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Today we are studying broken money, why our financial system is failing us and how we can make it better.
We are on the sixth, seventh study session here.
Today we are taking on part four, the entropy of fiat ledgers, which is chapters 14 through 19.
this section should anger you it should leave your blood running cold but with intent and purpose
ready to double down on bitcoin the genesis block of bitcoin was inscribed by satoshi with the
headline from that day's paper which was chancellor on the brink of second bailout for banks and that's
what part four is about so in this part really twist the knife on that essential point so first
though before we get to that i'm going to do a quick summary of the book up to that point and
then a summary of chapter four. And then Lucas and I are going to twist the knife even further
on what the entropy of fiat ledgers signifies. So part one of this book was, what is money? And at
that point, Alden kind of came up with the idea that money is at its most essential, a ledger,
a way of recording transactions and ownership. Part two was then the birth of banking. So
banking then, once you have money, banking arises as a way to specifically allow a gold-based
monetary system to operate more smoothly without having to constantly transport and authenticate
actual gold. That's the birth of banking. Part three, the rise and fall of global monetary orders,
tells the story more specifically of how fiat money, after the rise of banking, so fiat money,
money not backed by gold or anything else, becomes the basis of the global monetary order
in its current iteration, the U.S. dollar as the world reserve currency.
And then that part kind of also went into how this harms the U.S.
by tending to hollow out its industrial base and also hurts other countries
and developing countries specifically because inflation and volatility
as much as possible are exported to those countries.
And the institutions nominally that are supposed to help them deal with it,
the IMF and the World Bank, actually have a track record of kind of exacerbating
those problems through predatory forms of lending. So today we move on to part four,
the entropy of the fiat ledger, the way that kind of broadly speaking, the fiat ledger as a flexible
ledger, remember money is a ledger, the fiat system as a ledger, as a flexible ledger in its
operation naturally leads to abuse and wealth concentration. That's its kind of entropy.
And again, what I think should be in the back of your mind is the anger generated by the phrase
Chancellor on the Brink of Second Bank bailout and why that is an inevitable part of the fiat
system. So chapter 14, the modern financial system, we get first an introduction to the
actual operation of the fiat ledger. So the modern financial system operates, you could say,
in five general ways that contribute to the entropy, the degeneration of the fiat ledger.
First, money supply continually inflates. Second, purchasing power is gradually siphoned away from savers and towards those who are closer to the source of money creation. The system rewards large and well-connected, kind of politically well-connected entities at the expense of small and poorly connected entities.
Four, liabilities gradually shift from the private to the public sphere. Debt is prevented from ever clearing out completely. And five, volatility is suppressed for a while until it all comes tumbling down. So those are five general points that this section is really going to go into depth on.
So first, we get a primer on the Federal Reserve. It controls, most generally speaking, we won't go into all the specific details, but it controls the base ledger for the United States and is somewhat of a mix of public and private in that it does include, in its public aspect, representation from the public sector on its Federal Open Markets Committee, which sets monetary policy for the nation, which is essentially what the U.S. Federal Reserve does as our central bank.
and the one that manages the ledger in its most basic state, the base ledger.
How does the Federal Reserve system actually work then in conjunction with private banks?
Again, without going into kind of too much technical detail,
Alden describes it as a layered stack of IOUs, which is also circular in nature.
At the very bottom, the base of the system, even before the Federal Reserve system,
is the taxing authority of the federal government that kind of underlies and is supposed to provide
the assets for the system. The taxing authority provides assets to the federal government
and then backs the treasuries that are then the assets of the Federal Reserve.
It's circular because when you look at the whole financial system, at the end of the day,
what's happening is the federal government is taxing in dollars, which, of course, are liabilities
that it has to itself. And just to back up a step, it wasn't circular when we were on a gold
standard, because if you taxed in gold, gold is not a liability of anybody else. It's a bearer
asset. So the Federal Reserve System, a layered stack of IOUs that's circular in nature. To
summarize it in Alden's words, everything is a claim of a claim of a claim reliant on perpetual
motion and continual growth not to collapse. At a more granular level, how is the Federal Reserve
Ledger updated? Alden talks kind of gives basic descriptions of Fedwire, FedNow,
and what the acronym CHIPS, which stands for Clearing House Interbank Payment System,
ways that are, these are all ways that the Federal Reserve system ultimately clears transaction,
updates its ledger. To quote Alden, virtually all the transactions that we do as individuals
and businesses on higher ledgers of the system get settled through those systems at or near the
base layer of the system, that base layer being the ledger that is maintained by the Federal Reserve.
So we can then ask that internationally, you know, how is that updated? The Federal Reserve
is effectively the ledger for the world as the world reserve currency.
Given that the world reserve currency is the dollar issued and maintained by the United
States, the Federal Reserve then serves as the ledger for the world.
Foreign central banks tie into the Federal Reserve because they hold U.S. debt in the
form of U.S. treasuries as an asset.
And Alden also kind of briefly talks about how sending money internationally is this slow,
opaque, high-fee process with various conversions. So that's kind of how just a quick run-through of
how the modern financial system operates. As a key part of that, Chapter 15 then discusses how
fiat currency is created and destroyed, which is, of course, key in the modern sense to how
that modern financial system is actually operated. Alden explains this most essentially through the
distinction between two types of money in our system, base money and broad money. Base money
is a direct liability of the Federal Reserve, a direct entry on their ledger. This can consist of
physical banknotes or cash reserves that commercial banks hold with the Federal Reserve.
So the cash, the commercial banks are holding with the Federal Reserve on the Federal Reserve's
base ledger. So that's base money, which again, a direct liability of the Federal Reserve.
Broad money is all the money that the public holds in a broad sense, which includes the base money, but also includes money that is created when a commercial bank holds a fraction of a deposit, promises that that person can withdraw the whole deposit and so has a claim created in that sense, but then only retains a fraction and then loans out the rest, which create further claims.
these are all forms of broad money. So broad money is now a claim on a commercial bank and not against
the base ledger directly. Those types of claims can be destroyed, for example, if a commercial bank
defaults. To quote Alden, we often think that a dollar is interchangeable with another dollar,
but really when we go from interacting with physical dollars to bank account IOUs,
we switch from owning a direct liability of the Fed Reserve to a fractional claim for a direct
liability of the Federal Reserve. Again, two types of money, base money, that direct claim,
and then those later fractional claims that are broad money. In summary, central bank manages
base money. Commercial banking system operates with a larger amount of broad money that is an
indirect and fractionally reserved claim on the base money. The Federal Reserve directly determines
the base money, but it also indirectly influences the creation and destruction of broad money.
It encourages commercial lending through low interest rates, which will increase that broad money circulating through the system. And then it engages in quantitative easing and quantitative tightening. These are incredibly, when you get kind of into the nuts and bolts, complex things, broadly speaking, quantitative easing increases the money supply.
The Federal Reserve buys something from a commercial bank, such as a treasury or mortgage-backed security.
It's buying something, taking something in from the commercial bank, but giving them money.
And so there's more money going in the system, increases money supply.
Quantitative tightening decreases the money supply.
The Federal Reserve sells an asset, and so it pulls in money out of circulation, so less money in circulation.
Again, Alden then, after this, goes into incredible detail regarding the creation of money.
but she very generously gives us permission and says we can skip this if the details are not that
important and if you're not a banker or don't have you know some deep desire to go into the
nitty-gritty um you can skip it in fact going over at orally is not a good idea there's charts there
that are very detailed too um so we accept that invitation we skip over the details the importance
in understanding the entropy of fiat ledger i think is just as that distinction between base money
actual liability of the central base ledger, and broad money, which is all circulating money,
including the IOUs generated by the fractional reserve and lending practices.
Maybe a little quiz to help us understand the distinction again. We can ask ourselves,
can individuals influence broad money supply? Theoretically, yes, an individual could withdraw
money from a bank and hold physical cash, which is base money, and so they've influenced the broad
money supply because it can't be relent out. Practically speaking, though, we know there are
limitations on the amount daily you can withdraw, perhaps with certain banks, and also the amount
of physical cash in existence is just limited such that everybody couldn't withdraw all their money.
So now we get to chapter 16, pricing as a mechanism for organization. And here,
this is really a debate or tension between stable prices and prices as coordinating signals. So
a central banker type, they like price stability, which they define actually as gradually inflating
price. And they think that type of stable price is good. The person who is maybe of the more
Austrian economic bent sees prices changing as good. Stability is not an inherent
good because changes in price send a signal about what is needed. A price includes all the
information from millions of individuals doing millions of transactions daily about what they're
willing to spend in order to obtain a product. They utilize real-time local knowledge that is
specific to them. All of that knowledge is then aggregated in the form of the price.
To look at an example of this tension between price stability and prices as coordinating signals, we can look at gas shortage.
Alden gives the example of in Europe after the Russian invasion of the Ukraine, Russia no longer wants to sell to Europe.
Prices in Europe of gas go up very quickly.
The central banker type might be inclined to say, let's put a cap on prices to make it fair so everybody can keep on getting the gas and everybody has equal opportunity to get the gas, not just the wealthy.
The more Austrian economic type is going to say, but that's going to suppress important information signals that are being sent by that high price.
If the price is high, then people will tend to use less of it, conserve more, forego unnecessary usage.
Those who value gas very highly, if it's very important to what they do, maybe a trucker,
they need it, they're going to pay more for it.
So the most important aspect of that, if the price is high, a signal will also be sent
out to the rest of the world.
Hey, you guys, come sell us gas.
You can make a lot of money.
We need it badly.
In the Ukraine example, that's what happened.
Liquid natural gas ended up being rerouted from other places and sold to Europe in response
to the price as a coordinating mechanism, sending out information to the world.
Why is this relevant to the entropy of fiat ledgers, which is what we're concerned with here?
So money, too, has a price.
And in a centralized fiat system, we could say that its price is set by central bankers in the form of interest.
So the interest rate on loan is one way to look at the price of money.
In a decentralized system, maybe each private bank makes their own lending decisions, sets their rates as is best for their region and what's going on and their customer base. Based on prevailing market conditions, they make these decisions.
In a central banking system, you have 12 people on the federal open market committee set an interest rate. So they don't get this, you know, they are in this position of not receiving all of this information from price as a coordinating mechanism, but instead top down imposing a price on money based on what they want to do with the direction of price, the price of money.
it's like trying to set the correct price for natural gas and a gas shortage
what a centralized committee is doing when they set the price of something like money
this does
well the ability of a centralized entity like the federal open market committee of the federal
reserve to set the price of money in a sense through interest rates raises another question
In the past, we've talked about how strong is a currency, how weak is a currency.
But there's actually another really important question.
How flexible and fluctuating is the ledger?
How often does the money as a unit of account implicitly change?
How often does, if money is a ruler, how often does it go up to 14 inches and then contract to four inches?
And how often does it stay relatively stable over time, in a sense?
people who are, when money rapidly changes its value, people saving money are hurt because
the dollar has rapidly lost value. They can buy less. People who are borrowing money then are
hurt when the dollar rapidly gains value, it becomes more difficult to pay back their money.
This makes it hard to plan for the future if the value of the dollar is changing without respect to
the system as a whole making the decision, but instead being imposed from top down in a way
that's an opaque process. If you are the producer, you need to negotiate contract prices for all the
inputs of your product. And that's difficult to do if you don't know if a central banker is going
to radically change interest rates. If you're an employee, you need to be able to negotiate your
wage with your employer. So you also need to know how much is the currency going to inflate in the
future through decisions of a central planning entity manipulating or changing interest rates.
So to go back then for a second, I mentioned that central bankers are in favor of stable prices
and that stable for them is gradually increasing, which usually is defined as like a 2% inflation
target is what they define as stable. All the notes that that 2% inflation target in actuality
is actually higher rate of inflation because the way that that inflation is measured as a basket
of consumer goods is flawed. Naturally, also, Alden says, prices should deflate over time.
The 2% inflation target is odd because left to its own devices, one would expect that the prices
of things would deflate over time, get less because better technology enables more productivity,
which enables more goods to be sold and prices to be lower if they're determined by a free market,
which is good for consumers because goods are now cheaper and also for savers
because they can buy something in the future for less than they're buying it now.
So saving is then a good idea.
But it's bad for central bankers.
To quote Alden, in their policy framework, prices must constantly go up.
Excess saving needs to be constantly discouraged and people need to be kept on a constant treadmill of consumption and borrowing to support continual and smooth economic growth. That's the central banker's idea.
Inflation is good for central planners and not incidentally, it also financially benefits those who are politically connected to the central planners.
It allows productivity gains to be siphoned away from those having the gains in productivity and then amassed by the central planner and allocated to political allies.
It allows, in the same way, the value of people's savings to be drained through inflation.
And so non-transparent taxes to be imposed and it discourages saving for the future in that way.
Again, encourages present consumption.
This brings us to chapter 17, the financialization of everything.
If money is not stable in value over time or deflating, people have a strong incentive to hold other things with greater scarcity like gold, equities or real estate.
That this is the financialization of everything.
Everything becomes financialized, monetized.
scarce things end up being worth more than their actual underlying utility, whatever you would use
them for, because people then begin to amass those things to protect themselves from inflation.
You can print money, but you can't print more beachfront property. So you buy that beachfront
property because it will retain its value, whereas money will not. This has a lot of negative effects.
For equities, for stocks of large companies, their value is inflated way beyond the fundamentals of that company.
It gives these large companies then this inflated value, which gives them better access to capital and an unfair advantage against smaller companies that don't have that.
Which this tends toward to encourage malinvestment, bad investment.
It redirects capital to these larger but oftentimes more inefficient companies, which allows them to underprice their goods and continue to operate even when if they didn't have access to people piling that money into them to preserve it from a way to protect it from inflation.
They didn't have that.
Their product would be unprofitable and they would just fold as a company.
So you encourage capital misallocation.
in the form one of the negative effects and i think we're all savvy to this we see it on the
day to many of us see it on the day-to-day level in real estate housing prices increase way beyond
the value of a house as a place to live if people are piling money into the real estate market to
preserve and protect it from inflation a millionaire now owns multiple houses they don't live in
in order to protect their wealth a working class person struggles to buy one to actually live in
And the overall effect of this is people, what people are doing is they're encouraged to short the dollar, to take out loans, use credit, to buy these harder assets like gold, equities, and real estate.
Because the cost of the loan is going to depreciate over time, but the value of the asset is going to stay the same.
but also
inflation is going to be piled on top of that
but the value of the asset is not going to become
diluted. In a system
where real assets are financialized
in this way to protect people from
inflation to quote Alden in general the modern inflationary financial system rewards people who have access to low interest rate debt and then can use quite a bit of it judiciously
So in the system, savers regularly get diluted, over leveraged entities regularly default, and the sweet spot has been to permanently leverage, to be permanently leveraged without being over leveraged.
Again, this system encourages people to short the dollar by taking out credit to buy harder assets with that credit.
The use of debt and credit to capture value then brings us to the next chapter, chapter 18, Beneficiaries of the Cantillon Effect.
So we left the last chapter with this idea to quote Alden, the ability to effectively short fiat currency with long-term debt at low interest rates has historically been a key mechanism of wealth creation in this inflationary system.
And the inability to do so, to take out that debt, to short the dollar, represents being shut out of a key mechanism of wealth creation.
Some people benefit then, and some people suffer under this system of capturing value through debt.
Poor individuals have less access to credit.
We all know the story.
High-interest payday loans and credit card debt, not a good way to amass scarcer assets.
You can't short the dollar.
The interest rate's too high.
The wealthy, though, tend to have access to lower-interest credit.
And the risk to them of shorting fiat, of using debt to capture value, which is defaulting, not being able to pay those loans, is actually mitigated for the wealthiest people because historically the government has performed selective bailouts for them if the system begins to fall apart.
We've all seen this in the 2008 subprime mortgage crisis, the government swooping in to backstop those failing financial entities.
In the 2020 COVID lockdown, that aid money, Walden cites a study which showed that three quarters of it went to the top 20th percent of wealthiest households.
And very little of it went to what its purported purpose was, which is to keep workers actually in their jobs.
so the result of this prudent savers those people who don't use risky leverage have their savings
diluted to pay for the bailouts of those who get wealthy shorting the dollar the bailouts further
benefit the highly connected political class because they're also the first recipients of
newly created money and this brings us to the title of the chapter the cantillon effect
they can use the money before the prices rise due to the inflation caused by the creation of that new money.
So this is the Cannellon effect.
Essentially, if new money is printed, the first person to use it, the one who introduces it in the system,
still benefits from the low prices that the system has.
The system has not yet priced in an increase in the money supply.
After that initial injection of money, the prices begin to rise.
And so subsequent users of the money benefit less. The effect is that those who get bailouts can use that new money to buy the houses and hard assets of those who did not get bailouts. And when those people then turn around to use that money, all the asset prices have now gone up.
So, Chancellor on the brink of second bailout for banks. That's the true horror of that phrase. History also repeats itself. These cycles of booms and busts are all programmed into the system. The fiat system is working as intended, in a sense, which brings us to the final chapter, the long-term debt cycle.
Historically, wealth has always compounded upward and poverty compounded downward, so to speak.
If you have a surplus, if you're wealthy and generate a surplus amount of value, you can invest that and grow over time.
And that growth is then exponential.
If you don't have that surplus, you tend to get caught in a debt spiral and you continue spiraling downward at an exponential rate.
Throughout history, power has dealt with this poverty consolidation and the resulting social agitation of the lower classes through partial resets of debt.
Alden cites Hammurabi's Code, giving a specified term limit for debt slavery of three years.
Deuteronomy, the book of Deuteronomy, the Bible, canceling debts at the end of seven years.
She mentions Solon's reforms in Greece, which have a lot of redistributive taxation, the canceling of debts, a way to try to ease this tendency to consolidate poverty downward and consolidate and compound wealth upward.
Now we have in the fiat system, in the entropy of the fiat ledger, a system that has locked us into wealth compounding upward and poverty consolidating downward.
To describe this, Alden talks about short-term business cycles then leading to a long-term debt cycle that are kind of nested in the structure of that debt cycle.
The long-term debt cycle is determined by a series of short-term business cycles.
What is a short-term business cycle?
The cycle is something like this.
The central bank cuts interest rates to encourage lending.
Individuals and businesses then begin to engage in risky loans and speculative investment because they're trying to short the dollar.
Central banks then try to restrain this.
They raise the interest rates.
The economy, in response to the raised interest rates, then contracts, retracts, and people begin to default on loans, lose their houses and savings.
Policymakers then step in.
They selectively bail out the well-connected entities, those that are perhaps determined, quote-unquote, too big to fail.
This selective bailout then provides, it's usually new money infusion creation, printing, something like that, is the injection that then fuels the beginning of the next cycle.
And the business of the next cycle starts with the cut in interest rates, encouraging lending.
But in the next business cycle, it's those selectively bailed out entities that are in the best place to benefit from the next business cycle.
She gives some historic examples.
One is the 2000.com bubble burst.
There is a bailout selectively, which then fuels real estate speculation that leads to the 2008 subprime mortgage crisis, which then leads to another selective bailout.
The short-term cycles seem like boom and bust because of the bailouts, but there's never actually a bust because the debt is not actually completely cleared from the system.
Instead, what happens at the end of a business cycle when it selectively bails out certain entities?
The debt is just taken on from private to public, taken on by the government.
So in this way, short-term business cycles build up to a longer-term debt cycle.
Each business cycle began with a lowering of interest rates to stimulate the next round of speculative investment. In subsequent business cycles, you though eventually get to the point where interest rates, in order to jumpstart again, are zero or negative. You get to the point where you can't go lower.
At this point, at the end of kind of cumulative business cycles, the choice becomes either a massive default or massive money creation, and the government always chooses money creation.
Alden describes this as a one-two punch.
When each private debt bubble pops at the end of a business cycle, the public debt bubble simply grows.
so to quote alden in other words as the long-term debt cycle unfolds the excess debt starts to shift
from the private sector to the government and the true climax of the event does not incur until the
government itself runs into an acute inflationary debt spiral again the public debt bubble is pop
but the but the private debt bubble is popping at the end of the business cycle the public debt
bubble is just growing and growing as a result of multiple cycles. When do we hit this final spiral,
this acute inflationary debt spiral that Alden mentions? Well, so this is going to be the point
where higher interest rates can no longer be used to prevent private individuals from making these
risky investments and speculation to acquire scarce assets because the government has too
much debt. And so it can't pay that much interest without massive money creation, which would cause
even more inflation. So there's a dilemma in the spiral. High interest rates lead to a fiscal
spiral toward higher deficit-driven inflation. Lower interest rates encourage excessive borrowing
and subsequent money creation by the private sector in order for people in the private sector
to buy hard assets to protect themselves from the inflation they are creating. To quote a meme that
Alden likes to use on Twitter, nothing stops this train. Historically, a final fiscal spiral in this
sense ends chillingly through financial repression. Essentially, the government, at the end of the day,
it can't raise interest rates enough to keep people from fleeing the dollar. So what the
government does is it makes people hold money and then inflates its own debt away. Those that try to
run for the exit into hard assets are simply prohibited by law. We saw this in the past with
the government outlawing the possession of gold and confiscating it. We've also saw in the past
with lending restrictions and capital controls. So basically what happens is as the public ledger
is debased at the end of this acute fiscal spiral, people are prevented from fleeing to
a different ledger through financially repressive measures. In concluding this section,
And all the notes that kind of not only does nothing stop this train, but that nothing could have stopped this train, that it's this whole entropy of the fiat ledger is the necessary result of the technological innovation of telecommunications, which we've talked about in depth in past conversations, which introduces a speed constraint into finance.
Gold no longer works once you have telecommunications, which makes the way for abstractions on top of gold, paper claims on gold, and the eventual dropping away of gold from the system, which is the world of fiat.
Which includes a natural set of incentives, an internal set of incentives that lead to these short-term business cycles, long-term debt cycles.
So I'll end with a quote that's kind of long, but Alden just puts it all together, and I think it's worth ending at this point and with this quote.
Could this have turned out differently?
Around the margins, it could have.
But for the destination, I don't think it could have.
In addition to the historical human tendency to think linearly, even as debt compounds exponentially, this time the generational debt accumulation was empowered by the fact that the invention of telecommunication systems allowed commerce to occur at the speed of light, while any sort of hard money could still only settle at the speed of matter.
Gold, despite being of sounder supply than the fiat dollar, takes considerable time and expense to transport and authenticate, and thus could never really present an alternative in a digital era.
Once the fiat dollar came into being, those who managed it were able to discard gold as a supply constraint without much pushback and use the flexibility of their ledger to opaquely finance war, entitlements, and all sorts of things in ways that don't add up in the long run.
It was the first time the success of the fiat monetary system where a weaker money globally won out over a harder money, and it occurred because a new variable was added to the monetary competition.
Speed. The speed gap between commerce and settlements empowered banks and central banks and created an irresistible arbitrage that the whole world turned to, which led to a greater level of centralization for the public ledger than ever before.
That is the entropy of the fiat ledger, a natural, inevitable occurrence once you begin to adopt fiat unconstrained by any sort of scarce resource as your money.
So that's the summary.
That's the summary of part four, the entropy of the fiat ledger.
Again, I hope it boils your blood.
It did mine when I was reading it.
It reminded me again of the anger that necessarily makes one want to smash buy some Bitcoin right away.
I also had to let a lot of details, though, and excellent anecdotes drop out of that telling of part four.
I mean, what do you think, Lucas?
Was there anything that as I went through kind of what I determined to be the essential narrative, was there anything that I let drop out that you thought was incredibly interesting or maybe essential?
As usual, you did a great job of covering everything.
I'll throw in a little context on a couple of things just because this helps me visualize things.
And so in one in in chapter 14, I believe, Alden talks about the growth of the base money.
Sorry, that's chapter 15. So talks about the growth of growth of the base money.
And in like 1913, the growth, it was like two point something billion.
And now it's like five point something trillion or whatever.
So as you very accurately just noted that our brains think linearly, they don't think exponentially, so they can't really comprehend what that means because trillions are just magic numbers to us.
I kind of did a little poking around, a little math.
So that means that our base money supply has increased by 193,400 percent.
It also means that the buying power of the dollar has decreased by 99.94%.
And even that's a little misleading because it's exponential to go from decreasing by 99% to 99.9%.
Like that's a 10x loss in buying power.
And we look around and we don't see that things necessarily cost that much more. In fact, what we see oftentimes is that a lot of things are relatively close to what they were in the 30s or in the 20s, a bushel of wheat or a gallon of milk.
You know, it's higher and it's certainly significantly higher, but it's not a mass amount higher. And what that reveals to us is those are the cost savings of technology that are keeping us barely hanging on.
And as I was thinking through this chapter, there's a couple of things that to me just scream at the speed at which this is going to come crashing down.
One of those would be that never before in an inflation event has there been the ability for a central bank to offer digital money.
So like you think about all of these hyperinflation events from the 20s and the 30s and even up through the 90s in a lot of cases, the ability to just put it onto a digital ledger was not available.
So, I mean, first, that alone takes it to the moon.
Think about how much faster German hyperinflation would have occurred if instead of having to actually print money, all they had to do was change in entry in a digital ledger.
So that's one.
And how much faster it collapses if instead of going to the bank, waiting outside the door for it to open, you can go onto your online bank account and hit withdraw.
Yeah.
Yeah. And so that's the other thing. That's the other side of it is that never before have you had a voluntary off ramp that was available to everyone who, as you say, you can you can do it whenever you want.
Like assuming if you can get your money out before the capital controls go into place and before they hold the head of the citizenry underwater until they drown in fiat.
If you can do that, the rate is just phenomenal.
A couple more things about this is this system is designed to slowly nationalize every industry.
And it does so by the bailouts. Once you bail out an industry, it's never the same. It's always at that point. It has an established price floor. It has an established price ceiling. It is nationalized. You can say that it's not. But if you want to look at the mechanism of it, it's nationalized.
So you are slowly moving more and more towards a centrally planned and centrally run economy.
None of those has ever worked.
China is doing a – China was doing a bang-up job for a little bit, we thought, and then turns out that, oh, no, some things just still aren't working very well.
But in order to do that, they had to put capitalist tendencies into it as well.
They had to open up the free side.
They're never nationalized in the sense, though, in the good sense where like if you have great oil wealth, sometimes a country will nationalize the oil wealth and like give distributions of that to each citizen.
Like we didn't nationalize Goldman Sachs and give everybody a chunk of it.
Instead, they just gave big bailouts to the executives there.
It's like nationalizing the flaws of the system, but privatizing the gain from the system or, you know, letting the gain still fall to people who are just, you know, purportedly private or something like that.
Yeah. Yeah. So it just moves fast.
I am. And the other thing is that it's very encouraging to me because you you did note that there's the concentration of wealth at the top and poverty at the bottom.
And it gets more dense. The rich get richer, the poor get poor in this instance.
So the poor are the first to feel the effects of inflation.
They are the ones who need to get out of the system the most.
And now they have the opportunity solely by having an Internet connection to be able to learn, to be able to escape.
As Michael Saylor talks about it being Bitcoin is on a need to know basis.
And when you need to know, that's when you come around to it.
And so it's very encouraging in that sense, because there is no doubt that we will see the greatest wealth transfer in history.
There is no doubt that it will be on balance far more equitable than any sort of wealth distribution that we've ever.
I mean, even now, when you look at how Bitcoin is a relatively unknown asset, I mean, it's known, but it's it's not it's certainly not fleshed out its market potential.
But even now, it is still more equitable. The distribution is still more fair than global wealth, which is kind of shocking because you can audit the Bitcoin network and see exactly how many coins are in every single wallet.
And there are some wallets that have a million, there's, you know, Satoshi's wallet has a million coins.
And there's a whole lot of people that have 0.00001.
And that is still more fair than what we currently have.
And so it's encouraging.
I like it.
I look forward to the coming of the change and the tide moving.
Yeah.
And so I don't know.
I want to, it incites a lot of rage and you did a really good job, I think, of framing that with some colorful language in the beginning.
But to look at the way that I thought about this when I was writing notes, I took notes on what the fiat design principles are.
And the first principle is that it's a constant devaluation of your money by increasing the supply while manipulating the demand.
And to me, that sounds like dilution and fuckery. They sell it to us as inflation and stable prices. But it's more accurately described as currency debasement and theft. Because you're you're stealing, you're stealing wealth without asking for it, right?
If I take something from you and I didn't ask for it, then I have stolen that from you, regardless of who I am or what badge I have.
And so that's the big part is that you siphon wealth from citizens.
It flows to the government, to two entities.
It flows to the government and it flows to the holders of assets that are scarce and desirable.
So the nationalization part occurs because the nation eats the debt of the citizens whenever
buss occur as a way to sort of assuage them and basically placate and sedate them from uprising against the system that is continuously robbing them
And the real danger of all of this is, yeah, it's all unfair and it is theft and it is awful and people die.
The real danger is that you remove volatility from the system and you make it less and less and less resilient.
And it's as though you go from, I'm rubber, you're glue, you know, I'm resilient.
You can throw anything at me and it'll bounce off to now I'm made of paper thin glass.
And every time, every time that you plug a hole in this dike by sticking your finger in it,
Every time that you patch a girder in this railroad bridge by replacing steel with dry spaghetti, it gets us closer and closer to a really majestic failure, like a truly majestic, huge loss.
And so, yeah, it is by design.
And there's just so much, there's so many, there's so many half truths that are sold.
Stable prices are not stable prices.
Yeah.
It's ever increasing prices, outpacing all of the gains, all of the gains of technology.
You know, I looked out the window and I see a tractor that that can do probably you could probably plant 300 acres of corn in a day with it, maybe more, actually.
And I think about when people first arrived here, they had a horse and that horse could or an oxen.
And they were probably lucky to get an acre in a day.
You know, so let's take a 500 X efficiency gain.
And it's even more than that too,
because you're more efficient on the fuel and everything else,
but let's take a 500 X efficiency gain and still be paying more for things
everywhere. You know, like I think that should enrage people.
I think that it should, I think that it should cause people to protest.
I think that it should cause people to be upset.
And ultimately, I think it should just give people all of the courage that they need to exit that system because it just sucks everything into it and kills everything that stays within its reach.
Yeah. And I mean, I like the way that rhetorically Alden frames this whole part four is the entropy of fiat ledgers. Entropy is a naturally occurring condition of any system. It's that chaos that always creeps in the frictions that are always there in the way the systems always degenerate and decline.
And so by framing it and then going further to describe it as a naturally occurring consequence of the incentives of the systems, the technological advance of the need for speed, she, I mean, rhetorically, I think, cuts off any sort of argument that, no, we can just reform the fiat ledger, right?
There's some said we can elect new politicians. Our side, if we if right or left, you know, if our politicians in power, we can do it better. Whereas, I mean, the way Alden describes it, like both sides, like politicians are incentive and incentivized to always run a deficit to never run a surplus. That's an incentive of the condition.
There's always going to be the well-connected politically that are going to be incentivized to seek bailouts and to obtain them.
And it's just a naturally occurring aspect of a fiat ledger, of a flexible ledger in this nature that that flexibleness – is that the word? Flexibleness?
Flexibility.
There we go. Flexibility of the system is going to be – yeah, is going to be manipulated and used by human agents because that's what human agents do.
And so again, like entropy of the fiat ledger, that's a really good way to conceptualize it for yourself to both be angered that we've been in this system for so long, but sober-mindedly say that it's naturally the way this system had to play out.
And so sober-mindedly, we need to exit it and not listen to any sort of placating person on the left or right who says, here's how we're going to reform it.
yeah and entropy is something that you can't stop you can slow it and that's it that's all you can
do is just um do maintenance and try to slow it down you can see that the rust spot is starting
on the piece of metal and you can clean it off and uh repaint it and seal it so that it doesn't
rust anymore or you can let it go and it will eat the whole thing yeah um and so that's when i think
about really the beauty of being able to exit this system it's that you are able to escape that i
so if if our economy i i like to visualize it like this now if our economy was a tire and it
was filled with 40 pounds of per inch of air pressure which is what your average car is
if it had 40 pounds of pressure in 1913 when the federal bank was created it would now have
0.02 pounds of pressure. So you've lost everything beyond that. Um, it's, it's not just flat.
Our atmospheric pressure is 14.7 pounds per inch. So that's, that's your natural state. Like,
so there is a natural state we're below the natural state to the point that, um, if you want
to carry that analogy through, it's creating a vacuum and it's a black hole and it's sucking in
everything that is within its reach. And the only way that you can escape that reach is to exit the
system, is to put your dollars into Bitcoin, sell your dollars, take the profit, because why would
you ever hold something that can be created out of nothing, paid with more nothing, stolen from you
at will, and seized whenever someone disagrees with you? Why would you ever choose to participate
in that system unless you were able to set the rules and you were able to benefit from it.
And it's clear that 99.99% of the people in the world are not able to benefit from that system.
So there is a clear and direct route and cause and motivation for nearly every single person
in the world to go move into Bitcoin immediately.
there's also a cause for everybody else to do it eventually.
But yeah, I mean, you know, it's, it's, it's a,
people are going to fight and they're going to hang on, but there is no out.
I, this takes me back by the way, to two discussions ago where I said,
when you have a pie that has six slices and you tell seven friends that they
can each have a piece of pie at that point, you've lost.
It doesn't matter if then you carry it on to 7 trillion pieces of pie.
and along the way you issue bailouts and you do this and you do that. The second that you did that,
the second that you initialized fractional reserve lending, the second that you initialized
creating something out of nothing. Um, and, and, and, you know, that, that seventh friend showed
up and you handed them a piece, a picture of a piece of pie and you said, here you go. And they
accept it. When you accept that, then you're done. It's over. It's only a matter of time
at that point. It's all over but the crying. Yeah. I still disagree with that. I still think
fractional reserve banking will be possible on top of a Bitcoin system. I still think that if
people go into it eyes wide open, that their deposits are not entirely theirs. And if the
debt is also allowed to clear, if entities are allowed to default and not backstop with the
government i think it's a valid way things can play out but i don't we've talked about that last
time kind of ad nauseum a couple times ago well i guess it's actually since we bring it up we still
have we still have disagreement on it i think it's probably worth noting that i think you and i just
think about what's different in terms of whether or not it works i say it doesn't work because
there will be defaults and people will have their money lost you say it works because there will be
defaults that people have previously agreed to yeah that's it yeah i mean really people can still
in a Bitcoin basis that people can still take on risk and will take on risk.
And not for me, buddy.
That's not something that I, I, I'm pretty risk averse.
You know,
that's one of the things that like angers me a lot about rereading all this
is like, you know, I like most of my life,
live my life as a sort of financially and economically naive person.
And I always had this natural prejudice towards saving and away from
investment.
And then you get to know more about how the financial system works and it
completely is biased against anybody who wants to save and like people who are taking on and using
credit like that's actually the smart thing to do that's incentivized by the system it's the
natural state of the system like i was foolish to think that saving was that you don't save you can
never stand still you are melting it's a melting ice cube you know you have to keep on running
faster and faster in order to outrun inflation which is two percent and faster two percent faster
every year. And like, you know, 2% inflation a year, all the notes over 35 years is prices
doubling. And it's always worth the 2% as well. But like, even that in itself is for to me,
incredible. So yeah, the power of math, you know, if people were taught, just simply taught a little
bit of math comprehension as a, as a focal point, it would be a lot, it would be a lot harder to
pull the wool over people's eyes when it comes to this. But this system requires that you focus
on the short term and not on the long term. It requires that you do whatever you can today
in order to get to tomorrow without worrying about 50, 100 years from now. And so it incentivizes
short-term thinking, which incentivizes terrible decision-making for the overall citizenry long
term. And it's just, yeah, very unfortunate the way that it's, but now one of the things that
Alden notes in there is like, you know, Hey, is this gonna, is this gonna last? Can it last?
Like, well, you know, it's lasted for a long time. The dollar has been around as this, as this
reserve currency for a long time. I challenge that. It's not that long. I looked it up. There
is a Japanese woman that was alive before the Federal Reserve was created. She's outlived the
Federal Reserve so far. It's very unlike, I mean, it'll probably outlive her, but I don't think by
much. And so if you want to zoom out and think about in terms of the length of something, if you
were to say something is long lived to say that there's a human that's lived that long, I don't
think that's right. You know, it kind of puts it in perspective. I do think we're going to look back
just like I think we're going to look back at this time in history where we walked around
with a piece of glass and metal in our hand, a little rectangle that we stared at and we poked
at as though we were scratching in the dirt. I think that that time is about to pass. I do also
believe that the time of the fiat system is going to be looked at back in history as a real blip,
Um, just kind of like this, we had this deviation, we had natural money, natural commodity money that really got faster and faster all the time.
You can say all the bad things that you want about the speed at which you can transact with gold.
However, it was way faster than transacting in cows.
It was way faster than transacting in, um, beads that were not, um, equivalent in shape and desirability.
So we had always been moving along that, moving along, accelerating that characteristic trait of speed that we had been trying to optimize for it.
And, you know, you said that as, you know, when the technological innovation of the telegraph came around and the speed at which business can be done outpaced the gold and therefore you couldn't settle as fast.
And that created the need for the abstraction. It did. It didn't create the need for the abstraction. It created the need for a faster money. And the solution proffered was an abstraction. There were other solutions that were proffered. We talked about this in Lowry's book in Softwar, which was Henry Ford's idea that we could have an electric currency.
so there were faster ideas yet they just weren't technologically possible right and so yeah yeah so
this is just I don't know this like think of it as like this is like the stage where your entire
face breaks out and you're 13 years old and everything is wrong and your your voice squeaks
every time you talk and you trip because you're growing into your body and you don't understand it
And just everything about you is terrifying.
Like that's kind of the, like, this is like the puberty of,
fiat is the puberty of the monetary system.
It's just the awkward stage that you got to get through to get to adulthood
and be mature.
Yeah, no, but there's been a lot of pimples that have burst
and then not been adequately tended thereafter.
They've been bailed out through, like, Accutane or Retin-A
or whatever the stuff is, the bad remedies.
So, yeah.
i i just want to no go ahead actually i want to hear two points i was what i was just going to
say like that the fact that a japanese person is still alive who was alive back then japanese
longevity is a flexible ledger i don't think they actually ever died like the some like combination
of anime and sushi for whatever reason like it's just it works well it's an incredible tonic for
for like longevity the second thing is so tomiko ituka is that who it is tomiko ituka
Right on. Yeah. See what she eats. See what movies she watches. That's what you want to do.
So but the other thing, I mean, so this the idea of the electric money obviously kind of gestures towards a future that we now settled upon where Bitcoin is the next possible iteration of what a ledger might be.
And in fact, the next part of the book is Internet Native Money Part 5. So that's absolutely where it goes.
In this chapter, though, another very chilling aspect of it is that the end of the long-term debt cycle, when the public debt has accumulated to such a stage that it's going to burst, that's been solved historically, all the notes, through financial repression.
And so in the past, again, executive orders at 6102 where they outlaw individual private gold possession.
so it's not just that like if for me again it's another it's another reminder that
not your keys not your coin and financial repression in the future could take the form
if bitcoin is really a alternative to the fiat system in the past what's happened is
when the government's debasing the public ledger to deflate the debt they've locked all the exits
And so to prevent people from going to a different ledger, gold was a different ledger. So, you know, it's not if history is any sort of lesson, then the exit towards Bitcoin could be blocked in the future, which means, of course, like exchanges where there's a point of control and you don't hold the Bitcoin yourself.
This is definitely a good reminder that if a long-term debt cycle ends in a bout of financial repression, you should take the time now to learn what can I do to protect myself from potential repressive measures, what form are those repressive measures likely to take.
And I think, again, learning about Bitcoin self-custody is something you can do here today. This year, 2025, can be the year of learning how to protect yourself from potential future financial oppression by taking that step and learning about self-custody.
yeah i've kind of moved past the being upset about this and being enraged i know that
i think i remember i remember when i was going through learning about bitcoin i had written down
that there are three stages of growth that a person has with regard to a subject and it's
ignorance is the first stage enlightenment is the third stage and in between is indignation
and it's like you you don't know anything about something and then you start to learn about it and
you're so upset at how awful it seems. And then you finally go to accept it because you've gotten
past being upset and you've found your solution. And Bitcoin is our solution. So I'm not angry
about it anymore. But I do think that we should really have a good laugh about the joke that has
been played on people like kudos for over a hundred years the united states government
has given people ious that they paid with ious they gave out favors that they paid with favors
none of which have ever been able to be um turned in you know if i if you if you gave me a ride to
the airport and I told you, Hey, I owe you. Um, and then you came up to me and you said, Hey,
remember I gave you that ride to the airport. And I said, Oh yeah, that's right. And you're like,
well, will you help me clean up my apartment? I'm moving. And I said, yeah, cool. I owe you.
And you're like, wait a second. You're not picking up books. You're not packing up dishes. You're
like, no, no, no. I owe you. And you're like, but, but that doesn't help me. You're like, yeah,
I know, but I owe you.
So it's so laughable that this actually worked for as long as it did.
I mean, it is really shocking, I think.
And it does point to, speak to, and I think shed light upon the idea.
Everybody wants to traipse so carefully through this minefield of eggshells that could be that there's a conspiracy.
that maybe some bankers got together on an island and they wrote the laws in order to benefit
themselves and in order to feed their own ideas. And maybe it was kept secret from the public and
maybe it was intentionally used to defraud the public. Maybe, maybe, maybe, maybe. I don't like,
there's not really a whole lot of maybe surrounding that anymore. Like in order to
pull the wool over this many people's eyes for this long, I cannot believe that it's not
intentional. It's really, really hard to believe that it's not intentional, no matter how
antiseptically you want to approach it. Alden does a fantastic job. We've both noted this because we
talked a little bit about kind of the difference between Alden's book and Saifedean's book,
The Bitcoin Standard. And one of the things is that he's a much more firebrand of a writer and
And very direct in terms of assigning what he feels to be the accurate, accurate adjectives to describe how this how this was perpetrated.
So, yeah, I just I don't know. I think it's OK. I think it's OK to it's OK to think that it's all a ruse, that it's all a ploy and a plot, that it was successfully pulled over for a while.
It's not going to work forever. We're going to be out of it. We're going to be laughing on the way out because the people that are going to try to keep us into that system, I would assume are still going to be holding dollars.
and that to me is hilarious like right the the ridiculous reflected on the ridiculousness of the
system doug stanhope kind of has a risque joke that since you've said fuckery i will share his
joke so basically the premise is like um this is about the ridiculousness of kind of derivative
claims of an actual asset or whatever but um so he's on a date with his girlfriend they go to a
baseball game and he says hey if this team the team's down like 10 points if this team wins you
have to have physical relations with me and she says fine whatever you know and the team like
rallies and they win the game and then she's all down in the dumps and he's like hey just be happy
i'm not going to trade my claim to my friend he does it better and it's a long joke and that's
just one of the parts of the joke but just yeah just when you say like a favor is not completely
fungible and an iou on a material aspect like an asset or whatever it's an interesting sort of
ontology has an interesting ontology where it's like it's not the thing itself but we think that
you can just create this iou and trade it around for the thing and then cancel it out eventually as
debt um but uh it's an interesting thing like you said that we built a whole economic system on
trading around these ious even just an alden's account between base and broad money like we do
if you told people you know there are two types of dollars in circulation right now one of them
you know is like real in a sense and one is not like what i have no what do you mean like that
doesn't make sense at all. And then like base money, a direct liability of the central bank,
and then broad money this creation of the new claims to the fractional reserve system just like that in itself is kind of a um a pill moment of some sort where you see the truth of the how things are operating Yeah It like the uh the the broad money is sort of the uh it sort of the LaCroix of
uh, of tasty waters, you know, the hint, the hint of the hint of the hint of a IOU
that could possibly be claimed upon. Um, and the, yeah, it's just, it's a joke. Um,
one of the things that I want to bring up again real quick was the,
uh,
desire or the,
so extrapolate the thinking forward to Bitcoin and to thinking about the
world on a Bitcoin standard.
And we can continue to challenge you on this,
I think,
because,
um,
there's,
I,
I did have the thing in my notes of like,
um,
I was thinking about stable coins because I was thinking about,
um,
So what is it that we do that ruins the system?
It's that we try to take volatility out of it.
When we take volatility out of it, when we try to smooth it over,
when we try to have consistent prices or consistently rising prices,
to be more accurate, but smooth that line.
We take volatility out.
We take resilience out of the system.
And it's a lot like taking pieces individually off of an engine
until it simply explodes.
Like you can't just, you can't do those things.
It's, and so anyways, it made me think about stable coins
because I'm viewing stable coins differently
after having read this chapter
because I'm viewing stable coins as simply a very short-term means
to try and stabilize prices
because that's, I mean, that's really all they are
is that people want to trade USDT or Circle or Tether or whatever they are.
They want to trade these instead of trading their Bitcoin
because Bitcoin is volatile.
And on some days it might work out for them and on some days it don't.
First off, I would argue that this is the case.
If you operate on a Bitcoin standard and if you bring in more money,
then you let go, then it will always be in your best interest to operate fully upon a Bitcoin
standard. If you are keeping more than you are spending and Bitcoin is going up forever as it
eats the value of the world, then you are on an upward trend and you will actually not benefit
from using stable coins in order to do your business. It will eventually come back to bite
you. First, it'll come back to bite you because it will blow up. There are holes in that fence.
There is problems with that system. The big problem with that system right now is that all
those stable coins, even if they're one-to-one backed, what are they backed by? They're one-to-one
backed by US treasuries, which is digital fake money. It is not real. And I'm going to say that
it's absolutely fake in the way that I heard Breedlove talk about this one time. He said that
counterfeit money is effectively and mechanistically zero difference from money printed by the
government. It is just like if counterfeiting was the thing that we were trying to stop,
then it would be understandable. It's not counterfeiting. They want more money to go
into the money supply. That's the whole point. They want to dilute the money supply, but it's
not that, that they're going after people for counting or counterfeiting for it's the ability
to hang onto the Cantillon effect. It's the ability to be the first spender of that money
before that it dilutes in value. And so that, that's, sorry, that was a quick aside, but
anyways, yeah, cause I wrote down, I was thinking about stable coins and I wrote USDT and I was
It's like, dude, if they told Donald Trump that it was United States Donald Trump, then he would be all for it.
Yesterday, I had a conversation with somebody who was talking about how now we have an administration that is pro-crypto.
I would argue that we might have some people in the administration that are pro-crypto.
I think the president is just not actively attacking it like we were before.
And that is a little dangerous because I think you can then open yourself up to the idea that using things like stable coins are of benefit.
They're a benefit because there's a huge industry.
There's a huge industry that you can take and profit from.
Like, I think it was like Tether's done like six billion dollars in a year or something like that.
It's massively, massively profitable.
What is that profit?
And this is how I look at all profit now.
What is that profit?
That profit is extracted value from the individuals using that product who are merely losing that value due to Tether acting as a middleman.
And if you want to have your prices not change over the course of a week, if you want to make sure that the Pepsi that you buy today is the same cost as the Pepsi that you buy tomorrow, cool.
If that's all you want, fine, then you kind of deserve to lose.
But if you want to have the maximum benefit over the course of time, put your money into Bitcoin, live on a Bitcoin standard.
And as it eats the value of the world and it takes over everything and it will take over everything because the dollar reached 90 percent market saturation.
The dollar, which was enforced at the point of a gun, which was a terrible system for about 99% of the people who use it, it reached 90% market saturation.
And you've got a superior technological asset that is going to get, you would think it would reach more than 90%.
Like you would think that it would get closer to 99.9% of market saturation.
So that's where we're going.
I think it happens faster than anyone can believe for the reasons that we elucidated earlier, that there are technological off ramps that weren't available, that there are technological dilution mechanisms that weren't available for central banks before.
All of these things, I think, coalesce in a just a wonderful, fiery explosion of the fiat system breaking down in a very fast way and being very rapidly replaced by Bitcoin.
So that was that felt good, man.
I know, but I hope for a future where the where there is a smooth transition and it doesn't collapse.
And I think it's worth dedicating thought.
But there's all these aspects, the entropic nature of the fiat system and these short-term business cycles and the long-term debt cycle that Alden has described do indicate a ultimate fiscal spiral that's not pretty.
And we can imagine the end of one monetary order and the transition to the next also potentially augurs a period of discord and chaos.
But I think that smart people, good people can think about ways to navigate the transition and that it can be done even in the most – it can be done in a better way as opposed to a worse way.
Even if it can't be done in the best way, even if the transition will necessarily be messy and bad and painful, we can navigate that in a lesser painful way than – in a more painful way.
Again, mealy mouth moderation there. But I guess I also see room for stable coins in maybe people in developing countries right now. There's a big market for stable coins. And I don't think it's necessarily-
There is a big market and we're extracting the value of those people.
I don't think, though, that their desire to use of stablecoins right now is an ignorance of what Bitcoin is.
It's just like for their short-term goals and for their needs right now, stablecoins are helping fulfill something.
And maybe even saving in Bitcoin and medium of exchange is something like a stablecoin.
I can see a hybrid system like that.
You have network congestion on the Bitcoin base layer.
Of course, there's ways people are trying to resolve that, but one way to resolve that is stablecoins, and I don't see that as necessarily bad. Again, if people see it as a savings technology, that's 99% of how far we need to go to make the world an immensely better place.
Even if you call Bitcoin cyber real estate, we don't break apart pieces of real estate and use them as money. Real estate is a savings device, and people don't see Bitcoin as basic.
We would if we could.
Maybe or maybe not because we might or we might see the role for something again, just given other technical aspects, the Bitcoin protocol, the speed of the fact that as Lowry says, it's reverse optimized.
There may be specific uses for you where you want something that is absolutely optimized for speed and cheapness or something like that, that is a compliment to Bitcoin.
And I don't say that that's impossible, I guess.
You're bringing out your tender loving side and trying to paint me as this horrible person.
Oh, the second thing I was doing.
You said smart people and good people are going to hope for a peaceful transition.
I'm going to tell you why.
Not to say that.
I just want to say that doesn't mean that smart and bad people are against it.
I'm dumb and bad.
I just say that you're not dumb and bad if you advocate for that.
There's going to be smart people on both sides.
So I think you're smart and good if you advocate for it to come crashing down in a fiery ball of terror.
And here's why.
If you look at people and you look at the nature of people and what causes people to change, it's always a it's an event.
So you can have two people.
One of them gains two pounds a year for the entirety of their adult life.
And then they have a heart attack and they die.
or you can have somebody that gets really overweight in their 20s and they have an
experience where they're they can't walk up they can't walk upstairs and they realize no this is
where it ends this stops here I change now and they then change their entire life
one of those happens fast one of those happens quick maybe they have a heart attack you know
but Tony Robbins talks about this is that you don't change anything in your life until the
pain of staying the same is greater than the pain of changing. And there is pain to changing. There's
pain to changing monetary systems and learning new nomenclature and pulling the wool back over
your eyes. We've talked about how it is a very deep, you become unmoored from your reality a
little bit when you start to dig into this orange pill, red pill world and see it in a different
And so I look at it as benevolent and I look at it as a kind thing.
I think that if you slowly wean people off the system, then all you're going to do is sedate people and slowly ruin more people's lives.
I think if you do it quickly, if the Band-Aid rips, of course, there are going to be catastrophic failures.
But then again, as you said, you're like, hey, man, fractional reserve.
It's perfectly fine.
People, they signed up for it.
And if they signed up for it, then they can lose all their money. That's fine. If you're smoothly transitioning people over to Bitcoin and you're saying, oh, we're going to do a 2% allocation and then we're going to go do a 4%, you can see where the race ends.
Like you can, you can see where it ends up to just go there and wait for everybody else to catch up.
Because if you, if you do it along the way, I, and you know, this is not financial advice.
Everybody has to do that.
This is life advice.
If you can end the race immediately and you can go to the point where everybody else is going and you can be waiting for them to arrive.
And in the meantime, you can start doing other stuff in order to secure your family's legacy for generations, to build your own skills, to build your own network without having to struggle through this constantly devaluing world of living in fiat.
Why wouldn't you do that?
Yeah.
Why wouldn't you do that?
I think that you're painting an overly bright picture of what a fiery crash usually is.
could entail. You give the analogy of a person who, on the individual level, it's better to
increase your health immediately than do it slowly over long term. But when I think about a fiery
crash, we look at past times in US history where there has been a crash of the financial system,
and that has ended in alcoholism, suicide, drug use, people, literal death, bodies on the ground.
And so when I mean a smooth transition, I'm not advocating for any one person. I'm all in on
Bitcoin. And I advocate that, you know, again, not financial advice. For me, I determined looking,
reading books like this and talk, thinking, talk to others, the best plan. But I do think that
we do have a government with a lot of debt, and we need to figure out a way to get out of that in
a way that's going to lead to the least amount of desperation, you know, French Revolution type,
eat the rich people going after Bitcoiners to put them in the guillotine. You never, you don't,
I mean, we don't know what a fiery crash would look like, but we know from human history that it can be an incredibly not just painful thing, but like just murderous and can lead to things like the rise of communism and bloody wars and long periods of people, you know, out of desperation, ending their own life.
And that's what I mean, like a smooth transition where we do it in the way causing the least pain in that sense and trying to bring enough, bring people over as smoothly as possible so we don't have a buildup of resentment against a wealth transfer that occurs.
And so we don't have people that suddenly lose everything just because they didn't read the tea leaves correctly and then they commit suicide.
You know, that's the that's what I mean by smoother transition is mitigating those social consequences of whatever happens after the fiscal spiral ends.
I think if I've learned one thing about life, it's that in order to avoid pain, you have to do the painful thing.
And you have to have the hard conversation, which takes 15 minutes, but you struggle for two years to have it.
And you have to push through the four minutes in the ice bath that benefits you for the next week.
And you have to take the pain.
You have to take the pain.
because avoiding the pain in any way compounds it longer and longer and longer.
And we have been avoiding the pain.
We have been pushing it off.
And what do we have?
We have the most drug addicted, most unhealthy, most displeased, unfulfilled, aimless, lost,
confused, demoralized society that has ever existed.
and that's because we are trying to move slowly in one direction.
And it just turns out that we're moving slowly in the wrong direction.
Right. So I think we should move slowly in the right direction.
And I think that even – I think a lot of those bad social things you mentioned
will be compounded by too drastic a change.
But you could be right, I could be wrong.
We could both be right.
What does moving slowly –
Wait, no, no, no.
What does moving slowly in the right direction look like then?
There are conversations –
And I'm not endorsing this specific thing because moving slowly can mean different things.
But one is the conversation around would too aggressive an acquisition plan for a strategic Bitcoin reserve have the negative consequence of signaling a lack of confidence in the dollar and then –
But you should have a lack of confidence in the dollar because the dollar has nothing to be confident about.
We should, I think, pull back like a smooth transition away from the dollar should be managed as much as possible.
And I don't know if that's possible, but I think it's worth trying to do and having the conversation about what does it look like to try to manage a transition to a Bitcoin standard in the most orderly way possible.
yeah so if i'm injecting heroin into my veins constantly and somebody gives me the opportunity
to stop doing that and eat an apple instead it would be my benefit now i see what you're saying
so there's going to be withdrawal effects right yeah you would literally die if you cold turkey
off a lot of drugs just to extend that analogy so yeah that's uh that took me that took me to a place
careful with those analogies ruined it because a lot of but still i mean you know i i think that's
how you have to view it is you have to view it as like look you're you're killing yourself now
it's not going to kill you as an individual it's going to kill the system and that's the difference
some individuals could die i mean that's the thing i don't know of anybody that's dying by
selling dollars for bitcoin no no not on that but i mean if the system drastically changes we have
a french revolution of people going after bitcoiners i mean i'm thinking like the worst
possible points in history where we have drastic inequality resolving itself towards more equality.
We have like now. And so it's bad. Right. And I just think it can get worse. It could get worse.
And we need to make sure it gets better in a smooth way. So I don't know what that looks like.
I think this is I hope that there is a future book we read that talks about what does it mean
to actually manage the social transition to the Bitcoin standard and stuff like that. That would
be an interesting read because i get where you're coming from i think that there's a valid point
and i don't know what the correct answer is well it takes us back to an earlier conversation we had
where we talked about there's never been a problem that government has tried to solve that it didn't
make worse i disagree with that i don't i think you can't categorically say never someone will
find certainly find one so but i get your point generally that's probably the case yeah yeah i
mean they got a pretty good hit rate of fucking stuff up yeah they do like every once in a while
they stumble onto something. But it's just, it's so hard to think about what the second and third
order effects of things are. Yeah. Of slowing things down, of smoothing things. I mean,
what is going to happen? You know, Hey, we're going to allow you to convert 15% of your net
worth into Bitcoin. And then you've got all the people that have shell companies and different
entities and they're able to do 15% of their net worth as an individual and companies can do a
hundred percent or whatever. A selective bailout situation. Yeah. Yeah. Selective bail into Bitcoin
for sure. That's the, yeah. There are going to be attempts, I believe there are going to be
attempts to maintain the monetary hierarchy. Yeah, for sure. In order to like slow, to slow the
individual at the bottom from being able to get to Bitcoin while they hold the door open for all
the buddies from the old system to try and cross over. And that, that will get ugly. I believe that
will get, that will get, no, I, I, I'm not saying like, I'm not cheering. I'm not cheering for the
ugliness. I'm not cheering for, um, the fiery implosion of the global monetary order, but I am
because I know that the thing that comes next is better. Like, it's like, okay, here you go.
Here's a better analogy. If you're dating somebody that's not working out and it's a toxic
relationship. Are you wiser to continue dating them for another two years and slowly try and
distance yourself from them? You've got a lot of analogies while dating somebody else.
Yeah. You know, all your analogies and like depend upon making this on the individual plane
of one person. And those analogies fail. When you look at the social level of a bunch of people
operating, I think also, I'm going to go back and take the audio and I'm going to
extract the point where it says, I'm not looking forward to the firing plosion, but I am.
No more.
Yeah, you're correct to challenge me in saying that I am thinking about from the terms of the individual without trying to protect the institution.
And I'm coming back to you and I'm saying I don't believe the institution needs to be protected.
I mean more so that like analogies that try to analogize the body social to the human body are imperfect asymmetrical analogies and that some information is lost in transmitting, like doing the analogy between those things because they literally are different things.
One is a human body filled with blood and et cetera.
And the other is not.
So, but I mean, it's also,
you're very good at providing these helpful analogies
because it is good a lot of times to simplify things
and get rid of extraneous elements
to help us understand them.
So it's also a good way to think about it,
but just also caution too.
Yeah.
All right.
I don't know.
Pour gas on the fire.
Throw it in.
Which we can end right there.
Like put the other bell.
All right, guys.
Thanks.
We appreciate it.
You guys have a good one.
We'll talk to you later.
All right.
Thanks.
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