BTC Sessions - DEBT Culture, Wealth Gaps, and BITCOIN’s Alternative Plan - Guest Andy Edstrom ep124

Episode Date: December 9, 2020

Andy Edstrom is a financial advisor, wealth manager, and author of “Why Buy Bitcoin” - an exploration of the economic circumstances that have led us to the necessity of Bitcoin as an alternative. Find Andy here: https://twitter.com/edstromandrew http://www.andyedstrom.com/ SUPPORT THE SHOW: LEDN Bitcoin backed loans –  get $25 free https://bit.ly/397rlLN Get Wasabi wallet for Bitcoin privacy https://wasabiwallet.io/ Cobo Vault: secure your Bitcoin! https://bit.ly/2GgMFlH BillFodl: get your wallet backups in solid steel. https://privacypros.io/ Bitrefill: use Bitcoin to purchase gift cards https://www.bitrefill.com/buy/?code=O04UMic9 LIGHTNING tips: https://tippin.me/@BTCsessions Telegram channel: https://t.me/btc_sessions

Wasabi wallet and fairly private. Andy Edstrom is a financial advisor and wealth manager. He's also author of the book Why Buy Bitcoin Investing Today in the Money of Tomorrow. I had him on and we got to talking about a lot of the crazy monetary policies that we've seen play out, not just this year, but since the financial crisis of 2008, 2009. We also dive into debt culture and how the financial policies and the debt culture that we're living in leads to various outcomes when it comes to individuals, companies, and governments. And then we talk about the trajectory that we're on and how that might play out as well as how Bitcoin can present itself as an opt out and an alternative what a transition to a more hard money system might look like. I really enjoyed this one. I think you guys will too. It's great for previous bitcoinsers and new coiners alike. So if you're new to the space, this will be a good one for you.

And yeah, be sure to check it out. And let me know what you think in the comments down below. I am Ben with the BTC sessions. And this is your daily session. Before we dive in, of course, shout out to sponsors of the show, leaden.io. This is where you can use your Bitcoin for a variety of different services. Of course, they've got their Bitcoin back loans. They've saved me on a few occasions. This is where you can use your Bitcoin as collateral to get a Canadian or US dollar loan. So if you're in a pinch and you need some dollars, but you don't want to sell your Bitcoin because that is a taxable event and you're worried about having to buy back in at a higher price, this could be for you.

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So be sure to check it out. For reference, I am using the Kobo Volvo. Walt Pro, it has the fingerprint scanner and the rechargeable battery, which in my opinion was worth it. So check them out. Show notes down below. Up next, I make all of my income, pretty much all of my income in Bitcoin, and I do need to live. So where do I do that? How do I do that? Well, one of the solutions I use on the regular is bit refill.com. This allows you to buy basically any gift card you could think of is here. It's insane how much stuff is here. All the good, you know, Amazon, Best Buy, Uber, Walmart, Ishtna, like everything, Apple, all of it's here.

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All right, Andy, welcome to the show. Super happy to have you. We've interacted on some other pods and everything. But first time for a one-on-one. So welcome. How are you? Ben, I'm great, man. I love both the volume and the quality of the content that you are putting out. out there. You know, as a as another Bitcoin educator myself, you know, I'm just, I'm just constantly amazed by the, by the hustle and the quantity and the quality that, that you're, that you're putting

out. So I'm, I'm really psyched to, uh, to be on with you. Thanks, man. It's, it's a bit easier when you quit your job and you just start doing it your full time. You know, and that's, you know, for me, like this, Bitcoin is a side hustle for me, right? Like, I really believe in it. I want to educate people, but it's not my, you know, it's not my full-time job. My, you know, 40-50-hour week job is managing people's money. I mean, it would be amazing to be full-time in Bitcoin and, you know, maybe someday that will make sense for me. Yeah, absolutely. We're all hoping, you know, this was a gradual shift over years for me. And I'm lucky that it's panning out so far. But, you know, got to got to be careful, got to not, not expect too much out of it.

So we'll see how it comes, but it's looking decent so far. You know, I've got your book right here, Why Buy Bitcoin. I got it a while back, actually. I read it. When did it, when did it, it was, when did it come out? It came out September of last year. I didn't start chilling it. I didn't start using Twitter, basically, until about a year ago, almost exactly a year ago.

So it was December last year, you know, when I, first sort of started making noise about it. And I did my first pod that was Bitcoin Echo Chamber with Colin Falstead, I think in January. Yeah. Awesome. I must have gotten it sometime around the spring, I think, is when I bought it and read it. But yeah, it's a good dive into, well, exactly as it says, the why. Why should anybody bother to look at and or own this asset? And And I mean, if anything, holy hell, this year has given us a reason to to dive further into the Bitcoin rabbit hole and to help people see why there might be value here. I mean, we've, it's interesting because we've seen trillions of dollars printed.

You know, people, there's massive, massive unemployment that has happened in the wake of everything going on in the lockdowns and so and so forth. But at the same time, like all-time highs and stock markets, massive rebounds there of hastening wealth gap again. And at the same time, again, small businesses suffering people out of work. And for the first time, I think anyways, for the first time, it's been just so blatant the disconnect between what people are seeing, like in the news of, oh, you know, the economy is bouncing back and, and, you know, we're seeing, we're seeing all-time highs in the stock market, the disconnect between Wall Street and the day-to-day of what people are actually living as an income earner.

Let's, maybe you can talk a little bit about what we saw this year and I guess how it affected people differently and why some got richer while other people were massively hurt. Yeah. So I agree with everything you said and lots to cover there. I think the story so far of 2020 has been, and this is not my original idea, that it's basically accelerated trends that were already in place. So if software was already eating the world, you know, that trend was already in place when Mark Andreessen wrote it in the New York Times in that op-ed in 2011, almost a decade ago, it's all the more accelerated. The wealth gap, right? The cantalian effect, whatever you want to call it, that was already in place. It's now exacerbated. I think that the, well, and then of course,

you know, the political divide was already there and it's, you know, as much in force as as ever and maybe more so. I think when people, especially Normies and or legacy finance people talk about 2020 and they talk about how they found Bitcoin, right? For those who are finding Bitcoin in 2020, they'll say that, oh, the pandemic changed everything, right? Like that was the catalyst for them

and it just brought into stark relief the scale of the government deficits, the scale of the money printing, the scale of the, you know, of the rot in the system. And I will counter that actually, when I published my book a year ago, before the pandemic, every single one of those trends was already in place, right? Yeah.

And so the debt was already unrecoverable, right? There was too much debt as a percent of GDP, as a percent of the economy, both in this country and across the world. And then you added on the unfunded entitlements, right? The Social Security and the Medicare and all that stuff, all the pensions. what they call in Europe, quote-unquote pensions, we call them. And that doesn't count towards the debt, does it? Well, right, exactly.

And the figures in the book, I think debt to GDP I had in the book was around 350% total debt to GDP. Okay. That's household, corporate government, total in the U.S. And actually the figure globally is comparable. And then the entitlements, the unfunded entitlements are another 1,000% of GDP. Right. So you add them up and you've got 1,400 percent of GDP or something like that. And so, of course, yeah, now we're, you know, we added, we printed a few more trillion

dollars. I say we, I mean, the Federal Reserve, other global central banks, you know, printed a couple trillion more. And now the deficits are even bigger and the debt is even greater. So for sure, it's been an accelerant to the reaching of the end game, which I wrote about in the book. I think that endgame is, you know, is basically inflating away the debt. I don't want to spoil, I don't know if you, I don't want to spoil a future guest you've got

coming on. I'll leave it to you, you know, to mention his name, an episode recorded. But, you know, he sort of, he takes a deflationary view. That's maybe my only point of disagreement with him about sort of how this plays out. But, yeah, I think these, these, everything that was already in place has, just been, has just been accelerated. And it's put, and it's finally gotten to the level where, yeah, probably the average guy on the street, at least some, some percentage of the average people on the street are saying, oh, how much money can they really print? Like, what, what is the limit? And what does it mean to print, you know, a trillion dollars or two trillion dollars?

And why when I go to the supermarket, you know, does the, you know, does the state that used to cost me, uh, 15 bucks cost 25 bucks, you know, and, uh, why are certain, you know, goods, you know, in short supply. I'm talking about in the cities, like where I live. And what's going on here? So, so let's let's talk a little bit about impacts on individuals that these types of government and central bank actions have. So we keep hearing, at least in, you know, you're in the U.S., I'm in Canada, we keep hearing that they're not hitting their inflation targets. They're not hitting, you know, that that 2% that they're striving for. And they have something called the CPI or the consumer price index, which tracks inflation.

And they say, well, we're not, we're not seeing what we need from inflation. In fact, Stats Canada released a report like a few, I think a month or two back. And they said, well, inflation's only been 0.5% for the last number of years. What's the disconnect here? Why are people feeling that pinch, having their expenses apparently seem to go up and having a harder time keeping up? But the government is saying that's not the case and we need to ramp up inflation more. Yeah, a lot there. So the first is what do the statistics actually measure? You mentioned CPI.

I agree with you. CPI is the sort of canonical thing that people talk about. The Fed claims that their primary measure is a different measure called the PCE, the personal consumption expenditure index. It's similar. It's a little different than CPI. It's different in how it's calculated and what the weightings of the various components are. But it's in the same vein. One of the things I wrote about in the book was how these things are constructed.

The most blatant problem with these indices, I would say, is. housing cost, right? So housing costs is like 42% of the CPI. It's by far the biggest component, which makes sense when you think about it. But, and I can't remember, I think it was back in the 80s, they changed the way they calculated housing costs, right? And what they did is they used to use actual rents, but then they changed the methodology. I can't remember the name of it. It's like imputed rent. But the concept is, for homeowners who own their houses, they make this calculation of what your rent would be, you know, if you were renting the house, even though you're not. And the problem with that

statistic is rents haven't been rising especially fast because interest rates have been coming down, right? So when you figure out, so when you look at the market overall and you say, okay, what determines rent? Well, it has to do with the capital cost of owning the property. If you're an investor, right, you own an apartment building or you own houses that you're renting to people, you say, oh, okay, what are my costs to own this asset? Well, there's maintenance, obviously, you know, capital expenditure to keep the property up and there's tax. But the biggest component, of course, is the mortgage, right? Because real estate is by far the most levered asset class, right? The most, there's more debt against real estate by far than any other major asset class.

So if you keep lowering interest rates, well, the mortgage payment goes down. So yeah, rents have been kept in check unless you want to actually own your own your home, right? Because the because the outcome of this is that interest rates go down, property prices go up, house prices go up, you know, they're going bananas in my neighborhood. You know, young people, younger generations are just getting completely priced out of the market. So, you know, have rent stayed low? Kind of. But at the same time, you've pushed this, you've inflated this bubble of property prices and effectively priced younger people out of the option to own a home. So that, so again, 40% of the CPI, right, is, is housing costs. So that's artificially held down and you have this negative effect on purchase price of houses.

And then there's numerous other problems, you know, it's unclear sort of how to track and measure, what the cost of something in the goods basket is when, you know, the old type of computer gets replaced by the new type of computer or the desktop gets replaced by the handheld, you know, by the mobile device. And then, of course, you've got a lot of the industries sort of strip out volatile, quote unquote, volatile things like, you know, food and energy, also known as the things we actually consume. Yeah, who needs those every day? Yeah, exactly. And so it's just, I mean, It's just ridiculous. And the honest truth about inflation is inflation is devilishly hard to actually measure. I mean, you'll never, you know, no supercomputer or team of brilliant scientists is ever going to put a reasonably tight box around, oh, what is the actual inflation? This is not a physics problem. It's extremely hard to measure. And then, of course, you got the last issue, which is, oh, you know, the entitlements that we're talking about. talking about before. Those are indexed, right, to the inflation levels. So what is the government's

incentive to, in terms of how they're going to calculate this thing that raises or lowers their future liability? Well, the incentive is to, is to understate inflation. So, you know, for all these reasons, yeah, I think the inflation numbers are, they're flawed and biased. And I don't want to say useless, but they're not that useful. Yeah. Yeah. So. So. So from a regular kind of wage earning perspective, people, as we've been talking about, are feeling disenfranchised or they're not quite sure where to funnel their anger. You see regular day-to-day people effectively looking at corporations and, you know, big companies, things like that, and pointing the finger there and saying things like, eat the rich,

and down with capitalism. And you see a lot of that sentiment nowadays. And part of it may be a misunderstanding of what's happening and why that wealth gap is widening. Talk a little bit about how when you have these influxes of capital, central banks injecting capital into various places. How does that drive this wealth gap? where does that money flow to that benefits some but not others? Yeah. So a few pieces there.

So the first is just the obvious working capital concept, which is if you are an average or poor household, right, your first dollars of wealth, quote unquote dollars of wealth are held in dollars, you know, or Canadian dollars or whatever your currency is, right? if you are barely scraping by, you have to have enough cash in your checking account to manage your life, pay your bills, pay your rent, et cetera. There's no surplus, basically, right? So all of your sort of assets, quote unquote, meager as they may be, are in cash and cash is constantly depreciating, right? There is some inflation. They are printing more of it, so the purchasing power is

reducing over time. So if you're poor, 100% of your net worth, right, is getting depreciated away. In contrast, if you are wealthy, yes, you keep that minimum amount of working capital, but, you know, the other whatever 90% of your assets or 95% of your assets, you invest elsewhere, often in cash flowing assets. So you're protected against that inflation problem. So as a percent of net worth, the poor are effectively taxed at a higher rate than the rich when it comes to to monetary policy and inflation. So it's therefore a regressive tax. So that's one. Second one is obviously, you know, the QE, right, the printing money by the central bank to buy bonds. What does that do? That buys bonds. The basic math on buying bonds is price of bonds goes up, yield comes down. And the

yield of government bonds is the benchmark against which substantially all investment assets are measured. So when the 10-year Treasury was yielding 5%, well, then maybe you demanded a 10% annual return on stocks overall because there's more risk. But when the 10 years at 2%, now maybe you're going to only demand 7% annualized return on stocks. And when the demanded return comes down, that is reflected in the price going up. So this is what we see in housing, right, where prices have gone bananas. That's what we see in the stock market. It's what we see in most risk assets. Well, who does that value accrue to? Well, it accrues to whoever owns those assets, and that's the rich, right? The average American doesn't have a significant stock portfolio.

You know, I think the example I used in my book was, you know, ask, ask your cleaning lady how our stocks are doing, right? These people don't have those assets. so they don't get that benefit. That accrues to the rich. And then the last thing is sort of the direct cantion effects or cantillian effects, which is literally when the money gets printed and the bonds get bought, they get bought out of the inventory of the banks. They get bought, you know, out of the inventory of hedge funds and investment funds. So the dollars first go, you know, mainly to the banks, which goes into the pockets of the bank employees, as well as the shareholders of the banks. Now, eventually, after some time lag, the quote, quote, new money gets lent to corporates.

So that goes into the pockets of the CEOs. And then finally, hopefully, it goes into the wages, you know, of the workers. But they're the last on the ladder. And that's the common misconception. You know, they teach you in economics 101, any kind of one to one that, oh, they print more money. Like, you know, prices just rise all at the same time. No, there's a series of events and be closer to the spigot. makes you richer sooner or allows you to buy goods and services before the prices have increased and

sort of flowed through the whole system. Yeah. Okay. So we saw a lot of that in response to the recession in 2008, 2009. We saw a lot of the QE where it's direct into more or less the banks and the share buybacks, all that kind of stuff. We saw a little bit different this time around. We saw checks mailed out to individuals. Now, I'm hoping maybe you can speak a little bit to what the effects of this may be, especially in a situation where, because we've seen lots of calls for UBI or universal basic income where people just get like a set amount of money every month to survive, what some of the second and third order effects of that may be.

but also perhaps we could dive a little bit down the rabbit hole of what percentage of money, and even if you don't have a specific number, how much of the money being created is actually going to regular citizens versus percentage going to, again, the higher ups. And how does that perhaps disenfranchise even the people that are getting free money and feeling richer, temporarily. What does that look like? Yeah. So there's a lot there. First on the first on the checks in the mail. It's about time, you know, relative to what government policy has been, right? It's all been flowing to the rich and those owning assets. So in terms of, you know, evening up the score, the score has been extremely uneven for a long time. And this maybe caught it up a little bit.

Now, with respect to inflation, generally what I think most people would say is the marginal propensity to consume by, you know, a poor person is much greater than that of a rich person. You give the rich guy or even the middle, you know, middle class guy, another thousand bucks. He doesn't run out and, you know, go out to dinner, you know, three more times or four more times, you know, or buy a bunch more stuff. No, he's his marginal dollar just goes into savings. He goes and invest it. Whereas the average person, especially someone who may have lost their job in the pandemic, is going to spend that money. So that actually flows in large part back into the economy. All else equal, that tends to be inflationary. Now, putting money in people's pockets, like I said, is better, I would argue, for society than, you know, just fueling, fueling the assets of the rich. Okay. With respect to, you know, the balance and the fairness and who got paid, I was shocked in. and dismayed. And I wrote about this, you know, when the, when the CARES Act was passed in the,

and the bailout, the latest and greatest bailout, you know, came out in whenever it was March and April, because so much of it flowed to corporates and so much of it flowed to companies. And I remember having this debate. I can't remember who it was. I think it with a family. I remember. And I just had, I was like yelling at him. And I was like, I was like, companies are not people. People are people. People are the money that need, people are the people that need the money. Companies are not the people that need the money. And, yeah, most of it flowed to corporates as well as just the outright, you know,

asset purchases, which flowed to investment portfolios. You know, thank you federal reserve for saving, you know, my client's portfolios. You know, I benefit from this, you know, more or less directly. But, but yeah, the split in terms of corporates versus people was, was not, I don't remember the numbers off the top of my head, but it was really not very, it was not fair, not equitable, not favorable. And the logic, okay, that was employed was, oh, it's harder to find the people directly and deliver that money versus giving it to the companies to, you know, distribute on the people's behalf. But, you know, it's interesting, like,

luxury vehicle and boat sales, boat sales are my favorite, boat sales, rocketed. okay and like May June because you know it was probably my guess you know not small but more like medium sized business owners who got these checks and some of that flowed to their employees and some of it went to the you know pockets of the people managing the companies and they had more money to more money to play around with so that's my perspective on it and I think that the public you know I hope the public is figuring out what's going on. I think it is probably indicative of why we haven't had yet another stimulus bill passed is maybe people are wising up to, oh, the distribution of the stuff was, let's say, suboptimal. And yeah, I'm, I hope, I know there's going to be more stimulus. And given that, you know, I just hope it more of it goes directly to people.

who need it rather than companies and capitalists. But I'm not that optimistic that that's how it'll go. We'll see. Yeah, fair enough. Now down the same line, I wanna maybe get into a conversation about debt culture and perhaps how that affects, well, again, a little bit of everybody,

I guess when it comes to individuals, when it comes to even, you know, governments, government debt, and what levels those have risen to, you know, in over the past 10, 12, 20, I mean, a number of decades, however far you want to go back. But what do you see this kind of culture of debt? Where does it come from? And how quickly is it growing? Yeah.

So it's growing exponentially. And that's not surprising when you realize that the money isn't tethered to hard money because it's just fiat money. So the banks can print more. So they do every time there's a recession. And then they're supposed to take away the punch bowl, you know, when you get the recovery. They never quite do it. So it's this sine wave, you know, of money supply and stimulus through the business cycle, except it's sloped, right? It's upward sloping.

And the culture of money and debt, in part because the cycles are so long, right, the long-term debt cycle lasts typically 80 years, right? The last one started, you know, basically post-World War II with the Bretton Wood system and then really got going when we left the gold standard in 1971. And when you live a lifetime where you look around and you see that people that borrow make money because they borrow to invest in assets and the prices go up and then the interest rates go down. So the cost of that debt decreases. I mean, just imagine, I'll give you a specific example, right? And this is something I talk with, you know, about with my clients.

And I'll get some flack for this. But most Americans still borrow to buy homes based on a 30-year fixed. rate mortgage, right? And the 30-year fixed-rate mortgage now is like, it's almost down to 3%. I mean, it had been, you know, back in the 80s, it was well into the double digits. But the advice I was, I give my clients or have been giving my clients since I did the research for the book, like since it became clear to me that there's no way we can pay off the debt, it has to be inflated away. The advice I give is like, look, why would you, why would you pay for the rate protection, right? Because there are other structures.

in the mortgage market, you can buy, you can do a five-year arm, a seven-year arm, a 10-year arm. Arm is, it stands for adjustable rate mortgage. And that's still a 30-year maturity mortgage, but you only have a fixed rate, you know, a low fixed rate for five or seven or ten years. And then it floats afterward. You know, you can save significant cash out of pocket today by doing the arm structure. Me personally, you know, I've owned a house. I've lived in a house that I've owned for eight years.

And in that period, I think I've refinanced. I think I've done like eight mortgage deals, okay? Because they keep lowering interest rates. I never do a 30 year fixed rate, right? I do a five-year arm or a seven-year arm to minimize my cash costs. I never pay fees or expenses. I say, look, if you want to put my rate slightly higher, right, so that I don't have to pay you anything out of pocket.

That's what I do because I know I'm just going to be refinancing again in another year. Yeah. And, you know, it's so people pay for the rate protection, but it's sort of silly because if rates normalize, it's just going to be a depression. And so the government's, you know, just not going to allow that. I mean, there's the rate risk. And others smarter than me figured this out, you know, years ago. It took me until, you know, the last couple of years to really figure this out. But, yeah, the rate risk embedded in these things is so minimal that I think it was Trump. I think it was Trump that, you know, said on record, like, you know, only idiots don't borrow money, right?

you'd have to be dumb, you know, not to lever up as much as possible because the burden of that debt just goes down and down and down as interest rates go down and down and down. So, yeah, that permeates everything. I mean, it reduces the propensity to save. It pushes, it causes people to borrow in order to speculate on assets, which, you know, leads to probably huge misallocation of capital. It means, you know, companies that shouldn't get funded do get funded. companies that should die or should have died earlier, you know, get to limp along the zombie companies, as they say, you know, how many zombie companies came out of the recent efforts by the Federal Reserve to literally outright, you know, buy corporate debt and prop up these, these over- indebted companies. So, yeah, I was, I was going to say, like, that, and that directly affects, you know,

people will point and say, well, it's too big to fail. It'll cause too many jobs to disappear and so, so forth. But that, in effect, in propping up these zombie companies, these companies that should have died, that has a longer term effect on society as a whole and how we progress, no? Yeah, I think it does. I mean, the best and leanest and meanest, um, you know, entrepreneurs, the scrappiest, the most likely to be successful, they would ordinarily compete with and destroy companies that are propped up, you know, by cheap money. And there's also a

differential here between, you know, the bond market, let's say, and everything else, which is to say, once you reach a certain scale as a company, right, whether this is, because, you're you've achieved a monopoly position or not, we can talk about that, your funding cost is extremely low. But the funding costs for startups and smaller companies is actually substantially higher. It's interesting to observe this issue, which is that when you look at the stock market in the U.S. over the last decade, substantially all or most of the return has come from already big companies getting bigger. Small cap stocks have performed. performed pitifully. Historically, when you look back at a century of data, which is something that, you know, asset allocators like me do on a regular basis, small cap stocks usually outperform over long periods of time. And that makes sense. I mean, it stands to reason because, oh, smaller company more likely to fail. So as an investor, I'm going to demand some return premium. And over time, if I take that extra risk, I get rewarded for it. Not in the last decade. And the, you know, the issue started to appear.

even in the prior decade as well. So yeah, there's capital misallocation. There's basically shoring up and supporting and propping up already sizable organizations at the expense of smaller competitors who, you know, in general, tend to be more innovative. They also tend to create more jobs as well. That's a whole other issue rather than the large companies. And yeah, that's that I think is a major effect. probably a major retardant on overall economic growth. And it also, by the way, increases the

wealth concentration in itself, right? Because if you're a founder, CEO of an already large company, you're already very wealthy. And so more accumulates to you. We see this with the internet giants, you know, where the founders are literally worth tens of billions, in some cases, you know, over $100 billion. Yeah, that concentrates wealth further. So, yeah, a lot of factors there. So, and in part almost like unjustifiably so, because if, if the reason that you're succeeding is because you're being propped up and not, not, I guess, throw into the wolves as, as the smaller, you know, startup companies are, then then you have this unfair advantage, which means that, you know,

potential ones that would have swept in and been able to do things more efficiently, offered better products for cheaper prices to individuals, never get that chance and just are killed. And meanwhile, you're doing things that, you know, not in all cases, but in many cases, you were going to fail, perhaps, because you were not able to efficiently bring your product to market. and now you're in this spot that you can't be dethroned because you're too big to fail. They're stringing you along and people are left with a more expensive product that is not as good. 100% agree with you. You end up with less job creation.

You end up, as you say, with worse and more expensive products. And we'll never know the counterfactual, right? We'll never know historically how much economic growth we might have had if we hadn't had this terrible fiat system. You know, credit to Safedine, he does a pretty good analysis in his book about the late 19th century when we did have hard money and one overall economic growth was substantially higher than it was today. So that is, I think, a relatively compelling argument. And it's not apples to apples because it's a different time period. It's a different piece on the time series. But nevertheless, yeah, I think that, and this is why, you know, guys like,

guys like Brady Swenson, you know, talk about the Bitcoin Renaissance. You know, imagine how much more prosperity we could have if we had a hard money standard, especially if that hard money was Bitcoin. Yeah, yeah, 100%. It's interesting to see the current sentiment across, the majority of kind of regular day-to-day people that are effectively cheering on this government intervention when in the end it is it's further furthering again that wealth gap and funneling money into the very corporations that they're already angry at because capitalism when what

you're seeing is the opposite of capitalism. It's reallocating wealth away from people more or less to two corporations that are no longer really competing. Absolutely. So yeah. And there's two, there's a couple, just to underscore this, there's a couple, you know, components of government policy that right. One is the literally, you know, funding of the zombies. That clearly is a big problem and it drives what we're talking about.

And the second thing is basically is antitrust and monopoly policy. And this is one thing, the thing about capitalism, you know, unfettered free market, just totally laissez-faire, is, and there's a lot of proponents, you know, especially in the Bitcoin space that just say, look, just let everything rip, you know, let whatever happens happen. And the problem of that, at least historically, is that there are companies that can achieve market power. They consolidate horizontally, especially, you know, such that they've, you know, a single or a couple companies basically, are the sole providers of, you know, a particular goods or service.

And they end up with pricing power. And yeah, and then the consumer gets shafted. That is going on for sure in America now. The antitrust, you know, effort department, the Justice Department has basically been asleep at the switch for 20 years. It's reached levels in terms of industry concentration that are comparable with a century ago, right, the Gilded Age. And so that's another major issue in my opinion.

Now, the true free marketers would say, well, if you also removed the lobbying effort and you removed basically the regulation that allows companies to capture their markets because they impose this higher regulatory compliance costs on their smaller competitors, right, because the big guys can afford to pay, you know, X millions of dollars basically to comply with rules. The free marketers say, well, if you remove that, then you'd still have competition. I am open to that possibility. I don't know if we've ever seen it actually in history. But I think it's important to at least acknowledge that in the world that we live in today,

where there is a government and therefore there is a government that can be captured by large companies, you probably are going to need some kind of antitrust effort in order to prevent. companies from acquiring their way, you know, to dominant market positions and monopoly pricing power, you know, that they can turn the screws on the public with. So that's the other piece that I think's important. So with all this talk of everything that's going on in terms of, again, the heart that people are feeling, the inequity across the board, the rampant money printing. What's the end game here? Where do you see this going? Not, you know, in a, well, I don't know, what do you think our trajectory is in terms of the status quo and the way things are currently going?

Yeah. So I guess I'll start with the, I'll start with the financial picture, right, which is like, how can this debt problem resolve? And, you know, the good news, credit to Ray Dalio, who hasn't yet figured out of Bitcoin, but I'm sure he will. He's written a lot of good content on the long-term debt cycle. And this is a known, documented historical fact. People don't seem to know about it, but you get these long cycles of debt accumulation and they resolve themselves. And they resolve themselves in a few possible ways, right?

I've got a short chapter in the book about the six options, right? the menu, the menu of bad options for dealing with too much debt. So the first is austerity, right? That's belt tightening, living within your means. Basically politically impossible because when you got politicians elected on two and four and six year cycles, the ones that can deliver more goods than they take in tax revenue get reelected. So you got perpetual deficit spending.

So good luck with austerity. You know, you can have mass defaults. That's what the Depression. involved. And because we had the depression and because people know about it and how terrible it was, you know, it's unlikely that the government's going to go in that direction. You can have a Jubilee, right, what was called in biblical time to jubilee debt forgiveness. Now, people today are using that term to describe basically government, you know, printing more dollars or in order effectively to forgive debts like college debt. That's a different concept than, you know, a true Jubilee,

which is literally declaring debt's null and void. That used to happen in ancient times, but it's problematic because one man's debt is another man's asset, and that's hugely deflationary. It causes economic activity to contract. Again, you can end up in a depression. So more likely, I think, are the items on the bottom of the menu. One is tax and spend redistribution.

I don't know if we'll see that in this administration or the next, but let's just say that I'm expecting more soaking of the rich and more checks, you know, basically to the to the poor in the middle class. You know, another option basically is ongoing. That's financial repression, right? This is a term coined by a couple of Stanford economists in the 70s. It's basically keeping interest rates really low, punishing savers. Ultimately, it can, it can result in capital controls. I could see that happening. We're not there yet, but I could see it happening this decade. And then ultimately, you know, the most popular escape valve, if you are the issuer of the World Reserve currency,

or at least you're the issue of your own currency that's used in your country, that option is inflation. And I personally think that's where we're headed in this decade. So there's too much debt. We're finally going to reach the resolution. I think it's going to happen this decade. It may even happen in the next five years. Timing is always difficult to call. My colleagues often point to Japan and they say, oh, look, Andy, you know, they have way more debt in Japan, and that house of cards hasn't come down yet. And that's true. Japan is a special case, you know, because it's such a unified and homogenous society, they all pull in the same direction. Plus, they have significant net assets, basically, huge piles of assets that accumulated abroad,

you know, to help offset the debt. But it's also the issue of, you know, people look at Japan, they say, well, until Japan collapses, you know, nothing else will. And the problem with that logic is, well, eventually that, you know, debt situation in Japan probably will collapse. Let's say it's at 450% of GDP, debt to GDP. I'm making up a number. Well, when that goes, you know, people aren't going to be like, oh, 450%, that's the number we can get to before our system goes down. No. That's the panic moment that triggers people to think about, oh, well, if it happens at 450, could have happened at 400 or 370 or 350. So, yeah, I, you know, it's one thing, you never know where the tipping point is in advance.

Let's just, let's just put it that way. The other thing that I think is that we are in, we're halfway through the fourth turning, right? This is, you know, this is Neil Howe and William Strauss's excellent book from, I think, 22 years ago. they, by the way, called, you know, they called that right around now or slightly sooner, you know, there would be some triggering event basically that would that would basically cause the fourth turning and cause a crisis, you know, substantial crisis, like 80-year cycle crisis. And one of the, I think there were five scenarios they put in their book. I mean, yeah, I think it was five.

And one of them was a pandemic. That was 22 years ago. So interesting. Yeah, I think that. I think that we're getting to the stage where our institutions are not functioning properly, and usually the way that goes in the last few cycles is war. I am still cautiously optimistic that it won't go that way, but I can also construct scenarios, two obvious ones, right?

One is the external threat is the rising power of China, you know, and you get in this Thucydides trap conflict, like happened with Athens and Sparta, you know, millennia ago and has happened many times since. That's the external conflict. The internal conflict is, you know, equally possible, maybe more so, is just the, you know, widening gulf between the red team and the blue team that ultimately results in, you know, violence, some kind of civil war, secession, I don't know. So I actually really am worried about these factors for this decade. I'm really optimistic about the longer term, because the way this usually goes is you get through this conflict. Stronger institutions, new stronger institutions are forged. Bitcoin may be one of those

institutions. I hope it is. And it strengthens society. It strengthens individuals. And then you've got hard times creating strong men again. And then, you know, things go well for a significant period of time. So yeah, I'm sort of pessimistic for this decade, optimistic for the longer term. I think there's going to be bigger, more major conflicts than we've seen. There are, you know, potential outs in theory, right? Like, could we turn the ship? And what could turn the ship? In theory, if technology is accelerating, like exponentially, there could be so much economic surplus created, right, that it can actually, you know, support and de-leverage the whole debt edifice. But that depends on one, it happening fast enough and two like the distribution of that wealth creation right you know being being

percolated out so you kind of have to get two hard things right uh in order to yeah get out of this debt mess basically by just growing out of it probability of that happening soon enough you know I think it's low but yeah who knows maybe yeah yeah so obviously a lot of people in our our next of the woods are, you know, they've, they've seen and learned about Bitcoin and, you know, obviously basis for your book. Why does, why does Bitcoin present such a compelling out of, of the current economic system and, and, you know, what do you see in it and what does that transition look like if it's successful? Yeah. Wow. Okay. I mean, you can give a short answer. Yeah, you can give a Cliffs note version of that.

Yeah, exactly. So when I pitch it today, I keep it really simple. Digital gold, right? Hard money. That's it. People, I think, can understand that. And it's super simple. And in a world of money printer go br-hmm, people get that.

What I write about in the book is much more substantial. You know, it's not only does it take share from gold, but it's, It takes share from Fiat. It takes share from offshore assets. You know, it also is this new enabler of amazing new applications that weren't possible before, you know, whether it's micropayments using lightning, which actually seems to have some traction now, I think, which is awesome. You know, or it's, you know, collateralizing many kinds of assets, you know, using Bitcoin,

all this stuff. That's all upside and that's great. and I have huge hopes for that. That's the $100 trillion, you know, multi-hundred trillion dollar upside case in today's dollars, right? Not just, you know, funny money inflated away dollars. But I keep it really simple these days and I focus on digital gold. So it's, to me, like I get frustrated sometimes.

Like it's so blindingly obvious that one must own inflation-proof money. Yes. And yet people. are still struggling with it. I think they're still struggling with, you know, the idea of prohibition. And I see that possibility is so remote, you know, so low probability at this stage. And even if you, even if it were going to happen, you know, we're nowhere near that in terms of price, right? It's like, okay, talk to me about prohibition at 100K Bitcoin. Maybe. Yeah. So, you know, it's like, you know, it's like it's the it's the inflation proof assets that you must own and then in addition to that

when you're just looking around and seeing oh you know how much do i trust my government you know how much sort of functionality do i see there oh what's this um what's this you know government issued cryptocurrency they're doing that in china which is a surveillance state um are they going to do it here in the U.S., you know, I'm already basically fully or substantially fully surveilled, you know, if I'm not taking precautions when I use the Internet on a regular basis. Now are they going to have full surveillance of my money? All these things, you know, all these things are things that I talk about and point to and that I think are in people's heads. I am quite optimistic that a hard money standard will mitigate or reduce the, you know, the theft through inflation that hits the

poor hardest. So it is actually progressive, right? It's progressive there. I am optimistic. This is a debate I've had with a couple of clients, you know, it's the boil the oceans debate, right? You know, is it pro or is it positive or negative for the environment? I actually think it's net positive. I do think it accelerates the development of renewable energies by unlocking stranded assets, which increases the units installed of, you know, solar and wind and hydro, which funds the R&D budgets of these companies, which brings down the unit cost, which makes it more competitive with the old, you know, the legacy fossil fuel systems. It's an accelerant, you know, I think Jack Dorsey, I think I saw a tweet, I think he tweeted or made a statement in the last, the last day or two,

talking specifically about how his expectation is that in the long run, Bitcoin will run 100, percent on renewables and that Bitcoin will accelerate the development of the renewable sector. That's crucial. So I don't know. I'm going off on a couple of tangents here for you. But yeah, I think that Bitcoin wins by being the obvious hard money, by being harder than gold, by capturing market share from gold, by getting into more people's pockets, by watching the number go up, by causing people to learn about.

it, you know, whether they're reading my book or whether they're watching all the great content that you put out. You get the feedback loops. You know, you may have another boom and bust cycle, but this time around, man, there's going to be a lot of people learning about it. And, yeah, I think it just continues to get entrenched, continues to win, continues to attract more talent. This is the cycle, I think, where legacy finance guys are really going to pile in, right? Yeah. It's not happening right now. But, you. 12 months from now, when, you know, potentially, you know, we're past a trillion in market cap, you know, just for Bitcoin. And who knows, maybe with the whole sector, it's, you know,

a couple trillion with all the, with all the other alts, et cetera. Yeah. And, you know, so, yeah, this is, this is going to be attracting a lot of attention and people are going to learn about it. They're going to realize why it's important and useful and the feedback loops and to the moon, man. Yeah. And again, like you said, it's it's not there yet, but we're seeing the writing on the wall. There's a lot of legendary Wall Street guys that already know that they don't want to hold dollars. They know that they need to get their dollars into other assets to, you know, maintain kind of their wealth. And they're waking up to Bitcoin. We're seeing in headlines every day. It's all over CNBC, Bloomberg, all all kinds of people jumping in.

And so I think that you're right that there's going to be this wave of smart money. And hopefully some people watching this will be able to front run some of those guys. I really hope so, Ben. I mean, this is the thing that seems to be different about this cycle is, you know, it's always said that this was a retail-led phenomenon. And that's true, right? You know, average, a lot of people, just average people have had a chance to get a bite at this apple, right?

This may be the last chance, really, because when the corporates come in, you know, when Saylor buys tens of thousands of bitcoins and continues to buy, right, just comes over the top and buys more and borrows to buy more, et cetera. You know, it's, it seems like it's only a matter of time before this really gets bought up by the already rich and the corporates, which will further entrench it and sort of remove, you know, the remaining risk of prohibition or, you know,

of really negative government treatment. But yeah, it's, this is why I've been, you know, banging on the heads of my friends and my family for the last few years. This is why there's a big title in your face right now on this book. Why buy Bitcoin? This is why. Exactly. And, you know, I kind of hope that I'm, I kind of hope that a, I kind of hope that a,

the crashes again and people have a little more time to stack, but I don't know. I don't know. This may be the last shot. Yeah, I kind of feel like March was the opportunity of a lifetime that we're likely not going to see something similar to that. Maybe ever again. I don't know. But Andy, I want to say I had a blast chatting with you. It's always wonderful having you on the show. Well, I haven't had you on the show, but being on a show with you.

And I'm glad that I could finally get one-on-one with you. so thank you so much for coming on. Can you let people know where they can find you, whether it be Twitter, website, book, whatever? Yeah, of course, the usual shills. So Twitter, Edstrom, Andrew, personal website, Andy Edstrom.com. Obviously, the book is Why Buy Bitcoin,

mostly sold through Amazon, but it's also on Apple and other channels. And of course, you know, I'm affiliated with SwanBitcoin.com forward slash Andy. and look, I really, I really enjoyed this. I love what you're doing in the space. It's been a real pleasure talking with you and I hope we get to do it again sometime.

Awesome. Thanks so much, man. Thank you guys so much for watching and or listening. If you are on YouTube, please do hit like, subscribe, and share all of those things help so much. I can't stress it enough. Every time you do that, it bumps videos like this in front of more eyeballs.

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