Endgame with Gita Wirjawan - Dr. Saifedean Ammous: Your Money Should Not Steal From You

Episode Date: October 15, 2022

The best-selling author of “The Bitcoin Standard” and “The Fiat Standard,” Saifedean H. Ammous, talks about the inescapable conclusion of his insatiable curiosity about the fatal conceit of the current world financial system—including recession. He also criticizes the absence of irreducible complexities in the global climate crisis issues arguments and how humanity is trapped in short-termism. Saifedean Ammous is a Palestinian economist and educator who is also the founder and CEO of saifedean.com, an online learning platform on economics and the future regime of ‘free and sound' money. #Endgame #GitaWirjawan #Bitcoin --------------------------------------------------------------------- Saifedean’s books: http://saifedean.com/thebitcoinstandard http://saifedean.com/thefiatstandard Listen to Saifedean's podcast, The Bitcoin Standard Podcast: https://saifedean.com/podcast/ Find Saifedean on Twitter: https://twitter.com/saifedean --------------------------------------------------------------------- Pre-Order the Endgame official merchandise: https://wa.me/628119182045 Think like a contrarian, learn public policy: admissions.sgpp.ac.id [e-mail] https://wa.me/628111522504

I flat out do not believe there is such a thing as a climate crisis. I think the notion that the weather is a crisis or the climate is a crisis, I think is completely ridiculous. It's fiction. Our ability to plan for the future and our ability to provide for our future is inextricably linked to how good our money is at maintaining its value to the future. Well, now with Bitcoin you do have an alternative. And it's an alternative that does all of the things that your bank does. and does all the things that your gold does, and it does them all better.

So nobody can inflate it, nobody can devalue it and take the supply that you have, and nobody can take the money away from you without your permission, and nobody can put Riba in it. Nobody can force you to engage in Riba like you do with the other forms of money. I think there's a huge potential for the Muslim world to need in Bitcoin adoption, because if you don't want,

to take part in Ribba. You have the alternative right now. This is N-GEL. Hello, we're coming Savidine Amus, a one of an educator, and, and, after this,

it's known because of the written in some of the book, the Bitcoin standard and also the Fiat Standard. Hi, Savedin, thank you so much for coming on to our show. Thank you so much for having me.

It's a pleasure. I'd like to start out with, you know, a little bit on how you grew up. You were born in Ramallah and tell us, you know, how you've been spending, you know, your time until what you're doing right now. Well, I mean, it's been a long 40 years. How much time do you have to go over them? Maybe a few minutes before we deep dive into the Fiat standard and the Bitcoin standard. Sure, yeah. So I was born in the West Bank in Palestine and then... My family moved to Saudi Arabia initially.

Then we moved to Brazil for a couple of years. Then we moved back to Palestine and Jordan. Then I went and studied for a university in Lebanon. So I did my undergraduate degree in Lebanon in the American University of Beirut. And then I did a master's in London at the London School of Economics and a PhD at Columbia University. After which I went back to Lebanon where I was teaching for 10 years at the Lebanese American University. and then after that I left my job at the Lebanese American University and now I've become an independent scholar.

I teach on my website. I prepare courses online at safeadine.com. It's my website and I'm an author. So I've written the Bitcoin Standard. And my second book, The Fiat Standard, is out now. And my third book, which is a textbook in economics, is nearing completion. I'm writing the last chapter as we speak. So that's kind of a short summary of my background.

That's a good one. Before we go into some of the findings you've been telling the whole world with, you were into soccer. You were captain and coach of the Humra football club. I mean, it's not really a football club. It's just my friends and I, we get together and we play against other people. But yeah, no, I'm not very good at it. I'm just a it's more about a way of staying in shape.

I don't get paid to play. Okay. All right. Let's let's talk about the evolution. I mean, you've been going to schools where, you know, you've been taught Cajun, you know, philosophy. And how did you evolve as to basically start changing your views about the world? And how you started basically coming out to, you know, contradict, you know, whatever you. you've been taught in whatever many people around the world have been taught.

I mean, I kind of bought into a lot of the stuff that you've been telling people, you know, with the last few years. Please. Yeah, so when I was at Columbia University, I was doing my PhD, and the topic of the PhD was, you know, I decided I was going to go with something that was, I thought, not very controversial, not very political. My PhD program was in sustainable development, so it was in economics, but focusing on sustainable development.

And I chose to study, I did my undergraduate in mechanical engineering, so I had a good background in understanding energy and these things. So I decided I wanted to do the PhD to focus on the issue of energy, in particular biofuels. I found that an interesting question. And in fact, you know, now, interestingly enough, I'm just remembering right now, part of the motivation for that was something that I read about Indonesia at some point, because when I first started hearing about biofuels, the thing that drew my attention was the fact that this was being promoted in Europe and the US as a way of producing fuel that is much cleaner than fossil fuels.

But then you started hearing about all the stories of rainforests in Indonesia getting chopped down in order to grow crops to make biodiesel. and that was, you know, that was something that made me curious about how these things work, whether they're a good idea or not. So I started studying them. And while studying this question, I, you know, I started off with the kind of approach that you are expected to have in a place like Columbia University wherein you're looking at it from a top-down central planning perspective. So are biofuels good or bad? And if they're good, then, you know, what should be you? should government do in order to encourage them if they're bad what should we do in order to stop them and the you know this approach of looking at it from top down as if we can just answer a fixed

question and determine the best course of action this was how i start but then the more that i read about it and the more that i tried to um the more that i tried to arrive at an answer you know as an engineer because i studied these things from an engineering perspective and i thought a question like this, you know, it seems like it's an economic question, but ultimately, everything that's involved is fuels and physical things and all of that is engineering. So as an engineer, clearly, I'll be able to know, you know, this is good fuel or this is bad fuel, and you'll be able to answer that question. But over time, as I studied the question, I realized really the problem is not so much the fuels themselves. The problem, rather, is in the central planning,

in the idea that somebody like me or a policymaker can look at the question of biofuels and make a decision or decisions on behalf of thousands or millions or billions of people. And so, and I ran into this problem in a very serious practical way. I was trying to build a spreadsheet model that would look at how energy worked all over the world. And we're trying to assess, you know, what would happen if the EU, replaced, say, 20% of its fuel with biofuels, if they replaced 20% of their diesel and gasoline with biofuels, would that be good for carbon dioxide emissions or not? And so you start off with this question, which seems like it's a technical engineering question, because, you know,

there's a certain amount of fuel. You replace it with other kind of fuel and then you just calculate the differences. But then quickly you realize, nope, it's a lot more complicated than that. This isn't like studying a car where we're looking at the emissions of a car. What happens if we change this? This is a far more complex system. And that's, you know, looking at the deforestation in Indonesia was a great example of this. So you might think that we just took this oil out of the car and replaced it with another oil. And then that means less emissions.

But you have to look at the entire life cycle. So the thing that I was looking into is what is called life cycle analysis. So you want to look at all of the supply chain involved in producing the oil, the gasoline, and the one and the supply chain involved in producing biodiesel. And then you want to compare essentially the world with 20% biodiesel versus the world without 20% biodeasel. But that sounds obviously extremely complicated, but then it even becomes more and more complicated because in reality,

it's not like what you're dealing with are individual pieces on a chessboard where, you know, the EU passes a law and then everybody just falls into place. Well, the reality is people are going to react. in ways that benefit them. And so you can't really figure out all the complications of how things will unfold. Once you've distorted the prices of a particular good in the market, people are going to react in all kinds of unpredictable ways because you've changed their economic incentives. And of course, they're going to try and seek to improve their well-being.

And so once you've created such an enormous demand for these biofuels that might sound like they're a good idea, well, now you just created an enormous incentive for people to destroy natural resources in order to produce those things because there's such a huge demand on them. And so it might well be the case that the destruction caused by the deforestation is much more than the destruction caused by fossil fuels by the hydrocarbon fuels that they're trying to replace. And the more that I tried to answer this from a technical perspective as an engineer, the more I ran into the problem of human beings not being chess pieces, human beings not being like little molecules.

So you can't just treat the world like it's a container with gas molecules. And you know, you increase the pressure of the container so the temperature goes up or you decrease the volume so the pressure increases. That's not how humans work. Humans are a lot more complicated than that. So individuals have their will. And so trying to make sense of that, you know, the engineering problem just kept on getting more and more complicated.

And the only way that I've tried, that I managed to make sense, that was to start coming across the work of the Austrian economists. Initially, it was Hayek, who was like my gateway drug to Austrian economics. Usually people start with Hayek. And so, you know, his paper, the use of knowledge and anger too. Yeah. Yeah, well, I mean, I think Hayek is like more of the, people, people hear about Hayek first. Mengar is like at the bottom of the rabbit hole.

Hayek is at the door. So initially, I read that paper, the use of knowledge in society, and it was extremely powerful because in it he explains how he gives a very powerful example. He says, you know, imagine there's an earthquake or natural disaster that happens to a particular region, which is one of the major producers of a particular good. So the example that I give in my book based on this is like the earthquake that happened in Chile. and Chile is the world's major producer of copper. So when there was an earthquake in Chile, the world copper market reacted within seconds. You know, after the earthquake,

immediately the price of copper shoots up. So for people who are in the copper market, they found out about the price of copper shooting up before they heard the news of the earthquake. And so immediately there was that signal because immediately as soon as the earthquake happened, you know, the first person in Chile involved in the copper market who saw that the earthquake happened,

reacted in a certain way, which was going to, you know, raise the price of copper because he knew that, oh, well, that's an earthquake in Chile. It's going to hurt the ability of Chile to export. So we're going to see all of these markets for copper around the world are going to be affected. Clearly, the price is going to go up. So you see, you know, the copper producers will start buying some of the existing supply or they'll take some of the supply off the market. Copper consumers all over the world will react by reducing their consumption of copper by finding substitutes. So just one little signal, the price of copper goes up

and then millions of people around the world adjust their economic decisions based on the price going up without even having to know anything about why the price went up. You know, you run a factory in Turkey and your factory consumes copper. You see that the price rose. You realize, well, we don't have to use copper for everything. We can buy nickel instead for this use and we can maybe get a little bit more of silicon for that use. And so you reduce your copper intake by 80% and you increase a little bit of other materials. So all over the world, billions of people's decisions, you know, and then, you know, the consumers from your factory will buy a good that has less copper in it without even

knowing it. But, you know, if they bought it last year, it would have had copper in it. This year, they have it with nickel or whatever as a replacement. They don't even know that that is the case. But billions of people around the world are affected. without any one single person taking a centralized decision that tells them to do this. And in fact, the ability of the price to communicate this information is far more powerful than anything that an individual producer could do.

So therefore, thinking about it this way, gave me a much more, I would say, useful way of understanding how economic phenomena works, that ultimately what is shaping things, the world is not made up of dead molecules that we just move around the control. It's made up of human beings with a will and a brain and self-interest. And every one of them is at every moment of their life

trying to improve their life. And it's not straightforward or easy for somebody to come from above and just impose things on them that can achieve any kind of desired results. So that's kind of that was my gateway into understanding

Austrian economics that central planning, the problem of central planning, the problem of trying to impose economic reality on the world and why it doesn't work because human beings act and human beings are not dead matter. So from that simple example, well, not so simple, but this very complex topic of biofuels, I came to the realization of the limitations of the central planning perspective on the world and I came to the appreciation of the importance of economic freedom and the importance of people being able to take individual decisions and the dangers that happen when you subvert people's free will

because somebody in power thinks that he can use those people in order to achieve some other kind of goal. And most of the time, you know, these kind of things are well-intentioned. So governments pass a law saying, we're going to limit the price of this thing. Right. You know, the price, now is a great example. You know, the price of oil is going up all over the world, the price of gas and energy.

And so in many places, governments are saying, hey, we're going to put a price cap. And all of these situations, it seems like it's a well-meaning thing. But then, like I believe when you understand Austrian economics and our Australian economics works, you see that you can't make people's lives better by putting a gun to their head and forcing them to act in a certain way. So if you're telling people we can't you can't buy gasoline for more than this price, you're not just going to magically make all the gasoline available to them at the price that they want. You're just going to destroy the ability of the producers to make enough gasoline. And you're going to cause a black market to emerge and you're going to cause shortages

and you're going to cause much more complicated problems that things would have been much better off if you just let those people have their, you know, have a free market in which people bid up the price as much as they can, which encourages producers to produce more. And then the rising price encourages people to economize. So people who can make do with something else they will. And people who can produce more will produce more. So this is kind of how I arrived at this. And then I took it from the perspective of just looking at energy markets and then

started applying it to other things. And then I became extremely fascinated with money. And that was like, you know, after I finished my PhD, I was extremely fascinated with the topic of money because around the same time as I was finishing my PhD, the world financial crisis was happening. And then I was getting a glimpse of the same thing, the same kind of energy central planning, but applied to money. And so you have all these central banks printing all these enormous amounts of money and handing it over to their citizens or to their banks. And the idea was that this was going to somehow make, you know, fix the economy or create solutions. to the economic problems. And of course, you see the implications and the complications that

follow from it. And you see the long-term consequences. And that's what got me really interested in money in particular. It sounds, I mean, a couple of things I want to push you on. It almost sounds like you fundamentally believe in the renewability of energy. But you don't quite believe in the way, you know, we've seen misallocation. of resources or the renewable energy has been done in ways that would have been so inefficient. That's what your argument is, essentially, right, against renewables. And second, it almost sounds like when you're trying to distinguish Keynesian from Austrian economics, it fundamentally boils down to the fact that one is centrally controlled and the other one is a lot more

decentralized. Is that the right way to think about those two points that you've just raised? With the second one, I think definitely, yeah, this is ultimately what it comes down to. From the Austrian perspective, the economist is just an observer and it's trying to explain how the world works and understand how the world works, but from the Keynesian perspective, the economist is a central planner, the economist is the hero. The economist is the one that makes economic growth happen, which I think is an enormously, enormously inaccurate presentation of reality. People wake up and every morning and work and now produce. And that's what makes things happen.

Production, not academics pontificating. In fact, what academics do is get in the way of the producers. When it comes to the issue of energy, I would say when I was writing my PhD, I was under the impression that yes, there is a climate crisis and that fossil fuels are a problem and that we need to move away from them. And I should say, you know, as a mechanical engineer when I was an undergraduate, you know, we studied different energy sources and you do the numbers on the thermodynamics of the energy contained. And I had a very good understanding for why cars run on fuel rather than biofuels, why solar energy is not enough to run houses and so on. But then you go to graduate school in Colombia in 2004, you know, this is the beginning of the climate.

obsession and where people were just really sure that the climate was just the biggest crisis. And then I started learning economics and started thinking and started understanding how powerful economic incentives are. So it got me to a point where I started thinking that economic incentives can override thermodynamics. So all that is needed is just that, you know, if government just puts a tax on carbon dioxide or puts a tax on this fuel, then people will inevitably just find an alternative. This is how I used to think of it.

But then, you know, initially my skepticism was about the central planning, but I should say that like after graduating and after reading more about this and opening my mind, I've changed my perspective even further and further. So I flat out do not believe there is such a thing as a climate crisis. I think the notion that the weather is a crisis or the climate is a crisis, I think it's completely ridiculous. It's fiction. I don't think human emissions of CO2 are a control knob for the Earth's temperature. or for the earth's climate, I think it's extremely delusional. And it's no different from, you know, you see those old priests who sacrificed young girls in order to make the harvest better. This is exactly what it's like when people say, you know, we need to make a transition away from the energy sources that we need to survive in order to fix the weather and stop the climate and stop the flooding and stop the droughts.

I think, you know, flooding droughts, all these things have happened for millions of years. and they will continue to happen, and we have no ability to control them. And the notion that it is CO2 that is driving them, I think, is completely anti-scientific nonsense. But even more important than that, you know, even if you were to accept that is the case. The onus of proof, I think, is just so enormous for people to be able to present a case against why the damage caused by emitting CO2 is so drastic. that we would want to remove our use or get rid of our use of hydrocarbon fuels. Because hydrocarbon fuels are the reason that maybe 7 billion people are alive on Earth rather than just 1 billion people.

The reason we have almost 8 is because of hydrocarbons. I mean, Earth's population took off after we invented those fuels. They've completely changed our life. Our life expectancy has increased because we have sanitation, we have plumbing, we have ways of treating wastewater, we have we've been able to build the infrastructure that is protecting us from the environment. And this is enormously, enormously important. And I think, you know, the quality of life around the world is just simply a function of how much energy you consume. And so the poorest countries in the world are the places that consume the least energy. The richest countries are the places that consume the most energy.

this is an iron law of history. And nobody has ever tried having a washing machine and then decided, you know what, I'm going to go back to washing with my hands. Nobody has tried having a refrigerator at home and then decided, no, you know what, I don't want a refrigerator. I prefer to eat rotten food every now and then. This is a one-way arrow. And all of the people who say that we need to fix the weather by giving up all those things

are completely insane and completely delusional. because, you know, and I mean the word delusional and insane, because these people talk about giving up all of those things, but they're completely delusional about what it entails. You know, why don't you actually show us how you can go and live by reducing your carbon dioxide emissions or net zero, you know, get rid of your fridge, get rid of all of your electronics, get rid of everything that is made out of...

We'll start walking to work. Yeah, and also, you know, your work is probably not, going to be there. Like most likely your work today, if you're alive in 2022, your work involves machines that are only possible because of hydrocarbons. We can't make computers and electronic devices in the internet out of tree twigs. It's just not going to work. The only way we can get all of these nice things that we have in the world today is because

of hydrocarbons. So the cost of getting rid of hydrocarbons is essentially mass genocide. It's calling for the death for billions of people. And it's just completely delusional and insane to pretend like, yeah, we should just invent an alternative. Like, no, that's not how it works. We've, you know, this isn't how engineer work. You can't just go to Apple and tell them,

yep, you need to make the iPhone out of three twigs. It doesn't work that way. You know, the only way that we can make, it isn't as if, you know, the engineers are part of an evil conspiracy with the oil companies that want us to continue to consume their oil. and that's why they make laptops out of oil. We make laptops out of oil because it's the only way that we can make a laptop. And if you don't believe me, please go ahead and make another laptop.

So what I ask of those people is, you know, either do it or shut up. But you can't ask people to stop using the things that are essential. Because frankly, I mean, we can laugh at it. It is silly, but it is also criminal. I mean, just a couple of days ago, John Kerry, one of the richest people in the the world probably i'm not sure if it's a billionaire or close to billionaire but he's the climate envoy and he was going to africa and telling people in africa no no no no no you can't use hydrocarbon energy because if you use it it's going to ruin the weather for all the rest of us so we're going to

need you guys to you know use all of these forms of energy that we in the rich world we cannot afford to use them you know even even in his very rich part of massachusetts where he lives he cannot afford to run his house on hydro on wind and solar. He's still, yeah, he's got, he's connected to a very large, powerful grid connected to hydrocarbon energy or maybe nuclear. And that's the only way that he's able to do all of the things that he does. So it's, it's insane that you, and of course, it's extremely destructive. You know, a lot of people in the developing world are being put into debt for millions and

billions of dollars because their government is borrowing in order to build all these insane infrastructure that is supposed to fix the weather. You know, instead of making a coal or gas or diesel power plant that can give you 24-hour electricity, which is what people in those places need, and it's very cheap and it's very affordable, they're spending 10 times the amount of money to build a solar power plant that is going to give you intermittent energy and it's not going to work and you're going to be in debt for decades for it. So I think, yeah, I would say I think that there's no alternative to hydrocarbons. And I think the notion that we're running out of that hydrocarbons are dangerous, I think, is just

fiction. I want to go to Fiat. But I just want to clarify one thing. I mean, I want to put this in the context of how much carbon would have been emitting since 4.6 billion years ago. We've done about 1,600 gigatons of damage and you know to the atmosphere and and you believe in the finite nature of things right and and and if I if I take a look at the numbers there's probably about 2 to 3,000 gigatons of carbon left that that basically entails the finite life within which we can live use on planet earth at least from what I've from what I've been reading right and And we've been emitting about, what, 35 to 40 gigatons of carbon per year? I mean, okay, let's assume it's a lot more than 3,000.

But if we're emitting 35 to 40 gigatons of carbon per year, that means we have a finite life expectancy, right? Just using carbon. No, I don't believe that is the case. I think, you know, if you look at the data on oil reserves, and I mentioned this in the Bitcoin standard, It's been 100 years now of people saying we have reached peak oil capacity. This is it.

We've found all the oil that there is and there's only a little bit left and we're going to run out in 5, 10, 15, 20 years. We've had people saying this for more than 100 years now. And every single year, the proven oil reserves increase. So every single year, we have more oil left than we did the year before. So what this suggests me is that the quantity of oil on Earth is completely irrelevant for us. And I think this is a big part of the Malthusian idea is just in people's mind, people think the Earth is crowded. The Earth is not crowded. In fact, if you put all human beings in, you know, if you took the volume of all human beings and you put them in one square, like you melted down all of humanity into one square,

that square, I think that the size of it would be something like 700 meters. It's a cube of 700 meters. So you could fit all of humanity into one cube of 700 meters. You could fit all of humanity living at the, you know, the average kind of American household with a suburb, suburban house with a backyard. If all of humanity had a house like that, seven and a half billion people could fit in Texas living like that. So the notion that we are running out of things is just insane. And it's Malthusians, and those insane Malthusians have been at this for a couple of hundred years now. And they've always been wrong, but they've always been extremely dangerous and extremely damage.

And they've done extremely criminal things over the past century in particular because of this brain damage that they have, this idea that we're running out. We're not running out. The limitation on how much oil we have is not how much oil exists on earth. It's a little bit like being worried about running out of water in the sea. It's just, we don't. don't have a limit on the water. The limit on how much water there is is just how much more water we can take from the sea. And similarly, the oil that is under the ground is beyond our capacity to even measure. And the more we dig, the more we find. So the limit really is how much

time we dedicate toward getting an oil. And that's why 100 years of oil consumption and production. You know, we're consuming more oil today than we ever did, despite of all of this sustainability nonsense. The reality is the world is consuming more coal, oil, and natural gas than it has ever done. And we'll continue to do so unless the Malthusians truly cause an insane and large humanitarian catastrophe, we're going to continue to consume more and more oil. And yet we continue to find more. We continue to find large and larger quantities. So, and I think the other even more controversial idea that I'm not entirely sure of this, but I'm coming round to it is that I do not believe that hydrocarbon fuels are from fossils. I don't think this is a very tenable

contention. I think, you know, the idea that all fossil fuels is just, how can you prove that? You know, we found this thing, we burn it, and it keeps us warm. And you're trying to tell me that all of this oil everywhere on earth was at some point, a dinosaur and at some point it was a tree and at some point it was some kind of fossil. I mean, imagine if somebody made this claim to you for the first time. The burden of proof is extremely high. How do you know that this thing just doesn't exist there? Like, why can't it exist in the crust of the earth?

Why can't methane exist on Earth? We know that methane exists in meteors and in asteroids that have dropped on Earth. We find that some of these hydrocarbons exist in them. So the dinosaurs climb there and die 80 million years ago in the asteroid and to come and hit us here. We know there are places, and I've been to one of those places in Turkey, where there's gas flaring out of the earth. It's just been there for thousands of years. It's mentioned in old books thousands of years ago that there are these places where gas is coming out of the earth and it's just burning. So you've had a fire that's been going for thousands and thousands.

Who knows, maybe millions of years. and it's just continued to go and you're really trying to tell me that all that is dead dinosaurs I mean how many dead dinosaurs are there I don't I I I don't think that hydrocarbon fuels are finite in any meaningful sense so even if I even if I were to accept that they are fossil fuels realistically every year we find more and more and the more we dig the more we find so we're not going to run into a problem of running out of oil. If we were, we would be witnessing the price of oil rising a lot because we're not finding more and so the people who have it are selling it at a much, much, much higher price. But we don't see that. We just see them getting cheaper and cheaper over time.

Yeah. It's actually peak demand now, not peak oil. Right. Anyway, I don't think we're hitting peak demand either. I think we're just going to keep demanding more and more. I mean, I pray and hope that within my lifetime, the world will be consuming 10 times as much oil as we consume today, because that's the only way. And if you like the idea of poor people in Africa and Indonesia and in India and in China, if you like the idea of those people having electricity, if you like the idea of premature babies in Indonesia being able to survive because they have an incubator because the hospital has 24 hour electricity, you like oil and you like gas and you like coal.

If you care more about the concentration of CO2 in the atmosphere than babies dying in incubator, If you care more about that than billions of people surviving, then yeah, maybe you will wish that we reduce our consumption of oil. But I don't see that as a very compelling thing because I think, you know, you could start with yourself. Try and get rid of oil for yourself before you preach it for the poor people. No, no, I get it. I get it. But hypothetically, I want to go to Fiat, but hypothetically, if you had two washing machines, one is powered by hydro. The other one powered by, you know, fossil or hydrocarbon. And the non-fossil or the non-hydrocarbon is cheaper.

Which one would you use? Of course, I've used the cheaper, but that's not the situation. I just want to use. I get it. I buy your argument. I buy your argument. Okay, let's talk about Fiat, right? You've been pounding on this mantra.

You know, the developed economies have been printed. money at about 14% per year, right? For the last 100 years and it's created so much inequality between the developed and the non-developed. And if we take a look at the asset classes, we've got real estate at about $326 trillion globally. You've got the bonds at $120 trillion, equities at $110, money supply at $100 trillion, gold at $10 trillion, and Bitcoin slightly below $1 trillion. What's happened, you know, with the world? It sounds a little bit conspiratorial in terms of how the developed economies have been printing money much more disproportionately than anybody else could have in the last 100 years. Talk about that.

Yeah. So just a small little on the numbers. The numbers I have are for 60 years from 1960 to 2020, and it's worldwide. So the 14% is like the global average. 14% money supply increase. So that includes Zimbabwe and Venezuela and China and all the world's countries. The global money supply grows at an average of around 14% over the last 60 years. In the richer countries, in the U.S., Europe, Japan, the average is closer to 6, 7, 8% or so.

And then the worse the country does, the higher the supply growth rate does, because the more money you create, the more inflation happens, the more economic destruction. I mean, I think people are just conditioned to view this as if it is some kind of conspiracy, but there's really nothing conspiratorial there. You don't have to invoke a conspiracy to see why

a government that has the ability to print money at no cost might be tempted to use that ability. And what I do in the Fiat standard is to basically discuss it from an engineering perspective. And in fact, I think this is probably like a good antidote to the conspiratorial worldview, because the conspiratorial worldview is, in my mind, it's usually like an easy way of trying to explain how things work. And it misses the point of, well, why do they get away with it? Or if that were the case.

And this is what I try and explain with the FIA standard, which is, you know, sure, some people benefit. But really, this is a technical issue. And the technical issue and the reason, the book begins by trying to making the case for Fiat money. And the case for Fiat money is that at the beginning of the 20th century, the world was becoming more and more globalized. So people were trading all over the world. People were sending and receiving money all over the world at an increasing rate. And as our goods and services started to flow globally very quickly, and with the invention of the telegram and with the invention of the telephone,

with all these methods of communication, you know, the frequency of international trade increased far more than the ability of moving physical gold can handle. So you could no longer move physical gold every time somebody in the U.S. wanted to trade with somebody in Britain because it wasn't like it was just, you know, one big shipment of cotton goes there and then you send one big shipment of gold in exchange or, you know, the same boat goes, drops off the cotton and takes the goal. When you had an enormous amount of trade taking place, and increasingly a lot of this became services where things don't even get sent.

You know, you hire somebody in Britain to do something for you and they just send you things that are not, you know, they perform services that aren't even sent. Then naturally, the gold had to be centralized and it had to be centralized so that you could do clearance and settlement. so that you don't have to move gold every single time somebody in Britain wants to pay somebody in the US and vice versa. You have an account of the bank in Britain. I have an account to the bank of the US. And then at the end of the day, week or month, the banks settle with one another.

You know, we sent you this much. You sent us that much. So that means you owe us this much gold. So we'll send you this much gold at the end of the month or at the end of the year. So that became necessary because of economic reality. just because of the fact that gold is expensive to move around. And with communication with trains and modern steamships and modern cars, people are moving around much faster than they can move their gold around.

So money had to be centralized. Well, money gets centralized. Now, once it's centralized, effectively the entity that controls the central bank, its credit becomes as good as money. Because if it says, I will pay you this much money tomorrow or you know give me this thing and I'll pay you with a promise to pay you tomorrow it's as good as money because they are the ones who keep all the promises and so that just puts an enormous amount of power in their hands and I mean again to go back to the conspiratorial idea like

you see this happening in every single government and in every single country and over the world not because of some overarching conspiracy just because it's human nature you're putting a centralized authority in charge of the money of all of society. And as Mises says, you know, the temptation is just too strong for people in charge because you, you know, let's say you issue paper credit and you issue financial instruments that are backed by gold. And unless everybody comes and asks to redeem for all of their paper and all of their credit on the spot at the same time, you're going to be all right.

so you know you get a war and somebody's invading your country what are you going to do you know print a little bit of money you can finance the war and then you can defeat the enemy well then the war is over and you defeated the enemy and like you convinced people that this was okay and that the rise in prices was not caused by inflation it was because of the evil enemies well then there's an election you want to win the election what do you do so the excuses for printing money continue to proliferate and increase And the temptation continues to be too strong. So governments then end up with this enormous ability to shape economic reality. And that's the topic of my book.

And, you know, in the Bitcoin standard, I looked at Bitcoin as how it works as the software and then trying to understand the implications of the presence of the software. And in the Fiat standard, I tried to do the same. I thought of it as imagine this was a software, because this is what it is. You know, the Fiat is ultimately software today. Right. This is a software update that was given to the world in, early 20th century and what it does is that it allows people in government to have infinite

resources until the currency collapses and it allows them to shape economic reality and it allows them to devalue the savings of their citizens so what does this let us what has destroyed the ability of everybody in the world to save I mean everybody nobody has an easy way of saving in the 19th century doesn't matter where you were in the world you could have been in the u.s or Indonesia or um Europe right Africa, wherever you were, you got paid in a gold coin. And then you took that gold coin and you put it under your mattress and you waited 10 years and you took it out after 10 years and you knew that you could buy the same things that you could buy 10 years ago, usually a little bit

more. The gold depreciates a little bit every year. So anybody could save. Anybody could decide, you know what? I'm going to spend the next 10 years working so that I could build my own house and I'm going to save in gold. And that's it. Like you just have to take the same money that you got paid with and saved with it. Well, then we get to the 20th century, and you can't save anymore, because first of all, your money is no longer gold. Your money is paper that is supposedly backed by gold,

but then the backing keeps falling apart every now and then. And so, you know, everybody who's lived through the 20th century has a story in their family of one time somebody got wiped out because they saved money and then the money collapsed in value, or they put the money in the bank and then the bank collapsed, or there was hyperinflation, or there were capital controls,

or bank account confiscations. All of these horror stories have been happening all over the world. And the result is that people have lost the ability to save. And I think this is really the most important thing. The point that I make in the Fiazacian, which I believe is an original point. I don't believe anybody has made this, is that our ability to plan for the future and our ability to provide for our future is inextricably linked to how good our money is at maintaining its value to the future.

future. And so all throughout human history, we keep moving toward harder and harder monies because we keep discovering things that are better as money and then the better they are, the better they hold on to their value. And then people realize that this is the best way to save. And so over time, more and more wealth goes into the harder's money. And at the early 20th century, the whole world was saving in gold. Everybody was holding gold. Gold was the money that everybody was using. And, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, um, That resulted in really the advancement of human civilization because humans could save and humans could provide for the future. So humans become much more future oriented.

So you start thinking about your life in a way where it's not just about today. So really this is our progress as humans. You know, we go from being animals that are just thinking about every moment satisfying our needs. I'm hungry. I just want to satisfy myself now to curbing our animal instincts. and letting our mind control us and letting our mind focus on what matters in the long run. And so we don't just get hungry and go around looking for food. We start farming so that we can have food tomorrow.

You know, we work today so that our food will grow and then next year will have food. So this is what is called the lowering of our time preference, our ability to think more and more of the future. And I think this is basically, and from the Austrian perspective, time preference, is, you know, it's the degree to which you discount the future. So the higher your time preference, the more you discount the future. The lower your time preference, the less you discount the future. So the more you think of the future can be counterintuitive, lower, higher.

But the lower time preferences is what means that you're prioritizing the future more and more. So I think you met and from the Austrian perspective, time preference is what determines the interest rates. So the lower our time preference, the more we think of the long term, the more we save, the more capital is available, the lower the interest rate on capital, the lower the cost of capital. So historically, we see that interest rates have been declining historically for thousands and thousands of years. We see interest rates decline and decline and decline.

And, I mean, obviously they go up and down their periods where they go up, when wars and famines happen, they go up. But generally, there's been a trend of them to decline until by the end of the 19th century, the interest rate on Bank of England credit was about 2%, which is the lowest rate that we'd ever arrived at. But then what happens? Fiat money comes along. We can't save for the future.

And then our ability to save is destroyed. And so people become more and more present-oriented. And I think this is what the 20th century has been. In many ways, I think this explains a lot of what we see around us, and that's what I try and argue in the book, that we see, you know, you look at architecture in the 19th century, people built houses that were meant to last for a very long time. Today, houses are very disposable almost, you know, 10, 20 years and then you have to tear it apart and make a new one.

And you see it in art. You see it in saving rates. You know, people used to save a lot more back than they do right now. You see it in people's ability to, you know, commit to long-term relationships and families and so on. So everything becomes more short-termist when we lack the ability of saving for the future. So this is what I believe is the most pernicious effect of inflation. You know, obviously it's theft, but more than just the fact that you rob money from people, you rob people of the ability to provide for their future. It's not just like it's a one-time theft. It's not like, you know, one day some guy walked into my house and took my money. That's not going to really change much compared to the fact that now I realize that I live in a world in which

someone is going to take my money all the time and that there's no way for me to save that money. So therefore, I just become present oriented. I focus on the present and I become, you know, you look at the 20th century, even in the places where they didn't have hyperinflation, you see that the phenomena of hyperinflation are there, but at just a slower rate. You read stories about hyperinflation in Weimar, Germany, or in Venezuela recently, or in Zimbabwe, or in Lebanon. You know, people are focused on day-to-day survival, and then their ability to plan for the future is completely lost. And low inflation does the same thing, but at a lower rate, I think. Look, I mean, if we go back to, let's say, 2008,

ever since 2008, we've seen maybe quantitative easing of 30 to 35 trillion dollars, just amongst the developed economies, the U.S., the U.K., European Union, Japan, and to some extent China, It just seems that the inevitability of not being able to go back to the gold standard is really high, right? And what hope do we have in trying to bring down time preference, you know, from a level that's gotten so much higher than ever? And I want to put this in the context of countries like Indonesia where we are actually producers of gold, right? I think there is a chance for some countries to be able to go back to the pure gold standard as to try to bring down time preference to a much lower level than whatever we're seeing right now in humanities. What's your view on this?

I mean, I think, you know, what we need is hard money. What we need is for the average person in Indonesia to just, and it's going to take, unfortunately, it's going to take years and maybe decades for people to snap out of the idea that. that your money is not built to steal from you. Because right now, people act wisely when they think of their money as being just something made to steal from you. So you think of your dollar as a liability. It's not an asset.

Like if you're holding dollars, you're basically donating wealth to the US government and its friendly banks. So if you take that away from people and you give them an alternative that is a money that is hard that holds on to their value, I think you'll see a very significant difference in the way that people think about the future.

I think people will start saving more and people will start becoming more future-oriented. And I mean, I was a gold bug for a very long time. So, well, not very long. But I mean, as I became an Austrian economist at the end of my PhD, I became very much a gold bug. And then after hearing about Bitcoin,

I have to say, like, I've upgraded effectively from being a gold bug to a Bitcoin bug because I think the problem with gold is that the only way that we could have a monetary system that is built around gold is that it needs to be centralized and it is therefore vulnerable to government capture.

So what we need then is we need governments to basically promise us that they're not going to misbehave that they're not going to abuse their ability to print money. and like if you've gone through the last century I think intellectually the world is way beyond that anybody who comes anywhere near positions of power

anywhere in the world is only able to get there through the mentality that you know we need to print money in order to fix this and fix that like there's you can't get elected if your platform for getting elected is I'm not going to touch the money printer and I'm not going to give you anything I'm going to let you all say

Yeah, I'm going to let you all save your own money so that you can provide for yourself. You will not get elected with that platform. People don't want to vote for somebody who will tell them, you're on your own. People will vote for somebody who will tell them, I'm going to give you a pink unicorn for every girl and a Superman suit for every boy. That's what people want to vote for. And so this is, I think the political process, like if you support people like Ron Paul, you know, I have an enormous amount of respect for him. And there was kind of hope that somebody like him could get elected and then they would shut down the Federal Reserve and they would put us back on a gold standard.

I mean, maybe they will. But if they did, you know, it would be a few years and then we'd go back to the same thing. I think Bitcoin is the only solution that works because Bitcoin is decentralized. Bitcoin does not require central clearance. Bitcoin does not need government institutions in order for it to be. function. Bitcoin is extra legal in a sense that you can send money from Indonesia to the US using Bitcoin without having to resort to all of the government institutions of Indonesia and the US. And this is the real technological breakthrough. Like before Bitcoin, if you wanted to send money

from Indonesia to the US, you have to go through the Indonesian Central Bank and the US Central Bank. There was no other way of doing it. Whichever institution you use, whichever bank, whichever money transfer service, whichever app online you were to use, it had to go through the central bank. There was no way of getting around central banking monopoly. Bitcoin is the only thing that gets around it. And, you know, this is what we see with Bitcoins. And I think, you know, if you follow Bitcoiners online, you see that what I mentioned in terms

of time preference is actually extremely common. I mean, those stories have just repeated all the time. And I collected many of them. you know, people will tell you, I used to drink and do drugs every weekend. And then I found Bitcoin and now I just buy Bitcoin instead of drugs. And I save and I'm getting married and I'm starting a family. It's hilarious, but it's extremely common. And I felt something like this myself.

Like when I met my wife in the same week in which I met Bitcoin, basically. And it just, I think it was like a difference. in the way that you approach life where before bitcoin you don't have an easy way of providing for the future so the future is hazy and you're focused on things in the present but with bitcoin you think no there is a way for me to provide for my future so maybe i should start thinking about my future and maybe i should start taking it more seriously and i see this among bitcoiners it's extremely common and this low time preference thing um you know my book focused on this and um i think it's became very popular because it touched on something that most Bitcoiners felt.

Like there is something wrong in our world. Absolutely. Yeah, we all feel like there's something wrong in the fact that we don't have an easy way of providing for the future. We hear about our parents and our ancestors telling us that you should save and you should think about the future. And this is how they grew up or this is how they were raised. But it doesn't quite work for us.

And in fact, you know, it doesn't make sense for you to save. Like, it's extremely financially irresponsible for you to save money. because if you save money, you're losing value. The responsible thing to do is to take whatever money you have and use it as collateral to borrow with it. Then if you're borrowing, that's how you win in the Fiat system. And that's the analysis that I arrive at from the Fiat standard is that if you're borrowing, you're basically short the Fiat currency.

Your loan drops in value over time because of inflation. And so the smart thing to do is to get into debt. Of course, it's a smart thing financially. and it's a smart thing in the short term, but in the long term, it takes, it's toll on you. Nobody enjoys being in debt. Nobody enjoys the feeling of, oh, will I be able to make the payment at the end of the month

or am I going to be kicked out of my house or am I going to have my business confiscated? But that's what you need to do on the Fiat standard. We have to all be living on the edge, you know. Financially, we have to always be overstretched, very fragile and vulnerable to any little shock leaving us on the street. in order to beat inflation. That's the way that we can do it.

You know, I've been trying to put a lot of the stuff that you've been saying in the context of what Indonesians have gone through, right? And I put it in a very simple terms where, you know, it would have cost us X to buy a bowl of noodles in the 70s. And it would have cost us X to buy a bottle of water. It would have cost us X to pay for parking.

And each one of these three services, or goods would have gone up by multiples of 600 to 1,000 times. And then we've been taking pride in the way our GDP has gone up, you know, by 30 to 40 times since the 70s until today. You know, we usually have about $30 billion GDP in the 70s, and now we've got $1.1 trillion. And right there, it just stares at you that our purchasing power has been deflated, right? While we've been sort of like trumpeting to the world that you know we've kind of like you know grown in a big way by 30 to 40 times in the last 40 50 years and and I think it's

catching on you know I think it's catching on almost to the extent or the way your stuff has caught on to a lot of the bitcoinsers out there I'm just you know we've seen some correction in the last few months with regards to Bitcoin you want to share your views on this I believe in the philosophical essence of Bitcoin as the intersection between what can travel over space and what can travel over time. But explain this from your point of view to our audience here in terms of the correction we've seen in the last few months and what to look for in the future.

I mean, I don't think there's anything unique about this particular correction. I think from top to bottom it was maybe 70%, like from 60%. 69,000 to I think it was the bottom was around 17,000. So it was around, I'm not sure what the percentage was, but it's around 70, 75% decline. But we had bigger declines than that in Bitcoin. And in particular, you know, these kind of cycles seem to happen every four years around the having. So every four years, the new supply of Bitcoin, the daily production of Bitcoin drops by half. So right now we have around 900 Bitcoins being produced every day.

four years ago it was 1,800. Four years before that, it was 3,600. And four years before that, it was 7,200 Bitcoin's a day. So every four years, we get this drop in the production of Bitcoin. And what it does is it's like a shock on the market because there's a reduction in the quantity of Bitcoin that is being traded, that is being produced and being added on to the market. And so if you have the same level of demand where now the supply is dropped by half, the only way to meet the same level of demand is for the price to start going up.

And so then the price rises, which then attracts more and more people because they see that the price is rising. So then they start getting in more and more and more. And then the dynamics of a market bubble begin to form. So we get a rise in the price and then we get another, and then we just get more and more rises. But then eventually we get to a point, the thing about it is that as the price of Bitcoin rises, the value of the new.

coins that is being produced also rises. And so as a result, you know, eventually we get to a point where the prior, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the money to buy. And so with, you know, the leverage boosts the upside. When we're going up, it allows us to go up more. You know, it's, it strengthens the rise. But then once the collapse happens, you know, a lot of these people are borrowing and then they get liquidated and then they're forced sellers. So they have to sell. And then that exacerbates the drop. So we've had these happen over every single time that this has happened. And, um, um, it reinforces the point that I always tell people,

which is that, you know, Bitcoin is not a short-term speculation. So I always tell people, you know, don't buy Bitcoin today so that you will sell it in six months. Don't buy Bitcoin to sell it in a year or two. I always tell people, you know, to buy the amount of money that they're happy to sit on for five years. So if you're happy to sit for five years on a form of money, then, then, you know, put the savings in it. And I think, you know, people are going to learn on their own pace.

A lot of people are going to use leverage and lose a lot of money. A lot of people are going to use leverage and get very lucky and make a lot of money. But I think in the long run, what's going to stick is this idea that what's going to succeed the most is just people buying and accumulating a position that grows over time. And then I think with time, as the positions continue to grow, we're going to see just an increase in the amount of cash balances in Bitcoin, which is already what is happening. And so as you were saying earlier, you know, we've only at around $400 billion worth of Bitcoin right now, which is a drop in the ocean of the global money markets, but it's

growing. And so I think, you know, we can continue to witness this growth. And the more it grows, the more it gains as a monetary standard, the more it becomes a monetary standard and a tool that people can use for trade. You know, if we take a look at the amount of quantitative easing in the last two and a half to three years, it would have been around, I would guess, $11 to $12 trillion. And we're seeing signs where central bankers are starting to sterilize, suck the money out of the system.

That would have had some bearing, I think, on all kinds of asset classes, including Bitcoin. And that explains probably the volatility that we've seen in the last few months. I want to go back to the point that you've been raising a few times in lectures and stuff where, you know, you've got bonds that are sitting up there at about $120 trillion globally and equities. And you've been much bigger believer of equity stories. And how do you see the changing of asset classes going forward by virtue of the rise of Bitcoin? Yeah, I mean, so many people say Bitcoin is digital gold, and I've helped propagate that idea. My book talks more about gold than Bitcoin, and it argues Bitcoin is essentially a digital, better version of gold.

So I think the obvious trade here is that Bitcoin can eat a big part of the market for gold, not the market for gold as jewelry, but the market for gold as a monetary asset, which is significant because it's worth true. trillions of dollars. So you could say 10 trillion dollars of gold is the market for Bitcoin. But I think the real market, the real gold that people use today or the fool's gold that people use today, people don't really use gold as money because gold is no longer really money. And you can't bank with gold. There are no gold banks. The IMF doesn't allow any governments to beg their currency to gold. And you can't just open a gold bank. So nobody really uses gold. well, not nobody. I mean, the majority of wealth in the world is not stored in gold.

The thing that plays the role of gold in the world economic day is bonds, in particular government bonds. So the American saver will put their savings in bonds and stocks. And the idea is that stocks are like an investment and bonds are more like savings, where the point of bonds is not to make money, point is to not lose money. You just make a little bit of a return to compensate you for inflation. And that was the idea previously.

And it worked for a few decades, particularly if you believe government inflation statistics. So the bonds offered you a slightly higher return than CPI. And if you don't pay attention to the prices of the things that you buy and you focus on government statistics, then it seemed like you were protecting yourself from inflation by buying bonds. In other words, it's the way to save for the future. And then you take risks with stocks. So I think the way that I see it is that, you know, well, bonds obviously were unsustainable as a model because like it's a perpetual motion machine.

Like we're going to devalue the currency to pay bondholders to compensate them for the devaluation of the currency. There's something missing there. Why devalue the currency in the first place? Clearly you're not going to pay them enough to compensate them. for the devaluation or else you wouldn't have done the devaluation because there's clearly something in it for you. So that model can maintain, you can maintain that model for a few years and decades. But eventually we get to where we got in right now. And it depends on how much

you believe in government statistics. But at this point, nobody, you know, even the most avid fans of the Fiat monetary system will tell you that, yeah, bonds can't beat inflation. So apparently you get 1%, 2%, 3%, 5%, on your most. bonds, inflation is much higher than that by any stretch of the imagination. So right now, bonds don't really work to save you. So I think really the big, the main dish for Bitcoin, the main course is going to be the bond market. I think gold is the appetizer and the main dish is the bond market.

I think there's no reason for anybody to hold bonds. I think it's just completely ridiculous at this point that, you know, you're taking on risk in order to lose money, basically. You're taking on default risk. And the idea was, oh, bonds were low risk, but they offer you some return. No, now they offer you a negative return, and you're taking on all the default risk

of all of these insane governments that, you know, lock their people up at home and tell them not to work because of a virus. And they are the governments that are banning their people from using the energy that they need to survive because they want to fix the weather. like would you lend to somebody like that? So I think I think Bitcoin will eat gold and then we'll start eating into the bond market.

And I think the bond market will be the main dish. And then for dessert, I think will be the monetary premium on things like real estate, art, and stocks. A lot of the money that's in art and stocks and real estate, people are not buying stocks because they believe in this company and they understand. the thesis, they want to buy the stocks because they don't want to hold cash. So all of that will be taken out. People who will buy stocks will buy stocks because they understand the company and they think they have a good investment thesis. And we'll go back to investment being a same thing done by sane professionals who

know what they're doing rather than just a casino for everybody. And similarly with real estate, we'll get rid of this idea that, you know, your house is your saving account. Your house is not a saving account. Your house is a consumer good. Your house is like your washing machine, like your laptop. It's something that you buy so that you can consume and you need to pay constantly to maintain it. It's not a saving account and you only use it as a saving account because you don't have a saving account.

So that premium from real estate I think is going to be wiped out. And I think from art as well, a lot of people buy art only because it's scarce. You know, the artist dies and then there's no more to make from that. That's why people buy it because it's better than government money. But once we have a decent money, I think we'll be good. I think we'll witness a lot of that premium on all of these assets disappear, which is great for all of these assets because we'll go back to having sane markets in those things. We'll have a real market in stocks where the valuation of a company is dependent on its revenues

and its shares and its earnings, not monetary policy where, you know, Jerome Powell clicks a button, everything is green, he clicks the other button, everything is red. that won't be the case in a Bitcoin economy. There's just going to be, you know, your company is doing well, green. Companies doing bad, red. Okay. And in your book, you talked about how the U.S. dollar represents about, what, 51, 52% of the global reserves, foreign exchange reserves, and gold represented? 60.

60 now, okay. And then you mentioned, no, you're right. I think it's 51, 51 of. the reserves. Right. And gold represents about, gold represents about 13%. I'm curious as to, you know, a lot of what you say makes a lot of Fiat guys uncomfortable, right?

What would it take for central banks to pile up more on gold vis-a-vis the US dollars? And what would it take for central banks to start collecting Bitcoin? What's your mission like on this? I'm pretty sure the Fiat guys find what you say quite uncomfortable. Good. Because honestly, my hope is that central banks stay away from Bitcoin for as long as possible and governments stay away from Bitcoin as long as possible. I'd like to see their currencies and their reserves devalue significantly next to Bitcoin

before they're able to buy so that they can buy a smaller chunk of Bitcoin. I'd like people to be buying Bitcoin. So I'd much rather people in Indonesia buy Bitcoin than the central bank. Bitcoin and gold.

And gold. But I think with gold, I mean, yeah, gold is better than holding the US dollar. But the problem with gold, what it would take for them to be able to start stockpiling more gold is that they need a mechanism

for international gold clearance. And that does not exist. The only way that you can trade gold internationally today is through one monopoly organization called the London Bullion Market Association, which is an organization. LBMA, kind of operated along by the Bank of England. It's a leftover from the time

when the Bank of England ran the world financial system. And so, you know, if your bank in Indonesia wants to settle with a bank in Saudi Arabia with gold, they don't have a mechanism for shipping gold between Indonesia and Saudi Arabia. There's no gold bank in Saudi Arabia that has a way of sending and clearing gold with banks all over the world. And so the way that they do it is the Indonesian bank will have an account with the LBMA and the Saudi Bank will have an account with the LBMA. And they'll just take the gold from your account to their account. gold here, of course, in quotation mark, because nobody knows what exactly is going on there.

Because the other thing about it is that you can't check the gold bars and you can't take custody of the gold bar. If you take custody of the gold bar, it's no longer part of the system. So, yeah, who knows what's going on there? You know, the good thing about being a monopolist is that nobody can hold you accountable. So without a global mechanism for the clearance of gold, there, You know, we see central banks accumulating some gold. And, you know, we've seen particularly over the last 10, 15 years, China and Russia have accumulated significant amounts of gold.

But there's a limit on how much they can accumulate because they don't have an easy way of settling it. And recently, and what's really interesting, and I had a podcast, I've done a couple of podcasts on this, what's happened, you know, with the Russian-Ukrainian war is that Russia's been kicked out of the LBMA. So Russia can't even trade its gold using its LBMA now. And so they're talking about building something as an alternative mechanism for settling gold worldwide. Will that work? Will it not work? I don't know. But I think there's serious reasons why it can't work. And ultimately, I think it's just kind of like to an extent it's almost like saying, hey, you know, we can get rid of the Microsoft monopoly by going back to typewriters. In essence, yes, we can go back to typewriters and get rid of Microsoft,

but for all of the bad things about Microsoft, and I hate Microsoft from the bottom of my heart, it still beats typewriters. You can play solitaire on Microsoft. You can't play solitaire on typewriters. And there's a few other apps that are good for Microsoft. So it's difficult to build this system. And in particular, the main issue in my mind is that it's extremely expensive to verify.

gold. It's not just expensive to move gold. It's also very expensive to verify it. So if you if I want to take gold from you as payment, as final payment, you know, it's not a relation as final payment, it has to be something that is finalized on the spot so that I can't call you back and say, hey, you know, your gold is

not working anymore, your gold is rusting or your gold has tungsten in it. I have to take final delivery of it, so I have to test it on the spot. And the only way to do that, you know, if you're using a coin or a small little gold bar, then you can do it with a spectrometer.

But if you're using the thick gold bars, which is what we need for a global settlement, you know, the 12 kilogram bar is the about $700,000 gold bar. That's the kind of unit that is going to be used. That's what the LBMA uses for the gold bars. If you want to test one of those things, the only way to know for sure that it's not tungsten inside is you have to melt the whole thing down. So every time you want to carry out the trade, you need to melt the gold down. otherwise you're going to end up really trading not having a gold standard you're going to have a gold

slash tungsten standard which i think is an underrated problem this is the real issue with gold right now you can go on alibaba dot com the kind of chinese amazon and you can order gold coins and gold bars with tungsten in them so they're gold on the outside they have tungsten on the inside and you can just go right now you know order it and they'll send it to you by mail and then you can use this and pay with it And most people won't be able to spot it. So I think this, I believe, is probably the most important reason why gold has been demonetized at this point and why it can't really. I mean, obviously there's the political aspect, which is the governments won't allow you to set up a gold bank. But the reason that it's very difficult for people to build a gold bank outside of the government is that you need to be testing all of these gold bars all the time.

and people that are currently buying gold are buying so much gold that has tungsten inside it all the time that we end up with a lot of gold every year being scrapped so we're you know what makes gold a monetary metal is the fact that the supply

as I mentioned in the Bitcoin standard the fact that the supply does not get consumed we're constantly accumulating more gold and so because we're not consuming it every year we're adding the stockpile the stockpile grows so every year the new additions are insignificant next to the stockpile. But if the stockpile has a big amount of tungsten and every year we're scrapping out part of the

supply in tungsten, then it's no longer a monetary metal. It's becoming more and more like an industrial metal. So I think this is the real challenge facing gold. And this is why I think, you know, now we're going to see maybe the Chinese and the Russians are going to try something like this. I think it's going to be complicated and it's going to be expensive. And I think it's going to be a very, very, you know, very, very painful way of learning why Bitcoin is better. Eventually, who knows what governments

are going to do? And I don't work for any central banks and I don't talk to any central bankers and I don't have any central banker friends. So I don't have any idea about what they think. But my imagination is they're highly unlikely to be considering Bitcoin. The few of them that are considering gold, I think are going to witness, are going to see serious impediments to being able to implement something around gold, which for me is good because it means more and more people will be buying Bitcoin at the current lowest, low prices relatively. And that when governments want to buy, they won't have the ability to buy a large quantity of Bitcoin.

So we'll end up with a more distributed supply of Bitcoin. Making it less and less likely that it gets centralized and captured by governments. I got quite a number of central banking friends, but as of late, I'm starting to sound a lot like you. So I'm getting smacked left and right. But the, you know, the cool thing about it is if I talk to my students, if I talk to the youngsters, they like it. They, you know, they gravitate to what I say and, you know, a lot more to what you've been saying. I want to take this to Islamic finance, right? And you've, you've made this point, you know, a few times about the fact that the balance sheets of the Sharia finance, Sharia banks have basically interest-bearing nature

on both the asset side and the liability side of the game. And Bitcoin could be the answer in basically, you know, making it more Riba-centric. Talk about that. How how Bitcoin basically will dovetail a lot more with the pure, you know, intentions of Islamic finance. yeah so one thing that i came one conclusion that i came to from writing the fiat standard is that the global fiat monetary system of the last century has been effectively like attacks on muslims it's like attacks on being a muslim and it's just baked into the way that the system works

in a way that you can't uh you can't opt out of as a muslim you can't just say or i don't want to play this game and i don't want to be hurt by it. And the reason for that is that, you know, looking at Fiat, looking at the Fiat monitor system as a software, almost, thinking about how the process works, the key insight is how does Fiat get created? How does Fiat money get created? And the answer is that Fiat money, as I was saying earlier, you know, once you've centralized the money, then it became the credit of the government.

Basically, Fiat means that the government's credit is very much. money. So the government's credit is as good as gold in a fiat monetary system, which means that every time the government issues credit, the money supply increases. Which also means that anytime a financial institution that's backed by the government and guaranteed by the government, anytime one of these institutions issues credit, then the money supply increases. In other words, what I call it in the fiat standard is fiat mining borrowing lending is like mining you know in bitcoin you have the proof of work as a way of producing bitcoin which ensures that it's always expensive to make bitcoin nobody can make bitcoin for free with gold you need to dig into the ground and take soil out and

process it in order to make gold but with with with fiat the way that you mine fiat into existence is through credit. And many people think that government money is papers and you just print money and then that's how it comes into existence. And that's not true. The money comes into existence when credit is created and then some of that already existing money is printed as physical bills. So the money is digital. Fiat is a digital currency and it's created every time a loan is made. So this means that any time you create a loan or you take a loan or you take a take out a loan, you're devaluing everybody else's money. So therefore, banks are inflationary and banks benefit from inflation. And so if you go to a bank and you borrow a million dollars

in order to start a business, say, they're not taking a million dollars from their own capital or from their customers and giving them to you. They make a new one million dollars. So for them, that's why they really want you to borrow. That's why banks really, really, really, really, really, want you to borrow all over the world. And because every time you borrow from them, they make new money. So they are able to devalue everybody else's money by bringing new money into supply. And that's why it's much cheaper for you to buy your house with a loan than it is to buy it with cash. Because if you save money to get to the, to buy the house, you're saving money that is declining in value. So the house keeps getting more expensive and you're saving, keep becoming less

valuable. Whereas if you borrow, then you're letting the inflation work in your favor. The new money is generated. You've devalued everybody else's money to let your bank make these new $1 million that they're going to get paid back with interest. And because you're letting your bank do this very sweet deal, the bank is obviously going to cut you in on the deal because they want you to do that. So, you know, they're not going to take it all to themselves. They're going to make it a lot sweeter for you to buy the house or start the business on credit than it is for you. for you to do it with savings. So that's why if you have a million dollars,

you don't start a business with a million dollars. You use it to borrow $10 million so that you can start a business that's worth $10 million. So what this means is that basically if you engage in Riba, you are mining money, you're printing money. It's like mining gold. And so if your religion tells you you should not get into Riba, then you've locked yourself out of money creation. And, you know, you're,

But of course, you still have to use the money, right? So if you're a Muslim and you don't want to take loans and you decide that you want to save money because you don't believe in Riba, you are holding the money that is being devalued in order to finance everybody else's Riba. So in other words, whether you take part in Riba or not yourself, you are taking part in it because it's baked into the Fiat protocol at the protocol level. The only way that Fiat money comes into existence is through Riba. And this is true in the U.S., in Europe, it's true in Islamic countries is true everywhere.

The global financial system is built around this idea that money gets generated from debt. So you can't escape it if you're using the government's money. There's just no way around it. The only question is, will you benefit from it or will you get hurt by it? And even if you benefit from it, obviously, you're not going to very easily benefit because like, you know, you borrow and then you're at risk and then you could lose your house. And like it's not like it's all rainbows and roses if you just get into Ribba. But it is, there is a possibility that you could come out ahead with Ribba.

Without Ribba, you're basically, you're just financing everybody else getting into Ribba. And so up until I wrote the Bitcoin standard and I think, thought about this very hard. I hadn't really considered this in this way. But, you know, when you look at it like around the world today, the majority of Muslim scholars, particularly the ones that are related, you know, the ones that are approved by governments, have in one way or the other, found a way to basically get around this. And like, I'm not, yeah, I'm not a religious scholar and I can, you know, I don't want to pass judgment whether that's okay or not. I can sort of see the case for why you might want to say that something like, this is okay.

Like, after writing the Fiat standard, I can understand why as a religious authority, you know, you see how much people are getting hurt by inflation when they hold savings and you see how much more expensive it is for them to get a house. And again, I'm not passing religious judgment here, but I can see where the case for allowing people to engage in. this is because essentially we're in a world in which there's um there's you could argue perhaps there is no alternative to it um and you know there are there are kind of similar justifications like you know if somebody puts a gun to your head and tells you

um i will shoot you unless you drink alcohol i believe it would be permissible um so it you could see it as you could make the case for it in that way before bitcoin but now that we have Bitcoin, I don't believe that that case can hold up anymore. Because right now, we do have an instrument that as a Muslim, you can use as money that is free from Riba, and that also can perform all the functions of money. So historically, you know, a lot of Muslims have tried to revive the Islamic Dinar. And there are a lot of initiatives around the world built around, let's bring back the Islamic Dinar. And I think there's one in Indonesia that's quite popular. I'm not, I'm not sure.

I've read about it many years ago. So many Muslims want to work on reinstating the Islamic denial, and I think it's a noble cause. But again, the problem is you can't just have an international system for settlement to clearance of gold. And so therefore, you know, what ends up happening is, all right, you're a Muslim, you want to stay out of the Riba system. But let's say you run a business in Indonesia,

and you have suppliers in China, and you have customers in the U.S., and you have customers in Europe, and you want to get paid from the Europeans and the Americans and you want to pay your Chinese suppliers, your gold is not going to work for that. So what ends up happening is that you have part of your portfolio, part of your cash balance in gold,

part of it in your local fiat, part of it in dollars, part of it in money, yuan, well, before Bitcoin. So you had to diversify between all those different things and you had no choice but to deal with your local Ribba bank, you know. You had no choice. You had no way of dealing, if you wanted to buy things from abroad and send things abroad, you had no choice but to get paid through your local fiat, Ribba Bank.

Well, now with Bitcoin, you do have an alternative. And it's an alternative that does all of the things that your bank does and does all the things that your gold does, and it does them all better. So nobody can inflate it. Nobody can devalue it and take the supply that you have. And nobody can take the money away from you without your permission. and nobody can put Riba in it. Nobody can force you to engage in Riba like you do with the other forms of money.

And so because of all of that, I think it's, I think there's a huge potential for the Muslim world to lead in Bitcoin adoption. Because if you don't want to take part in Riba, you have the alternative right now. And obviously I understand that Bitcoin's volatility is not for everybody. So, you know, and I'm not telling everybody to go and sell everything and buy Bitcoin straight away. You know, there could be a big crash in the future. I think you should get into it responsibly, slowly as you learn how it works. And, you know, particularly, you know, as a business, if you have, you know, if you're a business and you're running your accounts with the local currency, you have liabilities and assets. And you have inflows and outflows.

denominating in currency, you can't just switch everything to Bitcoin, but you can't begin to build a cash balance in Bitcoin. And then, you know, accumulate and wait on that cash balance for a few years. As it appreciates, I imagine, you know, you'll be in a better position so then you can fully transition out of the Riba system. I'm with you. I'm with you. Dude, I know you got to go, but I got a couple of small questions. Do you believe in, you, do you believe in, you? using bitcoin in some fashion as to try to help the israeli-palestinian issues yeah i mean i think for us palestinians it's a it's something that is um it's it's a form of money that uh that's one thing that israelis can't control um so i i think it's great for people in this kind

of situation because you know if you live in palestine essentially um everything is controlled by the Israelis. And you have to use the Israeli Sheikh. You use their currency. And so their inflation, you know, the Israeli inflation finances Israeli defense and it devalues the currency that Palestinians also use. So it's an excellent way to opt out of it. And it's an excellent way for people to be able to get around the restrictions. And I think in particular, you know, for Palestinians, I think the internet is a great powerful tool for liberation because it's very difficult to move things around. Like the West Bank and Gaza are two of the most isolated places in the world almost because even though they're in a very central location, it's very expensive to get things in and out because of all the political problems and because of the Israeli restrictions. So physical goods are just extremely hampered.

Like if you're a Palestinian entrepreneur, you're thinking of setting up a factory in Palestine, and you're considering the alternative of setting it up in Jordan, doing it in Jordan is just much easier, much more productive because it's much easier to send things in and out of Jordan that it is from the West Bank. So that's why I think more and more people are going to start moving toward online work and toward getting paid online as well.

that completes it because the restriction on getting into online work currently is that it's very hard if you're in Palestine to get paid to your bank because all of the restrictions on banking. But Bitcoin, I think, gets around that. Last one. How do you think Keynes would explain the existence of inflation and recession at the same time? The good thing about being in charge of the money printers that you don't never have to answer to anybody. the way that he would explain it is that he would just fire anybody in any form of position that would ask this question.

Nobody asks this question anywhere. It's a very important question because according to the Keynesian model, there's a trade-off between inflation and unemployment. If aggregate expenditure is high, then we have inflation. If aggregate expenditure is low, then we have recession. We can't get the two together. Yet we constantly get the two together. And we constantly see examples of the opposite, low inflation and low unemployment.

So the notion that there is a trade-off is completely refuted empirically. You don't see it anywhere. You don't see the famous Phillipskerp. You do not see it. But also, you do not hear anybody ask any person in a position of authority about it. Why doesn't anybody ask the central bankers? Don't you think that your models are broken? If you think that there's a trade-off between printing,

between inflation and recession. How do you explain the fact that we have both right now? Nobody asks that question. So this is why I love Bitcoin, because Bitcoin means we no longer have to argue with those people. We no longer have to explain to them. We no longer have to try and explain to people who control a money printer why they should switch it off.

They're never going to be convinced. That's the great thing about Bitcoin. We don't need to convince them. We're just going to opt out and we're going to have a better money and we're going to use that money to improve our lives while they continue to wallow in their primitive monetary system. Hey, I really enjoyed this. Thank you so much.

Thank you. Thank you so much, likewise. I really enjoyed it too. And enjoy Austin. Thank you. Thank you very much. All right. Hope to catch up with you.

Likewise. Thank you so much. It was my pleasure. Cheers. Take care. Bye. Yeah. Teman,

that's Severinamus, Educator. Thank you. This is NG.