RECESSION: A Once In A Lifetime Opportunity To BUILD WEALTH Is Here! | Robert Breedlove | Transcription

Transcription for the video titled "RECESSION: A Once In A Lifetime Opportunity To BUILD WEALTH Is Here! | Robert Breedlove".

1970-01-05T17:52:23.000Z

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Introduction

Intro (00:00)

The argument has been that a little bit of inflation is necessary to stoke an economy. Otherwise, people will not consume and there will be no economy. Robert Braid love, welcome back to the show.


Understanding Inflation

Inflation defined (00:15)

Thanks for having me, Tom. Glad to be back. Very excited to have you in any financial crisis. What can somebody do with their money strategy to come out the other side better than they went in? Yeah, this is a kind of a complicated question because one of the things that money is, I talk about this a lot on the show, is an insurance policy on uncertainty. So, by definition, a financial crisis is a time of great uncertainty. So, the standard strategy, your grandmother's wisdom would be to save your dollars, save your hard-earned cash. But that gets a little bit more complicated in a very inflationary environment where we are inflating currency very rapidly or counterfeiting currency. You throw that out, it's the same thing. We covered that last time, but it's worth, for people that are just encountering you for the first time, why do you say that, what is inflation and why do you call it counterfeiting? Yeah, so inflation quite simply is legal counterfeiting and counterfeiting is criminal inflation. They're mechanically the same thing, but inside of a legal monopoly at a central bank, it's called quantitative easing or some other euphemism that makes it sound really good. But if you or I do it, we get thrown in jail. So, it's just making more money. It's just a political institution that has authorized itself the exclusive ability to print money. And when you print money, you are stealing claims on wealth from other savers of dollars. So, you have first person that I'd ever heard say it like that. I always thought inflation was a law of physics that we needed, that things just inflated by 2% year over year, that's just the way that it was. So, right now, we are in a very inflationary environment. Why? And I would say that's a part of why, where I would very much call what we're in right now, a crisis. The media is trying to softshoot it, but I think every day it's going to be more and more problematic. No, I could be wrong, but I don't think so. Why are we in an inflationary environment right now?


Why are we in an inflationary environment? (02:21)

Well, we're in an inflationary environment because we just printed $6 trillion in the US over the past 24 plus months. Which is what percentage of the total supply of US dollars at the US? You would have to check the exact data on this, but I want to say it's an increase with about 40% of the total supply. Since what, 1913? No, since 2020. No, but I'm saying that 40% of a supply that started in 1913. So, this isn't like... That's correct. So, supply issuance starts in 1913. So, for the first 108 years of dollar existence, we produced, let's say, again, check my numbers on this $15 trillion US dollars, and then we just increase that by an additional 6 or roughly 40% in the past two years. So, if you look at the chart, it's very kind of low and slow. If you burp, burps on the way up and then one huge spike recently. That's so crazy. I don't think people really understand, but before we go all the way down that, we will certainly get more into that. So, okay, we're in an inflationary environment. So, how do you want people thinking? If grandma's wisdom is now wrong because of that environment, and so if I... Because I really am right now, to your point about you want as many options as possible and if I'm of uncertainty, I am right now trying to be as close to gold buried in my backyard as possible. I always feel the need to say, "I don't actually have gold buried in my backyard. I don't want people showing up." But trying not to be locked up in too many things that are long-term, though full disclosure, I do own a very substantial amount of Bitcoin and Ethereum. But for the most part, I'm trying to have my options open. Well, I hope you have it in self custody, at least, because that's buried in the backyard. Yeah. Yeah. I'm not to the point that you would be happy, but I'm getting close. Okay. Because if it's Bitcoin on an exchange or with a custodian, it's not your Bitcoin, as we commonly say. Not your keys, not your coin. I don't want to disparage grandma. She's right, actually. Holding options in the face of uncertainty is the right strategy. It's just that the tool of optimal optionality, if that's a term, is not no longer the dollar. It's decreasingly the dollar. The more you print new dollars, the more you're debasing that instrument's ability to store value across time. So it's less useful as a tool of optionality, as money's intended to be. And as a nice barbell to that strategy, Bitcoin is, or gold, physical gold, is a really nice adjunct, because as you debase currency, that would indicate that would basically equal you have more dollars chasing the same amount or relatively same amount of gold or Bitcoin, which would be a higher price of Bitcoin or gold in dollar terms. So I want, on inflation, though, I don't want to leave this yet. It's a very complicated term. People often think price is going up as inflation, which it is. That's a form of inflation, price inflation. There's also monetary inflation, which is the expansion of the fiat currency supply. But the try, and the reason I equate inflation to counterfeiting, because it doesn't exist without the legal monopoly of the central bank. You don't have arbitrary expansion of the money supply outside of a legal monopoly. It just does not exist.


Price vs monetary inflation (05:45)

So to try and give people a useful analogy about this, if you slice a pizza into more slices, it doesn't mean that there's more pizza available to eat. You've increased the number of slices nominally, but the size and volume of the pizza has not changed. You cannot feed more people with it. You could similarly think of money as an option on the global capital stock. And every time you print a new unit of money, you're basically slicing that pizza. If the pizza is the global capital stock, you're slicing it into finer slices or thinner slices. But if I'm printing more pizza, why isn't it that I have more pizza versus... But you're not printing pizza. So pizza is global capital. Yeah. Capital, stuff, machines, equipment, real assets, let's say. Money is just the option, the call option, to acquire those assets. And so if I increase the number of options available, what I'm doing is taking away the ability of those saving in dollars, I'm stealing from them. It's you're stealing their purchasing power. And that's why I always equate inflation and counterfeiting. It's the same thing as if you could go out and print a bunch of $100 bills, increase the number in circulation. You could go out and buy things that cost $100 that other people went and worked and saved to be able to afford those things. You're basically stealing from them. You're bidding up the prices of the things that they would otherwise buy. And that's what we've seen taking place over the past 24 months.


Why do people print money if it doesn't actually create wealth? (07:19)

So if it doesn't create more pizza, then why do people do it? Because people like to have convenient strategies for wealth acquisition. And setting up a legal monopoly to steal from all of society is a really convenient wealth acquisition strategy. It's interesting. So because I've gone on this journey, I've had to wrap my head around some of the fundamental questions that you ask. What is money being one of them? I think what this is when people, the reason that they print is they're going to go buy assets with what they've quote unquote printed. So the government works with the Federal Reserve. The Federal Reserve creates the money out of thin air. But the way that they put it into the system is by acquiring assets. So they'll acquire government funds or whatever. Yeah. But those are also born out of thin air. The government can issue debt, add in an item as the Federal Reserve can issue dollars to buy government debt, add in an item. This is the most organized crime syndicate that's ever existed on the planet. Okay. So now that people know that that's the way that we create inflation. What do we do in an inflationary environment? How do we protect our money? Because right now, I really, I don't allow myself to do overwhelm. So I break things up into manageable pieces. But right now, I don't know what to do in terms of with my money. So I have allocated about as much capital as I'm comfortable allocating. I'm keeping as much as I'm not worried about being inflated into oblivion. And inflation was, as I wrap my head around that, was the thing that caused me to change my behavior. Because prior to this, I didn't want to think about investing. And then when I really began to understand inflation, I was like, whoa, you have to invest your money into something that its value goes up at at least the same pace of inflation. Otherwise, to your point, it's even though I have the same number in my bank account, what it gets me exactly. So I was like, okay, I have to do something. But now I feel like we're going into, I feel like we are in a time of so much uncertainty that I don't know what to do anymore. So even though I can describe, I can tell people what is happening, but I don't know that I have a good plan for what to do like even in my own life. So what do I do? Well, it's a number of things. First thing is to own assets that cannot be counterfeited or printed into existence. So physical gold, Bitcoin and self custody, these are great options. But Bitcoin is so volatile. Like how do you, do you just take a long time horizon approach on that? Well, it's volatile in terms dollar terms, right? And volatility is a function of price discovery. So if Bitcoin is a sub $1 trillion asset competing to be $100 trillion asset, you would expect it to be volatile in dollar terms.


How to approach investing and protecting your assets amidst global inflation (10:10)

So yes, you would expect cold comfort when I need to buy diapers for my child. This is not, I'm not advocating for Bitcoin as your checking account. I'm advocating for Bitcoin as a long term savings account. So define long term to protect yourself from the aggression of private property that's occurring through the counterfeiting of currency, something like physical gold or Bitcoin is useful. For Bitcoin specifically, it's performed really well over four year time horizons. So that's not necessarily long term. I wouldn't sit here and tell you that Bitcoin will be at a higher dollar price in four years. And with a lot of uncertainty in the world, no one can make that claim. But what you do know is that you have a money with effectively, that's effectively perfected the properties of money, which we talked about last time, specifically that we know it cannot be increased in supply. Whereas every other primary money in the world, the US dollar leading the charge here is being rapidly expanded in supply. So when you price one in terms of the other, you end up with a higher Bitcoin price as an insurance policy against debasement of the dollar. So one answer is that own assets that cannot be counterfeited, commodities, businesses. There's obviously a lot of risk here that you have to navigate. If it's a public equity, they might actually be printing it. Some companies issue more shares than they actually have outstanding. You could check out the, I think it was, Chiquita Banana scandal. What? Yeah, it's called re-hypothication. So there's a lot of games played on Wall Street where they will basically represent and sell more shares than there actually are in existence. Isn't that illegal? Of course, it's, well, it's illegal if you're not inside the monopoly. If you're not a prime broker, I think is industry that's allowed to do that. But so that's one area to be careful of. It's good to own businesses, good-owned things, productive factors in the economy. But if they're public equities, I do think you have to be a bit weary about things. Another thing is assets that are difficult to seize or confiscate. So this again, back to gold in your backyard or Bitcoin and self custody, I think what we are essentially seeing in the world is that centralized governments are bankrupt. And all government revenues are derived through taxation, inflation, which are both forms of theft and other forms of confiscation. So I would expect those activities to increase as monetary debasement ramps up. And it could even be accelerated now that people have an option to exit fiat currencies. They can go into a savings technology like Bitcoin. This actually puts additional inflationary pressure on fiat currencies over time because people have an incentive to sell the thing you're using to steal from me with and hold the thing that you cannot steal from me or use to steal from me, which is a good way to describe Bitcoin. So assets that can't be printed, assets that cannot be seized. And then the last one, I guess I would say knowledge. It's very important to study the ebbs and flows of financial history and equip yourself with a worldview for the world we're going into. We've seen currencies fail many times before. You could study the Weimar Republic in 1920s Germany, what happened there. Inflation has really corrosive consequences on people's psychology, their morality, their behavior. And yeah, I think that's a good start for protecting yourself and the world that we're going into. So what are you doing with your assets right now? So if just to all go first, so I have a ton in savings, just liquid, basically going in and out of really short term bonds.


What Jimmy is doing with his money to ensure his wealth in the face of debasement now gaining (14:05)

So no yield, but all stuff where barring the collapse of the US government, which I won't say is a 0% chance risk, but certainly very low, especially because they control the money printer. That's right. Very low risk. So money coming in and out. And then I have Bitcoin and ETH. I have some in the stock market real estate. That's sort of my portfolio, all because I don't consider myself a talented investor in any way, shape or form. What does yours look like? So dollars and treasuries are good short term liquid instruments. I think you're smart there. I consider Bitcoin to be the best long term liquid instrument. And that's actually all of my portfolio. Dollars in Bitcoin. I don't actually do the treasury game. I hold a smaller balance of dollars relative to everything else. I hold a lot of Bitcoin. Now, this is coming from someone who's studied this asset in the space and the history of money exclusively for six years now. So what I'm advocating for other people to do is to go out and do similar due diligence for themselves, their skill set and create this worldview and then make a portfolio construction that reflects that. I can't sit here and prescribe you any specific portfolio construction because it's unique to each individual.


Ericas current asset allocation (15:26)

And if I were to do that, you would not have the level of conviction or buy in into that portfolio. So you would inevitably be shaken out when the market starts to move. Emotions would set in and you would be shaken out of your positions. So that's why I don't believe in specific prescriptive portfolio constructions. But because conviction is one of the most important parts. Absolutely. You have to believe in what you own. You have to have buy in. It's not just that you bought it physically, but you need to have intellectual buy. You need to understand what you own. Otherwise, when the price moves, just like being at the poker table, if someone pushes in a big hand and you don't know exactly what you have and you don't have a read on your opponent, then you're going to get shaken out. You're going to fold or you're going to call, make a bad call. You're going to lose. It's the same thing when you own assets. You need to understand what you own, understand yourself, understand the asset and have a conviction in what it is. Otherwise, it's just not going to work. Why pay money? It's really interesting. And one of the things is I certainly spent time researching you as I just, this is my first time really paying attention to a monetary cycle where there was certainly in the crypto world, there was so much euphoria until about a year-ish ago, and then it really started to falter and go crazy. And when people were euphoric, it was like, man, I was looking sideways as people were taking out loans and getting into assets.


To sell or not to sell (16:47)

And I'm so paranoid. I was like, there's no way. I do not trust myself enough. And then same thing with when people started to sell, it was like panic selling. And the approach that I try to take is okay. I'm not, I personally view myself as not being smart enough to beat the market, to try to do things on timing. So I'm just like, what am I prepared to do long-term or what can't I lose on? So when I was talking to my, the person who handles the actual buying of bonds and stuff like that, I asked like 36 times, like, what happens if, right? The price goes down. Do I still get my principal back? I may not get the interest or whatever, but I want to make sure that I'm in something that I can protect my principal. So just looking at all that. And then on the crypto having a thesis and saying, okay, as long as I believe this to be true, I'm not going to sell. If I stop believing that to be true, then I might, you know, look at it differently. But watching the human behavior of seeing people act like they're gamblers effectively. And I remember when one of the first like big liquidation moments happened and there were, you know, memes of like people in front of their computer, like outside a nightclub, there was one guy's outside a nightclub. He's squatted down in front of his computer on the sidewalk. And he's just like holding his head because obviously he had been liquidated because I don't know if we want to go into explaining it, but like you, you're using leverage to buy it. And it hits that point where your collateral is now the soul. Exactly. So boom, you go from having something to having nothing absolutely devastating. And I was just like, oof, this is, this isn't just, I have mistaken money for a property of physics. And when you realize that it's a property of psychology or useful fiction as you refer to it, you really start to think differently about it. Well, there's an element of the physics as well. But I want to say something here. So leverage in crypto is not a good mixture, in my opinion. I think most people that play with leverage, most people that play with assets beyond Bitcoin, which we endearingly call shit coins and Bitcoin circle, you almost always get burned. I have some, some friends that have run the numbers on this as well of the 30,000 shit coins that exist. Two and a half had outperformed Bitcoin over a four year cycle. Most of them go to zero, go away, or the vast majority of them underperformed Bitcoin. So no leverage, preferably no shit coins. So you might want to sell your ETH. Do as you please. But me personally, I just think that's another project that's accumulated a lot of technical debt. It keeps moving the goal post. I think it will collapse at some point. And yeah, those instances of people crying and some people committing suicide, I don't know how true these stories are, but it can be ruinous to your life. Right? If you consider how important money is to your day to day existence, to lose all of it in an instant, can be extraordinarily painful. And I've traded options in this asset class for a long time, or in a hedge fund in the space. I've felt the pain of losing money rapidly. It's not fun. I would not recommend it. I would also say that 99% of the hedge funds out there cannot outperform buy and hold Bitcoin. Just buy and hold Bitcoin. The easiest, least intensive, least energy output strategy there is. The smartest investors in the world struggle to outperform that. So unless you think you are someone on the spectrum of rain man intelligence or some type of super prodigious trader, I would not recommend leverage or shit coins or trying to trade when buy and hold Bitcoin is performed so well. All right. So talk to me about the human element of all this. One of the things that when I was researching for this episode that I heard you talk about that I thought was really interesting is that for whatever reason, every three generations we forget how volatile governments are, how volatile currencies can be.


The theory is the frame (21:10)

I thought, wow, that's at echo something that Ray Dalio talks about, which is this has happened many times before, just not in my lifetime. And so because I was born in the 70s, to me it's like, oh, this is all pretty stable, like nice and easy. Why do people do all these crazy gyrations? But talk to me about the history of money. If Ymar Germany is the right thing to look at for hyperinflation and what comes of it, let's start there. What is it that the average person living today hasn't seen that they need to be very aware of? Yeah. So to start that, I want to talk about how theory shapes how we see actually. And to do that, I want to talk about Copernicus. So for a long time, we lived on this planet and we saw the sun rising and falling, right? And we just assumed that we were the center and that the sun was going around us, right? It was a bit of, it's called geocentrism. I think it's kind of an ancient form of egocentrism in a way or anthropocentrism where we think we are the center of the universe in those cases. And then along comes a guy named Copernicus ran the numbers and said, actually, the math says it's more likely that we are going around the sun. And so this shift in theory did nothing to change the prior empirical observations of the sun rising and falling, but it completely inverted our interpretation of that empirical data. All of a sudden we realize, wow, we've been defrauded by this optical illusion. We thought we were the center, the sun was going around us. Well, it turns out we are going around the sun. So I say this to explain the way in which theory, right? We had a new theory, heliocentrism, that actually changes the way we interpret empirical data. We often have this inverted in our mind. We think we see data and infer theory, but it's the opposite. You have to, the theory is the frame that you're putting on reality that determines how you see it. The truth is hitting your career goals is not easy. You have to be willing to go the extra mile to stand out and do hard things better than anybody else. But there are 10 steps I want to take you through that will 100 X your efficiency so you can crush your goals and get back more time into your day. You'll not only get control of your time, you'll learn how to use that momentum to take on your next big goal. To help you do this, I've created a list of the 10 most impactful things that any high achiever needs to dominate. And you can download it for free by clicking the link in today's description. Alright, my friend, back to today's episode. And so Copernicus also came up with a quantity theory of money, which is pretty interesting. He said that if you double the money supply in an economy, that the price level tend to double as well. Now, it's not that quantity theory of money is not specifically correct. There's a lot of factors that influence price, but it's directionally correct. If you counterfeit $6 trillion and you had $6 trillion to begin with, in the long run, prices will normalize it about 2 X to what they were. So, I think we have been, and as you just said, you thought it was this pillar of physics that prices needed to go up at 2% every year because we have been conditioned into this false theory of Keynesian economics, that we think rising prices and in the long run, failing fiat regimes is the norm of human history. But the real problem we have is that we are operating under a false economic theory. Printing money does not solve problems. Increasing nominal prices does not make you richer. So, I think that hopefully the emergence of Bitcoin that's leading to the resurgence of discussions like this, a heightened interest in libertarian philosophy and Austrian economics, it's actually throwing light on this corruption of money that's hidden in plain sight, right? How crazy is it to think that the most desired asset in the world, the US dollar, is also the largest pyramid scheme we have ever had in human history? How do you think that affects us psychologically?


When did it become a pyramid scheme? (25:44)

When did it become a pyramid scheme? Well, we started in 1913 with the Federal Reserve. Fractional Reserve banking is effectively a pyramid scheme, right? You have more liabilities outstanding than you do assets in reserve, so you're running a fraud so long as- Every dollar that you are every 10, no, every dollar that you have in the bank, you can loan out 9 or something. You have a contract with your depositor, right? They have given you a dollar that's redeemable for gold and you've given them a dollar in exchange, a liability. Now, if I over-issue those liabilities, but I don't increase the amount of gold I have in reserve, this is why they call it a fractional reserve as opposed to a full reserve. Yep. All of a sudden, I'm now engaged in a fraud. You only have to have this representing so much of what you've promised people, actually in the bank and you're good. And like 10%, is there a number? Well, the number changes based on policy, but in reality, anything less than 100% of fraud, you have issued more checks than your ask and cash, so to speak. So, if at any time the wrong amount of people, right, if you're a 50% reserve bank, 51% of the people come to redeem their money, you're bankrupt. Right. So that and the- We've seen the bank run in movies like a beautiful life, people were- again, we're very conditioned to think it's the norm. How does it run on the bank even exist? If it's a full reserve on its bank, it couldn't exist. So, I would say the moment we entered fractional reserve banking, it became a pyramid scheme. Was that day one? The dollar was redeemable for gold. It was redeemable for gold. Well, there was a brief moment where it stopped and we got back on the gold stand in 1971. We break forever. Exactly. But when- So we suspend convertibility in times of war crisis. So, that's when the banks- So that we can just pump money in and spend- So the fractional reserve can continue to exist. It doesn't want people coming to the bank through redeem dollars for gold because that would show the insolvency, right? When the tide goes out, you see who's swimming naked as a Warren Puffet said. So, get- So we had on and off convertibility throughout the existence of the dollar in times of war and crisis. We outlawed private gold ownership in 1933, executive order 6102, and then the big one where we move into this giant global pyramid scheme is 1971, where we break the tide to gold entirely. So now governments have the ability to issue dollars. The US government can issue dollars, add in for an item with no convertibility constraint. There's no check on this- on this issuance of dollars. And I want to say something here too. Again, inflation is legal counterfeiting. Counterfeiting is criminal inflation. The only thing you can do with printing money is violate the property of others. You cannot issue any equitable benefit to an economic system whatsoever. It's not possible. So it's- I can't emphasize this point enough that it is everywhere and always only theft. That is the only thing printing money can do. So any economy that has a central bank, which is every economy, has an institution, an anti-capitalistic institution of theft integrated into its core. And that is the source of so much of the psychological, financial, and moral malaise I think we see in the world.


When is deflation a bad thing? (29:13)

Okay, so I'm not saying this to play devil's advocate. I actually think this either is something that you have an answer for that I'm just unaware of or I'm about to change your life. I have no idea where to- so one of the things everyone's paranoid about deflation and I'm just dumb enough that I was like, why would deflation ever be a problem? That means that my money gets more valuable over time. It has more buying power. I'm like, that's amazing. So, but people get really freaked out about that and you hear economists talk about it. I'm actually more worried about deflation than I am inflation. So I was like, well, why would that be true? I think it was you that I heard explain that in a deflationary environment, now people start hoarding their money. So they're like, whoa, whoa, why would I spend this today? If I wait a week or a month or a year, I can actually buy more. This is amazing. And so they stop spending. And so, then I was like, well, hold on, then inflation is a nudge to get things moving. And when I think about all the amazing things that we've built and created, it requires people to create and to buy. And if you have creation, but no buying, then creation will stop. And if you have a deflating currency, people, just the natural inclination is to not spend. I mean, you'll buy what you have to buy to stay alive. But like, even when I think about my Bitcoin, I'm like, well, I'd rather hold it. So, isn't it possible that it isn't a sinister desire to inflate the money supply into infinity that we create the central bank, but rather I'm being generous, but rather a desire to know that there's going to be some times where I have to nudge this a little bit to keep the economy moving and the economy moving, meaning people want to buy something because they know, oh, my money, they have, again, I'm stealing from you here, they have a non-intellectual understanding. So it's a visceral feeling of like, I should spend some of this money and get something because holding it into the future isn't all that is cracked up to be. So I'm buying things, that cycle gets us all the innovation that we see now. Yeah, that is the standard Keynesian argument. It turns out, though, that human beings want to consume no matter what. We have to eat, we have to have shelter, we have to have transportation, clothing, all of these things. I don't need a new iPhone. Well, the argument has been that a little bit of inflation is necessary to stoke an economy otherwise people will not consume and there will be no economy. But I don't think that water, that argument holds water at the outset is how are you going to eat? How do we bear minimum? There's no doubt. But when you, like, if you just imagine a world where the currency holds steady or deflates, don't you think that would be a pretty different world? Maybe better. I think it's a great, much better world. Yes. So today our debt global debt to GDP is like 350%. So that's saying we have 350% in liabilities relative to about 100. So it's $100 trillion in global GDP, roughly $350 trillion in global debt. That is a consequence of currency being debased because in an instance, where units of currency are losing purchasing power over time, I'm incentivized to borrow the stronger dollars today and pay back the weaker dollars over time. So there's this incentive for accumulation of debt. That's one bad consequence of a fiat economy. Why is that? The accumulation of debt? Debt shrinks people's time horizon. So what you're doing is you're disincentivizing saving that accumulation of options against the uncertainty of the future that we discussed, you're disincentivizing that. I now, instead of delaying gratification today and saving for the future, I now want to sell the future and buy today. That's effectively what you're doing when you take on debt. It's an inversion of the principle of delayed gratification. And it increases economic volatility significantly because what did you just describe, the guy getting liquidated in front of the club, once prices hit certain liquidation points or margin calls, assets are forcibly sold. So this increases market volatility, increases the misallocation capital.


Bad money pushes out good money. (33:51)

Do you think Michael Saylor's crazy? No, you can use debt intelligently. Because he's going ham, dude. Like I'm being my breath. So if you can use that intelligently, is your argument that just most people won't hear the intelligently? Well, here's what Michael Saylor is doing, though. He is taking on debt where he has favorable terms, favorable repayment, frequency, duration, etc. So he's borrowing the weak money, selling it to buy the strong money, which is Bitcoin, and then he's paying back weaker dollars over time, subject to parameters that are favorable for him and his business, right? His strong balance sheet, all of these things. That's the smart use of debt. But notice what he's doing. This is Grussham's law, by the way. Grussham's law said that bad money tends to drive good money out of circulation. And what he meant by that is in an economy where, say, dollars, pesos, and Bitcoin are circulating, people are going to spend the pesos first, assuming that's weaker than the dollar. In this example, the dollar is second, and they're going to hoard the Bitcoin because the Bitcoin has a limited supply. So when bad money circulates, people that tactile knowledge of their economic reality, they tend to hoard the thing that can't be printed or is not being debased. The same is true when we used to clip coins. Emperors used to clip coins, and one would have, say, 100% silver content. They'd do another issuance that had maybe 90% silver, 80% silver, and so on. But they all had the same face value. This is where Grussham actually developed his law. So they were legally circulating with the same face value, but people being smart, they hoarded the ones with more precious metal content and spent the ones with less. So that hopefully points to how things actually monetize and demonetize. This is why gold became money, right? People wanted to hoard the thing that was difficult to inflate or counterfeit and spend the weaker monies. And it turns out gold, historically, is the most difficult commodity to inflate or counterfeit the supply of. We can't actually counterfeit the supply of it, not economically at least. So that's why it became the premier store value. I chose to hold the asset by being one economic actor across the whole history of economic actors, people zeroing in on this reality that there's only one asset that can most predictably hold its supply across time, which is to say it is the best store of value asset available to them. This is the process of monetization and demonetization that we've seen play out across history. Okay, so I have a base assumption and my base assumption is, I think, very clearly different than yours, but I'd love you to state exactly where yours is.


Innovation, Monetary Mindset And Historical Impact

Deflation equals less innovation. (36:32)

So my base assumption is that if you are holding the value of a currency steady or you are deflating it, that you will... Well, you're not holding... ...decrease innovation. Or decreasing the value is the supply. Values determined always by the market. The impact going back to your pizza example, though, if the size of the pizza stays the same, but only so much of it is allocated to me, but if my slice gets bigger over time, I would rather not eat it now. I'd rather wait until the slice is really big and can feed me. Even though I'm not increasing the size of the pizza, but my allocation of that pizza is growing larger. That would be to use the analogy of deflation, tie it to the pizza example, that's where we'd be. Well, in that instance, though, you would be a shareholder of a central bank. If the slice of your pizza is growing, or one of the first recipients of why is that true? Why is that true? Take Bitcoin. Bitcoin... Pizza is the global capital stock. And so the slices are basically... And this is an analogy, obviously. The slices are the representational option people have on that stock. So you have one pizza, which is all the stuff in the world, and we slice it up into a net worth. Right? What is the value of this global capital stock? Now, who owns which slice? Now, if we start printing money, we basically start creating new slices that are crowding out the other ones. Whoever gets those new slices first is stealing from the holders of the previous slices. Okay, so I think there may be... The analogy might be breaking a little bit. So if the pizza is the capital, technically the money supply is what I'm using to buy a piece of the pizza. And so as you inflate the money, the size of pizza slice that I can buy is actually smaller. So as you deflate the money, now it takes less to buy a bigger slice of the capital. Because the capital isn't inflating or deflating, what exists to buy is remaining constant. So now just to take it off the analogy and just talk like direct. So Bitcoin, I think you would agree with this.


Single focus money mindset (38:51)

I view Bitcoin as a deflating currency. Fix supply. Correct. But as more people want it, its value is going to go up. Which, if that is true, then the longer I hold it, the more pizza that same single Bitcoin will buy. So that has changed my behavior. I think of dollars as like whatever, like spend it. But when I have a Bitcoin, I'm like, I don't want to mess with it. It's a time preference. Yeah, I want to hold it. So because of that, my base assumption is that if you have a deflating currency that thusly buys you more over time, it's so counterintuitive. Because deflating makes it sound like it's bad, it's getting smaller. But it's actually growing more powerful. Exactly. It's buying the more... Monetary dilution is inflation and monetary enrichment is deflation. Yeah, god. The inflation and deflation is a Keynesian euphemism actually, to sell the idea of inflation. Well played because my brain is having a very hard time. Okay, so my Bitcoin is growing in purchasing power over time. And that has already changed my behavior. So I know that it's going to change more people's behavior. My base assumption is that will cause a decrease in innovation because people are like, "Do your iPhone is cool?" But like, "Ah, I'd really rather wait and see what my growing powered Bitcoin will get you." That's the leap I want to challenge right there. Yeah. Where we say less, we say more saving equates to less innovation. I think it's the exact opposite actually. Okay. Why? The nature of saving itself is that we are delaying present consumption and looking further into the future and engaging in longer term production processes. Yep. Now the Austrians describe this as the more round about the production process, which is equivalent to saying the more finely we engage in the division of labor. So you have one long production process to produce a thing. The more finely we chop that up amongst ourselves, the more productive we become. So that effort, that impetus to push into longer production processes that are more roundabout and more finely divided, that is innovation. That is how we become more than some of our parts. We accomplish greater results. It doesn't feel true to me. With less of a thoughts. So when I... That's it. You actually think inflation drives innovation.


The mentality of inflation does not drive innovation (41:23)

Can I give any count to a couple? I do. Well, so I'll tell you why I think inflation. And look, trust me when I say I am at the edge of I am thinking through this in real time. So this is not me saying I believe this. But this feels right to me. So when I think about what gets people to innovate, it is if I bust my ass and I come up with something better than other people, I get more value from people in a very fair exchange where they think they're taking advantage of me because they'd rather have this thing that I've created than they would they want the money. How do you have them? Exactly. And I'm like, I'm worried. This is amazing. So now where what we get into is right now with an inflating currency, people have just a sense of like, oh, this money is... it's inconsequential. It... God, this is going to sound stupid. But a dollar is only worth a dollar. Whereas a Bitcoin to me feels very precious. It's like this gets... It becomes $2, $3, $10, $100. So now I'm like, I don't really want to spend this. Okay. Because of that, I don't have the ease of like buying that I would. So now my evaluation of the thing that you've created, I'm way more screwedness. So I mean, maybe it just raises the bar on innovation, but it... I think it's saying it's like it's like it's... It's like it's turn to value investing, perhaps. So for a long time, people would only invest in projects that created real economic value. And if your money is holding purchasing power over time, that's a good bar. You could think about it like this. Imagine we're on a world run by Bitcoin. So there's one hard money, fixed supply. Everyone uses it in the world. Every successful economic project, every entrepreneur, every innovation that successfully increases productivity, that accretes to the purchasing power of everyone's money. So in a world where your money is constantly losing purchasing power, that is not happening. So you get more junk, I guess. There's more of a... There's actually the incentive, and this is related more directly to the violation of property, but there is an increased incentive to consume rather than invest the more rapidly you violate property rights and the more that it's permanent rather than intermittent. So if I know with a high degree of certainty that you keep 20% of whatever that I make, then I have a 20% less incentive to engage in investment rather than consumption activities. And again, that's what we're doing when we print money. We're actually inducing or incentivizing consumption actions over investment actions and investment actions or what drive innovation. It's savings that underpin investments, investments in that long-term production structure I suggested. There's also R&D in their experimentation, right? We're trying new things. That is what creates innovation in the real world. So if anything, the innovation that we've seen in the 20th century has been in spite of central banking, not because of it, but it gets very murky here because it's very easy. It could swap someone else into the seat right now, some Keynes and economists, and it'll give you a completely different interpretation of economic history, right? They can go through the historical facts and trace their own era of causality and say, "Here's what happened." We're back to Copernicus. Back to Copernicus, but here's what the libertarian philosophers did. They said, "You can't mistake economic history for actual economics. Economics is more of a rationalistic science. You have axioms. Man must act. Man prefers present satisfaction to later satisfaction. All other things being equal." Like these axioms, it's like geometry. So I didn't understand why can't I take economic history as economics? If you take economic history, you can... Because that actually happened. Do you think you can take the interpretation of economics? It's a social science, right? You cannot math-matize economics. In the same ways, you cannot math-matize psychology. I can't sit here and tell you the reason you're doing this is because there's a linear chain of causality. And if we repeated this experiment again, the economic experiment would unfold in the same way. It's not possible. Because it's just too complicated to predict human interaction. There's no constants in human action, right? So we know water freezes at zero degrees Celsius. That's a constant. We can build a framework of knowledge around that. There are no constants in human action. It's constantly changing. It's all these psychologies interlinked into the market process. So we're going to derail in this, but I'm just going to plant the flag to say, "I think there will be a day where we actually realize that human interactions are completely predictable, free will is a total myth." But that doesn't help us now. Like a pretty bleak day. I don't find it bleak because the experience will never feel like that. But that's going to completely derail us. Because right now, I don't... Free will is seems to just be provably an illusion. So we will definitely get derailed on this. Yes. All right. So instead of derailing on that, let's... So this Copernicus idea of we have a theory, the theory is going to completely shape how we interpret things and definitely how we act. So what is the... I call that a frame of reference. Frame of reference is everything. It is the distorted mirror that we perceive reality from. And to your point, it's individual. So everybody's got a frame of reference. It's going to dictate how they think about what they see and that will actually impact how they feel, which will impact what they do. What is the... So are the two, using my language, frames of reference that we're thinking about here, the Keynesian model versus the Austrian? Let's talk about a very fundamental theory, which is the theory of the individual. Now, this is something that we take for granted today. We assume that you're an individual. I'm an individual. We're all freely interacting. But in ancient times, it wasn't this way. Actually, it was the family that was considered to be the primary social unit.


In 1215, A.D., The Magna Carta Was Signed On June 15 By King John Of England (47:42)

They called it the paternal familius. And everyone was basically perceived as a unit in that family that you served the ends of that family. It was religious in nature. This was in ancient Rome. It was the religion. It was the family and it was property. So we're talking about ancient people that said on one piece of land, generation after generation, the present living family took care of the ancestors. They worshipped the ancestors. They used to burn a hearth. There was a fire that every family maintained on an altar. And the first thing they did every time they would wake up in the morning is stoke the flames of that fire. And so that was to symbolize their property interest in that land that carried forward from their ancestors into the present day. And if that fire were extinguished, that was considered to be an equal symbolic expression of the family being extinguished. So the whole primary imagined social unit of the world was the family. The individual did not even exist. Now, this is hard to imagine. Individual didn't exist or just wasn't the primary way that you thought about it. This is very hard to talk about because what I'm saying, and often we're talking about money, is the same thing. You're trying to describe water to a fish that's never broken the surface. How much of our cultural programming do we inherit from our parents, from our existence, from our cultural heritage in this world? Yeah, but let me ask you one question because I get where you're going and I can collectivist versus individualistic societies has real world impact. So I know there is a thing where you would feel that me as an individual is very much embedded in a collective and I have to be thoughtful about that. But nobody would be confused. If I poke you and it hurts, it's not like that person would not be able to distinguish between you getting poked and me getting. I'm not going there. So let me try to prevent the sidebar. Let's just say this. The individual did not exist as an economic or socioeconomic conception. Okay. It doesn't mean that you couldn't poke someone and they would, "Hey man, don't poke me." Right. A socioeconomic conception of the individual did not exist. One of the family did. It was all centered around the family. And then families eventually stitched themselves together and to tribes and clans and ultimately nation states. And that had a lot to do with the unification of religion. But the individual is something that we invented. We invented this...


From the Individualism of the Magna Carta, We Have Enacted a Socio-Economic Theory (50:21)

The individual as an economic... As an economic actor. Okay. And from the individual economic actor that came post-Christ, it was with Christ and Paul's analysis of Christ and the moral equality of men that we developed the conception of the individual. And from the individual, we extrapolated that into individual private property rights. So we moved from a world where the family had exclusive property interest in the land. It was also non-transferable. They weren't selling this stuff. They were just having dominion over it. I really think if anything, it was like territoriality. Like animals are territorial over specific pieces of land. We were basically territory animals. Right. We were trying to survive the way our ancestors did. There wasn't much innovation occurring. There surely wasn't a lot of trade occurring. And we had this sort of primitive society. But post-Christ, we invented as religion was evolving, we invented this conception of the individual. And I'm drawing on a book here by that title, "Inventing the Individual." If you want to do a deep dive on it, explain it in depth. But to gloss over a little bit, let's just say that with Christ came this idea of the equality of souls, that everyone had an equal soul or a moral equality, if you will. And with that notion came the 1215 Magna Carta, life, liberty, and property, that we had this conception of individual property rights. So that you as an individual now can stake a transferable claim on assets in the world. And that is what led to capitalism proper. Right. So we have individualized property or we have socialized property. And I think the degree to which we print money or the degree to which we have government interference, we are socializing property. And this is causing people to consume rather than invest. It also causes people to misallocate capital. Because of the tragedy of the commons? No, because again, if you keep 20% of everything that I make, right, that's a socialized property, right? You're taxing me. Yeah, but why would that sketch me out? If this is an invention, it reduces my incentive to invest. If I can only keep 80% of what I earn, I have a reduced incentive to invest. Have you heard Ray Dalio's take on this? So he talks about China as a collectivist culture, and he's like, look, you can rail against them and think that they're crazy, but they think that we're crazy and dealing at the individual level and any one individual thinking, whoa, you can't tread on me. I'm an individual. Whereas they're like, you're out of your mind. You live as a part of the collective, and if killing you is better for the collective than killing you, we must. And while admittedly those words I'm putting in Ray Dalio's mouth, his whole thing is, I know that you look at China and you judge them and think that they're crazy, but just know that they feel exactly the same in the opposite direction.


What It Takes To Switch Sociocultural Modality: Why I Behave Alike in Every Culture I Am In.. Because We Are All Actors (53:14)

So what I'm trying to figure out is when I look at, if being a part of the collective makes me less likely to invest, the only way I can wrap my head around that is if it's the same thing as the tragedy of the commons. I don't want the collective to be able to take things from me. Therefore, I'm going to do something with it, spend it in this case, not invest it, just so that I could reap the immediate benefits of that. And the collective now doesn't have anything that they can take from me. If that isn't it, I don't understand where you're going. I don't think it's a matter of being part of the collective or not part of the collective. That's not what I'm saying. What I'm saying is, is the integrity of your property interest. And let me specify what property is, the exclusive power to control an asset. You get to say what happens with your cup. No one else gets to say what happens with your cup. The prior to Christ, I didn't know this. No, that is property. Right? Well, it existed between the family and the land. And it was not exactly transferable. Now, there was trade occurring between families and among clans and whatnot. But we didn't have this established, legally protected, morally protected notion of the individual's right to own property and transfer and trade with others. So I'm not saying that this is participating with the collective or not participating with the collective. It's about justice. It's about people keeping what they earn, the value that they create. This is the entire premise of libertarian philosophy.


Sociocultural Creation, Property Rights And Rewarding Productivity

What path does Christ pave for the socioeconomic creation of the individual? (54:47)

And so pre-Christ, we didn't have that atomized individual as an autonomous socio-economic actor did not exist. Post Christ, it comes into being right, 1215 years later, we signed the King John, signs the Magna Carta, life, liberty, and viable property. You started down this path, though, when I asked about the Copernicanian, that's why I'm going to go ahead. We're going to take these two frames of reference. And so, I'm tracking that I've got the individual frame of reference and I've got the socialist, I think, frame of reference. Yes, tracking so far. Yes. Okay. So what I care about in there is what behavior is elicited when you take that frame of reference. Right. So you could think of the individual, the fact that we sit here right now, you have bank accounts, you have assets, you can sell those in the marketplace with other cell phone people that also have accounts and assets. We take all that for granted. Yep. But it's premised on private property rights, which is premised on the socioeconomic conception of the individual. Now, again, we take all this for granted, so it's hard to even talk about. But when you get to that, you get to private property rights, you've now entered a world where we have higher intensity exchange occurring, right? More people are trading more stuff because more people have a greater incentive in the assets that they own. They know that it's not being socialized away from them. Now, this is obviously true more in the western world than it is in many other parts of the world. But I would argue that's the reason the west has been such a successful economic story. Because the reason we've become so wealthy is because we've engaged in higher density exchange and had a deeper division of labor. And all of this is premised on this. You could think of this as live action role playing. We are pretending that individual private property rights exist all the time. And we don't even know it. We know it when we give our keys to the valet and just assume the guy's going to give our car back, right? Like we have a legal structure in place. There's ownership documents between you and that car. All of these things we sort of take for granted that are just embedded in how we actually act. So this is an enacted theory, right? We observe the sun rising and falling. And we reinterpret the data when we look at it. I think you want me to know this. What I'm trying to say is this live action role playing, this imaginal structure, this is different than imaginary. Imaginearies like you bring a pink elephant to mind. Imaginal is a little kid tying the blanket around their neck, picking up a stick and pretending to be Zorro. We're all doing imaginal all the time. You are the CEO of Impact Theory or whatever it is. That's an imaginal role. These people that listen to you and what you have to say, those are imaginal roles too. These imaginal roles that we take on change how we relate to the real world.


How does invention & adoption of private property inform the Magna Carta & US Constitution? (57:54)

So the invention of private property rights leads to capitalism. First of all, led to the Magna Carta, which was a precursor to the US Constitution. We have life, liberty and pursuit of happiness instead of inviolable property. And this has created the economic division of labor and the capitalism we see in the world today. The wealth we have created, the innovation, all of these things are born from this imaginal conception of the individual as a single autonomous economic actor. And I'm trying to say this because I think it's very important that we are human beings. We're running a lot of software. It's stacked. And a lot of it we take for granted. So when I write the book, inventing the individual, that blew my mind. The idea that the individual actually did not exist at one point. And then when we invented it, we created real economic consequences in the world. That is very mind-blowing. Now I want to state why I think that you're bringing this up when I'm trying to figure out one embedded in the context of what should people do with their money and what ought the money system be. Here's the prediction that I think what you're telling me makes about your worldview that it was suboptimal to think in a more collectivist way. It was far more optimal to invent the idea of the individual, even though it's imaginal. And from that comes the idea of individual property, the Magna Carta, even to some extent, the American democratic experiment, which is something I want to get into. And so these things are a progression. We're getting better, which I think you would define as by owning my property, Richard is going to confuse people. I've heard you go down that path before. Christian, I need to define it. But even wealth is confusing. When I tell people that my goal used to be to get wealthy, I'm like, God, I know what they're hearing. So I know what you mean by that. Anyway, I won't derail less than that because even trying to put worse was very difficult. But I'm with you spiritually, but I want to keep going on this. So we invent the individual. It's better than where we started because of this idea of individual property, which gives us the incentive to invest our energies into a highly specific way, being an architect, making shoes, running a media company, in my case, whatever, we get highly specialized. The whole world gets to take advantage of all these people doing highly specialized things to a freakish degree. When I think about the level of my ambition, it borders on pathology. But I find that utterly fascinating that nature has created that. I've tried to turn it off. I don't want to. It's way more fun when I have this wild ambition, a more bigger, better do things cool.


Commercial Break (01:00:45)

What is up, my friend, Tom Bill, you here, and I have a big question to ask you. How would you rate your level of personal discipline on a scale of one to 10? If you're answer is anything less than a 10? I've got something cool for you. And let me tell you right now, discipline, by its very nature, means compelling yourself to do difficult things that are stressful, boring, which is what kills most people, or possibly scary or even painful. Now, here is the thing, achieving huge goals and stretching to reach your potential requires you to do those challenging, stressful things and to stick with them even when it gets boring. And it will get boring. Building your levels of personal discipline is not easy, but let me tell you, it pays off. In fact, I will tell you, you're never going to achieve anything meaningful unless you develop discipline. All right, I've just released a class from Impact Theory University called How to Build Ironclad Discipline that teaches you the process of building yourself up in this area so that you can push yourself to do the hard things that greatness is going to require of you. Right, click the link on the screen, register for this class right now, and let's get to work. I will see you inside this workshop from Impact Theory University. Until then, my friends, be legendary. Peace out. By having individual property rights, we get to harness that internal engine that people like me, you, and the gazillions of other people have to create and we're incentivized. We get an echo back from the world of wealth where I have more optionality, maybe is a good way to explain wealth. Back to the things that matter to me at a hierarchy of needs level. I can have a worm house, food in my belly, certainty of food in my belly tomorrow, certainty of roof over my head tomorrow, all that. We are making progress. Now, again, prediction of what I think you're trying to convey is that as you revert through the modern monetary systems, the Keynesian economics of, "Hey, let me inflate the money supply to keep things moving." I know Tom thinks that a little bit of inflation is good because it creates innovation. In fact, he's moronic because it's moving us back to this pre-individual I like to speak in very aggressive language. It's moving us back to this pre-individualistic place where people are going to invest less, they're going to specialize less, we're going to be less able to capitalize harness their ambition because they don't get back from the world the capable fruits of their labor. How did I do? You did pretty well. You're not moronic though. You have just been in that alternative as being moronic. Hundreds of millions of us have been, myself included before getting into Bitcoin and all this stuff. There is a reason, there is a pseudoscience called Keynesian economics that's infiltrated all modern universities, funded by central banks, and its exclusive purpose is to justify the printing of money and the legal monopoly. It's a very perverse cycle because you get a system that can steal funds from people and then you use the stolen funds to fund university curricula. So the people don't get confused, it steals buying power. Purchasing power, that's the only power that really matters. I think people get lost in that because they're like, "Nobody's stealing money from me. I deposited a hundred dollars. I still have a hundred dollars." The price of beef has gone up 50% in the past 24 months.


Theft Every 24 Months (01:04:06)

So if you're a beef eater, you've been stolen from by 50%. It's easy to get people to understand taxes theft. It's more complex. But anyway, as long as we're in agreement that they're stealing via buying power, I'm with you. Yeah, stealing purchasing power, that's right. So you were correct. However, I would like to take it a step further because what we're saying here is that when we print money, again, that's the point I cannot overemphasize, you're only violating individual private property rights. You are disturbing my power to control the assets that I otherwise could. And this comes in the form of price inflation. If I'm a stake eater and I've saved up to buy two years of stake and the price of stake goes up 40% because the central bank printed money, well, they've stolen stake from me effectively. Or a house, which is something a lot of people are concerned about. You need to get an insert, your favorite asset. Here, I'm just picking stake because I'm a stake eater. So that is all well and good. It's incentivizing all the negative things you highlighted, right? Overconsumption rather than investment, over utilization of assets rather than preservation of capital because there's a deeper reason there, but let's just leave it at that and then misallocation of capital. So because government suck at using my money. Yeah, it disturbs what's called the price signal.


Misallocation Of Captial (01:05:30)

So you could basically think that the configuration of consumer preferences is always changing in the world. People always want different stuff all the time. The production structure is constantly trying to adapt and map on to that new configuration of consumer wishes, right? It's trying to satisfy consumer wants or consumer wishes. The degree to which you socialize property or violate property or steal, it inhibits the ability of the production structure to adapt. So you get misallocation of capital. This leads to a lot of waste and stuff in the world. But as bad as all those things are, the point that I really find deeply fascinating and whose work I'm drawing on here is it's a book titled A Theory of Socialism and Capitalism by Hoppe. It's a very dense book, but it is deduced, right?


When You Reward Non-Productivity (01:06:08)

He's deduced. This isn't an observation of economic history in reading someone's opinion. These are deductions from economic axioms. So it's hard to read, but the insights you gain are extremely powerful. There's a fourth consequence to the violation of private property or the socialization of property. And that is that you have now stopped the degree to which you're violating property is the degree to which you are not rewarding productive members of society. And you are rewarding political actors in society. People that are, and I've said this before, the legislator's pen cannot create wealth. It can only reallocate wealth. So the degree to which a legislator can become wealthy at the stroke of a proverbial pen, which is the passing of laws, policy, etc. There is an incentive to shift from a productive role in society to this non-productive extractive role. And the degree to which that becomes larger is the degree to which more people are drawn into non-productive roles. So what you're saying is there's a non-producer, right? We're rewarding non-productive activities when we print money or when we confiscate property in any way. So the thing that I'm fascinated with here is this money being such a fundamental technology to human affairs, it's used to hide the widest spread violation of private property rights we've ever seen through this global concerted action of central banks or semi-concerted action. They're all inflating their currencies. People that are on the ground saving are being taxed through this scheme. We are effectively through the corruption of this economic fabric we call money, we're actually corrupting our own individual character development. That now people coming into the world that might otherwise be a baker or an engineer or some productive activity might instead choose to go over here and be a statesman or politician or some other extractive role. And the degree to which we're violating property in that monetary system is the degree to which they're incentivized to take on political roles rather than productive roles. So such that the corruption of this technology that's so fundamental to our human being leads to the corruption of our character and the corruption of who we are. It's like a breakdown or corrosion of the moral composition of society through the debasement of currency and the violation of property. That's what I'm deeply fascinated by and hopefully talking about and helping spread awareness about to prevent. Okay so then I think we're going to have to get into axioms. So as axioms are something that I came to understand very very late I will get people a very quick primer. An axiom is the base the farthest down that you can take something and there's nothing more below that. So I'm here to stick with this species. Something like that. It's a base thing and now from there everything is going to make sense.


Axioms Of Morality And Economics

Economic And Moral Axioms (01:09:21)

A couple of lines never touch. That's an axiom of Euclidean geometry. There we go. Okay so getting into the axioms of what ought to be. You say you try not to should all over people but you obviously have a sense of how things ought to be at least as it relates to money. What are your axioms on how the world ought to be? These are not my axioms. I could just name a few from libertarian philosophy. Now if you ask why would you say they're not yours? Well I'll name a few that I've read from libertarian philosophers. They're not mine. You just saying you didn't think of them? I didn't originate them. Sure sure but I want to know what what do you think is the whatever number I'm going to give you the basic answer like what I think actually are economic axioms and then I'll give you the natural law ought answer which is more of a moral axiom if you will. I can't name all the Austrian economic ones but man must act is the most fundamental. So this is to say action is the purpose of use of means to attain ends. That's what we're doing all the time. You think about what you're going to do with your day. You decide you're going to need pants to go out in public. Well pants become a means to the end of going out in public. You need some food. That's a means to the end of going to do the next thing you're doing. We're constantly selecting valued ends and then choosing means to get to that end. One of the biggest breakthroughs in my life of understanding humans was when I read from a biologist humans are an active species. Yes. I was like oh damn like so I'm with you as an axiom to understand people you mustn't will never just sit still. And I tweeted this today actually inaction is an impossibility. To choose to not act is an action. You have decided that given all of the possible things you could do in the world you'd rather just sit here. That is means to a certain end. Maybe I want to meditate. It's just sitting here could be a means to the end of meditation but you cannot not develop a purpose and select means to pursue ends. You can't do it as a human as a living conscious human being. You can't do it. That's one act that is the axiom really of of Austrian economics. There's other ones like man prefers present satisfaction to later satisfaction.


Stolen Time and the Value of Assets (01:11:44)

So all else being equal I want to get paid now rather than later. If you want me to part with my capital well then you're going to pay me something. You're going to pay me an interest rate. And the degree of interest rate is how much I'll be charging you for that time. Essentially of separation. Theft always reduces productivity. This is another one. Taxation is theft. So anywhere that theft is occurring it's reducing and disincentivizing further productivity. That's an axiom because if you're creating 100 bushels of apples and someone's stealing 10% of them well then your productivity has been cut by 10% and their satisfaction came at the expense of your satisfaction. So the net satisfaction in the world has not increased for instance. I'll leave it at three. I want to give you the moral one though. You asked me what I think we ought to do. And this is singularly crystallized in natural law. And it says you can basically collapse all the things all the commandments and everything else into one which is do not steal. Now you might say well what about murder? Well if you consider that this property lens that you own your body the relationship you have with your body the exclusive power to control your body that no one else has. This is the most fundamental property relationship. So if someone kills you then they've basically stolen your life in this natural law sense. If someone puts you in jail right then they've taken your freedom to move about they've stolen your liberty right they've taken away your ability to move about. So there's you don't want to steal that either. And then when it comes to property you know all of the assets that you've justly acquired in the world. That you've worked to obtain or that you've traded with others that have also acquired them justly. This is again justly being the key word. You want people that didn't take from others because that caused someone dissatisfaction. They earned their satisfaction of getting the thing at the expense of someone's dissatisfaction. That's a net negative on the world. Whereas if we trade consensually as you intuited earlier you assume what I have you want what I have more than what you have otherwise you wouldn't do the trade. And I want the same. I want what you have more than what I'm giving up. That's the inequality of exchange that occurs where we both leave psychically better off. Where at least better off in our own mind otherwise we would have never done the trade. So the degree to which all exchange is consensual is the degree to which we increase net satisfaction in the world. So if you just get to do not steal which means don't print money don't tax don't actually steal or confiscate things. I think that is the in my view the ultimate ought in the world. It's very clear. I don't know that this will be fruitful but I'm super curious. I don't know the 10 commandments off by heart but I think there's don't covet thy neighbor's wife and love put no God before me or something like that. Dude are those workable into that or do they become a different category of thought. You know I don't feel qualified to answer that actually. Very fair. Religion is actually one of the things I hope that we would have time to talk about today though. I don't feel like we're there yet. So I want to say one more thing though. So again check out the book tell me if I'm right or wrong.


Bitcoin and Religion (01:15:15)

My interpretation of it is Christ is essential to the invention of the socioeconomic exception of the individual. I want to say something I'm saying a little about this. You can now strip out the historicity of Christ. Does it matter if he ever lived? You can strip out the theology. Does it matter if it was God not God supernatural natural doesn't matter. I think we get all agree that it's at least embedded in the social fabric at this point right the collective mythology of how we got to hear Christ is a big figure in that story. And now if he was indeed necessary or inspirational to the invention of the individual and the individual led to private property rights which led to capitalism which led to fame stocks which led to Bitcoin then all of the sudden you start to see the importance of that imaginal reality we talked about earlier. You know Peterson says this all the time we're living in stories. The first time he said that I'm like what the fuck is he talking about. Of course we're living in stories. Everything's like a narrated sequence of events but that's not I don't think that's what he or the people that inspired him like Carl Jung and others think. They think more like this that we inhabit mythologies right. We're doing this live action role playing called private property rights because of this story we have beneath the economic substructure called Judeo-Christian mythology or religion what do you want to call it. So I say this because I was turned off to religion a lot. I grew up southern Baptist and I became turned away from it as I became older and more well studied so I thought. But now I've returned in a very fascinating way. It's like wow you we have to have these stories to exist. We have to inhabit them and we're currently inhabiting one and it doesn't matter again you take out the historicity take out the theology of Christ. It's still fundamental to get to these things to get to capitalism to get to fame stocks to get to Bitcoin. So there's very pragmatic real world consequences right. We're changing our relationship with each other in the world that's creating modernity based on this live action, imaginal role playing we're doing through mythology. That's what I'm like struggling to articulate but very tuned into you right now. In a very I don't know that it's a similar way but in a similar vein I have been thinking a lot about what I call the God shaped hole in the human psyche. So I don't know I haven't thought through this so I'm thinking out loud and thank you for indulging that there is something in the human psyche where we have to believe that the story is true and we have to be serving something bigger than ourselves and what I will round to magic really does something to people. It makes them feel something. So the state seems to be taking on a new role that fills that, that it's this magical thing that's going to make all of your problems go away and very intrigued by people growing up now that really resonate with that. Religion obviously for hundreds maybe thousands maybe tens of thousands of years filled that role. There was some deity that you could pray to. They were grand and magical and I don't know if we're programmed for wonder and awe and that's how we combine that with our need to make sense of things to have a story that acts as an organizing principle. But even when I think about running a company and this is going to be controversial but I don't mean it to be as I really think about what my job is as a CEO one of them is to give people something to believe in. Part of it is to be someone they can believe in that and I've had to confront this because I'm very introverted and so my instinct is always to pull back and to collapse inside of my own mind and like today I was getting my haircut and at first I was just listening to you in podcasts but then we get to the point where I have to take my headphones out and at that point I literally just closed my eyes and I fall inside of my own imagination and I find that as close to space travel as I'm going to get in my lifetime and so as I fall inside of myself I will then create too much distance between myself and my team and so I've had to be like whoa like what something bad happens when I do that and so how do I re-engage why do I have to re-engage what am I doing what am I providing in that moment and my hypothesis is that I'm turning the company's mission into meaning and purpose into that bigger story that they're able to live inside of that gives them a sprinkle of magic that allows them to give so much of their productivity one of my employees was like dude I'm giving you my prime earning years and it was like he needed to know it mattered and I was like wow like that's a really powerful statement so to me it's the same conversation it has taken the guise of religion it plays out in all of these structures the useful fictions no way you've all heard is somebody you've all know a herarini my apologies you've all is somebody that speaks to this really interestingly that that becomes the very thing that makes humans the most dominant apex predator of the world has ever seen the ability to group up and very large but flexible groups but we do it through these stories and so my I am very intrigued I actually considered making this interview me reading responses to tweets from people that have such a different frame of reference to me that they sound crazy and just like getting your take so tied to this I'm going to ask you one question which is is very much a lead into this idea which I see a frame of reference taking hold of people that scares me because I think it's going to break the thing that makes society work and until


Are people with more material success morally evil? (01:21:18)

you I always saw it in the following loop I think you have way more fidelity so I think it's more interesting to talk in your terms but I'll give people the loop I thought of previously that strong men make easy times easy times make weak men weak men make hard times hard times make strong men and you get in this loop it's catchy and it's easy to remember but it doesn't have the fidelity of where you're going this question that I'm going to ask is going to seem perhaps unrelated but it's everything to me are rich people evil because that's the narrative that that's the worldview that people are taking and I think now using your level of fidelity what I see that breaks the reason it becomes hard times is they break the the individual property rights and then society begins to break down because there's something fundamental to my need to be able to control my destiny and when I can't do that darkness ensues because I will try to do that and to get me to fall in line you will have to violently oppress me and when you violently oppress me to get me to what I actually think they have something beautiful in mind that they want to do they really want to help people but to get everyone to stop being an individual takes an obscene amount of punishment so our that was a great lead-in and I was not the question I was expecting whatsoever I'd like to first my first answer would be no but I want to be more specific so Solzhenitsyn oh yeah the line between good and evil cuts on the heart of every man it is my assertion I'm sure there's a lot of factors that move that line and people but when I look at history I see material incentives as being the strongest force moving that line around when people are compensated to do something they're much more likely to do that something regardless of regardless of its moral qualities let's say so and again is why I always talk about property it's like the less viable we can make property you can remove that option entirely I always talk about making versus taking right making being the entrepreneurial path trade hard work delayed gratification that's one way to acquire wealth the other way the political way of just taking whatever the maker's made right you just steal it from them the degree to which we can make taking more expensive or less possible which is saying the same thing is the degree to which we shift that moral composition or ethical or pragmatic composition of society what people are actually doing everyone's trying to get more wealthy all the time it's natural right you want to live in a bigger place you want to eat nicer food you want to have more freedom this is very natural it's nothing to be ashamed of the means by which you require that is something to be ashamed of though if you're taking it from someone you should be ashamed because you did not create that value you stole it from someone the more we can make this an impossibility the more we can have people engage in the making path and this is where we talk about bitcoin being so important because bitcoin is in my opinion the most expensive form of property to violate in human history borders borderlines are impossible if you custody it properly and you maintain all your protocols there's not really a feasible way to take it that makes tyranny less profitable let's say so when i see good and evil the ebbs and flows of good and evil in the world it is occurring in everyone's heart and if you don't admit that then you're not being honest with yourself right we all have the capability to be evil or do dark things we've probably all done some dark things maybe there's some exceptions out there i know i'm not one of them we cannot change human nature so far as i know but we can change the incentive structures we inhabit and we can make property more expensive to violate and by doing so we can shift the moral composition


The secret to why religion is so inherently satisfying for humans (01:26:08)

of society so no rich people are not evil and like you said earlier to elaborate on writ like okay i guess it's sort of rooted in that axiom that man prefers present satisfaction to later satisfaction that's almost like saying you'd just given the options between rich and poverty which one do you choose all else being equal i hope everyone's saying rich i mean you don't even have to use you could give it all away right you could be rich and then give it all away and still be back in poverty but if you just chose poverty you just be in poverty so that uh selection process that's occurring in everyone's heart i think that the moving the solzhenits and heartline the most effective way we can do that is to make property expensive to violate that is the most important material incentive uh that we can move in the world and on this this notion of religious impulse and how we're attaching this to our stories you are the unifying principle of your organization just like god is the unifying principle in the church we do impute a religious value to these hierarchies that we're in uh i think because all action is premised on faith we talked about this in the last episode you never know what's going to happen right you can just choose an end that you want to obtain and then choose means and then try to act towards it but you're constantly messing up errors getting off course and trying to get back on path right so every action is an act of faith in a way right you just have the faith that the thing that you're trying to make happen will happen and if it doesn't you'll error correct so there is this there's this religious quality to all human hierarchies doesn't make you a priest or anything but people in your organization are going to look up to you they're going to look hey i'm giving you my best working years or whatever the guy said to you that's a real thing right he's on an act of faith betting that your company and your mission and your ability to lead and unify that organization will be an adequate exchange a consensual exchange of his working years for whatever you're going to do for him like that's very there's something to that and ultimately in this division the divisiveness between the rich and poor and people getting upset and trying to create class conflict i think it obscures the grandest truth on this little pelbuk dot is that we're one big family all right we're all here we've all got the same limited resources to deal with the best thing we can do is intelligently coordinate our action such that people are doing what they're best at specializing in what they're best at everyone's doing that and then we trade with one another so that we enjoy the best quality of everything that anyone can do in the world right and we don't have to be good at it so you can be really good at running a


The World Bryce Canter Personally Advocates for (01:28:28)

media company and you can still go to this restaurant and he'd need the best sushi in the world because he specialized at sushi and he can go home and enjoy your youtube channel because you specialize at this that's the ideal world in my opinion people living peaceably specializing innovating not stealing from each other and you know the religious piece i don't know i just i'm a guy that grew up in tennessee i consider myself an aspiring disciple of christ i don't know if that means i'm religious or not but it gives me a lot of meaning in my life and gives me something to look someone to look up to someone to try and imitate someone to try and and make to lead you to be a stronger better person right it's like a the highest consciousness you could imagine whether it really happened or not it's in that story and i can relate to that story i can read that story every night i can enact it in my life i can carry it into my organization to be a better leader better man but a person so i think that's where the world needs to go why are people so angry right now i and admittedly a subset why is a subset of people so upset i won't i think that there really is something going on but i can't quite tell what it is so one of the things you hear is that the boomers have trapped so much wealth that they're staying in positions too long organizations are becoming corrupted but if well like my parents are boomers and don't feel trapped by them at all the system has worked for me so i'm so confused by people's take on it am i delusional so the the story that i believe is accurate but is certainly the story that i tell myself is i am an average person who has worked my ass off to turn potential into skill set i've deployed that skill set very strategically in order to create value for people and they wanted the things that i've created more than they wanted their money that allowed me to build equity i then sold that company and was able to after many years of living like i was broke finally able to capture the value that i built into the company but when i hear the way people talk about people that have generated wealth it it's they want people to pay tax on unrealized gains no matter how much the wealthy pay and tax like elan musk has now paid in a single year more tax than basically anybody in human history not basically i think that's actually a true statement uh but all the responses are but it's not enough and and so i can't relate to that mental frame of reference but being generous and assuming that there really is something going that if i were a kid now that i would have the same frame of reference that they have why what's happening yeah um people are mad because they're victims of the largest heist in human history like especially if you're young right now and you're living paycheck to paycheck especially over the past couple of years that prices are soaring wages are flat right this is the same story since 1971 product you know look at the charts always recommend the website wtf happened 1971.com wtf happened in 1971.com make sure i'm saying that right all these charts shows in 1971 there's a divergence from productivity and wages the working class the lower middle and increasingly middle and lower classes are


The Criticism Of Economics Today And The Future Of Bitcoin

What People Are Upset about Today & Why (01:32:26)

being squeezed in this false economic paradigm that we have with Keynesian economics because we broke the peg to gold well that enabled the more rapid violation of private property rights through monetary inflation and all of those that corrosion of society the moral decomposition i described i think it all follows from that and people today don't understand what's happening right again you don't need to cognitively understand it helps if you cognitively understand but you just feel that you're getting scanned and squeezed all the time right no matter what you do nothing is working even if there's no malintent behind it when you repeatedly try an action and reality does not respond the way you want it to you are in the unknown right you're in unexplored territory and you're scrambling to get back to something that makes sense where i can do an action and get some semblance of an expected response you are not getting that today right they're going to work they're saving their money prices keep going up too fast they're still getting squeezed they're moving back into their parents etc etc so i think we're in the state early stages of currency failure and people that are on the wrong side of the economic hierarchy in those situations are feeling the pain they can't necessarily properly attribute the cause they don't know they don't understand the nature of property and money and all these things we're talking about so what do they do they're they reduce to this barbarism of class consciousness right rich people are evil these people are evil a lot of it's pointed at the government i wish more of it was pointed at the government because that is the sole legal violator of the do not steal dictum that i shared earlier this is the only legal enterprise we have that generates all of its revenues through theft that's a big problem and that is dangerous because we've done that before right we did this with Marxism that there was uh the problem was diagnosed that some people were getting rich and some people were getting poor right there was a there was a corruption or malignancy in the economic hierarchy but the Marxist prescription was to abolish private property the exact wrong thing you want to do for all the reasons we've described today right you have no prices all of the wealth then rolls up into very few hands the state they own everything uh wealth creation collapses mass suffering mass starvation genocide all of these things come from that root in my opinion i think what we need to abolish is taxation and inflation and the central bank that would maximize the integrity of individual private property rights which would remove this do not steal at least the institutionalized element of do not steal remove it from the world and enable people to deal with each other on consensual terms right just like you wouldn't the guy that's giving you his best working years you wouldn't banging him over the head to keeping him here right like coercion and that relationships never going to work long run even if you get the guy to stay here and beat him over the head with a wrench and say you're gonna work for me no matter what he's not gonna work so well for you he's not gonna work as hard for you he's not gonna work as smart for you he's gonna backstab you every chance he gets so if non-consensual exchange isn't working that very simple bilateral transaction why do we think it works when we scale it up to the multiplicity of the whole global economy and yet we have that integrated into our money today money that's supposed to be this instrument of trust and trade and integrity and optionality right there's a lot of uncertainty in the world but i know if i save my dollars like grandma told me i can protect myself against that entropy we're destroying that we've got no firm footing left in the world of course people are going crazy and i've written about this that i think i had a guy on the show metias desma and he wrote the psychology of totalitarianism on the phenomena of mass psychosis and he lays out a lot of very intelligent reasons why we've had mass psychosis in the past and why he thinks we're going through one again but i shared with him i think the violation of property is one of these things because if you sit down you know we talked about this last time too to play a game poker for instance i always like poker because i like to play poker and you start changing the rules randomly every few hands or changing the hand rankings whatever don't you think every play that table is going to go absolutely fucking crazy like you can't make sense to build a strategy there's no play left it's just noise and madness that's what we're doing in the world we don't know how many dollars in our existence we don't know how many will be in existence we don't know who decides we don't know who profits from their production it's just a giant opaque pyramid scheme that we all use as our primary means of exchange and that i think is i don't want to say it's the only problem in the world we have a lot of problems but it seems like the biggest one that i can hope to aim at and it's really interesting that at least as we break along political lines in the u.s that half the people roughly want more government bigger government and if you're right and again i will attribute only actually that's not true i used to attribute only positive things since i've started learning about nicha and the world of power i realize oh wait there's actually something else going on here but the idea that the i wouldn't say mass psychosis but the frame of reference that has way lower utility is that we need to abolish property rights everything needs to go to the government be redistributed is the thing that will yield the exact opposite of what they want ubi but it does feel like i get where they're coming from and even somebody like ray daleo and i don't know what his thesis is on how the taxation should change but he has said himself like yes we need a new tax policy we need to find a way to better distribute the wealth and i do wonder about this with bitcoin because the supply is finite isn't it possible that jeff bezos just ends up with all the bitcoin or michael sailer in this case like


Incentivizing honest economics and making stealing more difficult. (01:38:57)

how do we ensure that the game of the libertarian philosophy does not end up in the same pathology that everything else ends up that's a great question well we know that at least from a libertarian perspective that it won't because it's the stealing that's the problem right but somebody can win the game so well that everybody else is well let's think let's think through it though so any individual holder of bitcoin that has a very large accumulation let's pick satoshi he's got a million bitcoin supposedly the one hasn't moved since the beginning of bitcoin but that would be the largest single holder if that is one individual and if he holds that bitcoin does that in any way determine his capacity to change the rules of the bitcoin network i'm asking the question i'm not sure why because i know the answer the answer is no so the greatest risk that a satoshi brings to bitcoin is market risk so he could go and start dumping his million bitcoin on the market right he could suppress the price um you know who it depends on bitcoin's market cap how he does it how long he does it etc how long that would persist but the key point is that there's no way to for him even him the creator of bitcoin the largest holder of bitcoin again we don't know who he is so he's anonymous even that godhead individual of bitcoin cannot change the rules of the system that he himself created and that is the key point so jeff bezos comes in and i don't know his net worth or how much bitcoin he could buy let's say he could buy a million bitcoin first of all to do that you're going to bid the price of bitcoin up significantly right so you're enriching older holders they have larger unrealized gains imputed into their positions which is a larger incentive to sell your bitcoin for cash or goods or services uh and that's how through these price cycles bitcoin is tended to become more distributed into more hands for that very reason right if you bought it at a penny your incentive to sell at a hundred bucks is significant and at a thousand bucks it's gargantuan right so people tend to be selling it and buying it over time bazos comes in buys a million bitcoin a million and 1.1 million bitcoins so now he's he's uh superward into satoshi what's his story well he's bit up the market cap of bitcoin significantly but can he himself do anything to change the rules of the game no there's no amount of bitcoin you can buy to change the rules of the game and there's a large degree a large share of bitcoin let's say is held by people like me that won't ever sell so there's also that that you're always up against not that it could ever affect the rules anyways but you're never going to have one guy owning 21 million bitcoin i guess would be the point um and if you did you'd be in a world with free banking where people would go out and start their own bank and issue their own currencies as a substitute um and so that would be that alternate reality but i just in a libertarian model so that presumes that there is no government as we would recognize it today well that controls the monetary yeah i guess i was also assuming bitcoin had succeeded in that scenario and somehow i think the question you're getting is like what if happens if someone gets all the bitcoin yeah i'm just trying to think through a libertarian scenario so what i don't want to fall prey to is what i would view as a fallacy of everybody always says oh no no that wasn't real communism or that wasn't real socialism and if we just do it right everything is going to be fine like that that really is a dangerous way to think and if yeah i really hope people can stop themselves from that one but i don't want to hear the same thing on libertarianism like there's a reason i think my base assumption there's a reason that we don't have libertarianism either because it you'll never be able to walk that line is my guess and that what ends up happening is you get strong people that end up dominating and then the weak people go fuck that noise and so they group up to take down the bully and that grouping i was like whoa this feels really good and so then you have governments they start small good intentions and they just pathologize over time as they get bigger and bigger and bigger but the pathologization is expressed through taxation that is the domination right the stealing the stealing yep so again from a practical engineering perspective the only thing we can do about that we can't change human nature people are always going to steal if that's an option of it so do you think the make stealing more expensive yep that's how you dissuade and remove non-consensual exchange from the economic fabric so that i think makes the following prediction that the only reason libertarianism has never truly is profitable to steal yeah because there's never been a and libertarianism will never exist to the extent that it is profitable to steal because people will always do what is profitable always i mean if you that could maybe be an axiom like people always do what's profitable at


Will governments shut down Bitcoin? (01:44:06)

least psychically this is kind of gets back to what we said earlier on the last episode that all action is an expression of value right people do things because they expect to they expect it to be a good outcome otherwise you wouldn't do it even people that are cutting themselves and physically damaging themselves they're looking for some high or some goodness of that it's almost platonic where he says every action we take is aimed at the good and you can think of you know horrible things but the individual actor thinks what they're doing is good to them or for them in some way otherwise they would not do it so we can't do anything about that but what we can do is change the actual incentive structures we inhabit and make the stealing game less profitable thereby shifting human action towards making rather than taking what do you think though about so because the argument that's hiding in that is that there's no way to shut off or kill bitcoin but when i watch shinabe like nope sorry and i get it didn't kill bitcoin but you can regionally kill bitcoin and i know of course yes you could take your things and go but that's not easy so it's pretty effective to either at a country level say nope this is done or like with what happened to russia where you shut things off at the like the um transmitting layer so what kind of risk do you think exists there for governments and it will be whack-a-mole i totally understand that but for them to just keep crushing any sort of because if libertarianism only exists in a world where stealing is no longer profitable they just make sure that stealing continues to be profitable at least in their geographic location yeah and that can always be the case with physical property but at least something like bitcoin gives us the option to vote with our wallet or vote with our feet and lead to the situation trying to man they like they're not playing that game i want to get to china so whack-a-moles a good analogy actually because we have to remember the bitcoin mining network these miners are like yay big right so what happens in a country like china the authority comes down and says hey no more mining here's all these legal restrictions against it what happens a lot of these things these miners get boxed up ship to


Super Abundance of Hydropower in China (01:46:31)

another location plug back in all right so the network itself is kind of amorphous if there's a regulatory crackdown in a certain area miners will just fly into other jurisdictions and get plugged back in um now actually about china would you agree that they are the most i guess the largest communist regime in human history i'm pretty sure they're over a billion people i'd say the ccp has got the reputation for being one of the most ruthless and overtly powerful in human history there's a there's a lot of stories that are leaking out of china about the atrocities taking place there i mean would you agree that at least today let's say of present governments that they are the most ruthless and uh totalitarian regime out here your earlier point i am not qualified to answer that question if you take scale into account from my very ignorant perspective that seems true okay they shut down bitcoin mining i think we're about a year and a half ago at this point i think 20 percent and so i'll have to check my numbers on this because it's been a few months as i looked at it but there's 20 percent of bitcoins hash rate is still coming out of china really yes i did not know that so if the most ruthless authoritarian regime on the planet with its heaviest iron fist can't squash this whack-a-mole amorphous game of bitcoin mining so people are just doing it like hack or stop then who can well my theory is that again it's easy to mentally frame the ccp or china as a singular indivisible entity that moves as a whole it's not what it is at all right there's a bunch of little five thumbs of power and uh families and all these things and what do people do people do what's profitable so they have a super abundance of hydropower in china for instance i know that they have other sources of power i'm sure if that power can't be sold to the grid at a profitable rate and it's more profitable to blind bitcoin how are you going to stop how like what what iron fist can control the individual maneuvers of 1.2 billion people when it comes to something like this i don't i don't think it's feasible i don't think it's prof as profitable to try and enforce and control and prevent bitcoin mining as it is for people to just circumvent the law and whatever way they're doing it and continue bitcoin mining and that past 18 months i think shows that that 20 percent of the hash rate again check the numbers is still coming out of china so if the most ruthless regime in the world can't put a lid on this thing then what other government has a chance yeah i had no idea that there was still 20 hash rate what percentage is that of what was there before that i don't know i want to say they were in the i want to say they were in the majority of the hash rate and above 50 percent so it wildly diminished it but still i mean that 20 percent is a really big number yeah interesting i didn't know that so when you think about the so i've heard you say that america is thus far the best economic experiment we've ever run but that there's potentially something better beyond that what would that better thing be is it no government well i think we go back to the exclusive scope of government as circumscribed by the magna cara which was the preservation of life liberty and inviolable property do you think we made a mistake in the american


The Best Current Economic Government System (01:50:04)

constitution to say pursuit of happiness instead of property i do but i've heard arguments to the contrary and i haven't done the dig on that so in my extremely strong views about the importance of property i see it as a mistake but i've heard there's a religious or spiritual element to it but i'm not qualified to speak to that one um ultimately government is the social apparatus of coercion compulsion and violence you only want to invoke that social apparatus and as a means of retaliation or resolution to some form of coercion, compulsion or violence right someone stole your stuff someone hurt you someone hurt someone you love that's when you need recourse to the state or the law so to the extent that we can move the world toward one in which government exclusively maintains that scope of service that it defends life it defends liberty and it defends property that seems to me the best solution for dealing with this it's almost like a necessary evil right violence and force is an ever-present reality we have to deal with it somehow this seems to be and this is what you know the founding fathers and obviously the people that inspired them thought as well the government that governs best governs least right just restrict it to that very specific scope of service and now okay it sounds great in theory but history is obviously been a real pain in the ass of that because once you put all the power in one place absolute power corrupts absolutely institutions don't follow the laws that they promulgate institutions follow the individuals that run the institutions those individuals tend to be corruptible they will bend the publicly applied rule for private gain that is actually my definition of corruption there's a rule they're all supposed to play by and then one guy twists the rule to his advantage and everyone else has to keep playing by it or is otherwise hurt by it that's corruption in a nutshell and that's what I think inflation and taxation and all these things are so that would then I guess with Bitcoin that's why we call Bitcoin incorruptible money right it's a the first level playing field we've ever had in the sphere of economics a rule set that no one can change everyone just plays by by consent now it's always optional to use Bitcoin you're never coerced to use it but that option to have space or territory in a monetary network that no one can compromise and no one can change that option becomes more valuable in the marketplace as the other money space is increasingly having its rules twisted and violated and changed right more capital controls more inflation more taxation more confusion as this place gets more chaotic there is increasing demand for this place of integrity and transparency and universality so that's how I see this playing out is that the violation of property rights is going to continue to accelerate as it always has with governments that creates this osmotic pressure for people to adopt the option of not being violated right as people try to preserve wealth across time this is sucking economic energy out of the fiat system and into the Bitcoin system and now you have people with a very strong form of property that is immune to capital controls it can go anywhere in the world with it and they can basically vote with their feet so you're defunding this mechanism and empowering individuals to self organize in the way that best suits them individually and that hopefully restricts government over time because you're now you're removing the revenue sources of taxation and inflation from government definitely inflation taxation is more interesting when it comes to bitcoin over time we'll see how that plays out it's at least going to shrink government and hopefully shrink government back towards that exclusive scope of the preservation of life liberty and property which was the philosophical theoretical perfection of government as conceived 800 years ago have you read the book infomocracy i've not interesting it comes to a similar conclusion that you've come to but i think from a pretty different angle so the idea is that the world fractures into all these tiny little countries and that even as you move through a city you're moving through countries and


The Sovereign Individual (01:54:58)

each one because you can track people so specifically and data is like the oil it's you get this just completely fractionated world i heard you say that while you have no concept of what timeline would be if it's ten years or a hundred years two hundred years whatever but that you think that there will sometime be like 20 000 different countries why is that the natural conclusion of this osmotic pressure into the bitcoin world so this is one of my favorite books actually it might be closely related to the one you just mentioned uh the sovereign individual written in 1997 it predicted things like the move from what do they call it broadcasting to narrow casting so they're predicting social media as a consequence of mobile digital technologies it's so interesting to hear people like predict that stuff yeah it predicted uh the government use of certain medical policy to revalidate its borders let's say to control the flows of people in and out of countries and it predicted the emergence again written in 1997 of what they called anonymous digital cyber cash and the extrapolation from that invention was basically the fracturing and collapse of the nation state as the dominant institution in the world now it's a very dense book um i'll try to give you the very there's a lot that goes into it but it's the very basic premise of why that is the case why why do you go from anonymous digital cyber cash to the fracturing of the nation state is sort of what i tried to just describe right like we've all been forced into monetary policy up until this point we did to the point we don't even know what inflation is right like how much purchasing power have you been milked of inflation in your career that you really have no idea about really it's it's an interesting kind of insidious invisible taxation once people have an option to exit that for a either an individually selected monetary policy or one that is just fixed like in bitcoin i don't even like calling bitcoin a monetary policy because there's no policing to it it's not being enforced in any way it's just an option you just go and freely choose uh to use this this type of money that no one can print and so as that unfolds and people realize that there's an option to again people are going to do what's profitable right and profitability also entails reducing cost so if i can reduce my cost structure by saving in bitcoin rather than saving in dollars then i'm going to do that and then once i'm in bitcoin i now have more leverage in my negotiations with the state that they can't as easily they can't inflate they can't as easily tax me either because i have a form of property that's immune to capital controls it's globally transactable i can vote with my feet and move anywhere in the world that that would lead to a reorganization of people into jurisdictions where they are treated best so the most capital the most talent the best performers will naturally coalesce into the jurisdictions where they're treated best and a lot of this the thinking on this too it's rooted on kind of an obscure literature on the economics of violence or force i've written about this a bit my sovereignism series again the sovereign individual goes into it but let's just say that the ways we project power in the world can radically change our political modes of organization a very simple example of this was for a long time the armed knight on horseback


Violence And Economic Forces

The Economics of Violence or Force (01:58:46)

was the dominant martial force in the land right no one can take out an armed knight it was the strongest form of military hardware in the world pretty much you know he had single knight could kill 50 peasants let's say no problem so that was the weapon in the world all of a sudden the invention of gunpowder what happens one peasant can now take out an armed knight on horseback at 200 yards that led to the collapse of feudalism collapse of the medieval church as the law and the land like there were all these follow-on consequences as a result of that simple change that someone figured out you put explosive power and a long pipe and shoot a ball of the guy and he's dead so with bitcoin it's it's the default ultimate defender's advantage right earlier when you're talking about the strong people coming into power dominating the weaker people well now the weaker people will have recourse to a form of wealth that is indomitable you cannot steal it from them right they can so there's less profitability for the the aggressor he can't get the property and there's more optionality for the victim so


Conclusion

Outro (02:00:15)

that leads to a world that's more heavily consensual in my opinion and then it is going to be so interesting to watch this all play out it happens slowly enough and with enough uncertainty that it is um it's fascinating to watch people argue and all of that where can people follow you as you help translate what's happening for us uh yeah i would say check out the show it's what is money podcast dot com i love it boys and girls if you haven't already be sure to subscribe and until next time my friends be legendary take care peace if you want to learn the money habits of the ultra wealthy be sure to check out this episode with wall street trapper all right thank you real fast what are three things that people do habits money habits that keep people broke hmm three money habits that keep people broke i would say the first thing is not invest in that all


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