On The Brink with Castle Island - Matthew Mežinskis (Crypto Voices) on How to Compare Bitcoin with Fiat (EP.203)

Episode Date: April 7, 2021

Matthew Mežinskis, creator of the Crypto Voices Global Monetary Base project joins the show to discuss how Bitcoin stacks up against sovereign currencies. In this episode:  The difference between base money and broad money Why Bitcoin should be compared to base money and not the broad money supply How exchanges are serving as proto free banks – and why they might end up becoming transparent fractional reserve institutions How free banking actually worked Why unrestricted banking activity tends to equilibrate with single digit reserve ratios How the Scottish free banking system was stable despite fractional reserve How Bitcoin improves upon gold in a free banking system The role of Proof of Reserve in a neo free banking system The bankruptcy of the Ayr Bank and what it tells us about the Scottish banking system Why 'free banking' in the US wasn't really free Bitcoin passes the Swiss Franc Where Bitcoin stacks up relative to all the major sovereign base monies Follow Matthew on Twitter and check out the Monetary Base project.  Sponsor notes: Copper is transforming how institutional investors engage with digital assets by developing award-winning custody and next-gen trading infrastructure. Headquartered in London, the firm is scaling rapidly across Asia and North America to bring its suite of products to a wider pool of institutional investors. To learn more visit copper.co or reach out on Twitter, @CopperHQ Aave is a decentralized, open source, and non-custodial protocol where users can deposits and borrow digital assets, and earn interest on those assets. Head over to aave.com to experience and learn more about DeFi.

Hello and welcome back to On the Brink with Castle Island. I'm Nick Carter. Today we're talking to Matthew Mishinsky's. He's one of the two folks running the Crypto Voices podcast, which is really excellent, as well as the base money tracker. Before we start, let's talk about our sponsors. This show is brought to you by Copper. It's the global provider of blockchain infrastructure solutions for institutional investors who are actively trading digital assets. Its award-winning custody application is connected to 25 of the largest exchanges in the world, ensuring safe storage and movement of assets for the biggest crypto hedge funds, market makers, family offices, and high-net worth individuals. Their clear-loop system is the first off-exchange settlement network for digital assets. It's the safest way to trade

balances in custody across multiple exchanges without requiring on-chain settlement, on-chain movement of assets. To learn more, visit copper.co, or reach out on Twitter at CopperHQ. This show is also brought to you by AVE, AVEE. AVE is an open source and non-custodial liquidity protocol where users can earn interest on deposits and borrow digital assets. It's a decentralized community-governed protocol. More and more about Avey at Avey. com. So this episode is a little bit special and it requires a bit of explanation. So I wanted to bring Matthew on to talk about his base money tracker, which basically

compares Bitcoin to the base money quantity of a bunch of sovereign currencies. It's really great. I'm going to link it in the show notes. In my view, it's the only consistent comparison to be made. A lot of people compare Bitcoin to M1, M2. That doesn't make as much sense. We talked about that in the episode. The problem was Matt and I recorded the episode in February.

And then I lost the audio for the episode. So we had to re-record. That's the first time I had to do that. Matt was really gracious and agreed to do that. So you're hearing the second version of our conversation. My apologies to Matthew for making him do that. Let's jump right into it. Brought down by bad mortgage investments, Lehman,

which has 25,000 employees will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentive Easy. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called the Bitcoin. Bitcoin. Okay. So Matthew Majinskis. Am I saying that correctly? All right. Welcome to the show, Matthew. Unfortunately, this is our re-recording.

This is the first on the brink pantheon. We had to re-record because I lost the audio of the last one. So I'm making you do it again. Nicholas, have you hit the record button this time? Yes. It's actually not my fault, though, to be clear. Oh, yeah? It's Zencastr as fault.

You would to make that? Yes. So normally I use Zencaster and I record a backup copy of the audio. However, my laptop was overtaxed that day. And so I couldn't record on audition. And I trusted Zencaster and Zencaster let me down. So this is a Zencaster problem. You know, I had that actually happened once in the history of our show as well, just once.

And out of pure respect for the game, I immediately took to my computer after the fact, took their recordings, which I had, and re-recorded my own questions and layered it on, and it just sounded fantastic. What did you think? Did that ever cross your mind? Yeah. I could have done that, but you know, I listened to, because I had your audio. Right. To make it clear, to the listeners, it's the exact same scenario that I just. It's the same scenario. So I sat down.

I sat down a couple weeks ago. And I was like, okay, no, this will be easy. I'll just listen to Matt's audio and then I'll re-record my parts. But for the life of me, I couldn't figure out what the hell I'd been saying in the conversation. I'm sure it's really smart stuff. And now it's lost like tears in rain. It's lost a history. It is.

It is. No, no, I will admit it was I actually really enjoyed that. conversation it was it was a fun one you know even though that one is lost to uh to history this this will be uh just as good the next best thing and uh probably even better so yeah did did the conversation even happen if you didn't turn it into a podcast like was it even a valid conversation good question my friend very very good question leave that one to the listeners for sure it's like you know that tenacious D song? No.

Yes, I do, but I'm not going to know the song you're about the quote. This is a great reference. Great reference by me right here. So great, great band. I guess they were a parody band or were they a real band? Yeah, I think parity is a good way to describe them, yeah. Well, they made real music. It was just kind of satirical, I guess.

Yeah. I mean, anyway, so. Solid music. Solid. It's solid. It's kind of like the monkey. were like a fictional band, but they also made music that was good. So, all right.

That's fine. I mean, in a sense, they were very real as well. I swear we'll talk about money supply at some point, but we got to start. All right. So what did Jack Black say? Tell me. They had their song, Tribute, where they talk about an encounter with Beasel Bub, the devil, Satan. and Satan challenged, I guess, Jack Black or his character in the song,

to play the greatest song in the world. And so in the song, he relates how he played the greatest song in the world. And, you know, defeated Satan. But the song itself is not the song that he sang on that night. It's just the story of the song. You're absolutely right, actually, now that I think of, that would be about, like, one of the only songs that I can kind of remember through the haze. But anyway, so this episode is just a tribute to our last episode, which was the greatest episode in the world. But you just have to believe us that it was the best episode in the world.

And after just stumbling through that fantastic, inace, the metaphor, I think we're probably ready to. give the people what they want, right? Let's pause the episode for a second. So, as it turns out, I found the old episode. I located it in a dusty corner of my Dropbox file that I had forgotten. The punchline is,

I made Matthew record a whole 90-minute second episode for nothing. Now I'm left with a dilemma. I have two episodes on the same topic with Matthew, recorded about a month apart. They're both really good. But you've heard us for the last 15 minutes talk about how nothing could be as good as the original.

So I'm going to redirect us now. I'm going to pivot this show and send us back to the first episode, The Dead Sea Scrolls of Podcasting. Unlike the Tenacious D song, you do get to listen to the events that happened that fateful night. Let's jump into it. Well, Matthew, this is the episode number 179, I believe, of On the Brink.

And it's a complete tragedy that it's taken us this long to have you on. I can't believe it. Welcome. Anyway, welcome. Nicholas, thank you very much. Much appreciated. Very happy to be on with you. I would love to see your shining face in person once again.

It's been two, it's been like three years at this point. Yeah, I think it was the second Honey Badger, I believe. We met in person. We chatted a few times before that. We got to remediate this. Absolutely. The immediate topic for discussion today is your outstanding work with the supply base money and comparing Bitcoin to that.

So that's the main motivation for today's discussion. So you recently did the, is it the Q1 refresh of the base money ranking? It's Q4 2020. Oh, Q4 2020. Okay. Yes, I think this is one of the most, like, you put so much work into it, and I think it's one of the most underrated resources in Bitcoin land, if I may say so. Well, I appreciate it. There's a couple of things, I think, that are interesting and kind of funny about it to begin.

Yeah, it is like one of these pieces of research. and points of information in comparison that we have, Fernando and I both have been talking about, I think, perhaps longer than anyone in this, in our little corner of the Bitcoin space. And I think, I'd like to think most consistently than anyone, that we certainly weren't the first people to talk about it as an idea that Bitcoin would represent something like the monetary base today, which also is analogous to the way that Golden Silver worked in prior, banking systems. Most people know there's no backing of gold and silver in the fiat system today. And so there's backing that just has no concept in the current fiat system. But nonetheless,

there's a quote a long time ago made by Hal Finney in about 2010. I think you might have even quoted it in one of your articles as well. Many people quote it where he talks about basically, you know, Bitcoin, hopefully will be, you know, the base money of a new banking system, a new financial system. And it might, and he didn't say it needed to be this way, but he said it might be that you don't even interact with it. And that's actually quite true that a big portion of the base money supply today is not even interacted by, with individuals, you know, directly. It's, it's, the cash is, but the reserve portion of the base money is basically just, base money for the banks. It's assets for the banks. So anyway, he made this comparison. I've known

about it for a long time, Fernando as well, and we have just constantly seen interesting, sometimes creative comparisons with Bitcoin and the financial system as a whole. But I thought that they really weren't encompassing as rigorous enough as they needed to be. And so I just decided to compile one myself. And it's interesting because there is like other than this report that we've done. I'm not saying this like a feather in the cap. I mean, I'm proud of the work that I've done. And I'm not a I'm not as prolific a tweeter as you are. So I'm not on tweeting even much besides these quarterly updates. But it is interesting. Like if you go to any data bank in the world, you know, IMF bank for international settlements, world bank, like you try to find any money supply

that is the monetary base, and we can describe that more in detail in a second. But if you try to find any money supply that is the monetary base, you won't. I have no doubt that Maine central banks know what this number is. They track it, whatever. And it's absolutely true that the big four currencies, the dollar, the euro, the yen, and the UN,

Chinese Rimini, is the, they are the 82% of the basic money as we compile it, top 30 floating currencies in the world. So the huge portion, but yeah, it's a massive long tail, and it's just not tracked. You actually have to go to each central bank's website to do it. Now, I'd probably just stop there. Like, I don't know the reason for that because there's definitely, like, as the IMF calls it, narrow money, which is basically M1.

We can talk about what that means. And then there's broad money, which used to always mean M3. Now it means M3, M2-ish, because the U.S. hasn't published M3 since. 2006. We can talk about that as well. But it's just funny because there literally there is no resource in the world other than what we've compiled for the monetary base. I don't exactly know why. I don't know if they just sort of the magician doesn't want you to pay attention exactly to what's behind the curtain, but there is no other resource. And we definitely plan, like I know my charts are quite static. If you go to the website, it's not as fancy as many interactive websites

tracking various things. But we're working. on that as well. So that's a little bit of the intro, I guess. It's a fantastic resource. I click through the thread every quarter. I find a lot of value in it. It's a great benchmarking resource. And, you know, people just compare Bitcoin to gold because that's gold is the most immediate comparison. But there's other monetary bases out there. And those are fiat currencies. But I see a lot of, you know, sloppy work in terms of comparing Bitcoin to outstanding fiat currencies. And I think partly that's just because it's so difficult to get a real view of what these monetary aggregates actually represent. You know, it's really diffuse and it's not clear what they mean. And you look at like,

you know, you look at like wikis like describing what the monetary aggregates are and they talk about like travelers checks and demand deposits and like it's all this like like obsolete stuff but so i guess like the you know the first important question is like why compare bitcoin to monetary base as opposed to like a measure of the broad money supply yeah before i answer that just one thing uh piqued my interest what you said just there is yes uh the current financial systems various ms or you know this m1 m2 m3 different levels of money supplies and the monetary base. They are very rough, antiquated. Sometimes one central bank would classify something in M2 and another central bank would classify at M3. There's no, even now, like even 10 years ago, there was no rigorous standard of that.

So it's very nebulous in the upper bands of those money supplies. I am 100% confident now that the invention of Bitcoin and the tracking of various coin metrics like you and your enterprise does so wonderfully well, and the invention of other cryptographic means of settlement like stable coins and the way that exchanges work today, even before we talk about any regulation, because keep in mind, we're in a pretty free market for Bitcoin right now. if a bitcoiner was confused or a libertarian free market economist type person was confused before regarding all these various money supplies I am very very confident that as long as we don't let regulators come in and muddy the waters too much like we will continue to refine and hone and

understand the relationship between bitcoin which is base money and everything that is built on top of Bitcoin, which is a claim. So it's a long way of saying Bitcoin makes everything easier. It really makes everything come into focus. We should keep that in mind, I think, during this discussion, because I will. I think it's just simple to make the comparison between a Bitcoin monetary system and a traditional financial monetary system. That's what I wanted to say, and that's what I wanted to lead in. Because, again, we have, so now going back to answer the question, why base money and not some other money supply. There's a few reasons why we initially thought of it, right?

So one, of course, is can we find a money supply that economically compares to Bitcoin, you know, where we can rank it, or can we find a money supply that economically compares the Bitcoin where we can see the size of other money supplies in U.S. dollar terms? Can we find the money supply that makes sense to measure inflation, the way that we measure inflation of Bitcoin's units. But all of those things, you know, rank value inflation, although they impart part and parcel of the reason, I believe that the real reason, the most important reason, it goes back to what I just said about Bitcoin making everything easier is Bitcoin economically, absolutely economically compares closest with. It's not, it's not 100% like

dollar for dollar equal. Obviously, it's a different thing. But Bitcoin most closely resembles what we call the monetary base in the Fiat banking system. And then prior to 1971, prior to 1935, when we were more on a gold-based dollar standard, we were on a silver-based dollar standard before that, even as silver-pound standard, as you know, gold and silver as well were basic monies of past legacy financial systems. So gold, silver, fiat today from 1971, and Bitcoin. There is a money supply that ties it all together. There is a money supply where you can compare value, and that is the monetary base.

And what that is exactly, we've been sort of dancing around it, talking about it. What it is exactly is the supply of cash and coin. That's the easy thing, right? Everybody understands that. The hard notes that you put in your wallet or the coins that no one wants to hold, cash and coin. And then another part,

which is actually a larger part today, although let's say 15 years ago, it used to be much smaller, is what you call the reserve account that each bank holds with its respective central bank. And the reserve account is equal, legally, economically, accounting-wise.

It's the same thing as a note in your pocket. It's just something that sits with banks. So it makes trade and commerce and settlement with banks easier, much easier than using actual notes. it's a ledger entry. And this is, it doesn't, I always call it a digital version, but it doesn't have, like, we had reserve accounts with banks at the central bank well before anything digital. It went back even to the gold days as well, although again, gold was actually sitting behind those reserves at that time, the reserve

account with each bank. Now there is no such thing. But that is, that is the number. So today with the Fiat, modern banking system that we have, the ultimate asset of settlement, the way that, you know, you think about you have checks in the U.S., which is, you know, quite funny to Europeans, obviously, because we, you know, trading very quickly now with the SEPA, this is goodwill payment system in Europe or whatever. If you pay with Venmo, you pay with any sort of ACH. There are things that, like, yeah, it's sort of settlement for you, right? Like you can pay back your buddy for a beer or dinner or whatever.

You settle. and you pay a check as well. You settle the debt at the moment, but the banks don't really understand that until they meet at a commonplace. And where they meet, that commonplace is what you call the reserve account. They meet at the central bank,

and that's how they settle. Literally, literally days end, they go around the table. And of course, as I said, the checks don't move all the way up the system in a day. It takes time. Although it's getting better now with more tech, obviously, in the financial system. Well, the legacy banks still are antiquated

compared to any crypto exchange, which I know most listeners would agree with. Anyway, literally at the end of the day, banks sit around the table at the central bank, and they say, okay, you know, JPMorgan, you owe city this, city, you owe B of A, this, whatever. And that's it. That's how they settle their balances. And those balances are settled with the reserve account at the central bank. So it's the reserve account for a reserve in the U.S., the ECB in Europe and so on down the line.

So cash and coin plus the reserve account. They're completely analogous. They legally have the same thing. It's just they're in different forms. Reserves are sort of money for the banks and the cash and coin are money for us. They're both assets on our personal balance sheets, on our corporate balance sheets. They're assets. They sit on our side of the left side of our balance sheet as an asset.

And that is literally the money. That's the end of the day. There's no way. in the financial system where you can look deeper to settle a debt. Like you can't, there's nothing deeper, that's it. That's why it's called the monetary base and it's called that for good reason.

So hopefully, you know, we can definitely repeat this stuff and talk about their money supplies, but I would say hopefully people start to get a sense of where we're coming from, you know, and you can look at, listen to our older episodes, Fernando and myself as well, we talk about this,

is that's where you start to get a flavor, like it's ultimate asset of settlement, final settlement. At the end of the day, there's no deeper level of settlement other than with the central bank. The monetary base, it includes reserves. It includes cash and coin. They're equal. And banks, by the way, can swap one for another. So, like, they can swap cash with reserves at par with the Fed. This is also how cash gets through the system. Sometimes the Fed says, hey, get a little bit more cash in the system. We're taking some of reserves, take some cash. It's a completely analogous thing. It doesn't matter that one's a piece of paper and one is on a ledger. It doesn't matter. It's legally, economically, accounting-wise,

the exact same thing. And that is the ultimate settlement in the banking system. And thus, that would be the thing that compares economically with Bitcoin's eventual 21 million. And I think what confuses people is they look at the not. numbers in their checking account or their savings account. And then they have the apparent ability to convert that into physical Federal Reserve notes that they withdraw from an ATM, for instance, or you can withdraw notes from the, you know, the bank teller, I suppose. And they believe those things to be equivalent.

But in fact, they are not equivalent. There are differences. And there's differences in terms of the, how impregnated with sort of risk they are, although I guess the FDIC exists to, you know, mitigate that. But those are not equivalent things. Correct. And again, here's where I would say, yeah, FDIC aside, there's reasons for FDIC, even though there's not case anybody's wondering, there's not, you know, trillions of dollars stacked in a vault. Yes, FDIC at all, you know, it's absolutely a relationship of confidence

with that organization with the treasury and with the Fed. But anyway, the easiest thing to do is just look at Bitcoin as well. So any Bitcoins who's worth their salt, salt is also a funny meme going around these days, but any Bitcoin are worth their salt knows that if I log into my Coinbase account, my BitTrek's account, crack an account, and I see 0.5 BTC on my screen, if you ask, really, if you ask, okay, do you own that 0.5 BTC, if you understand not your keys, not your coins, if you understand the importance of validating, you know, the transactions on your own node, you will understand that actually know the exchange

holds that Bitcoin for you as an asset. It literally is the exchange's asset. It's the exchange's Bitcoin. And from an accounting perspective, you actually, you're a creditor of the exchange, but it's not a bailment-style relationship. Exactly. That's exactly what I was going to say. No one answers the second question. What's the same? What's the same? the second question. If it's the bitcoins, if it's Crackens Bitcoin, if it's Bitrex's Bitcoin, what do you have? And the answer is you have a claim. You have a claim. And so that is an exchange account is analogous to a checking account at a bank. It doesn't matter if it's checking account, savings account, time deposit account, money market mutual fund. This is just up the ladder of different

ways of stacking cash basically through the system and using that cash to buy certain things. But you have a claim. You have a claim. So all those money supplies, M1, M2, M3, there's M4 in certain systems. There's L as well in other systems. Korea still uses L, which is an old American term for like the broadest of money. Like it includes like foreign exchange won in that in that example. Anyway, the euro dollars would be the U.S. example of, you know, dollars that are held abroad.

I don't want to get too down in the weeds. The clear idea there is the thing that you see, the thing that you think you have as a Bitcoin that you own. Really, you don't. You own a claim. As you said, you are a creditor to the bank. They are a debtor to you. If you want to even get more technical, you can just say that you lent them money. You lent them your hard-earned assets.

You put them on the exchange. You might have bought some Bitcoin. Great. They credited your account in Bitcoin. but until you withdraw that Bitcoin from the exchange, put it on your own node, and you put it in your own wallet with your own keys and you validate on your own node, you are not holding on-chain Bitcoin. You're not holding Bitcoin as basic money.

You're just holding a claim. So again, there's the reason. M1, M2, and 3, all claims. And basic money, Bitcoin is not a claim. as an asset on your personal balance sheet. If you hold Bitcoin, if you hold gold personally, you know, on your person or buried in your yard or whatever. That's like that that is on your person.

And the same is with bank reserves for banks and, you know, notes and whatever in your wallet. So it's a question of asset versus versus the liability for each institution. So there are, however, I appreciate this analogy because Bitcoiners were under, they understand this concept. I mean, most bank pointers do for sure. The notion of intermediation, transforming, and the ownership relationship that, you know, is involved there. But I guess the key difference, there's two key differences, I would say. So crypto exchanges, in theory, are fully reserved.

And obviously in practice, they're not always fully reserved. And I'm not, I'm excluding, like, bank style entities like blockfine. and NXO and so on. But so crypto exchanges are, I guess, meant to behave like narrow banks, where in theory, they sort of have assets that correspond to all this IOUs, whereas, you know, banks themselves are not fully reserved by any means. But then the compensation you get for that is that there's sort of a guarantee from the government that they'll make you whole or make you mostly whole.

if the bank fails. So there's still like distinctions between the two systems. Yes. And I would say regarding the Fiat system, right, regarding a bank, checking account, whatever. The reason, let's not forget the reason that we're doing this is it's not necessarily to take risk, although there is more risk in a financial system than a narrow bank system, as you said, which for all intents of purposes, let's just, let's call it like a bailment bank as well. Like let's just say you have gold, stored gold.

Gold is definitely there. If you're a hard money, gold person and you want to do that, right? And this is a debate between a lot of Austrian free market people too. It's like fraction reserves or 100% reserves. You know, Fernando, and I always say like it's the wrong name. Like you can easily fall into quicksand with these arguments about reserves or not. Like it's a measure of degree. There's not nothing on the other side of the balance sheet when you deposit gold.

Like with gold, it's definitely just there. That's it. If it's like a bailment account. And if you want that, by the way, you've got to go to a place like gold money, which is a Jim Turk's wonderful company. Unfortunately, Peter Schiff is an investor as well. But if you want gold and you want to know that it's audited, secured, they audit it twice a quarter. It's secured. It's allocated to your own name.

It's in a special cage within a cage of a vault that's gold, money, gold allocated to you to the gram. You can do that, but you've got to pay. Imagine what you've got to do to make that happen. You've got to pay. So you got a fee. They audit it twice a quarter, maybe more now even. And you can do things like trade some gold with other people, send gold to other people and buy gold or silver back to Fiat if you want. Fine. That's great. That's a great way to do it. That's a very specific like narrow banks aren't even really allowed in practice, unfortunately, but or even practice. So like let's just call that a narrow bank, a bailment. It's like where basically your money is fully reserved by something that you know, whatever. it is. The banking system has never worked that way, even though, even with gold, it didn't work that way. Let's just say that. And it's not a immoral crime or it's something that people didn't understand or realized. It just never was like that way in history. Again, you can very quickly get into a lot of

debates about what is a proper reserve or not, but it's not that there's, you know, the assets will always equal the liabilities. So if you, let's take it back very simple to if you take it back to a checking account. If you deposit cash, base money cash into the bank, again, same thing. That cash now belongs to the bank. It doesn't belong to you. You no longer have the cash. No matter how much you think morally, legally, economically, it should be that way.

You do not have the cash anymore. The bank has it. But you have a derivative of this cash in an interesting way that helps you to facilitate your own commerce, your own life in the future. So old school America, you know, you could draw checks on this account. You could pay with checks. Then eventually we had ATMs. We could withdraw basic money at certain times and places but didn't always need on your person. And now, of course, Internet banking services as well.

But again, Bitcoin made it all just vaporized through any of that because you know that you don't have the Bitcoin when it's on the exchange. Now, to your second point about, or maybe it's your first point, I don't know, that the exchanges are always theoretically 100% backed. I would even be careful with that language because I don't. I mean, I've read some terms, some say like we have full backing, we have your funds. but um and i don't even think at some some extent it matters right i mean bitcoiners are going to know and people are going to know that if an event like mt gox occurs that was not fully backed right and true it can be hacked and stolen uh maybe that was more the case with that cryptopia maybe but um it can be hacked and stolen usually an inside job whatever uh but we have mtogs we have bitfinex

in an interesting way, which were covered in an interesting way. I think, I really do think this is, we are seeing the market in action, no matter how much a Bitcoiner, and I would include myself in this like, I really do want to have like this sound, sovereign, simple banking system. I can see that the explosion of innovation that happens out, you know, well beyond anything a regulator can do every day just continues. It just, it can't keep up. And if they do keep up eventually, that will, they will hinder it, unfortunately.

There's no reason to think that a crypto exchange necessarily needs to hold 100% Bitcoin backing. They could swap some of that Bitcoin for another interest-bearing asset, like just a bond, for example, a bond and a corporate bond of another crypto company, if they thought that that would be safe enough and pay enough of a dividend, and that they could take. a spread, even give you an interest spread. Defi is a whole other interesting thing, but I think rather than, yeah, go too far, like, let's still keep it to the differences here between like, what are these broader money

supplies versus what is based money? And yeah, I just say that. Like, I'm happy to answer any more questions regarding that. Well, I do find it, this is one of my favorite topics, though. I feel like George Selgin has spent his entire career trying to convince people that, you know, fractional reserve banking isn't illegitimate.

And, you know, in fact that we never really had this idealized utopia of full reserve banking. And people that are nostalgic for that are actually nostalgic for historical epic, which never existed. Yeah. Well, you've written about that. What do you think? What are your latest thoughts? Because I know you've written about a full reserve Bitcoin bank.

I agree. I agree. I mean, I think full reserve banks are great, but I also think there's a market, if you let the market clear, you would find that the average reserve ratio would be less than one. 1%. Because people want interest-bearing deposits. They want that we know. I mean, we've seen the explosion of crypto banking, true crypto banking, not full reserve. Yeah, you said less than one. I was already thinking where you might have been going to. But yeah, it's true. Historical, although we didn't have many, but historical precedents of systems that did not have a central bank, the reserve ratio not only was less than one, and sometimes it was less

than 1%. And it didn't fail. It didn't fail. People didn't want the coins. They're happy with depositing the bullion. They're happy accepting interest on the bullion that they deposited. And it went on. And a favorite example I have.

And it was stable. Generally, yeah. I mean, like, here's an example of a failure that didn't take down the system, but it was a major failure and major people suffered, but they suffered for a good reason, was in your home British Isles, you know, in Scotland, Scottish free banking system. And it's the town of ire.

Is that right? I'm pronouncing that correctly. Iyer. Yeah. Air. Eyre. Ayre. AYR.

Either way. AYR. So the Iyer Bank. that was late 1700s. This was when the Scottish free banking system was taking off. Adam Smith was writing about this as well, by the way, about the many economic, like amazing economic growth that happened as a result of this banking system.

The Iyer Bank basically decided to cheat. They decided to cheat. Now remember, we're under a gold-backed pound sterling at this time. So there is a gold, and there's silver involved too, but it was a gold sterling at that time. The, the IRA bank decided to cheat a little bit, decided to make some investments. And in that day and age, you know, you have some of your investments are reflected in the notes that start to pass around through your suppliers, through your depositors. because the bank itself is not regulated by any central bank. So they cleared with their own notes all the time constantly.

And if some bank really wanted to settle, again, back to the basic money point, if they really wanted to settle in gold, they could do it. And the IRB bank just exploded the amount of fiduciary media, that is the bank notes that circulated in that region of IR under their name, right? and other banks start to pick up these notes. Other banks start to realize, hey, there's a lot of iron bank notes floating around here. I'm not really quite sure that there's economic activity underlying what they say they're doing.

They might be pocketing some profits, some senior age, whatever. Let's go claim the gold. And that's what they did. That's what they did. Compediadi Manx claimed on the iron bank and just brought it to its knees immediately. I'm embellishing, of course. But brought it down and didn't bring down the Scottish banking system at all. That is free market redemption in action.

And we've had the same thing in some way or another with Bitcoin. I mean, I know it's not an exact comparison, but that's what's happening. You know, when there's too many amount empty, empty, I always like to say empty-ox accounts, people get suspicious, right? People get suspicious. And so again, I'm not saying, like I'm a fan of gambling or taking unnecessary risk. I mean, I'm in Bitcoin, obviously, because I feel quite the opposite. And my conclusion, by the way, of all this is the same as yours and many other people,

why we're in Bitcoin. Like, don't get me wrong. My conclusion is very much the same as anyone else's who respects the innovation of Bitcoin for the soundness and the hardness and the, you know, the robustness that it offers. It's just that the way that a system can scale, one way today is via lightning,

we can talk about that. But another way is the way that it's always scaled from days of yours, as someone like Seljean would say, like literally back to the old free banking systems. You just, you have to, layer it up. You have claims. You have claims on claims. These things are investments in the community. They're investments. It's how you pay people more efficiently. You don't want to always plunk down a little bit of gold or lug gold from bank to bank. It was much more efficient to do it

via a ledger entry and via a note. And that still holds true to this day. I love that you brought up the freaking airshire bank example that you, aside from like Larry White and George Selgin, you might be the only other person that I've met that is familiar with that example. But it's really great because it shows the competitive redemption of notes. And we have like the notion of proof of keys or even people like me agitating about proof reserves. It's the same concept, really. it's but the difference is that bitcoin is this innately redeemable commodity where you can take physical delivery without too much difficulty whereas gold is hard to redeem it's sort of really annoying to redeem absolutely absolutely and to add to that it's a beauty it's lovely it's amazing

and to be clear i agree with you that we should try to do proof of reserves like um you tell me if there's any developments there but we should definitely do it you know i know i know Blockstream has technology to help exchanges with this. Like, we should definitely do it. If you can, if you can transparently, quickly, efficiently post your reserves and show that you have full reserves of, let's say, at least the Bitcoin that you hold on deposit, great. I'm just not necessarily sure that that's the end all be all.

And keep in mind, for those depositors that accept a, let's say, exchange posted proof of reserve, end of day sort of thing, again, a Bitcoin are worth their salt will know that that's not the same thing as holding basic money. It's close, it's very close, but it is not the same thing. It is different. You've got a claim still in that case versus if you held the coins with your own keys, validated on your own note, that's an asset. But in the other way, it's your asset, but you have a counterparty. You have a counterparty's liability. You don't have that if you just hold Bitcoin on your own key. So again, that's furthering the analogy. Yeah, proof of reserve is just a way to create better assurances among depositors, but it doesn't, it's in no way tantamount to actually

challenging the institution and demanding redemption. Yeah. Or like I said, that, or challenging the on the other way, like you would even want to do that, challenging the, the, the, the, what's the word challenging the hardness of what you see on a bitcoin node every 10 minutes right yeah it's not yeah i mean it it yeah it's a much weaker assurance um and ultimately it's not a purely cryptographic exercise it's an accounting exercise because you have to account for the liabilities which is um is is is is not something that you can cryptographically prove Although, you know, there's like developments there. We don't have to get into that.

I want to just briefly return to the Air Bank because it's just such a fun episode. It tickles me to no end. So here's a fun. Here's some fun like little tidbits about that. So banks in Scotland at that time were full liability. They weren't limited liability for the creditors. Or for the investors, for the shareholders.

demolished. As you know, the shareholders were they were forced to make whole the depositors to the best of their ability. Yeah. And so in order to do that, and this is why you probably didn't want to start a thing. They lost their land. Yeah. These people would have been like barons, you know. I mean, yes, they were. They were. Because those were the kind of people that started banks back in in those days. I mean, they would have been. But today, I mean, like they would, you know, I'm sure they would have some direct line of credit with the crown or something to get some, you know. I mean, these people, they lost an unbelievable amount of that. Like they lost at all.

They had to sell their assets in order to make the shareholders or the creditors in the airbank whole. And I don't know if they fully made them whole. I think they might have. Probably not. The stat I heard is that something like 60% of the land in Ayrshire in that province changed hands after. the collapse of the air bank. Wow. Unbelievable. Yeah. And I mean, that's the market at work. That's the market at work right there. That's unbelievable. And of course, we have different systems today with bankruptcy and it's hard to bring back such a pure system as that. But that's incredible. I don't know.

What do you think about that? Like we ever going back to zero to zero limited liability, to full liability. Talk about bearing risk. Yeah. I mean, you know, abolish FDIC and Abolish limited liability. Yeah. That's hardcore. That is hardcore. And that's symmetrical. Yeah. It's symmetrical. Yeah. It's truly symmetrical. Risks proportional with the reward. Rewards proportionate with the risks. Absolutely.

But there's a lesson. That's why the bankers were so well behaved in Scotland because there was real downside risk and because there was also this threat of other banks doing this competitive redemption. Yeah. And really the threat was a. typically there were not that many bank failures the Arab bank failure was really notable yeah because there were so few in the period and and also uh keep in mind just so people like don't think I'm just learning this from textbooks or whatever like I have some Scottish friends

and I've heard like it is it's a part of the culture like they know I mean obviously Adam Smith himself being Scottish but like they know the history of this stuff and they they appreciate it And I believe it's four banks today, like RBS. Three. Three, which still issue notes with their own emblems. Scottish notes have Clydesdale, Royal Bank of Scotland. I'm missing out the last one. But yeah, Scottish notes are currently still issued by private entities.

Yeah. And of course, they have to be at the behest of, you know, the Bank of England now. But the tradition is still there. And Canada as well is another good system that compares and contrasts, more importantly, very well with the U.S. It contrasts very well with the U.S. during the Great Depression, the central banking problems of the Fed during that time. So Canada's free banking system came later. You know, like post-World war, like mid-1800, sorry, post-Civil War America. But like, you know, mid-1800s to 1935 when they eventually got a central bank, like one of the last year,

last major nations to get one. Their first year, their Great Depression was worse than the U.S. Great Depression. The U.S. had like umpteen thousand, okay, it wasn't that much. It's like, I don't know, 10,000 bank failures. Canada had zero, zero bank failures. And it was worse. It was harder economically, but the risks were different and the banks, depositors kept their money.

And also a lot of other things that U.S. systems were just horrible, even pre-Fed Federal Reserve. of the biggest problem was the U.S. banks could not branch. So you had this archaic, even for those times, like system of discounted notes where you go to New York, you go from New York to Ohio, you try to make a deposit of a New York bank note. You just immediately have to take a haircut of 10, 15, 20 percent or whatever from the face of that gold back dollar or silverback dollar, I guess more. it was blending at that time in biometalism but you didn't have that in Canada

because Canada like there was just a stupid rule like you couldn't branch out of state couldn't branch even out of county in some places in the US so you had all these like just hodgepodge of banks that couldn't layer appropriately whereas in Canada you did not have that you go literally from the west coast to the east coast you have full redeemability with a Canadian bank note

which again there is no central bank here there's no central banks you have full redeemability And still, that's not base money. That's just a banknote supposedly redeemable for gold, but because it's a banking system that's so decentralized and so layered appropriately, it worked very well. It worked very well. But unfortunately, everybody succumbed to the central banking whims.

And by World War II, for sure, we were on a fully fiat. fiat system that was centralized with a central bank and eventually not even redeemable for gold those notes anymore. And that's another thing to say, by the way. We just use these terms a lot, notes, Scottish bank notes, Canadian bank notes, and also the ledger themselves, right? So if you were a big supplier, as I said, or a big bank customer, you had accounts of different banks or you moved from one bank to another, it wasn't hard to do in those free banking systems because the fiduciary media, that is the media that was created by those banks, i.e. the notes and the ledger account,

they transfer very easily. That was fiduciary media back in the gold standard days and silver standard days. Now, there is no convertibility. Most people know since 1971, no convertibility. That's why we've moved, ironically and strangely and weirdly. The base money of the past used to be gold and silver, right? Things literally were redeemable, whether it was a ledger balance or whether it was a bank note.

It literally was redeemable for par ounce of gold, right? It's about 120th of an ounce of gold in the U.S. for a long time. Now that we are since 19701 completely off that system, there is this weird thing where like, okay, well, we don't have gold on the asset side of our central bank balance sheet anymore, but we still have the Fiat banknotes and reserves, which we are as a Fed or as a Canadian central bank monopolizing. what do we call base money?

Well, we're still going to call base money those notes and those Fiat Bank reserves, but there's nothing behind it. There's nothing backing. And to even out the account or to get that money into the system, they buy bonds from their banks in their system on the secondary market.

That's how they get it into this system. So you get this weird thing where gold and silver and Bitcoin, by the way, are assets, if you hold them, they're assets. But base money at the central bank level is a liability, but it is an asset. if you hold it yourself. So it's still an asset, right? The banks hold reserves. People hold notes. It's assets on your own personal balance sheet, but you got that corresponding liability

with the central bank. Therefore, it's a weird type of base money, but that's just this ultimate settlement. That's why you've got to look at the monetary base as ultimate settlement, analogous with an on-chain Bitcoin payment. So we're going to get to your ranking. It's taken us a while to get there. Yeah, but I love this. I'm enjoying the... This is, I mean, there's a reason we talk about free banking. It's because not just because Hal Finney sort of mentions it and his really infamous post on Bitcoin talk,

which is one of the best ever observations written about Bitcoin, I think. But it's also because empirically, these systems were pretty good. And they are an antidote to this claim that you... necessarily need a central bank to backstop financial systems. And perhaps they're not relevant in today's world, but they did function very well for very long periods of time. And they give you good counterfactual because in both Canada and Scotland, you had similar economic conditions across the continent, you know, so they had their southerly neighbor, which was on a more non-free banking standard.

That's true. And in both cases, there was more financial instability and more bank failures in the southern neighbor. Yeah. You know, so during the free banking era in Scotland, England was much more unstable. Yeah. And had more bank failures.

Whereas Scotland had sort of moderate deflation, very few bank failures, a very stable system. And there was no sort of central governance. there. And a beautifully seasonal increase of the money supply. If you look at those charts of their money supplies like these beautiful sawtooth, lower left, upper right, sort of notes outstanding because they would only be required during the harvest and certain things. And then they would just, it's not like, like for those that agitate for central banks today, it's clear examples

you didn't need it. The market could keep it in check. Yeah. People talking about free banking in America as you say, and as George Saldron points out all the time, like that wasn't true free banking. Not at all. It did have the name free banking, unfortunately, but it had nothing to do with it. Because it wasn't unrestricted. Like bank's behavior was very restricted. And the market, as you point out, developed these ugly structures where the notes were not. Yeah. Branching was the biggest issue there. And as well, The U.S. succumbed to the problem of backing, of the sovereign, basically really taking control of the money supply, because in the national banking system, which was started with Lincoln, his famous greenbacks, those had to be backed by law, by law, 100% in federal, northern, which continued to just be the union, you know, northern United States bonds.

So you couldn't, you couldn't be creative. You couldn't use notes that you issued yourself, which, by the way, they did issue them as themselves, but they had to buy bonds with that, which is very analogous to what they typically do today. Central Bank buys bonds, which is what the sovereign typically does. It was never about lender of last resort. This goes back to Selgin and Whites. Also, they have this thing called the fiscal hypothesis of money, which is very true, that anytime the free money supply is monopolized, it's for the sovereign. It's for the state. And that's, again, Just another example of, yes, the fact that United States bank notes post-Civil War had to back their notes, even though there were banks like quote-unquote competitively issuing different types of notes, which as I just said, since that branching wasn't allowed, they were redeemed at discounts often, they had to back northern bonds with those notes, the greenbacks. And that started up.

Unfortunately, in the United States' history, this war. worldwide temptation of the sovereign monopolizing the money supply. That was the start. That was the start of it. And the United States avoided that for so long. They closed down to prior iterations of a central bank. They really avoided it. But they fell into that trap after World War II, unfortunately. But like you said, Canada and Scotland, their northern neighbors did much, much better at the same time. One more thing. In case there are, in case there are People that are relatively educated on this topic as well, listening and are like screaming because we're not talking about some of the other problematic aspects of free banking. We did talk about

the IRBank, I think appropriately so. But a few years after that, like 20 years after, you know, the Napoleonic War started, 20, 30 years after, start of the 1800s. And the UK was invaded, and the UK suspended species. It suspended redemption of specie at par with their notes. And they did that to pay for the war, to issue more bonds, as is always done with the sovereign and its money supply during war. So Scotland had a choice. They could have kept on, but they were so intertwined with the system. They chose to not do that, and it's true that during the Napoleonic wars, although they went back after, but it's true during the Napoleonic Wars, free banking was on standby, on hold in Scotland. But again, there is no system that is,

just, you know, amazing of this idea like we're talking about. Other than, I believe, as we've alluded to, like, modern Bitcoin banking systems. I mean, they're not regulated yet. I mean, crypto exchanges. They're not regulated yet. They're taking deposits. They're managing money. And it's great.

It's really, really great. I hope they can do this very. Cracken's got a banking license now. Ironically, they got their banking license the same week that the Bitfinex shareholders came under injunction or whatever. affidavits, I guess it was like a week after. Very strange mixed signals from different members of the banking system at large, the financial system at large.

But we are in a free banking system at the moment. So pay attention like why certain things happen. Like it doesn't not happen for, you know, for good reasons. Yeah. And I want to ask you your view of the prospects for the Finian ideal of the Bitcoin free banking system. Like clearly Bitcoin, clearly a lot of depositors haven't realized that exchanges are Bitcoin banks. Yeah. We were talking more, or actually just before the show about the latest numbers you thought, there's a wide flux of data here, which is fine. I mean, no reason that it has to be

perfect or the market's going to do as good as it can. But it's possible by some estimates that 20% of Bitcoins are lost. 20% are held literally by private individuals or very secure private custodians managing their own keys or someone else's keys close to them. And then possibly, possibly fully 60% of all Bitcoin outstanding is in some form of the Bitcoin exchange, a Bitcoin bank. It's possible right now. Yeah, that's the upper bound estimate.

The upper bound. Yeah. Yeah, yeah. So it's probably, you know, maybe not be that high. So I would, I guess, like to say just again to let me just put my two cents on how I see that number formed relative to the rest of what goes on in crypto banking land or in crypto exchange land is I don't, I think those are interesting numbers, but what we can be clear on is that the other. upper bound of 18.6 million at the moment, Bitcoin's outstanding. No matter how many are lost, no matter how many are in exchanges, that is, that literally is the base that if you hold it, if you can redeem it, it's just it. As everybody knows, I'm not saying anything new. Like, you cannot mint, no crypto exchange can mint any more Bitcoin. But similarly, similarly,

no commercial bank can mint any more base money. That is the sole. discretion of the central bank. So central bank can mint dollars, you know, dollars euros yen in paper form or in reserve form, digital asset form for a bank. That's fine. That's fine. But note that we have barely scratched the surface. Like if we're still talking about like ratios of exchanges that hold, let's say of a ratio of one, how much Bitcoin, right? And it's like maybe 0.5.6 of all the Bitcoin in the world. That's fine. You know, that's what, NYDig is doing, you know, Ross Stevens and micro strategy and all those people. They're holding Bitcoin in certain ways, whatever.

Bitgo as well. BitGo as well. Bitcoin based custody. All the anchorage, all the, all the quote unquote custodians, those are in theory doing that in sort of a bailment model, but maybe not explicitly in a legal accounting way like that. Yeah. No, but that's okay. It's all fine.

It's one way to hold it. I just want to be clear. like that is actually still a level up than the Bitcoin itself, right? Because the Bitcoin itself is on, it's behind the keys of whoever holds it. So that's the interesting thing about Bitcoin. And then the other side, which I think is very positive for Bitcoin banking, Bitcoin banking and crypto banking, if you want to say it that way, is, you know, we're not at all anywhere close to developing out this structure of M's in the crypto banking world. Like, don't forget, there are tons of euros and yen and dollars and stable coins, which is something like a euro dollar or a money market mutual fund type thing,

which it would be classified under M3. Like, there's tons of assets denominated in regular fiat that these banking systems, these crypto banking systems are managing. And I think so far, generally effectively, certainly there have been failures, but generally effectively, some exchanges are paying interest now. They call it like staking, which is kind of a funny thing.

But some exchanges are paying interest. That means that that money is at work. It's invested somewhere. So my point is, it's all good. Like it's, remember, anytime it's in an exchange, you've got a claim on it. It's your asset, but it's still someone else's liability. It's the exchange's liability.

Same thing with the commercial bank. It's anytime you've got to change. checking account. It's your asset, but it's the bank's liability. The only time you fully get back to that base money form, and I'm not saying like you have to, you don't, or Michael Saylor's wrong to say that he holds Bitcoin, but if it's mostly in NYDig or whatever, I'm not saying any of that. I'm just saying if you really want to get back to the full base money form of Bitcoin, you withdraw it and you hold it on your, you hold your own keys and you validate on your note. and that is a very interesting, like, stark contrast to golden silver, for one, because that system is basically gone.

I mean, you can hold it, but you can't, like, very easily move it around or whatnot, withdraw, redeem, as we all know. And then with Fiat, the big challenge there is the base is completely monopolized, controlled by these institutions that are called central banks. And maybe there we can pivot back because we've tracked the top 30 floating currencies in the world in this. Yes. Sorry, I get on these tangents, man. No, so this, this is great. So, you know, it's just so telling. It's like very simple question, like, where does Bitcoin rank in terms of sovereign currencies and base monies? And it took us an hour to get there. But. Because it's not the main thing, right? The main thing is understanding. And hopefully we've chipped away at some of the little bit. It's understanding, like, where it fits on the balance sheet. You know, if it's your asset, do you, are you aware? that it's someone else's liability. If it's your asset, how are you securing it?

So, and so forth. So, yeah. Basically, yeah, go ahead. The punchline is, though, that Bitcoin is, what is it, number seven right now? Number six, if you don't count gold. Number six. I'm count, oh, I'm counting gold. Count gold.

Count gold. Go for it. Count gold. Number seven. And it's actually above Switzerland, which is notable, and above silver as well. Yeah. So silver just happened basically in December. first time ever of available silver. I'm discounting any silver that's like, you know,

I didn't do that in the beginning, but it didn't matter because Bitcoin wasn't close to that amount. It's probably like $1.3 trillion dollars of silver approximately has been mined throughout all humanity, like 54 billion ounces. Now, let's roughly take out half of that to say silver that's not lost industry, is in jewelry, bullion,

very small percentage in bullion, but mostly jewelry, silverware, even. Anyway, All that silver, you mark to market at market price. You're basically, you know, a little bit less than $700 billion. Bitcoin is, as we know, like close to $900 billion at the moment. So it passed silver in December, in December. And as you just said, for the first time ever, for the first time ever, it has passed the Swiss franc.

Literally of this month. It actually hasn't, I put it there in that ranking of one of the, the progressions of when it passed each monetary base, each currency. It technically hasn't passed it. Let's see, because it's as of month end, right? It's as of close. Right. So we'll see what happens.

But yeah, first time. Be a nail bider. Yeah. Very exciting for those geeks of this stuff. But yeah, it's very exciting that it has passed the Swissy for the first time ever as of this month. Hopefully it'll close above it. And then you only have of gold, of course, as you mentioned, which is always,

been a base money in some way, shape or form, even today, like central banks hold some gold. And you only have five. You have one more mid-major, which is the pound, the formerly great British pound sterling, as I like to say. And then you got after that, you got the top four. You got the yen, euro, yuan, and the dollar. So Bitcoin has done it. That's really it. Yeah, there is nothing else. So like, don't look, don't look at like M3 or something. You know, Don't look at M1, like a chart of Eurozone M1. Like, it has nothing to do with it. First of all, that's not a global chart.

Second of all, as we've talked about ad nauseum, those are just balances. They're claims with banks. That's not the actual money. It's not the actual money. You can trade claims. You can settle in certain level with claims. Pay someone in Venmo, but that's not the money.

That's not the monetary base. that's why we've done it this way and ranked all these out. And these big for EU, Japan, US, China, they're all in the 5 to 6 trillion range in terms of the base money. Yeah, USD equivalent, correct? Yeah, Bitcoin's closing in on one trillion. I guess we can leave aside lost coins for now. Yeah, you actually texted me about that a while back.

I'm not using your wonderful free float metric from coin metrics. I don't dispute the legitimacy of using it. It would probably make sense to use that, which would be a less bombastic number. A little bit lower, right? So, yeah, no, it's okay. It doesn't make a huge difference. Yeah. What would you?

Well, just to say, I don't use it actually because there's no free float of these base monies. of like there's no there's no distinction of the fiat that way it's just the it's just the number it's a straight up unamortized straight up number and then i am it is kind of analogous to gold and silver so there is some merit because i do try to the best i can and i get most of the gold data with some cross-checking from a guy named nick laird very nice excellent gold professional for years and years um i am discounting this of about less than 15 percent of gold and about 15 percent of gold and about 50% of silver, I am discounting from the total to get sort of an available supply. I could do that for Bitcoin, but no one else does for that metric.

So I'm not. Yeah. I'm not. So in terms of parity with the euro, which is currently the largest quantity of base money. Yep. And US. In dollar terms. Right.

Right. Yeah. What would the unit price for Bitcoin be to reach that final hurdle? Right, that would be, it was on the first tweet and is on the last tweet, but it would be around $328,000 per coin at current Bitcoin emissions, current Bitcoin issuance, current Bitcoin emissions. $328,000 per coin would match the European. Well, we're not going to celebrate until we get there. 50,000 is just a number.

And remember, that's just one, right? So the yen is the same, basically, $321,000, and then the dollar and the yuan, which I don't exactly believe the Chinese numbers at all. They are very mysterious with the way that they post a very simple balance sheet every month. Whatever, who knows. But yeah, those are a little bit less in terms of dollar amounts. But in total, of all the $20 currencies that I am talking about, the top floating, 30 currencies in the world is 27 trillion dollars is the total amount. And if you would match all of that, which again, Bitcoin's got a lot to ride there to get to that would be about a million

five per coin. They'll basically be like total absorption of Fiat, but also Fiat keeping its value. So who knows? You know, Fiat's going to grow and keep printing during these times and Bitcoin's going to grow. So it'd be very interesting just to see it develop. Yeah. And also the, you're standardizing these things in dollar terms. But then, of course, it's Wittgenstein's ruler. You know, the value of the dollar is also changing based on the amount that the Fed produces and so on. Completely agree.

Money is not a measuring stick. It only can be compared ordinarily. Yeah, unfortunately. It never really was, though. It can only be compared ordinarily with another asset. So, yes, people in Japan might look at this differently. they might like to see this in yen or whatever, but money is actually not a measuring stick. One of the surprising things, and we have to hop here in a second, unfortunately, to me is the fact that the dollar is this dominant medium of settlement globally, and it's the dominant foreign exchange asset.

It's a dominant thing that's held by other central banks for the most part, sort of 40 to 60 percent. Yeah. Depending on what metric you're using. but in the base money chart, it's actually not even the number one. Yeah. And that's actually, we should make that point again. So this goes back still to the layered monetary system. Again, this is the base.

This is, this is, you can only find these numbers on the balance sheet of each central bank. It's very clear. It's also another reason why it's good metric because it's literally called the printing press of each nation. It, you know, it's solely sole discretion, the monopolistic control of the central bank. that is what has happened in our financial system since 1971. That is the basic money in each nation's system. The moment you start speaking of FX reserves that certain central banks have, or even something like oil being priced in dollars,

or gold itself being priced in dollars, or euro dollars, which we're not going to have time to flesh this out on this show, but basically foreign-based dollar accounts. Think like Panama Papers or Paradise Papers. Think stuff like that. Caribbean dollars. Yeah. I have no dispute.

I'm not trying to say to anyone in the world that dollar-based accounts are not the dominant. No doubt dominant. 60% is maybe even conservative. Denomination of contracts and derivatives and contracts for difference and checking accounts in the world. No doubt. Everybody should understand that's, again, that's not what I'm saying. What I'm saying is those, all of those things are claims. Everything we just talked about is a claim.

This is not. This is the money. This is the basic unit of each nation's financial system. And don't, you know, don't be disappointed. There are famous people out there who, relatively famous handles and memes that talk about $100 trillion or whatnot. And it's probably true that U.S. dollar denominated claims are well over 100 trillion.

That's not what this is, though. Something that's analogous to Bitcoin, on-chain settlement, settling with a bar of gold, settling with a bar of silver. That's basic money. There is a money supply for that. It's called the Global Monetary Base, which we rank here. And we will expand this set, by the way, hopefully very soon to 50 currencies. Well, Matt, your clarity of reasoning and your commitment to

decision is truly, truly commendable. I use this resource a lot. I love it. So thank you for doing this and putting so much effort into it and wrangling these obscure central bank data sets. I think I have some conspiracies there about them, not making this data freely available. Similar, as I said at the beginning, yes. Interesting that you can't find a global monetary base like I've compiled. Yes. No, sunlight is the best. disinfectant. That's all we can do is shed light on these things. Yes, hopefully we can have you back on. Maybe we talk about Euro dollars or maybe when we cross some more of these key thresholds. Yeah. We'll have you back on. In the meantime, tell us where to find you. Where shall we look to find

your analysis? Yeah. So thanks again, Nick. Always a pleasure. And cryptovoices.com is the website for everything we've been talking about, Cryptovoices.com slash base money. I have a podcast as well. Fernando doesn't join me as much, more of a color commentator these days, but still going on with some economic issues there. It's also some political issues, so the podcast. And again, I would just say,

like, if you really want to dig in, probably the Twitter threads are actually, I just, that's where I decided to put most of the information. And then hopefully, I keep saying this for my, my dear, dear listeners, there are improvements coming, hopefully more interactive charts and ways you can subscribe and see more of this in more detail. So that's coming.

It's coming. Well, yes, and for the listeners of OTB, I will say that Matt's podcast is really, really outstanding. And he's had some of these great people whose work we've referenced on this episode on the show. So it's one of my favorites. So highly recommended. Thanks, Nick. Appreciate it. Thanks a lot.

They're for getting up early in the morning here. And hope you have a good one. Yeah, I want to see you at the next Honey Badger. So let's make that happen. Yeah. I don't know when it will be. if it will be this year, but if it is, let's definitely make it happen.

All right. Thanks again, man. This is great. Let's do it again soon. All right. Sounds great. Take care, man.