THIS Is the Issue With the Legacy Financial System & How BITCOIN Fixes All of It | Saifedean Ammous

Any kind of money whatever gets used as money, the fact that it's used as money will incentivize anybody who can produce it to make more of it. So, if there was an easy way to make gold, we'd all be out there looking into gold prospecting. But then, you know, we'd flood the market with gold and then it would stop being gold. And the reason that gold was money is because it was very hard to find in large quantities compared to the existing supply, which I explained in more depth in the Bitcoin Standard. Saifedean Ammous, welcome to the show. Thank you for having me, Tom. It's a pleasure to be here. Dude, I am super uneasy to make sure that I help get these huge ideas across. You've written a book called Well, you've written multiple books, but the one we're going to be talking about today is the Fiat Standard. You also wrote The Bitcoin Standard. Um as I have gotten more into understanding Bitcoin and cryptocurrencies in general, uh then you begin to encounter the ideas of what money is, what fiat is. I mean, this is something I've been in my entire life, but had no idea what it was. If you can, what I want to do is start with a brief description of what fiat is. Then, we're going to tell people what the subtitle of your book is, which I think will set us up nicely. And then, I have a really interesting quote from your book that I want to get into. So, what is fiat? So, the way that I wrote the Fiat Standard was almost like an imitation of the Bitcoin Standard. It was like a knockoff of the Bitcoin Standard in that with the Bitcoin Standard, I looked at Bitcoin with you know, everybody's an amateur when it comes to Bitcoin. It's such a new thing. Nobody's an expert in Bitcoin. So, I decided to just come at it from first principles, try and figure out how it works, look at it functionally, and then tease out the the of this thing continuing to work and operate. And that worked out pretty well. The book sold very well. I I I heard from a lot of people that they enjoyed it and they liked it and it was quite influential. So then I thought for my next trick, I should do the same thing for the fiat monetary system, which is the monetary system that everybody uses. But in a sense, we've never had the luxury of looking at it with fresh eyes because, you know, it's like asking a fish to tell it asking a fish about what the water is like. Well, you we've always been in water. It's just what we're used to. So I decided, imagine if I you were coming at this civilization that was using this monetary system from scratch and you were trying to understand how this thing works or so what what is it? How does it function? Explaining it as if it's just another uh you know, digital currency similar to Bitcoin and trying to draw analogy with Bitcoin. And I found that to be a quite powerful analytical tool in order to understand how fiat works. And it was the perfect setup for writing the sequel to the Bitcoin standard since the Bitcoin standard was all about how you know, why I think Bitcoin is such a big deal and why I think Bitcoin is going to succeed. Um the question that the Bitcoin standard leaves you with is well, then how is it going to interact with the prevalent monetary system? How will this survive? How is it going to grow? What's going to be the relationship between the fiat monetary system and the Bitcoin monetary system? And in the fiat standard, I thought this is really the perfect way of approaching it. Let's study fiat and then that will help us figure out how it would interact with Bitcoin. And I found that to be quite a useful framework. So by drawing analogy to how Bitcoin works, you know, Bitcoin has nodes, Bitcoin has mining, and we have a decentralized network where everybody determines the the If you just carry these things into fiat and then try and analyze how fiat works, well, you find in the case of fiat, you know, we don't have a distributed network of nodes. We have I mean, there are nodes, but they're not all equal. It's not peer-to-peer like in Bitcoin where every node gets to dictate its own rules and then the network only works between the nodes that agree on the rules. And so, it's entirely voluntary. Well, Bitcoin is different Well, fiat is different. Fiat is a network where there is one sovereign node that determines the rules for everybody else, and that's the US Federal Reserve. And then there are all these partial nodes around the world that can sort of determine the rules locally, you know, the local central banks, but then they are kind of subordinate to the master node that runs the global monetary system. And that, I think, is quite important to understanding the political situation in the world, the geopolitics of the world today. You know, thinking about Because it opens up people to manipulate it. Cuz one thing I've heard you say about um if I were going to have a concern about Bitcoin, it would be that at some point something happens where it begins to centralize, that there are fewer nodes, and it becomes more likely that somebody can manipulate it. And so, as you start talking about the fiat standard, it's like, "Hey, the entire problem with the fiat standard is that it can be manipulated." Now, to your earlier point about this is water, right? Um what's it? Brian Foster Wallace? I'm forgetting his first name, I think. Uh that fish don't even understand that they are in water. When I before I started the journey into crypto, I thought of money as a force of nature. It just is a thing like gravity. It It is and first principles would lead you to the axiomatic understanding that money is, and it there's this paper representation of what money is that makes it easy to transfer, but I had no concept of a lot of how it's entirely constructed, wildly manipulated. Even if you assume good intent, that it's it is this thing that is designed to orchestrate society. And so, I was like, okay, that was a very eye-opening introduction to things. And then as you begin to peel back the layers and you realize that there is disturbing there's a disturbing setup, right? Breaking away from gold, and we'll get into that. But that there is a um it's influencing society in ways that you would never have guessed because you're so used to it. And I want to talk about the the subtitle of your book. So, if fiat money is money by decree, the government says there's nothing backing this other than I say it's valuable, and so as long as everybody agrees, we're good. I can print as much as I want. I can just keep making it up because it is literally money by decree. Uh gold is money by star explosion, right? So, it's limited because it is a metal that happens when stars explode that embed themselves into the crust of our earth, and therefore there's a limited quantity. So, you begin to understand, okay, wait, there's different types of money. And then obviously we'll get into Bitcoin and hard money and sound money and all of that. But I want to give people that setup of money is not a property of nature, that it is fiat is something that is created and by a ridiculously small number of nodes to use the Bitcoin analogy. Yeah, that's the um you know, if we the next question is, all right, so there's nodes, but then what about mining? We know how Bitcoin mining works, and we know how uh well, I explain it in the Bitcoin Standard, and we know how gold mining works. Well, how does fiat mining work? So, most people have the idea that it's just fiat is paper money, and then the government prints it when it's needed in order to keep the economy going, and that's false. The majority of fiat money is digital, less than 10% of dollars are in paper form. The majority of dollars are digital dollars. They don't exist in physical form. So, how do they come into existence? And the answer to that is that fiat money comes into existence when debt is created. When loans are made, new fiat money is generated. And this is really the key starting point of the analysis of the book because this is a very powerful concept once you draw analogy between lending in the fiat world and mining in Bitcoin and in gold, a lot of the world around us begins to make a lot of sense. So, any kind of money, whatever it gets used as money, the fact that it's used as money will incentivize anybody who can produce it to make more of it. So, if there was an easy way to make gold, we'd all be out there looking into gold prospecting. But then, you know, we'd flood the market with gold and then it would stop being gold. And the reason that gold was money is because it was very hard to find in large quantities compared to the existing supply, which I explain in more depth in the Bitcoin Standard. And in Bitcoin, you know, we have the difficulty adjustment, which continues to make mining Bitcoin difficult for most people and only makes it profitable for the people who do it very efficiently, the most efficient miners, the ones who mine at the lowest electricity cost. Well, in the case of fiat, basically, anytime a government-backed entity or central bank-backed entity is able to issue credit, new money is made. So, what does that tell you about This is so scandalous when I came across that in the book, I I literally took a note. Wait, is it That's how loans work? Is this always how loans worked and money gets into the system? It Can you give the example that you gave in the book about how you've got a house, you're about to buy a house. The house exists, but the money doesn't. And it is going to come into existence. I was like, what? This is still I I can't believe I'm actually understanding what you're saying correctly. This seems impossible, and I discovered this 48 hours ago when I started reading your book. How's this true? Yeah, well, I mean uh yeah, so let's say you were going to sell me your house. Your house is worth a million dollars. I agree with you that I want to buy the $1 million house from you. Now, I have two options. I can take $1 million from my money and go and give it to you in cash. And then uh in that situation, no debt is created and so no new money is created. The money supply stays constant. All that happens that I have a million dollars less and you have a million dollars more. But, most people obviously are buying homes by borrowing. So, I go to my bank and I tell them, "Hey, I found this house. I want to buy it. I want to borrow a million dollars." Forget about the the uh down payment for for for simplicity now. So, let's say I'm just going to go borrow a million dollars from the bank. Well, the bank is not going to take $1 million from other depositors and give them to me. They don't need to do that. That's the whole way in which banking works in the fiat system. They will give me a loan and because they're backed by the central bank, because they are a regulated financial institution that is backed and regulated by the central bank, they will make those new $1 million. So, the money supply will increase by $1 million after that loan is generated. So, the bank now owns owns a $1 million loan. I owe the bank $1 million. You have an extra $1 million in your bank account which you got from the bank and I own the house. So, you know, the the money supply has increased by a million dollars. It's we've devalued everybody else's money in society in order for me to buy your house. And that's really very powerful when you think about it because it's like mining, you know, when you mine new gold, you devalue everybody else's gold. When you make new Bitcoin, you're kind of devaluing everybody else's Bitcoin with the new Bitcoin that you're producing. And when you make a loan from a financially uh from a from a from a financial institution that is backed by the central bank, new money is created. Note it's not the same if I borrowed that money from my mom. My mom takes $1 million from her bank, she gives them to me. That doesn't create any new money. My mom is not backed by the central bank to issue those loans. Great news. If you're watching this episode, that means you're actually doing the work to research this new world of finance, cryptocurrencies, NFTs, Web3, all of it. Seriously, I mean you, most people are going to write all of this off without even looking into it, and that means that most people are going to miss out on what could be, in my opinion, one of the greatest wealth transfers in history. Now, look, it's incredibly important that you do your own research. I cannot see the future. I just know that something very important is happening right now, and it warrants you taking the time to look at it, to do the research. Now, if you're excited at all about learning about all of the changes, then I invite you to join my special community of like-minded people on our Discord by going to impacttheory.com/discord. Since you're watching this video and learning about crypto and the future of the blockchain, you should know that this really is the future of Impact Theory. About 9 months ago, we decided to pivot because I can see that this is where the world is going, and this is truly the moment of disruption that we've been looking for, and Discord really is the best place for you to begin to engage with that side of Impact Theory. We've launched our first flagship NFT, the Impact Theory Founder's Key, and our holiday feature narrative, Merry Mods, which is also an NFT project, and I promise you you're going to be blown away by what we're doing. We've got a lot more planned for years to come. We have a long-term, very aggressive, very fun road map. So, if you want to turn this learning into action, I hope you will join us in our Discord community at impacttheory.com/discord. All right, back to today's All right, back to today's So, all right, hold on. This still I understand the words you're saying. It seems impossible that this is true. So, how? What are the guardrails on a bank? Because uh what was it, Charlie Munger that said, uh "Tell me the incentives and I'll tell you the outcome." So, as I hear that a bank can now, cuz they're going to get the fees from servicing that loan, and that means they're incentivized to loan as much they can cuz it they literally get to make up the money and then take a a poll off that. Who limits that? Well, what limits that is the central bank. The central bank doesn't just allow them to go out and give loans to everybody, although it might look like it at times. There are And a central bank is is per country? Yeah, every country has its own central bank, more or less. That all use the same idea. Yep, basically, yeah. This is the 20th century for you. So, the central bank puts regulations on what uh on who can borrow and how they can borrow and what they're able to borrow. And so, you know, there are criteria. They're not just going to give a million dollars to anybody. Although, you know, recently it looks like it. Aren't they? Yeah, but I mean generally you going to have to have some income and some kind of some kind of way of demonstrating that you are able to make those payments back. And that's kind of the political restraint on fiat mining that the central bank doesn't just allow anybody to do it and that if a central bank uh if a bank issues too many loans, then the central bank will punish it in certain ways. You know, it'll have liquidity problems and it might get liquidated and go out of business. But in reality, the real check on this is the fact that if you just issue too many loans, you have a lot of uh insolvent borrowers. And then those borrowers don't pay you back, and then that causes your you know, that that causes the money supply to contract. So, the way that we limit the growth of the fiat money is that credit creation is in itself self-correcting. And that's the important insight that we gain from the Austrian School of Economics and Austrian business cycle of the Austrian theory of the business cycle, which is that banks want to create as much credit as they can, and they do, but then that just means many more people have money and are investing and have resources, and that leads to central banks that leads to bubble, and then that leads to a collapse. And then when there's a collapse, you know, I can't pay back my loan to the bank. Well, that reduces the money supply now because the bank The property is gone now. Yeah, the money's gone now, and the bank has the house. So, I'm homeless, the bank has the house, the bank needs to sell the house, but obviously now that we've got a credit crash and the bank can't issue as much credit as it used to before, when it tries to sell that house, there won't be as many suckers as me and like me willing to buy the house. So, they're probably going to get a lower price for it. So, they the $1 million house is going to sell for something like half a million dollar house. And so, this kind of process of boom and bust is what's limiting the credit money system from continuing to grow. Um and then that's kind of the equivalent of the difficulty adjustment in Bitcoin in that it limits the growth of the money supply so that it's not hyperinflationary. And in fact, when we've seen examples of hyperinflation, we have seen hyperinflation under this fiat monetary system. In fact, it's the only monetary system that has um seen hyperinflation. But when we do see hyperinflation, it's not through credit creation, it's when the credit creation gets out of hand, and then the government wants to bail out its buddies, and then they crank the actual physical printing presses. That's the case in Lebanon right now, like the actual physical bills have gone up in circulation. The physical bills in supply supply has gone up by about sevenfold in the first 2 years since the currency began to devalue. So, they've gone sevenfold and so the price of the currency has dropped more than 90%. Um but Yeah. But generally the Yeah. That's the case in Zimbabwe and that's the case in Venezuela. Because what happens is that you know, you keep doing this credit What governments do is they keep playing this credit creation game like like an addict taking another hit of crack all the time. And then you know, the come down keeps getting worse and worse and then to ameliorate the come down, they start printing money. Once you get into the phase of printing money, that's when it goes to the dogs basically. All right, there's a few things I want to anchor around. For people that are like me where they have enough information to follow along, but they need some of these breadcrumbs put together. Um So, I had read your whole book and because I I do everything audio, I actually hadn't seen the sub headline and I thought, "Ah, after reading this, I need to see like the sub head of this." And so, uh I will read the sub headline which is the debt slavery alternative to human civilization. Okay, so then it's like, all right, wait a second. The the Is this a good alternative? Like what are we talking about here? And I want to uh read a quote from your book which you you said earlier, but I think this quote really sums it up. Getting others This is a quote from the book. Getting others in into debt is the fiat standard's version of gold prospecting. So, the whole way that the fiat system gets more of this very coveted thing is to get, as you just walked us through, people to take on debt, which creates these debt cycles, which I'd heard about but didn't understand. And so we're in this sort of forever boom and bust, constantly pulling levers, like trying to engineer the system. And I'm curious to hear what what's your sort of final take on the fiat system? Cuz you you I don't want to put words in your mouth, but you were basically like, I want to look at fiat cuz it's done some good things. So, where is the sort of good, where does it start to break down? What's your final edict on the fiat standard? Having read the book, I think I have a pretty good idea. Uh but what what is that the final take on this? And what do you mean by that debt slavery alternative to civilization? Yeah, so historically, all through human history, what humans have done is we've always looked around and used things as money. And naturally, whether through our reason or just through evolutionary selection, money ends up being the hardest thing to produce. That's why the whole world was on a gold standard by the end of the 19th century because the hardest thing to produce will hold onto its value much better than everything else. Is that why it's called hard money? It's hard to produce? Exactly. Yeah, that's what it is. It's hard to produce. And easy money is easy to produce. So, the harder our money, the more reliably we can provide for our future. You know, you earn money today, and if you if your experience in you throughout your life and the experience of your family and friends around you is that you save $100 today, and then next year you expect it to be worth 102, for instance. You're likely to save quite a bit of that money, more than much more than you would save if your experience was that if I save those $100, next year their value is going to be something like let's say $85, right? So, by saving, if you lose money from saving, you're less likely to save, you're more likely to spend that money today. If the money's likely to appreciate, you're more likely to save for the future. So, historically, we've always moved toward harder money, and that has led us to constantly save more because that allows us to provide for the future. And that is the basic building block of civilization. One of my favorite economists, Hans-Hermann Hoppe, says, "The lowering of time preference is the In it was is what initiates the process of civilization." And lowering time preference refers to the idea that you um your time preference is the degree to which you prefer the present to the future, and everybody prefers the present to the future because the present is certain, the future is uncertain. So, if I gave you um you know, a choice between having a house today and having that house 10 years from now, you obviously would prefer to take it today. You wouldn't want to wait the 10 years. So, if I gave you the same choice between the same amount of money, the same purchasing power today or in a year, you prefer to take it today. But, there's the the higher your time preference, the more you prefer today, and the more you discount tomorrow. So, the less you care about tomorrow. So, as we develop the ability to have a stronger, harder money, we're able to provide for our future more, we start discounting the future less, we start caring about the future more, we start providing for the future more. And that makes us more um you know, more future-oriented. And so, we become more moral, we become better uh humans, we become more civilized, we accumulate more capital, and we save more, and we invest more. And then, you know, the more we save, the more capital we have available for investment, the more we invest, the more the productivity goes up, the more our standard of living increases. That's really the process of civilization. That's really I I like my best metaphor for it is to think about the fisherman who goes from trying to catch fish with his hands to building a fishing rod. That's capital, you know, you you have to sacrifice time fishing with your hands in order to spend that time building a fishing rod. But then the result of that is that you can now have a much higher productivity after you've made that initial sacrifice. And then you build a small boat, and then you build a fishing net, and then you build a bigger boat, and then you build Currently, you know, our civilization has advanced to the point where we have giant trawlers that last 100 years and continue to fish for 100 years. You know, people 100 years ago were giving up consumption to build those gigantic boats that are still in use until today. So, that's the process of civilization, and it's a process that's spurred by the hardness of money. The harder the money, the more we're able to provide for our future, the more we invest in the future, the more capital we accumulate. And that was basically the process of humanity up until the turn of the 20th century, and then fiat really came along and provided us with an alternative to this. Where now, you know, gold's supply in increased at around 1 and 1/2 to 2% per year. And now fiat's supply increases at around something like 14% per year on average. Some currencies increase a lot more, some currencies increase a lot less. For the best currencies, you know, the US dollar and the euro and the yen and the Swiss franc, these currencies increase every year at around 7, 8, 9, 10% or so. Um some currencies increase at 100 to 200% or so, like, you know, the Lebanese and Venezuelan currencies. But if you counted an average market weight, it's around 14% or so. So, we go from 1.5% per year increase in the money supply to 14% per year increase in the money supply. So, that and that is happening because of the massive incentive for mining fiat through issuing debt. And that's really the subtitle of the book. We move from a process of human civilization where everybody is saving and accumulating wealth in hard money in order to have a better existence in the future to a process of of debt slavery where everybody's getting into debt because debt is money mining money. Debt is creation of money. So, you have a huge incentive to go and borrow for buying your house, to go back to the original example, because when you buy it with your own money, you're not creating any new money. But when you buy it with the central bank with the bank's money, new money is created. So, you and the bank come out ahead in that game because you're essentially devaluing the money of everybody else in society. So, that means everyone is in debt. Individuals are in debt, corporations are in debt, governments are in debt. Everybody's borrowing. Everybody's indebted to their future. Everybody's a slave essentially. And that doesn't change. It's not like, you know, if you if you get richer, then, you know, you snap out of this game and you're secure. On the contrary, the richest people are the ones who borrow the most. And so, everybody is in debt and everybody has that insecurity of debt. Everybody has payments to make at the end of the month and if they don't make them, they lose their business, they lose their home, they lose all kinds of different things. So, we moved to the system of universal debt slavery basically. And that's really what I try and explain in terms of what fiat does. And I mean, this is obviously a very high price, but I do try and think about, you know, what the benefits of it are. And to be entirely fair, there are benefits to the fiat monetary system over the previous thing that it replaced, which is that gold is very expensive to move around. And that's why fiat was able to replace it. It wouldn't have replaced it in a free market because the cost of moving gold is still much cheaper than this enormous cost of, you know, destroying human civilization and turning everyone into debt slaves. But the fact that moving gold around was so expensive meant that governments could get away with banning you from using gold. And with ultimately, you had to in order to use gold as a trade as a medium of exchange, as money for trade. As the world became more globalized by the end of the 19th century, all of people's money was centralized in banks, and then all of the banks were centralized in a central bank. That was just an inevitable outcome of the fact that moving gold around is expensive. And so, you need to have all of that gold centralized in a central banks, and therefore, in the early 20th century, when governments got into wars in World War I, they all went off the gold standard. They all confiscated their government their citizens' gold, and they all issued more paper than they had gold in reserve. And since then, they've gone off the gold standard, and it's now been an entire century of um this insanity. And I think it has been enormously, enormously catastrophic for humanity. I think we take it for granted. Um, you know, we think that this is just human nature, but I think um there's a reason that a lot of very bad things that happened in the 20th century um aren't such a a prevalent part of human nature before. I think this massive get into what that is, but first I want to I want to ask a hard question, which is if hard money is so good, how did it get replaced by fiat? And is it really just because it's hard to move from place to place, or is it the combination which you were um stating just now, which is uh the government comes in and squashes it, basically, because you said it's not a free market, so they're manipulating it somehow, breaking down that free market, and leveraging that it's hard to move from place to place? Like, an ask I'm asking the same question in a different direction. Has Bitcoin solved the only real issue, well, I guess two issues, uh that made the previous take on hard money, gold, vulnerable, which is that it's easy to move across time and space and it's hard hard hard meaning that you there will be 21 million units and that is it period full stop. Absolutely. Yeah, that's kind of you know, thanks for ruining the book I guess but uh Trust me when people get into it and they see you detail like explaining the fact that you have a whole like section talking about how fiat destroyed food there is much more in the book for people to discover. I mean it's like literally crazy. I could have unless we read it in real time we would not be able to destroy the the number of ways that you you break down the hey this is water thing this thing that you don't think is a problem or that you don't even notice let's start looking at it. Uh it's terrifying and we're going to go through some of it but I want I want to answer that question to see if I'm really understanding the fundamental issue here. I think you know, I'm I I I that's that's really what it is. So the Bitcoin standard of my first book focuses on Bitcoin scalability across time Bitcoin's ability to hold value across time and that's that's what made gold that's what made gold money which is the fact that it is the hardest money its supply increases at only around 1.5% per year and so therefore gold is excellent at holding on to its value and that's why the Bitcoin standard has many examples about how harder money eventually drives out easier money all throughout human history. The fiat standard focuses on scalability across space on money's ability to hold on to its value across space as money as you move money around and that was gold's Achilles heel because and in in the fiat standard I look at this I look at how expensive it was to move gold around and I look at the example of World War 1 when gold was demonetized effectively when those countries moved off the gold standard we see that the cost of moving gold around across the Atlantic for instance was around 0.5% somewhere between 0.1 to 1% of the value of the gold that you move around. So, that means that a bar of gold um costs a bar of gold to move across the Atlantic 100 times, roughly. 100 to 200 times you move it across the Atlantic, you have to pay as much as the whole bar of gold. That's quite expensive, you know? And so, that necessarily means that you can't just keep moving gold around. You have to centralize it. And that in my mind is the Achilles' heel of gold. That's what makes it uh vulnerable. It's not that governments went door-to-door and put guns to people's head and forced them to hand over their gold. In the majority of the world, that's not the case. At least definitely wasn't the case in you know, the the most important advanced economies of the world in the early 20th century. They didn't do this in the US, in France, in Europe, in Germany. That's not how it happened. But, the gold was already there in a central bank. It had to be in a central bank because you had to have the system of batching the transactions effectively and doing periodic clearance rather than moving the gold around with each transaction. The advantage that Bitcoin has, well, two advantages. The first one is that it is even harder than gold. So, gold is always increasing at 1 and 1/2 to 2%, which means that the supply of gold the global stockpile of gold doubles roughly every 50 years or so. 40 years, 50 years, the supply of gold will double. Whereas in Bitcoin, gold Bitcoin supply is never going to double. Bitcoin supply is stuck at 21 million and that's it. We're already almost at 19 million. So, we only have another 2 million to produce over the next century or so. So, Bitcoin supply is completely inelastic, completely unresponsive to demand. And then in the fiat standard, I compare also the scalability of Bitcoin across space. Well, with Bitcoin, you can move the equivalent of a gold bar, which is around $700,000 right now, you can move $700,000 across the Atlantic with Bitcoin currently for a few cents. I know this is going to go up, but it still has an enormous, enormous, enormous margin to go up before it hits anywhere near the cost of moving gold around. So, I think there will be, um, you know, solutions for scaling Bitcoin that are going to, um, improve it, but, um, improve the cost of, um, moving Bitcoin around, but still, it's so much cheaper than, uh, gold, and it's so much harder to confiscate than gold, that I think it has a much, much, much better chance of defeating government centralization than gold. Okay, so, um, now that I think we've laid the groundwork for people understanding what the fiat standard is, what I liked about your book is there's two, you can sort of break the human experience, I'm not sure what the right word is for it, down into really two big chunks. You've got financial and cultural. And in the book, you detail the ways in which both of those are tremendously impacted. Um, I have a quote, sort of, that covers each section from your book, and I want to read the first one, uh, now, which was just, it literally stopped me in my tracks. And this, I'm going to read, it's a long quote, but I want to read the whole thing so that people understand the financial side of this, the implication of having a system that inflates over time and uses boom and bust cycle versus something that, um, deflates over time, and it, when you hear that, I'm just going to read the quote, cuz the, the, the first time you hear the numbers, the, the one that is bad sounds good, and the one that is good sounds bad. And it's, I think, a huge part of how people end up getting lost in all of this. All right. This is a quote from the book. The average US house price in 1915 was $3,500. In 2021, it was $269,039. That is a compound annual growth rate in the price of the house at a rate of 4.18% over 107 years. Had the fiat standard adopted a fixed supply in 1914, so not inflating, and prices declined by 2% per year instead, the average American house today would cost $411. And I can hear people panicking cuz that sounds terrible. With a much smaller supply of the dollar, prices would be far lower than they are today. Incomes would, of course, also be much lower, but the decreasing price of goods means that they become more affordable over time, and that saved money buys more goods every year. $411 in 1915 could have bought your great-grandfather 12% of a house, but if he had saved it and passed it on to you, it would buy you an entire house today. Your grandfather's pocket change would be enough for you to live off of today. A world of decreasing prices would provide people with a strong reason to save for the future, and one can only imagine how much better living standards would be today had humanity not been afflicted by inflationary fiat. All right. Help people understand why on earth they would want their house to be worth $411 today. That just seems so impossible and so counterintuitive and so zero-sum. Like, if Bitcoin can't be inflated, then if I get some Bitcoin, it means y'all [ __ ] you get no Bitcoin or at least not those. So, it seems to somebody who grew up in a fiat system, it seems bad. Why isn't it bad? Well, I mean, if you think it's bad, then why don't you just go move to Venezuela or Lebanon where your house is going to be worth 10 billion of the local currency. So, you know, if you're trying to collect collect zeros next to your house valuation, move to Zimbabwe, Lebanon, Venezuela, go where the hyperinflation is, and you'll have the most valuable house. Obviously, people don't care about how many zeros you attach to their prices of goods. You know, people care about the purchasing power of money. And this is this is really one of those very very very obvious insights, but you have to basically be part of or subscribe to the ideas of the Austrian School of Economics to be willing to just accept this very obvious thing that any human being with half a brain will accept. You have to, you know, like what do you prefer? Would you rather have $10 or 100 yen? Well, 100 yen are worth a lot less than $10. So, people prefer to have the $10. It doesn't matter the exact number. What matters is the purchasing power. What can you buy with it? And so, the choice is not between having a, you know, in in a world in which your money your house would have been worth $400, your day-to-day transaction would be done in cents, more or less. So, you know, we'd have 1 cent bill, and it would be probably worth something like the $100 bill today. And then we'd have in units that are smaller than the cent would be divided into smaller and smaller units. And that's fine. So, then yeah, you could have your house be worth 400 million of the smaller unit of a cent or whatever it is. But the the point is that in that world where the money appreciates, every year, you know, four generations of your family going back to 107 years ago, every one of your family for the last four generations, every year they had the choice of saving money that every year was going to be worth a slightly more the next year. So, think about your family over the last four generations, and I think pretty much everybody, no matter where you are in the world, everybody has gone through, you know, you everybody's family has gone through a period in which they witnessed their savings essentially get wiped out. Either it was happened suddenly, you know, bank failure or bank collapse or financial crisis, or it happened gradually through inflation. But everybody has seen this and everybody has learned their lesson not to save. Everybody has accepted the idea that you shouldn't be saving. And so everybody has been living in debt and everybody's been in a financial secure and then because of that doesn't seem true. Now, I obviously have read your book, so I know what the punchline is, but I think it's worth explaining to people because I was taught to save. My mom taught me to save. Um and yet, as you and I think a lot of people will feel that way. But as you actually look at what society does versus what your mother may have told you to do, the evidence starts to mount that people really really discount the future. But give us a couple examples of how we can see that the statement that we've all been taught not to save is true. Well, I think a lot of parents teach their kids to save, but it's pretty bad advice. Like if you save in the fiat standard, I mean, if you save money, if you hold on to money, you're witnessing it basically lose its value by 5, 10, 15% per year. And you know, the the the kind of actionable information from understanding the fiat. So, you know, when you read the Bitcoin standard, you come up with the conclusion, the inescapable conclusion that you need to buy Bitcoin. You need to be long Bitcoin because there's only so many in the world is going to find out and the price is going to go up. Well, when you read fiat, you come up with the conclusion that you need to be short fiat. In fact, you realize that that's basically how people get rich on a fiat standard. In fact, you know, you look listen to people like say like Kiyosaki who wrote Rich Man, Poor Man. You look at a lot of the successful businessman. The way to get rich is to accumulate hard assets and accumulate hard cash yielding assets while accumulating also debt. You want to have your liabilities be things that are scarce, and you want to have your Sorry, you want to have your assets be things that are scarce. Houses, companies, real estate, stocks, bonds, et cetera. And then you want to have your liabilities be um fiat. You want to owe dollars. So, in fact, it turns out, you know, saving is good for building character for young people, but really once you get into the real world, you know, you don't just save up to buy your house. And people who do that end up really paying a lot more than if you just take a loan. When you take a loan to pay the house, you're shorting the dollar, and then you benefit from the inflation, because the value of your loan repayment goes down. And especially true in the case of hyperinflation, you know, I have friends in Lebanon who had loans to buy houses, and then with the collapse of the lira, collapse of the local currency, now their loans are 95% discounted. They have to pay them back in a currency that is So, they kept they keep the house, and they just have to pay very, very little amount of money. So, the people who didn't take out loans and saved money in the bank got wiped out. And that's happened all over the world. It happens very quickly during the case of hyperinflation, but it's happening slowly today around you. Like imagine if you have your money in the bank, if you've been saving, what is your bank giving you in terms of interest? 0.2%, 1%, 2% best case scenario. Well, you're losing every year 5% or 10% or so, because look at the price of the house that you want to buy. You know, especially if you want to buy a nice house in a nice neighborhood. Look at the price. You know, can you save up Here's the question. Can you actually save up to buy a house in Miami Beach? Think about how much income you need in order to save up to buy a house in Miami Beach, versus how much income you'd need to buy it in debt. If you buy it with debt, you get the short contract on the US dollar, and then your repayments are going down over time. And so, the house is just continuously getting cheaper and cheaper. You know, you live in it today and then it gets cheaper. If you try to save up for it, I mean, you'd need to have astronomically high income to be able to save uh in a saving account that appreciates at 1% while the Miami Beach house that you want is appreciating at 5, 10, 15% per year. So, help me understand something because as you're saying this, I'm starting to think, okay, what do I need to take loans out on? Like, how do I uh you know, get myself in a better situation? The catch is though that if I'm still getting paid in the fiat, it's the the two are tied. So, it's going down like my purchasing power is going down at the same rate that my loan is technically getting cheaper. So, it ends up feeling like a wash. So, I guess I'm going back to then your earlier point. I have to have a hard asset that's going up in value. So, I've got that. I can't just have my uh my short on the dollar. I have to have something over here that's going up. So, as this goes down, I'm laughing because it's getting easier and easier for me to pay it. But the key is to have to have both. You can't just have one. Or you can't just have the debt, I guess. Th- th- this was like the kind of uh breakthrough insight that made me tie the book together when Michael Saylor came into the Bitcoin world and started talking about how uh he's really what his strategy is and his idea of why he's borrowing in order to hold Bitcoin. And when he explained, you know, this is what rich people do. If you're rich, you have hard assets, you have an old building, you have real estate, you have a factory. You don't need to work in a fiat system. You just are constantly refinancing and your loans continue to get cheaper and you continue to take out money. And the goal, you know, is to die with a lot of debt. Like, this is how you win in the fiat game. You win by accumulating the most debt. But you have to always And this is the this is the tricky part. Like, this is All right. so this is the kind of uh great um side of it is that, you know, you just keep clocking up more debt and running up a bigger tab on the bar and then you die. And you win, basically. But, of course, the risky part, and that's that's why I think, you know, it it's not a universally good thing. The risky part is that um yeah, at any month you miss a payment, you risk losing all of your assets. So, you Well, not any month, you know, it's going to be a few months, but if your business has a few bad months, you might miss the payments. You could lose the business. And that's why, basically, I think, you know, it's it's um everybody's just massively insecure, and everybody is heavily discounting the future, because the future is so much more uncertain in this world, as opposed to a world in which we just accumulate savings that appreciate. Because in that world, where you're trying to accumulate a positive score, it's you know, you're running up a score in terms of let's get as much gold coins as we can. The more gold coins that you have, the better you sleep at night, the more secure you are, the less you have to worry about whether your business is going to make it this month or not, or whether you're going to end up being homeless, or whether you're going to lose your business. But, in a world in which you have um in a world in which you have debt, and you're just running up more and more and more debt, the more debt you're running up, the more insecure you are. This episode is brought to you by Pique, where plants and science intersect. Go to piquetea.com/impact, you'll get 5% off your first order. And use code impact at checkout to get free shipping. Enjoy the episode. Yeah. It This game is is a very complicated game. I never thought that I would need to pay attention to this, and now I'm realizing how important it is to really understand how money works and finances, which is why I've been doing more and more shows around it. Okay, so I think we're starting to understand the financial implications of fiat and how people have to really understand how the system works in terms of inflation being problematic, your purchasing power is going down, the sort of ultimate dichotomy of what you're talking about, but it's a risky game um in the end. Now, I want to start getting into the cultural implications. You make a really strong case in the book that uh in fact earlier you you alluded to it and you were like, "Yeah, that's the 20th century for you." Um I want to read another quote from the book around the cultural implications. It it just happened to be one specific example that you were giving and then we can sort of extrapolate beyond that. Um but it really reading your book really impressed upon me how much of what I again think of culturally as just being the reality of the way that the human world works and that there is no alternative and seeing that, "Hey, a lot of things can be traced back to having an easy money system basically." So, here's the quote. Uh again, it's lengthy, but I think worth reading. Perhaps the most pernicious effect of the fiatization of the modern university is the destruction of the scientific method. What passes for science now is a mix of government propaganda, corporate advertising, make-work welfare programs for nerds, and research papers that amount to meaning-free, irrelevant, irrelevant, irrelevant gibberish. This sad state of affairs persists and survives because government intervention has removed the market test for success. With funding for research primarily coming from government bureaucrats, academics don't need to worry about real-world profitable applications of their work. Irrelevant research bears no cost for the researcher or his institution. And with universities afforded an effective subsidy through subsidized loans for their consumers, the market test for success is removed, and universities and the geeks populating their offices are free to drift into a world of insignificance and corruption, a world with little regard for truth. The most obvious manifestation of this is the mushrooming of entire fields and departments specialized in producing completely inconsequential and incoherent noises and marketing them as scholarship. What passes for humanities in the modern university has degenerated into an endless sea of angry grievances and rabid victimology consisting almost entirely of politically corrupt platitudes and zero substance. The end result is heaps of graduates with zero marketable skills, but a strong talent for finding ways to take offense at everything. These departments continue to grow and the professors in them continue to get paid because they face no real market test and can continue to secure financing from the world's biggest money printer while railing against inconsequential, imaginary, and historical evils. How is that? If Let's Let's assume that we can get people to agree, some people. How is that the result of fiat money? Well, um it's obviously the result of fiat money in my mind because um universities today don't operate in the market, and that's that's really the key point. In In In a free market decide which college they want to go to. How's that not the free market? Well, because their choice The choice is not which college they go to. The choice really is whether they should go to college or not. And that's a choice that's heavily skewed by two ways in which the money printer intervenes. The first is that the money printer heavily subsidizes student loans, which, you know, sounds like one of these um and one of these, you know, apple hood and mother uh um No, wait. Motherhood and apple pie. Motherhood and apple pie kind of ideas, which are just always um you know, how could you be against it? You know, universities are great. And the reality is, no, you can actually be against university. I taught at the university, and I've been to universities and I spent a lot of time and I'll tell you I I've spoken to many students where I asked them when they're finishing their university, you know, you've just spent all this amount of money of your father's money on university and you still have no idea what you want to do. You know, you could have just gone and worked in this field where you're interested for 4 years earning whatever you could have made and saved your father's money and now you'd have all of that money to start a business. Wouldn't you better off? Wouldn't you be better off? And many of them said, "Yeah, I would." And the same thing applies obviously if you take on loans, you know, you end up with 4 years of no marketable skills or little marketable skills and then a big loan. So, the reason this is this seems like a good idea is because the concept of opportunity cost is destroyed by fiat. And this is a theme that I keep returning to throughout the book. The idea of opportunity cost is central to all economics. Everything has an opportunity cost. Everything sounds Everything is a great idea if you don't think of the opportunity cost. You know, going to university for all of your life collecting university degrees until you're 90 years old is a great idea. You know, yeah, let's do a PhD in physics and in mathematics and in linguistics and in chemistry and and and and and do them all, you know, who could hate knowledge? Well, but there is an opportunity cost. Every time you're doing a PhD, you're not doing other things. You're not starting a business, you're not earning money, you're not having a job. So, you fiat allows us to basically suspend our conception of what opportunity cost is. Instead of Because it's removing the market? Like, how is it How is it doing that? What is the mechanism by which it creates that incentive structure? A, we can't save our own money, so you your money if you just put it in the bank, it's losing value, so you don't want to save money. And B, the government can just basically uh, bring money into existence if you just give them a good idea that appeals to them. So, if you do something that sounds good for the government, you can get infinite amounts of money for it and there's really no cost to it. So, they're able to make more money out of thin air and that's really what distorts all of those things. In a free market with hard money, the universities can't just continue to teach irrelevant nonsense. All of these econ departments teaching fantasy economics, Keynesian economics, they can't continue to teach all of this nonsense because you're clearly producing people with a very delusional perspective on the world and then when they get out into the world, they can't succeed with these ideas. But, if you're being paid to do it by somebody who has a money printer who can just make as much money as is possible as is needed in order to continue to keep this stuff happening, nobody's really paying the cost or the people who are paying the cost are society at large. And so, I'm not tracking this. So, uh, how how is the government paying the schools? Does this only count for governmental schools? Does this also cover private schools? Is it because the loans are easy to get? Like, in what way is the government paying the schools? ways. The first one is loans to students. So, this is enormously subsidized, very low interest rates and that's just massively tempting for people to get in because, you know, you can take out essentially, you know, a couple hundred thousand dollars when you're 18 years old. I mean, And that's the government mining for fiat to get people in there. mining fiat because, you know, education is motherhood and apple pie and the other aspect of it is that the majority of university income comes from research grants, government research grants. So, the role of the government in financing universities is enormous. You know, tuition fees are only a small chunk of university income and universities that rely on tuition fees are just they can't compete with the big universities that get government money for research. So, that's you know, that's and then I discuss this in in detail in the chapter on fiat science. I think you know, if you wonder why is it that you know, every day there's a new headline about coffee causing cancer but also protecting from cancer and wine causes cancer while also protecting from cancer and tomatoes can cause this while actually protecting them. It's there's an infinite supply of money to be turning out these studies because you know, people think that this science is a good thing. So, if you're in an academic position, there's no cost to to publishing something that is wrong but there's a very high cost for not publishing. And so, because of the a high cost for not publishing? Because you lose your job. You have to publish in order to keep your job. So, everybody's just it's a big giant uh rat race where everybody's you know, they're running on this mill where they're producing all these papers that nobody reads and nobody cares if they're right or wrong. There's no sense of you know, let's actually figure out is coffee good for you or is it not? Does it cause or protect from cancer? Does it make you live forever or does it kill you on the spot? Nobody cares. You can publish papers on with all of these conclusions as long as you are you know, as long as you're just basically adhering by the kind of superficial standards of these papers. So, there's no sane kind of sense of what's the real opportunity cost because there's no market test. There's no test of all right. Well, this guy said this in this paper. Let's take this out into the real world and see if it actually works in that way. You don't have to have the market test. The market test is not applied to this and that's why you can get all these insane ideas come out of universities today and you know, I I begin by knocking on humanities because that's easy and everybody does it. But I think, you know, humanities aren't much better than the natural sciences because really I mean, people are freaking out about the idea that cow farts are going to boil oceans and that's university research and they're freaking out about all kinds of things. It's it's a constant stream of hysteria because if you have concerning hysterical findings that suggest, "Oh no, you know, the earth is going to be destroyed." then you are more likely to get funding. There's no opportunity cost to the people providing financing. They don't have to think about whether we are better off directing our resources toward this researcher or that researcher in the sense of which one is going to give us a more accurate answer. They are thinking about it from the perspective of the the you know, if this is concerning, we need to give all the resources that we can and that's why research budgets just continue to mushroom and the amount of research that is produced continues to mushroom and the research is always headed in the way of more hysteria and more concern and more calamities. You know, it's it's chicken littleism basically as an idea because um that's the motivation. If you if you go into research and say, "Well, I've looked into cow farts and I've concluded cow farts are not going to destroy planet Earth." Well, guess what? You don't need more funding to study cow farts anymore. That's it. That's done. But if I look into cow farts and I think, "Oh no, cow farts are going to destroy the planet." Well, now I need a much bigger research budget to look into them and I need a research center and I need to hire a whole bunch of people to look into it with me. And so we see how this is reflected in many fields where we go all through these hysterias where everybody is always fascinated by this and of course that also helps with that also will inevitably be driven by the agendas of the people funding it. It's all ultimately political. It's ultimately government money. It's bureaucracies that are that have political goals and objectives. And so they push funding toward the kind of hysteria that they want to hear about. Ooh, okay. So I'm going to see if I can reiterate all of this. There are some pretty aggressive claims. So All right, you've got the government is printing money. They can print as much as they want. They mine fiat by getting people in debt. One of cuz we're talking about universities, but it really is just one of the examples used in the book. So we're just going through this example as one way fiat distorts incentives, which then have these huge knock-on effects. So they mine for fiat by getting people in debt. One of the the sort of easy targets because it's motherhood and apple pie is education. So let's make education nice and cheap. So we subsidize the loans. So the loans have a very low cost. Students take out then these massive loans to go to school, but which could be a good thing were it turning out people that are extraordinarily gifted at things that the world cares about deeply and that really matter and move the needle in a meaningful way for humanity. But we don't end up with that result because there is an incentive that I don't know if it was originally tied to fiat or not, but a decision was made that publishing is good. Okay, so to keep your job you must publish. I'll say I'll say the issue here is that you know, think about the example of Soviet cars. Why did Soviet cars suck? Because they were produced in the same way that modern research in modern American universities has produced. It's from the top down. Imagine, you know, it's the same thing. You have a committee of people that decide which car factory is going to get funding, and then they allocate the cars to the consumers. Whereas in non-Soviet countries, you know, compare East German cars to West German cars. In West Germany, Mercedes or BMW, they had to make their own cars, and they had to come up with their own decisions, and they had to then get the consumer to willingly take money out of their own pocket to pay for the car. So, that forces them to make cars that are good, that don't suck, that convince the consumer to come up with something that to come up with valuable money and pay for it. But, in the Soviet Union, when the money comes from above, the you know, you don't even have to posit and this is kind of the the key insight from Austrian economics when it comes to socialism, is that socialism is not an incentive problem. It's not just that you have corrupt people. It's not that you just have lazy people. Socialism is a calculation problem. This is the economic problem of socialism, and it's something that most socialists cannot come to terms with. Even if you solve the incentive problem of socialism, it is not it is not a workable system because it's not possible for the East German car factory to figure out how to make cars properly unless they get feedback from the customer. Unless they put the cars out and the customers willingly pay for them, and the customers have a choice between their car and all the other cars, and they choose this model rather than that model, and then the and then the producer asks themselves, "Why is it that they like this over that one? Let's focus on the things that they like. Let's get rid of the things that don't they don't like. Let's focus on the things that we can make profitably." If you can make something profitably, that's telling you that you're using your capital productively. So, when you sever that process so that the money doesn't come from the consumer, the money comes from above, from basically the money printer, you end up with shitty East German cars, and you end up with shitty academic journals that produce all of this pseudoscience and babble, basically. Wow, that was a really good way of explaining that. Okay, that that certainly hits home. Central planning is an idea that runs through the book. And why do we have the temptation towards central planning? And how is a hard money like Bitcoin or maybe to you Bitcoin is the only thing that's going to make this happen. Um how is that going to solve the problem? Does it shift incentive structures? What what does that look like? Yeah, I think it's it's it's all about the figurative printing press. It's all about the ability to make debt into money. So, what happened in World War I? In the first couple of chapters of the book are a little bit more history, which looks at the way in which that monetary system was installed in the West during World War I. Uh what you know, later on in the 1930s uh con artist by the name of John Maynard Keynes came along and wrote a bunch of stupid books about why this actually is a better way of running the monetary system. But this is this is really just like the the fake excuse that you come up with after you've already, you know, it's like you've totaled your father's car and then you go to your dad and you tell him, you know, dad, I actually think this is better for you. You don't need the headlights. Let me explain to you why cars are better without headlights. Um but you know, they went off the gold standard in 1914, 15, 16. There was never a an admission. It was it was totally surreptitious. It was manipulative. It was a lie. It was done by central banks behind people's back. And there was never an honest admission that hey, we're going off the gold standard. It was always no, we're on the gold standard. We're coming back to the gold standard. We're just suspending redeemability for a bit. Don't worry about it. Everything's going to be fine. We're just fighting a war. And what example did he give for why it was this car is better without headlights? Well, basically it's it's it's it's it's extremely stupid. I have to say like I and I mean this not just, you know, to throw away a gratuitous insult. It's it's a very well-earned insult. It's the idea that if you have a recession, which was the case in the 1930s because they'd gone off the gold standard for 20 years and had been trying to um trying to basically pretend that they were still on the gold standard while they were off the gold standard. That causes recessions. You know, you you have um complete dislocation in the in the labor market and in all kinds of product markets where people are unable to invest and spend money in a way that is um um that you know that that that meets the market demands. And so you have, you know, just like you if you had price controls and anything, you get shortages and surpluses. You had price controls over wages and labor and so that's what led to unemployment. So, the sane answer would have been get rid of those shortages and stop the inflation and then, you know, it's going to prices will adjust and people will go back to work just like they were working before 1914 when you had the gold standard for 50 60 years and you didn't have these um massive economic problems that occurred after abandoning the gold standard. But effectively what they did is they broke the gold standard and they blamed the gold standard for why it didn't work. So, what he said was these this unemployment is caused by a an insufficient amount of demand. People are just not spending enough money. And they're not spending enough money because we're on the gold standard and the way to fix it is for the government to print a whole bunch of money and hand it out to people and then that, you know, it's like getting an engine going. You know, you crank the engine and then it gets going. So, if we just throw in a a bunch of spending, the engine will get going, and then we'll have more money uh circulating in the economy, and then that leads to more people being hired, and then when people start getting hired more and more, they'll start spending more and more, and then the economy kicks into gear. Isn't that true though? Like, I get how it devalues the money, but if you're if you So, you made an argument earlier that I completely buy into, which is when you go to a fiat standard, you discount the future, and therefore people spend money. So, it may be a horrible reason to do it, but if you do create this thing where people are discounting the future, the money's going down in value, uh money's there to be spent, you will create, until the bubble burst, you will create this sense of like, "Word, I've got money, I'm going to spend it." So, didn't it get the engine going? Just at a huge cost? It gets the destructive engine going. It gets an engine going where we save less, we destroy capital, we consume capital. It's basically eating the seed corn. That's the thing. So, you know, if you sold all of your properties today, yeah, you could spend a lot of money this week. Like, you could throw the sickest party of your life if you sold everything you owned. And that's that's the really the logic there. So, the the same kind of classical economists, what they were saying is, "Get back on the gold standard, and then prices will fall where they will adjust to where they need to be, and people will spend money as much as they you need to, and you know, markets will clear, and the world will work as it did." Now, did you look at it closely enough to know why the unemployment actually was happening? Yeah, the reason the unemployment was happening was because of the inflation. So, the the part that the Keynesians skip is the part of the history which I focus on in chapter one, which is that the money supply in England more than doubled during the period between 1914 and 1920. So, the money supply doubled and the suspend redemption of gold redemption of the British pound into gold was suspended. So, you couldn't buy gold from the Central Bank. You couldn't just go and give them their paper and take gold because they had so much gold paper outstanding. So, they'd inflate the money supply and they wanted people to believe that they didn't inflate the money supply. So, they wanted to keep wages and prices as they were. But, obviously that's impossible. That's like trying to um square circle because people are uh you know there's more money out there, so prices are rising. And then uh because prices are rising, people are unable to buy a lot of the things that they want to buy. And so, you end up with shortages, you end up with surpluses, you end up with problems in the labor market. Worker um businesses can't hire workers because they can't sell their goods. So, all of this would have been solved if Bank of England just said, "You know what? Sorry, we messed up. We were fighting a war with the evil Germans. We had to do this. We did an inflation. We're sorry. Let's revalue the pound." You know, if they just revalued the pound and said, "All right, it's let's go back to a gold standard, but we have to revalue it at like I think it would have been 20 30% less." Revalued compared to gold? Exactly. So, that the price of gold 1 oz of gold was about £4 at that time, 4 and 1/4 lb. 4.25. So, if they'd just gone back to a gold standard at 1 oz of gold at £5, then you know, it would have sucked for people who had savings. Um but, it would have been a just one-time hit and then you're back to building on a solid foundation. You're back to having a a free market economy where prices reflect fundamentals and where wages will adjust in a way that gets everybody working. But as long as they were trying to manipulate this, as long as they were trying to hide that deception, they continue to suffer from the problem of unemployment. And then and and like the the really the really scammy thing about it is that what you're doing by printing money is the same thing as you would do if you just let the wages fall. And Keynesians are the only people stupid enough to think that uh people people would rather earn less money with more numbers or less value with more numbers than um you know, the same amount of value or with with uh smaller numbers. It's it's it's ridiculous. It's the same example that we were mentioning earlier about the house. Like Keynesians are the only people who would tell you no, it's better to live in a house that has a lot of zeros next to its valuation. They're the only people who would move to a hyperinflationary economy because that would mean that they could buy a house that's worth a lot of trillions of dollars. It's it's nonsense. So, you know, the workers needed to take a pay cut and that was the result of the inflation. If you didn't want the workers to take a pay cut, you shouldn't have done the inflation. But the governments because they it was a democracy, they had elections, they didn't know president or prime minister anywhere in the world wanted to be the one to go up and say, "Hey guys, sorry, the minimum wage has to go down. You have to start earning less." That's just political suicide. So, what you do is you print a lot of money and then the real wage drops even though the nominal wage stays the same. And so, you know, your salary was $100, let's say, and it used to be that well, if you just take $80, everything would go back to normal and the economy would revive and we'd be back on a gold standard. Well, let's just print 20% more money and now your $100 are worth $80. And now we didn't give you a pay But you still get the $100. Exactly. You still get the $100 of value. Exactly. That's really all that that's the Keynesian scam in a nutshell. And like Keynes admits it and and and it's it's the book I think is is is an absolutely pathetic intellectual exercise of just equivocating and trying to justify this and trying to find ways of um making this explainable and acceptable by somebody who just clearly had no understanding of economics in any meaningful Really interesting. So, I buy the argument. What I will say is that as you have pointed out, you've got it would be more palatable. And so, when you're what I I know virtually nothing about Austrian economics, but the little thing that I do know, which is that it's an acknowledgement that humans derive value subjectively in their minds. Now, it might be based on something, um but ultimately, you need that subjective layer. It seems to me, again, I know even less about Keynesian economics than I know about um uh Austrian economics, but it does seem to, even though it's gross and I don't like it, that they're taking advantage of this, that Keynesian economists are saying, "Look, it's just reality. Like, people aren't going to respond to that." And people would, whether they should or not, they would rather have a house that's valued at, you know, $269,000 than $411. It just is. And if you ignore that fact, you're going to ignore it at your own peril. And while I actually think they are wrong, and I, in my limited economic, my limited ability to understand economics, um find myself gravitating towards your argument, I can't help, even as I invest into Bitcoin, I cannot help but have unease about what happens societally at least through the transition. You know, maybe, just like you said, hey, just suck it up. It was you were getting $100, you're going to get $80 of value no matter what. So, let's just call it $80. I worry that in that moment, there is in that moment, I don't know if that's a year, I don't know if it's 10 years, but as we transition to a hard money standard, cuz you have said over time, societies that can always do move towards hard money, and it certainly seems like we're moving towards hard money now. But that there will be a reaction. And there will be a reaction from some people, there will be a reaction from governments, and while it's gross, at least as you present the Keynesian side, that is gross. I'm with you. I don't like it, doesn't feel right, but there they are hinting at a truth of human nature that is going to we are going to have to deal with, reconcile, something, when people start getting real upset that their money isn't worth what they thought it was. I think that's that's that's incorrect because the the reality is they try and present it the Keynesians always try and present it as if they're out there looking for the little guy, but the reality is they're just looking out for the big banks and the government. They're looking out for the people in power. To keep everybody quiet. Like, hey, let's just keep everybody quiet. that. Not even that. Not even that. Because the real the people who would really get hurt from this, the people who would really get hurt from the kind of So, what what we're arguing against is Here's the thing. Like, again, it's it's it's the it's the fiat idea of opportunity cost not existing that even makes the debate framable in these terms. If you're going to inflate, if you're going to have the ability of the government to just get off the gold standard and continue to inflate, it's not like you're just going to solve this problem once and for all and then it's over. Then the the you know, this inflation is going to lay the groundwork for the next bubble. With the next credit expansion, when then we get the next uh um crash, and then that will require the next set of adjustment, which is going to require more credit expansion. So, the choice is not, you know, we just take the pain once um and then we solve this problem and we prevent social unrest. It's we get into this problem we get into this world where government and the banking system have the ability to constantly make more and more money to their benefit while presenting it as if it is to the benefit of the working class, while constantly screwing over the working class, who are constantly going getting laid off and going through these business cycles. That's one side of it. On the other hand, we have an actual example of what happened when, you know, this kind of unpopular um supposedly catastrophic and apocalyptic path was taken. And that was what happened in the US. The US did not do what the British did in 1920 after the war. The US actually did go through a recession in 1920. The US went back on the gold standard in 1921 or 22, I'm not sure exactly. I mentioned it in the book. And then it suffered a short and sharp recession. And fortunately for the US, apparently at that time, President Calvin Coolidge was um a guy who knew how to have fun and had more pressing things to do than go and destroy the economy with Keynesian insanity. So, he was throwing parties and um enjoying himself in the White House while the recession basically it was a painful recession that went on for a few months, but then after that recession was over, the economy recovered and then you had a massive boom in the 1920s. So, Britain on the other hand continued to suffer through this pain of constantly seeking to lie about the fact that they um went off the gold standard and couldn't go back on the gold standard throughout the 1920s, and so its problems continued to get exacerbated throughout the 1920s. And then what they did effectively was export their inflation problem to the US because and I discussed this in detail in the book. The British Central Bank, the Bank of England, basically convinced the French and the American central banks to inflate their own money supply in order to prevent the flight of gold from England to the US because in the US in England, okay, you couldn't redeem your uh pounds for gold, but you could redeem your pounds for dollars, which you could then redeem for gold in the US and then ship your dollars to England. So people continued to do that, and they would sell their and that would cause the gold to leave England. And so the English somehow convinced the poor American um really simpleton central bankers that the that the way to fix the problems of England was to have inflation in the US. And that's what led to the big inflation of the 1920s, which led to the Great Depression, which led to the stock market crash of 1929 and then the Great Depression. So we have the test of that. We had we've had these examples many times across history where you have the quick, sharp, painful recession for a few months and then life goes back to normal and everybody recovers. And on the other hand, you have the system where we're constantly inflating more and more, which is what happened in the 1930s both in Britain and in the US. And that serves people in power, people in governments, and of course it serves banks. Cuz you know, the the biggest creditors are banks. The biggest borrowers are banks. They're the ones who benefit the most from the devaluation of the currency because they're the ones who owe the biggest amounts of money. Wow, okay, so the plot thickens. Uh as you were explaining all that, I thought, okay, then if people been playing all these games with money this whole time and smart people already sort of understand the game, and Bitcoin is a better gold, then that all sort of fingers point to gold as being a it should give us examples of what Bitcoin is going to look like in terms of how it settles into the the basket of offerings, if you will. So, if we know that we're deflating the currency over time its value, and that we want hard assets, why isn't gold? Cuz like there's a a picture being presented of like, "Yo, Bitcoin is going to be worth a gazillion dollars. Like this is crazy. Just hold it." But that didn't happen to gold. It hit some sort of threshold, and then it just sort of wavers. So, is that because gold is still deflationary at 2% a year, and that creates that gives it that sort of ceiling, or is it that Bitcoin is only ever going to match gold, and so we're just replacing that? And it's, you know, I mean, look, it's interesting. It's very valuable to be trillions of dollars, but it's not going to be that thing that just like keeps eating more and more asset classes. Because if people didn't react to gold like, "Must have it." why would they react like that to Bitcoin? Because again, it goes back to the point about gold's spatial scalability. Gold just can't play the role of money as long as governments don't let it play that role. It needs central banks. It needs complicated settlement infrastructure. And all of that, in order for that to happen, you know, you need the permission of governments. You need physical infrastructure to allow governments that in physical infrastructure to be allowed by governments to operate. And so, that's why today, you know, in the fiat standard, you know, I look at where if you want to think about what is gold's What is Bitcoin's potential? Uh gold is just the first the first rung of the ladder, really. Because gold is not what people use as cash Like how much of your portfolio or the average person's portfolio is in gold today? Very little. Um some people hold significant amounts of gold, but the vast majority don't. And you still hold cash. Um but your cash really in in in a sense there are two things that you can hold in your portfolio. You can hold cash or you can hold investment. Investments are equity that yield a return and they have a risk. So that's the risk part of your portfolio. Cash is something where you are trying to be conservative. So you don't want to you you don't want to take a risk with it. You want to just hold on to it. The point of it is that it holds on to value. So what do people use today that is not meant to offer risk, that is meant to hold on to value? Um physical cash is one thing. A saving account is another. Gold is one small thing. But the major one, you know, the major part of people's portfolio that plays the role of cash is bonds. Bonds because they don't have equity risk. So you're you're you have senior uh creditor uh you know, if you if the company that is issuing a bond goes bankrupt, the bond payers the bond holders get paid before the stock holders. So that's why people want to hold bonds. And of course government bonds, you know, you you get the government being able to print money which makes things easier for you. So um in a sense gold can't fulfill these functions because governments want their bonds to replace the function of gold. That's really the kind of scam. They want you to hold their bonds because that just gives them money. Allows them to print money. Allows them to finance themselves. Allows them to finance all the stupid [ __ ] that they like. And so we have, you know, the total gold market in the world is something in the range of around 10 trillion dollars. But the total bond market is somewhere in the range of 100 to 140 trillion dollars or something like that. So Exactly. So it's How man, maybe I just have not been paying close enough attention, but the bond as the governmental dirty trick of creating a gold-like safe thing, whoa. Okay, that's one that's exciting from a there's a bigger asset class that people are already using for this thing because when I I listen to Michael Saylor a lot and again, maybe I just never heard him say it or wasn't paying attention somehow, but haven't thought about that. People often talk about, you know, is it going to start eating into real estate because real estate is used as a a hard asset. And I was always like, but real estate you can live in. So, there's like a thing I just can't see real estate ceasing to be a thing. Um but bonds I can see bonds ceasing to be a thing. Yes. That's kind of one of the uh one of my conclusions of my analysis in the book that I in in the one of the final chapters, I basically argue Bitcoin's going to end this entire barbaric, idiotic practice of bonds. I think Bitcoin's going to eat the bond market. I see no reason for bonds to exist in a Bitcoin world. I think bonds exist because borrowing is the equivalent of mining and bonds are debt and that's why bond issuance is so profitable. But this has just been abused to a point right now where I mean uh you know, governments um uh highly, highly irresponsible governments have bonds that are trading in the billions. It's it's it's insane that people give them this money and it's it it shouldn't be the case. Um if you look at say for instance, you know, the US government is a AAA rating. But if you looked at its balance sheet and you were if you treated it as a corporation and you looked at its balance sheets and I discuss the details of this, you know, like what a bond holder, if you told them, all right, look at the numbers. Let's say you knocked out three zeros from the numbers and um you turned it from trillions to billions and he told them, "Here's a corporation. Let me see what you think of their um their rating." They would not be a triple A rated bond. They would be junk bond. They'd be you know, B plus sorry, B minus or double B or something like that depending on which rating, but they'd be junk firmly in the junk category. And that's the US government. And then you know, you look at the rest of the other governments, they're all be um sub junk. They would would not even get on the bond market if it was like that. And I think um Simply because they spend so much more than they make. Exactly. And the only reason that they can get into bonds is because everybody is counting on their ability to inflate their money supply and devalue their people. So, the bond market is just Wow. It's evil through and through. Wow. Uh when you say it like that, it is um it doesn't sound good. Man, this is crazy. This is crazy. I have stepped through a door that uh I did not see coming. Um So, as I walk through this door and I have more and more realizations like this that the bond market is I'll say potentially evil. I have It's so new to me as a concept. Uh but woo, I don't have any arguments against it as you explain it. But I mean, look at it today, you know, you're even the best bonds are not keeping up with inflation. Like even if you're taking on risk with bonds and you're getting high interest rate, you're not keeping up with inflation. So, the the entire practice is just falling apart and uh holding on to Bitcoin is so infinitely better and it's so much more secure and it doesn't have default risk. It's uh that's that's that's the real jackpot, you know. Gold is just going to be the small little appetizer that we have before devouring the bond market, I think. Woah. I'll be turning that into a clip. Uh Jesus, man. Okay. So, now my next question and this is the one that uh I think about maybe more than I want to. This Does this happen peacefully? Because it doesn't seem like the government is going to let go of their ability to create bonds and other things. Just the ability to print, the ability like saying out loud that the government or anybody is using debt as a mining mechanism to bring value to themselves. Like whoa, don't you think at some point that there is going to be I mean China is obviously already said [ __ ] this. Like no crypto for you or at least no non-governmental crypto. Does Bitcoin take over peacefully? You know, I don't have a I don't have a crystal ball. I don't know. Um the the kind of conclusion of the book is and and the really powerful thing about remember when we we've started this discussion I told you you know approaching fiat from the lens of how I analyze Bitcoin would be the best way to try and appreciate this question of how is it that Bitcoin arises. And I think I came up with a very very important conclusion from this which I think is pretty original. I don't think anybody else has mentioned this before. Which is that what we are doing with fiat is that we're monetizing debt. And what Bitcoin is doing is it is monetizing a hard asset. Just like gold but with wings. It can fly very easily. So this means that with as as gold as Bitcoin continues to get monetized we our demand for holding on to debt and our demand for needing to get into debt are both reduced. So, people think, all right, well, Bitcoin rises, that means that everybody dumps the dollar and the dollar goes to zero. But, that's only one side of the story. The other side of the story is that as Bitcoin rises, people don't get into debt and therefore don't issue debt and therefore the issuance of the dollar declines as well. So, not only does the dollar's demand decline, but also the dollar's supply declines. And so, I think there's a case to be made that this is an upgrade. This is This is a technological upgrade. This is the free market coming up with a genius solution to the problem that is this fiat cancer that the world has because it's going to We're going to witness the Bitcoin economy appreciate more and more and we're going to witness the fiat economy um basically drift into more and more irrelevance. Um the supply of fiat is going to contract because people are going to be issuing fewer debt, less debt, fewer bonds. You know, people are not going to want to hold on to bonds. So, you you think, you know, if you extrapolate Michael Saylor um and you extrapolate El Salvador, and you extrapolate all the Bitcoin holders, they're taking out bonds from their portfolio and they're buying Bitcoin. So, they're reducing the demand for the issuance of bonds. They're reducing the demand for the issuance of more debt. And they're causing uh so, there's no reason that that should lead to a massive collapse in fiat. It is just going to lead to the Bitcoin economy growing and appreciating while the fiat economy uh stagnates and the value of fiat continues to do what it is always supposed to do, which is shrink in real terms. And in fact, the reason why I think I mean, I If I were to make the optimistic case, and I have known to be delusionally optimistic before, I'm a Liverpool fan who spent 30 years thinking Liverpool are going to win the league every year. Um, but then they did win it after 30 years, so it's not entirely delusional. Yeah, I was right. Yeah. Um, so to make the kind of delusionally optimistic case here is that um the people who have power in the world are all in debt. The people who have money, the people who have wealth are all in debt. And perhaps you know, maybe Bitcoin is taking away their ability to print money. But Bitcoin also devalues their debt, and that's a great thing. So, if this you know, if we just the next 20 years are just a continuation of what we saw in the next in the last 10 years all of the world's most powerful people are going to witness their debt liabilities wither away into tiny fraction of what they are in real terms. And the best way for them to do that, you know, that's a great thing. So, they will owe less and less. And they can accumulate dollars. Sorry, they can accumulate Bitcoin. And as they accumulate Bitcoin, you know, they benefit from the Bitcoin appreciating, and they benefit from their debt devaluing. That's the Michael Saylor strategy. So, as more and more people do this um, we reduce the supply of dollars, we reduce the demand for dollars, and we reduce the value of dollars. And that works out fine for the people who have power, and the people who have influence, and the people who have money, and the governments even. Like, you're basically giving everybody a debt jubilee. That's kind of the argument that I put in the last chapter. Bitcoin can be the global debt jubilee because it's um, just going to make that worth less and less and less, and it's going to allow us all to upgrade one at a time, you know, as we grasp what is going on. One by one we upgrade uh, into a superior technology. I think we'll have, you know, we'll have hyperinflations, we'll always be having hyperinflations, but when we do have those, they're not going to be caused by Bitcoin, they're going to be caused by insane governments like the Lebanese and Venezuelan governments doing what insane governments have always done. But, um, I think the long-term perspective here is that, um, in the long run, I think Bitcoin just continues to grow and fiat continues to wither away. But, I have to say that was the kind of idea with which I started writing the book. But, then all the whole COVID insanity happened, and now I think with all of this noise being made about the central bank digital currencies, that makes me, um, less delusionally optimistic about that scenario because I think, um, central bank digital currencies take away that property of fiat as being debt and turns it into just basically the equivalent of the money printing. Remember I was saying earlier that when you get hyperinflations, always when we when when it's always when the government just stops, um, it's always when the government shifts to cranking out new physical pieces of money. Well, central bank digital currencies are the equivalent of running the printer, but digital printer. And there's no restraint in terms of the credit creation that goes on. And there's it's just straight up inflation. With credit creation, with credit money, with fiat money, you know, the the credit creation leads to a boom, and then there's a bust, and the money supply contracts, and so that is a restraint on the growth in the money supply. But, if you're just printing out money and handing it to people and, um, buying their votes essentially, which seems to be the case of what's going to happen, I think things are likely to get uglier and fast. Why would that make things uglier? Because there's no business cycle, there's no restraint, there's no, uh, there's no So, we won't get the bust, it will just be inflation, inflation, inflation, inflation. Exactly. So, since most of the money that's injected back into the system is done digitally anyway, I think earlier you said 10% physical, 90% digital. Um why is removing the 10% of the physical so potent potentially? That I don't understand that. Um it's not about the physical. It's It's about the fact It's Not just you're removing the physical part. It's um the the the converting the physical to digital is uh inconsequential. It's the fact that um well, it's inconsequential in itself, but it the important part is that it allows you to replace the credit dollar with straight-up uh central bank digital currency. And so, that currency now exists. It's basically physical, but it's I see. So, before, because the money wasn't real anyway, when the value disappeared because you couldn't pay your house, poof, that money is now out of the system. And so, there was a constant sort of rebalancing. But now, we're making a physical It's digital, but it now exists. I can track it. It's a It's a thing on a blockchain presumably that now will go on forever. So, there's no check to make it evaporate. Exactly. Whoa. Okay. Interesting. Save. Uh yeah, this is very intriguing and terrifying and exciting. I don't want to lie. I'm more excited than I am scared, if I'm completely honest. Uh and like you, I may be delusionally optimistic, but that is uh that's interesting. I have no ability to prognosticate about what is going to happen in that scenario. It is something very interesting to think about. Um man, your book blew me away. Absolutely incredible. Your interviews are always amazing. Where can people find out more about you, follow along on this crazy journey? Um, my website safedean.com. You can buy my books from there and you can sign up for my website where I offer courses in economics and the economics of Bitcoin and economics in the Austrian school tradition. So, you can join the membership on my website safedean.com. You can buy the books from there and I'm also pretty active on Twitter @safedean. And there's also my podcast, The Bitcoin Standard Podcast. Amazing. Awesome. Dude, thank you so much for joining me. This is incredible. I hope this is the first of many. And speaking of first of many, if you haven't already, be sure to subscribe and until next time my friends, be legendary. Take care. Peace.