Julian Dorey Podcast - #14 - All The Money In The World, Inflation And—Yes—Bitcoin

Episode Date: October 14, 2020

SOLO POD - When the Covid-19 Pandemic rocked the world in March 2020, governments and banks everywhere responded to the economic crisis that followed in the same way they always do: they printed money. As history repeatedly tells us, this is how fiat currencies die. Yet here we are once again. Inflation events like this place cryptocurrency and digital currency front and center. In this episode, Julian ties it all together as he puts the global supply of money into perspective, breaks down exactly what the Fed did in response to the pandemic (as well as what they’ve done in past crises), talks about why crypto has had some branding/marketing problems early on—and, once and for all, explains how Bitcoin *actually* works. ~ YouTube FULL EPISODES: https://www.youtube.com/channel/UC0A-v_DL-h76F75xik8h03Q  ~ Show Notes: https://www.trendifier.com/podcastnotes  TRENDIFIER Website: https://www.trendifier.com  Julian's Instagram: https://www.instagram.com/julianddorey  ~ Beat provided by: https://freebeats.io  Music Produced by White Hot Learn more about your ad choices. Visit podcastchoices.com/adchoices

What's better than a well-marbled ribeye sizzling on the barbecue? A well-marbled ribeye sizzling on the barbecue that was carefully selected by an Instacart shopper and delivered to your door. A well-marbled ribeye you ordered without even leaving the kiddie pool. Whatever groceries your summer calls for, Instacart has you covered. Download the Instacart app and enjoy $0 delivery fees on your first three orders. Service fees, exclusions, and terms apply. Instacart. Grocer $0 delivery fees on your first three orders. Service fees, exclusions, and terms apply. Instacart, groceries that over-deliver. So they're not going to do that. So what do they do? They print money.

This is how it happens. This is what they did in 2008. They had to fund that bailout for the banks. They had to fund all the government resources that had to go into saving people. So they printed money. With Bitcoin, it's a finite amount. When did you guys realize, like have the first moment where you thought to yourself hmm this corona thing's a little different like something's a little off here i'm not saying when did you realize this was going to shut down the economy or change everything we're doing or be a an unmitigated disaster i'm saying when did it creep into your head that like, huh, something's wrong here? I don't know. We'll figure it out.

But something's wrong here. For me, that was on Monday, February 24th. And the reason is the stock market took a huge shit that day. Now, things like this happen. There's overreactive days in the marketplace. Sometimes the machines who do all this trading, you know, there's some nutty stuff that happens. But we had seen a couple shaky days the week before. And then on Monday, I don't remember the percentage, but it fell through the floor. And so that was also the first day where I kind of noticed that the overall media was really starting to cover coronavirus and what was supposedly going on in China and what it meant for here.

Like it had been a topic. They had been talking about it a lot, but there was a clear shift where, oh, now it's hitting our economy already in the stock market so something's wrong here so let's just talk about it ad nauseum kind of like a little bit of panic and so i went to the data and i looked at the who and the numbers at that point which were almost exclusively out of china as far as the spread goes. I reviewed the numbers and I tracked it from the first day it was reported as far as being in existence, which they had as December 31st, 2019. And I measured cases and deaths, cases and deaths, cases and deaths over and over and over again through the present day. I also took a look at

recovery ratios. And so then once I had those numbers, I don't need to get into what they were, but looking back on those numbers, I then went and compared them to swine flu, which was a pretty big deal here back in 2009, 2010. I had swine flu. I remember how much that sucked. And the numbers were actually worse in a lot of ways, at least from what I was looking at, was swine flu. So I kind of thought to myself, okay, this is probably more of an overreaction. Little did we know at the time,

any data coming out of China, regardless of who was reporting it, in this case it was the WHO, which is a primary source, any data coming out of there was bullshit. To this day, we don't actually know how many cases they had, what the death rate was, anything. And we've kind of talked about that ad nauseum. But the problem here had a beginning right there and within two and a half weeks i know i started quarantining march 13th within two and a half weeks it went from this doesn't seem like that big a deal we'll get through it to oh this is this is legit we're

fucked go inside don't do anything a totally unprecedented event. And I hate that that word got killed now. Like I cringe every time I say it. That used to be like something I would say. Like it's not that big a word, but it'd be like, that was one of my words. Now I can't even stand when I use it. But anyway, this unprecedented event happened, and we all were sent inside on lockdown, and the economy stopped, which economically – forget the event itself – economically, that had never happened. And so what had to happen next? Well, meanwhile, over those two and a half weeks and then into the beginning of that stock market kept going like this people were getting laid off as soon as quarantine started and for those of you who aren't watching when i say this i was pointing directly down but the economy because it had stopped was an unmitigated disaster so the government had to act

and that's what they did and that's what happens every time and that's an expectation we have of the government and in a lot of ways I don't fault them but how did they act when I ask this people say you know they gave us the $1200 stimulus check and gave the businesses that loan

the PPE loan yeah they did. That's right. But do we understand how that happened? Or do we just read it in the news story and then just kind of forget what it actually means or not even consider what it actually means? How it happened was they created dollars.

They created money. They printed like $3.5 trillion. How it happened was they created dollars. They created money. They printed like $3.5 trillion. And when I say printed, it doesn't mean they physically printed dollars. Not at all. It just means they created more in circulation. They put it on a balance sheet, on an electronic page from the Fed saying where there was this amount of dollars, now there's this amount of dollars plus three and a half trillion. And that's called inflation. Now, right away, you say, all right, there's a buzzword.

Great. There's another one. We don't need that. Yeah, buzzwords suck. I hate them just as much as you. I try to dumb them down to my level as much as I can. And inflation is one of them. So when I say inflation, it means if I have a lot of these and then I create more, this by itself becomes worth less.

So what we saw after the government did this legislation, I keep on forgetting because people are listening to this and not watching on YouTube, but I was holding up a dollar. Anyway, after the government acted here and people got used to the new normal, being inside, quarantined, we did see two economies form. One economy is where everyone who worked in an industry where they could legitimately work remote and kind of keep going things were great and the stock market went straight up still is going straight up i guess technically and then in another economy you had people who it was on it was just a complete end of their life in a lot of ways. Whether they owned a business that needed to be in person and they couldn't do that, couldn't pay their bills, or they worked in an industry that didn't really allow remote work, it was bad. And it still continues to be that way.

And that can be a whole separate episode. But because some people were feeling pretty good about it and feeling like, all right, we'll just ride this out until it's over and kind of went on with it. I felt like the whole idea of what the government had done to help with this problem was just being completely ignored. Now, one of the things that I had always thought about and never taken the time to really actually sit there for a couple hours and google away until i could really find it was how much fucking money is there in the world it's a great question because it affects everything like how much money is available to the seven and a half billion people who walk this planet well i finally actually did this and I found a source that was still confusing for me but did the best job of anywhere that I had ever seen in giving me an idea of how much money exists around the world. And I will have the source in the show notes. It's the Visual Capitalist, and it was based on values that they put together in 2020 so it's very very current so what they did is they separated it out into topics like they had silver as an asset class and gold as an asset class they had the entire global stock market value as an asset class

the entire global real estate value as an asset class. Global wealth itself. And so what I found is that some of these numbers did actually overlap a little bit. So I did my best, me, the dummy at home, trying to get some form of a number by taking out some of the double counting. And without going into the details, they are in the show notes so you can check them out. The final number I got to was around $615 trillion. So it's probably definitely not exactly correct. Point being though, it's in the ballpark. It's in the area of that is how much money is going around the world. And when I say $615 trillion, it's not all U.S. dollars by any stretch. That just happens to be the dollar value of all this stuff when we put it in our own value.

But the U.S. dollar, to that point, is the main currency accepted around the world. It is the number one. It's the top dog. And yet I think at home, many of us have tried to figure out, well, is it a problem that our national debt is up in the 20 handle of the trillions? And then to add this on, is it a problem that now it's 4 trillion higher or 3.5 trillion higher for the moment? Whatever it is. And then we kind of stop thinking about it. Like it doesn't really make sense to us. What I want to point out is that every monetary system that has ever happened in the history of this world

has been killed, murdered, ended, destroyed, whatever, by human beings. And a lot of the times it's not their fault. It's just as things happen, we react. It's what we do. And so when I look at that monetary supply, and I look at where we're at right now, and I look at us just creating more money, and all the other governments around the world are doing it too, so it's not just us. I see eventually the end of a currency system

like the one we're in right now. And I think it's something we don't really talk about. So yeah, I told you this one was coming. But we're going to be talking about cryptos in this episode. We're going to be talking about cryptocurrency and digital currency.

And we're going to do it from a lens that covers our own currency right now. And I want to stress, I'm going to do this in a way that makes it easy for all of us to understand. I know you've heard that before. Now you're dealing with me. When you go to YouTube and you type in, explain Bitcoin for an idiot or explain Bitcoin for a dummy. However, I type it in both of those ways. I don't know how you do it. But when you do this, when you probably did it especially a couple years ago, you still found that it was some kind of 10, 15-minute video or even worse, a five-minute cartoon narrated by someone who works in the field and then still drops all these buzzwords

on you and smiles as if you completely understand what they're saying and didn't lose them six sentences ago. I'd like to try to fix that because I love this topic. I know a lot of guys who are in the field and even sitting with these guys is taking me a long time to even slightly understand it i am not a coder i'm not a miner not any of this stuff but i found some interesting ideas about why it's so confusing and why we're at the point where it's so confusing so i'll want to talk about those too but in this episode we're going to go through a little bit of our currency system we're going to revisit when crypto became the big fad in 2017 2018 and what a fucking disaster that was and we're going to actually talk about one example i'm going to keep it simple because it's the most recognizable one we're going to talk about bitcoin and how it

actually works and how it applies to the situation I just laid out. But we have more and more money being injected into the system and inflating not just our currency, all the other currencies. I'm going to give examples of how that screws over countries, in some cases, into perpetuity. And I'm also going to explain how, believe it or not, a lot of these concepts, yes, we don't understand the technicals behind them, but for some reason we're so caught up in understanding the technicals that we don't

realize that many of the things we do in our life, including using YouTube and Instagram every day are relying on many of the same realm of complex technicalities that we claim to be too annoyed with to understand things like Bitcoin. I'm going to cut the intro there. There was a lot to unpack, but this is going to be a real conversational, let's figure it out as we go. I had to do a lot more research just to be able to sit down and do this and not sound like a complete moron speaking with you but it's got to start somewhere it's got to start from normal folk like me and you somewhere so here we go you know what it is i'm julian dory and this is This is Trending Live. Let's go. This is one of the great questions in our culture. Where is the nuance?

You're giving opinions and calling them facts. You feel me? Everyone understands this, but few seem to do it. If you don't like the status quo, start asking questions. There's an old phrase from Wall street that talks about like stock sentiment that says the minute you hear the taxi driver giving you stock picks sell everything and the idea is when you're just hearing on the street random people suddenly sounding like Jim Cramer on CNBC with an opinion, that usually means that the quote-unquote dumb money has entered the marketplace and anyone who thinks they have smart money should leave.

Because the ending there is never good. That usually means stocks through the floor i like the phrase because it's applicable to absolutely anything in a marketplace in my opinion because it all comes back to supply and demand and a part of supply and demand is who's on each side especially who's demanding how fickle can that be? How much can that change? Why are they doing it? Gets all these complicated questions. I love that shit. But the reason I bring it up is because some of you probably got introduced to cryptocurrency at the end of 2017 into 2018. And therefore, if you were, you probably know what happened.

What happened was you got introduced to it because over the previous especially two years or so, cryptocurrencies led by Bitcoin, the original one, had prices going through the roof. And it was looking like this great investment and it was looking like an opportunity to make a lot of money and so everyone started word of mouth people started talking about it then it became a news story and eventually worked its way down to a lot of society and that's that's probably where you picked it up so seeing what happened next beginning in january 2018 and through the rest of 2018 and an utter disaster you realize that crypto wasn't quite the exciting space you thought it was and you watched all these cryptocurrencies either lose all their value or completely disappear.

And part of the reason is, anytime there's an opportunity at a gold rush, everyone comes in. You know, the phrase gold rush itself comes from the San Francisco gold rush back in the 1800s. And the thing is, we hear the stories of the two assholes who stumbled upon gold and became really rich we don't hear the stories of the millions of people who went out there and and found nothing and then had to figure it out and that's very relevant to what happened in the crypto market i should have known at a particular moment though and it rings in my head all the time because it was it's hilarious now but i'm an idiot for not realizing it i was at my gym and there were a bunch of trainers there i'd been going there for a few

years but this one trainer who's the nicest guy never says a word to anyone i mean when you wave at him he goes hey like just a sweetheart of a guy but doesn't say fucking anything and so one day i'm in the locker room getting ready getting ready to go work out and he walks in and walks straight up for me because i worked in finance so he was thinking all right finance crypto same shit i'll ask this guy something so he walks up straight to me and actually says hey you know what what are you thinking about cryptocurrencies guy had never said anything to me in his life without me saying something to him so i was like okay and i realized like he was making that distinction thinking i really knew a lot at the time i was actually very curious and was learning a lot more but i was the farthest thing from an

expert you could ever find in your life and so we sat there and and i talked about a couple things i saw just broadly and then i said to him i said you know what do you own any like are you really interested and he goes oh yeah and he proceeds to list off like 15 different shit coins. I don't even remember their names that he owns and how they were all going to the moon. And then, you know, I walked out and went and worked out and I laughed and I'm like, yeah, it's not really a great sign.

And I just kind of ignored it. Should have known right there, that was it. Like that was towards the beginning of January 2018. So that was at the very beginning of the prices going off a cliff. Now I look at it and I say, okay, well, why did that happen? It happened for all the reasons I just laid out. And it happened because everyone rushed to the space. And then suddenly when everyone wasn't getting rich overnight they left and as they left they sold things and as they sold things the price got pressure and the price

went down that's how supplying demand works what's sad about it though is that the concept got lost in the sale the concept got lost in that whole 2018 bear market people don't want to hear about cryptocurrency as a result which by the way whoever the fuck named this cryptocurrency i don't know if that was the guy who founded it i gotta look that up what a terrible name it sounds like a criminal conspiracy i mean like we need to change that so i'll call it digital currency sometimes too but that's a mouthful it at least like sounds nicer but i i don't know who invented that name anyway i digress as the market went all the way down people were like all right fuck this and they didn't want to talk about it anymore they had no interest in it you brought up cryptocurrency was the dirtiest word in the

room people rolled their eyes and sadly it cost the idea itself of what the whole concept of crypto is supposed to be for money it cost that idea at least several years and it cost a lot of the really smart people working on it several years of their life just to try to rebuild the brand here which i'm not sure they're doing a great job of it made us think like oh that was a fad it doesn't work it's bullshit fuck it just just deal with the dollar deal with venmo call today and we're still there i think the biggest though, and I alluded to it in the intro, is that unlike Silicon Valley, who figured out how to take genius people who just knew things that other people couldn't,

and match that with genius marketing, and people who could understand those concepts, and package it in a way that the average person could also understand unlike that setup i believe the entire crypto community is missing the second part of it they got a lot of the genius in there they don't have anyone to message it i got a really good friend of mine who was on the original team of the first blockchain project – there's a buzzword already – at IBM when he was like 22. Guy is a genius. He's awesome.

He's a true purist in this space. And even he, who's a very cultured guy I would add, like he's not somebody who just sits in a basement and looks at a computer at all like he's a very interesting personality but even he gets lost in the minutiae sometimes and forgets like oh i'm talking to julian he he doesn't fucking understand a word i just said it's just a it's a very easy thing as humans for us to get lost in that i worry about it on this podcast sometimes i'm half an idiot you know like but when i'm doing stuff where where i go through research and i've actually been sitting with it for several days and i'm just taking for granted that i may know this number or why that thing applies or whatever i lose sight of the fact sometimes or i worry about losing sight of the fact that other people might be sitting at home going, what the fuck is he talking about? There is no one in my estimation, or very few people, I should say, in the crypto community who are sitting at home asking

themselves if people are asking, what the fuck are they talking about? I even got a friend of mine to forward me over a video of our old friend Dave Portnoy the other day. I was laughing my ass off. Apparently, he did something with the Winklevoss twins a little while back, who are from Facebook fame. If you saw the movie, The Social Network, they were the two twins who ended up suing Zuckerberg. But the Winklevoss twins are huge Bitcoiners. They're huge crypto guys. They got a ton of money in that space and dave portnoy invited them over to his house because he realized they were in town and tried to have them explain crypto to him you know to the average man and at the end of it he just looked at the camera after they left and and went i have no fucking idea what they just said.

And that's the problem. Now, there are some guys out there who are at least making a really concerted effort to get this point across. There's one guy up out of New York named Anthony Pompliano who has been, you know, he's like sub 30 years old. He's young. He gets it. He's like sub-30 years old. He's young. He gets it. He's with it. And he also is not somebody who was a coder or came from that side. He kinds of content online and try to just continue to get the message to people as to how this works and why it's important. And he specifically sticks with Bitcoin above everything when it comes to the actual currencies in this space. Because that whole buzzword blockchain is like a whole ecosystem there that has nothing to do with money which also confuses people so when pomp is talking about the money side of it

he stays on bitcoin and he's a huge bitcoin proponent but even pomp who i have the ultimate respect for even when you listen to some of his podcasts and stuff yeah if you were listening to episode random episode x for the first time and clicked it there are certain ones where you just be like all right i can't listen to this again because you just don't understand it so even the guys who are out there taking this topic and really expanding upon it even they struggle sometimes and there's not many of them. It's a very difficult thing to go over. In my opinion, though, we miss a really important point here. One of the things that cryptocurrency branded itself as at the beginning,

and I'm going to talk about that in a couple minutes, but one of the things it branded itself as is no more secrecy and full transparency which I've done episodes transparency is great it's something we expect now that's awesome what I would argue is that the cryptocurrency space the digital currency space bitcoin the big boys they have actually been punished for their transparency why do i say that because in their transparency bitcoin for example explains to everyone the inner workings of exactly how it works how it happens how its mind what a blockchain is what transactions go in there what the codes look like or how they'll

be coded so that it's you you can't find out who you are when you do a transaction how the computers talk to each other, all this shit. And what happens is, as you can tell, as I started listing those off probably, your head starts spinning. And you're like, all right, wait, wait, computers, blockchain, money, transfer. Wait, what?

It's not done for you. When you go onto Venmo, that's just an easy, or PayPal, something that's an easy transfer service. You know, you go click Venmo, that's just an easy, or PayPal, something that's an easy transfer service, you know, you go click somebody's name, you type in the amount you want, you put on a stupid message, you send it,

it's already attached to your bank account, and the money goes. And that's what you know. My argument is that we take things like that for granted because it operates in the same system, meaning, especially in money, the same currency system. It's underneath the dollar and it's underneath banks and bank accounts, which as much as we hate banks, that's what we're used to. does all that we just don't worry about how that money went from person to person on venmo and how it's then handled at each bank and how some ends up in our account and the other is debited from

their account or vice versa we don't think about that i'll take it a step further and i'll say when we use instagram when we use youtube we don't think about how the fuck it works i mean people like to joke about the algorithm and how the computers decide some things so at least we know that but we go on Instagram we hit the heart it's alike we want to hit comment oh there's a button that says comment and we hit comment and then as we scroll through our feeds certain comments will show up in the previews and others won't the stories are at the top and when we hit them, it goes to the back of the feed because we watched it and the other person can see that we watched it. Like all this stuff is fairly simple.

DMs, I want to hit somebody, I message them. We don't think about how that's happening on the inside. How a DM is allowed to happen. How a story is shared and then all these different people can see it and maybe other people can't. How post comments are organized. All this stuff, we don't think about it. And yet we hit on Facebook all the time for lack of transparency and whatever. Who owns Instagram? But we don't think about that.

We don't think about how YouTube is tracking our views and figuring out exactly what to put next in the queue. And how their bots read for the best content we don't think about this stuff because the expectation isn't that they're going to tell us exactly how it works with bitcoin and cryptos they told us we're going to tell you exactly how it works and so the average person like me and you looked at it not a coder not somebody who understands like heavy tech shit and we go what wait wait wait back up how does that work how does this work it makes no sense it's like another language and so then especially when there becomes this craze where no one understands it but everyone starts buying it like they did in 2018 and 2017, we just assume it goes up, up, up. And we don't think about why it's going up. Why that was a problem that it was

going up like that. And we never think about how it actually works. The whole point of Bitcoin is eventually to be a currency. I'm not saying that they're the one that's going to win. I don't know that they are. They're just the best example as far as the most recognized name. Well, people weren't thinking about the concept that one day Bitcoin, for example, in 2017 was 12 grand and then the next day was 13 grand as far as its dollar value. They didn't think about the fact that if this were currency, that means that the next day their iced coffee is a lot cheaper. Immediately. They didn't think about how the rest of the currencies and governments whose literal power is derived off their ability to control money. That's just how it works.

They didn't think about how that ties into this system and it's a very hard thing to think about essentially all these resources that were available and explained very poorly because they were not explained to a layman layman however you say it ended up being held against the cryptocurrency community and therefore the whole blockchain community and everything associated with it and so we are just back on the dollar train and as we've done it we have yet another example of why over time our currencies are getting crushed the average life of a fiat currency fancy fancy word right there, so let me completely change it.

The average life of one type of money, like a US dollar, a euro, a yen, whatever, is somewhere in like the 25-ish years handle over the course of human history. People say, oh, well, the US dollar is 250 years old or 240 years old. No, it's not. That is a concept we have wrong. The U.S. dollar was derived in gold until like 1971 or 72, one of those two years. You say, well, what the hell does that mean? It means that the value of our dollars was based on the reserves of gold that we had. That's an oversimplified way of putting it, but for the intentions of our argument, that's how it is. And when that was the case, it therefore, the dollar was not a true dollar that relied on its own value to create value when we went off the gold standard in 71 or 72

the dollar became that so yes the dollar is still very powerful and it has far exceeded the average 25 year length or whatever expectations of a type of money in the world. But it doesn't mean that all the same things that have killed money, other types of money before it, aren't also happening to the dollar. And so when I talked about inflation in the intro, that is how currencies die. You get into cycles and eventually they die. Because the the value once you just create more of it there's more of it in supply and there's the same amount of people who want it so the demand is now technically down relative to supply and it just keeps going like that even if demand stays the same which in in concept let's just say it does, the supply keeps going up, the dollar or the currency in question in that case keeps going down.

And that's why things like cryptocurrency, part of why things like cryptocurrency were created. And I'm going to give some hard examples on what I just talked about later, but I want to keep it on our topic and talk about the origins of how this started in 2008 and why that matters and what the concept's supposed to be. So you heard me mention it in the Real Always Wins episode. I think I talked about it for maybe three or four minutes, so some of this is a little bit repeated from there but in 2008 we had the great recession the housing market and we all know what happened the housing market in this country collapsed and then we just know the average person we all know that that meant the stock market went down and jobs got lost and everything

went in the shitter and by the way it was affected globally that's what we know the way it happened which a lot of us also know at this point whether it be from watching movies like the big short or documentaries like inside job or just reading about it over and over again whatever it is some of us are aware exactly why that all happened. And the way it happened was there were these things called subprime mortgages. Basically, Joe Blow could walk into an office almost with no job, or let's say he's getting paid $40,000 a year, and he could sign for a million-dollar house.

And it was set up in a way that he could afford it at the beginning and eventually when interest rates changed another buzzword but when the amount that people actually had to borrow went up just to be able to get money get a hold of money that meant that that person's rates would go up and they wouldn't be able to pay it because they don't have a job good enough for a million dollar house and so the reason this was all interconnected is because wall street select group of people at all the big banks went in and tried to make a lot of money and so they bought up all the mortgages and they put them all together in these little products. And as people paid their mortgages, like as the home buyer paid their mortgages, that money would then flow through to investors who invested in these products that these people made up.

And there were more levels to this, but I'm going to stop it there because that's the most important one. And so when this happened, you had, what I say, Wall Street, banks coming in and facilitating this whole thing. You had money lenders, call it banks, not officially what you should say, although in some cases it absolutely was, but you had lenders lending out money to people to buy homes that they couldn't afford. The point is everyone at every level of the financial system and then also therefore the government above them who's supposed to watch for this shit failed. Because once people started getting rates on their mortgages that they couldn't pay, then there was no money going into these investments. And these investments were exposed in portfolios all over the world. So people's portfolios went down like this, and that included corporate accounts, and it's just a giant, it's a bomb, and it goes off.

And so when this happened, the culmination of, oh shit, this is a full-blown absolute end-of-the-world potential scenario was in September 2008 when the investment bank Lehman Brothers failed. There were, call it, five or six major investment banks on Wall Street located out of this country who really mattered. Like as they went, the whole U.S. economy went because they had their hands in everything at the top and then even down into the economy. And so one of them actually did fail and was bought very cheaply by a bank back in February 2008. So there were cracks in the system and somehow things at least stayed afloat after that. It wasn't great, but nothing crashed yet. Once Lehman Brothers went to fail, whole different ballgame. And you say, well, what do you mean fail? What I mean is these banks, these products I talked about,

they would buy up with their own money, like their own accounts at the bank, to say nothing of all their clients and stuff. They would buy up these positions. So when these positions went from being worth a dollar to being worth 30 cents or 20 cents well they just lost 70 80 percent in their portfolio overnight and yet they still have a whole business to run that is running off the expectation that that thing right there is worth close to a dollar or within range of that dollar but when Lehman Brothers went to fail, it was because they couldn't cover their bills because their own investments were worth nothing

and they were investments that they had helped create. So if they failed and went into bankruptcy, everything would stop, which it did, unless the government helped the other banks not fail who would be right behind Lehman Brothers if Lehman Brothers did Lehman Brothers was just in the worst position of the remaining powerful banks that they were going to be the first to fail but next was going to be you know Merrill Lynch Citigroup potentially even JP Morgan and Goldman, who were both at least better positioned than the other banks, but still kind of screwed. It was a systemic problem. It affected everything,

because again, all these banks had their hands in everything. So Lehman Brothers failed, and the government did exactly what they had to do. People give them shit for it, but the government ended up coming in and working to bail out the other banks and we paid 700 and some billion up front to do it and then regulated the fuck out of them i worked at a bank i know what that regulation was like and the the other banks were able to survive and that money that went into them was taxpayer money so double whammy here because the banks survived with that but the economy was crashed people were evicted out of homes jobs were lost in the tens of millions people couldn't pay their bills the stock market cratered the worst it had since the Great Depression and only continued to do so throughout the end of 2008 and into 2009.

And the entire U.S. economy and global economy was at a standstill. one of the ways that this was solved is all the banks central banks around the world so all the governments including ours ended up printing money for the next still doing it today in many cases so right back to that inflation point but that's not what i'm getting at what i'm getting at is the banks small groups of people at these banks created these products because they were trying to make a lot of money and then they facilitated a system where lenders just wanted they couldn't give out mortgages fast enough remember everyone's just trying to make money so the people sell mortgages are trying to sell as many mortgages as possible so if their competitors are selling to people they shouldn't be you get lost in the moment and you do

it too because otherwise you go out of business so the banks caused this whole thing to happen because they drove demand for the products they created and then the entire system crashed the whole economy screwed everybody and then on top of it our government had to come in with our money and bail out the people who did it. And so people were pissed. And they had every fucking right to be. So it was only fitting and only completely explainable that that event that happened in mid-September when Lehman Brothers failed and it was quickly announced that banks were going to be getting some kind of bailout.

It's only fitting that the introduction of bitcoin for the first time its invention was announced on october 1st 2008 and it was announced in what's called a white paper by its founder satoshi nak Again, prime example right here. White paper is like an academic term. I wish they would call it something else for people. It's not hard for a lot of us to understand, but people have no fucking idea about this shit. They hear like, oh, it was announced in a white paper.

They go, what? So white paper is when something, when a new cryptocurrency is announced, it is written up in a binding document that explains how it works and that document cannot be altered that's the way to put it and on october 1st 2008 as i said the founder of bitcoin a man named satoshi Nakamoto released this. To this day, we do not know who Satoshi Nakamoto is. It was a made-up name. And it even could have been several different people, like, together. We don't know. There's a lot of rumors around it, but we don't know.

The idea was that this was created as a way to introduce a new monetary system to society that had lost all trust in new monetary system to society. That had lost all trust in the monetary system. And the government who regulates it. This was a new way. For money to be exchanged. And not have to involve. The banks who fucked everyone and who we don't trust.

Or the government who was complicit. Complicit. That was the idea. And so Satoshi said that at the beginning of next year, meaning 2009 at that point, this technological apparatus that he had concepted and created, was the first introduction of the idea of blockchain, was going to begin. And Bitcoin, therefore therefore would begin adoption and i might add by the way banks haven't done much to help with the trust issues since the great depression they're regulated like hell but you still have banks like wells fargo opening up sham accounts because they have quotas

for their employees to open up and the employees compete against each other. Same problem you saw with the mortgage lenders, people just giving out mortgages like pancakes. You also have overdraft solutions at banks that they don't even tell you about, like policies with when you overdraft your account by accident that they don't have anything in place. They just automatically have it overdraft and then get to charge you for it. Credit cards are still sketchy. It's the whole system. Like they haven't helped themselves very much. Back to Bitcoin though. This is the part where I want to actually explain

how this works. So I'm going to include some of the buzzwords and then immediately deconstruct them and make it simple and there's some stuff i'm going to point out that we're just going to ignore because it doesn't matter for the intents and purposes of understanding what it is so let's get going with that the very first thing we can cover going through this is the fact that bitcoin is fully digital it's totally online i think everyone knew that i mean i have a bitcoin physical coin sitting on my headphone amplifier but it's a symbol it's completely fake there is

no physical currency which is probably one of the hardest concepts for people to wrap their head around. But we're already kind of there. We don't use a lot of cash. Like how many people use a dollar all the time? I mean, I'll have the same cash sit in my wallet for months and months on end and never actually take it out. So this is just fully taking that system to the 100 where there is no physical currency one of the main things that bitcoin leads with though is this idea that all their transactions are peer-to-peer with no third parties mouthful number one number two it's in my opinion it's

mostly right i i do want to correct the record at the end but what they have correct about it i think the best way for me to explain it would be using the example of venmo and i choose venmo because venmo is one of the more convenient shining examples of our current currency system and yet even venmo has this problem so i use the best example that we currently have and show why it's not even good in the new world Bitcoin wants to create. So with Venmo, let's say that I want to pay somebody $10. I previously have had to tie in my bank account with wiring instructions, account number, all that. And when I pay this money on Venmo, which is as easy as clicking the other person's name and then typing in the amount I want in some stupid message,

Venmo then alerts my bank account, my bank, that they need $10. My bank grants them the right to take $10 and send it to the other person. So now the other person has their bank get involved too because their bank has to receive it. And all the while, this can take a day, two days, three days to settle. It will say pending when you go to actually send it from Venmo when you receive money and go to send it from Venmo to your bank. It will be pending for three or five days.

So you don't even have access to the money. And you have to trust that there's not going to be fraud, that there aren't servers that are going to get hacked because Venmo and the banks involved are private entities. Like they have their own servers that they rely on. So there is a lot that is out of your control. Where I question a little bit, a little bit, this concept is that technically when you go online, you automatically do have to use a third party to do something. Like if I want to go online and find a chat room about tables, well, I need to go find the chat room that has that and the place that therefore hosts that chat room about tables well i need to go find the chat room that has that and the place that therefore hosts that chat room you can't just magically in the air you know create a chat room and talk with somebody there's still some kind of third party there so somebody who's smarter than me with this needs to explain that to me but with bitcoin the only third party would be maybe an app like Coinbase or Abra where you go on and literally instantaneously send Bitcoin to someone else and vice versa and have a QR code and have it behind a firewall that – not a firewall but your own personal code that protects your identity and protects your assets have read about on some of the apps like some fraud going on there but we're talking about the idea here and the idea is that over the long term

bitcoin is completely peer-to-peer without any risk of an outside third party bringing in their own risk to your money all right kind of a convoluted explanation there, but that's about as complicated as I'll get. Furthermore, though, the transactions on Bitcoin, so when you send somebody money like you would on Venmo, or when you're paid by your company, you might be in direct deposit. The transactions are irreversible. And they cannot be copied. And this has to do with the underlying technology that no one understands, the blockchain thing. I'll get to that very lightly in a minute.

But think about all the times and all the risks you have with fraud. Like on your credit card or your bank account. Think about when the bank does something wrong. Like Wells Fargo even set up transactions on, technically, by pulling money on fake checking accounts no one ever agreed to. You know, that's a bad actor third party. That's the point. With current monetary systems, bad actor third parties can do things. Do things wrong that hurt you. I actually had a

situation a few weeks ago with my bank who received a position from me, had it on my account electronically for two weeks, and then out of nowhere without calling me anything, it disappeared. It was taken away. And the bank had decided on a formality without informing me, without confirming with me, to pull it from my account illegally, I might add. I got it fixed. But that was a prime example of the fact that that's not going to be the case. And I don't want to go more complicated than that on the topic, but just understand that idea. It's between you and the people you do it with. You don't have all these other people coming in. You don't have to worry about money taking a long time to settle. It's instantaneous. Now, the next concept is the most important one.

And it's another mouthful of a word. But you've heard it a bunch and rolled your eyes, I'm sure. But Bitcoin is built on this concept of decentralization. And you say, what the fuck does that mean? I actually already touched on this without you maybe realizing it. Instagram is the example. and I could use a million of them and just say YouTube, whatever, but let's use Instagram as the perfect example of what centralization is. So the opposite. When you send a DM on Instagram to another person,

you don't just get on your phone, type out the message, go into the Instagram app, type out the message on Instagram and send it and have it go straight to that person's phone. That's not how it works. When you are accessing the app, that DM you send inside of a nanosecond or whatever goes to Instagram server. They have one central server that stores all the incoming data of all their billions of users around the world. They're in the billions now. And then that message is then sent from their server to the other person's Instagram DM mailbox.

When you do a post, it's the same thing. You send out your post, it goes to Instagram's server, and then they send it out to the relevant people that they're supposed to we joke about the algorithm a lot where's the algorithm between you and your friend's phone no it's on instagram server instagram has full control that so guess what instagram as because they're not regulated in this way right now like other social media, if they want to remove an account, they can do it. And you can't do fuck all about it.

If they want to decide that, hey, you know, we used to – our DM mailbox used to look this way, but now it's going to look this way. They change it, you can't do anything about it. That's what it is. And then if they want to change up how it gets sent or whatever, it's all because it comes through their servers that they run, they own. That's it. And so if all the data is going into one place, that means that if you are a bad actor,

if you are someone who wants to hack that data or do something wrong with it, hard as it may be, you have one place to go to, and then it can fuck everyone else up. Not even when there's a bad actor, by the way. Not even that. Like when Instagram goes down, it's because their servers are fucking up. So people can't use Instagram for a couple hours or three hours or a day sometimes, whatever it is. Once in a while that happens. That's another example but when people want to get access to whatever Instagram has they only have to go to Instagram server this is where Bitcoin is different Bitcoin and blockchain

that whole idea does not have a central server there is not one place that people can access good actors, bad actors, everything in between, and then be able to shut the system down or hurt the system or take something that's not theirs. Instead, imagine you had an Instagram, but when you sent a DM, it didn't touch an Instagram server. It just went straight to the other person. And imagine if a record of that not the record of the message itself to keep your privacy but a record that that was done would exist on the rest of a bunch of other computers or phones that aren't related to you two where you're having a conversation you with me that would be how bitcoin works when you transact in it. And it is confidential. You are transacted behind a long code. That's how they're set up. So people cannot trace exactly who did it. overall explanation simplest one i ever heard of this was a couple years ago at a convention that

my buddy mitch laxamana was working where he was doing interviews with all the participants and he interviewed this guy samson williams i believe was his name and samson has been a long-time consultant in the blockchain space and a few other tech spaces and so samson gave an incredibly simple easy to understand concept of what blockchain is and i just want to repeat it as best i can word for word right now And what he said is that imagine you are on a group text. So for your purposes, I want to say, imagine you're on a hundred person group text. If someone sends a message into that group text

and you on your phone delete that message, does that delete the message? Does that mean it deletes on everyone else's phone? No. In order for that message to actually be deleted, it would need to be deleted from all 99 other phones, including the person who sent it. So instead of having to hack one server

where you could go in and delete it and unsend it from all those phones, you'd have to hack all 99 other phones or physically assault the people to get them to delete that message. That is blockchain. Blockchain is what Bitcoin is built on. So that is Bitcoin, which is why when Satoshi came out with this, he said, look, if five people adopt this, not literally, but if very few people adopt this, it's not powerful enough. The system is only as powerful as the number of people who have adopted it. And so now millions of people around the world are adopters of this system And do have access to this. And therefore. As Bitcoin transactions happen.

There's a public record of it. And enough computers are on the system. That it would be pretty fucking hard. To delete that that shit happened. It would take. My one guy who's. Tech Illuminati. Was trying to guess what it could take a couple years ago.

And he was like, I mean, with unlimited computing power, teams of a couple hundred people, whatever, he's like it would take 110 years just to delete one. I mean that's crazy. That's the power of it. And this concept blockchain, as I've said, I would get to it. I don't even want to who at your bank communicates how or who with someone at venmo when you send money but you just send the money and you know it's done very similar here the blockchain is just the term for the system in which the data is stored and it's the way that the data is therefore doesn't have the ability to be changed

as i explained and so the other buzzword that people throw around is they talk about mining and bitcoin mining and stuff to this day i do not entirely understand it i get it but the actual details of how it happens and who decides, I don't fully get. The bottom line is, as people join the network, and as people within that network are coders, who are interested in keeping the system alive, which happened right away when this was created, and now we're 12 years in, those people, according to the rules that were set by the original bitcoin white paper the original rules of bitcoin those people help code in a way that stores transactions on the system and puts them safely into this blockchain that then proves that they happen and they can't be changed.

And as these miners do that, they unearth more Bitcoins. And that leads into the final, most important point, which is why I had that intro, why I talked about the total amount of money in circulation, why I talked about inflation, and why I talked about, especially at the beginning of the episode itself, after the intro, why human beings always kill currencies over time. When Bitcoin was released, in the paper, it was explained how many Bitcoins were going to be available day one in circulation. I forget what that number was it doesn't matter but it said the total number of bitcoins that will that will be

created when it is done is 21 million bitcoins it can never go above that and it must get to it and furthermore it said that year will be in the year 2140. So today in 2020, we have like 18.5 million of them in circulation. There's only 2.5 million more Bitcoins to come. And because these rules are defined on the blockchain, they cannot be changed. That is what it is no human being no government no bank can come in and say one day you know i think there should be 25 million bitcoins not 21 which when you look at the course of human history that is how we solve every single problem we have economically you know

why because governments are controlled by people who in a government like ours are democratically elected and could lose and then even in totalitarian governments who are relying on not getting an uprising from their people so they try to solve the problem very quickly in the cya world cover your own ass world that we live in happens time and time again so if our federal government in march were really looking out for the long-term value of the u.s dollar they wouldn't have printed shit and they would have sat back and allowed the system to reset itself and a lot of people would have starved and so guess what they would you they'd lose this election in 2020 and they'd never recover in this case it was the republicans in power so that would be it for them

all the congressmen would lose their everyone would lose so they're not going to do that so what do they do they print money this is how it happens this is what they did in 2008 they had to fund that bailout for the banks they had to fund all the government resources that had to go into saving people so they printed money with bitcoin it's a finite amount it's not even like gold technically which people still mind but we have an idea of how much is available at a given time or whatever, and it's rediscovered slowly, but gold hypothetically could exist on other planets. That's not necessarily true, but it's an idea that scientists have.

So the minute we start figuring out how to be on other planets, we're going to get more gold. And then there's going to be more supply of gold bitcoin stops at 21 million that's it it's done at 21 on a set schedule that you cannot change so when i did some math of the total amount of money in circulation which was that 615 trillion number ballpark number i gave you in the intro just the value of that money if you valued it all in bitcoins i think one bitcoin i forget the math but it was it it was like maybe 17 million dollars or something one one which the average person like you and me thinks of one bitcoin and we think of It was like maybe $17 million or something. One.

One. Which the average person like you and me thinks of one Bitcoin and we think of it in our heads like this, like $1. It's not like that. It's completely different. It's completely different. When you can't get more of it, people have to make value out of what it is now. And it is a more finite controlled system and it's very reflective of us living in a world that's more and more advanced and learning more and more through our interconnectivities of all the places that in human history we've fallen short

and in the way we control our money and our systems of trade, we always fall short because it's always run by governments who are run by people who have to stay in power. It's just – it's game theory. It's what they do. I'm not even yelling at people in the US who are acting to save their ass. It's just a part of the system. But if you can change the system, this is the way to do it now naturally a question i'll get asked is well you know the u.s dollar is the most powerful one how does this really affect us you know we have i don't know what the number is but it's roughly like maybe half the circulation in the world whatever it is it's a big number so they say it's too big to fail. Well, that is such a murky point and so confusing to even think about that I am not in the slightest way qualified to describe exactly how that would happen or even sit here and guarantee you that it would. What I can tell you is that it is already proven

to be a system that is not without a ton of flaws and it has already been proven that one of the major flaws in that system is that we create too much of it over time to solve for short-term issues it's just what we do now a very very extreme example of this in a country that is far smaller and far as far less important in the world economically as we are was venezuela and they're not the only example it's just one but in 2013 when nicholas maduro took over for hugo chavez after hugo died and i think i don't know that much about venezuela i think they're communist or social no I think they're just socialists either way you know he's more of a totalitarian ruler and the way that Venezuela

has made money is their oil they have a ton of oil and they export the oil so they send the oil out of the country and so their own dollar which is called a bolivar, I think, that's like their money, is very, very tied to how much oil is being bought from their country over time and how much is being spent on that oil. So in 2013, when oil prices began to fall through the floor, I'm not going to go into exact numbers, but just pretend what used to be worth $100 was suddenly worth $20. The oil that Venezuela would send out to the rest of the world was now worth $0.20 on their dollar, hypothetically. And because they relied on that so much, and because the government had so many programs set up for their citizens that were based on income on tax income from that money the government couldn't cover their expenses and also since the rest of the world wasn't buying as as much oil monetarily wise because

it was worth less the rest of the world was therefore demanding less bolivars they did not want as many because that you know that's the one country that actually uses it now they didn't have a need for it which is not a that's not a relatable problem to the u.s dollar which is used all over the place so this is a much smaller scale i want to point that out i don't want to cherry pick here but what the government did to cover their bills is they began printing money like crazy and then citizens suddenly had way too much i'm recording citizens sorry i'm getting interrupted over here someone at the studio door so citizens hold on i'm gonna be done in like, I don't know. Where was I?

So as prices went up and the value of the boulevard around the world went down, they couldn't import anything. They couldn't bring in all their goods that they're used to. This includes food. And so those prices went way up. And then citizens, basically, without continuing to go down this rabbit hole, it got to a point where it was far smarter to use your boulevard as toilet paper than it would to actually use a piece of toilet paper than it would be to actually use a piece of toilet paper think about that that's what can happen when a government decides that they need to solve a short-term problem and they do the only thing they have the power to do in that moment which is just create more of the money and try to figure it out later. That's why currencies die.

So when I see the federal government, despite the fact that we have by far the best currency in the world, when I see the federal government printing $3.5 trillion overnight, when we're already in debt for $25 trillion going into it, that's one day. It's one day of an announcement. Now they're doing it throughout the rest of this year, but it's not a long time. That's a lot of supply coming into the marketplace, driving down dollars.

So when people are looking at the stock market and let's say, you know, it got to the point where it broke even with where it was before coronavirus. They're trained to say in their head, oh, my stocks are worth what they were worth in the end of January, beginning of February. In numerical values, yes. In the value of a dollar, no. And where does it end? Being in quarantine for a long time, now we have citizens who are never, they lost their businesses. They can't just redo that. There's going to be displacement. There's going to be changes.

There's going to be industries that go away. How's the government going to solve this? They're going to have to stimulate more money. Another topic for another episode is something that the guy andrew yang democratic candidate for president last year who ended up bowing out but something he introduced to the table which was hey we're going to be losing jobs this is before corona we're going to be losing jobs to automation which is another thing we've talked about before but we're going

to be losing those jobs very quickly he thought over the next two decades and he may very well be right about that so we need to talk about how we pay our citizens universal basic income something to live off of there's 330 million people in this country and that might be the system to go with i got to see the whole thing but that money's coming from somewhere and chances are they the system to go with. I got to see the whole thing, but that money's coming from somewhere, and chances are they're going to have moments where they're behind on the budget, and they got to cover it by creating more dollars. The only thing keeping the dollar afloat right now

is the fact that all the other governments around the world are printing money for the most part due to this corona thing. It doesn't mean that we printed a lot more than other places did though it doesn't mean that we're not still killing this system day by day this is why crypto is important and for the love of god can we get a different name than crypto that's probably not going to happen but i can wish now i didn't get into all these shit coins today that's why i call them that's what a lot of people call them i didn't get into all these shit coins today that's why i call them that's what a lot of people

call them i didn't invent that name but yeah when you saw the rush to the marketplace in 2017 suddenly everyone was in fucking blockchain you saw a lot of bad actors come in who had no value and you still to this day see coins that are trading on the marketplace that have absolutely no hope no value add they're in name only it's like it's fairy dust it's it's way out here and i hate that actually one of my favorite ones of all time just on that note was i remember there was a company called it was like long island iced tea something it was based off of like making long island iced teas this is maybe the end of 2017 beginning of 2018 and overnight they were a publicly traded company like a penny stock worth nothing but overnight they changed their name to long island

blockchain and we're suddenly a blockchain company so this company literally was like this is the taxi driver example this company was apparently making long island iced teas to package up and sell to stores and then the next day they were suddenly like a crypto company so anyway yeah you had a lot of bad actors come in but the concept of bitcoin is the most recognizable one as the name. So it's the best one to explain. However, it does not mean that Bitcoin is going to be the one that wins here, the one that has to win, or the thing that's going to become the one digital currency around the world. I don't know.

I don't know. You know, before Amazon, there were companies like AltaVista. You don't fucking know who they are. I think that's what it was called. Like things rise and fall and better things come along and Bitcoin certainly has some issues. But it's been, it's had the most staying power.

It's the biggest coin by its market cap. And it was the original one and the concepts that it created, especially as it relates to decentralization, which we now know what that means, meaning no central server, everyone's connected like a group text. And as it relates to the supply, are both going to be critical to any currency, digital currency or currencies, there could be a few, that win out if that is to happen and if we do move to a system like that. I'm somebody who believes that things change over time. I think that makes me completely unspecial to think that. But every time an entirely new concept at the most serious levels comes in, there is a ton of pushback and needed areas of adaptation for humans to even slightly consider it.

And I still think we are in the very early innings when it comes to anything, especially related to money. What it doesn't mean is that even if the sentiment isn't like excited or even has some eye roll to it right now, what it doesn't mean is that this is not going to be how it goes in the future. And part of the way to get it there, to get it to a better place, that's the idea, is to explain it and actually be able to understand it and not have your head spin.

And that's what I was trying to do today. One final thing that I do want to point out before I close. And that is, I look a lot, just because it's natural to do it at this point, I look at a lot at what China is doing. Because the two real world powers right now are us and China. And obviously they have completely different governmental principles than we do.

We're a democracy, which certainly has a lot of flaws, but they're a communist government. And just history teaches me to think twice about communist governments one thing about china though another thing that can and should be a whole separate episode there's been a lot of those today is that their environment for innovation and the encouragement that their government gives for innovation when it comes to technology is unprecedented it's unprecedented and so as a government that does like having total control one of the things that they began to look at years ago was the whole concept of blockchain and digital currency and so they've been in the process not only of locking out some of our major tech companies from their environment so they can control everything. But as a government, they've been in the process of developing and testing out their own digital currencies.

And investing and testing out all different things on the blockchain and so it doesn't take a genius to realize that a communist government doesn't just test out things to see how it's going to work for all their people and say oh great if they figure out it's going to be something good they're testing it out to make sure that any systems that come up in the future are systems in which they can maintain control they're trying to get out out in front of some of this stuff i don't even think you can trade bitcoin in china right now double check that but i should know that but i don't think you can i think they may have locked that out so when i look at a country who is very smart and very adept in this space and a government who clearly cares a lot about it and i see them even looking at ways

of adopting this ahead of time that tells me a lot they're putting a lot of money into it so anyway that's all i got for today this is not the last we'll hear about this topic i hope i didn't bore you too much with some of the explanations but we got to understand it in order to even slightly move towards it we got to understand it in order to even slightly move towards it we got to understand it we got to put all the bullshit and all the bad actors of 2017 2018 behind us and then see what happens here but one thing's not going to change and that is human beings who inherently are a part of governments are going to continue to print money when when shit hits the fan moving forward.

It always happens, always has, always will. So how can we find ways to protect our monetary systems against things like that in the future? That's what we got to be asking ourselves. I guess I'll see you next week. Until then, give it a thought. Get back to me. Peace.