
um
engage in destructive behavior so raise
taxes um
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
yes you have to kind of create human
institutions that prevent you
as a king or any kind of leader from
from expan so going back
on the original
promises and the purposes of your
position yeah and then uh 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 one and if you
remember your history books it's famous
that uh this was called august bank
holiday it was just going to be a few
weeks where the british troops were
going to 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 um the government
would pay off the bond over the next
five or 10 or 20 years so for world war
one
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 um
at each other's throats i'd rather
invest in something else so they only
bought a third of the bond issue and
then one 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 back of
england to buy the other remaining
outstanding two-thirds 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 um 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 uh huckster
himself he's and 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 quoted 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 going to happen next you know
what could go wrong not a question
keynesians ask themselves because
you know their jobs depend on not
thinking about what's going to go wrong
so a quick question about
war and somebody has been non-stop
reading and thinking about the wars of
the 20th century
and
thinking that most
of those wars were unjust unethical and
destructive um
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 want to fight for
self-defense yeah you finance it
taxation or bonds so the people really
need to want to warn not just with their
voices their thoughts their tweets or
their actual financials put up the
bullets and the cost of the bullets and
the bodies so their life and their
financial well-being
[Music]
um 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 they had a
certain amount of gold and that wasn't
just you know they couldn't infinitely
increase it so they couldn't tax their
population um 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 is 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 let's find flaws in this thinking
if there's any okay
um there's a lot of
pacifist type of thinking in the in
world war ii as hitler was expanding
expanding hitler framed himself as a
victim
of the past of history he never attacked
anybody
everyone is always threatening to attack
him that's kind of the narrative and he
keeps expanding he keeps sweet talking
with his charisma all the countries
around him
uh into sort of
embracing pacifism stay out of the war
until the war is on your doorstep
so france
just very sub optimal military
strategy from the perspective of the
many european nations in response to to
hitler they were basically hoodwinked by
his his words so
then there's churchill winston churchill
who's 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
how
what's the right way to do that if
you're a winston churchill
what's the right way to do that
if you're um
to uh to fight back
evil when violence is required now you
could argue that um
that no war is just but there is such a
thing as a just war index
and uh 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 your britain
the war would 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
um
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 when it's real people will want to
fight and people will want to pay to
fight and um
i mean i think though on this particular
example i think you know that the best
way to fight hitler is to have not
fought world war one
and not take out the kaiser of germany
and if
if britain hadn't written in the us had
not gotten involved in world war one
which really is
the senseless war about nothing what
what was in it and what was the goal
from anybody fighting that war if you
look at it
after world war one 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 uh
massive and it wasn't like you know 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 um 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 enormous the
criminal manipulation of
printing money to buy the pawns 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'd struggle to see how it could have
been worse i mean as i struggled to see
who benefited from four years of carnage
in
europe and then this was this came at
the height of civilization you know
before that the people of europe had
um
had the golden ear under the 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 you know my favorite story
from world war one is the christmas
truce um
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
it's 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 a trouble
basically uh well he's a brit
suggesting that if britain stayed out of
world war one 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 finance the war with that money so
what is 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 use 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 going to go
up so during the war prices keep going
up and
this is of course
is going to 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 um
war is a very good cover for inflation
which is caused by monetary phenomena
so then the war ends
and inflation uh prices have more than
doubled over the past four years over
the four years of uh world war one
prices more than doubled
and then the british economy is in bad
trouble obviously you know it's
lost a lot of the labor force for four
years that was out there fighting now
those workers come back
you've got uh prices are up and so
people are requiring that 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 when you
make you know you say all right well
bread can't be sold for more than x uh
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 economized
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
and then they also implement wage
controls so
you want to 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 this is basically you know i 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 hundred 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
um
and and of course throughout all that
they're promising that we're going to go
oh and oh so the the other thing that
they did which i mentioned in the
chapter is they stopped people from
using physical gold and they confiscated
the phys 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
uh the fiat white paper was that the
bank of england announced to all of its
banks and post offices and 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 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 want to talk about the
original sin
but well you should you should like
republish it as the fiat white paper or
something like that
there's 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 uh world war one and it was a
study that was kept under wraps uh
confidential in the bank of england only
released
2017 almost a century later
and what was special about 2017 by the
way about the year just it was a year on
which uh
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 going to be over this is
temporary we're going to be back to
using gold and of course you know um if
you if you told people in britain this
is this is the real scam about fiat if
you told people in britain in 1914 hey
we're going to 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
the fact that the that they'd managed
the bank of england had kept the british
pound at a fixed rate next to gold
for since newton you know the exchange
rate the the value of the british pound
was set by isaac newton himself he was
the warden of the mint uh and he
made the pound a specific amount of gold
and since then up until world war one it
was uh
4.25 pounds per ounce of gold i think i
might be wrong but i have it in the in
the book so he'd set that price and it
was a matter of national pride for
people in england you know
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
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 you know basically dumping their
bags uh like uh just any other coin
you just if you get people to buy your
coin you know that raises the value
of your coin so can you define
coin
coin is it's in my my definition of
coin is that it's any form of money
where uh somebody can produce it so soft
money
um not necessarily
i guess i think the difference so
there's easy money um but
the
coin is something that someone can
produce at the rate that is diff 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
seems true for bitcoin um but gold is
not a coin gold is not a coin
the copper is
cop
i i'm not so sure i wouldn't call copper
or coin as much as it is easy money
but i think um government currencies and
other alt coins i think are coins
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 one
so
the
the march towards fiat began
with a global desire for war
in the 20th century did war start this
or was war result
it's difficult to say really i think it
goes both ways i think um 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 it's 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 uh
you can 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
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 you know let's just ignore
the official stories and look at how
this thing actually works
and um
i think it does have value in the fact
that it um you know the reason that it
was that they were able to pull it off
is because
it was not possible for people who don't
uh
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
um
the fact that it is expensive to move
around means that
uh there's
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 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 like
generally you know moving a bar of gold
across the atlantic is going to cost
somewhere between point one to one
percent 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 with it's
essentially government credit and so
it's just um sending a message from
one's 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 the
sort of you're reducing the friction
yeah the communication as well exactly
of the transactions as well exactly it's
faster
how big is that benefit because 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 um you know banks
settling with one another you
essentially using credits can you define
settlement
just for
people who are outside this world
because 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 uh ten dollars over um
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 um you know
it didn't also happen in those 10
seconds that my bank which could be in
another country
uh sent the money to your bank into your
account
it's
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
um you know banks in the same city will
settle with one another banks in the
same country will settle with one
another and banks with different from
different countries will settle with one
another so they won't you know they
won't move the ten dollars from my
account to yours at the end of the day
or week or month they'll
tally all the money that was sent from
one bank to the other and then just
settle the difference so turns out at
the end of the month my bank had sent 15
million dollars to your bank and your
bank had sent 14 million dollars to my
bank
so they give them one million dollars
and that settles it that finalizes the
transaction
so final settlement 3d 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 the
michael saylor so the final settlement
is like the the the moment when you
paper and ideas connect to physical
reality a uh
yeah or just 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 there you know if you were
reckless if you were insolvent
you went out of business
so there was no um
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 manage to find
their way into
um you know getting into position where
they don't get bankrupt so in part two
of the fiat standard called fiat life
you describe the effects if you have
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 the monetary system
actually like how that affects our life
from this book i mean there's there's a
whole bunch of things and i 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 the um
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 the 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
going to give you something today
versus giving it to you 10 years from
now the same thing you would prefer to
take it now because 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 uh
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 um 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 uh 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 decided i'm not
going to do that i'm going to 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 it's
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 60 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 um
if you take a basic numerical average
for all fiat currencies you get
something like 30 percent uh the average
fiat currency increases by 30
but if you value it by the volume of
each currency so that you know you're
not giving equal weight to the
venezuelan bolivar
uh
increasing at 500 percent a year and the
dollar increasing at eight percent a
year
um if you do it by value of the
currencies so that you get the total
supply fee and it's something like 14
percent so unweighted is thirty percent
you said yeah thirty percent it's insane
i'd like to see the worst ones the the
the people that are dragging the average
up uh yeah but fourteen percent is still
an incredibly high high number and so
you're saying that
that's sorry that's the average over the
century or the past over the past 60
years 1960s 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 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 um becoming more and more an
industrial metal and as a result
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 um protect your
wealth over time very well so what do
you do well you could invest and 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 know you
just held the gold coin
and it just sat there it did nothing it
didn't take risk
you knew that it was going to 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 and this is
uh you know the keynesian objection i
think is is is up is
very wrong and bad because
uh investment is a job in itself
to figure out what to do with your money
in order to beat inflation is something
that you know 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 masters 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 um if
you remember 18
yeah that 14
or even you know the seven percent like
if you look at just the increase in the
money supply which i think is a much
better metric and 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 six
seven percent per year on average over
the last century
so that's you know if you want to live
in a nice area that's what happening to
real estate if you want to 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 um but you know 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
and the price of good food the price of
good real estate so and you know 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 know you listen to the fed
and you um
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that you know 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 the world's central banks and 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 in bond markets
and real estate markets
you need to do all of those things just
in order to be able to save and earn
them and keep the money that you've
already earned yeah 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 want to
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 going to
happen to copper and what's going to
happen to oil and
what's happening in the wars and what's
happening with foreign policy and
russia and the u.s and all 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 you know we have all of the
problems i mentioned but also uh
it means that the future becomes much
more uncertain so you're far less likely
to provide for yourself 10 years from
now i'm 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 want to see what it is
take a look at a society that goes
through hyperinflation and look at what
happens there you know how do people
um
change under hyperinflation and compare
that to
essentially what we see in the 20th
century all over under
not hyperinflation but under low
inflation you know 10 15
that you see across the board most of
the time
is just slow motion hyperinflation so
what happens in hyper inflation
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 it's
reflected not just economically it's
also reflected in all aspects of
morality on 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 uh you
basically
you're talking about an average kind of
time preference but you know 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 put a kind of
investment but say i want to start a
business
i want to
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 not it's not
saving for the future
it's
uh
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 as being human
it's uh 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 you look at the world around
you today pretty much everything that we
use was invented in that period the car
the airplane the um
the telegraph
the telephone
uh the camera pretty much modern life as
uh
late 19th century you know the period
between 1870 and 1914 because 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
calvin said not in a million years we're
going to be flying thomas edison said
it's never going to happen no i think it
was edison who said a million years but
kelvin also said it's never going to
happen yeah the new york times said it's
never going to happen the same month in
which the wright brothers did it and
they continued to deny that it was going
to happen even two years after they did
it
um but
that's
why could they do that because they had
savings in gold they had the security
with something that you know
is going to 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 still okay to
take on debt
given the stuff the gold and the match
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 the business you could
use your own savings or somebody else's
savings so you didn't need to
get into debt uh
well you could get equity from others
and you could also get that from others
so there was but it's directly mapped to
physical reality yeah it's directly back
to economic reality and that there's a
hard money out there that you know what
you're spending money
you know you want to 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 this is you know the first part
of the book where i 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 going to give you a
million dollars from their own money or
from their depositors money they're
going to make a fresh new million
dollars when you walk out of that bank
the money supply has increased by one
million dollars 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 like 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 bad is all credit bad
no i think what's bad is uh you know
anything in in my opinion anything that
is consensual you know i want to borrow
money from you and we agree the terms i
can't object to that um
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
you know 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 hold so
effectively interesting so like that
little agreement between
the bank and you is 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 valuation of the currency
that's how it uh
that's how the whole thing actually
works so this is why you know
i wrote the bitcoin standard explaining
bitcoin and basically the takeaway
message of the bitcoin standard is you
need to stack as much bitcoin as you can
because this is the best money that has
ever been invented and we'll talk about
that why bitcoin is a hard or the
hardest money yeah but with fiat the
conclusion of the fiat standard and
again this is not financial advice i'm a
lowly academic you should 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 you know
there isn't
if you're worth a billion dollars today
you don't have a billion dollars in a
checking account
you've got maybe a hundred thousand a
million
of 5 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 going to be borrowing you know
the 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 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're going to buy a house
with your savings you know 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
want to do as a government is be the
sexiest currency out there so the the
the main currency like the dollar
currently is is the one that has the
most power in that in that kind of
context so you have if you if you were
to try to summarize what is the global
monetary system it is as as it is today
is a bunch of fiat currencies
battling for position
for um
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
how what is what is it currently uh so
outside 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 if
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
it always returns home to the dollar
yeah there is no competition there is no
second best as michael saylor would say
um and money is like that you know 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 going to be
a winner-take-all situation
so um
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
one if you go back to a system of
several currencies you're just
reinventing barter so um in in the case
of the dollar system you know the the
global dollar system is built around the
dollar
because all central banks have dollar
reserves and because all central banks
use the dollars 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 uh what that's
going to do and how that's going to
change but um
it is looking like you know the the this
dollar system is clearly unsustainable
it's not sustainable for the u.s it's
not sustainable for anybody
speaking of which so you
do an amazing podcast called the bitcoin
standard podcast uh so episode 108 of
that podcast is is about the very thing
you just mentioned and allow me please
to read the description of that and then
i ask you a couple 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 question
mark will global central banks stop
accumulating u.s 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
sellability
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 the
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
u.s 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 and
this is really
like on top of the uh 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 know you 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 uh well it doesn't really go but
effectively it does go
anywhere once and the money can move
without having to abide by political
situations and the point here is not to
bash u.s foreign policy
much as that might be deserved i'm just
going to discuss it from a kind of a
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 in the government's uh 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 um
you know
when i wrote the bitcoin standard
initially i used to be much more of a
gold bug and in my mind you know
um goldbugs 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 system 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
is to melt the gold bars down and recast
them which is pretty expensive
so we have this situation now where
russia which is major one of the biggest
economies in the world has been kicked
off uh
two varying degrees off the global
monetary system and the u.s has
confiscated their reserves and 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 it's the war is
justified or the sanctions are justified
is not 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 at 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 you
know we want to build an alternative to
the u.s 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 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
going to be china is going to be russia
is it going to be iran is it going to be
india
none of these countries wants to be
well you know they don't want to jump
out of the um the u.s based system to
get into somebody else's base system so
china doesn't want to use a russian
system russia doesn't want to 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 based
on like the
who who's going to be the boss who's
going to be the one who can in this case
china
right because china is becoming
increasingly an economic power in the
world yeah that's hard to deny yes it's
true and it's the most likely scenario
perhaps if we where to witness something
like this is going to be a chinese uh
based system is it possible to have
like a split
in um
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
you know 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's there are billions of chinese
people and billions of dollar-based
people and they're going to want to
trade with one another and the power to
want to trade with one another is too
strong that we can't just split the
world economy into two monetary systems
that don't trade with one another so
then they're going to want to trade with
one another or
the dark
possibility
is it
the inability to trade as opposed to
being a forcing function for trade it
could 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 you know because uh there's an
old uh historian who used to say when um
oh i think his name is auto 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 that on 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
um and of course you know you can't
discount that with all 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
there's going to it's going to end at
some point and we're going to be back at
square one or well not in square one
we're going to 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 going to base it
on copper and
corn and agricultural commodities
and that's that's the analysis of
assailability that we discuss in the
bitcoin standard in the fiat standard
that's i don't think that's workable if
you end up basing the monetary system on
copper as we said earlier it doesn't
matter how many governments say that
we're going to make a new monetary
system based on
copper grains and nickel and iron and so
on it doesn't matter you're just going
to stockpile you're going to have to
stockpile those things in order to make
a market in them
and then if you talk about 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 going
to 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
going to be a very expensive mistake
where we raise the price of copper
destroy a lot of industries dependent on
copper 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 rust and
copper in uh
government uh warehouses that's why i
don't think it works for the uh
to use commodities that are not monetary
commodities then the question is maybe
gold
can we go back on another gold standard
and um 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 um they're fixing
the price of gold in rubles so they will
buy and sell gold at a fixed drubal rate
which effectively means you're on a gold
standard now i'm not sure how uh much
how serious this is how they've 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 you know
considering all the sanctions going on
but
um 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 um
go into the digital space on the
blockchain and go with bitcoin
i think you know the the point of this
discussion is that you know 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
uh i'd love it not to be but i mean it's
uh
it doesn't look like there is any kind
of desire in china or in russia to
switch to a bitcoin basis sleep to
bitcoin so unfortunately i think we're
going to 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 um
making a regular appearance and
because the weapons of war becoming more
and more powerful as they have been in
the past
um
many decades i'm really concerned about
nuclear war
so let us see if bitcoin can fix this
yes bitcoin fixes all of this
first rule of bitcoin is if it's a
problem bitcoin fixes it
all right well i have some personal
questions for bitcoin then because i
have some uh my life is pretty up
so i'll have to try to see a quick pause
for bathroom breaking 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 you know 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 going to be 21 million bitcoins and
that's
that's a 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 one
point eight percent 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 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 um
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 uh 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 uh i think
an an enormously enormously significant
invention because
um 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 are co in the world are caused by
easy money are caused by inflation
and
caused by government having access to
essentially an infinite uh
recourse to people's wealth and i think
bitcoin fixes this because it allows us
to have money
that has the sustainability 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 and that fiat can travel quickly
but bitcoin can travel even faster than
fiat so
it combines
gold's saleability across time with fiat
saleability across space in one
immutable package that nobody can change
and nobody can control can you define
the word sellability saleability 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
saleable if you want to sell a house
you can just click a button and sell a
house and have a giant market of people
buying houses from you you need to find
um you need to find somebody who wants
the exact house that you have with the
exact specifications that you have and
because you know 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 sellability
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 100 worth of phone
it's not as easy to spend it as a
hundred dollar bill that's scalability
what do you mean that bitcoin i
understand that bitcoin has the
sellability of gold across time
better even yeah better yes like on the
order or whatever um and then and then
has the syllabity of fiat across space
what does that mean so if you remember
when you asked me what is the advantage
of fiat what does the um advantage
offers us it's cheaper to move fiat
across space than it is to move gold you
know with with the current fiat monetary
system for all of its flaws you know you
can send money uh you know i could send
money from my bank account in the us to
a bank account in
china
in a couple 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
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 um 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 going to 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 and the human level is 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
um i don't know who it is if it was
would you tell me
that's a trick question i know great
question but i mean everybody who knows
me knows i can't really code so
uh you would say that even if you could
but 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
the entirety of the concept
um that its founders and animus and how
much guts do you think it takes if it's
one person just walk away from so much
money
i've considered all these questions many
times it's very hard to formulate um a
definitive answer to all of them
i don't know who it is and i don't know
um 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
creators 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 this is really the most
important thing and you know maybe maybe
he died or she died or they
you know 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 faith or serendipity that is
given us this very vital
very very very vital building ingredient
in bitcoin which
no other digital currency would ever
recreate which is that
you know because it was the first
it was the one that was able to um
establish the first mover advantage and
get all the people who are interested in
the technology to get into it and so
that's an enormous advantage but
you know the the 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
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 uh so much um
even even if they you know they might
have had the self-control to like mine
the first million coins to get the
network going and then throw away the
coins on or send them to an address that
they don't have the key to
um 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
uh
don't fully have
i 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 corruptable
and perhaps that's true to some degree
but i think some people are more
corruptable than others
and i find that there is i mean this i
like to think
that uh satoshi nakamoto is out there
and
uh 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 um i mean there's power
to that money what's what's the worth of
money in the end
uh in terms of just personal financial
gain
versus
um
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
um
live by that principle you have you have
people like that you know in uh
uh grigori gracia pearlman in
mathematics who turned down the fields
medal
because he was
yeah that's the medal not 50 billion
dollars of bitcoin well that's i 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 there's often correlated but
that good feeling you get when you win
or you um
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 oh
like more money that positive feeling
that's correlated but it's it is
distinct from the power of the idea to
change a world uh 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 your number goes up like that
gambling feeling of like yes yes this is
good uh and i mean short short-term
number go up there's a long-term i'll go
up that's more like investment and so on
and there's a short time that will go up
just a good feeling that you can't you
have to in your mind keep those distinct
from um
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 things worked for 11
years without him and i think this is
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
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 seda's discussion with you was a
magnificent illustration of um
the difference between bitcoin and
altcoins in that they are securities and
i think he makes a very compelling
brilliant case for
why this is um 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 i need to
maybe i'm quoting him out of context yes
okay uh
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 uh or the
node is not really the criticism but
bitcoin mining is not fully
decentralized because a small number of
miners uh control a majority of the
hashing power
i looked it up as ten thousand fifteen
thousand whatever the number is of of
computers they have the full that are
full nodes that have the full
uh that are actively connected to the
network so you could argue that's
decentralized because it's global it's
all across the world but the miners
they're still
um
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 is the
nodes the important thing to think about
yeah and what number of nodes counts are
centralized and not
the nodes are what matters because the
nodes are what uh determines bitcoin's
consensus parameters i think the the um
the 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 uh this is
and this is i 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 uh one mining company
that uh 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 up front 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 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
they've put up their capital up front
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 we want
to we you want to have as many nodes as
possible you should um you want to have
a system where there's a large number of
nodes and this is of course the biggest
problem with um
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 traction um 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 um
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
um
de facto you know you can 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 you threw in
a few criticisms of all coins there but
so one is the small group
that one we could we could talk about
it's a tricky one and we we talked about
that with satoshi nakamoto but the other
one is a
small number of nodes so to push back on
that as computational power increases
you can argue that
that enables more and more uh cheap
computers to serve as uh nodes so at
least it paints the
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
decentralization on the node front
yeah but i mean
ultimately again it doesn't really
matter how many nodes uh you have if you
have a you know
if the way that the currency is run is
that you're going to 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
um basically the the unique thing about
bitcoin uh in a tactical 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
uh one mistake that was owned that would
have only appeared i think in around
2013 or 14 or something like that
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 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 um facebook apple
amazon anything that centralizes 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
[Music]
um corrupting forces that governments uh
fall victim to sure and for people who
don't know yeah hard fork
is a
reverse incompatible change to uh
to the underlying function of a
cryptocurrency
of course there is hard forks of
uh bitcoin as well
i'm sure all of which you love
dearly anyway but that doesn't that
doesn't matter the original bitcoin uh
for the most part has has not undergone
any changes
and that's one of the i mean it has
undergone changes but none on none in
the uh important parameters of the
network
so another criticism
is about energy
so the proof of work contestants
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
is such where 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 in the whole
hysteria around energy and i think it's
it's a product of fiat
inflation because it's a way of trying
to covering up the fact that energy
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
the letter the telephone allows you to
um 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
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 in this sense
it's truly criminal to tell poor
countries that they should not consume
the same energy sources that are being
used in rich countries that
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 high
expenditure yeah and i should be clear
you know it's not a quality of life in
the sense many people think of this as
oh yeah well you know um
taking needless
flights for vacations no no these are
the 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 it in an
incubator 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 going to make it and
you see it you know the level of energy
consumption per capita is highly
correlated not just to income but also
to health outcomes to infant mortality
to all of the things that you care about
and um bitcoin is just
another technology it does consume a lot
more energy than central banks a lot of
bitcoiners like to
take and 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 i think is going to
consume a lot more and that's a good
thing you know what's humbling is to
look because 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
other digital
our digital lives
i just uh bitcoin becomes a rounding
error
relative to how much energy spent on all
the computers in our world but also like
things like home appliances microwaves
and yeah hair dryers and stuff
yeah it's like
yeah i mean this is
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 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
to get to consume energy and
i mean i i used to live in lebanon
lebanon had hyperinflation i
escaped from hyperinflation i escaped i
it prevented
my life could have been ruined by
hyperinflation and the reason that it
wasn't ruined is because i have bitcoin
so
uh
i don't know am i allowed to swear on
your podcast yes please so your
washing machine
uh given a choice between my washing
machine and my bitcoin i'll choose
bitcoin i it's it's a technology that
has been that has already saved my life
and i think it's going to save the lives
of many many many many more people so
um
but of course i don't have to choose
between um
my bitcoin and my washing machine
because um this is you know we're just
constantly consuming more energy and
we're going to continue to consume more
energy in this world
and that's just what progress is and a
small remark so in principle that 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's 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 is 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 to
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 it 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 going to make it
if you're running your miners at 14
cents because 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 this is the
absurd thing about this kind of energy
scarcity um
viewpoint where oh no it's a catastrophe
bitcoin is taking all the electricity as
if the electricity is just one fixed buy
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 giving us
like obviously it's not it's it's not he
doesn't mean that i've gotten so much
criticism for saying krishna and
cristiano ronaldo is not in the top five
um oh i apologize
i love portugal that's another
discussion we should get into something
because you posted a few soccer things
i'm not yeah i realize how passionate
people are about this listen it was a
joke all right he does not love people
potentially 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 christian ronaldo's the
greatest football player ever number one
over pele 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
uh really strong argument to be made for
him and 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 geniuses ronaldo is the top
scorer of all time he's like the
geniuses in the scoring not the actual
dance of the of the play the creativity
well i mean i don't know messi's been
absolutely mediocre since he's left
barcelona this is strong words
he's got what two goals in psg season
this year they're out of the champions
league
what about muhammad salla you've you've
posted oh yeah is he he's a boy is he
climbing up to be i think 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 um
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 uh no he didn't he did not deserve
it last year
we can agree to disagree
there's
you're a boston fan or a messy fan
i would say
no i'm not i wouldn't say i'm a barsa
fan but bars a fan because of messi and
i just i i think it's like there's
certain things
um
so when i was growing up in the in the
soviet union in russia i remember
maradona
he was the first person
i saw that i was like oh wow this could
be um
this is greatness in sport not just
football and sport right and for some
reason i mean there's something about
like diagonal
like the way they were commentating
the genius of his play the 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
right in the early days i mean
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 um i
don't know so you kind of just fall in
love and then uh you get you pick sides
i mean that that's the thing about
football part of the fun things about
uh football soccer is like
you pick a guy you pick a team
and everyone else and you just have
fun talking i mean there's part of
it you know it's great it's great
because uh i i think you know obviously
it's 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
like that's it i you know instead of
hating people for their religion and for
their skin color
hate them because they support
manchester united exactly
so you're a liverpool fan yes yes
hardcore
long-term uh-huh but yeah so to go back
to the original point on portugal um
yeah energy bitcoin is not competing
with uh 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 and non-viable for
bitcoin that's why you know they'll
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 over capacity so bitcoin is
not out there buying the expensive
energy taking energy away from uh
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 that's been somewhat
decreasing over time but uh
what's your answer to the
sort of criticism that bitcoin is too
volatile i want to 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 um i think
the the the safe way to approach that is
in terms of position sizing uh
if the volatility bothers you then
you're over invested perhaps so maybe
you should
maybe you should reduce the size of your
position so that the volatility doesn't
bother you
this is this is the short answer that
you know
like
stack as much as your conviction will
allow you to tolerate the volatility um
but
and of course the reason you should try
and consider tolerating 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 going
to go down 40 percent you can count on
it it might take a year two years five
years ten years compared to the things
that you want to buy it's going to go
down by 40 percent
and it's not going to come back and it's
going to go down another 40 percent and
then another 40 and 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
one percent of the global money market
so there's about a hundred trillion
dollars of money out there in the world
um a hundred trillion dollars roughly of
fiat and about 10 trillion dollars of
gold and bitcoin is less than one
trillion dollars so
you know one rich guy decides to get
into bitcoin that's gonna show up on the
bitcoin chart you look at it you know
elon musk decides to buy bitcoin you see
the buy you know you see the news it
happens and you see the pump
um he almost decides that he doesn't
like bitcoin you see the drop
but you know 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 you know think
about it as a 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 sailbility
increases and the likelihood of one
individual purchase affecting the price
so violently increases
decreases
and so over time you know as the size of
the market increases
i think we're going to see the
volatility decline more and more
ultimately
what you know 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 saleable good and so
therefore 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 the new production was a tiny little
uh addition to global production to the
supply so that's what made gold the most
relatively i shouldn't stay stable
because nothing is stable in economics
but relatively it holds on to 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
um
you get
only slight changes in value so i think
as bitcoin matures
that's going to decline so effectively i
think you know the the the end game is
bitcoin is
um
huge you know bitcoin is worth something
like i 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 dollars
and sorry trillion dollars trillion two
trillion sorry yes we're saying if we're
saying billion we meant trillion yeah uh
so you think
uh bonds can move to bitcoin i've always
held this is this is the prize this is
the main dish and the gold is the
appetizer bonds are the main dish
because bonds have replaced
yeah i mean bonds have replaced gold in
people's portfolio people you remember
when we were saying gold was um 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
uh specul not speculation for investment
in which they take risk and yeah
speculation
and that's stocks and equity and
other high-risk
assets
i think bitcoin is not going to replace
equity there will always be equity there
will always be companies and people who
want to have equity
but it will 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 want to
save you go into stock indexes
so i think bitcoin likely eats a big
chunk of equity markets because
currently
it's people are using it as saving and i
think it eats all
bonds that's my most
ambitious well the question is the scale
of uh 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
um currently you know 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 if bitcoin fails in the long
term future
as all 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 it 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 uh 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 uh governments go back on a gold
standard
oh interesting so they make in your view
a better decision than the current
system just not the best decision
yeah and i thought you would go much
darker
but so that's yeah okay interesting so
maybe because of russia because of china
and so on because the current war
they might reconsider
the
the power that america holds because of
the monetary
because of being the primary currency
and they'll start thinking about going
on the 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
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
um
if governments were to go and peg their
currencies to gold again the price of
gold would shoot up um
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
or half 90 of the planet was destroyed
the 10 percent continue to run bitcoin
uh 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 uh
of the bitcoin maximalist 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
um definitely not i'm not in a 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
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 it's i
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
i mean
tens of millions of people use bitcoin
around the world
and a lot of these i'd say parasites you
know people who don't have anything
productive to do with their life um you
know outrage merchants they'll come out
and say something along the lines of you
know the bitcoin maximalists are um
toxic they're holding bitcoin back and
they need and of course it's
manipulative the point behind it is they
want to get to you to they want to get
people who are you know not that nobody
with 300 followers who said something
silly they want to get the notable
people uh 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 i'm only responsible for my own
actions and
i don't recall regretting anything
okay but let me push back or push
further into that direction fine let's
see community aside labels suck
for sure but you have a spicy way
about you on twitter
now even in this conversation you know
you had some uh
some good strong words
i've always believed
life is too short to mince words one day
i'm going to be dead and i'm on my
deathbed i'm not going to 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 because
you're uh
you're many people in one
so there's a person that loves there's
kindness for the human beings there's a
person that gets annoyed there's a
person that uh enjoys this agreement as
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 are some aspects of
online interaction that encourages
in different communities online
interaction is one community that
encourages kind of derision and mockery
and so on so you get 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 like very straightforward about
their disagreements pretty harsh
it's fun to watch because it feels like
you arrive at the truth much faster
because you tear each other apart
um but
uh you know that's a choice that's a
deliberate choice and you mean 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 alberta and you know new york
is different than uh iowa you start to
notice things i mean you don't want to
generalize there's all kinds of people
everywhere but
you know there's a certain way of
communication on crypto twitter in
general but also
bitcoin maximalist that i even early on
received a bunch of heat it's like what
the hell
so it listen there's definitely a
difference when i go to the computer
science community machine learning
community
uh it's way friendlier than the
cryptocurrency community
um i i have much more freedom to
actually
be what i enjoy being which is um asking
simple dumb questions even when i've
already spent
years sometimes decades with an idea i
like asking dumb questions anyway uh the
crypto folks punish you for this
for curiosity for
um
like exploration i understand the
mechanism because so many other people
come into that community
and they might masquerade as q 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 you
know the stakes are extremely high in
this situation and i think you know if
you don't like bitcoiners if you think
bitcoins are toxic wait till you meet
fiatus you know the fiat community has
financed world wars and genocides and
tyrants and
the mass death and destruction the fiat
community if you want to use that term i
don't believe that you should but i mean
you know 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 you know they all have a story
about the inflation and the
hyperinflation and bitcoin offers us a
way out of this and um coins
altcoins
are uh
essentially fiat world's uh 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
i what i found 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 then you
don't know how to use twitter
just follow the accounts that you like
it's it's
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 i've lost
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 they're less the communicating the
way you enjoy and uh it's becoming meme
at this point that i i block with love i
think yes because i did not
i block very prolifically and i strongly
recommend people continue to block i
think twitter is you know you're not
going to get to interact with 300
million accounts anyway so you want to
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 get
you accumulate the block list which is
very big which i'm very happy for and
i'm going to pass on to my children
it's in your deathbed your grandchildren
will gather around and your grandfather
can finally share
yeah uh the full list
yeah so like again it's just a twitter
account if it bothers you so much ask
yourself why it bothers you that some
people are still i 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
um 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 then the ulterior
motive is hey i have this coin that
i made with five other friends of mine
and i'd like you to i'd like to write
your coattails bitcoiners and i'd like
you to please help me promote this
like this i get this
practically every week whether through
email or through twitter where hey you
know this is our coin um 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 coin for us
and
being straightforward and forthright is
a great
productivity hack because
um you know you just tell those people
no i'm not interested it's a stupid
coin and i wish you a quick and swift
failure before you take a lot of
people's money
um 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 coin
worries me uh so that's just 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 um too tribal about things i'll
miss actually
really strong ideas outlier ideas
totally new ideas so that that worries
me one one of the
downsides of the way
bitcoin is how much it 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 like that's why with with
cryptocurrency in general i just tried
to keep an open mind and just the
coin
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 uh but coming out of your mouth
because you say a lot of other edgy
stuff it's just more you having fun
that's the way i hear but if i said
something like that that's uh 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 these nigerian
prince email scams that you know email
you tell you send me five thousand
dollars and i'll send you 15 million
dollars
none no none why are you being
close-minded to all these great ideas no
but i'm also
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 dollars
for nothing just if you send me five
thousand dollars 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 will 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 coins pretend
to do
the only difference is aws doesn't have
its own monetary system tact 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 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 um i think the uh would you
classify a theorem as a coin for
sure it's the um it's the mother
from which the coins spring
the royal the king bitcoin yeah
i think the key thing is uh you know the
way to think about 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
by keeping them on the ground like the
the invention of proof of work the
reason the entire uh 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 is grounded in physics
in the real world the proof of stake is
more about is politics it's the federal
reserve it's exactly what we have it's
exactly what we have it's it's just a
group of people who get to decide the
rules and it's essentially a 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 writing bitcoins
codetails and they're writing the fact
that most people don't quite understand
what bitcoin is and how it works to
portray themselves as a cheaper better
more 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 it's over
time
you can't trust
it's not gold under the mattress it
doesn't have that kind of heart it's not
properly and i
really very strongly recommend your
discussion with sailor for people who
want to elaborate more on this there's a
bunch of people in charge which means
that
um you know legally they should be doing
this under securities law um but even as
an anarchist if i don't want to 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
we 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 the 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
um you can change everything in any of
these digital currencies and that's why
that's why i think you know you'll find
a lot more sympathy among theaters to
uh coins the keynesian economist to
ethereum fanboy pipeline is a very
strong one because
it it's uh the same thing it's like you
like the idea of people being in charge
in money and you think you're going to
be the one who's going to 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 uh
for many reasons it's not making me feel
good about that uh so
you know day by day things change you
used to be one of those
uh so people evolve people learn people
that are supportive 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 uh become enlightened so i think
every single person sort of
as this technology is evolving as this
world is evolving
as wars break on the geopolitics changes
the monetary system is constantly
put under stress people will evolve so
we're trying to all figure it out
together that's why like open-mindedness
here i think
for people like me at least is seems
essential i know so i expect you to be
answering all the spam emails you get
i will prince by prince by prince but no
i
i don't have a clear understanding what
is a good investment of my time what is
the good investment of my money
that doesn't seem clear because things
um
things are good at promoting themselves
i'm not talking about all
the different kinds of things like
ethereum altcoins and so on i just mean
life
like dating
jobs um
friendships
like everybody's advertising themselves
is a great investment right um but you
don't you don't know and you have to
keep an open mind and also you know i
don't
um and be sort of self-introspective
about what um
how uh like biases i operate under
and uh ways i delude myself
like hallucinations that i'm living
under it's like breaking you know
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 uh thought process to take
it's a dangerous one it's you the
nietzsche if you gaze longer to the
abyss the
best case 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 the all these conspiracy
theories that it holds in his head but
it begins to really destroy him so it's
a psychological burden to to carry so if
you question
if you question authority if you
question government if you question
culture the way things have been done
it's really difficult
um and the biases you are 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 know you're talking to somebody and
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 is
required has required an enormous
enormous amount it's a heck of a journey
so
i'd much rather appreciate um you know
direct arguments rather than these kind
of general fluffy you know you should be
oh of course yes you should be
open-minded but you know 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 of considering every
spam email so well to me okay so i'll
i'll just say from my
relatively sort of shallow perspective
almost like a technical person mostly my
understanding of economics is weak
um proof of stake is not obviously
a weak consensus mechanism relative to
proof of work
so it's not that's not obvious to me
that that goes wrong and get 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 it isn't it's
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 back door the the agreements
between the 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 on a
free market and that's why
you know 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 you
know they've been talking about it
they we still haven't seen the proof of
stake system operational in the wild
it's vaporware for all practical things
proof of stake it's
potential i mean you can do it in a
centralized way but like
um
can it survive can it last for a long
time
i don't think so and i think um you know
it 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 so like but there's also
applications that i was a lot lightening
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
right so what's the you can have nfts
probably on top of bitcoin but you don't
because there's no marketing on in
bitcoin because
all of these ideas get promoted on
proprietary 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 it
actually has impact like the fact that
nfts can have an impact on the art world
or the world in general
is is wild to me
but it it worked so well you know the
question is david rothko has an impact
on the art world doesn't say much i'm
saying these ideas have you know we're
collective intelligent beings and we can
believe a thing and that has
that has power that has led to major
wars and all those kinds of things so
the
uh it's interesting to me that nfts took
hold and the question is is there
distributed you know dabs is there's
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
uh because right now it's like uh 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 uh 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 um on
on the prospects of the technology i
personally i don't want to ever
imagine myself having something on my
eyes i'd rather just go out into the
real world
um but i don't have strong opinions on
virtual reality i do have one dabs and
nfd's yeah what's your criticism of dabs
and nfts is this a distraction it's a
way to sell um a flawed uh technology
the problem with the apps is i mean it's
just the economics of it makes no sense
in the sense that um you know currently
um
if you wanted to run an application
whatever the application is
you want to run it on aws you pay a
specific amount of money you want to 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 dapps
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 um economic value from here to
china
and move it safely and reliably so that
power
i 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 want to wonder really why we come
to this kind of aggression is because
we've heard all of this you know i've
had all these hucksters come to me for
years you know it's been i've had um you
know people in 2016 talk to me about how
um
ethereum blockchain technology is going
to revolutionize real estate deeds in
india i remember this guy um
i
i'm not gonna mention his name
but this guy was you know 2016 and he
sold a lot of coins and he got made
a lot of money off of coins based
on the i based on all these silly ideas
we can have blackjack on a distributed
ledger we're going to have indian real
estate on a distributed ledger
and it's just it's concerned trolling
marketing you know oh there's a problem
with real estate in india real estate
deeds blockchain fixes this buy my
coin and then people buy the 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 dap 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 uh about these dapps you know the
ethereum people are constantly saying
those daps are going to grow and they're
going to have so many applications and
they're going to 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 um
twitter on the blockchain there is no
social media on blockchain because these
are businesses and businesses require
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 no
it's water off my back no but a man that
uses in a community that uses the word
coin
is a little bit
you have you call it amusement and i
think amusement is the way
to deal
with the frustration it's a channel in
your frustration like la sometimes when
you have to deal with
the best way is just to laugh at the
absurdity of it all and that's what you
mean by amusement
um but the the fact is like
there's things like artificial
intelligence for
uh 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 time scale is
unclear it seems like we all
certainly over promise we dream too big
and too aggressively in the ai community
but a lot of yeah and i'm happy to give
people the benefit of the doubt when
they're over promising 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 them good time to
mention that i i am actually launching
my
i'm gonna have to block you with love
okay um one thing i wanted to ask you
about is uh the fed's
uh
this paper they released in january 20th
on the uh 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 all
interesting to you that they're even
considering this kind of thing i used to
think that it's um it's just basically
um
waffle it's meaningless
because
as it exists the dollar is a central
bank digital currency right the vast
majority of dollars are digital and um
but i think the way that over the last
couple of years i've changed my mind on
this i think this is that 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
this is kind of the really dangerous uh
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
ghost bank on a global scale with modern
technology so under the soviet union
there was something called the goss bank
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 goss bank now
imagine that combined with the power of
digital technology
and you can see that this could
be an enormously powerful um
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 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 you if 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
you know the the money creation is
self-destructive it's self-correcting so
you end up with an average of like seven
percent per year increase because you
have ten percent 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 going to get much faster
inflation
and i think the that's obviously a huge
problem and perhaps the even bigger
problem is the
enormous amount of power that it gives
to governments it's it's it allows them
to create an
awful dystopia where
you know you've got your money
on your phone and
anything you do is completely supervised
and controlled through your spending so
they want to introduce a new lockdown
then they'll just make your money not
work you know 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 you know the chinese
social credit score system is an example
of this
and i think uh i don't know i i i don't
have a crystal ball so i don't know what
the likelihood is of implementing
something like this in the u.s
um i've discussed it with michael saylor
he thinks it's highly unlikely he thinks
you know
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 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 government searches can launch
their own digital currencies and then
bitcoin is going to 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's away from
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 the gradual is
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 of monetary
power in the world
but like just specifically from a
government perspective how how do we
move the united states china russia
india
european union
to 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 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
um
i i i the way that i tend to think of it
is that most likely what's going to
happen is we're going to have
kind of uh 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 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
um
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 going to happen
i think we're just going to witness you
know 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 going to learn more and
more people are going to 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 going to 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
this is something that the skeptics
don't get like a lot of the academic
skeptics to bitcoin you know they they
offer up all these theories about why
they think bitcoin can't work and then
they present it and they think you know
they've delivered the knockout blow as
if bitcoin needs their permission or the
word is going to need their permission
well the reality is people are going to
join bitcoin out of greed out of
self-interest number go up technology is
is really what's going to get everybody
in yeah and that's really the trojan
horse for
fixing the world you know come for the
greed and stay for the revolution it's
gonna keep going up because people don't
like to be poor um 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 managed to get a
bigger house because they bought bitcoin
five years ago they realized maybe i
should stop um mocking my cousin and
start buying more bitcoin and this is i
think an indomitable force that's going
to continue
and one thing
um
most bitcoiners tend to lean toward an
apocalyptic transition you know the fiat
is going to collapse we're going to get
hyperinflation everything is going to be
terrible and then we're going to 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 it's because and this was like the
conclusion of the fiat standard which is
once you realize that mining fiat is
creating debt
and bitcoin is allowed 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 want to save money
if you want to 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
bubbling 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
the 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
um 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 way that we 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 describe with fiat and if you
want to
sell yourself in a democracy as a good
leader you might want to make that part
of the platform you mentioned you know
michael malus he just texted me asking
uh me to ask you
what do you like best about michael
malus if you can spend
five to ten to twenty to an hour talking
about the genius of michael malus what
um
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 yeah
um 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 uh i used to
live in new york when he used to live in
new york
i met him a couple of times there was an
um
a bunch of anarchists in new york used
to throw a happy hour uh once a month it
was called the high time preference
uh happy hour
in honor of hanzo manhatta so i met him
there a couple of times and
we followed each other on twitter for a
while
is it interesting
that you're aware of philosophical
differences in your world views
um no i think we pretty much see eye to
eye um
i think the difference is mainly that
he's
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 zooming out
at the
big picture of it although recently he's
working on a book called uh the white
pill
and he's been
every 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 holland holomore
as you might imagine he's not taking
much i believe of a monetary perspective
on things
his book his writing at least for for
time his um
kind of philosophical ideology
perspective that as a
but you argue that those are actually
inextricably linked
but yeah and i don't think he would
disagree but it would uh but a book has
to be
you know 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
you know 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 and
this is really the key thing you need to
wake up every morning and figure out how
to serve others this is
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 and um you know 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
things 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 pre-contra 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 uh
i think you know you should consider how
you can
create value online because that sk
scales
beyond anything you can do in the
physical world in a very very uh well
maybe not beyond obviously there are
profitable businesses in in
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 it's probably the thing
that carries the most uh
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
um 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 um
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 i tell them to drop
out and go learn to code it's probably a
better use of their time and money we
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 um
fields because 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 because
math hasn't changed for a long time so
yeah it's 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 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
uh 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 you never really get a chance to do
learn quite that broadly
again yeah that's the curse of
specialization is you kind of
never get a chance to study biology
chemistry if you're a physicist on you
know time runs away from you so it's
enjoy the the broad
uh the broad education of it 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'd also add 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 you know 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 going to happen in the
history of humanity
lower your time preference think about
the future think about think further
down the line think about the
consequences of the things that you do
and then what you know and so you do
this now it feels good today but then
what happens tomorrow you know 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 um save in bitcoin i urge everybody
to put savings in bitcoin for the long
term don't buy bitcoin for the short
term you know 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 ten
years or so at least four years is what
i recommend for people so keep a low
time preference focus on the future and
saving bitcoin and uh 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
uh so you should definitely invest in it
yourself and uh
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 us
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 the value to be stored an
actual thing that you can have in your
physical possession yeah that's exactly
what this is
um 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 you can take a step to
to maybe
a bit of a dark step for a short time
what has been uh
maybe darkest time
period place you ever gone in your mind
a dark period of your of your life
a struggle they had to overcome it 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
[Music]
ideal to see that
um people like to think of it as this
intractable conflict between two bitter
enemies but um
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 you know 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 you know the link with all
of this is that
um 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
and
the
the balfour declaration was written by
the
government of britain
to the rothschild family telling them
that um
they'd like to make um 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 my fam 67
more land was taken over by israel now
you see it with the settlements
um you know if you ignore the day-to-day
headlines and you ignore the media
propaganda and you ignore all of this
thing there's a very clear thing that is
happening which is more land owned by an
exclusive
uh ideology that believes this land
needs to be owned by people from one
religion and everybody else is being uh
kicked out and so
that is the uh 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 yafa
their homes are being lived 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 it's it's it's an
ongoing tragedy it's not something that
is uh
um 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 it's a 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 um you
know my interest in bitcoin comes from
uh came from a place of desperation with
um the situation there traditional
politics is
a dead end um
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 richard you
may know him on twitter um one of the
brightest minds in bitcoin in my opinion
he told me his theories that uh bitcoin
is going to bring peace to the middle
east because land is a coin
[Laughter]
and land is a coin i love it and i
think he's got a very good point there
that the this fixation with land and the
bitterness of the with which people um
have to the land is
likely to decline when people are going
to have a form of property that they can
keep and so
hopefully that will help in one way and
of course the the more obvious way is
that
this is a conflict of governments and
it's a conflict that is financed by fiat
and from day one you know the entirely
insane notion
that you could um build a
national and 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 how horribly these worked out
but the idea that you could
you know it's one thing to say we want
to build a homeland for germans in
germany
it's one thing to say we want to build
the homelands for germans somewhere else
and that was
uh that was um 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
um the people who 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 uh
it's people who live abroad you know
it's 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 um
jews around the world who feel extremely
uh 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 take part
and um it's
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
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 the settlements are just growing in
an
astonishing way like it's it's
it's not just
housing units that are going up it's an
entire attempt to build
uh 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 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 uh people on the ground it's the
creation of leaders power centers
and um
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 um
is what allows people to just continue
to treat war as a spectator sport yeah
that's that's really what it comes down
to and it starts with world war one and
it's continued and this is why i really
i think i've said this before um i've
tweeted this before and it was a pretty
popular tweet but it also got a lot of
people um to to dismiss the idea with
mockery of course
but i really think bitcoin is the only
technology that's going to end world war
one
once world war one started we got into
this endless conflict it's been going
ongoing since then if you look at all
the world's conflicts today pretty much
they all trace back to world war one
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 you know and
then
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
the king would the kings or the would
settle
you know 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 you know
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 an
independent part of politics that all
right we have a problem over this piece
of land let's do it and 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 you
know 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
um 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
uh people who have never fought and war
whose children will never fight a war
will never pay to fight a war who'll
never suffer a broken window in their
house because of war
sitting there and based on these
moronic garbage that they teach at
moronic fiat universities about politics
and geopolitics making decisions about
you know 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 where and that's
why you know back under gold if you were
a warrior you know you went and actually
joined the war
and that you know the 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 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 have
never fought 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
um 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 um
introspecting and thinking about these
things and i
i value life a lot i value my time on
earth a lot and you'll see this in my
dealings with people you know
go back to twitter why am i so brash and
straightforward it really is because
life is short
because i don't want to waste i think
you know on my
i've i've said this before
on my tombstone let it be written he
never let anyone waste his time twice in
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
you're a fast learner you give people a
chance but you're a fast learner yeah so
i try and i try and use my time very
wisely and i i'm unapologetic about it
it's my time is the most precious thing
and like the way to get on my side
on my list forever is to try and
take away my time
and to abuse my time if you do that i'm
uh it's the one
that's the one unforgivable sin for me
and i think that's that's really i think
that's my way of coming to terms with
mortality we're all going to 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
um
doubly so it's a huge honor that you
will 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 this has been great took
the chance to do it it's a huge honor
and i've been a huge fan of yours thank
you thank you thank you uh impact on the
world that you probably are not even
aware of it's it's tremendous and a lot
of people love you and your work is
important even uh you know i disagree
with some things you say and there's
people that disagree with you but uh
everybody respects you and thank you so
much for spending your really valuable
talent today brother thank you sir
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 safety and 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
you