TFTC: A Bitcoin Podcast - #157: Ben Prentice + Heavily Armed Clown

Episode Date: May 5, 2020

Join Marty as he sits down with Ben Prentice and Heavily Armed Clown to discuss: - WTF happened in 1971?! Follow Ben on Twitter Follow Heavily Armed Clown on Twitter Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse you download the app.

What is up, freaks? It's your boy Marty Bent here to introduce this episode of Tales from the Crypt. I sat down with Mr. Cool B, Ben Prentiss, and Colin from the Bitcoin Echo Chambers podcast to talk about the website they created, WTFHappenedIn1971.com. What the fuck happened in 1971? We talk about the trends that have been happening in America, particularly around productivity, wages, and the gap in inequality that has been growing significantly since something happened in 1971. We talk about Bitcoin as a revolutionary act and very much in line with what the founding fathers of the United States had in mind when they wrote the Declaration of Independence and constructed our Constitution.

I think you guys are really going to like this one. And one note, I think I misrepresented Jeff Booth's stance on UBI in this after having spoke with him yesterday. So please disregard me misstating his. Don't disregard it. Just know that I think I may have misstated his stance on UBI. And you'll learn more about that early next week when I post that episode. This episode of Tales from the Crypt was brought to you by our good friends

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you've had a dynamic where money's become freer than free If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. You probably should be.

What is up, freaks? Welcome back to Tales from the Crypt. It's your boy Marty Bent here for the second recording of this Wednesday. Second of three. Got three recordings today, boys. It's a busy day here at TFTC, but a very exciting day. Hitting on three different topics, and this topic is something that I am infinitely fascinated by. It's something infinitely fascinated is my phrase of the day, by the way.

It is really what drove me to Bitcoin. It's a strong economics topic, which is what I am most interested in when it comes to Bitcoin and why I think it's important. We're going to dive into the what the fuck happened in 1971 site. WTF happened in 1971. I'm sitting down with the co-founders of the site, Ben Prentice and Colin, a.k.a. Heavily Armed Clown from the Bitcoin Echo Chamber podcast. What's up, boys?

What's up? What's up, freaks? glad to be here glad to finally uh get this in the books i mean ben and i met in person uh about probably about this time last year um in new york city and uh heavily armed clown i'm just gonna call you colin sure yeah it's easy colin uh i was on your podcast what two years ago you were actually one of my first guests actually i was like some rando and i was just i just hit you up and you were like yeah sure i'll come on yeah i uh i remember your dog on the chew toy in the background yeah it's something you were worried about yeah good stuff

uh yeah no but i mean this is a site i've been talking about and sharing a lot uh on this podcast in the newsletter and just in general conversations i just tell people go to www.wtf happened in 1971 uh to to sort of get an idea of why i'm into bitcoin and why i think it's important so i'm not going to describe the site you guys are the ones who uh built it so let's get into why you build it and what's going on on the site yeah just very briefly um i was just doing research on on bitcoin and trying to understand you know why bitcoin would be better money and And, you know, we all probably, the freaks out there know that the ending of the quasi-gold standard we had from 1944 to 1971 was executed by Richard Nixon. Richard effing Nixon, I like to say.

I'm not a crook. Richard Nixon just one day came out and said, I'm just going to end the convertibility temporarily. Of course, that was, you know, over 50 years ago, and he hasn't ended it. But in your research, you probably find yourself on Wikipedia pages for Bretton Woods and Nixon Shock, and you'll see some of these same charts. And that's actually how I got onto this data. And I started just kind of collecting them, being like, oh, that's pretty weird that all these charts just start going absolutely crazy in 1971. And I collected enough of them that, you know, Colin and I were just joking one day. We were like, you know, what happened in 1971, dude, with the WTF?

And he was like, dude, we should throw this up on a website. and we did and that's that's the story it's just that we just found this data and it's like i think it's pretty alarming i think we started as a for like our own selfish purposes too because we were both kind of like man wouldn't it be great if there was just one place where you could go and like look at all this data because it's all over the place like there wasn't really anywhere that ben and i were aware of where you could find a collection of data that just showed the anomalies that happened after 1971 um and and so I was kind of just like well let's just like we should like compile a list you know like get all this in one place and the meme kind of just evolved out of

that and we didn't I don't think Ben and I expected you know that website already has like 100,000 views I don't think Ben and I expected that many people to be interested in it you know to be to be quite honest but I think the meme really lands with people I mean you see it getting shared all over the internet in places you would never expect people to be talking about um the the breakdown of the gold standard where's the weirdest place you guys have seen it popped up like bernie stan like are bernie standards for president on reddit or like like a lot of like leftist forums on the internet um for some like i i didn't know this but like they're critical of the monetary system too uh they they would rather you know and i don't know if that's like a

cognitive dissonance thing like if they don't really understand um that that it really just makes socialism more impractical but um we've gotten a lot of we've gotten a lot of hits from like far leftist like socialist slash communist communities yeah that's one thing that's always perplexed me or not perplexed me always pissed me off is that You have polarized people in politics, left versus right, and blue team versus red team, and they fight over these policies that really just strike at the branches of the problem, where the money is the root of the problem. And I don't think politics would be as polarized if people were focused on the root of the problem, which is we fucked up the money, and we fucked it up really bad in 1971, particularly. I absolutely agree. One of the things I often talk about in talking about Bitcoin is that we run around trying to put out all these fires, you know, through politics. And, you know, if you look at this data on this website, you see all these, these are the fires, right? And that we're like, oh, well, you know, wages aren't rising with GDP. So let's increase the minimum wage or, you know, income inequality is bad. So let's tax the rich and give it to the poor. But those are the fires, right? Those aren't what started the fire. What started the fire is the broken monetary system. And it seems like so much of our politics is running around chasing, putting band-aids on things when it's clear that this bipartisan issue that everybody who cares to do the research can see that the money is broken.

And yet nobody's talking about fixing the money except our, you know, the freaks and the rest of the Bitcoin community. It's just mind blowing to me. You can even see Ray Dalio, you know, talk about that, you know, the system is broken and that there's a paradigm shift coming. And yet, you know, somebody like him, it seems like it would be so obvious that he would comment on these things. but I don't know why it escapes that mainstream narrative so it's just so easily it's it's just it's just hidden it and uh another interesting thing too is like we we've kind of cherry-picked the data on the website like obviously we're we're putting stuff on there that is intentionally dramatic um around the time period that we're that we're memeing right because that's the point

we want people to look at the website with no you know prior knowledge or understandings of finance or economics and see the data and just say what the fuck um there's tons of data that like ben and i would love to put on there and this is a constant crisis that we're in like go back and and look at um the annualized cost of a four-year undergraduate degree and if you really like dig into the data you'll see that it has gone exponential but it didn't really go exponential till the 80s and there are almost always like second order effects to these types of things. And some you saw happen almost immediately after 1971. And then for some, there's like lag time. It waited for policy to catch up. It waited for lending models to catch

up. And I would love to put, you know, the annualized cost of a four-year undergraduate degree on the site, but we don't want to hurt the meme. That's kind of what, because the meme has been like the biggest strength. And if we can get people who had no interest in these things, just simply looking at the numbers, just simply asking the question, what the fuck happened in 1971 like that is that makes been a nice day i mean that's everything that we've ever wanted to do is just get more people to care about this thing that we're obsessed with which is you know the money yeah and it's funny you bring up college tuition uh and how that started hyperinflating and that's actually something i've been looking into more recently and i would attribute that more to

mmt like uh qualities where you have fast select programs popping up in the 80s like you described And when the government started giving out grants and letting people get free loans or not free loans, but easily accessible loans subsidized for these college degrees, subsidized, no default loans. Yeah, that's that's when you start to see the really big spike in college tuition prices. And this is fascinating to me as a subject, college tuition alone, because it trickles down to like the high school, the high school area, too. I was lucky enough to go to a private high school. When I started, it was like $12,000. When I graduated, it was $17,000. So within four years when I went there, it increased almost 50%.

And then now it's like $24,000. So it's 100% of where I started 14 years ago. So you have 100% inflation there over, let's say, 15 years. um and yet like we were discussing before we hit record none of this shows up in the cpi or anything the things that are hyper inflating the most are are are not really accounted for in the metrics that attempt to track inflation and it's just honestly like evil to a certain point because you tell people like you need to go to school you need to get a college education if you want to be successful and they're really forcing people into an asset it's not an asset class but into

into schooling that is becoming increasingly more unattainable for your average American especially in the modern day when we have this paradigm where anything you really need to learn you can learn for free on the internet and there's this accreditation chasing that our society does when really a lot of that i feel like is is not as relevant in the in this modern day you know yeah and more important so i've been diving more into this and let me i'd be very much interested to get your thoughts on this because we have mmt becoming very popular in the mainstream now uh joe weisenthal's of the world really pumping it and saying that it's the future and i even have some bitcoin are saying it's inevitable it's coming and they all argue

that'll never leave lead to hyperinflation but so like at my right and saying that maybe college education is the first foray in the mmt just hasn't been talked about in that way over the last few decades where you have the government basically giving out money for free to something they deem as a necessity and we have seen i would argue like close to hyperinflation in that realm and And again, it trickles down to the high school and now even grade school and preschool where you say, hey, you offer the loans to the colleges and the institutions are like, all right, if the government is going to be giving, they don't offer it to the colleges, they offer it to the students, excuse me. And the universities go, if they're going to give it to the students, we can jack our prices up because we know they're going to get that money. And then you go down a layer to high school and you're like, hey, if you get your college degree, it's going to be worth this much. So preparing for that is worth this much now, and you just have a terrible cascading trickle-down effect that really increases, again, one of the things that is considered a cornerstone of American life and a necessity for most.

I would agree with everything you said there, but I try to take it a step farther and say that, you know, will MMT lead to hyperinflation? Well, you know, a lot of people asked the question and even made the claim that 2008 style QE was going to lead to hyperinflation. And we all found that wasn't the case. But, you know, inflation as defined by the CPI never really increased at all in 2008. And I think this is a really important concept to understand because especially if you're looking at the site and you see, you know, the massive CPI rise that happened after 1971, we saw a lot of consumer price inflation. But obviously, as you mentioned many times on the show before, the way that you define the CPI basket has a lot of outcome on what that number looks like. And they've redefined that, I think, once in the 1980s and then once again in the 1990s. But regardless of that, regardless of that manipulation of the CPI metric, I think the worst atrocities that have been thrust upon our society from this break in the monetary paradigm that happened in 1971 has come through the use of stocks and bonds as money and real estate as money by the wealthiest class. because see you know as safe dean will talk about you know you can't insulate yourself from the

consequences of others holding money that's harder than yours and the money that's held by the wealthy is not us dollars it's stocks and real estate and bonds and since 2008 um you know massive amounts of money have been dumped on this and we're seeing that again now today we all got our you know our 1200 checks but you know anybody that did the math out and realized how much money was printed which by the way we you know you're talking about increasing 15 or 50 percent for your college and you know a few year time we just increased the monetary supply them one monetary supply 50 and inside of like a month and and a lot of that money is still going to get dumped on stock market i mean look we're we're in the worst economic crisis that maybe this world has ever

seen and the stock market is up that i mean it's absolute madness and who is that benefiting it's clearly the people that hold those stocks and and that's largely a huge portion of that is just this 0.1 or whatever that they hold you know 70 i don't remember the actual numbers but just in ordered amounts of of that stock market even if some of it's held by middle classers and such uh is just inflating their bags and um and and they're coming out on top it's just sad colin you had the stats from today we got some numbers released what were they yeah the GDP contracted the most today since 2008 but stocks just hit a 7 week

high madness monetary madness it really is though and that's the weirdest thing to see in the mainstream is like the Kramers of the world the CNBCs

Bloombergs of the world just acting like this is all normal and hey this is going to help produce a V shaped recovery it it makes me feel like i'm crazy sometimes like am i missing something or what the fuck is like there's this does not compute there's there's an obvious disconnection between reality and what's going on in the markets well like to to touch back on the student loan thing you know there's i think it's 1.5 trillion plus outstanding uh dollars in in u.s student loan debt um

you know we we get so abstract in the way we think about these things but all that is is capital allocation, right? And I mean, capital allocation is prone to malinvestment. And that's pretty much the name of the game in the United States financial system is malinvestment. But as these busts come, the more we rely on QE and the more we rely on inflation, and now, you know, even airdropping shit coins into people's bank accounts, the more we postpone that liquidation of malinvestment. And it's no wonder, you know, that things are continually getting more and more confusing like just outright make no economic sense like gdp goes down stocks go up explain that you you can't it's silly but if the longer you postpone malinvestment malinvestment is not

being punished right so of course it's going to continue and and that's probably what the student loan bubble ultimately is is just one big giant malinvestment bubble because has you know that 1.5 trillion dollars of debt returned 1.5 trillion dollars or more you know in in capital returns for the society as a whole or for the individuals who attend the school? Probably not. I would assume, you know, I haven't done any research on it, but I would assume if you looked at it as a whole, people going and getting four-year gender studies degrees are not getting a return on that investment. Yeah, and that kind of leads me to, I think, you know, this liquidation of malinvestment that Colin's talking about here. The paradigm we're in right now is that, you know, there was,

We saw massive deflation at the start of this crisis because people were taking money out of stocks and real estate and they're putting it into the most liquid good, which money is supposed to be the most liquid good. And the USD is the most liquid good. And that has deflationary pressure. But we're facing absolutely massive deflationary pressure just right now as a society because this malinvestment is trying to liquidate itself. especially in light of this crisis where we're we're starting to see the water recede and see who has you know who has the swim trunks on and those those businesses that you know weren't sound and to begin with should should be liquidated right and and that would cause deflation and and loans you know so many you're talking about student loans but there's absolutely just

the systemic uh corporate debt um and you know you talk about this the zombie economy that should be liquidated as well so that's also massive deflationary pressure and you have it being met with the fed who their job is to um ensure employment right and um to stabilize prices so they're printing money they're they're they're executing their mandate and they're printing money as a kind of combating this massive deflationary pressure and i think that leads to these these situations where we say that you know these things don't seem right at all um that the the data just doesn't it doesn't seem rational certainly doesn't seem rational i mean it's getting more irrational by the day like you

described like the zombie companies and the the high yield corporate debt i mean all the bonds the CLOs that went from AA, BBB to junk basically in the last couple months is laughable. I mean, it reminds me of the problems that S&P and Moody's and Fitch sort of created by not accurately rating the CDOs that existed during the mortgage crisis in 2008. It seems like we're repeating the same mistakes just in a different asset class. And that seems to be the solution to these problems. Like, all right, print a bunch of money and then go dump it into another asset class where it hides for X amount of time. And then that pops up, boils over, and we have another crisis somewhere down the line.

Yeah. I want to comment on that really quickly. I think WTF happened in 1971 is its own rabbit hole. And one of the rabbit holes that's taken me down is the Eurodollar rabbit hole. So I've mentioned this before, the Eurodollar University series on Macro Voices. It's like eight or nine different podcasts that are at least an hour and a half. It's like 20 hours of podcasts. And I've listened to the entire thing twice, and I still don't understand all of it. But I've taken a bunch of notes on it.

And one of the most interesting things that I've discovered, especially during the Basel Accords that happened in the 1990s leading up to 2008, is that the way that they've defined how banks use money, the banks are using non-USD. They're using other forms of money. Just like I was saying the wealthy use stocks and real estate as money, well, the real estate got packaged up into these MBSs and the super senior and all these different tranches of mortgage-backed securities, and that is the underlying money of our economy. And the reason that it is is because USD is such a poor money. It's such a poor store of value that the banks and the underpinnings of our monetary system are using other things of money. And when you use other things that might have better store value characteristics, but also bad monetary characteristics that are only used because of the propping up of the U.S. dollar, then it leads to other issues that we saw just actually explode in 2008. And you're saying that we're seeing hints of that kind of crumbling now, even in this crisis. And I just find that so fascinating.

and it's easy to see you know looking back like six to twelve months ago i don't think there were a ton of economically savvy bitcoiners or economically savvy austrians who were surprised by what's by what's happened you know like coronavirus or not um you go back and look at like anybody who was in the know like eight eight months ago twelve months ago they were tweeting about like yield curve inversions they were looking at the bubble in the junk bond market They were saying like, look, people are here. They're searching for yield. They're taking way too much junk debt. These corporations are lending at just ridiculous rates just because they can. They have no business doing it. And it was clearly in a bubble. And just like Ben just said, it's because people are searching out alternative forms of money, right? Because I mean, sovereign debt particularly is just about close to as good as money for now or has been in the past. Who knows if that will continue to be the case, if those loans will continue to stay solvent. But all it is, is a search for good money.

It's the market trying to find a better store of value than the U.S. dollar. Yeah. But guys, everybody's selling their assets for dollars right now. It's the strongest currency in the world. Every foreign country is trying to get access to dollars and that gives it strength. That's a problem for the U.S. What are you talking about, man? That's a problem for the U.S. because then it deflates our debt.

It makes our debt more heavy, right? So that's why the central banks have to try to create inflation. And when they execute these massive QE events and it doesn't create CPI inflation, it just creates real estate and stock inflation. Now they're literally – they're airdropping money on the citizens. And I think that's very interesting. I think that's that's another paradigm shift. Yeah. And that's I mean, that's what we were talking about before we hit record. This is where I think. People have been talking about the Fed's monetary base expanding for some time, leading to direct hyperinflation and consumer good prices. And obviously that has not been the case due to the fact that, as we've been describing, that QE money goes straight to assets like real estate and stocks.

but when you start airdropping money into people's bank accounts you shut down the economy and millions more people have dollars that they can go spend on goods that seem to be getting scarcer and scarcer that is a perfect storm for a hyper hyperinflationary environment and i tweeted that out over the weekend i got a lot of shit but honestly i think it's a very big blind spot in the policy that's being enacted in reaction to the to the quarantining that's going on is is are we sure that we can uh absorb those dollars without any significant amount of inflation and consumer good prices well and and ben has a really good point about inflation you know when you print money uh you have to distribute it um what's the what's the word unequally like it has

to go in a certain proportion to one party more than another because if you just print you know know more money and give everybody the same amount nothing changes you're in the exact same like situation maybe for like a day you might have a little bit more spending power but like in even in the midterm nothing changes all that changes is your unit of account you know it gets another zero so you have to distribute money that you print disproportionately to different populations and you know maybe the argument could be made there that they're already disproportionately distributing so much money to certain populations, you know, like with the corporate bailouts and things like that, that a little bit of airdropping on on US citizens is just kind of counteracting that a

little bit. And maybe that's a naive way of looking at it. But I'm just trying to play devil's advocate on that a little bit, trying to maybe tease out a potential other side to it. The other problem with this method of trying to deal with this crisis that we have is the airdropping of money on people is a form of welfare. And when you start a form of welfare, it's very difficult to stop. And there's already a lot of discussions that we can see about UBI becoming more and more of a possibility. And if UBI becomes a reality, I don't think you can ever turn it off once you turn it on because it would I think it would destroy the people that had come to rely on it and that certainly will cause inflation all the studies that Andrew Yang did for his campaign

were like super localized like I think they did a study in Alaska they're like oh UBI didn't cause inflation okay if you print a whole bunch of money and give it to people and they go buy stuff it causes inflation. I don't care how you slice it. And that would be bad for savers, and it would be bad for fixed incomers, and it would be bad for the people that are retiring right now. I don't think it's good for anybody. Inflation is awful. Deflation is phenomenal. I brought up the tech sector. Actually, I think you brought it up, Marty, before we hit record. um deflation is is phenomenal because it encourages us to save and we can buy better products with the same money every single year um i don't know why that's so hard for keynesians to

understand um they that is or deflation is only bad for those who have lots of debt and uh you know i know this is nothing new to any of us here but yeah like why would anybody want not want prices to go down and to be able to buy more with their money it's always perplexed me too but going back to a couple points here it's been funny that we've seen with the airdropping like there's reports of people via unemployment and the trump box making more than they were when they were employed which is an interesting thing so then you talked about the incentive of taking that ubi away it's it's very hard to do that like especially if people are already making more not working than when they were working and it's easy to make the mistake of thinking about these

things in a bubble or like in a vacuum i think and i do this all the time like i sit there and i think okay well i mean if they're just giving people money it's going to cause inflation of course because even if your spending power remains the same but you're getting more cash like you're going to go out and spend disproportionately because your economic calculation is disrupted um but you know just thinking about that in the vacuum yes of course it causes inflation but we have a huge percentage of the working population right now sitting at home doing nothing producing nothing contributing nothing to the uh the the exchange of goods and services you know like it's it's not how markets work it's not what pulled us out of um wearing loincloths and and foraging

for roots and berries like it's it's just not the way human society flourishes to have everybody sitting at home doing nothing um for an indeterminate amount of time without catastrophic economic consequence and maybe they're delaying it a little bit now but yeah inflation seems absolutely inevitable more and more people more and more people competing over fewer amounts of goods yeah all right and again just on paper that makes a ton of sense to me and that's what i think is going to happen we'll see if that plays out but even beyond that like you were calling you were mentioning that like we've been talking like bitcoiners and people have been paying attention but talking about this for yeah like almost a year when the uh when the yield curve

inverted last year and then in september when the repo market started spazzing like we predicted that something would um would go terribly awry in the economy and um this is where like my little conspiracy bells start going off like is this long prolonged shutdown like just like a controlled demolition of something that was inevitably going to crumble within itself right because if if you wanted to do like a currency reset if you wanted to do like a sovereign debt default right and you understood that that would bring an entire economy to a grinding halt that that would probably force a lot of people to lose their jobs a lot of businesses to close a lot of people to sit at home and do nothing wouldn't be better if all those things were already going on so that when

you caused when you did the currency reset when you did the debt default you didn't um shock the system that that system had already had time to adjust i mean you know that that's pretty that's pretty out there but it's not impossible you know that's that's not i would i would give that you know a non-zero um probability and you could take their you could take your tinfoil hat off for a moment still and say, even if this thing isn't engineered, meaning the virus itself or the release of said virus, at the very least, it's certainly an amazing scapegoat. If you find yourself in this position where, oh man, I would really love to blame this massive deflationary crisis and liquidation of all these malinvestments and really the revealing of all of the things that

the federal reserve been doing to to quote prop up the economy as as actually being a terrible thing well wouldn't it be great if there was something else happening uh right around that time and maybe it was just serendipitous and you know you don't you don't necessarily need uh you know the collusion between the u.s and the chinese to release some virus for that to be a reality that here here here is this this case that now you know you have something to blame it on essentially yeah we could totally just take advantage of the situation like don't let a crisis go to waste type of situation and again and like colin said i believe there's a non-zero chance i'm not saying that is the case but just if you're playing out possibilities that is certainly a plausible one

um yeah i'm sorry i had to bring that up that's because it's like it is uh it's all relevant it's It's too good to be true that things were going so bad. It almost seems too good to be true, but who knows? I don't want to take us down some weird rabbit hole. So speaking of tech deflation and that making things better for the economy overall and individuals overall, it's actually very interesting that we're talking about that today. It's a good warm-up because I'm going to sit down with Jeff Booth, who the name of his book is escaping me right now. But let me pull it up real quick so I don't sound like a complete dickhead.

But he brings up the point in his book that tech deflation has done wonders for society. and we're succeeding in despite of the inflationary monetary policy that we have going on in the world because of this tech deflation. The name of the book is The Price of Tomorrow. Thank you for letting me find that. But he also is an advocate for UBI. He's under the impression that the advances that we're making in the tech sector on software and automation, AI,

will supplant a lot of jobs. And unlike the times of the Luddites who thought the factories were going to replace all the jobs and there would be nothing to sort of come in to take that, to fill in that void, he seems to be under the impression that there's going to be a void caused by this tech deflation and advancement in software and automation. Sure. What are the lamplighters going to do whenever they bring these electric candles and put them in all the cities? I mean, it's going to be catastrophic, right? Or think of the buggy whip manufacturers, you know, just awful. You know, there was a Peter McCormick thread where he put out a question about, you know, what would we do under a Bitcoin standard, you know, if the coronavirus came along and we needed to print a bunch of money to give to people to keep them alive or whatever. And I had a long response to his thread, something along the lines of, you know, it's such a shame that this is happening in peak fiat times because, you know, Americans have no savings, which Marty Bent, you mentioned that on literally every episode. It's like, you know, whatever percent of Americans can't afford a $400 emergency.

There's absolutely no savings in the economy. There's such malinvestment everywhere. Where, yeah, if this AI revolution happens overnight, it will be very frustrating that we're in this kind of fiat society and we're not prepared for any kind of black swans or anything. I'd argue in a sound money economy that we'd be much better prepared to deal with such things. Obviously, automation itself is supposed to decrease prices, which is deflationary. And that's phenomenal for everybody, because if you can make something cheaper and compete with somebody else, then that's going to bring the price of that thing down. But, you know, we have these monopolies everywhere propped up by by government regulation. And it's all of these fires that I was talking about earlier that that make these these transitions for society much more difficult.

You know, the buggy with manufacturers and the the lamplighters that had to transition into a new job. yes, that was difficult for them. And it's sad that their investment in these industries that were useful for society at some time was now kind of made obsolete. And that's tragic. But to prevent that happening, to prevent the transition into these technologies that made our lives so much better is obviously not the right course. And just straight up handing money to people, which will cause inflation and all these other things is not the right course either so i don't have a a solution to your problem but it's just kind of a perspective on why it is such an issue well and you know it's always easier to think about these things um you break them down to

the lowest level right and i try to do this whenever i explain economics to to the lay person um you know uh disruption of industry through technological progress through changes in productivity they are a fundamental nature of markets you you can go all the way back to the invention of the first tool right i mean let's say you had like a whole bunch of laborers tilling the ground in a field with rocks and some guy comes up with the crazy idea to put the rock on the end of a stick and use it as a hoe well now his productivity has increased you know 100 and and you can just hear you know the the concern trolls coming to the front of the circle saying And we'll, how are, you know, we're going to have to take half of these people that

work to till the fields with the rocks with their hands. And now it's only going to require half the people to till the field with these new tools. Like we can't allow this to happen. That is an essential nature of human markets. It frees up labor to focus on other problems, right? I mean, that is not a bad thing. But the markets don't owe you compensation for technological solutions that increase productivity unless you're the one that wrote that software program unless you're the one that

figured out tying the stick to the rock made you more productive to produce crops right i mean you're not guaranteed a share of that increase in productivity and then that kind of flies in the face a little bit of um the first chart that we have on the website about the wages being tied to productivity and then you know there was um a schism that happened in 1971 where those two things separated. But all that really represents is the way that monetary shift, that shift in monetary policy disrupted what was up until that point, a fairly closely correlated phenomenon. Yeah. And I'd point out one more thing here on this whole big topic is that if you look at the last hundred years, we've had immense increases in living standards and none of that has to do

with them printing money it has to do with technological process progress itself with deflation uh it it is much despite the inflation that these deflationary forces have caused it to be so much easier to you know i mean we always point to the simple example of the washing machine that saves us time in our day and you know as it gets cheaper to make washing machines and they become more ubiquitous, then our productivity as a society is increased. That has been the progress that we've seen over the past century. And it's much despite all of this monetary intervention. And I find it so frustrating when you argue with a Keynesian apologist that says something along those lines that, oh, but look, everything's working so great. We've seen all of

these uh increases in living standards and and i point to it's it's exactly the opposite it is the deflation that has has allowed us to uh you know really prop up even even the the little man in our society um what it's just an illusion yeah and i'm a strong believer in that too and it just innately thinking about the monetary system alongside this these strong deflationary pressures in the the tech sector and industrial sector overall industrial building technology is getting better significantly over the last five decades as well like it just makes sense that you would want a sound currency that is hyper deflationary in a way where you can have a better opportunity to save and as prices are going down the money that you are saving is going to be able

to buy you more right like it just makes sense to me innately yeah i mean it comes back to the whole using you know money as the the measuring stick for prices and you know if i if i'm trying to argue that it is the progress of society to to decrease prices to compete with people and to you know increase uh the the productivity of of your i mean that that's that's what the market rewards, people that can make something cheaper or make it more valuable for the same price. It is that concept that drives us forward. That is economic progress in itself. And when you have a sound money that measures that progress, then it reflects that in prices. But when you have you know, unsound money that, that, that can hide that, you know, I often talk about how the

Federal Reserve targets 2% inflation nominally, right? Nominally. So if, if, if society as a whole is decreasing prices at 2% per year, then theoretically, they're just, they're just keeping everything flat. But if, if society decreases prices at 10% per year or 20% per year, Well, then where is all of that 20% going if they're targeting the 2% nominal inflation? It takes a bit to wrap your head around here, but no matter how fast society progresses and decreases prices, on average, based on the CPI, they're going to eat it all up in inflation. And where is that money going to go?

Well, I've argued that it's going to go get dumped on the stock market and increase the wealth of the 0.1% stuff. So yeah, mull that one over. that and then i guess to a point where it's like a it's really a moral argument too like let's talk about the externalities of going off the gold standard what it's done for family formation for life expectancy for drug abuse uh like like money stress is a big stress it's number one stress on anybody's mind if you ask couples or individuals even what they're most worried about it's like money. And when you fuck up the money, you're going to really increase the amount of

overall stress that exists in a society. Yeah. One of the charts on our website is divorce rates. And one of the big pushbacks that we've gotten on that, and this is something Ben and I kind of discovered independently, was that they changed no-fault divorce law in 1971. And up until that point, there was no no-fault divorce clause in the United States. And a lot of people just you know even if they wanted to get divorced they couldn't and i understand you know like of course that's going to affect the statistics of course like i said the data is cherry-picked it's a meme right i mean you know if you actually think that wtf 1971 is like you know it's legitimate you know i'm not trying to say it's not legitimate but it's it's intentionally

memed uh to to get more eyeballs on it to get more people asking the question what the fuck happened in 1971 but you know you look at any survey of of married couples and like you said marty the number one thing that causes conflict in those marriages is money so of course changing the money had an effect on divorce rates of course it did it might not have been the only contributing factor right networks systems are very complicated particularly when they involve humans there's lots of variables at play um but to say that it was no fault divorce law and that money wasn't a contributing factor is just asinine yeah and then the the compounding effects of that right? Like forcing, so the money stress drives both parents into the workforce, which means

there's less time away from their kids to raise their children. Um, and eventually if the stresses get too much to get divorced and that creates a psychological, uh, problem for the children. And then just the ripple effects of this policy, like, I don't even think they can be calculated if you've been tried to. Right. And it forces, you know, it forces, um, adults to dump their dying parents into nursing homes rather than bringing them home to spend the last years of their life changing their diapers uh they they would rather send them to a nursing home and let someone who gets paid minimum wage do it and and that's really a product of our you know the demand for time demand for yield um you know people people don't want to give up working that extra

shift to be able to be home taking care of mom and dad you know with alzheimer's or whatever they have to or at least they're feeling compelled to to pawn that um to pawn that responsibility off to someone else uh and they would rather work the extra extra shift to pay for the nursing home costs and that's really like indicative of like breakdown in greater society i mean and it's and it's really destructive like you said like that doesn't bode well for the future you know um because it has all of these compounding effects on the way that our our families interact with each other, on the way that we interact with our neighbors, on the way that we think about the future. Shit, man. You just got me thinking. We were on a sound money standard. Maybe this

coronavirus wouldn't be as bad as it is now because it's attacking the nursing homes. And maybe if people were more incentivized to have their parents living with them, you want to have a spread as vast if we've seen it up to this point. Not to mention, we'd have more savings. I mean, I have a chart on the website that just tracks savings after 1971. And then, actually, it goes up for just a moment after 1971 in 2008 when there was a massive deflationary event as well. But other than that, it's just been on a downward trend since because it's very clear that inflationary money disincentivizes savings and incentivizes debt. And we have more debt than has ever really been a case before. even as a nation, the CBO just predicted. I actually have a chart on here that the CBO

predicted that debt would go higher than World War II. Well, that actually already happened. I think it's just happening now. This chart wasn't early enough. The CBO just predicted that we're about to surpass the debt held by the public as a percentage of GDP from World War II. We're already about to surpass that um just in this in this crisis so um yeah just it's devastating devastating to society the other thing that we passed was um federal reserve balance sheet as a percentage of gdp we rocketed past all-time highs on that it's like 30 or 35 percent now it's unbelievably high yeah uh so how do we get away from this i mean obviously we're all bitcoiners here we'd like to transition to a bitcoin standard but how do you guys think that happens practically if at all

as colin was alluding to earlier the longer that this gets delayed um the longer that this this the capitulation needs to happen the liquidation of malinvestment needs to happen um the harder it gets and you know i you know i've i've thought a lot about you know what this transition to a bitcoin standard would actually look like if it happened and uh you know some think it'll happen gradually and something will happen suddenly. And some people say suddenly and then gradually and then suddenly. But regardless, it still will be a painful transition. You know, Ray Dalio talks about in his, you know, the system is broken letter that, you know, the people that position themselves for these paradigm shifts are the ones that stand to profit. And what he's really saying

there is most people won't be prepared for these things. But what I'm trying to argue is that I think the longer this gets delayed and the more they um you know more money that prints the actually the worse it is for society to transition back to a sound money because it will cause massive deflation and that will be very terrible for for people who who own debt uh or for people who have debt sorry um and i i just hope it happens more more gradually and i hope it happens earlier rather than later that's my take on it i'll be very clear that i believe the the greatest cause of our strife is the disruption of power between the individual and the state and i believe that fixing the money is the only way to claw back

enough of that power to make a difference i think that until you know you can take away the the seniorage and the credit expansion rights of the state until you can hold them accountable for their own spending and for their own um you know we know as austrians that that democracies trend to socialism that's just an inevitability right and the founding fathers of america understood that and it's why ben franklin said when he came out of the continental congress you know when they said mr franklin what did you give us and he said a republic if you can keep it Right. He understood that it took a society full of well-informed individuals who respected liberty in order to maintain it, you know, in a constitutional republic or, you know, even in a democracy particularly. And we don't have that anymore. I mean, the honest truth is that we don't have that anymore.

And the only solution is to take back some of the power, you know, the disruption of the power dynamic back away from the state. And if that isn't done, there won't be any fixing it. And that's really, that's what Bitcoin, that's what Bitcoin is intended to do. That's what it was designed to do. And if you believe anything else, you're fooling yourself. I completely agree. It just got me all jacked up. And it's disheartening, especially now during these lockdowns, to see how little people do care about liberty.

And how quickly they are giving away their civil liberties in the face of fear, mainly. The fear of the unknown created by this virus. and luckily thank god we have bitcoin i can't imagine what life would be like right now if if we weren't here and didn't have this easy exit option that exists because like i can't think of any other tool that allows you to to exit the system as directly as bitcoin does that exists right now like can you i would be very pessimistic about the future uh if it wasn't for bitcoin i would be i was until i discovered bitcoin i don't i don't see any other way right i mean i love you know recently we added the hayek quote um to the bottom of the wtf 1971 website about finding a

sly roundabout way to take money back from the government because ben and i we wanted to accomplish two things there one we wanted we love that quote and two we wanted to make a subtle slight nod to bitcoin because wtf 1971 is not um ben and i's marketing model for bitcoin it's just just a way to try to wake up people to economics. And we don't want to try to sell anyone anything with that process, because I feel like it dilutes the message, right? Because somebody who already doesn't have an understanding of economics, isn't going to understand why Bitcoin is important. And if you tell them to buy it, because you think it's going to go to 100k, you know, within a year, then they're going to think you're you have an agenda. And you do, right? Everybody that's in

Bitcoin is financially incentivized to get as many people into Bitcoin as possible, because that's just the way money works and we've never seen the monetization of a new asset before like this and of course it's unprecedented of course it looks ridiculous when you when you project out extrapolate out what you think the future looks like but it's inevitable and it has to happen and bitcoin is the only way right i mean we we have to get to the point where bitcoin is strong enough to resist attacks by the state direct attacks that are funded by the expansion of money by the expansion of credit to try to control the network we it has to get to that point if it doesn't then it will fail i think we're getting closer than most people expect um i think i think we're i mean 11 years in

it's been around for more than a decade like it would be it'd be hard for me to imagine it is hard for me to imagine that they're able to stomp this out uh it's like part of the culture now everybody knows what bitcoin is they may not understand it but they at least heard it and understand that it exists yeah i could be wrong though maybe maybe all the people who know what it is think it's dumb and should be should be abolished no i think you know it's all about incentives and i think like the work that you guys are doing uh is incredibly important right because you're providing an opportunity for yield in places that normally are desperate for it like you look at what's going on in in the oil markets right now and you look at just this this

desperate need for solvency this desperate search for alternative uses of resources to find yield and bitcoin is the solution for so many people in so many cases like all of this excess energy all of this waste energy all of this unharnessed energy you know all across the board energy is just a stranded resource and if it can be harnessed for profit you better believe that incentives of human nature will make that so and that is so good for us yeah no i mean knock on wood it seems to be happening i think i think people are starting to have aha moments and what we're doing in the oil fields like it is and that's why i'm confident it's gonna happen it's like undeniable like how like the the opportunity cost of selling that gas

down a pipeline or turning into an ngl it it doesn't it's too much compared to just putting some miners on-site and turning it into Bitcoin, it's so much more profitable. I think it's really hard for a lot of people to understand Bitcoin because, as Colin just alluded to, this is literally unprecedented in human history. Nothing like it has ever happened, and I don't mean distributed ledger computers reaching consensus, I mean a real-time monetization of an asset. We've seen, you know, things be demonetized in real time before, you know, you go back to the glass beads and the yuppies stones from societies that that store their money and not a hard money or money that other poor characteristics. But we've never seen something emerge just and be thrust upon the world and that that had the potential to to be such a, you know, a huge improvement upon money.

And because that's never happened, there's absolutely no framework. There's no economic model. There is no way to compare this to anything before it. And I think people have such a hard time wrapping their head around something that has never happened before. And therefore, we don't have a way to incorporate that into our viewpoint. We have to develop from scratch. And I think it's such an amazing thing to be a part of the people that are actually trying to interpret that and actually try to understand this event that the Bitcoiners believe is already underway. And it's so marred an illusion because people in the finance space that you think would be like all over this, their entire life is made around trying to profit from the movement of these different assets in U.S. dollars. and it's so hard for them to get away from that you know oh i can't wait for bitcoin to go to 200k because then i can sell some and get more us dollars because that's that's the end game right um the the end game has never been to hold on to uh you know government bonds and just forever and that's that's what you're gonna have government bonds or or stocks and it's just that's that's the money now it bitcoin is is is the new money and i i don't know maybe i'm not articulating it

well but i i think that's just so fascinating well something some ben and i have talked about too um it it's almost impossible to make baby boomers understand this narrative and it's it to a certain degree probably also gen x and the reason is because you know it takes a very asymmetrical thinker who's benefited from inflation their entire life um to take a step back and say this might not be good um you know you you see like ray dalio like kind of on the edge of that right seeing it and and looking at this you know the system that he's profited from his entire professional career and and when once he gets out of it he's able to take a step back and say well maybe this wasn't such a good idea um but you know you take the average baby boomer and their

solution you know to having nothing is to well why don't you just start acquiring assets right and And of course, it's easy to say, it's easy to say when you at least thought you had a completely paid for retirement ahead of you to point the finger at millennials and Gen Z and say, well, you're just lazy. I worked for everything I had. I accumulated assets, they increased in value. I bought my house for $2,500 or whatever, and now it's worth half a million. And I worked hard for this my entire life. And of course they did. I don't want to take away, you know, the fruits of their labor. But how do you show somebody that has been the recipient of asset inflation their entire life, that they've priced entire generations out

of entering the system, and they are now stuck at the bottom, right? And the social unrest that that causes, of course, it seems like UBI is inevitable, right? I mean, you have the average 20 year old today starting their life out with like six figures in debt how are they ever going to start a family how are they ever going to you know they god forbid they'll never be able to start a business i mean come on they still live with their parents too yeah well yeah no that's i mean how do you ever get that's what i was going to bring up is the second to last chart on the page is uh to your question like how do you ever get a boomer or gen xer to rethink this and i think them noticing their kids are living with them and they weren't um into their early 30s so the

chart ends in 20 middle 2015 and so it's probably increased since this point but the share of 25 to 29 year olds living with their parents or grandparents is above 30 so it's a third of the demographic which is pretty insane and i don't think i don't think that there's anybody you know like i don't think there are a whole lot of like late 20s early 30 year olds that want to live at home with their parents i mean maybe there are some i mean in a lot of sense i think that people you know you spend your whole um this is something i heard someone say the other day a guy named bill cooper i was listening some of his older work um you spend your whole young life trying to get away from your parents

trying to go and become you know self-sufficient and then once we become adults you know many people spend their whole entire life trying to find someone to be their parents again and in the most cases that's the state right people want they want to go back to that point in childhood where they didn't have to worry about anything where everything was taken care of for them and they had no freedom but they also had no responsibility right and that drives like another point home it's all this money printing and now welfare like what does it mean for society overall and you have a bunch of individuals who just aren't motivated or driven to make their their lives better like can we get out of this vicious cycle

there are too many people too far gone to dependent on the state that they like you just described they're looking for that paternal maternal uh arbiter of their life to to come in and and basically provide comfort for them have we is the pacification of the world gone too far misaligned incentives corrupts our culture and you know misaligned money uh does the same thing uh so you know again i always try to remain optimistic ever since i found bitcoin that a sound money will tend to uh breed a sounder society so you know i never give up man i mean yeah things could look bad but uh i certainly hope that you know as as brady always says the dawn of the bitcoin renaissance the the renaissance itself will be a renaissance of everything culture

and economics and everything no i agree i'm an eternal optimist as well just gotta play devil's advocate there i like it i like it push back and there's a and it's hard to deny there's a hey quote um i i don't remember like the exact wordage but it goes something along the lines of um you know strength of strength of character and um strength of will or something like that are nearly impossible to find in a society where men are not confident they could that they can make their way by their own efforts. I believe it was Hayek. Powerful.

I mean, it makes a lot of sense. Why even strive to be greater if you don't think you can do it yourself? If you're looking at the history of the last five decades, most people not being able to save enough money to even retire or retire in comfort, why even work hard? Why do that?

Is it even worth it? And I guess the question is, and what we've been getting at here this whole episode is, all right, it could be better. You've got to fix the money first. Fix the money, fix the world is something I've been trying to meet more often because I think it is, as we've said, the most important thing to fix. Colin, his very invigorating speech, speech? I'll say it's a speech. uh earlier in the podcast like if we want to fix this we need to take control of the money which gives us leverage against the state which is enacting all these policies that really put

society in a bad spot easy times breed what is it uh weak men and hard times breed strong men or something like that what's that you you've you've put that on the pod before yeah easy times breed weak men, weak men breed hard times, hard times breed strong men strong men build good times so it seems like we're sorry

I keep interrupting you one of the things that's really important about Bitcoin aside from the fact that we're trying to fix the money is the fact that it's encouraging for people, right? People like us who were asymmetric

thinkers we we're okay with going against the grain we like to ask why right we want to solve problems it's important to give people like that something to to rally around a little bit right like if if you're demoralized all the time well then yeah maybe it would just be better if we let the state take care of us you know if you can't break out of that like what chance do you have dan again like thank god we have bitcoin and that's another beauty of bitcoin too is that you just meet these like-minded individuals who are asymmetric thinkers and not afraid to go against the grain that are just congregating more and more around this protocol this network that we're trying to build out and meme into existence i mean it already is in existence but meme into

the main mainstream um and that that's what encourages me the most and i said this on a couple podcasts this week with developers who are building out the protocol like just seeing the the uh interest around protocol development specifically and more and more people coming to bitcoin to help build this out is highly encouraging absolutely gentlemen i wish we had another hour and a half to rip here um unfortunately i have to go is there any parting notes or thoughts do you guys want to want to end on before we wrap up here yeah if anyone knows what the fuck happened in 1971 please let us know yeah we keep asking everybody i just get a lot of bad answers like someone said it was disney

world i'm not so sure hey uh could have been disney world who knows i don't hey might have been nixon might have been uh the opening up of of the ability of divorce who knows who knows there's a lot of weird things going on at the same time um gentlemen i really appreciate your time uh we should definitely do this again expand on some of these topics uh dive into the nitty-gritty of every way in which the inflationary monetary policy that persists throughout the world sort of erodes the quality of life on this planet. Thank you so much for having us on, Marty.

Long time coming, brother. I know. I can't wait till we can all congregate back in New York and get another burger at G.I.G. That'd be amazing. I severely miss that place. Thank you to the freaks. Shout out to the freaks.

you guys are you guys are the best always a pleasure yeah all right keep crushing it guys really appreciate the work you're doing um peace and love freaks