Bankless - 141 - Who Stole the Wealth? with Ben Hunt

Starting point is 00:00:07 Welcome to bankless where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams, and I'm here with David Hoffman, and we're here to help you become more bankless. Guys, excellent episode with Ben Hunt. We talk about wealth and who stole it. First, a few takeaways for you. Number one, why is the world on fire now? That's the opening question we ask, Ben.

Starting point is 00:00:33 Ben thinks the root cause is actually just a simple number. We get into that. Number two, who stole the wealth, actually? Why wealth is accelerating while GDP is flat. We talk about the difference between these two metrics. Number three, why the center cannot hold. Not against big tech, not against big media, not against big politics. Why our world is increasingly fractionalized. Number four, how Wall Street and Treasury are defanging Bitcoin. Ben's bear take on Bitcoin. Also his bull take. More bearish than bullish, I think, and you'll hear why. And number five, Ben's best advice for us in crypto and his hope for the future. We talk about all of these things. David, what are we talking about in this episode and what should listeners pay attention to?

Starting point is 00:01:18 Ben Hunt and his Epsilon Theory newsletter community, I've always appreciated it because of how close to the metal it is. Epsilon theory is going after the alpha of the market, which rides along the beta of the market. And these are all real parts. of the market cycle, right? Like the fundamentals, the numbers. But the epsilon part is the part that Ben Hunt truly excels at, which is the narrative part. And this was novel a few years ago

Starting point is 00:01:44 when Ben Hunt was talking about the narrative and this storytelling side of financial markets. And now everyone has kind of woken up to it posts all of these like Federal Reserve shenanigans and the fleeting nature of money. And so we're bringing Ben back onto the show to talk about what are the big narrative migrable. meritive movements that are going on in just the macro markets right now. And also just like how

Starting point is 00:02:09 people are all waking up to the story of fiat currency. So as listeners go through this, I think it's one part of a lesson in history of how the story has been told since the 70s, the 80s and the 90s, and how that story has been conducive and flexible in creating a disparity between GDP and wealth. Wealth being a lot higher than GDP. Well, listeners, listen to this. They'll get tune into a little bit of the future stories that they will probably hear out of the central bank federal reserve members, but also what Ben calls, you know, big tech, big media, big politics, just a little bit closer to the stories that we hear that we forget to pull back the curtain on, but Ben always does a fantastic job. Yeah, that's great. He also has a lot of insight for people in

Starting point is 00:02:52 crypto, I think, outside of our bubble. So Ben exists in kind of the real non-crypto world, I would say. He's definitely on our side from a core values and thesis perspective, but he also has some almost like fatherly wisdom, I would say, to offer the crypto. And that comes near the end. Don't miss that as well. Of course, David, premium subscribers get to stick around the show for the debrief, which is an episode after the episode where you and I talk about this Ben Hunt episode. So, David, what do you want to talk about during the debrief? Yeah, Ben Hunt's characterization of Bitcoin is art. I thought it was really interesting that, you know, not to undersell Bitcoin as a financial asset, but it's also much more of a cultural

Starting point is 00:03:31 expression of values more than it is money, I think is a new take that I want to unpack with you in the debrief. What do you want to talk about in the debrief, Ryan? I think that Ben was a little more pessimistic than I am on crypto. So not as pessimistic on Bitcoin TM. Well, maybe that, but not as pessimistic on defy TM or bankless TM. I think we have a real shot at making this more than a bumper stick or making this a real revolution. Anyway, listeners, get a flavor of that in the episode. If you're a premium member, you'd stick around for the debrief. Of course, you can always upgrade to premium membership. There's a link in the show notes. Guys, we're going to get right to the episode with Ben Hunt.

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Starting point is 00:06:45 To get started unlocking the full potential of your application today. Bankless Nation, super excited to introduce you once again to Ben Hunt. He's an investor in the creator of Epsilon theory, which is a website. It's an internet community that examines markets through the lens of game theory and history and narratives in particular. It does a fantastic job in general, pulling back the curtain on what's really going on in the world and getting to the bare metal of things. Ben, welcome back to Benckless. Well, it's great to be here. And thanks for the kind introduction. I've got to have you do in front of me every time I go somewhere to speak. Very good. Excellent. Happy to do it, sir. I'm a big fan of your work. And it's been actually

Starting point is 00:07:23 two years, a little bit more over two years since you've been on bank lists. And so I think a lot has happened in the world. For sure. In the last two years. And I know you've been keeping, you're someone who keeps a keen pulse on like reality versus narrative. I guess one narrative that feels true in my mind. And I want you to check this against reality is it feels like the world is on fire

Starting point is 00:07:44 right now. Like we're not in control. And I'm wondering from your perspective, if this is unique or if this is just a thing that's always happened in history and every generation, every kind of moment in time has its struggles and problems. Is this unique, or is this something that is pretty normal? Unique's a strong word, you know, a stronger word than I would use, but is it the first time in 40 plus years that the world has been a situation like this? Absolutely. That 40 year number I use advisedly because it was 40 years since the last time we had a dramatic repricing of money.

Starting point is 00:08:23 And that's what's happening right now. Money globally, is being repriced. That's always going to be a searing event, and it's particularly searing, given the amount of money that has been borrowed and is now sloshing around the world in various forms. So a global repricing of money is about as big or as impactful a global event as you can have,

Starting point is 00:08:55 and it absolutely means, that central banks, in other words, Western economies, cannot paper over their differences anymore. It's impossible now, right, to just print your way out of a real-world problem that comes up like a war, like an energy crisis. You just can't do it. We're returning to an environment of every country for itself, returning to a country for itself, returning to a an environment where, as Thucydides said, 2,500 years ago, that the strong do what they will and the weak do as they must. So it's not unique. It's happened, you know, many times before, including 2,500 years ago with freaking Thucydides and Athens and Sparta. But it sure is

Starting point is 00:09:50 the first time in, you know, in my adult life where this has happened. It sounds very volatile, very chaotic, this era that we're entering into once again. Well, actually, I want to stop you there. I'm going to stop you there. I wouldn't describe it as chaotic. And what I mean by that is what we're experiencing is not an aberration. What we're experiencing, I believe, both internationally and domestically here in the United States, it's an equilibrium, which is just a $10 word that means a balancing point. So chaotic, obviously that's a term of. of real art when you're talking about physics, but I take it for what you meant, the chaotic in a

Starting point is 00:10:31 colloquial sense that, you know, that anything could happen. I actually don't think that's where we are. I think we're at a pretty stable balancing point. Unfortunately, it's a very painful balancing point. So I just had to interrupt there. I don't think it's chaotic, but I think it is absolutely once in a lifetime, once in a generation, and searingly painful. This idea of money getting repriced, I think that is foreign to people, because when people think about money, they think about dollars. No, that is the thing we price things with Ben Hunt. Money can't get repriced, can it? That's a foreign idea to people. And if it's repriced, what is it repriced against other types of monies? Are we talking about like foreign currencies? No, no, no, no, no. The price of money is an interest rate. That's what a price of money is. In the beginning, I was just writing a note about this. So this is so great to have this conversation. So in the beginning, there was, and I'm talking in the beginning like 10,000 years ago. In the beginning, there was a person with a business, you know, doing some economic activity, hauling, you know, grain from point A to point B, whatever, right, in Sumeria, right?

Starting point is 00:11:43 Person with a business. And they wanted money from a person with money. I don't know what the money is, you know, to buy another cart to, you know, develop a better wheel technology. But a person with a business wants money from a person with money. And there are only two mutually voluntary ways to have that transaction. By mutually voluntary, I mean, you know, obviously the person with the business could, you know, use violence to get money from the person with money or the person with money could use violence to take over that person's business. But let's leave that aside. Two voluntary transactions.

Starting point is 00:12:19 One is that the person with a business can offer the person with money a promise to participate in the future business activities, the future economic activities. We call that stock, right? Or the person with a business can promise to repay the person with money at some point in the future with more money. We call that a bond. That's it. There are stocks and their bonds. That's all there is. So about a nanosecond after stocks and bonds and money was invented, Wall Street was invented.

Starting point is 00:12:57 Again, this is 10,000 years ago. So this is before we had streets. Different street name. Right, different street name. And these are people who are in the business of facilitating these transactions. So all of finance, all of Wall Street, the last 10,000 years, has been designed to do one of two things. Either to find new ways to turn something into a transferable piece of the economic business. We'll call that securitization, creating stock to transfer, or defined new ways to make a promise to take money today and to give back more money in the future.

Starting point is 00:13:39 So we call that leverage or borrowing. That's it. All of financial innovation for 10,000 years has been to do one of those two things. to find something new to securitize or to find something new to apply leverage to. That's really it. That's the it. Now, a nanosecond after Wall Street was invented, organizations with a, how do we define this in political science? So an organization with a monopoly on the legitimate use of force, right?

Starting point is 00:14:10 We call that a government, an organization with a monopoly on the legitimate use of force. So these governments noticed that the price of leverage, the more money you had to pay the person with money in the future, it ruled the economic lives of everyone over whom they had a monopoly over the legitimate use of force. It just ruled their worlds. And we experienced the same thing today. You know, if I want to buy a house, I'm using leverage. So here in the U.S. if I'm putting 20% down to buy a house. I'm using 4-1 leverage.

Starting point is 00:14:47 It's a very highly leveraged transaction. I'm borrowing, using the technical term, a shitload of money to buy that house. And it's a long-term loan, too, typically 30 years. The difference in the price of my leverage, whether it's 3% a year for 30% a year for 30 years, or 6% a year for 30 years,

Starting point is 00:15:10 it's everything. It's everything. It rules my way. world. And that's what governments discovered 10,000 years ago, is that the price of money, by which I mean the price of borrowing, it rules every aspect of our economic lives, every single one. And so governments, whatever that organization with a monopoly on the legitimate use of force, whatever that organization was, ever since they have been trying to control the price of money, by which I mean interest rates in their territory.

Starting point is 00:15:43 That was true 10,000 years ago, and that's absolutely true today. So when I say that there's been a global repricing of money, what I mean is that governments are shaping interest rates, and that is everything when it comes to an economy, and because they are having to raise interest rates, which is painful for everyone, is painful for everyone who to buy a house or buy a car or do any sort of economic activity that uses borrowing, it's really painful for us. So this is a once-in-a-generation time where money is being globally repriced, and it reveals all the fault lines that exist otherwise in our world.

Starting point is 00:16:27 It's the old Warren Buffett line, right? That when the tide goes out, you see he's not wearing swimming trunks. It's the same thing here. It's the same thing here. And we're seeing more and more people who are naked when the tide. goes out. And we're going to have more and more traumatic experiences because of this global repricing of money, which is the increase in interest rates that we're seeing around the world. What is different this time, Ben, because central banks have raised interest rates previously,

Starting point is 00:16:58 right? They've even been as high as 3% or whatever they are now, 3.25% in the majority of people's listening in their lifetime. So we've been here before. Why is this event different than other times the Fed raises rates either up or down based on business cycles. Yeah, I mean, my parents had a, their mortgage was something like 15, 16% interest rates. Imagine that. Imagine that. And here, you know, our world is turned upside down. Oh, my God, it's a 6% interest rate. We're done. We're finished. The difference is that we've had 30 years where, again, globally, central banks have intentionally and effectively pushed interest rates, the price of money artificially down, artificially lower than they should or would be. And they were able to get away with it.

Starting point is 00:17:53 Why would they do that? They do that because in the same way that high interest rates are economic death, right? low interest rates are an economic bonanza, particularly for people with money. Particularly going back to that, in the beginning, there was a person with a business and there was a person with money. And the person with the business wanted that money from the person with money. And so they made a deal. That collection of deals that people with money have made go up enormously in value when interest rates are held down low.

Starting point is 00:18:25 It's just the math, right? It's the math of how promises to repay and future bonds. It's just the math of how they work that when interest rates go down, the value of those promises to repay you in the future, the value goes up. So what we've had is 30 years of artificially low interest rates, artificially high values of investment portfolios, and so a crazily high divide between how wealthy we are, particularly how wealthy the rich are, and how our economy has grown. And that's what's different today, is that that divide, the divide between the really rich and the not so rich,

Starting point is 00:19:13 the divide between how we have grown our economy and how we've grown our financial assets, that's what's different today. And that's why this experience is so much more painful than, you know, economically than anything I think we've experienced in our lifetimes and why I think it exacerbates the changes and tensions that have happened in politics and every other aspect of our lives. So I'm not really optimistic, right? Well, it's coming out of here. But, you know, you got to play the cards you're dealt. Right. These are the cards that were dealt.

Starting point is 00:19:50 I think bankless listeners feel a lot of this pessimism, right? You know, you're in a bubble here, Ben, talking about this, like, we feel this in our everyday lives. You wrote this article that maybe puts a fine point on what you just said. It's called hollow men, hollow markets, hollow world. Yep. And it's about this hollowing out effect. People in Western countries, I think in particular, maybe all around the world have felt. And we could narrow into the U.S. in particular, because we're talking about the Fed interest rate. This hollowing. out. And you have a graph as part of that article, which kind of blew my mind when I saw it. And we'll

Starting point is 00:20:28 show this to bankless listeners who are watching on YouTube. But this is a graph with two lines. One line is US GDP from the 1950s, onward to 2021. And you see kind of like a nice, you know, increasing curve going up, of course, because GDP of the U.S. has increased since the 1950s. And this is nominal U.S. dollar GDP. And then you see this other. line, which is an orange line. And the orange line is U.S. household and non-profit net worth. So this is net worth. We're looking at two lines. One is wealth. The other is GDP. And what's really interesting is these lines track incredibly close until about 1996. So until about 1996, they are basically right on top of one another, which means GDP increased and so did wealth.

Starting point is 00:21:16 And that seems pretty logical. Your economy, your nation, produce. is more economic output and what happens? The citizens get wealthy. Okay, this makes sense. But then something in 1996 happens. I want you to tell us what happened, but for people who aren't able to see these two lines happens as the orange line completely departs from the blue line. Wealth completely departs from GDP and it never goes back. And in fact, departs in such a way that it is like, I don't know, double the increased rate. And so the wealth has increased at a rate that is not commensurate with GDP increases from 1996 onward. And so we have the wealthy, apparently, getting very wealthy, well, productive return is not providing GDP. Explain these lines to

Starting point is 00:22:03 us, Ben. Is this what you mean by the hollowing out? Absolutely it is. And it's exactly what I met earlier when I said that in the eternal relationship between people with businesses, you know, our real economy and how that grows, versus people with money, starting in the kind of, I'll call it the early 1990s with Alan Greenspan, the Federal Reserve, other central banks around the world made a very conscious decision that they could keep interest rates a little lower than you would think they'd have to. It was a very conscious decision. Alan Greenspan writes about it in his memoir, right? I mean, it's not like this is some conspiracy theory. It's like, yeah, we did it. And why? Because we wanted people to be richer. You know, I'm all for that.

Starting point is 00:22:50 The problem, though, is that end up starting by sinning a little bit. That's what Allen Greenspan thought he was doing. He thought he was sending a little bit, meaning he was keeping interest rates lower, artificially so, than he thought he had to, because he thought, well, I can keep it low, I can make us richer, and I'm not going to create inflation. And he was absolutely right. What happened, though, after Allen Greenspan, you know, he had Bernanke, you know, I got Jay Powell, is that each step in the way, they've gone from,

Starting point is 00:23:20 from sending a little to sending a lot. So for people, I actually look at that chart, and this is in answer to people I'm comparing to growth rates, you know, growth in GDP to growth and wealth. The important thing to look at is probably not the actual distance between the two lines, but what the slope of those lines are. And the really scary part about that line is that the slope, the rate of increase in wealth,

Starting point is 00:23:47 continues to outpace by greater and greater degree, the rate of increase in our economy. So let me go back and say why Greenspan was able to get away with it. Why sending a little worked for him. It worked because we were in the middle of something that the Fed and other economists called the Great Moderation, meaning that there was productivity increases without inflation increase. Now, what I think is really clear that drove the ability to keep, interest rates low, and so to keep asset prices high propped up, was really because of one really big thing,

Starting point is 00:24:29 right, and that was globalization, which is another $10 word. All globalization means is that money was able to go to countries with cheap labor, and they were able to build factories, make stuff that was cheaper and could do it for less labor than before. So that's what, kept inflation down for like 30 years. And the other thing that helped was that governments, you know, there's certainly deficit spending. It wasn't crazy. You know, it wasn't, you know, just completely off the wall crazy with how much money they would give to their citizens to spend in the real economy until the pandemic hit. And then both of those things broke, right? Globalization broke. Globalization started breaking earlier with the U.S.-China trade war, right? And, and

Starting point is 00:25:19 globalization started breaking earlier with the first Russian invasion of Ukraine. So, you know, all these things, there's no kind of single moment where it breaks. But the pandemic is a pretty good breaking point for the breaking of globalization. And with the pandemic, governments went absolutely completely crazy in giving people money to spend in the real economy. And those two things happen. Inflation comes back. And so now all these central banks are in a bind. This is why they have to reprice money. For 30 years, they've been keeping interest rates artificially low. And for the last 15 years, they've been keeping interest rates at zero, which is just nuts. So now they're in a position where they've got to get quote unquote normalize interest rates in order to try to contain inflation before it gets well and truly embedded in our society. And I think they're too late. But that's what that graph was showing.

Starting point is 00:26:19 And as a result, we've got a wider than ever disparity between the rich, the very rich and the not rich. We've got a wider than ever disparity between where interest rates are and what inflation is. I mean, usually in the past, right, to control inflation, you need your interest rates to be above the rate of inflation. Inflation in the U.S. is 8%. we're at three and a quarter. So this is why I mean when I say that what's different this time is that we've had 30 plus years of excess of intentionally keeping the beach ball underneath the pool. And now, by God, that beach ball is going to pop up out of the pool. And there ain't nothing you can do to stop it.

Starting point is 00:27:06 Ben, in this article, you use the word hollow. Hollow men, hollow markets, hollow word. Can you unpack that word, the hollow word? Why is that the appropriate word to describe the state of the world right now? At least I feel the hollowness in at least three different ways. The first way I feel it is when I look at the charts I was making there. The hollowness is the difference between our wealth and our actual economy. There's a real hollowness there.

Starting point is 00:27:36 It's a hollowness that I think we all feel in our own lives. I think we feel the hollowness of when jobs are offshore. I think we feel the hollowness of when capital and investment doesn't come back into our own communities. I think we all feel the hollowness of the, and it's not the difference between, I'll say, kind of rich and middle class, right? It's the difference between the very rich and everyone else. It's not the 1%. It's the 0.01%. Right?

Starting point is 00:28:09 And we all feel that, and we all see that, and that the final, hollowness that I think we see, we could talk about politics in a minute at a national scale, but what I mean is our social lives, right? There's a hollowness that comes from the ground not being steady beneath your feet. There's a hollowness that comes from the barrage of narratives and words that are meant to change our behaviors. There's a hollowness that comes from going to bed at night and looking at my iPhone is the last thing I do when I go to sleep. And then looking at it again is the first thing I look at when I wake up. I mean, how pathetic is that?

Starting point is 00:28:55 But that's the hollowness that I'm describing. It's at a very personal level and it's also at this macro level. And I think listeners might be able to kind of get the gist for this hollowness when we see these two lines that are diverging between each other, the wealth of the United States versus the actual GDP. and people, I think, also intrinsically understand that what's missing here is a bunch of real stuff, as in we have the wealth, but we don't have the real stuff to back it up. We don't have the real economy.

Starting point is 00:29:24 It's all fake economy. It's all financialization economy. How did this gap come to be where we have more wealth than we have economy? And I think as a result of that, that's where this hollowness comes from. When we have, there's an is-a-a-gap between we have the world that is. versus what it ought to be, which is less than what it is because we've been able to prop up this unsustainable financialized economy. How did this gap come about in the first place? How did this hollowness arise? Where did this void come from? Well, I'll talk about from a macro and an economic

Starting point is 00:29:56 perspective first. Then we can talk about our own personal lives, right? But in both cases, it's a separation from what is real. Yeah, maybe I'll talk about the personal first. Then we can talk about the economic. What I mean by a separation from what's real is that most people, at least in my circle, right? Most people I know are symbolists, right? Meaning that their job is to work with symbols all day, every day. That could be numbers as symbols to represent some ticker or something in finance. It could be letters in an alphabet representing words that they used to write. But we're symbolists. There's that sort of disjuncture between what's real in our kind of macro world, one of the big results of keeping interest rates really low, the price of money

Starting point is 00:30:49 really low, making it really easy to get as much money as you want if you are already a person with money or a company with money. So let's be clear here. When interest rates are really low, that doesn't mean that anybody can just get a, that their credit card interest rate goes down to nothing. That is not what it means. It means that a public corporation, can borrow money at essentially nothing. It means that a government can borrow money for nothing. It means that a family office with a lot of assets can access money and borrow against things essentially pay nothing.

Starting point is 00:31:25 So when I say the price of money is really low and the price of money is nothing and interest rates are zero, that's not meaning that everyone gets that. It particularly helps the people who already have our people with money. So this plays out in so many different directions, and one of the most pernicious ways it plays out to get to this, why it doesn't translate into building real businesses and hiring real people and doing real things and real cash flows in the real world is that when the price of money is exceptionally low for corporations like it is today, it eliminates risk-taking. Say that again, it eliminates risk-taking. And risk taking is the oxygen for an economy. If you don't have people who are willing to take risks, I'm going to build this company here. I'm going to invest in this idea that I have.

Starting point is 00:32:22 And I might lose, right? I might lose. If you don't have that risk taking, your economy will not grow. It just won't. And that's what we've had with phenomenally low interest rates. Why? You're a company. Let's say, you know, pick any company you like.

Starting point is 00:32:41 Intel, right, there's a good one for you. IBM, there's another good one for you. Let's see. I could take a risk. You're the board of directors of Intel. I could take a risk. I could build a new semiconductor factory here in the United States. It's a big risk.

Starting point is 00:33:00 You're taking a lot of, you know, I think we can afford it. You know, we can raise some money. We can borrow some money. It's a cheap race. But, gosh, you know, demand my value. I don't know. If it works, that's great. But, man, it's a real risk to build that factory.

Starting point is 00:33:15 Or I can borrow a couple of billion dollars and I can buy back some stock. I can get a guaranteed investment return by borrowing money for nothing and buying back stock or doing a dividend, whatever I want to do. It's a riskless return, really nice return in this world. of zero interest rates, why take a chance? Why take a risk of actually building a factory like this? So that is played out again and again and again in every corporation in frankly the Western world that has access to this phenomenally low capital. Why would you take a chance of investing that money in a real world economic activity that might fail when you can absolutely guarantee yourself,

Starting point is 00:34:07 as the manager of this company or the director of this company, a wonderful return to become even richer than you already are through a financialization activity, increase a turn of leverage, buyback stock, and the like. I'm not opposed to buying back stock. I'm really not. I'm not one of those wackos who say, oh my God, buying back stock is the worst thing. No, it's not. It's not. It's really not. But what it is is something different than actually investing that money into productive economic growth. And that's what we as a country, United States, we as the West, have not done for 15 years. The past 15 years have been the worst, pick any 10 years in there, it's been the worst decade for productivity growth in the history of the United States.

Starting point is 00:34:55 Boom, that's the root of the problem when you say, you know, why isn't our real economy grown? is because our productivity has been the worst over this period of time than at any other point of time in this country's history. That's the answer to your question at a macro level of why the real hasn't kept up with the leverage and the money. Just to summarize this, it's a culprit of low interest rates, which are primarily benefiting already sufficiently capitalized people. Correct. And so they do not take risks with their money. And it's that risk-taking. And that is what drives an economy. That's what drives a real economy.

Starting point is 00:35:36 It's taking risks. So the largest, most capitalized players in the world don't have to take any risks to generate returns anymore. Correct. Because of low interest rates. Exactly right. Ben, what's crazy about this is for people have not thought about it. It's like one tiny number causes all of these downstream effects and misalignments in

Starting point is 00:35:54 incentives, right? That number, kind of the interest rate number that the Fed sets. It's everything, right? It's really everything. And I say, this is why I started the talk with, this was the realization 10,000 years ago, that it is the price of leverage, the price of borrowed money that drives every aspect of our economic lives. Yeah, it's absolutely incredible. And as we get into the conversation about politics, maybe the last thing to kind of cover in this hollowed out concept will lead us into a discussion about kind of the political decision. You call it the widening geier, I believe, in one of your articles, the political class. climate in the U.S. and all of the division we feel. But when we're talking about this hollowing out, and we see these two divergent lines of productivity and then wealth, and wealth increasing far faster than productivity, right? Like, one of the interesting pieces in your articles, you say it's theft.

Starting point is 00:36:44 It's stolen money. This is a line through monetary and fiscal policies that have pulled forward future growth and productivity into the present. They have, and you're talking about the leaders of the U.S. political system, stolen wealth and prosperity from our children and our children's children. but they've also created a political dynamic that has hollowed out the Constitution and its attendant political norms. As a people, you say, you can't be richer than your economy grows without stealing that wealth from someone else. And you say that stolen wealth comes from the future, one of two places. It's either you steal it from other countries. It's not quite the case the U.S., maybe a little bit, but you still it from the future or you steal it from maybe different

Starting point is 00:37:23 classes, I suppose, and, you know, take it from middle class or low class and bring it into kind of, you know, upper class. But stealing it from the future is the one that strikes me most. Being from kind of like the millennial generation, and I know Gen Z feels this as well, is there is an anger of feeling that like, we've been stolen from. Yeah, it's well placed. Like our future. And tell us about this. Has this future really been stolen from us? Has wealth actually been stolen from future generations here? Yeah, yeah. To the degree that you borrow for consumption, you are stealing from the future. You may just you're just, stealing from your own future.

Starting point is 00:37:59 Which is fine, right? We're all, we're all you means we can make these economic decisions, right, for ourselves, which is that, you know what? I haven't gone on a trip with my wife in three, maybe four years, right? And it's a 50th birthday. And, you know, it's our 20-somethings anniversary. And we're going to go a really nice trip in a couple of weeks. Can't wait.

Starting point is 00:38:21 And bucket list kind of thing. You know, borrow is going to be expensive. And hell yeah. I mean, this is my life. then we want to spend it on this. Fantastic. There's other kind of borrowing that I can do. I borrow to, you know, for my children's education.

Starting point is 00:38:35 I borrow to, you know, on my home. You know, we've got a mortgage to, you know, invest in my company. That's not stealing from the future, right? So long as the investment pays off, some investments work. Some of them don't. All you can do is the best you can do. But those were investments, right? Investments in my children, investments in my company.

Starting point is 00:38:54 That's not stealing from the future either. What is absolutely stealing from the future, I'll call it pulling forward economic activity, is the encouragement to do so by keeping interest rates artificially low, by having a whole suite of government policies that encourage just that, borrowing, pulling from the future for consumption beyond what your means are, your future means are. And that is absolutely taking from our children and our children's children. It is absolutely what that is it.

Starting point is 00:39:32 That is. Borrowing for consumption is exactly what I mean. Borrowing for, let's call it malinvestment. For example, borrowing to buyback stock, borrowing for a dividend. It's all connected to this notion of not taking risks in the real economy. You take a risk by investing. To the degree you don't invest, to the degree that you're making riskless choices of financialization through leverage, through, again, easy money that is

Starting point is 00:40:03 absolutely taking from the future. Because at some point, and this is what I'm experiencing right now, at some point, it catches up with you. And our degrees of freedom today, because we have no savings, we have enormous debt, our degrees of freedom to invest for the future, now that the price of money is increased, it's going to be really hard. It's going to be really hard. It's going to be really hard unless our standard of living goes down, unless we're prepared to consume a lot less. And that's what breaks politics. I don't know any electorate that's, we'll say, oh, yes, please, tax me more. Oh, yes, no, you're right. I need to pay more for that gasoline. And no, you're right. I took too many vacations. I'm done. You're right. I need

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Starting point is 00:44:02 You've also overlaid all of the Federal Reserve chair members. And you talked about the first Federal Reserve chair member. Like, hey, I can actually keep interest rates lower than what would be thought. Yep. Ellen Greenspan. And then that vibe rolled forward into the next chair member. Ben Bernanke. Ben Bernanke, who thought the same thing, but was perhaps like, oh, I could do it a little bit more.

Starting point is 00:44:23 And then this kind of set the status quo to where we are today with Powell. And I want to read just a single line from this article because I think this is a great punchline for this whole thing. You say that after thinking of making a lot of statements about Jay Powell, you say, I also think that Jay Powell, banker, would sooner betray his convictions than risk a tarnished reputation with his Wall Street Tong as the man who ended the decades-long party. So it's partly a question of like, how did we get here? Oh, well, one federal chair member made easier money than the last federal chair member, which made easier money than the last federal chair member. And then now we're at Jay Powell at the very end of this story. And it seems that from what you're talking about, what many other people are talking about, we actually can't kick the can further down the road. Why can't we just have easier money? Why can't we just do it again? Why is it now landing in the realm of politics? So why can't we kick the can down the road? Why does this seem to end with Jay Powell? Because so it's a great question. And the answer is, because now we have inflation. It's possible to keep having ever easier policy so long as inflation is under wraps. But when globalization broke, when we pumped trillions of dollars into the economy through PPP, through the other tax credits, through in 2017, the tax cut and job, you know, the tax cuts and law jobs act, right?

Starting point is 00:45:44 The tax breaks for people. all of these things put enormous amounts of money into the economy that was used for consumption, right? That was used to drive that triggered inflation. And that's where we are. So that's why we can't keep doing it. So what's J. Powell going to do? Well, my strong belief is at a certain point in someone's life and someone's career, when there's no job above this that you're aspiring to, your overwhelming concern becomes one of how is history going to remember me? what is my reputation, what is my legacy.

Starting point is 00:46:18 And what I will tell you is, Jay Powell is not going to be remembered as the man who unleashed the inflation genie out of the bottle to wreck the world. That's not how he's going to go down in the history books if he can help it. Because he was a big part of it. He was the one who said,

Starting point is 00:46:38 he made the gruesome error saying, no, inflation is transitory. Which was just like Ben Bernanke saying, no, the subprime crisis is contained. Right? Those are the two phrases. They'll just go down is just like, oh, my God, you blew it. You blew it.

Starting point is 00:46:54 You had your chance and you blew it. So Powell blew it by not addressing the inflation problem earlier. And so now it'll be damned if he's going to go down in history as the guy who let this genie out of the bottle. So instead, you can see this in the articles that he's kind of dictating to be published about him in the Wall Street Journal. He's channeling Paul Volker, who was the Fed chair before Alan Greenspan and was the man who is credited with breaking inflation in the 1970s. So Volker is, there's a lot of truth to it. There's some not truth to it. Truth with capacity doesn't matter.

Starting point is 00:47:37 Volker's image, the way that history remembers him, is as the guy who was tough enough and crazy enough to raise interest rates far enough to break inflation when other Fed chairman couldn't do it. So that's how Powell wants to be remembered. That's what he wants his legacy to be. And so I think that's what he's going to do. That's what he's going to do. And it took a while for the market to kind of recognize that. But over the last few months, that's what we recognize. And yeah. It's an interesting question, though, Ben, as to whether, like, the politics are going to let him fill the role as Paul Volcker. I think this is maybe the segue to the next question we wanted to have with you. So we've got this hollowing out that I think a lot of us feel, and you've described very aptly from an economic perspective, also from a personal perspective. And that has led to some societal consequences that we also feel. In addition to this feeling of hollowed outness, we also feel more divided than ever. Like, things feel unharmonious. Feel like everyone is always angry at one another.

Starting point is 00:48:47 And maybe I just spend too much time on Twitter. But this is honestly the way it feels. You wrote this article called The Winding Geier. That's what you're calling it. The widening geier, which is interesting. I think that's from a Yeats poem. And I'm going to read a quote out. The widening geir is eating America alive.

Starting point is 00:49:04 And it's not just our country. It's our families and friendships, too. Ourselves even, as the widening geier rips our internal identity. to shreds. Rips are internal identities to shreds. What is this widening geier? Like what's happening in the U.S. right now? Well, I think we all feel it, right?

Starting point is 00:49:23 I mean, I think we've all got family members. We've all got friends who are essentially lost to us now, who have gone across the event horizon, right, to use an astrophysics analogy. They've gone past a point of no return to either the Trumpism MAGA side or gone over the event horizon into the woke liberal lefty side. There's a black hole in the middle of both of those ends. And I think we've all experienced, right? I mean, it's so hard just to have conversations with their own family members anymore. Friends are, you know, the people we hang out

Starting point is 00:50:10 with the people at work. I mean, gosh, we're all very wary of what we say because it's unclear whether the person we're talking to has been infected by, my phrase, you know, weaponized narratives. I think this is entirely intentional. I think the result is, again, not an aberration, but $10 word, equilibrium, where political entrepreneurs, our political parties, our media system, our technology players, I like to call it, you know, big politics, big tech, and big media, this is all to their advantage, right, to create a state of crisis in our relationships with other humans, to snip the connections that we have with our family, with our friends, with our workplace, to atomize us.

Starting point is 00:51:08 and I do think it ends up creating a conflict inside of us as well. I feel it sometimes. I mean, it's very attractive, right? The siren call of this call to arms from the left or this call of arms to the right because it's about something that you really care about. It's about your kids. It's about your country. It's about your work.

Starting point is 00:51:29 It's about the people you love, who you love. And when I say it's a weaponized narrative, I really mean that in exactly the same way that a virus can be weaponized. It's an intentional effort to choose words and grammars that hit our brains to elicit specific response patterns. Again, that's not tinfoil hat stuff. I mean, that's really how this is designed to work, which you end up with then, again, equilibrium, a balancing point where there is no middle. The center cannot hold. which is the main point of Yates' point, that the falcon cannot hear the falconer. The falcon is us. The falconer is God. If you're religious, it's truth and wisdom. If you're not religious, like I'm not.

Starting point is 00:52:23 But we can't hear the wisdom of the past. We can't hear our better natures. And the center does not hold. This feels like something that we've talked about, which bankless listeners, I don't know if you're familiar with, but Meditations on Molok was a Slate Star Codex article. from a long time ago and talks about this god of coordination failure. It's kind of like been screwing with humanity for our entire existence. And this feels very much like he is raising his ugly head. We've got a time when 72% of registered Democrats and 70% of registered Republicans, both of them believe that the other party poses a clear and present danger to the survival of American democracy. We're talking about existential threats. And what we've seen, Ben, is politics really change from kind of this coordination game of we're all in the same team.

Starting point is 00:53:13 This is how democracy works, the free, open-fair elections, and then one group wins, compromises with the other group, and we kind of get our best guess at the will of the people from a coordinated game to a game of competition, where we're stuck in like this Moloch trap, this prisoner's dilemma. Can you talk about that a bit more? Sure. Well, you know, coordination game, it doesn't mean that we always agree on stuff. So a coordination game actually has two equilibrium, two balancing points that work. One is where, oh, everybody works together. In the famous example, this, the name of the game is called the stag hunt.

Starting point is 00:53:52 Rousseau first wrote about this as a game theory idea. And we called it the stag hunt because we can all cooperate to bring down a big animal and we'll all eat really well. And that's our best outcome. And once you do that once, it persists as an equilibrium. because neither side has got an incentive to defect, do something different. Man, we can all go out. We can all eat like kings.

Starting point is 00:54:15 This is great. Stick with it. Now, if something happens, by accident, whatever happens, and one day someone does defect and they go out, I was going to hunt for this, join the crowd, and hunt the big deer, the stack. Now, but a rabbit just crossed my path. I just grabbed it. And I didn't go hunt for the stag, but I've got a rabbit, so I eat fine. And that happens once, and so the rest of us, we don't get the big stag.

Starting point is 00:54:38 bag, we say, I come home with the rabbit and say, what were you doing? I said, I got a rabbit. I'm going to say. So the next day, we all hunt for rabbits. And that's also a balancing point. Again, it's not as good as it's all eating like kings from taking out the big stack, but it's an equilibrium point. We're all hunting rabbits, kind of on our own.

Starting point is 00:54:57 There are ways to get from one equilibrium to the other. The game, the coordination game, a game that is set up by the rules of the game, like a constitution of the United States, right? It doesn't mean that the two parties are always doing bipartisan stuff and, you know, winning World War II or doing whatever kind of big game stag hunt they're going to do. A lot of times they do their own thing and they're in competition. But a true cooperative outcome is possible in a coordination game. And what is magic about the way the United States was set up and the way the Constitution set up the gives and takes of American politics is that it truly sets up a. a coordination game, where at least it's possible to work together to achieve really big things.

Starting point is 00:55:46 You change one kind of like little outcome in the game matrix. You know, I talk about this in the note. You can show it. And it transforms into a competition game, a prisoner's dilemma being the most famous of those, where cooperation is actually impossible. There's only one balancing point in a prisoner's dilemma game, and that is the every man for his freaking self. That's the only balancing point. And that's what's so important, I think, about what's happened to our electorate and our constitution, because it's just a piece of paper, right? But true in

Starting point is 00:56:24 markets as well, we've lost the potential to even have a cooperative outcome and work together to accomplish something big. And now we're locked in a game that only has one equilibrium of every man for his freaking self, and that becomes the rational behavior. So everyone's thinking, you know, I got mine, Jack, right? And it's so hard to find a community where you can, I call it a pack. Find your pack. People where you're not just out for yourself, but you're actually working together to achieve something better. That's what we have to do. We have to find our way back to a coordination game where at least it's possible for us to work together for some great end.

Starting point is 00:57:08 Our political coordination game breaking down, which means kind of the fabric of our nation state, our societal structure breaking down as well. It's a scary prospect. And we have this hydra before us, which is big politics, big media, and big tech. At the end of your article, I was really interested because, of course, like the crypto world has its kind of, not solution, but it's a way to help the same problems that you see, right? Big tech, big politics and big media, of course. We have crypto answers to these problems.

Starting point is 00:57:37 One of your answers to these problems actually goes back to the constitutional protocol itself, which was very interesting. I actually just learned about this. There is an amendment in our Constitution that hasn't been fully passed, was never ratified by the states. And it's only one of 12 amendments

Starting point is 00:57:56 passed by Congress that was never ratified called the constitutional portionment amendment, I believe, Ben. This is interesting because we've had, Andrew Yang on the podcast before, and politically he talks about, like, you know, rank choice voting, open primaries being very important, like protocol changes. And we're like, oh, this sounds very reasonable. Yes, the solution to part of America's problems is you have to adjust the base protocol. This is another way to adjust the base protocol. Can you describe what the constitutional

Starting point is 00:58:23 apportionment amendment actually is and how it can help? Yeah, I'd be happy to him. By the way, I've had conversations with Andrew too. I mean, he de-mned me the other day and we started talking. And, you know, he's a big believer in the same things that I am, right? A third party is a tough way to go, honestly, because of the structural issues that exist with first past the post. You know, our voting system is really geared for that. And I say my main concern with the third party, and I know that Andrew Shears is concerned, is that I think all of this will be so much wasted if it just becomes a plaything for some billionaire's ego. I mean, the last thing the world needs, right, is a political party, so, you know, Mark Cuban can run for president.

Starting point is 00:59:05 I mean, who gives a fuck? But what I like about Andrew's, I think, his real effort is to try to make some changes in the rules. So the constitutional apportionment amendment is, I think, a really interesting approach to this. So I really, and it's over, yeah, I just, just Google it. Constitutional Apportionment Amendment. It was passed. It was passed by Congress in the 1700s. It was like, along with the Bill of Rights, this was passed way back then, right?

Starting point is 00:59:33 And for a range of reasons, it was not ratified by the requisite number of states. But see, here's the thing. Once an amendment, a constitutional amendment, is approved by Congress, it's out there. It doesn't go away. There's no, you know, statute of limitations on it. So we've got, I think 11 states have ratified it. And so it needs something like 20-something more. But here's the thing about ratifying an amendment.

Starting point is 01:00:04 It's done by the state legislature. And what the constitutional apportionment would do would be to massively increase the number of people who are elected to the National House of Representatives, which is what the founders intended. Right now, we've capped it at a certain number. So as our population grows, each member of the House represents some larger and larger, number of people. I think it's like 550,000 people that every representative represents, which means that they don't get represented, right, which means that the only way you can be elected to Congress, it's like a massive election. So you've got to be part of the Republican machine or you've got to be part of the Democratic machine. That's the only way you can run an election at such a large scale.

Starting point is 01:00:53 So what the apportionment amendment would basically mean that every 50,000 people would elect somebody to Congress. And 50,000, still a big number. Man, that's doable, right? That's some local person who says, yeah, well, I got an idea. What you'll get if the constitutional apportionment amendment were to pass would be a lot more people going to Congress with a lot weaker party affiliations. The forward party, somebody who could run under the forward party, Andrew Yang's party, and win in some districts. You could get green candidates win. You could get, you know, you get wacko far rights win, right?

Starting point is 01:01:30 Absolutely you would. And I am so okay with that. I want so much broader representation because when 6,000 people go to Washington, Nancy Pelosi and Kevin McCarthy, they'll have no clue about you. You can't organize that. And that, that's wonderful, right? Because what it leads to, I think, is the formation of lots of political. parties, true multi-party representation and proportional representation, and that's how we break the

Starting point is 01:01:59 stranglehold of the two-party system, I think, from the bottom up, through an amendment that's already been passed through Congress. It could never get passed by Congress today because you're basically asking Congress people to let in, you know, thousands more people into their little club. So we've never passed today, but it only has to be passed by state legislatures. And it's those state legislators, the individuals there, they're the ones who are most likely to go to Congress, right? So it's a promotion for them. So I think it serves their self-interest. And I sure is how I think it serves the people's self-interest to try to break this stranglehold that the two parties have over these massive elections that we have. Me and Ryan, we certainly like changes to our systems

Starting point is 01:02:46 that seem to go right down to the root level, because especially when we are in these times, where it feels like all of the world or all of society's turning a page, it really takes the conscious thought to go down to that root level, like, all right, let's, what is the base level protocol that we need to tinker with? Exactly. I'm wondering, Ben, as we talk about this widening guy, or we have the far left, getting further from the far right, getting further from the center, and the center gets smaller and smaller.

Starting point is 01:03:12 How does this connect to the earlier conversation, where we had the discrepancy between the GDP and the wealth? Are these adjacent conversations? Are these highly synonymous? Are they just happening because we're talking about the United States of America, and that's the common denominator? What are the big common denominators here, or are there many? Well, it's connected by that hollowing out, right? So on the political side, the hollowing out is that the center dissipates.

Starting point is 01:03:38 And so it's on the far ends and farther and farther ends where people fall off into that event horizon of becoming part of that tribe, where they think that the other tribe is not just... wrong but evil. When they think that the other side, whoever the other side is, that they are the threat to American democracy. That's the hollowing out that happens in politics. The Constitution just becomes a piece of paper and there's no belief or faith in the American people by a majority on either side of the spectrum. That's the hollowing out in politics. The hollowing out in markets is very similar. Our real economy becomes more and more just a shadow of the the market economy.

Starting point is 01:04:24 And that results in the disparity between the very, very rich and everyone else being as hollowed out as our politics. And where does the hollowing out really happens? It happens in the middle class. The middle class economically is what the center is politically. It's just there, there anymore. Or it's going away more and more every day. And that's what we've got to stop.

Starting point is 01:04:51 Now, how do you stop it? I think you stop it in the same way. You stop it from the bottom up. You started from real risk taking in the economy. You started from real risk taking in politics, which means running not as a Democrat or as a Republican, but for a small district of the people around you, you represent. It's the same way for both. The answer, I really believe, is from the bottom up, not from the top down. So let's talk about this, the bottom up, as you say. There's another sort of third party, right? It's not Andrew Yang's Ford party, but this is kind of the crypto party, if you will, the Bitcoin party and then kind of the wider crypto ecosystem. I want to get your thoughts on this lastly as we close, because I think your diagnosis of the problem is exactly right, that, you know, the Hydra and the question of how do we slay that the Hydra, big media, big politics and big tech. And your answer to that question is like, if you just cut off a Hydra's head, maybe you take Facebook, and carve it up into like 20 different companies, another head will pop up in its place. That is the nature of a hydra. And so what we have to do is get down to these fundamental protocol level changes, right? One protocol level change is potentially bottom-up adoption of cryptocurrency and using crypto as kind of a banking layer. Now, I know you have some aspects of that that you like and you're kind of cheering on from a narrative and mean perspective, but fundamentally you have some concerns with it. And I want to

Starting point is 01:06:14 you to take us back to like, I think it was April 2021, I was reading. It sounds like you got on a Zoom call with Paul Krugman, a bunch of academics, like from the Fed. And the topic at that time, of course, we're in an entirely different crypto market. We're in a bare season, Ben. I don't know if you've noticed, but crypto prices are down bad. Kind of have, yeah. All right, but at the time, take us back to April 2021. You're hosting this Zoom call. Bitcoin price was at 50K. And I think the conversation was, what's happening with this Bitcoin thing? Is there anything there? there. What was that discussion like? Yeah. By the way, I want to make sure I say this, I find Paul Krugman personally to be just as nice and as gracious and as thoughtful as they come.

Starting point is 01:06:56 I think he's genuinely a thoughtful, nice person. And I really want to get that out there. But he was kind of in the placed in the position of, you know, what's the use case, right? And the best that, you know, this is the way these things get set up. It was set up. There were going to be two people are kind of going to argue in favor of Bitcoin, and then for some reason they had me on the group that was anti-Bitcoin, and I'm really not. But in fact, by the end of the conversation, I was saying, no, no, no, guys, you've got this all wrong. Because the only use case that people come home is, well, it's a really effective way of, you know, people in failed states to, you know, get their money out, which is true, right? I get it. That's fine, right? But that use case is not why

Starting point is 01:07:39 all these people from academia and finance were getting on a call at a Zoom call at six or seven at night whenever we were doing it. They weren't getting on there to discuss the use case of, you know, helping people in Venezuela get their money out of the system. They were on a call because Bitcoin was trading at $50,000 a Bitcoin, right? That's why they were on the call. And the consensus queen of it, well, it has no use case. And so, you know, it's nothing. There's nothing there to it. And even the people arguing for Bitcoin were saying, well, maybe, but the blockchain will have something. And, you know, it's like, oh, guys, are you kidding me? Are you kidding me? And so I switched,

Starting point is 01:08:17 right? I was on the team kind of supposed to be arguing against Bitcoin when I came in. I said, no, this is ridiculous. Bitcoin is elegant. Bitcoin is so smart. Bitcoin is art, right? Bitcoin is inspirational like all good art is. Bitcoin, I love those aspects of Bitcoin, that entrepreneurial energy, that spirit of autonomy, of risk-taking, of a long-time horizon, we are not stealing from the future, but you're actually being a steward of the present to build for the future. I think those are all absolutely part and parcel, inextricable from OG Bitcoin. And I say OG Bitcoin, because what I have against Bitcoin is not the OG Bitcoin, but it's like what I like to call Bitcoin TM or Bitcoin X-Meet with jazz hands, which is the securitization.

Starting point is 01:09:18 Remember the only two things that Wall Street does for thousands of years? You find a new way to securitize something. you find a new way to apply leverage to something. And with Bitcoin TM, they've done both, right? So it's securitized, is re-apothecated. We can talk about what all those words mean. But what it really means is that it is absorbed by Wall Street into another casino game, to another table at the casino.

Starting point is 01:09:44 And I get it, you know, its number go up. And that's why you had all these people on the call at 7 o'clock, because it was $50,000, right? they didn't want to talk about defy or, you know, leading a more autonomous, decentralized life and having a different layer rather than a layer that's smothering you from the state. That wasn't the point of the call. The call was, oh, it's 50K. That sounds interesting.

Starting point is 01:10:09 Anyway, I get agitated about this because it does agitate me, because this is what Wall Street, and frankly, Washington, through the Treasury, does so well. They co-opt. They don't prevent, they don't forbid. that they don't outlaw, they co-opt. And I see it every day that this is what's happened to Bitcoin in the same way that gold was co-opted into GLD and the ETFs and the like, you know, 15 years ago. And it makes me really sad.

Starting point is 01:10:41 So I am such a supporter of all those aspects that I said were part and parcel of this community, of this pack. And it is not the grumpy grandpine. I swear to God, it is the revolutionary in me that is disappointed when it becomes Bitcoin with jazz hands. And we talk about, is it above or below the 200-day trend line? And I mean, God, what a waste. Sorry, I'm getting agitated again. Ben, I want to articulate your point because I think it's a really unique and prescient perspective.

Starting point is 01:11:20 It's really like you're hitting the nail on the head. in a way that I think many in the crypto industry don't like take time to actually understand. But your take is like you don't agree with the Khrigmans and, you know, the Fed economists and such that Bitcoin is worthless, right? You actually believe there's value there. And you think the value that it's art, it's cultural expression. It's almost like an NFT, as it were. And you said this. Yes, the Bitcoin project in and of itself is an NFT. Absolutely it is. Right. You said this. Owning Bitcoin has been an authentic expression of identity, an extremely positive identity of autonomy, entrepreneurialism, and resistance. It's almost like a bumper sticker

Starting point is 01:11:57 that you put in the back of your car. Team Bitcoin, what do I believe? Sound money principles. I believe the Fed should get out of our money printing business. And you think that that is incredible and accounts for much of the value of Bitcoin. Now, on the other side of things, if I'm taking your meaning, you do not go to the side of, let's call it Bitcoin maximalists, who are like, Bitcoin is going to take over the money system. It's going to be the reserve currency of the world. And part of the reason you are skeptical of that claim is you're seeing it play out in Bitcoin TM, Bitcoin with the trademark, which is you see a world. There's maybe a more practical world than the Bitcoin Maximilists are envisioning of Wall Street's going to co-op this thing.

Starting point is 01:12:38 They're going to securitize it. They're going to make it an ETF, Bitcoin ETF, just the way they did with other commodities like gold. And so you got there and they'll sell their product. You got that competing interest. And then you have the Treasury, which is all about financial secure surveillance. I think there's a picture of the eye of Soron. The Eye of Soron, that's my word phrase word. Yeah. The Eye of Soron, what's the I of Soron trying to do? It wants to log everything. So this idea of on-chain privacy, your own private keys, not unless we can AML KYC you, we have to know your identity. And so these two factions are going to basically trim the claws off the lion and make it a house cat. And so we get Bitcoin TM and we don't have the full vision.

Starting point is 01:13:17 and it becomes just a bumper sticker rather than a true revolution that's going to shake the system. Is that your viewpoint? Amen, brother. You said it just perfectly. You said it just perfectly. It's really fascinating. Here's the thing. So what I want bankless listeners to think about here, and this is kind of challenging and reading some of your work for us, and I'll just like give some reflections. I definitely see we're talking about with Bitcoin TM, right?

Starting point is 01:13:38 It all ends up in coin bases and exchanges and in centralized lending platforms, the block fives of the world as a regulated thing. We don't get it out elsewhere. We are now fighting this battle, though, Ben, on the defy front, okay? And the bankless front. And my worry is that it becomes bankless TM or it becomes defy TM as well. One of the things, I don't know if you've been following it, but there's this privacy mixing technology. It's a smart contract on Ethereum. It's called Tornado Cash.

Starting point is 01:14:07 Have you been following this at all? I sure have. Okay. So it seems that the Treasury via OFAC does not want this to exist. And in fact, they are OFAC sanctioning some code right now, which is like, are you sure you could do that? Because you could sanction individuals and corporations and entities, but can you sanction code? And yet they are. Okay.

Starting point is 01:14:29 This is where we get into this place of crypto advocates. And I think many lawyers in the space will say, this is a fundamental breach of American freedoms. Like, we should have the ability to have our private keys and be able to use privacy, sorts of applications. We have this ability with encrypted communication on the internet. SSL and HTTP is not illegal. And does OFAC really have the ability to sanction code? And so, like, I very much worry about this. And we collectively worry about this, Ben,

Starting point is 01:15:00 that if we don't win some battles in our court system now, which is where this is all going, that we will become defy TM and bankless TM. Do you have any comments for us or thoughts on all of this as is playing out in real time? Yeah, I do. First, obviously, you're on the side of the team. terrorist, you know, if you're supporting,

Starting point is 01:15:17 trying to say, yeah, that was a joke, right? Obviously. That is the battle that takes place in narrative space, right? And it's a hard battle to win, given the, not control, but the influence over big tech, big media, and big politics that Treasury has. So it's from, in narrative space, this is a very tough fight to undertake. I think it's a very tough fight to undertake in legal space, right? because the argument that code is speech, you know, there are lots of ways in which, you know,

Starting point is 01:15:51 speech is regulated, first and foremost, commercial speech, right? Commercial speech doesn't get the same sort of privilege that political speech does in the United States. And so, you know, putting the code under the heading of, this is commercial speech, it was to deal with money and there's a compelling national interest, you know, all this kind of stuff. I think it makes it a very tough fight in legal space. Where I'm going is that once you start challenging organizations with a monopoly on the legitimate use of force, which are governments, once you start challenging them on the ability to set the price of money, which they know, that is the reason really that governments exist, is to control the price of money. And when you start challenging that, when you start fighting them

Starting point is 01:16:40 on the battlefield of money, it is fighting them on their turf in a way that is the greatest of all home field advantages for them. It doesn't mean you don't do the fight. But I think you have to prepare yourself that is a fight you are likely to lose. And so what does that mean? What it means, I think, my view, and this is my approach, that people can have very different approaches to this, and that's okay. I don't want to fight in the realm of money. What I want to do is I want to fight on the realm of a protocol that people don't associate with money. And that's what I think is possible, right? I think we have to get at these protocol layers.

Starting point is 01:17:24 What are the rules here? And I want to apply the energy of defy. It can be in finance, but it's got to somehow be away from money itself. And maybe that's small, right? it doesn't have the same sort of number go up properties as working directly and, oh, here's my coin, right? But I think that's what we've got to figure out. And I think there's some really smart people out there with some various projects that are

Starting point is 01:17:53 out of the direct money arena. Do you like NFTs? Would this be an example of this? Absolutely it is. NFTs are very non-threatening for Gary Gensler, for Janet Yellen, like, cute little owls and cute apes and, you know, Jimmy Fallon talk shows and that sort of thing. That is the farthest thing away from money laundering, well, financial surveillance, or I guess, you know, terrorism that you can think of in the U.S. And yet, I still believe that the most subversive thing in the world

Starting point is 01:18:24 is art and content. So yeah, I'm a big fan of NFTs and using them in very subversive ways, right? I also think there are ways to use a defy philosophy. around philanthropy, around our time, around the real-world connections we make with other people. I think that if the basic problem we're trying to solve is one of distributed trust, then let's take that out of the realm of money per se, because this problem of distributed trust is that the problem of the hollowing out of our lives in every field, in every direction. So I don't have the answers, right?

Starting point is 01:19:05 but I do resist the idea that the only way to fight this is, or that the only way that you're going to declare victory is from some top-down acceptance of Bitcoin or whatever protocol we're talking about as the new monetary system. I'd rather not storm the machine gun nest, right? I would rather fight in another arena where I think we can win without killing ourselves. Ben, I think you're advocating fighting smart as well. I'd like to think so. Yeah. This is good advice.

Starting point is 01:19:40 I know you're on the same page from a narrative perspective and from an end goal perspective as many in the crypto industry. And I think you close your article with this. I don't think I can help much in the policy battle, but I think I can help a lot in the narrative battle. And we certainly appreciate all your help on the narrative battle and all of the wisdom that you've conveyed in this podcast. Is there anything, given all we said, is there any hope? because part of this podcast has been pessimistic, I think.

Starting point is 01:20:05 And there were glimmers of hope where we talked about, you know, finding a pack in protocol changes that we can, you know, strive for in new use cases maybe in crypto and NFTs that are outside of the purview of the nation state and outside of the Soron's eye. Is there any hope for us? What would you leave us with there? I'm going to come back to exactly that of finding your pack, that you find a group of people who do not treat you as a means to an end,

Starting point is 01:20:30 but treat you as an autonomous human being in your own right, and who demand that you treat them the same way. I hope you can find that in your family. I hope that you can find that in a wider community, but wherever you can find it, you've got to find it because that's how we get through this. We do get through this as a pack, and that's what writing Epsilon Theory has done for me,

Starting point is 01:20:56 has connected me with tens of thousands of, people all over the world, all over the world, and it's given me the knowledge that I am not alone. So that's the message of hope is you are not alone, right? If you're listening to this, there is a community here, and it will get us through whatever comes down the pike. I promise you that. So, yeah, that's the way to end this. Well said, Ben, we'll leave it there. Thank you so much. Guys, Epsilon Theory is a tremendous pack to be a part of. It's one of my favorite writings on the internet. Ben Hunt, of course, leads that. And there's a whole community around this. We'll include some links in the show notes to some articles that were published on

Starting point is 01:21:36 Epsilon Theory, including the hollowed out article, the widening geir, and also in praise of Bitcoin. Bankless listeners, as always, got to leave you with this. Risk and Disclaimers, none of this. It has been financial advice. It never is on bankless. You can definitely lose what you put in. Crypto is dangerous. We tell you every week, but we're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless. journey. Thanks a lot.

Bankless - 141 - Who Stole the Wealth? with Ben Hunt

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