These Monetary TRENDS Aren’t Going Anywhere! Here’s What You Need to Know | Nic Carter

Nick Carter, welcome to the show. Thank you. I was 30 minutes late. It's kind of [laughter] I wasn't going to rat you out, man. It's all good. I am super excited to have you on. So, for people that don't know you, how do you So, I think of you as one of the leading sort of philosophical voices in Bitcoin. Um how do you describe yourself? Um that's a great question because most people know me more as a writer as opposed to an investor. The main thing I actually do is you know, invest through my venture fund. Um but yeah, I enjoy writing and and doing podcasts and things like that. So, I guess it's it's a kind of a weird thing whereby the thing I'm known most for is not actually my job. I know the feeling very well. Uh so, yeah, that's because when you're in front of a camera, that's what people begin to associate you with, but we're building a like true studio, like Disney-style studio. But of course, what everybody knows me for is interviews like this. Um I want to start somewhere really specific. So, about, I don't know, 2 years ago, I started to change the style of my interviews and moved away from being just purely mindset stuff and getting into things that matter. And that ended up leading me hardcore down the crypto rabbit hole. And that brings us to today, and I've started covering this a lot because it's become extraordinarily important in my own life, and I'm very curious if if somebody is from a 30,000-ft view, they are trying to navigate this world well, do you think Bitcoin matters? Um it I think it depends. It depends. So, strictly speaking, if you are an American, you probably don't 100% need Bitcoin for anything. All of that said, you may find it very useful in the coming years. Um, I think it's probably important to have a general awareness of sort of monetary trends around you because it's kind of one of those things that you know, people say um you know, you may not be interested in politics but politics is interested in you. I think it's the same for, you know, your monetary system. Um, you may not care to learn about it but it's going to alter uh your life, your quality of life. Um asset price inflation affects everyone. Uh, some for the better, you know, let's say if you own property. Uh, you own financial assets and some for the worse. If you're starting career, you're trying to save and uh get on the property ladder and things like that. Uh, you know, currency devaluation affects everyone. Inflation affects everyone to varying degrees. So, having a keen awareness of sort of where you sit in the monetary landscape uh, and how you stand to win or lose based on sort of inflationary trends, that certainly matters. That's something that you should pay attention to. Um some of us pay probably too much attention to it. It's a bordering on obsession. Um, and then Bitcoin is a is a part of that. You know, it's a part of the landscape. You have sovereign currencies, you have savings devices like stocks, uh it's effectively savings device today, uh property, real estate. And then, you know, these commodities that live outside of government control. Gold is obviously historically been the most popular one. And in that same subcategory, I'd put Bitcoin. And um, you know, to that extent, to the extent you're trying to diversify away from you know, these uh systems of saving wealth that can be interfered with, uh I think Bitcoin is a pretty good choice. All right, so there's a lot of sort of fractal paths that we could go down, but I think the first Robert Breedlove introduced me to a really interesting concept what which I think you inevitably encounter as you begin to go down the the finance rabbit hole. And I was somebody that I never wanted to learn about finance. I didn't find it particularly interesting. Um it doesn't speak to my skill set. It doesn't even necessarily speak to my natural inclinations. I had always focused on getting good at generating money rather than investing money. And as you begin to learn about it though, it begs the question, what is money? So, if you're talking to somebody who is really they believe us that they the financial system cares about them even if they don't care about it. But how do you explain like what it is? What is money and why does the financial system matter? The interesting thing is that your answer to that question tends to be laden with actually um ideological or political views. Um and it's interesting cuz you'd think it would be a factual question, but um one's answer tends to reveal a lot of how one thinks about the world. So, there's a big school of thought which would say money is a system of credit that effectively the government underwrites and creates. And it can't exist without the state. So, money is something that's sort of brought into existence by the government whether it's through striking coins or, you know, cultivating a sort of financial environment like the one we have today. And then there's another school of thought which is, well, money is something that people sort of spontaneously begin to use in order to gain efficiencies in trade. Uh and so they don't have to barter. Uh and so you have sort of the commodity theory of money which is the latter and then sort of the credit theory which uh is sometimes referred to as chartalism. And those are pretty opposing uh views because one of them sort of presupposes that the state, the government is sort of the guarantor and the instigator of the whole system, and that you sort of money exists at the pleasure of the state. And the other one is well, no, it's actually it's a sort of a private sector thing and it just happens spontaneously on a bottom-up basis so that people can find efficiencies in trade. And and both of those are laden with ideology, right? The form you know, one is sort of the collectivist, one is sort of individualist. And so the answer to the question, and I don't think either of those is precisely the right answer, the answer is more about revealing one's you know, general predilections and views. As opposed to nobody really tries to answer in a straightforward way. Is what I'm getting at. My my own personal sort of best answer would be you know, it's a system of effectively societal memory to store a record of sort of prior work done. And you know, the quality of that record you know, varies. It doesn't have to be it doesn't have to exist you know, as a ledger, it doesn't have to exist instantiated in a physical commodity that is struck into a specific coinage. The form of that memory can differ whether it's commodities, whether it's a piece of paper, whether it's you know, a record a database entry that exists in a bank. The important thing is that you're preserving a somewhat honest account of historical work done. You know, in order to basically facilitate the process of taking that work, storing it, and then actually being able to sort of you know, take advantage of the the proceeds of that work in the future. All right, so that's a really interesting way to look at it. And I don't know if you'll agree with a slight shift in the wording, but instead of calling it work, it's you're basically accruing the value of your energy spent across time. So, I have done a thing that cost me time and energy, and I'm able to at least transmit some of my energy into a monetary form that allows the and it gets it starts to get weird and complex because the amount of productivity that I get out of that time and energy is going to vary wildly across how people spend that time and energy. So, you could have an entrepreneur that pours his heart and soul into something for 10 years and have nothing to show for it at the end. And then conversely, you could get somebody that, you know, spends 10 months pouring their time and energy and it makes them a billionaire. So, it's that starts to get really fascinating. But, if you think about it in terms of I have energy, I made that energy time and energy might be a better way for my mind. I have time and energy that I put into something and I make it productive to a certain level that then goes into this thing we're going to call money that allows me to carry that with me across time. Now, if that's all it were, I don't think I ever would have become fascinated by it. And here's the second part. I've heard you talk about it, so I'm pretty sure you're going to agree with this. But, given that we live in a fiat system, I'm putting all of that time and energy or I'm converting it into something that people can pull levers on that retroactively affect the value of that. And it could go up, as you're saying, like with if I have financial assets and the system is being flooded with money like it is now, and we're going to have to explain what that means. But, then the assets that I turned my time and energy into will go up in value, and yay, I love that people are pulling in the levers. But, if I don't have those assets and people pour money into the system, and now my buying power goes down, they have essentially devalued my time and energy retroactively, which becomes very distressing, but you can be very blind to it and then just feel like what what is happening? I don't understand. How do you help people like wrap their head around that idea? Yeah, I mean, that's that's absolutely correct. I think it's it's spot on. I mean, that's effectively what what inflation is. Um and you know, devaluing the monetary medium that we store our our work and and labor in um is always redistributive. Uh so it's effectively a way to reapportion societal resources from some group to another group. Can you walk through the mechanism of that? I've heard you talk about there's a name for it, I forget, but that your proximity to the spigot of money basically, how the money is actually entering the system is like a real thing. There are some people that actually are closer to that and benefit from it. Can you walk people through the mechanism? Yeah, certainly. I mean, it's a it's a big concept. So um there's this um economist called I think Richard Cantillon. Well, I suppose you should pronounce it the French way, Cantillon, maybe. Um and and he posited that the flow of money uh as it's injected into the economy is non-neutral. So new money that comes into existence through whatever mechanism is not going to be evenly dispersed throughout everyone. It'll start with whoever is the recipient, um often times the government, and then um the folks who have the most proximity to the new expenditures benefit the most because it gets spent into the economy before the economy fully appreciates the devaluation effect of the new units of money. And so um if you know, it goes to the elites, then the people that benefit are immediately the elites and then it's the people that the elites spend money on. How do you define elites? That's become like the the code term for, you know, like shadowy secret coder. It's like, I don't know what that means. Well, in this example, it's it's simply who uh whoever is the sort of initial recipient of the money. Um but it you know, money can take any number of different trajectories through the economy. So, um you know, in the last decade or so, it's primarily been uh injected through the financial system. So, everyone that works in finance has done great. Everyone that owns financial assets has done great. Because the government gets money from the central bank and they go and buy bonds? Like, how is it actually getting in? It's very obscure and opaque. And that's actually part of I mean, it's deliberately obscure, right? Because um if it were transparent, people would be pretty scandalized by the whole thing. Um and so, it's mired in jargon and impossible terminology deliberately because, you know, the whole thing is quite scandalous, I would say. Um and so, some people describe quantitative easing as an asset swap, but and try and you know, mitigate mitigate its impact, but what's happening is that um the central bank is um you know, effectively buying government debt that would otherwise be bought by foreigners. Um and so, that that keeps interest rates low. So, if the central bank didn't exist and they weren't buying that government debt, then households, investment trusts, pension funds, and foreigners would have to buy the government debt that the government is issuing, and that debt would be more expensive. Um and if it was more expensive, that would impose more discipline on the government cuz they'd have to pay a higher sort of interest rate on that debt. So, because there's this other buyer, the central bank that effectively buys the debt and just kind of sterilizes it, sort of goes into this void, this black hole, because the central bank exists as a buyer for the debt, uh the government is able to finance itself by issuing structurally more debt than they otherwise would. And so that's sort of effectively the way that um you know, the government is able to grow itself and finance its expenditures even if foreigners and households don't want to own government debt. Um and so that's sort of the quantitative easing process. Um and that has the net effect of it driving up the value of financial assets. Uh the Fed now is buying all sorts of stuff. Uh bonds in the secondary market. Other central banks buy equities directly. Uh so there's a all number of of assets that end up being bought. Um and you know, that that has you know, pretty deleterious effects on society, I would argue. And why? Well, because it is a redistribution, right? Um so the Can you define redistribution? Um some segments of society being empowered relative to others financially speaking. So that's that's like a word people want to hear that wealth is being redistributed. Why do you think it's bad? Arguably we should have a redistribution in the sort of the inverse way that we've had it and maybe we're going to get that. Um but right now the redistribution is going in the wrong direction, which is that people are the most proximate to the capital spigot, they're working finance, which you know, has been engorged as a sector of the economy. It's too big. It's bigger than it should be. Um because finance is ultimately just intermediation, right? Intermediating financial transactions. It should only be a certain size. Like we don't need that much finance. Um everyone that works in that industry has done well. People that own financial assets has done great. But that is partially what's driving up inequality to levels that are enormously high historically. I mean truly truly, like Gilded Age levels of inequality. And everyone's kind of aware of this, but they're not exactly sure what the culprit is. And I would say people underrate the effect of the Federal Reserve um and low interest rates in in, you know, they underrate their level of complicity, basically. Um and as of right now, the Federal Reserve understands that um quantitative easing, money printing, does have the net effect of increasing financial asset prices and thus by extension driving up inequality. Alan Greenspan um admitted as such. Today, the Fed won't admit it, but effectively, if financial asset prices go up, that causes um growth for GDP because there's a wealth effect whereby people feel richer and then they spend more. Like if the value of your 401k goes a lot goes up a lot, you're probably willing to buy that nice new car. If the value of your house goes up a lot, you might, you know, spend money on an expensive vacation. So, that is the transmission mechanism through which quantitative easing now actually supports GDP, supports economic growth. But the cost of all that is that inequality continually increases cuz most people don't have stocks. Most people don't have financial assets. And so, society is just getting more driven by these enormous structural differences, which is going to reach a breaking point pretty soon. Ooh, that's interesting. So, when you say going to reach a breaking point, are you talking um upheaval or something else? Well, there's kind of like a mathematical regularity to it whereby if inequality reaches a certain point, you get uh civil wars, you get revolutions, you get uh debt defaults, uh something has to give, basically. Um and historically in the US, once you've had uh political polarization and inequality reach enormous levels, you've had the Civil War or you had uh strong movements in favor of labor as opposed to capital or you had really high inflation. So, there needs to be a mechanism to reset inequality back to a structurally lower level. And I don't know what the mechanism is going to be. It's probably going to be really disruptive. Um it could be uh high inflation for a long time. Uh high inflation would probably hurt financial asset prices. Um but it could also be though? Like so, is that just Is that the mechanism by which we make the rich poorer and so we scrunch it down that way rather than bringing the poor up? So, Bitcoiners have a weird discourse on inflation which I kind of disagree with where they say inflation disproportionately hurts the working class. If you look at it, it's that's actually not really the case. Like inflation kind of just generally hurts, but it mostly actually hurts financial asset prices because what actually happens is um well, and it certainly hurts the middle class, too. But the working class often uh benefits relatively speaking. They may lose in an absolute terms. So, everybody may lose, but they may lose less. So, if you sell your labor for a wage uh or a salary which is not uh fixed and it can adjust to inflation, you can stay abreast in inflation. You can swim with the current and sort of keep your head above water. Uh if you're on a fixed uh salary, you might be continually losing to inflation uh because maybe your salary is only renegotiated once a year. Um if you're on a fixed pension that's non-inflation indexed, you're also going to lose to inflation. Um if if you own financial instruments that have a lot of government debt in them, you're going to lose to inflation. So, the middle-class generally suffers with inflation. The professional classes suffer with inflation. But, importantly, and and you're not really going to hear this acknowledged in Washington, high structural inflation does affect asset prices um in a big way because corporations lose the ability to forecast what their cost of capital is going to be a few years out. They lose the ability to predict the future, right? Cuz what happens when you get inflation? You don't just get inflation, you have volatility in inflation. If you look at the '70s, you look at the '40s, you get extreme levels of volatility. So, they lose the ability to predict things a few years out. Um often inflationary movements are come in conjunction with um a a growth of political power in favor of uh of labor. So, it's always the struggle between capital and labor. And um the two things are often in conjunction. So, um I think that might be one way to sort of reset this is uh have inflation effectively um you know, decrease the value of government debt and um crush financial asset prices um and effectively uh reduce inequality that way. Um so, it might actually be a genuine objective of central bank policy at this point to encourage inflation to sort of run hot. Whoa. But, they're not openly discussing that. No, because, you know, if they admitted, "Okay, we are going to do a soft default on government debt," then no one would own the debt. I mean, people would Anyone that could would try and sell it. I mean, foreigners are already divesting themselves of of US government debt. Um but, so they have to kind of uh Luke Grommen says ride two horses with one ass, basically. So, they want to um they want to hold interest rates down and have inflation be high so that they can reduce the level of government debt in absolute terms. Um, and they also want to convince their creditors, the people that hold the debt, that they're not going to screw them over. But, one of those has to give. And my guess is that, uh, you know, people that hold the debt are going to lose money. And so, in what way is one holding the debt? Bonds? Yeah, so if you own uh treasuries, you might own a money market mutual fund. Um, if you have a pension fund, they are, uh, often by mandate, uh, holders of government debt. Um, there's uh just a number of public institutions, banks, you know, that, uh, that hold government debt. Uh, and so, if the government debt has terrible returns in a real sense over the the next decade, and just based on historical multiples, it probably should, um, that might be passed on to you if you have exposure to these sort of financial instruments. Mhm. [snorts] Okay, so let's take the average person right now. If So, you've talked about when people meddle in the financial system, it does not necessarily go anywhere good. If we could put a message out to the public, as we are doing right now, would we encourage them to learn about financial assets so that there just isn't this huge discrepancy between the government when they're pouring money into the system, that they're pouring it into a system where more people are. Like, would that actually solve the problem? Forget whether we can actually get the behaviors. But, would that solve the problem, or is there something that I'm still missing? I would encourage people to think critically about the financial system, but not necessarily to start engaging in, you know, speculation or trading financial assets, or getting really into stock picking, because I think one of the consequences of the devaluation of the dollar is that speculation increases and you see this in all other historical episodes of inflation. People feel that their money is a hot potato, so they want to trade it for something or other, whether it's foreign currency trading. feel it or cuz I mean that seems like such a complex idea to understand or does it just happen in other ways? Like with what's going on in Robinhood for instance, with the whole GameStop, like all of that, is that part of this phenomenon? I mean the growth of Robinhood is totally part of it. I mean it's not like people are looking at the you know, the the CPI statistics and saying, oh, you know, like energy prices are up you know, 7% year-over-year and like used car prices are up 24%. Um they intuitively feel that things are getting more expensive. So you know, um people go buy groceries, they're like, huh, this carton of eggs is like you know, and $3 more expensive than it should be and like this steak is more expensive and gas is expensive now and everything's more expensive. So you know, you don't have to like be a genius to figure out, wow, like, huh, seems like the value of the dollar is going down. It's not just that the prices of everything are going up. The dollar is going down. And that is a force that pushes people into wanting to get rid of the dollars. Effectively, their personal discount rate goes goes up. Do you think that inflation drives the average person to get more involved in investing? They won't think of it as investing, but like you're saying, they're trying to find somewhere to put their money and I ask this as somebody who got into my mid-40s and generated a substantial amount of money, but never thought about like, oh, holding money in a bank is actually devaluing it over time. I just never even thought like that. So and look, I'm not the brightest guy ever, but good lord, if I'm not even thinking about that, I have to imagine there are a lot of people for whom the idea of I need to do something with my money is just not a thing. It's like, what's in my bank account or I'm living check to check. It's like, is it a class of person that finds themselves suddenly speculating cuz they can feel that things are going up or is this really a phenomenon that just blanketly impacts humanity? Well, not everyone has to care about it, especially people that um you know, uh sell their labor on a short-term basis and don't tend to hold a lot of money in their bank account. Um and also frankly, you um you weren't alive the last time we had a significant experience uh of inflation. You certainly weren't. Uh you know uh probably financially active in the '70s. Uh and so that's the thing. It's just there's not a lot of living memory of the last time we had an inflationary episode. And so no traders are thinking about it. No um al- asset allocators have this embodied understanding of what it's like to go through an very few. Um and so we've lost this societal experience of inflation. So it's not sort of as ingrained into our culture. Um but now that it's returning uh you do have to start thinking more dynamically about what you're going to do with cash. And of course, I think one of the dangerous things is that everyone believes that public equity is a good savings device. Uh which is kind of like a you know, the I call it the cult of like the Bogleheads, you know? And this is stock market, public equity, stock market. Yeah. I mean, it may have initially been good advice because like from the '70s to now, like public equity did return, you know seven-ish percent on a real basis, you know, after inflation. Um and we've just had a hundred years of amazing public equity market returns in the US, like incredible. Uh you know, the risk premium on on US equity the last hundred years probably been 5 to 6% real. Which is very very very strong. Um but so everybody got collectively indoctrinated to this idea that stocks always go up. But if you actually look at what you're buying when you buy a stock, you're buying cash flows. And the share of the cash flows that you're buying today are minuscule relative to the price you're paying for them. So that's just another way of saying that you know price earnings ratios are at the highest they've pretty much historically ever been. And that's all you're buying with a stock. You're buying a claim on future cash flows. But there is, you know, the price that you pay for like a dollar of cash flows really matters. If you're paying $35 for a dollar of cash flows on a yearly basis, you know, that you're putting yourself at risk. Um and so I think that's one of the issues with this sort of inflationary period is people like, "Well, it's fine. I'll just put my money in stocks. It'll be my savings device." Well, you know, the Japanese stock market after 1989 went sideways for 30 years. And that can happen in our stock market, too. Oof. Okay, so let's talk about how that ends up happening. So what when I look at Japan, Japan's always the thing that people talk about and you know, use as an example of stagflation. What brings that about? How do we trade sideways for that long? And if if that's a mechanism of inflation, then I have follow-on questions. But first I want to understand that. Well, I'm not going to sit here and claim to be a Japan expert, but you know, they had the mother of all asset bubbles in the '80s. And does what we're going through now look similar? Arguably, yes. I mean, it's certainly a financial asset bubble. It was built on enormous growth in Japan. If, you know, you recall Japan was like the China of their day. They were really the manufacturing center of the world. You know, they uh built the best cars and you know, they had the best technology and things like that. And um I don't you know, I can't claim to know the exact mechanism, but basically financial markets got way ahead of their skis in terms of pricing and expectations of future growth, right? Cuz that's that's a lot of time how you get bubbles is people just get too excited about future growth opportunities, so they overpay. And by overpay, you mean that they break some sort of rational connection between the cash flows and what they're paying for a dollar of cash flow. Yeah, exactly. And and people like to say number that we should be at? Uh for equities for instance, um your historical price-earnings ratio is something like 15. Um and $1 buys or sorry, $15 buys me $1 of cash flow? Uh earnings on a annualized basis. Yeah, so in theory it would take you 15 years to recoup your investment. Uh that's with stocks. Of course, it depends on the you know, the country in question. Like countries with um you know, weaker governance and less rule of law have generally public equity markets traded at a lower price-earnings ratio because um investors demand excess compensation in exchange for taking the risk of buying stocks in you know, Russia or you know, Iran or something like that. Uh but yeah, in the US I believe the historical average is around 15. And uh in Japan, you know, things just got completely crazy and particularly with property, but also with public equity. Um and then there was sort of a slow bust. Um and a a demographic crisis, right? The population got older. Um the productivity and the dynamism in the economy uh wasn't uh you know, what investors thought it would be. Uh the banks themselves um you know, had to be sort of bailed out in this really slow motion way. Uh, there were a number of uh, what's called zombie corporations, which is corporations that sort of should have failed, but were kept afloat. Uh, and so that stripped a lot of the dynamism out of the Japanese economy. Um, and you know, they've had this sort of like s- slow motion crisis for a kind of the last 30 years. And even though, you know, they're one of the richest nations in the world, um, probably number two by GDP at some point, um, the returns that public equity investors uh, had were absolutely terrible. And so, that's all to say like it can certainly happen here. There's nothing that, you know, uh, guarantees that public equity investors in the US are going to earn 7% every year for for, you know, for the rest of all time. Well, so let me ask the obvious layman's question here. So, binge Japan, it's amazing, go there, it's wonderful, it's beautiful, clean, freakishly clean. Uh, does not feel like a country in crisis. So, what's the problem with stagflation if that's really what's going on? Well, I think I would say arguably they had just structurally low inflation, low growth and low inflation. Um, strictly speaking, there's nothing like that wrong with Japan. I mean, they have uh, a birth rate crisis, you know, so their their population is shrinking. Do you think that's tied to there's no growth, there's no excitement, and so there's this just weird human factor of there's no energy in the streets, and and this is why I started with Bitcoin. There's some it factor about excitement, about energy flowing into a system, cultural momentum. And when we don't have that, there are these second and third order consequences. Is that sort of the hypothesis of Japan is just it's fine, it's stable, but stable isn't sexy? Well, it certainly isn't fine from a returns perspective, just looking back historically, which was kind of the lens I was approaching it with. But, you know, leaving finance aside for a moment, um yeah, if you look at uh GDP growth, like it's composed of two things. Um the growth in sort of like the labor force, and then growth in productivity. And if your labor force is shrinking, your GDP is just not really going to grow, even if you have, you know, productivity growth. Um and it's an interesting question, like when you talk about Bitcoiners and optimism, like do low interest rates and low growth, are they a consequence of demographics? Like people like to say demographics is destiny, uh which I have a lot of time for that. Or um is it the other way around? Um and and so like I'm not sure which way the causality goes. Um but, you know, I I I think, you know, it could well be the case that you have if you have more optimism structurally, you're likely to have more kids. Uh and so like Bitcoiners actually kind of you just anecdotally like have a lot of kids. They tend to be like pretty family-oriented and things like that. Really? Um I I would love to see a survey of that, [laughter] actually. That's interesting. Yeah, I think there's like a correlation between, you know, general societal optimism, a belief in the, you know, quality of the future, a belief that the future can be better than the past, and then just But through the lens of finance, this is where this gets so interesting. So, here's why I found you just incredibly fascinating. You take like a values approach to Bitcoin, you talk a lot about the values of it, that there's this thing that like undergirds everything that is distinctly human. And, you know, when I think about Japan, and look, I'm totally ignorant to this stuff, but I actually think that it gives me a way of looking at it, which is just psychology-based. So, you right now there's something so insane happening in the transition to everything becoming digitized. I'll sum it up that way because to me it isn't it isn't just around currencies. It's around like all the new ways that we're finding to put value in some way shape or form onto into a digital space. So NFTs has been my lens. That was what drew me into all of this stuff and and sort of accidentally taught me about finance made me start asking the question of what is money was all through that lens. Because I realized as an entrepreneur it opened up vistas that weren't there before. And so I get into it and all of a sudden I can feel this energy and there's all this excitement and there's just like, you know, OpenSea does 3.8 or whatever billion dollars in August alone. It's just like pandemonium. And you spend any time with these people and there's the euphoria, right? And so just made me start going whoa, like what is this as a cultural movement? This is very intriguing. And as an entrepreneur, your ability to understand I'm sure the same is true as an investor, your ability to understand cultural momentum. Where is it going? Where is the energy pouring cuz that's going to be where there's growth and if you're viewing this through the lens of finance then obviously growth is what you want. But the real like mind [ __ ] is when you understand that all of that is simply a function of psychology far more than it is a function of like first principles reality. It is a function of psychology. And that's why and I always love asking a question to which I don't know the answer and I wasn't sure what you would say about whether Bitcoin is a meaningful part of someone trying to navigate this world well, but to me given the importance of understanding where energy is flowing, given that I think we do have to redistribute wealth but in a way that like the people decide based on things that they like and are excited about and want to move towards instead of just moving away. Crypto seems like the right answer. And then I'll bring it all together. But the question is what behavior you want the masses to do? Now, I'm perfectly willing to accept I'm delusional and just they're never going to do it. And so we can't deal with the system in that way. But I look at it and I have built over the last whatever 7 years a megaphone. And now I'm using it to to say you at least need to research cryptocurrency, the blockchain, NFTs. You may reject it and say that it's dumb. I can't see the future. So you should definitely do your own research. But you need to look at it. It seems like the most important thing happening right now. Well, to answer your question, I wouldn't ordain anything because that's pretty contrary to the principles of sort of, you know, bottom-up like markets approach. Um but I think as like, you know, an entrepreneur in the crypto space, um and someone who allocates capital, my best hope is to sort of uh create the tools and uh the systems that regular folks can use to potentially escape a ruinous fiat system. Uh and I think uh Bitcoin uh and cryptocurrency more generally is one of the most profound tools that's ever been created to give people the option to opt out should they choose it. Now, we can't mandate just remind people of the difference between what fiat is and why Bitcoin isn't fiat. Well, if you look at if you if you want to go to the Latin, uh fiat uh means kind of let it be, I believe. Uh so in the Bible, uh the Latin version uh in Genesis, it says fiat lux, let there be light. And um if you think about what God was saying at that point, it was a command, right? It was an an ordainment, right? Uh there will be light, um regardless of what you, you know, may may want. Um and so, you know, in English, fiat came to mean a decree. Uh so, something that was handed on down from on high, um ordaining a certain state of affairs. And um so so, that's what fiat money is. That's money money, basically. Yeah, but it you know, it could be some other source of authority. But yeah, it's money created by decree. And of course, that's not saying that the value of money is being enforced at the point of a gun. That's actually not how the dollar works. People sort of stylize it that way. But um you know, there aren't any like police officers like, you know, bashing down my door and like, "That you better like treat that $5 bill as if it's worth $5." You know, that's not how it works. The government cultivates an environment in which the dollar has has value. They have certain like tools to do that. Uh one is tax policy, so you have to pay your taxes in dollars, so they create a tax liability on all of us. Um and then you have to satisfy that liability in dollars. So, it's that's kind of like a dirty trick, but it works pretty well. Um then they sell their debt for dollars, right? So, uh all securities markets in this country and they're uh enormously sort of rich and and robust, uh you have to use dollars to sort of participate in the game, right? Uh and so so, there's, you know, and then of course, there's laws. There's legal tender laws. Legal tender laws don't actually mandate the use of dollars. You could create a You could start a store which just accepts gold. And that actually would not be illegal. That'd be completely fine. But what legal tender laws say, the dollar is a permissible way to satisfy debts in this country. You have the option to use it. And so the dollar is kind of like privileged in a certain way. And then so if you look at actually El Salvador where the dollar and now now Bitcoin are on the same they're on a par um the way the government did that was with tax policy. They said uh Bitcoin is not subject to capital gains taxes. Cuz when your dollars appreciate in this country, you don't have to pay taxes on the dollar going up. But you do have to pay taxes on else appreciates. Property, stocks, even foreign currency. So the dollar is privileged in a certain way mainly through tax policy. So very long-winded way of saying um you know, fiat money is money that is uh you know, uh privileged by state edict, by decree. That's literally what fiat means. Uh decreed money. And now commodity money is something that does just come to have value um regardless of what the government thinks about it. So gold is the perfect example. It's a spontaneous thing. It came to have money. Of course, many governments did embrace gold and we had the gold standard for hundreds and hundreds of years. Today governments hold gold, but they don't give any special status to gold. So you know, gold is a commodity money. It still's, you know, worth $10 trillion. Similarly, Bitcoin I would say is a commodity money. Its value is spontaneous. At one point it was worth zero and then it was worth something, right? I think the first price was like 0.0008 dollars um back in 2010. So no government uh well, until this year um did anything to encourage Bitcoin to have value. El Salvador has now in a small way uh you know, gently encouraged the adoption in in that country, but that's not really the reason Bitcoin has value. It's because the market spontaneously decided this is an interesting commodity that we can sort of store our wealth in. Okay, so the Bitcoin story, I'm going to take a more aggressive approach. I think you will be the the balancing force here and you know far more about it than I do, but what bothers me, so I've worked in the inner cities a lot and I've seen really incredible people that that are truly bright, but their perspective on life is nonsensical and because that's just what they've been taught, right? And so because of their frame of reference, they don't behave in a way that moves them forward. And that has given me a very deep passion around trying to help people that aren't necessarily getting useful information from the school system or from their parents or from their friends to tap into the internet basically and say, "Hey, it doesn't matter where you grew up. You can now learn from anybody." So now let's look at things that could really move you forward. Now, Bitcoin and we'll keep it relatively tight to that, though I find more currencies in that interesting, but Bitcoin is a highly volatile asset, so you could lose everything that you put in, so it's super important that people be clear on that. But you and I are recording this at a time where Bitcoin is doing extraordinarily well. And so just looking at how my portfolio is going up, I'm like, "We can't do this again where it's like the whether it's elite because I have information that other people don't have or that I have the capital to put in the system, whatever." Like I I have found a potential opportunity, again, it could go to zero. But like if people don't at least look at this, it's so insane, the gains are so potentially outsized that I feel a moral obligation to get people to do the research. I think that's fair. Um I morals is an interesting lens to put on it. Um I mean I think money is sort of imbued with morality but you know, I I at this point I I don't try and evangelize Bitcoin too much just because evangelize? Do you want to see um I'll give you the universal I want to see. I want to see every human being who meets what I call minimum requirements intellectually to research finance to understand that your money can be safe in a bank and losing value every day and that you need to understand that to protect yourself against that devaluing substantially over time. So I want everyone to take that action. Do you have an action that around finance that you think people should take? That's a great question. Yeah, I I mean I I think that's a a good framing. Um I would just suggest that people look into the rate of money issuance in this country which is substantial and don't don't buy the narratives coming from the Fed cuz remember the Fed does not have your best interest at heart. What they're telling you about inflation being transitory about being there not being a connection between the rate of money creation and the price of money which doesn't make any sense of course like it's funny like you have econ PhDs telling you something and it's like anybody that's sensible you know, that hasn't been indoctrinated into sort of like their dogma would be like well, this doesn't make any sense. What do you mean like you like you're telling me there's no relationship between the quantity of money and the price of money is like completely nonsensical. So just you know, apply a a skeptical lens to what they're saying um and then in terms of direct action, yeah, I mean just look look at the data and look at where where the inflationary trends are going. Look at energy prices uh look at the shortages we see in the economy and consider okay, well what historical epics could this be like? You know, could this be like the '70s? Could this be like the '40s? Could it be like the 1850s? You know, so there's there's a lot of work to do there. But I I think the first thing is just not not accepting uncritically the narratives coming out of sort of our monetary elites in this country. All right, so we have a system by decree fiat. We have grown up with it for so long that it just seems so second nature that most people don't look at the fact that the US government makes you pay your tax bill in US dollars is like a sneaky trick to make sure that US dollars essentially stick. It just is the way that things are. And as this moves forward and we are printing money and we've got potential inflation coming, um why does it matter if we're looking at Bitcoin and thinking of a way to okay, potentially they need to do their own research, but potentially get into something like that? What is it about the values of the of Bitcoin versus the values of a fiat system that caused Satoshi to create it in the way that he she did? Satoshi was actually pretty deliberate in terms of putting the pieces to of Bitcoin together. And they were chosen for kind of a specific reason. So, the first thing to understand is monetary discretion. And so that means is there anyone that can control the flow of monetary creation? Does anyone have the choice in that? And in fiat the government has that choice. So, they can choose to ramp it up. They can ramp it down. Everything in between. In the last few years in the US, the rate of monetary creation has been enormous. Truly enormous. Um and and you know, we're told that that's to sort of save us from a recession. But of course, we still have financial crises and the rates of financial crises and recessions has not gone down since you know, the Federal Reserve was created. Certainly hasn't gone down and the severity of those recessions hasn't gone down since the 1970s when we fully got onto the fiat system. So, the claim that you know, we need government to put their thumb on the scale and periodically change things, you know, change you know, tune, pull that lever of you know, interest rates and monetary creation, things like that. That claim doesn't seem very sound to me. Uh and so, if you look at what Bitcoin does, it just fixes the variable. It sets it completely fixed. So, um you know, there's going to be 21 million units ever and the first 50% were created in the first 4 years. The next 25% created in the subsequent 4 years. Next 12 and 1/2%. So, it's a decaying curve. Um so, right now the rate of issuance for Bitcoin is 1.8% per year. That's going to get cut in half in 3 years, cut in half, cut in half, cut in half until we hit 21 million. Um and so, that curve, that rate of emission is totally fixed. Um I don't think anybody has the authority to change that. Uh Satoshi said it that way and that's kind of what we got. Um and it you know, the thing that that compares to would be a non-state monetary commodity like gold. Now, gold is an attractive thing to use to backstop your monetary system for much of the same reason, which is that no one really controls the rate of gold issuance either. Over the last few hundred years, it's kind of fluctuated between about 1 to 2% and it very rarely exceeds 2%. Even when uh the conquistadors found all the gold in the new world, people think that was you know, that caused rampant inflation. That caused the rates of inflation uh to increase by, you know, 1 to 1.5% a year for about 100 years. So, that wasn't even that significant in terms of like new gold issuance. So, that's a natural feature of the world because gold is really well distributed in the Earth's crust and there's not that much of it and it's really hard to get out. And so, because of those natural physics-based features, we get a monetary outcome, which is if you link your currency to gold, your currency is not going to be created at a rapid rate. I want to say that in a really basic way for people cuz this was a big sort of moment for me when I realized gold is valuable not so much because it can be melted and turned into jewelry or whatever. It's valuable because stars had to explode and, you know, get coalesced into the crust of this Earth so that there is a finite amount that is really hard to get out. And so, it literally becomes proof of work, as they call it, that I know this was hard to get, so there's no way that somebody is like secretly in the back room like making more gold and putting it into the system, which would essentially be counterfeiting. So, it becomes an anti-counterfeiting, anti-inflation mechanism. And that is what makes gold valuable. And so, it's like, wait a second. The very thing that makes gold valuable, you're saying that the fiat money just like, "Hey, [ __ ] it. Like, make it rain. Like, you know, money printer go brr." It's like, you you start to get sketched out of like that scandal you talked about, where it's like, "What is happening?" So, yeah. Do you buy into the narrative that Bitcoin is like the ultimate digital gold and that it perfects those elements of scarcity? Well, that's why I introduced gold. I mean, you know, I'm not a gold bug or anything, but Bitcoin mirrors, and it's actually synthetic attempt to recapture those qualities of gold, right? And now, of course, gold wasn't perfect either because um technological innovations or gold finds like in California in 1848 uh 48 yeah um would increase the rate of gold creation. So, that would be you know, a shock, right? And you don't necessarily want the money supply to increase dramatically based on a technological change. But it even so didn't increase it that much. And so, what Bitcoin took was this relatively strong but not perfect commitment to not increase the money supply too rapidly to just give a strong predictability which worked very very well for hundreds of years. And Bitcoin made it even stronger. It made it a perfectly sound commitment which is we're going to adhere to this monetary schedule and we're never going to change it. And this is just what you got. And no one has the authority to change it ever. And it's going to be perfectly predictable. So, it's like the most hardcore version of gold possible. Gold gets those traits from the explosions of stars and the nature of the Earth's crust and also the atomic nature of gold. It's not radioactive, doesn't corrode, so it's very stable which is important uh because you know, it's not going to decay or rot or anything like that. Um and then Bitcoin gets those traits by looking at the natural world and creating a synthetic version of that which is designed to recapture those ideas. And Satoshi compared Bitcoin to gold a lot. That wasn't a coincidence. The proof of work function Satoshi compares to the mining of gold because it's expensive and difficult to get the gold out. It's expensive and difficult to get the new Bitcoins out, too. And it should be that way. It shouldn't be easy to create the money. Should be really hard. And the people that create the money shouldn't have a huge um you know, advantage in doing so. So, gold extraction you know, the gold mining companies, sure they're worth a little bit, but the people that mine gold are not like these princes of the universe that control everything. They have to compete in the free market like everyone else, so they eke out a margin. It's the same with Bitcoin miners. Bitcoin miners aren't princes of the universe either. They, you know, earn a return doing it, but it's just kind of a normal corporate activity. It's not something that endows you with fabulous, unfathomable wealth. And that's by design. That's because it's a free market equilibrium where if the miners were earning too wide a margin, other miners would come into the industry and and compete with them and compress that margin. So, the fact that it's a competitive free market process, that it Bitcoin inherits that from gold, but that's also great feature. So, a lot of Bitcoin's design, arguably, is kind of inspired by gold. So, now we get into the other day I was thinking about, you know, I'll get asked a lot like, "Who's the person that you want to interview that you, uh, you know, haven't yet?" And I was like, "Satoshi. I want to interview Satoshi." Now, I understand why people would not want me to interview Satoshi, but I am utterly fascinated by the mystery around Satoshi. I know at one point you said somebody should write a book, maybe you, going through like all the different things that Satoshi said. And I'm really curious, what were they saying? Like, when you think about the value system that's driving this? And this gets into my core thesis around there's something happening culturally right now, and the the value system of currency is resonating with people in like a crazy way. So, going to that idea of demographics or destiny, there's something here where the the upcoming demographics really resonate with what I lovingly call the [ __ ] the man philosophy of decentralization. So, what what is the the value system of Bitcoin? Yeah, I think that's such an important and great question because we've had all these sort of civil wars about it actually. Um you know, this all these internal conflicts and Bitcoin in many ways is kind of a reflection of your own expectations and your your beliefs. And so, no two people come at Bitcoin and consider it to be the same thing. So, that's where we get all this conflict from. I mean, a lot of people thought it was this peer-to-peer internet uh payment system like a high-powered Venmo. Some people thought, "Okay, well, it's more of a digital gold type product." Some people are like, "Well, actually, it's a programmable substrate for the new internet." Um and all of those conceptions imply different development directions. And they imply taking different angles on the tradeoffs within Bitcoin from an architectural perspective. So, that's why we had all these wars, all these conflicts. They're not fully resolved, arguably. And part of the reason I think is because Satoshi left so early after a year or two. And we didn't get that much guidance from Satoshi. Did Satoshi say he was going to bounce or did he just disappear? Um yeah, Satoshi sort of suggested that uh they, you know, they could leave and the project would be okay without them. Um but still, you know, I don't know if it's a good thing. I mean, I suppose it's for the best that Satoshi isn't here because it eliminates a point of centralization. And you know, Satoshi has apparently never spent any of the coins that they mined. So, it seems to have been a very sacrificial thing. Whereby they didn't capture the spoils of their wealth from creating the system, which is incredible. So, you know, I think it was a a very sort of humble thing to do. No one knows who Satoshi was, so they didn't get any of the clout that comes with creating Bitcoin. They apparently didn't financially um you know, take their reward or anything like that. You know, something like a million coins. Uh so, So, you know, that's all very important, but the trade-off is that now it's a tug-of-war between all the different factions of Bitcoin trying to determine what Bitcoin actually is and what it should be. But, I think undergirding all of those conflicts, there still are a few things that you can say, "Yeah, these are the sort of key fundamental values of Bitcoin." And, you know, one would be uh, very strong respect for property rights. So, of course, the anti-inflationary characteristics are key because inflation is a way to um, effectively compromise your property rights. Two is the ability to have strong seizure resistance. So, if you own Bitcoin, it's you can very plausibly defend yourself against a powerful adversary that wants your Bitcoin, uh, particularly through legal means or through intimidation or force. Um, you know, as a fully digitized money, it's something that you can store in your brain. For instance, if you can memorize 12 words, you can store an unlimited amount of value in your brain. Uh, and so that, you know, is, you know, part of the property rights idea. And then, eliminating centralized points of control, I think, is a political idea, which is to say, we want a monetary standard that is not, uh, something that can politically be interfered with. And so, the architectural design is inherited from that core idea. And Satoshi even said, "Look at these other historical digital cash systems, like you Satoshi talked about Digicash. Um, it failed because it was centrally controlled. But, if you look at these P2P systems, like Tor, um, and sort of like BitTorrent style stuff, Satoshi says, "Well, those succeeded. So, let's inherit those ideas in terms of our design, our architecture. And so, you know, if you think about it, these are actually political ideas first, and then uh they get processed into technological designs. But, the designs are not arbitrary. The designs are function of the underlying idea. Uh and so, that's why Bitcoin is the way that it is. Because Satoshi had some pretty definite ideas about the world. Yeah, this gets really interesting. So, um the more I look at like the sovereign individual, the book The Sovereign Individual, and think through some of the implications of what it means to say to have demographics that already at least some fashion of them have a anti-establishment bent. They're young, they're tech-savvy. They immediately understand the idea of digitizing anything, whether it's art, and you know, and NFTs is born from that, or whether it's um money, and obviously Bitcoin, Ethereum are examples of that. But, they take to this really fast, and then, as nobody knows better than you, this space moves so fast, if you put your head down on a different project for 3 weeks, you will be disoriented when you come back up, because things will have changed that rapidly. And that's going to make it a nightmare for um regulators to try to stay on top of this. What do you think is going to happen as this upends the apple cart? You talked about, you know, there can be enough disparity in wealth um that you get these moments of revolution. What do you think the government response is going to be? Like really, really, when they start realizing, holy hell, like there is a flight from the US dollar, let's say, into Bitcoin. Well, I think political power is always litigated, you know, between individuals and between the state, and uh it's kind of a tug-of-war. And you know, one of those sides may believe a sort of set of conditions holds that doesn't hold anymore. And I think that's the case where we've reached this nexus of political centralization right now. Um you know, big tech companies have completely uh like enormous levels of power that we've virtually never seen before in history in terms of uh a small number of individuals being able to exercise control over a large number of individuals. And some governments co-opt that technology like the Chinese government and they wield it directly. In the US, it's wielded sort of indirectly where effectively big tech companies like work alongside the government today. I know not everyone sees it that way, but there seems to be a convergence of objectives there. And so, you know, we're at this historical zenith in centralization, whether it's corporate or state power. And I mean, if you just look at um you know, the trends of authoritarianism happening in the West, like it's very real. And you know, the question is like what will the pendulum swinging back look like? And I think states aren't prepared to witness that. Uh they believe that people are still geographically um you know, indexed to their particular location so they can't be portable. They believe that people's assets um are linked to the state ultimately, to the banking system, to the financial system and they're not portable. And once those assumptions prove to be false they're going to be taken by surprise. And so, the crypto industry is so interested cuz it's created $2 trillion of wealth for young um kind of mobile uh very driven sort of very technical, um, talented, uh, people globally, not not just in the US. And those people are engaged, whether they know it or not, in a negotiation with versus their governments. And should the governments misbehave, they can, you know, convert the rest of their wealth into, you know, crypto-native format such that it can be untethered from its local context, which was never really possible before, never possible. And uh, if necessary, they can sort of flee. And you're not just fleeing with the clothes on your back, you're fleeing with your wealth and your assets intact. And that's a kind of a new thing, right? I mean, historically, if you were fleeing the Nazis, you'd have to sew the gold into your clothing and, you know, you wouldn't really be able to escape with any of your wealth. And now everything's digitized, you can escape with, you know, the wealth in your brain. Um, and so we have this class of like mobile, um, entrepreneurial, uh, you know, skilled individuals that are effectively breaking the linkage, the linkage between themselves and their their governments. Uh, and they don't really feel, uh, much allegiance to the government anymore because it's not working for them. Um, and so like I'm like a miniature version of this because I moved within the US from somewhere that I felt was like pretty authoritarian and hostile to crypto to someone somewhere that was the opposite. Um, but this is going to happen on a global scale and it's just exact sovereign individual idea, and now we've been technologically enabled to actually do this. And so you'll see some states that are very slow, that will try and ban crypto and and, uh, you know, stem the capital flow and maybe they'll insert, uh, capital controls and extremely onerous tax policies. And then a number of other states will realize, "Well, we can create a a crypto-economic zone and attract all these people and get this concentration of wealth and talent. Uh so we're that's obviously what we're going to do and then we're going to win out with regards, you know, relative to all these other states. So, I think we're right on the brink of seeing that. Yep. Yeah, this is um man, this is such a an interesting and crazy time and my goal is just to get people to pay attention to it. I think you're one of the voices to listen to. Um where can people follow along with you? So, I'm on Twitter uh Nick_Carter. That's two underscores and if I get banned from there, which is very possible, my personal website is nickcarter.info. Hopefully, I don't get banned from the internet. So, that will always be up. Awesome. Dude, I really hope that we get uh round two, round three. This has been really incredible. Um I will be following you closely. Thank you for putting out what you put out. And uh yeah, keep doing what you're doing. Guys, if you haven't already, certainly dive into this world. I think I can't say this enough. I just think it's so important for people to do the research and to figure out what's happening cuz there is something tremendous happening right now and I will say miss it at your peril. Again, you need to do your research. When I say miss it, I just mean look at it. Look at it. If you look at it and reject it, fair enough, but don't just reject it without looking at it. Speaking of things you should look at, if you haven't already, be sure to subscribe and until next time, my friends, be legendary. Take care. Peace.