Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics | Lex Fridman Podcast #284
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 support it please check out our sponsors in the description 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 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 [Music] 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