Hey, so Lucas and I are here today. It's Christmas Day. Merry Christmas. Probably release this probably next day or so, I suppose.
We're reading Broken Money, Why Our Financial System is Failing Us and How We Can Make It Better.
We're on to chapters 9, 10, and 11 today. So I'll do what we always do.
I'll do a little kind of super quick introduction of the book up until chapter 9 and then a more belabored summary of the book from chapters 9 through 11.
to get, so even if you haven't read the book to this point, hopefully you can watch this first
part of the video, get up to speed, and then afterwards, Lucas and I will talk about, kind of
analyze the chapter, break it down, what was significant to us. So part one of Lynn Alden's
book, Broken Money, that was kind of, it began with this really vague question, broad question,
what is money? And kind of the point of that was that there were two systems, credit and commodity,
Credit money.
If you think of money as credit, that's like money as the exchange of favors.
If you think of money as a commodity, and this was anthropologically the case, that money was based on physical characteristics that made it suitable for use as money.
Things that made it scarce, things like for a while, shells, and then later on, other sorts of things until finally settling on gold is the most scarce thing.
And looking at these in part one, Alden deduced from these two systems that what is common, what constitutes money, the common characteristics of both credit and commodity money was that money is a ledger for recording transactions and ownership.
Part two of the book, then she moved on from that question, what is money to the birth of banks. And we got this really fascinating kind of historical and technological portrait of the growth of early banking.
specifically, this is the birth of banks in part two, they began as ways, banking began as kind of
ways to provide layers of abstraction on top of commodity money like gold to transmute it into
credit IOUs to make it more quick and convenient to actually use. Gold is not great for transactions.
It's slow, risky to transport. Bandits can waylay you and steal all your goods, steal all your gold
if you have it on your person, and you have to authenticate it.
So gold wasn't great for daily transactions,
although it did hold value.
It's very scarce.
Making gold into claims for gold through layers of abstraction,
IOUs instead of actual gold substance,
enabled it to kind of move quicker and be more convenient.
So that's part of the birth of banking.
So the historical trend in part two,
as Alden kind of really detailed for us,
was a trend for banks to issue more and more IOUs,
claims for gold relative to the gold they actually had
in a fractional banking system,
and also to centralize more and more
to go from a free banking system of many different banks
operating their own ledger to a central banking system
with one central bank operating a ledger
that the other banks then used as part of their reserves.
a big part of that historical story in part two, the birth of banks, was a need for speed.
That's what motivated a lot of the growth of banking, this layer of abstraction on top of gold.
It was a technological story, too.
The development of telecommunications allowed for instantaneous updating of a ledger based on IOUs.
So gold further tended to drop out of the system.
telecommunications with you tend to telegraph and say, Hey, Joe made this transaction update
his ledger with your bank, instead of having to transport a caravan of gold across the desert.
So gold, again, does the further drop out of the system become more abstract claims for gold
become more popular. Banks tend to centralize even more and more. So this is a single ledger
that can be updated in this fashion, instead of having to settle transactions amongst the banks.
And so we have part two, the birth of banking.
We're now moving on to part three of the book.
Chapters 9, 10, and 11 are the first part of part three.
Part three is the rise and fall of global monetary orders.
So the way I was thinking about this is we've been given kind of an anthropological and
historical account of what money is, an historical account and technological account of the birth
of banking as a layer of abstraction on top of money.
And now we're kind of given a geopolitical account of what this development of banking means. That's the global monetary order. So chapter nine is printing money for war. World War I begins and all these countries are kind of dragged into war.
We all kind of know the story, I think. It begins between Bosnia versus Austria-Hungary, but all these treaties activate. And before you know it, the UK is now this island country separated from the reason for the conflict is now dragged into it.
Well, they say they need to enter the conflict in order to ensure that Germany doesn't defeat France and become the continental power.
So imagine now UK is trying to sell its populace on the idea that it needs to enter a continental war about some obscure conflict emerging between Bosnia and Austria-Hungary.
That's tough to do.
So they say, you know, we want to enter this war.
We're going to sell war bonds to fund the war.
And they then say it was a massive success.
We sold a bunch of – we oversubscribed.
We sold all the war bonds.
People are very for the war, and they continue into the war.
But it's then later revealed in 2017 by the Bank of England that the bank just lied about that.
It was actually the bank through its officials.
They realized that only one-third or so of the bonds had been sold, these war bonds, to fund the war, which if they had revealed that at the time would have indicated that the war was very unpopular.
Instead, the bank officials stepped in and bought those bonds that they were selling, which resulted in money being created to pay for the war by devaluing people's savings in an opaque and involuntary way, kind of in a tax that people don't realize is happening.
So the result of World War I is kind of this rampant inflation, further government control due to high inflation because once there's high inflation, the government then steps in to try to stop the high inflation.
They impose rent controls.
They redirect production to the war effort from things that other people are making – that are being made that don't relate directly to the war effort.
They say you can't buy certain securities.
So inflation is used to tax the people secretly for the war and also as a justification to control the economy directly.
At that time, also, because the UK was the world reserve currency, it being kind of at the end of its empire, it could also, by printing a lot of money, siphon value from all these developing countries as well.
So World War I, in Alden's estimation, then demonstrated a power shift from those who use the ledger, which would be people who go to the bank, update the ledger to note transactions with other people, and those who control the ledger, which is now these nation states.
So to quote Alden, throughout the war, countries around the world showed that their governments and central banks now had nearly complete control of the ledgers that people around the world used for savings and payment.
Savings could be rapidly devalued in a non-transparent way and channeled toward what the government considers worthwhile to spend money on.
And this control of the ledger by the government was permitted by what I mentioned in part two, kind of that increasing abstraction and centralization of the banking system.
Gold resisted inflation, but claims for gold do not.
That tech story, again, claims for gold were necessitated because of a mismatch in the speed of credit versus the speed of gold.
and that need for speed led to decentralizing the ledger under the kind of control of the few.
When that happens, human nature kicks in and they begin to manipulate that ledger.
A part of this too is simply also that the governments demonstrated at this time,
if you want to win a modern war, well, first, maybe if you want to drag your population into
a modern war, you need to tax them implicitly. But also, if you want to really mobilize the
entirety of society, take all that savings and value, then the country that inflates the most
is going to have also some sort of military advantage in the short run. That's chapter nine.
That leads us to chapter 10, the Bretton Woods system. So after World War I, now World War I
has kind of demonstrated that new control of the ledger, but has led to rampant inflation.
The UK does try to control that. They try to re-peg their currency to gold, re-establish some sort of stable currency. But the problem was after World War I, they kept the same redemption rate as before the war. So despite there being much more money in circulation, they said that it's still worth the same amount of gold.
So this kind of – all the notes led to an artificially strong currency.
People's wages were inflated, so they were making more gold per hour even though they were doing the same thing, which led to less people being hired because you really can't justify that.
People's jobs weren't worth that much gold if they would now be paid for what they were doing.
And this also affected global capital flows.
And Alden says it affects the United States as well.
In 1929, it encourages a credit and speculative bubble in the United States, leading to the Great Depression.
And we now get to the U.S. government and its response to this inflation that's kind of global after World War I.
The U.S. tries to deal with the Great Depression by declaring a bank holiday.
These fractional reserve banks were failing across the U.S. because there were more claims for the reserves that those banks held than there were reserves.
And so people trying to redeem the reserves lead to these bank runs.
So the government closes the banks, the bank holiday, to allow the banks to be recapitalized, which basically just meant that the Federal Reserve was now going to step in to backstop with 100% deposit insurance.
because the Fed Reserve backstopped failing fractional banks with more currency,
it also needed a way to prevent people from redeeming those new IOUs for gold.
Because once you create all this currency, as we saw with the UK,
you can't just say it's worth the same amount of gold.
And so people are going to redeem it, get all this gold,
because they want to get rid of their paper.
So the US, we talked about this last time.
There's a little bit of history in the last part.
The U.S., through executive order, seizes gold and through other law centralizes.
So executive order 6102 seizes gold from private individuals, prevents them from using it to redeeming their dollars for gold.
And they also shift gold from the Federal Reserve to the U.S. Treasury to take it out of the banking system.
um they also the u.s also changed the dollar peg uh to gold to devalue the currency because
to quote alden currency devaluation favors debtors over creditors and there was no bigger
creditor than the u.s federal government at this time so that's the situation after world war one
this rampant inflation and these attempts to control that inflation by devaluing the currency
All of this kind of globally then leads to World War II, all the notes. Populism and extremism grow during the economic stagnation of the 30s. Currencies fail, savings are depleted. There's class enmity between the haves and have-nots, the working class and the elites.
strong men arise who can kind of reductively state the problem by blaming it on some minority group
and say we can fix this by taking away civil liberties and we get World War II.
In this telling, it's kind of a repeat of World War I. Money printing occurs again to fund the war.
There's interference in the market during the war to control that resulting inflation in the economy
and redirect it towards military purposes.
After World War II, there is then an attempt to establish a global monetary order.
This is kind of the first historical moment where this type of thing occurs.
44 sovereign nations meet at Bretton Woods, New Hampshire,
to try to consciously design what the post-World War II global monetary order is going to look like.
the problem. So here's the problem they want to solve, or they think they need to solve is,
of course, countries need a way to trade amongst themselves when they don't trust each other's
ledgers. Everybody's inflating their currencies, and so I'm not going to trade with you and your
currency, and you're not going to trade with me and mine because they're worthless between these
countries. The situation then seems to devolve into barter. So the Bretton Woods Conference
wants to solve that for the post-World War II monetary order. Also, of course, gold is not
fast enough. So that's kind of not on the table at Bretton Woods as like, you know, a solution to
just go back to gold because we have, as we saw earlier, speed is a necessity in the telecommunications
based era. And gold is not fast enough for most banking purposes, at least the way that it's kind
of been used previously. So two visions of the future of the post-World War II global monetary
order, two possible visions emerge at Bretton Woods, the Bancor versus the dollar.
And we, of course, know the dollar is going to win.
But what's the Bancor?
So that was proposed by, it's a system designed by John Maynard Keynes, this kind of very
intricate, complex, centrally managed, neutral settlement account system based on, it's like
the perfect status stream, which is like this intricately designed mechanism.
It's based on a basket of major global currencies.
You adjust currencies up and down based on deficits and surpluses to make it easier for countries to balance their trade.
There's punitive measures for countries who are chronic creditors or debtors.
So it's just an attempt to fine-tune and have this neutral system, the Bancor, as a unit of account.
It's not like a currency.
It's just a unit of account for international trade amongst countries that's really centrally tightly managed.
The other proposal is by the United States.
Let's use the U.S. dollar.
So the U.S. dollar, the United States proposes, would be the reserve assets. Countries then peg their currency to the dollar, and the United States is constrained because we are then going to peg the dollar to gold at a fixed rate.
So foreign governments then can just redeem dollars for gold. Everybody's happy.
The bankers problem, I kind of hinted towards it, very centralized. It's going to require like it would have required, and I think, an imaginable level of cooperation between all these different sovereign countries to keep it going.
the dollar's advantages primarily all then i think as she describes it is primarily geopolitical
that the united states proposes it it's the it's the major it's the world's biggest economy at this
point it wasn't devastated by war like europe or even great britain um it has large amounts of gold
other countries that shipped gold there during the war and the united states even made acceptance of
its proposed dollar system contingent upon those other countries benefiting from the Marshall Plan,
which is what, of course, the war-torn countries were going to need. It was a program of financial
assistance to these war-torn countries. So for geopolitical reasons, that dollar system of
foreign currencies pegged to the dollar, dollar pegged to gold, is what emerges from Bretton Woods.
But this global monetary order decided after World War II is short-lived. It's agreed in 1946. It becomes fully operational in 1958 with the U.S. now the global reserve currency in this way, but it really only lasts from then until 1970.
U.S.
as soon as it kind of goes live
U.S. gold reserves begin to
decrease because
number of dollars increases to satisfy
global demand for them as a global
reserve as a this reserve
asset that everybody's going to use
countries as
dollars
don't just there's a few
ways that all the notes of dollars
increase in this way so
in part due to
what she calls a euro dollar system. So a euro dollar, as it arises now, is just a dollar that's
in a non-US jurisdiction. So in Europe or in South America, any of those dollars were euro dollars.
These are dollars that are now arising outside of the US control, really, through the fractional
reserve system, which was such that the Federal Reserve could loan money to US banks, increasing
the money supply. U.S. banks then could loan to foreign banks who are now part of the system.
Now we have three levels of fractional reserve banking that are increasing the money,
the dollar supply, including through the creation of euro dollars in foreign bank
fractional reserve systems. The result now is many more paper claims for gold than actual gold.
So the ability of, rather, all these paper claims mean that foreign countries could then
suck all the gold out of the United States if they redeemed them all.
At first, to manage this system from 1950 to 1970, the U.S. could kind of throw its
weight around diplomatically and say, you know, if you want our aid and assistance,
et cetera, don't redeem for gold.
But over time, foreign leaders saw what was happening with the more and more dollars going
into effect, tried to redeem them more and more often for gold.
So finally in 1971, Nixon pulls the rug and ends foreign redeemability of gold, which is kind of the nail in the coffin of the Bretton Woods systems because that again depends on the dollar being pegged to gold and foreign countries being able to redeem their dollars for gold.
now this is another world historic moment kind of the death of the post-world war ii global
monetary order of the breton of this kind of consciously intentionally designed breton wood
system to quote alden at that point in 1971 the world entered the modern fiat currency regime
meaning the world reserve currency and other currencies are not redeemable for anything
So that's the end of that global monetary order.
Chapter 11, the rise of the petrodollar.
We're going to see a new global economic order, monetary order emerge here.
So again, the Bretton Woods system has now ended.
US dollar is not redeemable for gold by foreign countries.
For the first time, as Alden notes, we now have fiat on a global scale.
previously fiat had occurred kind of nationally which makes more sense a nation can force its
people to use a currency can say we're going to tax you in this currency we're going to impose
taxes on other commodity monies to encourage you to use our currency and so within a nation people
have faith in their own nation too it kind of made sense but how now globally in a global fiat era
We're back to that problem of how do you get other countries to acknowledge the value of what a country can simply print.
So the U.S. does this through the creation of the petrodollar system.
So after the Bretton Woods rug pull in the 70s, we now get worldwide inflation because it's the money era.
U.S. oil production also peaks.
It had been increasing.
It's now not really increasing in the 70s.
To make matters worse, the Saudis restrict oil export in retaliation for support for Israel, putting the U.S. in kind of a really bad position and also globally a bad position for everyone.
The U.S. Treasury Secretary goes to Saudi Arabia then, is sent to Saudi Arabia, and has two goals.
Neutralize this use of oil as an economic weapon and find a way to finance American debt.
So the resulting scheme that's developed with Saudi Arabia is the petrodollar system. The petrodollar is simply, in this definition, the Saudis' dollar trade surplus. When they exchange their oil, they end up with dollars. That surplus is the petrodollar. The dollars over in Saudi Arabia derive from selling oil.
So here is the diplomatic solution that was devised as kind of a new economic order between the U.S. and Saudi Arabia.
That is the petrodollar system.
So the U.S. would buy lots of Saudi oil, sell them lots of military equipment, use naval power to ensure that the Strait of Hormuz remained open for oil trade.
And on top of it all, keep this whole thing secret, even and sell U.S. treasuries outside of normal auction process, really increasing, encouraging Saudi Arabia to amass U.S. treasuries, keeping all this secret due to the negative optics of Saudi Arabia's perspective of them associating with the USA, given the support of Israel.
In exchange, Saudi Arabia then is going to invest their trade surplus of petrodollars in U.S. Treasury securities, which is then going to finance U.S. deficit spending, and then only sell their oil to other countries in dollar terms, in $4, to increase demand globally for U.S. dollars, which then the thinking goes would cement the U.S. dollar as the global medium of exchange.
Oil kind of being the blood that runs the world. And so if you have to pay in dollars for that from Saudi Arabia, the dollar then is seemingly in a way backed by oil, which is – I'll just quote Alda. She explains this very well.
Quote,
could buy oil when they needed it. This kept the global demand for dollars going strong,
and therefore kept the overall dollar network effect going strong.
So this kind of is the post-Bretton Woods global monetary order, in a sense, the petrodollar,
encouraging the use of the U.S. dollar by pricing oil in that through this deal with Saudi Arabia.
What are the effects of the petrodollar system?
First, the U.S. had to stabilize its currency and kind of make it respectable again.
So the U.S. in 79 and 80 imposed really 20% and really high interest rates, 20% interest rates.
This brought down inflation, made the dollar stronger.
But when you make the dollar stronger, you hurt debtors.
And this had an effect, especially all the notes in Latin America.
All these dollars are moved from circulation.
the dollar is stronger. Latin America has large business and government debts in dollars.
It becomes very, very difficult for them to repay their debt. And we might talk about this. I found
this astounding. It's 70 to 80 is referred to as the lost decade. The United States is increasing
its oil consumption. Developing countries are increasing their oil consumption. It actually
decreases in Latin America, this substance that is so vital for any sort of economic activity.
So that's one effect of the petrodollar system. Another astounding one is that it may have led to the invasion of Iraq. In 1999, Saudi Arabia begins – no, Iraq begins selling oil denominated in the euro instead of the dollar, which again, that's a direct threat to the petrodollar framework where we're trying to price oil in dollars to encourage other countries to buy our treasuries and amass our dollars.
in 2003 of course as we all know 1999 that that move happens by iraq to reprice
in selling oil in the euro 2003 four years later iraq is unilaterally invaded by the united states
on the pretext of weapons of mass destruction which as we now know was bunk and even at the
time north korea other countries had weapons of mass destruction none of the 9-11 hijackers were
from Iraq, Alden notes all this. And so, you know, she doesn't go outright and say that to preserve
the petrodollar system was the reason for the invasion of Iraq, but she does quote
a senator talking about that this is one possible reason. He's saying this back in 2003. And of
course, retrospectively, we begin to wonder why did this happen? And this seems like a pretty
persuasive reason. It may also have led to the United States backing a coup attempt in Venezuela
when Chavez made a similar move regarding Venezuela's oil supplies. And so the effects
of the petrodollar system, devastating in Latin America, devastating to the Middle East,
and because of the Iraq war and having all of these geopolitical ramifications.
Who controls the ledger now, once we've kind of are in this new fiat era and geopolitics is so important?
To quote Alden,
The answer geopolitically is that in the telecommunication age whichever country has the most economic and military prowess is likely to have the primary control over the world ledger
Unless or until there is a better solution or until no single nation is large enough to force its will onto the rest of the world.
Who controls the ledger in the fiat era?
power makes right or whoever has the power geopolitically controls the ledger.
So all then ends this chapter and I'll end my summary with a summary of modern global monetary
orders up to the States. This is a quick run through of what we talked about.
Again, the issue is that it's necessary that there be a ledger to act as a trusted unit of
account and medium of exchange for foreign trade to prevent the 160 currencies that there are
devolving simply into a barter system internationally because no one trusts the other
currencies. So before 1944 and up until 1944, there was the gold standard. 1944, after World
War II to 1971, that's the Bretton Woods system. Foreign currencies pegged to the dollar, dollar
pegged to gold. 1971, that's the Nixon rug pull. And then the creation of the petrodollar system,
To quote Alden, from the mid-1970s to the present day, so this is the current order, the U.S. dollar has represented the primary unit of account and payment rail for international trade, with U.S. dollar deposits and U.S. treasury securities also representing the primary savings asset for foreign reserve holdings.
other countries then have to manage the strength of their currency with respect to the U.S. dollar
kind of pricing it in the U.S. dollar they have to fiddle with their own economies devaluing their
currencies etc or making them stronger in order to be able to conduct international trade
so that's the chapter that's the summary up until where we are now in the book I'll toss it back to
Lucas with something that you noted before we talked that a lot of the story
seems to be shared with the creature from Jekyll Island.
And it's been a while since I read that,
but of course this all sounded very familiar to me as I was reading.
Do you, so was that, did you,
did you find anything new in this reading that was not in the creature from
Jekyll Island or anything specifically that like jumped out at you as some
novel reading of history as Alden runs through the creation of our current global economic order?
That's a good question. For people who are unaware, the book, The Creature from Jekyll
Island, I believe the author is C. Edward Griffin, is often really thrown out into the wind by
those who oppose it as basically this giant book of conspiracy
where the author effectively lays out from the creation of the Federal Reserve
all the way up until the modern system.
That it was not an accident that things happened the way they did.
that it was not only intentional, but it was intentional and secret and kept secret for the reason that it was known.
It was known that they were doing something that was wrong, I guess.
So it's a incredible book. I strongly write it. By the way, it's very well cited.
This is what we were talking about previously was that I had made the note.
I had made the comment that these chapters really read kind of like an overview of the creature from Jekyll Island, kind of like a fast summary.
And I would recommend anybody read that, that the comment I made was that, well, you know, that guy had citations as well.
Like he looked up things in history as well.
And he's and the creature, it's not, you know, it's not directly cited by Alden.
And I'll give Alden credit, too, by the way, of all of the books that I've read on this subject. She does more than anyone and incredibly intentionally, I believe, to stay above the fray, to stay out of the muck, to stay out of the mud.
Yet you still cannot avoid having these things pop up that are that are very, very similar to what you read in the conspiracy rags.
And so, yeah, let's let's get into that.
What is something that I noticed in this that I didn't notice in the creature from Jekyll Island?
And the one thing that I it may have been in there, but I don't I don't think it was or I don't remember it was the Bank of England.
Well, actually, I definitely wouldn't. Because I think. Yeah.
So 2017 was when the retraction came out by the Financial Times to say, hey, by the way, we discovered that England went into World War I on false pretenses by defrauding and lying to the public in order to make it seem as though the populace wanted to go to war.
When truly, in fact, it was only a very, very small amount of people that concocted this travesty of an abomination of a lie upon the people.
They put out a call for 350 million pounds, British pounds money.
I have to say that, not wait.
They put out a call for these war bonds that paid a higher percentage that, you know, hey, by all rights, if you wanted to buy bonds, that would be the bond that you would buy because it paid a higher percentage.
And yet they only sold, I think it was like 80 million of that 300, 350 million.
And so what they did was they created money out of nothing.
And this to us sounds just commonplace, normal.
It's an everyday Tuesday that you create money out of nothing. But back then, that was not the case. So this was like the first real, like real egregious example, I think, of the fiat phenomenon occurring, where they unilaterally decide that they're going to create this money out of thin air.
They're going to put it in the names of some employees of the Bank of England.
Those employees are going to purchase the remainder of the bank of the war bonds in order to finance the operation to go to war.
And what happens, of course, is that they experience inflation.
They go to war.
The people have their wealth and their savings stolen from them.
Just as John Maynard Keynes is quoted in the beginning of this chapter as saying, and this to me, I think this bears talking about, which this is one of my favorite quotes.
This is in a presentation that I have.
This is John Maynard Keynes.
By a continuing process of inflation, governments can confiscate secretly and unobserved an important part of the wealth of their citizens.
By this method, they not only confiscate, but they confiscate arbitrarily.
And while the process impoverishes many, it actually enriches some.
I just tweeted out earlier today a post by the Fed, Federal Reserve, that shows the wealth distribution of the United States currently, which is the most unequal that it's ever been in history.
And so this is a direct result of that type of inflation of being able to steal from from the populace and to do with it what you want.
So I enjoyed these three chapters because they take me into something that I became really interested in.
It's really a lot of meat on the bone, but it's also a lot of candy when you start down this path, which is the conspiracy theory angle of why did these things happen?
Now, one of the things that they'll talk about that the creature from Jekyll Island talks about in much, much, much more detail was so Alden talks about how Britain got into the war.
The way the United States got into the war was that the Lusitania, which was a U.S. flag merchant marine ship, was sunk by German U-boats.
and they took it as, you know, oh, this was this unprovoked offense and they killed over a thousand people died.
And that was the reason to go.
The way that it's framed in The Creature from Jekyll Island talks about, well, actually, the public sentiment was not there.
They did not want to go to war.
There was absolutely no will of the people in order to engage.
They knew that it was not their problem.
They had no had no means. They had no reason to go to war.
And those merchant marine ships were supposedly loaded with munitions and supplies that were going to help the British war effort, which was something that the United States was not allowed to do as someone who is not a participant in the war.
They, you know, by doing that, what they're doing is they're taking sides and they are they're staking a claim.
A couple of facts about that. So that ship sunk in 18 minutes.
It was hit by one single torpedo. This is a massive ocean liner.
It was hit by one single torpedo. There are eyewitnesses.
There were eyewitnesses that said that it was hit by the torpedo and seconds later it blew sky high, suggesting that it was packed to the gills with explodable munitions.
Um, there was also, um, reports that, uh, the, the ship, as it went through the submarine infested waters, it had, uh, patrols on his side there to protect it.
And those patrols were called off and sent it through this, uh, this narrow strait that they knew to be, um, knew to be heavily patrolled by German U-boats.
And not only that, I looked these up myself. There are pictures and quotes of the warnings that the German embassy in the United States placed in United States newspapers that said, look, don't get on passenger ships that are going to Britain.
we will, you know, they're in danger
because they are illegally supplying the war effort,
et cetera, et cetera. And supposedly I couldn't find this one.
Supposedly there was like a full page ad taken out in the Cleveland newspaper, which
Cleveland at the time was arguably the most powerful city in the world next
to New York. And there was a full page ad
that was taken out by Americans that warned
people, hey, there's conspiracy underfoot, they're going to blow up the ship, do not get on the ship.
Obviously, that's how it turned out. But I enjoy this because it takes us down, you know, the road of conspiracy theory.
And for those uninitiated to the subject who bandy about the world, the word conspiracy or the phrase conspiracy theory,
It did not enter popular nomenclature until the Warren Commission, which was a report that came after the assassinated of John F. Kennedy by the intelligence agencies investigating themselves to find out whether or not they had anything to do with the assassination of Kennedy.
And I just one of the things that I think is so fantastic to point out is that at the same time, while labeling that while labeling the idea that the intelligence agencies were somehow involved in the assassination of a sitting United States president and that there had been reason to tie to this.
At the same time, they called that a conspiracy theory and they said, that's absolutely ridiculous. The theory that they put out that they offered for acceptance and said, this is the official theory is literally called the magic bullet theory. They literally invoke magic, which I find just utterly hilarious.
And so Alden does a really good job of walking us through. So World War One, you know, was definitely entered into under completely false pretenses by Britain, probably by the United States as well.
World War Two, there's the argument that the heavy the heavy war reparations placed upon Germans forced them to hyperinflate their own currency after World War One, which led to the rise of populism, which led to the strong man coming out and saying, hey, you know, it's these guys problem.
If you get with me, we'll take care of this.
And they rose out of it.
The Germans really did rise out of it, become, you know,
the world's most dominant industrial power yet again, which they were doing that.
They were doing that World War I as well.
Right.
And they were competing with competing with Britain and Britain didn't want them to to be able to do so.
And so possibly that's a great reason to oppose them.
So possibly World War II maybe was.
You may or may not say that it's false pretenses, but you can certainly say that it doesn't take a whole lot of head scratching and squinting in order to in order to say that it was a very predictable result.
So and then you have, you know, we skip over, by the way, we skip over Vietnam where where Kennedy Kennedy orders home.
I believe it was like 12,000 military advisors, the 12,000 military advisors that had been sent to Vietnam and said, you know, we're getting out of this is ridiculous.
We've got Americans being killed on foreign soil for a war that's not ours.
And they assassinate him.
And a couple weeks or a couple months later, it's like 288,000 troops or something like that deploy.
And we enter into a decade-long war that has no real justification that we end up effectively losing.
Sounds a whole lot like Afghanistan, by the way. You know, it takes us to takes us to the late late 90s, early 2000s, where, again, you know, we we go and we enter into a war with a country that it appears on the face of it that we have no reason to go to war with this country.
You know, none of none of the as you said, you know, none of these terrorists were Iraqi.
There were no weapons of mass destruction.
It seems as though seems as though this fall something else that that is, I think, of note that I think is just a wonderful, interesting coincidence and fact of history.
So, you know, the justification for going to war, going to war in Iraq was that, you know, 9-11 was the terrorist attacks, even though none of the terrorists were from there, etc.
etc. On September 10th, the day before Donald Rumsfeld, the sitting DOD secretary,
confirms that the Pentagon has lost track of $2.3 trillion. And they have no idea where it's at,
which, by the way, that represented about 40% of the entire United States debt at the time. So
to put it in perspective, that would be like 17, 16, 17, 18 trillion dollars in today's money.
Just all of a sudden, hey, we have, you know, must have fallen into the couch cushions or, you know, I had a hole in my wallet or, you know, I had no idea.
And then there's also Building 7, which is another one of the buildings that went down on September 11th that probably most people listening to this have never heard of.
Building 7 was one of the World Trade buildings.
the CIA was housed on the 25th floor. It was one of the places where a lot of very sensitive and
only copies of financial records were stored, including supposedly the financial records that
proved where that $2.3 trillion went. Also Enron, where their money went and some other things
there. So, um, it's that, that, that's to round this out. Um, because what you're asking, what
you asked was, you know, was there anything in, in Alden's book that I learned that wasn't in,
um, Jekyll Island? One, one thing is that she has the benefit of history where, uh, her book
has been written after some more things have come out and she's able to tie a few, a few more things
together, where if she wanted to, I'm sure she could go very deep in it, but it's just not her
interest. But suffice to say that any one of these things, World War I, World War II, Vietnam,
Afghanistan, Iraq, any of these things, you can look at individually and you can say, oh, okay,
I can see, you know, I get the reason, you know, there's terrorism and there's, you know, there's
genocide and there's a, but when you tie them all together, it does,
you don't really have to squint at it very much to see that there's some
common threads. Yeah.
And those common threads are quite often involved with, um,
what is the dominant monetary, uh, unit of account, uh,
the dominant monetary system, how is it being used?
And is there perhaps a,
an attempt to get off of that and go somewhere else?
So, yeah, I, yeah, I guess that's, that's kind of, that's kind of what I take away from it, which is just that I think she actually does an even better job of drawing lines between these things and being like, oh, look, here's bullshit.
And there's horseshit and there's some more shit.
It's just, let's back some shit on top of more shit and realize that possibly that there are some very clear lines to be drawn between these things.
Yeah, even a final conclusion, who controls the ledger? I mean, she states it in kind of abstract terms that in the fiat monetary global regime, the answer to who controls the ledger is geopolitical, whichever country has the most economic and military prowess.
And we see, therefore, like the United States exercising its flexing its economic and military prowess to head off any threat to its geopolitical dominance that allows it to control the ledger through first the Bretton Woods agreement to peg foreign currencies to the dollar, and then later to the petrodollar system to loosely tie it to oil by encouraging Saudi Arabia to stack dollars.
So the stuff that the history that you run through, again, that can seem conspiratorial in any of its parts, you know, at least it does have a general explanation on paper that is very sober minded that fiat money is about power.
It's about believing the issuer has the authority to issue it. And so in a fiat monetary, global fiat monetary regime, that country that exercises power and might is that country that then can dominate and control the global ledger, which has been the United States.
And I think it's a really good point you make regarding conspiratorial thinking. And I think this is, I mean, we're less and less inclined to take conspiracy theory as a pejorative term because we've seen so many of them come true.
And so nowadays it's like, you know, that worked for a while. You could shame us into having thoughts about what happened by making us seem like paranoid, schizophrenic fools. But now we're seeing all these things come to light. And we have two really great examples in this chapter. You mentioned the Bank of England. At the time, it would have been a conspiracy theory to say, oh, the Bank of England is buying all these bonds. It's not you and me. It's the bank itself.
A person saying that at the time would have been looked at as not patriotic, all of these things. Now, it's just that's a fact that they operated in utter secrecy and they did sell war bonds to themselves to finance a war that would have been difficult to sell to somebody to send their son to go die overseas in a continental war to assert dominance over Germany.
You know, incredible. And also regarding the petrodollar system, this is all the notes only now.
So it was kind of an open secret in a sense, but the creation of the petrodollar system through this diplomatic mission of the U.S.
Secretary Treasury to Saudi Arabia, a condition of that was that it remained secret so that Saudi Arabia would have plausible deniability that it's not helping out the USA, helping out the U.S.
because of the tricky situation with Israel.
And so these are like, these are conspiracies.
Conspiracies are things that happen.
People do conspire to do things
and they conspire to do things
on the condition of secrecy to make them work.
And that's kind of the way the Federal Reserve operates
is based in secrecy.
A lot of financial and economic moves
are done with intentional secrecy
to prevent the market from being spooked
and things like that.
And so it's I like that you pointed out that if the creature from Jekyll Hyde seemed conspiracy minded and Alden doesn't, maybe it's just because more time has elapsed and historical record is resolving as it does to show us that conspiracies did in fact happen.
And the most glaring example here for me, like personally, because I think maybe for you too, Lucas, and for some of our listeners is the Iraq war.
Because like I was in high school and I came of age with that.
I came of age. I was sold by my own government that there are weapons of mass destruction in Iraq and that there was some sort of nebulous tie with terrorism that was kind of hinted at.
Even though none of the hijackers were from Iraq.
And I was, I kind of had, I wasn't, you know, not a developed geopolitical worldview as a high schooler, but it was kind of default neocon because that's what the administration was. And, you know, looking back at myself, it's like, oh, how naive to just buy hook, line and sinker what the government was saying. And it's kind of like, you lose your political innocence at a moment like that.
for another generation, maybe it's going to be COVID. They're going to lose their political
innocence when they see the factual record resolve,
maybe in this current administration, as more and more records come to light about
why certain things occurred. And so Alden, as
you know, she has a very sober-minded way of detailing things, and she doesn't sound
in any of its parts like a conspiracy. She lays
out why she thinks things happened, is not
like to, she doesn't say the Iraq war occurred because it was trying to preserve the petrodollar
system. She simply lays out the facts and say, this appears that it could have been one of the
reasons. And then cites, you know, congressional record of a senator talking about it, that this
is a possible reason. So yeah, conspiracies are real. And in the economic realm, they maybe are
more prevalent than other realms because secrecy is encouraged.
There was one other thing I wanted to mention that based on what you said, you had mentioned
that the kind of fiat money explosion and money printing after World War I historically
unprecedented that wave of inflation after that money printing and the wave of inflation.
And that's because like we, you know, reading all of them, we can say why it's historically unprecedented, this money printing during World War I and the resulting wave of inflation.
It's because prior when you have, of course, a gold standard or even gold coinage, there is constraint.
When you have gold coinage, if you debase the coins, it takes a long time for those coins to go out of system.
Once you have paper claims for gold, those can be printed and replicated much faster than the gold is allowed to come out of the system.
And so in 1921, so this is in the aftermath of World War I and all of this inflation, that's when Henry Ford proposes what Lucas and I encountered in another book, Jason Lowery's Soft War.
He comes forward and says, we should use electricity as money to remove it from banker control. So this is happening in 1921. I mean, they were seeing that at the time that the bankers could not be someone smart, like Henry Ford could look at what happened in World War One and after deduce what had happened and said, you know, we need to get money out of the bankers hands.
He proposing that electricity be money after World War I ends 1921 And again this is one of the historical kind of precedents or whatever kind of intellectually for something like Bitcoin coming along later on that is going to through its proof of work
function, use electricity as an aspect of why it's a scarce resource and what is going to make
it a viable money. Yeah. I would argue that they, at that time in the 20s, were probably far more
in tune to what was happening. Looking back, you're like, oh, it's a crazy coincidence. It's
insane how Henry Ford could have predicted, effectively predicted Bitcoin, could have envisioned
Bitcoin by saying we're going to have this currency that's based off of money and or sorry,
that's based off electricity. And countries will basically utilize their natural resources in order
to compete and power their economies. And we think, oh, that's that's so outside of what you
would expect from, you know, people that, you know, Babe Ruth eating hot dogs and flappers and,
you know, prohibition and these things that we think about that are old age type of things.
But they were so much closer in time through their chronological memory to the betrayal of governments and how they how they had been oppressed so much.
And not only that, you know, the immigration population was much more fresh.
You know, these people that were leaving the shores of whatever country only to arrive at ours to find something that was entirely different, that was entirely new from what they had ever known.
So, yeah, I love the reference to Henry Ford because I'd kind of forgotten about that.
But, yeah, that's the proper time frame for it where we're coming out of World War I.
The United States experienced a ton of inflation during that time.
And they experienced a lot of inflation probably for the same reason that China experienced a lot of inflation throughout the 2000s.
And up until the current timeframe where you saw so many American companies and American investors investing in China, you know, take, you know, back things up and say, okay, World War I, that era, you've got Britain, which is kind of the falling dominant power in the United States, which is the rising world power, the kind of decrepit empire and the rising upstart.
And then you look at modern day and you've got the United States, which is kind of the crumbling empire in China, which seems to be the upstart economy that, you know, the Chinese currently trade with like more than twice as many countries.
They trade with all but like a handful of countries in the entire world.
And the United States only trades with like a third of the countries in the world.
Like we have a much smaller global footprint when it comes to having relationships, trading relationships.
And so at the time, you can just kind of flip-flop the ideas of like after World War I, England has experienced a lot of hyperinflation.
And so what are they trying to do in order to keep up with that?
They're investing in the United States stock market.
And they help to create this speculative bubble that burst on Black Friday with the stock market.
leads to the Great Depression, which so now take a look at what's happening in China right now.
I think I told you this. I can't remember. But so the Chinese have overbuilt so much in the real
estate side that there there is no demand. There are huge complexes of like multi-story, say 40,
50, 60 story buildings that are built for apartments and for commercial use. And there's
no demand for it. And in order to create demand for that, they're literally imploding buildings
that have never been used. Brand new buildings, billions of dollars being taken literally through
rubble in order to artificially create demand. Kind of like the British artificially trying to
strengthen their pound by re-pegging it to the original rate. They know they're trying to drop
their real estate footprint back to the original kind of rate there. So yeah, it's just fantastical
to think about how the roles have shifted. One of the things that I had, so there's this quote,
I just looked it up. What was his name? Wheeler. As the shores or what is it? As the as the island of my knowledge grows, so do the shores of my ignorance.
And and I remember when I first heard that as the island of my knowledge grows, so do the shores of my ignorance.
Of course, you can relate to that. You could relate that to, you know, this idea that if you start to learn very deeply about any one thing, then you realize just how much there is to know about that one thing and how you'll never know everything about that one thing.
And if you're not naive, then you extrapolate that to all of the other things that you aren't studying. And you go, I am becoming a world's expert upon how an inclined plane around a cylinder is a screw and how a screw does work.
Also, it turns out that I should probably recognize that there are things that I will never understand about how a bird flies and how somebody sews a button onto a shirt and the way in which an apple pie is made.
Like all of these things have an infinite amount of detail that you can put into them.
But mathematically, it also works.
if you've got you know assume an island is a circle um the growth of the square footage
of the area of the circle grows faster than the circumference of the circle so the shoreline
which if you're a company or sorry if you're a country and you're expanding your empire
what you're doing is you're really expanding the amount of borders that you have to protect
Yeah. And if you double the size of borders that you have to protect, then now you've like quadrupled the size of the square footage of the the the the actual land that you have to protect.
This was noted in a book that I was reading about the Roman Empire and why they fell and the British Empire and why they fell, which was just that as you build an empire, you eventually build your borders out so far that it becomes economically infeasible to continue to secure them.
and things just start getting through and you start seeing cracks in the armor.
And at that point, the only thing that you can wisely do is to contract.
But nobody ever does that.
They just continue to try and expand, thinking as we've talked about in previous discussions,
thinking along the false pretenses of scale and growth,
that those things are what you need in order to be successful,
which as we've seen scale and growth are things that just inevitably lead to
bigger blowups. When you stay small, then you stay secure.
So anyways, I know that's a bit of a tangent,
but that was something that I just considered thinking about.
We have continued to try to do that with the United States dollar where we're,
we've got the petrodollar and we're trying to push it out, push it out.
We have over 800 military bases in the world.
at all these different countries. And eventually somebody just calls your bluff. Eventually somebody
just says, you know what? Fine. Pull your base out. Fine. Pull your ships away. Fine. Do whatever.
We're tired of whatever this situation is and we want something better. And if you're not going to
give it to us, then we're willing to take our chances because it turns out in the end, there
are more of us than there are of you. And a whole lot of small things can beat one big thing. And
And so, yeah, you can drop an empire that way.
No, I mean, one way to look at Alden's book is the rise and fall of monetary regimes.
And so, like, you've given the paradigm of the fall of the Roman Empire.
There's been an immense amount of literature that is speculated on why the Roman Empire fell, what we can learn from that.
And so we can ask, you know, what can we learn from Alden's telling of why we've had a shift in global economic orders, or even first, the creation of an economic order that is global from monetary regimes that at first were interpersonal, then intertribal, then international, and then global.
and one of the things that i mean of course is key that is her book is a book about how technology
disrupts and so like why we've had these changes in economic orders which are going to probably
if you map them overlap with the fall of empires and nation states is technological innovations
like telecommunications that require new technologies.
And then those that jump on those technologies are the ones that are going to survive into
the future.
So you can't, you know, once we have, this was from our reading last time, once you have
the era, once you enter the era of telecommunications, you can't simply continue to naively use
gold as it is without modifying it as a currency. It does not move quick enough. It's too difficult
to authenticate for the increasing number of transactions there are. And the increasing
dispersion geographically of those transacting parties make it so that you simply can't use gold.
It's not a moral take then to say that speed necessitates a new type of currency that gold
simply does not fulfill. And so we have the rise of IOUs of credit based currencies. And then we
enter the eventually this, as a result of speed becoming the defining characteristic of modernity
and interconnection globally, globalization, we enter the fiat era is the new global monetary
regime because fiat credit money can move at the speed of light. And is the only way seemingly
to allow us to satisfy that criteria of speed that we need to have in order to have an international
economy. Until, as Alden hinted in the last chapter, we can have some sort of money arrive
that is a bearer asset in and of itself, and that it allows for settlement instantly, so that you
don't have that distance between transaction and settlement that allows for this arbitrage situation
where many IOUs are created in lieu of actual redemption for the underlying gold asset,
at the end of which the gold falls out entirely and we're left with this fiat money era.
So I think that your speculation and thought to why the Roman Empire fell, it does tie
into this and that this is a book that has a grand scope like that.
Why do we have changing monetary regimes and orders?
And we can look back and do a retrospective and autopsy and say speed killed the order we had, speed necessitated the new order, and whatever new order is going to supersede the fiat monetary regime is not going to be an atavistic recursion to gold as the monetary standard in itself because we had that.
It didn't work. Every nation left a gold standard behind. Moving into the future, it's going to require something that has all the characteristics of what we know that Bitcoin has.
And we're hearing today, I saw on Twitter that Russia has said it's going to conduct some international trade in Bitcoin. I mean, that's like, that is like, in a sense, similar to Iraq saying, we're going to sell our oil in the euro. Venezuela is saying we're going to sell our oil in the euro.
Their unit of account, they're going to transact internationally in Bitcoin. That's one of the steps that is required for Bitcoin to become a unit of account globally to be the way that international transactions are denominated.
That is the thing that prevents the 160 currencies from throwing us into this anarchy of barter internationally, either a fiat of dictated by U.S. or whatever nation's global geopolitical dominance or a neutral, uncontrolled asset.
And I guess before I throw it back to you, Lucas, I'll just say the other solution potentially that could have happened to Bretton Woods, the Bancorp, is so ridiculous. I'm reading about that.
To think that as much as all the previous wars and international conflicts there had been, that all the nations would somehow work together to perfectly manage an international unit of account, all these sovereign nations, when one nation itself can't do it without abusing that privilege of having its own currency.
To think that there could be that sort of Bancor system requires a stunning amount of naivete and like a total ignorance of the human condition of international relations.
It's the dollar won because it was the best system at that time in the Bretton Woods post-World War II economic order.
And, you know, again, I think hopefully we're at the point where Bitcoin is the next best one.
it's funny because that's what i was going to ask you when you when you turned it back to me
because i was going to ask what your thoughts would have been had we gone onto this suggestion
of john maynard keens that we make this thing called a bancor um the uh the global unit of
account um i'll tell you my assumption um which is that so uh it appears looking back through history
that no nation has ever made a bad decision that they didn't think could be fixed by a worse one.
And so I think that very rapidly, I mean, incredibly rapidly, we would have been in a situation where the proposed solution was a one world government.
Yes, absolutely.
Yeah. Instantly, instantly what would have happened, which is so to recap this whole bank or idea. So the bank or was going to be this unit of account called a dollar, a coconut, a Sasquatch, whatever you want to call it.
It was going to be this sort of fictional unit of account thing that they used for the ledger.
And what they were going to do was that any country that had a surplus, a trade surplus, they could get penalized.
So they would like have to pay basically like a luxury tax for being really good at for having a positive balance of trade.
um now they could um they could uh after a certain time they could devalue their currency
in order to um you know they could issue more of their currency um against the bank or in order to
this is like it's like great britain saying uk saying let's freeze everything as it is now and
say if you deviate from that going above or below it's like okay okay of course you want that
100% right so yeah what this is like this is basically said it's like it's like the it's like
the Yankees and the Red Sox get together and they're like okay so here's how this is gonna work
yeah basically uh if you sell a lot of Yankee hats um then this will work out well for you if not
yeah it's gonna tough but anyway so you know imagine 160 180 countries however many there
worth time, each individually trying to do this with their ledger, very few of them are
going to like instantly somebody is going to break the pact.
They're going to break the pact and they're going to issue, you know, they're going to
issue additional currency when they shouldn't, or they're going to tighten their currency
when they shouldn't.
And what's going to be the resulting summary from people looking at the situation from
places of powers?
they're going to be able. Obviously, the problem is that they have control over their own currency.
So what should we do? Well, we should simply consolidate the power. We've already consolidated
the money. So let's just consolidate the power into a one world government. And that would be,
you know, straight to it's just really like, and for anybody that I really doubt that there's
anybody that's stumbled onto this that is of a socialist bent, but I truly hope that there are
for somebody to maybe be exposed to it. But if you are and you do believe in those things,
then look at the proof of the proof of the pudding. Look at how in every instance that
it's ever been tried, they get the exact same results, which is that millions and millions
of people are killed for no reason. People starve, people die. Corruption goes to a level that makes
what happens in the United States look just like, I mean, it makes the United States look like
first graders trading pencils or something like that. It's crazy what happens in those instances.
So yeah. Do you have the same kind of take on what would have happened if a bank whore had been,
if John Maynard Keynes had been successful in promoting his idea?
Yeah. I mean, I think it would have just been a forum for new conflict and would have led to
probably World War III when we're trying to manage this thing together and then, you know,
countries aren't doing what we want them to or we can't, you know, it's just it would break down
and there would be something, it wouldn't have worked. And we kind of see how it would have not
worked or how it would have been abused in the form of the IMF and the World Bank. These are
actually created in, it's part of the Bretton Woods. I don't know if it was arrived at Bretton
woods but these were created at the time to like complement um what if the bank core had been the
solution these things are going to complement and help like manage those trade surpluses and
deficits and we see like do would it have been great if the imf and world bank had been globally
powerful institutions that were like you know directly dictating the unit of account and
mediating between all international trade. Alex Gladstein has a phenomenal book. I think it's
called Monetary Repression, but it's about how the IMF is used by dictating the terms of its loan
to developing countries, requiring structural adjustments, the devaluation of currencies,
how these developing countries are kind of kept in a state. First of all, their leaders are often
dictators who want these big loans to then give it to all their cronies. The dictators deposed,
the country is still saddled with that debt. The IMF imposes conditions on them to help them repay
it. They take out new loans, the interest grows, predatory lending on an international scale.
The Bancorp system would have been that on speed or whatever. It would have been that times 10.
But I actually think that it just simply wouldn't have functioned. It would have broke down
And there would have been probably, I think something like the petrodollar system would have arisen because, as Alden notes, in the fiat money era, geopolitical dominance is what is going to determine what is going to be the unit of account.
geopolitical dominance as a result of alliance treaty, flexing of economic and military prowess.
The UK's attempt to kind of freeze the de facto trade regime in place as it was at the time through
the Bancorp, it just simply, you know, in the real politic of international relations was never going
to function long term, we would have arrived at something like we have nowadays, because that's
what happens when you have nations that are sovereign entities competing with each other,
you know, and when you don't have recourse to some other neutral bearer asset that operates at the
speed of light that provides for quick settlement, that satisfies the speed condition that has been
placed on modern finance, banking, and international trade. Yeah, we do have the benefit of being able
to look back on these things.
Yeah, for sure.
But for future reference,
for anyone who is ever building anything,
what has become clear through these talks
is that if you optimize for speed,
you are going to destroy everything.
Like, think about if you optimize,
like, think if you had a pizza hut
and your only condition was,
I want to make pizzas as fast as possible.
And by the way, you know, every...
every 30th one that you send through the oven explodes. Um, and you just accept that, um, you
know, and what's going to happen to the quality of what, you know, you're not going to spin the
pizza. You're, you're just going to flat and you're not going to take time to put the things
in the right places. You're not, you're, I mean, every single thing dies at the expense of speed.
Um, you know, I, I compared it to taking like a paper airplane or a stick airplane and putting
jet engines on it. And the thing is, after a while, you're like, well, why do we even need
the airplane? We've just got the engine. And then you're like, why do we even need the engine? We
can just blow the fuel up. And that's kind of what happened. You know, all we care about is
burning the fuel at this point. You know, we just, we just need to make heat. We just need to make
stuff go. And so that's really what you see. You know, it is, it really hurts. I get genuine,
I don't know me as kind of an empathetic person, it genuinely hurts to look back and think about the position that people were placed in.
So my parents, I was talking to my parents the other day.
And so in like 1979, 1980, right around then was when they bought the farm.
They bought a tiny little farmhouse and a little bit of acreage from my grandpa or great grandpa.
And that was right when Volcker pumped rates to 20 percent in order to suck everything out of the United States economy to try and stabilize the petrodollar.
And so, you know, at the time they just got married.
They really didn't have hardly anything anyways.
And my mom was saying that my dad was being paid eight hundred dollars a month and their mortgage was six hundred dollars of that.
So, you know, that's no food, no clothing, no fuel, no nothing.
And to think about how people really suffered.
I had this thought.
It was actually in relation to a relationship I was trying to talk to somebody about.
But I think it applies here, which is that home is where the locks are on the inside and prison is where the locks are on the outside.
And when I think about people being unable to, you know, citizens being unable to repatriate and exchange their money for gold, but foreign countries being able to, you know, that's what I think about.
It's like, or you think about like the Berlin Wall, you know, like that was not meant to keep people out.
It was meant to keep people in.
And therefore, that's the lock on the outside of the door.
That's the prison cell.
That's the only difference.
It's like that's what makes a home into a prison.
And I feel like, you know, that's the true experience of what financial repression is,
which is that the locks are turned and they're taken from the inside and they're put on the outside.
And you're locked in.
Your wealth is locked in.
Your ability to leave a country is locked in.
these things where you see, you just see things go bad as a result of people trying to,
as Elon Musk says, trying to look good while doing evil.
Yeah, so it's very unfortunate.
But I really like that you're returning to the human element here.
We talk about things like global economic orders and these broad historical trends.
the individual human experience can drop out of that, like your parents trying to make their way
in a time when interest rates are very high. And I really liked the part of this chapter that
mentioned, because I found this astonishing, that the lost decade for Latin America, where
70s 70 to 80 oil consumption declines but that's incredible i mean that's like a return to the
stone age in a sense or a movement not i mean not return to the stone age but it's a movement
towards the stone age whenever a country is not moving into the future it's moving into the past
because every other country is moving into the future and to think that like i mean that's the
horror, I think that a lot of families, the biggest horror is my, I'm going to be worse
off than my parents and my children be worse off than me. And like, that's what that was
like. The United States is able through these, um, you know, diplomatic gerrymandering or
whatever come up with diplomatic solutions to keep the dollar strong um and to bolster the U S debt finance I guess is the end of the picture there Whereas Latin America holding largest amounts of debt is simply left to implode And I think we
still see, you know, maybe one of the reasons we see so much immigration to the United States
nowadays is as a result of U.S. economic policy and decisions that siphoned a lot of value out of
developing countries into the United States because we control the world's
currency. You know, I'm not, not to blame or,
or what or justify anything, but I think you're totally right. You know,
to try to try to return to that state of empathy,
or at least if you don't like the word empathy,
a recognition that behind all of this talk of economic orders and whatnot,
There is the human experience and there was and is a vast amount of suffering that occurs due to economic policy.
Yeah. An economic policy that is often unjustified in its basis.
Yeah. That is, you know, it's simply I'm trying to find I can't find it right now.
I thought it was called the Stone Mountain Report, but it might be something different.
But so this this falls really, really heavily into the conspiracy thing.
But there's this I think it's called the Stone Mountain Report.
It was it was put together like a think tank in the 60s.
I want to say 50s or 60s somewhere.
And the goal of it was to try and figure out how can you control a population when you're not at war?
you know because when you're at war then you have this outside thing that everybody bandies
that everyone bands it up against and you have patriotism and you can talk people into some
pretty crazy stuff if it's for everybody if it's for the good of the country if if you don't do
this then the evil you know russians vietcong koreans afghanis you know etc etc etc
somebody the evil whatever went and I remember reading it and or I you can't read it but you can
find summaries of it then there's people that talk about it that were supposedly involved in it that
they talked directly about what they discussed and anyways what they came out of it was that
there are a number of ways that you could maybe get a population to band together and really be
able to control them in any sort of way one of them interestingly enough was aliens and they
apparently they tried kind of by really funding and promoting a lot of like alien type of
of media and movies and stuff.
And what they concluded was that even if aliens are real,
that it's just so far unbelievable to the average person
that you wouldn't be able to do it.
Like you could literally land a alien UFO
in the middle of Times Square
and people would just kind of be like, whatever.
You'd still struggle to control.
And there was a number of other ones.
But anyways, they supposedly the one that they settled on was climate control, was that if you tell everybody that the world is going to end unless you stop burning oil.
Then you can start to control the population.
And that was right before, you know, we go into this period where we have the lost decade, where we have gas lines, where we go from having beautiful cars and gorgeous, gorgeous automobiles that are just the most incredible dream of an automobile engineer to having, you know, the Mustang II and the rise of the foreign imports.
these tiny little eco cars that are just hideous little blocks with four cylinders in them and
um it's it's it seems very true like that um if you can convince somebody that um that by doing
i mean we grew up in the we grew up in the era of um being hammered home with all of this
reduce reduce recycle stuff um and uh i don't know i i just i just think it's interesting to
see how all of that coalesces with what we do call this lost era, this lost decade.
And again, yeah, to talk about the human condition of it, I mean, it takes me back to thinking
about my parents and thinking about them.
They both graduated high school in 73.
They went to college and they started a farm.
and to think about how they would have suffered under that system
in order to prop up the United States dollar
just so that we could continue to impose control
on this ever-growing shore,
ever-growing global border of influence.
Yeah, you can't take the human element out of it.
You can't take the empathy and even the anger out of it
and being upset at the way it was done,
Although you can look at it and you can go, look, I, I can see how, if you're in this situation that you're going to continue to double down, you're going to continue to double down and you're going to hope for the best.
and it turned and and and to go back to um i think probably my favorite jason lowry quote ever he i
heard him say it on a on a podcast it wasn't in software but just very simply technology does not
negotiate um you know it we we created a technology the ability to do business electronically but we
did not have a money that could do business electronically yeah and and there was simply
no way to negotiate your way out of that. It didn't matter how many countries you held influence
over. It didn't matter how high you abstracted the layer, you know, so that the Bank of England
was just simply and the Federal Reserve, you know, those were just higher abstractions of
what were already happening, you know, where we just continued to extrapolate, oh, well,
if it's fast to do business between a couple of banks here at the local level, then it'll be even
faster to do business between banks at the national level.
And thank God that John Maynard Keynes' idea of, you know, if we just have a central, effectively,
almost like a central bank for the world.
Thank God that that didn't go through.
Because I, you know, when I think about it, I think what would have happened would have
been World War III.
And it would have been, it would have been everybody.
It would have been everybody.
It would have been utterly devastating.
You probably would have lost.
I mean, just take what happened in World War I and World War II.
I think World War II was about an order of magnitude greater than World War I, which was about an order of magnitude greater than the war before that.
So take World War II and take an order of magnitude off that or onto that.
And, you know, probably, you know, you could argue it would probably be like a third of the world's population, a quarter of the world's population, depending on who got itchy trigger finger.
Yeah.
Because by that time, there was a significant amount of the world that was nuclear armed.
So, yeah, it takes us down a really interesting path, the bank or being this thing.
Glad we didn't go there.
Glad that we're in the situation we are now where we might have a solution with Bitcoin.
But yeah, I don't know, just fascinating circle that Alden draws for us here.
There was one final thing I wanted to end on. And this is something that gelled with me in this reading as an extension of our last conversation. We were talking about fraction reserve banking and if it was in a sense necessarily bad and was necessarily going to lead to a bad situation, I guess.
And so I'm going to pair this with an Alden tweet that I read today. So if Bitcoin is the reserve asset in a fractional reserve system, instead of gold, do we arrive at a fractional reserve banking system with the same problems?
And I think not. I think Alden says not. So we have this speed arbitrage between transactions and settlement that arises because when gold is the reserve asset, because it's too slow and costly to authenticate gold.
so even if you have gold as a standard to settle transactions you create IOUs on top of that that
can circulate faster and people are actually in a gold standard system are going to prefer to hold
the IOUs and not gold because they can get rid of those much easier you don't have to authenticate
them, they move quicker. So there's this prejudice or bias in a gold reserve system
to want to hold the IOUs. And so people are, gold is simply too illiquid to hold.
Fractional reserve systems, fractional reserve banking is not then just going to lead to more
IOUs because they'd lend out this money. But also people are less likely to redeem for gold and so
less likely to test the fractional reserve bank that is overextending itself. And so if when there's
a run on the bank, then it occurs at a later moment. But if the fractional, but if the reserve
asset in a fractional banking system is Bitcoin, this mitigates a lot of the potential problems
with the fractional reserve banking system, because people are much more likely to redeem
IOUs of Bitcoin or would be to redeem an IOU of a Bitcoin for actual Bitcoin because it's cheap
and convenient and easier to hold and transact with in a way that gold is not. So this acts as
a better check on a fractional reserve bank if people are more ready and eager to redeem their
IOUs for actual Bitcoin. Again, when gold is that reserve asset, people are going to keep on holding
the IOUs even as the situation gets out of control because it's just tough to hold and
use gold.
Also, you can't print more BTC, of course, so that alleviates the moral hazard of fraction
reserve lenders knowing that they need to restrain the amount of IOUs against the claims
against the Bitcoin because they know that they can be redeemed easily and people will
redeem them more than they would with gold. And of course, they can't print more Bitcoin.
So the resilience of a fractional reserve system depends on the nature of the underlying reserve
asset. Gold, difficult to authenticate, difficult to move around and transact in.
Bitcoin, almost as easy as an IOU, just as quick, can move around, easy to hold,
stuff like this. So this is the quote, this is the tweet from Alden today that helped gel this
for me, quote, without the ability to print the base layer, any excessive attempt to fractionally
reserve it gets wrecked and likely in cascading fashion. So if you don't have the central bank
that can backstop fiat banking with their infinite reserves, if you can't print the base layer,
any attempt to fractionally reserve it is going to get wrecked and likely in cascading fashion.
And if an asset gets verified 10 times more quickly than gold, that cycle of wreckage is likely to be way shorter. So in a fractional reserve system based on Bitcoin, there would be bank failures, but they would not be as catastrophic and they wouldn't be as extensive because people would be more quick to redeem their IOU.
So you have less circulating claims for against the underlying reserve asset at the time that people go to redeem them. Does that make sense? Why Bitcoin is why fractional reserve, like why the riskiness of fractional reserve banking depends on the characteristic of the underlying money, commodity money held in reserve, and why Bitcoin as a commodity money mitigates or is a better fractional, better asset for a bank operating.
on a, you know, fractional reserve banking, loaning money out. Does that make sense? Or
am I not? Those are words and they're in English. Okay. And when strung together,
one could say that they are sentences and paragraphs. Absolutely. Um, does it make sense?
I not, not, not is first of all, two questions, not, is it right? But first, am I, am I saying
something that makes sense? I think you've represented, I think you've represented Lynn
Alden's claim very well, which is to say that because you cannot make more Bitcoin and because
Bitcoin is quickly verified that any attempt to issue a abstracted currency on top of that
in a fractional reserve type of fashion, when it inevitably blows up, will likely have a
smaller blast radius and will likely explode.
It will likely have a much shorter fuse as well.
In that it will probably not be the global financial crisis type.
It won't be too big to fail, right?
Yeah, exactly.
What I would push back on is fractional reserve is the moral hazard.
It doesn't like putting Bitcoin at the base layer.
I don't believe removes the moral hazard.
I believe fractional reserve is the moral hazard.
if I have a pie and it has six pieces and I tell seven friends,
they can have a piece of pie. I have done something morally wrong.
And it doesn't matter that instead of telling 7 million people,
they can have a piece of my pie. I only told seven.
If people agree with you that you can have, you know,
I'm going to lend out this piece of pie because somebody else is going to put
it to work and make more pie.
And so you're agreeing to the risk that if you come back here, then Pi might not be here because it might not have returned the loan or the loan might have defaulted.
But I mean it's not immoral because people can agree – they can accept the risk and as adults can acknowledge that and understand it and then consent to the situation.
And if they don't consent, not enter into the agreement.
But the fundamental flaw is that they can't make more Pi.
They can't make more Bitcoin.
When you make a loan –
There's no making more.
You can – if you – I mean you can make a loan to somebody and then that loan is capital for them to start a business and they can pay back that loan with interest.
So then you can –
Yeah, yeah.
They can then pay off the loan with interest and so there's now more Bitcoin.
They didn't print Bitcoin.
They just went out into the world, earned some with this loan that they put to work and come back.
And then that bank then does have more of the underlying reserve asset that it then pays out in interest to the people who agreed to enter that into that risky relationship.
Yeah, that works when there's one system.
But there won't just be one system.
There will be competing systems.
And when there's competition, then there are people that will take risk.
And there are people that will take risk.
And they will agree to take risk because they want to get a higher return.
Or as is the case in the system that we live in now, we implicitly agree to the risk or we basically involuntarily agree to the risk because we have no choice.
Right. So that's a separate issue.
That's why that's why we enter into these risky.
You know, that's why that's why everybody's buying equities that are valued at 50 to one earnings, because that's the only way to keep up with inflation.
And nobody really wants to do that. And by the way, nobody really thinks that Facebook is solving the world's hunger problems. Nobody thinks that Tesla is solving the world's housing problem.
Yeah, but these are all aspects of fiat currency when it's used as a reserve asset. Bitcoin, if people hold that and the fractional reserve system and a fractional reserve bank in and of itself is not the problem that you're describing there.
That's a wider problem of structural inflation under a fiat system. So I think you can separate those two things and say, you know, if we have a free banking system with separate private banks that aren't backstopped by a central bank that can print the base layer, and instead each of these free banks relies on the Bitcoin that is deposited with them, any IOUs, any claims to that Bitcoin, any loans out that they issue is something that people have to consent to up front.
they deposit their Bitcoin with them. People accept the amount of risk. This is 40% fractional
reserve. I'm going to go with them. Or no, I want a higher one. I want 95. I want 99% reserves.
And people can consent to those relationships. And if you get burned, you get burned. And that's
at the end of the day, you lose your money if you get too greedy and want too much yield.
Well, that's Celsius and that's FTS.
Yeah. Yeah. Things go... Well, there was illegal stuff that happened in those two. And so those
weren't like a fractional reserve free bank. If we had a free banking system, we had these
different banks, they were audited, or they consented to be audited by some third party in
order to prove to people, or they have proof of reserves, you know, that you can look at,
which is easier to do with the Bitcoin system. And then also, you know, I think that's the free
market of a free market system allows for competing free banks on that some of them want
to be fractional reserve, some of them want to be pure custody. I think that's a good thing. I
I don't think fraction reserve lending in itself is bad.
And I think Bitcoin mitigates most of what is bad about it.
And all that's left that's bad is simply risk that you can accept or not accept.
And if you don't want the risk, don't do it and simply hold the stuff yourself or with a bank that isn't going to lend it out.
Yeah, I just, again, I go back to, you know, if there's a hole in the fence, the cows will get out.
And that's a hole in the fence.
Like that is the hole in the fence.
The fraction reserve is the hole in the fence.
And then when you introduce the competition of different, you know, you're going to have free banks with the base layers, Bitcoin.
When you introduce competition, then you're going to have this bank is going to do 10 percent.
This is going to do 20. This is going to do 30.
That's the free market.
They are. They are. But yeah.
And and and so I am I would say that there is.
I don't think it's any more like to say that to say that that's more moral.
I think you can make an argument for that just like you can make the argument that capitalism is more moral than than socialism. I think you can say that because the the losses in the social and by the way, inflation, inflating the monetary supply.
That's a socialist concept where everybody shares in the losses.
I think you could maybe make that argument.
But I would say that that is kind of like saying that maybe it's better to die in a car crash than in an airplane crash.
You're dead both ways.
And the difference, by the way, is going to be that under a free banking system that allows fractional reserve banking using Bitcoin is that I would say it's probably more likely that people will lose everything individually.
You know, there will be fewer people, but that group of people, they will lose everything.
Now, this will, of course, create an insurance industry.
And by the way, that insurance industry will be better than Federal Depositors Insurance Corporation. It will be better because that insurance industry will actually base their premiums upon risk, actual risk, as opposed to just a flat rate for everybody. You get the same as the next guy. I agree that that will be, you know, it will be better.
better i i can i can i can kind of get on board with that i can kind of say that um but i would
say that yeah um i i think that you're really just arguing about the degree of immorality
when it comes to i think immorality i just think immorality is the wrong word i think the degree of
risk is the better thing and people can judge for themselves their own risk tolerance and if they
want to risk losing their bitcoin to gain some interest then good for them but i told you but i
told you I had a piece of pie for you and you're hungry for that pie and you're without that pie
you're going to starve and and I knew that when I told you so just because you agree to it doesn't
I guess I don't know I don't think that absolves like to me that does not absolve the um the issuer
from the immoral uh burden that I feel that they they should carry um so I I don't know I I uh
I, yeah, I guess you can say, oh yeah, we're all adults here and everybody agrees to it. But, um, yeah, in my mind, I think it's just degrees. I, I truly, um, when I learned what fractional reserve banking was, I was working in lending and I was working, you know, I was working in a bank.
And when I zoomed back out and I was able to see, you know, the money's created out of nothing.
It's deposited here.
Then it's 10x.
Then it's deposited here.
Then it's 10x again because of lending practices and creation of money there.
It made me physically ill to think about the terror that is going to happen when that all comes crashing down.
And by the way, it all comes crashing down. There is no way to stop it. So every single fiat currency that has ever existed is either defunct or down 99%. I can see that it may be a little easier to control with Bitcoin. I can get that. I get that. Still not in favor of it. Still don't love it.
Yeah, no, I wouldn't either.
I'm against, I don't enter into Bitcoin yield schemes,
except for whatever scheme Mr. Saylor has going on.
Except for combo itself.
I think it's immoral to joke about that, as though it's a scheme.
I do.
You and your immoral were throwing this around, man.
I know.
Well, I think for the first time, you have an honest person
telling people exactly what he's doing.
No, I don't.
I don't want to say that it's a scheme.
I don't understand it, but I don't think it's anything.
Scheme is a fair word to say.
Scheme is fair.
It's a plan of action that he's decided upon for reasons.
Like it's a scheme.
But no, I find it very interesting what he's doing.
I don't know enough about it to opine on it.
But I was just saying,
I would generally,
if someone's promising me more Bitcoin for my Bitcoin
or something similar,
I would want to look askance at that.
And so like something,
anybody that says Bitcoin yield,
you know, I definitely,
my eyebrows go way up,
but he's definitely transparent.
Sailor is about what he's doing.
And it seems to be an arbitrage
on the legacy financial system
in a way that makes sense
from what I understand.
So he's giving you more pie.
He is, he is saying,
here's you now talking
about the overall pie giving.
But he actually is.
And the way that he's doing it is because he's not selling you Bitcoin and then give me your dollars.
You know, like he said, we're selling dollars for three dollars.
I love it.
And I am so excited to see what's going to happen.
And I do think it's so fascinating right now, just like at this very moment, because there is this tiny little tiny little microcosm of people that understand Bitcoin.
And there is a much smaller microcosm of that microcosm with a few people that probably have no idea about Bitcoin, but just know about micro strategy.
But it's a fraction of a fraction of people that are looking at this and they're going, oh, this guy broke the system.
He figured it out.
He is making a speculative attack on the dollar by issuing shares that are being paid for in something worthless, a dollar, that is something that you have to suspend disbelief in order to find value in that only has value in certain areas.
And what he's doing is he's using that and exchanging it for something that has value everywhere.
Take it to Mars and it'll still have value.
There's nobody to transact with there, but still has value.
So, yeah, I find it fascinating.
I, yeah, I, oh, man, I want to defend the guy so bad, but I watch him do it so well.
I know, it's like, he doesn't need it.
He does not.
No, he needs.
Stepping in to defend sailor is like, yeah.
Some kid stepping in front of Superman, like, don't shoot.
Yeah, yeah, exactly.
No, it was great.
I think that was a great place.
That was great.
Yeah, that's all I got, man.
Yeah.
Hey, this is fantastic.
As again, this is Bitcoin Study Sessions.
My name is Lucas and I'm on X at Lucas Matty.
That over there is Grant and he is on X at The Whole Frame.
I want to wish you guys a Merry Christmas and we look forward to continuing to go through
Broken Money, Lynn Alden's wonderful book on how to view money as a technological progression
through history.
So have a great time and we'll talk to you guys later.
Yeah, right on.
Thanks.
Thank you.