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Bitcoin, BitPower, BitNet. So Bitcoin is a lot of things. And today, Lucas and I are going to discuss Bitcoin as a way nation states can win network power competitions.
Specifically, we are going to discuss an essay entitled Great Power Network Competition and Bitcoin, an Assessment for Policymakers by Matthew Pines.
It's collected in an anthology, The National Security in the Digital Age, Bitcoin as a Tool for Modern Statecraft, put out by the Bitcoin Policy Institute, I believe.
And the essay also is available at the Bitcoin Policy Institute website, so you can get a PDF as well.
So this essay, again, great power competition and Bitcoin. Global competition, well, I'll do what I usually do, give a quick summary, and then Lucas and I are going to hash this out, what Bitcoin as BitPower or as a network power competition might mean.
So global competition in our era is primarily over networks. That's kind of the first starting premise of this essay. Trade, finance, critical supply chains, digital, telecom infrastructure, these are all networks. And why are networks so important? Why do we compete over networks?
So the structure of current networks is kind of an abstract point about networks. It's very interesting. It's going to launch us into network power competition. The structure of current networks facilitates hegemonic power, Pines writes. So when you think of a network, you might think of just like a spider web where each kind of node is equally connected or randomly connected to other nodes. But it's not like that.
And so, Lucas, could you bring up that image? This is an image from Pine's essay of what is called the Barabasi-Albert structure. So this is the way that networks, the type of networks that matter in global competitions currently manifest themselves, not as a dense spider web with each point or node connecting to every other point.
Instead, as you can see, or if you can't see, a new node added to the network will tend to connect to an existing node.
So you can see these like clusters of nodes, existing nodes becoming clusters of connected points with just kind of one edge that then connects one cluster of nodes or points to another cluster.
There's like these hubs that nodes tend to be attracted to.
It's not like perfectly peer-to-peer.
It's not a decentralized network.
You see these clusters.
So given this structure, to quote Pines, network power consists in the ability of a state to exercise surveillance and control, I mean surveillance and choke point control over a global network.
So to control or surveil a network like this is just to have control over a hub, which then serves as a choke point and all the edges that go into that.
An example, maybe a helpful example that Pine gives of network power in a more informal setting, we all kind of know the friend who knows everybody else.
They're a node for gossip in their community.
All the edges and connections that people have are with them.
They know everybody.
They then kind of have an asymmetric information and influence in the community.
They know something about everybody, and they can share or not share information as they desire.
For a nation, then, network power is exerted over various networks due to this peculiar structure where there are choke points and hubs and collections of nodes connecting to other clusters.
Just as that friend who knows everything, nations that are those big clusters and connections can use that to collect intelligence, influence, and impose sanctions.
So for network power over trade, you can surveil and control major – if you have network power over trade, you can surveil and control major trade routes.
If you have maybe network power over finance, you can control and surveil major financial hubs and institutions.
Network power over information then would be some sort of control and surveillance over internet infrastructure like subsea cables or over major tech companies.
So that's kind of the abstract idea of what a network is in the relevant sense and what is network power, the ability to control and surveil, and its real power in the modern era.
Once you control the preferred network, in addition to this power being real, it is also hard to overcome.
Once we're all in the network, it's tough to get out of that.
To quote Pines, quote,
network power is sticky power it attracts and then traps digital network power from control
from controlling and influencing foundational information infrastructure is especially sticky
so network power is real power in the modern era it's also sticky it attracts and then traps but
it's not necessarily permanent so pines notes that another aspect of networks networks are dynamic
and that they tend to route around control and abuse.
So an example then would be in the U.S. regarding financial networks would be the world essentially debanking the West,
debanking Russia by blocking them from the SWIFT system,
the SWIFT being a bank messaging system that facilitates secure financial transaction between banks and across borders.
If countries are nodes that trade with other nodes, the SWIFT system is a central hub that many nodes attach to.
In this network that is international trade, a country does not really attach peer-to-peer with other countries for the purposes of the financial aspect of trade.
Instead, each attaches to the SWIFT node, we could say, and the transaction is facilitated through that.
So in 2022, Russia is excluded from SWIFT as a sanction for the war in Ukraine. SWIFT is then a choke point over which the U.S., the West, exercises network power. But networks are dynamic. And so these types of financial sanctions can lead nations to attempt to route around within the network or to create new networks.
So that brings us to Pine's next key point. We have kind of now the abstract general nature of network power. Then he begins to talk about really the substance of the SA. So the U.S. currently has dominance over the monetary network. We have network power of a dominant nature, but it's vulnerable.
So the dominance that the U.S. has is because the U.S. dollar is the global reserve currency and the U.S. treasury is a global reserve asset.
So the U.S. dollar gains huge network effects from being the global reserve currency being held and used globally.
It is a sort of highly connected node in a network that gives us network power because we control that node, which is a hub.
We have the power to choke and surveil all the edges that connect to that node that is the dollars, the global reserve currency.
We can surveil.
We can analyze global transactions, collecting that through KYC, know your customer, and CTC, counter threat analysis.
And we can also implement choke points by enforcement of sanctions, as in the SWIFT debanking of Russia, essentially, designating in designations of that sort to like terrorists and rogue states that block access to the global dollar system.
But even though we are dominant and have that strong network power, we are vulnerable for two reasons, really.
Well, so it's kind of a conglomeration of reasons.
But the first big reason in any case is the U.S. is vulnerable for structural reasons relating to its overseeing the current system and issuing the global reserve currency and global reserve asset.
So we saw this before in our conversations, the overarching vulnerability of the financial system, financial fiat system described by Lynn Alden.
As we saw in her book, Broken Money, the nature of the fiat system encourages speculative bubbles that grow and then burst and then end up with a lot of debt on the public ledger taken over by the government.
all then describe this as short-term business cycles that kind of lead to a long-term debt cycle
or debt crisis because debt is never paid it just ends up going over to the government to present
to which the government takes on to prevent the whole machine from falling apart so pines describes
this in three simple steps one private debts surge prior to a banking crisis two private debts become
public debts after the crisis, and three, public debts after the banking crisis precipitate
sovereign debt crisis. That's kind of the overarching structural vulnerability of our
financial system, and that is kind of leading, it seems, to the accumulation of debt and sovereign
debt crisis. So the large amount of debt accumulating in the system makes the U.S.
monetary network dominance a sort of brittle, fragile thing, subject to shocks, because we
have to keep global liquidity going to supply the world with US dollar and treasuries that it needs
to function as a financial network. This reduces our ability to deal with foreign adversaries who
can kind of game the vulnerabilities and aspects of that system, like China, because they are
integrated into the system and capable of even a big player like China dealing the system a huge
shock if they want to. So in addition to this kind of overarching vulnerability of the entire system
that Pines described, there are also specific political and geopolitical vulnerabilities,
which are kind of the more important for this essay, I think. These are structural vulnerabilities
that our financial system has based on the US system maintaining that global reserve currency.
We've heard this before. Essentially, it's the Triffin dilemma and its implications,
which is that the Triffin dilemma is this dilemma that any country faces if its currency
is the global reserve currency. If you issue the global reserve currency, there's certain
structural dynamics that arise and present a dilemma to you. Here is the Triffin dilemma
succinctly stated. So we could say that to maintain the US dollar as a global reserve currency,
the US has to supply the world with dollars. The world is hungry for those dollars. They need them
for global commerce. So the US, we have to import more than we export. We export those dollars and
import the things we're buying with them. The world isn't supplied with dollars. We keep that
outflow of dollars going. This then leads to a structural trade deficit again, where dollars
are flowing out and we're getting the items that we're buying. This though has implications. It
leads to things like the hollowing out of the industrial base and the exaggerated growth of
financialized fields. So manufacturing, domestic United States manufacturing can't compete globally
because of the flood of imports that we are getting as we export the dollar and buy things
and bring them in. This has a big impact on the defense industry, which depends on manufacturing
large amounts of munitions. In the event of a conflict, it's often about just how many bullets,
ballistic missiles, things can you expend. As we atrophy our manufacturing base by
throwing those dollars abroad, buying things, and then causing domestic industries to become
too expensive to operate. Those manufacturing industries go abroad. That has a big impact
on the defense industry, again, because that depends upon manufacturing things domestically.
One example is that China has 40% of global shipbuilding, of the shipbuilding market,
and a capacity, as of the writing of this essay in 2023, of 230 times the U.S. capacity to build
ships. So we have hollowed out our domestic manufacturing base, and that has recentered
itself abroad, leading to, again, China accumulating a lot of that. This leads, when you atrophy your
own manufacturing base, you have a difficulty in rapidly scaling up for conflict because
it requires skilled labor to do that manufacturing with a long training time. You can't just
suddenly switch from being a banker to building missiles. It also has difficulty in adjusting
rapidly to a conflict because of supply chain issues. We now depend upon, for example,
subcomponents for our defense industry that might come from China. Also, the U.S. net interest on
our debt, as we approach sovereign debt crisis, as we accumulate debt, the net interest increases.
As of 2023, the net interest expense exceeded the defense budget. So for that reason,
as we accumulate debt and export our manufacturing, it becomes difficult to scale up quickly in the
event of a conflict. While our industry is hollowed out in this way, other financialized
industries grow, finance, insurance, and real estate. These grow because other nations have
a trade surplus. We have the trade deficit. They have a surplus. They're selling stuff to the
United States to get those dollars. And we have a deficit. We're sending out those dollars.
So they then have this trade surplus in dollars. A lot of countries do. They then need a place to
invest it. They turn back to the United States. And we then, through our finance, insurance,
and real estate industries, create securities and hard assets for foreign countries to invest in.
So we hollow out our industry and then we sell ourselves, our hard assets to foreign countries. Pines provocatively frames it in this way. Quote, this has greatly benefited this Triffin dilemma, the fact that we are, again, exporting dollars to the world and having to hollow out our industrial base, all of this.
This has greatly benefited the technology and finance, insurance, and real estate sectors who exist to create investable securities and help direct foreign dollar surpluses into them, often via opaque tax-sheltered offshore structures.
The U.S. is the money laundering capital of the world.
So that last sentence, of course, very provocative.
foreign nations are using all these dollars that they've acquired to buy U.S. hard assets,
and they often do that through opaque channels. And then Pines characterizes that as a form of
money laundering. So the U.S. has strategic vulnerabilities to our continued network power
dominance over financial networks, the accumulation of debt, the atrophy of the industrial base,
and the exploitation by foreign powers that buy our hard assets in that form of money laundering.
So that brings us to the next key point in the essay.
The strategic vulnerabilities to our financial network power means, of course, that our adversaries will seek to exploit those vulnerabilities.
They can go out and read broken money just like we can.
They can see what's happening.
They know about the Triffin dilemma.
China specifically has developed a long-term strategy to take advantage of the structural issues manifesting in our financial networks due to us issuing the global reserve currency.
China has developed a block, build, and expand strategy.
That's how Pines characterizes it.
So block.
First, they need to develop the ability to block U.S. sanctions.
They saw viscerally in the example of Russia, you need a way to survive after you get debanked via SWIFT if, for example, China wants to go after Taiwan.
So they then, in order to block, develop the ability to block U.S. sanctions, they develop CBDC, central bank digital currency and blockchain technology. So create a new monetary network that you can fall back on essentially if you get blocked.
then if China gains network effects through its CBDC and blockchain systems that it's developing
if nodes begin to attach to its currency and blockchain the world then could be forced to
accept China's technical monetary architecture which would then of course give them network
power the ability to surveil and choke in network transactions as nodes begin to attach to their hub
So that is kind of China's strategy to block sanctions through new monetary networks.
And these are kind of block, build, and expand, kind of all interrelated.
The next aspect of this strategy is build.
They are building out this alternative international settlement system that will allow their CBDCs to connect with CBDCs from other countries to allow a true kind of global financial network to develop.
This includes building trade relationships with energy producers.
China produces commodities, so they develop trade relationships with energy producers like Russia and like Saudi Arabia, which is looking for construction materials and tech that China has for its 2030 vision project.
As it develops these kind of alternative trade or develops this kind of trading relationship with these parties, there's no need to use the U.S. dollar as a bridge currency in order to trade for energy and commodities, which are, of course, very significant parts of the economy.
So that's China's attempt to build out alternative settlement internationally.
The final aspect of their block build and expand strategy is China is developing, and this is really the heart of the essay, which is going to bring us to Bitcoin.
The expansion that China is doing, China is developing a techno-authoritarian stack, which Pines characterizes as authoritarianism as a service that it is selling to the world.
So the techno-authoritarian stack consists of things like the CBDC technology that I mentioned, but also infrastructure like fiber optic cable networks, cloud hosting, 5G, Internet of Things, and also surveillance tech that other authoritarian countries are hungry for, like AI monitoring software.
In addition, kind of the promise that they will provide the tech know-how, training, assistance, and customer support.
This is all, this techno-authoritarian stack that they're offering, this authoritarianism as a service, is a form, Pine says, of digital colonization by China.
When a foreign power can read all your citizens' data, control all your domestic and international financial transactions, and run all your government services on their digital platforms, that foreign power effectively controls your country.
So up until now, what Pines has done has set the stage for what he calls Cold War 2.0, a competition for network power over financial networks.
Again, network power is real, and it is sticky. It attracts and traps, but it is also dynamic and can route around abuse or sanctions, choking and surveilling.
When countries don't like that, they can attempt to route around.
U.S. financial network dominance is vulnerable to this dynamic aspects of networks routing around abuse because of our accumulating debt, atrophying manufacturing base, and the sell-off of hard assets to our foreign adversaries in particular.
And then in response to these vulnerabilities, China has a block, build, and expand strategy to try to exploit these vulnerabilities and replace them with its own system.
So Cold War 2.0 then is fought by countries choosing which techno-monetary network they will attach to as nodes.
You have the Chinese model of interconnected CBDCs that China is trying to build on its own techno-authoritarian stack in which it controls the infrastructure, in which we can kind of see appealing to authoritarian countries.
And then against that, we have, of course, our very vulnerable current system, which is kind of falling apart. Apart from that, though, the West lacks currently a 21st century alternative that would kind of replace this, update our current system, and also respect our foundational values of openness and democracy.
Cold War 2.0, techno-authoritarianism versus techno-democracy openness, whatever that's going to be from the United States. So Pines' thesis is that Bitcoin and stable coins could constitute this new technologically open stack offered by the United States as foundational to our own values.
To quote Pines, Bitcoin and regulated dollar-based stablecoins may help the U.S. counter adversary efforts to challenge U.S. geoeconomic power while reinforcing liberal value systems around the world.
So Bitcoin has these value systems.
It is an inherent threat to authoritarians.
It's a decentralized networks with privacy protections that can be built up on top of it.
It does not embed the inherent programmable surveillance of a central bank digital currency. The Bitcoin network is peer-to-peer and permissionless. It goes around capital controls, the type that are oftentimes imposed by authoritarian countries.
Bitcoin's increasing value monetarily as it monetizes also advertises itself to the world.
It gains traction organically without imposition.
Banning mining, as an example, just causes it to decentralize out of the country that banned it.
As far as stablecoins, those are already proliferating rapidly, beating the Chinese CBDC.
countries are also kind of organically wanting to take in stable coins.
The U.S. dollar stable coin network could encourage the use of the dollar,
even as it is no longer declining as global reserve currency,
by making cross-border payments faster, cheaper, and easier with the dollar
as the underlying aspect of the stable coin.
If stable coin issuers hold lots of dollars in U.S. treasuries,
something that they currently do and which can be encouraged with further regulation,
So – and also like with Bitcoin, stablecoins are anti-authoritarian in Pines' estimation. They go right to the people in other countries. In fact, have – people in other countries have shown preference for them over local currencies that are kind of declining in value. They prefer to have the stablecoins.
To quote Pines, Bitcoin and dollar stablecoin adoption along the front lines of Cold War 2.0 may serve as a bottom-up bulwark against China's geomonetary network expansion strategy.
strategy. So Bitcoin then, as it monetizes, it can oppose Chinese geoeconomic network expansion,
and will also kind of have Bitcoin as it monetizes will have additional advantages.
Pines notes that Bitcoin is better from a strategic point of view for the United States than
maybe remonetizing gold because China and Russia would actually be huge benefactors of remonetizing
gold because they have big stockpiles. I think that's a very important point as people debate
and talk about sovereign wealth funds and reserves, what those mean that, again, our adversaries
already have large deposits of gold. Whereas the US has a large supply of Bitcoin, we also have
large, you know, good amount of energy resources for mining. And in fact, Pines notes that Africa
has a lot of stranded energy. If Bitcoin monetizes, becomes something akin to a global reserve asset
or currency, China then, or Africa then, would be likely to tip towards that as it monetizes its
energy. And that would drive a wedge between kind of authoritarians and those who have a more
Bitcoin-oriented technological openness. This, of course, would also, monetizing Bitcoin,
would remedy the structural issues that were kind of the underlying structural vulnerabilities that
we have as a result of issuing the global reserve currency. It would allow us to rebuild our
manufacturing base if we can now begin to accumulate surpluses and afford to pay people
domestically instead of having to import certain things. With those balanced trade flows and trade
surfaces, we would also no longer need to financialize our hard assets and try to sell
them to our rivals because they're accumulating dollars and we're not. So that is Pine's paper.
The old face of network power then is that Barabasi-Albert structure that we
showed at the beginning. It is, again, hubs that are clusters of nodes with maybe one edge,
one line connecting them to other hubs, allowing for choke point control and surveillance.
The face of the Bitcoin network is obviously very different peer to peer. And just to have
one representation of that, I don't know if you're, Lucas is having some tech issues. We had an image
here that was of
the Layer 2 Lightning Network.
It been kind of floating around on Twitter You can find it It was tweeted by at not grubles and it available at HTTPS the lnrouter backslash graph
And so what it shows is all the public nodes on the Lightning Network and the channels between them.
And when you put that lightning network right next to the Barabasso-Albert structure, you see immediately that network power is a different thing when the network is completely decentralized.
There is very little opportunity for choke point surveillance and control.
So that it could be that I mean, that's Pine's paper.
He doesn't mention that the lightning network decentralization or have that image.
I also began saying that maybe Bitcoin could be BitPower, could be BitNet. These are different ways to think about Bitcoin. That's not something that Pine says. BitPower is, of course, Jason Lowry's idea in his software thesis.
BitNet is my attempt to kind of give a helpful label maybe to Pine's discussion here where as I interpret this essay, it's saying that the nature of 21st century warfare is that it is competitions over networks in which network power is very important.
And the very nature of network power competition is going to change if we're all participating in decentralized networks such as Bitcoin.
So, I mean, Lucas, that's the essay in a nutshell.
Do you have that or are tech difficulties going to prevent us from showing?
I see two of you, in fact.
Yeah.
Two cameras there.
Yeah.
So my computer screen shut off for absolutely no reason.
But apparently it's still running.
Yeah.
But I do have –
It's not necessary that we show that either.
No, I do have it.
And I think that it's a wonderful thing to show because it's shocking to look at it and then realize exactly what it is that you're talking about here.
I think it really puts into perspective just how prolific the network is.
And I'll just describe it because if you're listening and not watching, what you're going to see if we get this up, again, the Barabasi structure, you have these hubs that are clusters of nodes and the hubs are connected by long lines.
And so there it is. It's up on there.
What you see with the Lightning Network decentralization is basically a circle just like filled in with points.
It's just like maybe like you can see like some points that have greater intensity or size, but you can also see that otherwise it's just like filled in with points.
There's no hubs or islands that present choke points.
And again, this is just a lightning network.
This is not even to speak of like direct peer-to-peer transactions on the Bitcoin network.
This is more just kind of a visual.
If we take seriously that network power is a very important thing, what does it mean when the nature of networks switches from being kind of centralized or chokepoint-oriented networks to completely decentralized networks onto which we build our financial system?
Maybe sanctions don't work as well.
We kind of know that with Bitcoin that it's used for, I mean, that's kind of the flack it gets is that it can be used by parties to do things that you don't want those parties to do.
But as far as, you know, enabling a freedom forward vision of people connecting to whoever they want to connect with and countries not worried that they are going to be excluded from the financial system, it does at least preserve that vision.
so yeah lucas i am curious i mean did you get that from this essay that the nature of network
power itself is one network power is very significant for the 21st century but then two
that the nature of network power itself could shift and that that's a good thing for
I guess early adopters to the new system.
What I find interesting, I'm glad you started here.
What I find interesting is how he defines the nature of network power.
And let me, you mentioned it, but let me just restate it here.
Let's see.
Well, maybe it's easier for you to restate.
So here's kind of a definition.
Network power consists in the ability of a state to exercise surveillance and choke point controls over a global network.
So I read that and I thought about it.
I don't really like what it sounds like.
It doesn't sound good. It doesn't sound like something that you would want.
It basically, I think, is saying that power over a network exists in order to control.
Power over a network exists in order to exert power and to intervene into the world by having an asymmetric informational advantage.
it's probably not false and so it's it's worth uh it's worth thinking about
the words that he uses to describe it
if you control the network and then you move to a network over which you have no control
what does that mean for you and so one of the questions i i thought of um that i wanted to ask
you was so we're we're talking about this in terms of this this paper is basically written
from the viewpoint of hey we're the united states we have the world reserve currency however it's
tenuous and um here are a number of attempts not just one but a number of attempts by other
countries to go around that process. You can use words like subvert if you want to make it sound
as though they're doing something that is wrong. Or you can say that they're innovating in order
to find their way out of an oppressive system. I think if the paper was written by someone
outside of the United States, then obviously it would have a far different tone. But the idea is
preserve the U.S. dollar system, I think,
or preserve the U.S. dollar advantage over the global monetary network.
And I guess just kind of thinking about in that terms,
one, I think the question really needs to be asked,
is it something that you want to have control over?
It sounds good for now.
then we learn about what this Triffin Dilemma is.
And the Triffin Dilemma basically says that if you export currency,
then you'll have to import goods and services,
which means that you'll be exporting your industrial base and your skill.
And someone else will be fulfilling that.
Because if what you provide to the world is money,
that you make for nothing,
and the fun part of that deal
is that you get to trade that nothing for something,
that something comes from somewhere,
and that something originates on your shores,
in your borders,
with a middle class and an industrial base,
and it slowly at first and then rapidly
moves to another jurisdiction.
You know, it sounds great when you're the guy in charge to go,
hey, guess what I did?
I talked all these other countries into this deal,
and this deal is that we get to give them nothing,
and they're going to give us all of their stuff.
and his buddies are like, that's fantastic. Hey, by the way, we build that stuff.
That's not going to be great for us. So why don't we do this? Why don't we make an even better deal?
Since we're making this money up out of nothing anyways, why don't we make up some more of it
and give it to them and say, hey, what we're doing is we're investing in you
and we're going to come over and we're going to own that stuff over there. So we're going to go
invest with our made up nothing into your country that's taking the something away from us.
And we're going to maintain control over this, even though it's outside the borders of the
United States. And so you create the oligopoly, the limited power structure surrounding the
surrounding the creator of money.
And what happens is that you end up losing the industrial base,
you end up losing the skill and the will, really, to produce those things.
And you find yourself in a position where you have this increasingly polarized world.
And I'm going to share this graph because I've never seen it shown this way, and I think this is absolutely fantastic.
So the author includes a graph that displays the United States net wealth share.
Could you zoom in on that a bit?
Yeah.
displays the net wealth share of the United States.
And it has two lines on this graph.
So on the X axis is the years.
So 1900 going by decade to 2020.
On the y-axis is the percentage of net wealth that is shared by the green line is the top 0.1% and the red line is the bottom 90%.
So to kind of state this in a different way that may be easier for somebody who's just listening.
So what we're seeing is we're seeing a graph that shows the poorest 90% of people, how much of the total wealth do they own, and the richest 0.1%, how much of the total wealth do they own.
And it appears that in times where those amounts are equal, where the richest 0.1% has gained so much of the wealth that their 0.1% people own the same amount as the bottom 90%, then we have the rise of populism.
So the first time that these two lines cross, I guess you could probably say it's like in the early or the mid-teens,
but it looks like the graph isn't really accurate right there.
So let's just say the mid-20s, the roaring 20s, very populist time, again in the late 30s.
and then it shows that in like 2016, 2018, we're there again.
And obviously this graph is old, yet it shows the direction that we're moving, that we moved.
So basically the emergence of populism comes when we have these lines crossed.
So what does that mean?
That means that you end up with the type of politics that we have right now, which is extremes, jingoistic, bombastic, and very, very segregated in terms of beliefs.
my question though that i wanted to post to you is so we we know all of this we know that we have
the triffin dilemma we know that there's a global monetary network um
bargain shopping bargain shopping happening where other countries are looking at
alternatives to the dollar. And I think the big question that I want to ask is,
how long do you think the United States can maintain power over this dominant monetary system,
which is currently the dollar? And I think from a bigger perspective, is it useful to even try?
and I might riff on that a little later,
but I want to get your thoughts on that
because I think that there is something about this
that is very seeing the trees without seeing the forest,
and so I want to kind of get the take on what you think about
the direction that we head.
How long can we maintain power,
And if we can only maintain power for five years or 10 or 50 or 500, if there is an admitting that we will lose that power, then what position will we be in when we do so?
And will we be at that point, will we have gone so far down the wrong path that it makes it difficult to get back on the right one?
So very, very long and rambling, but kind of want to kind of want to throw that at you and hear what you think there.
No, I mean, I think that goes right to one of the key points of the essay.
Is it useful? I mean, how long I guess I couldn't how long we could maintain the current system teetering, tottering pieces falling off of it.
I don't know that, you know, what's the tipping point where it turns into something else?
It crashes or something overcomes it.
Well, we can kind of assume, right?
I mean, not assume, but we can say the current system has been around for 54 years.
And after 54 years, there are at least, if you want to count, I think you could probably count cryptocurrencies.
If you look at it that way, then there are probably somewhere around 25,000 proposed alternatives to the system.
Yeah.
And just to say, I just want to say I couldn't put a discrete amount of time.
There are lots of proposed alternatives.
And I'll just add another fact into that to kind of illustrate that, that Pines notes that the total from Q4 2019 to Q2 2021 total public debt as a percentage of GDP increased to over 125 percent, peaking at 130 percent.
This is significant because this is the historical point where 51 out of 52 times a country reached this level. It led to restructuring, devaluation, inflation, outright default. So I don't disagree with you that that's the point we find ourselves at now.
And so that's why this particular essay, I think, is very essential. And to get like a key point of it, Pines, even though he advocates for stable coins mixed with Bitcoin at the end, he is not about trying to maintain the U.S. dollar as a global reserve currency, not as I read this.
So he talks about issuing the global reserve currency, you have the Triffin dilemma, and it does lead kind of intellectually, it seems, to atrophying of the manufacturing base and the sell-off of your own assets because of foreign dollar surpluses.
So he doesn't want to do that, but that doesn't mean that you want a dollar that disappears or a dollar that is weak or something like that.
So how do you maintain the dollar but not have it as necessarily the global reserve currency?
You monetize something else in its place and kind of put us onto a different monetary network altogether.
And there's kind of two possible visions of a future monetary network.
One is the techno-authoritarian stack, which appears dystopian to us in the United States, built on Chinese infrastructure subject to Chinese surveillance and control.
with CBDC's program to do all sorts of manipulative and surveillance-based things.
That's one path, the techno-authoritarian path.
The other path is, is there a technological alternative that is freedom forward,
that supports the U.S.'s purported foundational values of democracy and openness?
That is the Bitcoin network.
And so if we can monetize the Bitcoin network, have that be the new or be the architecture for the new financial network of the future, then the U.S. can preserve our own currency.
We're not going to have a Venezuelan hyperinflationary scenario where our dollars become less than the paper they're printed on.
But we also cease to supply global liquidity, support all settlement around the world with the dollar necessarily because Bitcoin is that underlying settlement mechanism.
If we go that route, then again, the U.S. can have a first mover advantage within the new network of a hyper-Bitcoinized world where Bitcoin is the underlying financial network, the settlement layer.
then the United States has a first mover advantage.
We will not have surveillance choke point control.
The nature of the Bitcoin network, again, is peer to peer decentralized.
But we will have that, you know, we will, you know, just the fact that Bitcoin will
monetize and become worth so much, we will still be a wealthy nation.
We'll be able to have lots of hash rate to protect the integrity of our transactions
on the network.
So, I mean, I guess, is it useful to prop up the U.S. dollar not as a global reserve currency?
And I don't think Pines is saying that, but it is, you know, it is if we don't want to hyperinflate our own currency, devalue it.
We want, even as Bitcoin monetizes the U.S. dollar to have some some power.
And I think stable coins fill that gap where they can be based on the dollar, but also tied to Bitcoin, support Bitcoin liquidity, things like that.
How are dollar-backed stablecoins not propping up the U.S. dollar?
Again, propping up in what sense?
They can prop up the dollar as the global reserve currency.
You can also prop up the dollar as a strong currency, but not the basis of global liquidity or settlement.
I was thinking about this the other day
because I saw the report that
Tether, the amount of profit per employee at Tether,
which is the world's largest, most used stablecoin,
is somewhere around
like 80...
They say they had a net profit of $13 billion,
which is somewhere between $86 million and $260 million per employee.
And so what is that profit?
That profit is a microcosm, a short-term example of its value extraction, right?
So it's the seniorage, basically, that they get from issuing dollar stable coins against a dollar that is continuously losing value.
So it's extraction of value, $13 billion in one year when stable coins are used by a minute amount of people in the world.
I think of stablecoins basically the same way as I think of a central bank.
I don't think that they're really any different.
I mean, they're doing the exact same thing other than controlling interest rates,
although there's arguments to be made that they control interest rates as well
by housing wallets that offer interest payments.
So I think that moving to stablecoins is simply a way to make the seniorage and the ability to extract value at a very granular level instead of doing it with T-bills, multi-million dollar T-bills that last for six months or four years or whatever.
Instead of that, then we can just do it with individual stablecoins and we can extract the value that way.
I was trying to think of, so I drove out to California and stopped at a couple gas stations.
And, of course, you walk in, you walk around, you look at the stuff, and you're like, man, this is unappealing.
I don't want to eat any of this.
And there's always the little hot roller place that has the taquitos and the hot dogs that are just awful.
I find all of that immensely appealing, but continue.
It's awful.
Anyways, so I'm thinking, like, so what if that's the dollar, that taquito, that it's, you know, the advantage of the Cantillon effect is being the guy who gets to it first.
Because if it's been there for nine hours, then it's awful.
and so what if the what if the dollars are taquitos and and um we're the ones the united
states is the ones that's supplying the world with taquitos and then all of a sudden um it comes to
be that anybody can just get filet mignon and and so now we have a choice we're like hey we'll
We could offer this filet mignon next to our taquitos.
That's not a good idea because who's going to buy a taquito when there's a filet mignon next to it?
Probably not a rational actor.
There might be some people that are duped into it and good for them.
But you can't just put it next to it because then it highlights the vulnerability of the taquitos and how shitty they are.
you also can't, um, you also can't say, Hey, you guys, we're going to sell you taquitos.
We're going to eat filet mignon, uh, because they can just go out and get it on their own.
Um, and that is like an implicit, um, implicit advertisement for it. You know,
very much like the founder of a social media company who does not let his child use social
media. I think that's the kind of, kind of would be the same thing. It's like saying,
oh, it's okay for you, but there's no chance in hell that we will take that in. So I, I'm going to,
go ahead. I see what you're getting at. There is no second best. And so why have stable coins? If
we're just going to, why not just go Bitcoin all the way? Is that what you're saying? Well,
it's so yeah i mean it's it's a horrible dilemma but it's actually not a difficult choice
um there are like it's not a difficult choice in that if you look at what happens if you stay
on this path and you continue to try to prop up the dollar um and you what does he there's there's
something that basically, you know, what we're doing is we are trying to maintain a system that
has short-term stability in exchange for guaranteed long-term failure. And the replacement for that
has short-term volatility in exchange for what appears to be long-term resilience and long-term
strength. And on the whole, when you're looking at that, that's not a choice. That's not a difficult
choice at all. But it all depends on what your time preference is. And when you're engaged in
populist politics, your time preference is very short. And your time preference is very short
because there are pressing issues that need to be dealt with now lest they get much, much worse.
I think that it's wonderful that we're talking about this on the time that USAID is being exposed
as being the global money launderer for the United States
and for everyone basically around the world I actually going to share this real quick because I this is a this is a post about the amount of grift that has been found just you know
just in a couple of days. Go ahead. Well, I would just say just, I mean, to your
underlying point though, is like, why, you know, should you prefer, I mean, you're saying, you know,
you should prefer this over that. I mean, who's the you because like who Pines is writing for
is the U.S. establishment politicians.
And I think it was,
they had the press conference yesterday
with David Sachs as the crypto czar or whatever.
And I believe it was in that one.
I heard this yesterday,
some politicians saying that the U.S. dollar dominance
is like what they want to maintain
and they're looking at a Bitcoin reserve.
And so like U.S. dollar dominance
is like the stated goal of the establishment.
In order to talk to them,
you don't, you know,
one way is to try to make the argument
that Bitcoin is better, good luck.
Or you can say, you know,
Bitcoin is going to help us move away from the Triffin dilemma, while we can also maintain the
dominance of the US dollar through stable coins. And so I think it's a way that you talk to like,
both, you know, politicians, but also people in the real world, the world is not ready tomorrow
to go to the Bitcoin standard, people don't know what Bitcoin is, by and large. And so
should you get Bitcoin, you individually, the listener specifically, for sure, if you believe
that it's going to, you know, has the qualities that we think it has. But, you know, if you're
advocating for some sort of move away from the dollar as a global reserve currency, it's a much
bigger sell to say, go to Bitcoin than it is to say, you know, we can maintain dollar dominance
without being the reserve currency if we also use stable coins and that other countries, people in
other countries have preferentially shown that they want stable coins over Bitcoin. And they do
have, at least as it's currently situated, you know, the Bitcoin network is good for large
settlement, but not as good for daily transactions. Stable coins are really good for daily transactions.
And so there does appear at this moment in time, we could talk about maybe 100 years from now,
what we're going to have as a system, but Pines selling a transition away from the strategic
vulnerabilities of the US maintaining the global reserve currency. I think it makes sense to propose
a hybrid system where you do take use of the preference people have for stable coins in other
countries, their particular functionality, that they are tied to the U.S. dollar, while also
advocating that we do it with Bitcoin to move the settlement layer maybe away from the U.S.
controlling the gold-brain sub-currency and asset, if that makes sense.
Yeah, it makes sense. I just think that it is, I think it's very short-sighted
because it's catering to and patronizing the people.
By the way, I'm not saying that Matthew Pines is patronizing at all.
What I'm saying is that the idea that we're going to maintain dollar dominance,
because there's a second part to that, which is how long,
because we know that fiat currencies fail.
That's what they do.
And what does all dominance mean?
I think you raised that point earlier.
Yeah, because we've reached peak dominance.
Like, you're never going back.
Like, you're never, you know, there is a reason why alternative systems came about and alternative systems came about because the current system does not work.
It works in that it allows a very small number of unelected people to exploit the rest of the world.
So it works for about 0.01% of people, but it does not work for the majority of people.
And saying that it does, I think is just a misstatement of the facts.
Okay.
I think that the Pines would acknowledge that the administration themselves,
Like US dollar dominance does not mean United States unipolar status because the administration, I think it was, is it Bessent has, the US Treasury Secretary has acknowledged a global economic reordering.
And it was maybe Rubio who said that there is, we are now in a multipolar world.
And so like part of what I see the Trump administration as doing is maintaining dominance in the sense of us being an economically dominant world power, but acknowledging that the world is multipolar.
And, you know, it's actually a more secure system where we don't purport to be the most powerful and patronized to China and patronized to Russia.
We acknowledge a sort of co-equal status in certain ways.
The system becomes more stable is the idea, I think. And in a multipolar world, what better type of settlement system than Bitcoin, even as you want dollar dominance, making us economically strong through stable coins, which are also popular, you also want to entice people into your system.
We don't we're not going to you know, one route we could go is the CBDC route, have our own stable coin essentially issued by the government.
But you can't, Pine says, compete with China on the authoritarian axis.
If you want to compete with China, you don't do authoritarianism light with your own CBDC.
You go whole hog liberty.
Bitcoin is the underlying settlement layer.
That's going to entice people onto the network because Russia, they want to join the network.
They're not going to be debanked through a swift sort of sanction.
Even, you know, Africa wants on because they get to utilize their stranded energy.
And then, of course, the kind of U.S. allied states went on, hopefully, because the U.S. is leading the charge.
So, yeah. Yeah. I overall, I feel like I feel like it is it's kind of trying to think of the best way to put this.
Like your parents are getting divorced and they come and they they try to tell you in very, very soft ways what's about to happen.
oh, mommy and daddy are going to be spending some time apart,
and you're going to be hanging out sometimes with mommy and sometimes with daddy,
and you're going to have two birthdays.
It's like, oh, we're going to...
When we're avoiding talking about the elephant in the room,
which is that when the United States triggered...
When they sanctioned Russia,
and they seized the FX reserves of people that were ostensibly connected to the Russian government
in order to show their displeasure about the attacks in Ukraine.
When they did that, that was the straw that broke the camel's back that had already been very weakened.
You know, let's not pretend that this started in 2022.
This began earlier. I think the Chinese digital currency and the Chinese knockoff of CHIPS and SWIFT, the clearinghouse interbank payment system and SWIFT, the international banking rails, they were starting to do that six years ago, at least.
And so if they were starting to do it six years ago, they were probably talking about it a decade ago, trying to figure out solutions.
And so this is a problem that will not.
So what is it? You can't solve a problem with the same type of thinking that got you into it.
You know, so I do love that he notes like things about like intervention.
You know, intervention is going to be much more difficult if you have Bitcoin.
being able to jump into markets in order to stabilize crises.
One of the things that we've talked about before, however,
is that what these statements like that fail to recognize,
which I'm sure that Matthew Pines knows and just decides not to put in
because he knows who his audience is,
but what that fails to recognize is that the intervention
is always the result of a previous intervention,
is that governments do not solve problems that governments do not create.
And so they are always basically chasing their own tail,
the little Dutch boy sticking his finger into the dam with one hand
and using a power drill to get through it with the other
in order to create another problem.
So it's anyway. So I wanted to I wanted to change gears. So there's no segue. I wanted to change gears because he talks about the United States being the global center of money laundering.
And I just this is fantastic because let's talk about what we found with USAID, which is basically appears to be a way for bureaucrats in the United States to launder taxpayer money to their favored favored sycophants.
I suppose is probably maybe a good way to say it.
But here are some of the ridiculous projects that we have found that USAID spent money on.
They did $1.5 million for art inclusion, art for inclusion of people with disabilities.
That's cool. We need that.
I don't know if USAID needs to do it.
$2 million for sex changes and LGBT activism in Guatemala.
$6 million to transform digital spaces to reflect feminist democratic principles.
I have no idea what that means.
I assume that that means that we're trying to make websites more feminist.
$2.1 million to help the BBC value the diversity of Libyan society.
$10 million of meals, which went to an al-Qaeda-linked terrorist group.
$25 million for Deloitte to promote green transportation in the country of Georgia.
I guess that's important for us. There were some really good ones. Yeah, here's $5 million to EcoHealth Alliance, which is one of the key non-governmental organizations that funded the bat research at the Wuhan lab.
In fact, I saw one report which showed a grant that was issued directly to the researcher who is identified as patient zero of coronavirus, of COVID-19.
So anyway, you know, 1.3 million to Arab and Jewish photographers, 1.5 million to promote LGBT advocacy in Jamaica.
There's a whole bunch of LGBT stuff in this, like just over and over and over and over.
But anyways, it does highlight that because it highlights it.
I think, again, zooming out, I think that we really have to consider, is there an advantage to being the issuer of the global currency?
Much like is there an advantage to being the dawn of the mafia?
because, yes, all of these people are dependent upon you
and all of these people you pay off in order to get things done.
But that just means that your attack vectors are multiplied exponentially.
It also guarantees that when you go down, you go down hard.
You go down violently.
You go down in an insurrection.
you go down at the hands of the people that you use to prop yourself up.
And so I do think it's worth zooming out and really considering from a very philosophical point of view,
is there any long-term benefit to being in control of the global monetary network?
Long-term benefit.
And so I think, again, that takes us back to time frame.
I think it does highlight Pines calling the current situation where the current war we're in is Cold War 2.0, where now the war is to fight for what monetary network is going to be the new prevailing monetary network, which one you're going to join if you're a country as a node.
Cold War 2.0 is attracting countries to your monetary network to join your network, increase the network effects.
Cold War 1.0, maybe it was characterized by those USAID types of soft power to prevent countries from, quote unquote, going communist or to kind of, you know, fight, you're fighting a Cold War through non-kinetic types of avenues by, you know, maybe maintaining choke points and surveillance on a network.
or as Cold War 2.0, trying to get a new network going all together, which people want to join.
And so maybe that shift from USAID type of like kind of U.S. tentacled influence around the world
through money laundered to foreign entities to promote a certain type of ideology that's
perceived to be Western around gender or something like that, you know, maybe that type of soft
influence can decline as we realize that that's not important. The Cold War 2.0, again, is about
the techno authoritarian stack, you know, versus whatever we're going to counterpose against that,
which is, as Pines proposes, Bitcoin.
Bitcoin, you know, maybe they're, you know, USAID should support,
begin to support Bitcoin development in rural communities in Africa.
You know, things like that.
If we really do want to.
Maybe it should support Bitcoin development in rural communities in Nebraska.
It could do that, too.
I mean, I only mean if we want, if we consider USAID as a form of soft power influence around the world
to promote U.S. interests,
and we're now moving from a Cold War 1.0
to a Cold War 2.0 paradigm.
I mean, I agree.
I don't think that the U.S. should be funding
a lot of things around the world in any sense.
And I think that a lot of these types of attempts
to interfere or interject aid abroad to accomplish a goal,
they end up as that one line item you noted
going into terrorist hands, things like that.
I am just saying that if you were a full-throated proponent
of the exercise of American power abroad,
you should still buy into Pine's thesis
and try to exercise that power
to steer people towards adoption
of the Bitcoin network by supporting that.
And again, I don't think the government
should have its hands in that.
The Human Rights Foundation is doing that.
There are private entities,
individual citizens on the ground.
The thing about Bitcoin is it's monetizing.
It's going to do that itself.
It bootstraps itself into
kind of people wanting to do it.
So I do think it's right to zoom out as you did.
I think even zooming out, we can see that we're going to win Cold War 2.0, not with that type of graft that you've been citing.
Yeah, I do think that you're right.
Like, I do think that we'll look back someday and we'll look at all these podcasts and we'll look at all these talks we had and we'll look at all these things that we got excited about.
and we'll realize that it was all barely moving the needle
because what we were doing was watching,
we were watching an idea whose time had come
and it was simply going to happen.
I do believe that it's incredibly important though
for people to do things like this,
to write papers like this,
to move the policy discussion
and the Overton window of what's acceptable
to discuss in political circles, to move that a little bit further into this direction.
Pines does an excellent job with that paper.
One of the things that I really thought was interesting is how he draws the direct line
between the atrophy of the defense industrial base and the dollar system.
So effectively, to summarize what he says is basically that we have seen our industrial base for defense manufacturers,
companies that make missiles and aircrafts and tanks and jeeps and tracked combat vehicles and torpedoes and helicopters, all of those things.
We have seen the number of companies that do that shrink to effectively nothing.
Um, so, uh, basically, uh, we have one, there's one company that makes tanks, general dynamics.
They have no competition.
Um, there's two companies that make missiles, Boeing and Lockheed Martin.
There's two companies that make torpedoes.
There's two companies that make, um, launch vehicles that are, are not reusable.
There's three companies that make airplanes.
Like we have lost all of this because what we have done is said, okay, we're going to
export dollars, which means we have to import stuff. By the way, we've got people over here
that they're super rich and they got super rich by developing these defense companies.
And hey, we'll just make some more of this fake money and we'll give it to you and we'll call that
investment. They're going to come over and now they're going to show you how to make these parts
for our stuff in your country.
So we'll buy it from you with this money
that we made up out of nothing.
And so it always comes back to the idea
that there is no free lunch.
Like you don't get something for free.
You give up something huge when you offer nothing.
And what you give up is apparently
the ability to protect yourself from others.
The ability to really stand up a good army,
a good navy a good military the shocking because i read it i read it three times and you noted it
in your summary that china has 232 times the building capacity for ships that the united
states does as in 2023 i don't think it's gotten better i would assume that it's gotten much worse
yeah i would like i cannot imagine that u.s global competitive advantage in um in manufacturing
has done anything but decline since 2022.
And that's very significant because the U.S. has its power and its privilege as the issuer
of global reserve currency and as an empire or whatever.
We protect global trade routes with our Navy.
We keep trade open and flowing.
You can't do that if you're 232X smaller in power than your rival.
We are not the ones who can assure that trade routes stay open.
I mean, yeah.
Yeah.
As the Royal United Services found in their study,
a country must have either the manufacturing capacity
to build massive quantities of ammunition
or have other manufacturing industries
that can be rapidly converted to ammunition production.
You noted this in your summary.
You can't just go from being a banker to making missiles.
Yeah.
Unfortunately, the West no longer seems to have either.
If competition between autocracies and democracies has really entered a military phase, then the arsenal of democracy must first radically improve its approach to the production of material in wartime.
This again, this goes back to highlight something that Jason Lowry brings up in his thesis, which is that there are benefits to autocracies.
And one of the benefits, in fact, probably the most glaring benefit is that they are fast to move, that they can decide things, that they can go after it.
democracy in the United States particularly was designed to be at loggerheads at all times.
It was designed to be slow to change because rapid change without forethought has some pretty awful secondary consequences.
And so we are in a position where we are undoubtedly competitionally restricted.
We're in a very bad position.
And not only are we in a very bad position, we are of a political system that does not lend itself to making rapid change.
I think with the current administration, just in the first two weeks, I think that we're seeing evidence that we can see some type of rapid change.
But I'm not sure yet what extent that can go to.
We can see some sort of really shaking up.
But I don't know.
you know you can't you can't just you can't just build a port yeah you can't just build a a ship
you know you can't just immediately catch up like you have to do certain things that
certain things that the chinese have done very well for 40 years industrial espionage i mean
yeah industrial espionage is um something that you have to do in order to stay up and
And Mark Andreessen actually talks about this very well in one of his recent interviews where, you know, we've long celebrated the idea that the best minds in the world come to the United States to become educated.
And our benefit from that is that some of them stay here.
A lot of them, however, they take that knowledge and they go back to their country and they implement whatever it is they learn.
And we end up shooting ourselves in the foot twofold.
He was talking about affirmative action.
and what affirmative action has actually done is that it didn't help black people get into school,
at least not black people in the United States.
If you're from Nigeria, if you're from Senegal, if you're from South America, then yes.
But if you're from Chicago, no.
In fact, it actually did not improve your opportunity to get into school.
And so therefore, what we saw was we have a brain drain where we suck talent out of other countries and try to bring it here. A lot of it leaves, but we have let atrophy the brains of our domestic base, people from Wisconsin, Nebraska.
I think he noted four specific groups. If you are white, if you're Jewish, if you're black, and if you're Asian, white, Jewish, black, and Asian, if you're any one of those four, then you have suffered greatly from affirmative action, which was put in place ostensibly for black people.
Um, and so what, again, these, these long scale, long scale consequences of, of what are we trying to do by intervening?
Yeah.
Once again, we're, we're trying to fix a problem that we all, we created.
Yeah.
You know, we, not only do we not have a military industrial base, not only do we not have a middle class, not only do we not have a commercial consumer industrial base,
We do not have a base of talent, of domestic talent, because we have not cultivated that in the same way that we have cultivated talent from other countries.
And that's due to intervention.
I mean, that's due to people trying to intervene on top of the free market in some way to do some sort of statist or authoritarian intervention.
And I think that what's really interesting, too, about the network power competition that we find ourselves in is that we don't win by becoming, we don't beat the techno-authoritarian stack by becoming techno-authoritarian light.
We don't beat it by intervention.
We need to do some quick interventions, as you know, to right the ship, such as eliminating structural things that are causing bad incentives.
But once we get our incentives in order, things grow in a capitalist free market, democratic and open system. Things grow from the fertile soil of all the minds, peer to peer, decentralized that connect with themselves to transact in a way that they don't grow in authoritarian societies.
And so what we doing if we act in as Pines proposes is just writing the system and letting the system do its thing which the system again being you and me it not like we can passively sit by but it letting people in an open system show that openness always wins That the theory That the thesis of our nation over authoritarianism of the type of like you know we almost lurched towards in the past
I don't know how, you know, a couple of decades, but which we can write ourselves again and
remove state intervention and allow ourselves to reassert our thesis that freedom and liberty is
what wins in the long run because it is, it does conduce to strength. Yeah. And the strength is in
numbers is just that, you know, over a long enough timeframe, if there's a technology that's
available to everyone that benefits everyone, then everyone will adopt it. Um, you know,
there, there are, there are no advantages long-term to holding someone down to, to oppressing,
to intervening in order to create desired outcomes that you can't predict.
And so we do end up in this, you know, it's a very tough spot.
And I think this is why I keep saying, like, this is kind of looking at the trees and not the forest.
It is a very tough spot that we are in, but it's not a difficult decision.
It is, I was thinking about the movie 127 Hours because I was driving past the place where the guy, he fell into the canyon, right?
And he got his arms.
Oh, that's the one about him being pinched between the boulders.
Yeah, he had to cut his own arm off.
And that's really, I think that's what you need to think about in terms of like you need to cut yourself free from this.
as a, I'm not talking about you, I'm talking about the United States, like, look, do you want to
compete on a global scale? And do you want to have innovation? And do you want to be a light
of liberty and democracy and freedom and choice and the ability to pursue that which
is noble and productive and creative,
do you want that?
Or do you want to hang on to this necrotic,
dying limb that you have this tie to
because it's part of you right now that you created?
Pull out that pen knife and start hacking away
because you need to get rid of this thing
because it is cancerous, it's necrotic,
It's killing everything that it touches.
Everything that it comes into contact with, it is corrupting.
It's making them poor.
It's making them short-sighted in their approach to the world.
It's creating dissension.
like
it's just so simple
when you zoom out you're like
okay there's a game being
played and there's this bully
that's in charge of the game and
they set their own rules and they always
win and you can go
play that game or you can
go play a fair game where the rules
are clearly stated they're the same
for everyone
and nobody is
advantaged over somebody else
So, you know, it's a tough position, but it's an easy decision, I think, is what I'm saying.
It's an easy decision if we zoom out and have foresight and have a strategic plan.
And this paper is about how we currently have the absence of a plan.
China has its block, build, and expand kind of a grand strategy.
On this and other fronts, a digital belt or what is it?
The Belt and Road and the Digital Silk Road initiatives, two initiatives to kind of create infrastructure.
and networks physically and digitally around the world.
What is the United States plan?
And I think you're right.
We need to zoom out and note the power of freedom.
And then Pines is right that specifically, here's how we do it.
We need to note that the monetary system we are within USD as global reserve currency
is not the way.
And here's a way to bootstrap into systems where people around the world will opt into
our network on a free basis. Even as authoritarian countries try to impose CBDCs on their people,
they will personally opt into the systems that we support because you can't stop Bitcoin from
that type of adoption organically in those types of countries. So one final question I had, at least,
was you cited Lowry, I think, a couple of times. And I wanted to get your take on
a synthesis or just how they stack together Lowry's thesis and Pine's ideas. And to kick that off,
I noted that there was one time where Pine's mentioned power projection, which is a key aspect
of Lowry's theory. It's a common idea within military strategy. So it's not like it's only
Lowry, but maybe it's a way to begin to compare the two. And I have a quote here. I'll read this
and hopefully it'll give the basis for a question.
So, quote, this is Pines.
This authoritarianism as a service fulfills a strategic purpose
given China's current geostrategic power projection gap.
It does not have the Blue Water Navy and overseas basing infrastructure yet
to confidently secure its access to necessary strategic resources.
Imperial aspirants of the past typically relied on in-situ military capabilities to keep pliable governments in power or to replace them.
While its private military companies are growing alongside China's overseas energy and natural resource operations, these are still small-scale and lack official reinforcement to be a credible strategic force in distant political capitals.
Wagner Group has filled this gap somewhat in certain, especially weak and unstable locales, but those mercenaries don't report ultimately to Beijing.
While China hopes to have the hard power necessary eventually to project force across Eurasia, the next best thing is to close the, quote, virtual distance by means of digital colonization.
foreign governments that rely on chinese providers for their essential digital telecommunications and
financial infrastructure will have essentially traded away a good portion of their sovereignty
and become de facto captured in china's strategic sphere of influence such governments are unlikely
to renege on a contract with a chinese firm or against beijing at the un or other international
forum so the i think just to kick off a question to you about lowry um this then china is trying to
project digital power, not by harnessing proof of work or building on top of proof of work,
but by digital colonization, supplying infrastructure and its authoritarian stack,
authoritarianism as a service to other countries, hoping that they utilize, accept, and then build
on that, giving China god-king admin rights over the thoroughfare that is digital finance,
So finance as such. I mean, I guess, do you think that that's a good way to look at it? Does that put it in terms of Lowry's theory? And then I guess, what do you think Lowry would say to kind of Pine's statement of China's direction?
or however you want to take that.
It's just interesting to think how, you know,
Lowry, given a software thesis that Bitcoin is physical power projection in cyberspace,
that's what makes it valuable,
goes up against Pine's statement of what China is actually doing,
projecting power by creating that digital space from the ground up,
by creating a new network in which it will have God-King admin rights.
Yeah.
So China actually has something to offer.
You know, China can build. We cannot build. China can produce and manufacture. We can't do that.
They actually have something to offer. They come in and they say, look, hey, you can have access to all of our economy, all of our goods and services.
You know, we'll build ports, we'll build roads, we'll do all of this stuff.
And by the way, we'll throw in this currency that makes it really easy for you to pay us.
You can also have control over your citizens.
That's awesome.
You know, you want that.
So if you're a government, you want that because you are adversarial with your constituents.
You should be.
You should not trust your government.
You're not supposed to because a government will get out of control.
So they have something to offer. The United States doesn't have anything to offer. The only thing the United States has to offer is, hey, we'll give you access to everything from China, but we'll take a 7% cut when we exchange your money for dollars and then change it back into yuan to pay China.
So we have nothing to offer. I think what we really need to focus on is having something to offer.
So we've talked a lot about the decay of the industrial base, the loss of the middle class.
We've talked about all the things that we've lost.
But let's highlight people like Palmer Luckey and let's highlight Palantir.
Palantir and, you know, these companies that are, and Tesla and Amazon and to a certain extent,
maybe Meta. I don't know that Meta is really doing anything truly useful right now.
They're going to have a project to lay subsea cables, which is a material in-world project
to create some infrastructure.
I thought about that. What's the point of laying subsea cables when you've got Starlink?
So you're not dependent on somebody else to manage your network, I guess.
Or aren't you dependent on who's managing the subsea cable?
I mean, unless you're managing it or something like that.
Maybe there's greater throughput as well.
I don't know.
Yeah.
But, I mean, anyways, but to say the United States has a lot to offer.
The United States is the leader in a lot of technology.
and it's done that despite being handcuffed by this previous administration and to a certain
extent I would say going all the way back decades where we've had a really adversarial nature with
technology and tech entrepreneurs that was basically extractive, oppressive and really
putting the thumb down on people that were changing the world.
So that is all to say, where does this align?
How do we find similarities in this and Jason Lowry's thesis?
If there are such similarities, unless you think they're different,
like distinct, I guess, or oppositional.
I think, so first off, I think when I read this,
I thought of Lowry's thesis because I thought of this as kind of an application of grounded theory methodology,
where you have two people that are coming at this from different directions,
pulling from different sources, and coming to the same conclusion,
which, as we mentioned in our software discussion,
that is one of the benefits of grounded theory methodology over a typical hypothesis-first approach,
is that hypothesis first approach, future attempts to do the same research,
they only reconfirm, they don't actually make anything more robust.
Grounded theory means that we have tested this in different ways,
and it still is not false.
And so that gets us closer to truth.
So I think that this gets us closer to truth.
in the subject. Jason Lowry is coming at this from the idea that Bitcoin is an imperative
for global power projection competitions. I think Matthew Pines is saying that Bitcoin is
is unavoidable as a means of shoring up and attempting to maintain some sort of political global dominance for the United States
as the world moves from unipolar to multipolar.
I think they get to the same place, especially at the very end, Pine's notes, the abundant energy production of the United States lends itself to effectively standing up its own hash force and creating its own hashing industry in order to have domestic control over its ability to put transactions on the blockchain.
I find a lot of similarities.
In fact, before we got on, I was reading through the citations to see if he actually cited Jason Lowry's thesis, which he does not.
However, it does sound as though if he hasn't read it, I would be amazed.
Yeah.
He's read it, for sure.
Yeah, so I'm super excited about this path of discussion because I think that it moves us a little bit closer to common sense.
I think it moves us a little bit closer to taking out the pen knife and cutting off that necrotic arm.
I think it moves us a little bit closer to let's think about the solution that works for the next thousand years, not the solution that works for the next midterm elections.
So overall, I really appreciated this paper by Matthew Pines.
I've read it twice now, and I may go back and even read it again just because I seem to keep picking up different things.
As you noted, his approach to writing is more formalized and therefore very dense in the word.
The word choice carries a lot of weight.
And so he is very specific, very precise in his language.
This reads, you do maybe have to read it and then, as you said, maybe copy and paste,
put it into chat GPT and say, what, what exactly are we talking about here? Um, or do what I do,
which is kind of like try to break it down into like hillbilly speech and say like, well, what,
what's happening here? It's like, oh, the U S spit on Russia. And now everybody decides they're
going to spit back. Okay, cool. Got it. Yeah. Um, so yeah, I'm that, I guess that's where I,
that's where I kind of come down is that I find,
I find that even though Matthew Pines may not be advocating in as full
throated a manner for what Jason Lowry is,
it would be hard to do that because,
uh,
what Jason Lowry says is very cut and dry.
Um,
you need to do this.
You need to do it now.
You need to do it wholeheartedly, full-throatedly, and with as much resources as you can bear because this is a war and it's already happening and it's been happening for a while.
So, yeah, that's kind of what I think about it.
No, Pines has to be the public messaging and language we use to talk to politicians right now to begin action.
And Lowry's thesis is what you hold in your heart to motivate you long term to understand the significance of what you're doing.
I think that right now, think about like rhetorically the Bitcoin strategic reserve, a sovereign wealth fund that may include Bitcoin.
These types of thoughts are being considered by the administration.
So there needs to be a dialogue that connects to the decision makers in the room regarding these things.
maybe back channel talking, you know, amongst themselves.
Lowry's thesis does that.
But public messaging to them, as Pines did, he has another publication with the Bitcoin
Policy Institute, which is like a policy brief to incoming Treasury Secretary Besant, where
he really formulates this in a way that could be acceptable to Besant and also acceptable
to people he would have to answer to both, you know, upward hierarchically to Trump and
also outward to the people who may be skeptical of Bitcoin somewhat.
For example, I would note two, I think, good faith critics of the Bitcoin strategic reserve, George Selgin and Nick Carter.
George Selgin, from the angle that why do you need a Bitcoin strategic reserve?
Strategic reserves are used to backstop a foreign currency because they're not the global reserve currency.
We're the global reserve currency. We don't need that.
And then Nick Carter, his critique, I take it being something – as I understand it being something like,
you're going to signal weakness in the dollar or run on these types of things.
So those are both good faith critics because at their heart, those people both understand Bitcoin.
And this is a good response to both of them, like Pines steady approach where you want the first mover advantage into the Bitcoin network.
We can do this without trashing the dollar by incorporating stable coins in response to Selgin kind of just openly acknowledging,
maybe this is a move away from the U.S.'s global reserve currency while maintaining dollar dominance.
But we're going to get out of the Triffin dilemma one way or the other.
And so we're going to need a strategic reserve.
And if we're going to bootstrap ourselves out, slowly monetize a different system, we have to start somewhere, something like that.
But I think Pines offers a very productive dialogue to the decision makers in the room,
as well as good faith critics to the Bitcoin strategic reserve.
Yeah, I think it's just like, again, going back to kind of hammer this point home, is that it's really important to consider if having the global reserve currency is a benefit because of the Triffin dilemma.
And so if you have the global reserve currency, then you will export currency and you will import goods and services and you will export your industrial base and your defense capacity and your middle class and your skills.
You will export all of those things.
You will lose those things.
And I don't think that there's a way to avoid that.
I was trying to think through in my mind if there was a way to limit, like, oh, we're going to export dollars.
We'll sell you dollars, but we only will sell it for energy.
Like, what if we did that?
What if we only sold it for energy?
Then that might be maybe something.
Because if you're bringing more energy into your country, then you are creating opportunities.
So maybe that's something that you could do.
But I just, you know, people don't have a hard time trading a pair of Nikes for made-up imaginary money.
But eventually they're going to get tired of trading oil and coal and natural gas for that.
So I don't think that that works long term.
So the Triffin dilemma was a really fun thing to learn about.
I think it's something that we intuitively kind of understand maybe,
but to hear it kind of lined out and really understand it from that perspective of
when you have the global reserve currency, this is what will happen.
You will hollow out your country.
You will create populism.
that populism will result in massive political instability like this is all just step by step by
step by step down the road we go yeah and and so this is profound this tripping dilemma is propounded
in the 60s so it's been known for quite some time you know our adversaries are aware that when you
hold the global reserve currency certain structural vulnerabilities occur and we have to accommodate
ourselves have a response to that. And I think this is a really good paper. I would note at the
beginning, I said that, so this essay is collected in national security in the digital age, Bitcoin
as a tool for modern statecraft. It's actually, this book is though issued by the Bitcoin Today
Coalition. The PDF was originally published by the Bitcoin Policy Institute and is available on
their website. This is an excellent anthology. I've kind of skimmed some of the other essays.
We may hit them in the future. What Lucas and I are doing, we're also reading Balaji Srinivasan's The Network State right now. And we're going to try to do that, I think, for a while of reading a book, discussing the book, but interspersing that with discussions of essays.
and so if you have any ideas of essays you'd like us to read consider think about definitely shoot
recommendations there's a lot of interesting stuff out there but i'm really interested in stuff that
kind of um either you know people themselves have written and they're kind of interested in some
feedback on um but also really are in the domain and kind of being debated by other people kind of
to facilitate a dialogue and really, um, help hopefully through our discussions. I hope,
I hope that they help other people, um, get the key points for an ongoing debate and feel kind of
better, um, more confident themselves in participating in that debate. Yeah. I, especially
papers like this. Um, first off, this was an excellent choice. I'm so, so glad you picked it
because I am going to be rereading it and I am going to be reading what, uh, what he wrote for
Scott Bessent. I think something like this is fantastic for people if they're listening,
if they have a connection with a congressperson, that they would be doing the world a favor by
trying to get this in their hands and trying to get someone to take a look at this and be serious
about it. If you feel as though your congressperson cannot read it, then maybe they'll make a pop-up
or some sort of picture book in the end.
If only they had a podcast about it,
they could send a link to their congressman as well.
God dang, with a couple of jokers from Kansas.
I know, comparing taquitos to whatever you compared it to.
Hey, man, you've got to go to where the people are.
That's right.
Yeah.
No, I think this one was really fantastic.
Matthew Pines is a name that I've heard of,
but I have never consumed any of his information.
Check him out.
He has a lot of really good information on UAPs.
Actually, here's an Easter egg for you.
The Scott Bessette policy brief on including Bitcoin in a reserve, there's a line or two about that you look at the end.
He cites the literature on UAPs, and it's something about we need to be ready for if exotic technology enters the discourse in the near term, something like that.
So this UAP stuff, if you have any doubt that it's vital and real, listen to Matthew Pines.
He also integrates it into the debates that we're having right now.
And he also has really interesting takes on consciousness, the nature of consciousness.
Very fascinating guy.
Check him out.
He's on Twitter and he has some other publications, the Bitcoin Policy Institute.
Isn't it a great world where magic internet money is now considered just normal discourse?
And it's like, oh, you know, we might just talk about aliens.
Something more exotic is needed to keep us excited.
Throw in some aliens.
Oh, an insatiable desire for novelty.
fantastic
well let's wrap it up
and we'll get to another one
thanks for joining us
and we'll talk to you soon
right on
Thank you.
owning a cave and that way I'll never have to mow a lawn or replace roof shingles ever again,
which would be wonderful. Thanks.