TFTC: A Bitcoin Podcast - #250: Q1 Monetary Base Update, inflation, and haters with Matthew Mežinskis

Episode Date: May 13, 2021

Join Marty as he sits down with Matthew Mežinskis to discuss: - The latest global monetary base update - Why the monetary base is a good benchmark for bitcoin - Bitcoin is the 6th largest base money (ex-gold) in the world - Defining assets and liabilities on the Fed's balance sheet - Why Japan matters - Communism creep - Bitcoin and a free banking system - Academic economists and bitcoin - much more Follow Matthew on Twitter Check out cryptovoices.com 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 when you download the app. Lend at Hodl Hodl is a new non-custodial bitcoin backed lending platform, that allows peer to peer lending and borrowing between users, globally, anonymously & on your own terms. Create you offers & set your own terms on lend.hodlhodl.com Compass Mining. Compass wants to democratize bitcoins hashrate and give everyone the ability to strengthen the network while mining bitcoin profitably. Thanks to Compass, it’s never been easier to mine bitcoin. Check them out at compassmining.io Braiins. Braiins are leaders in the mining industry; running Slush Pool, creating firmware to make miners more profitable (Braiins OS+), and building out Stratum V2 to help further decentralize mining and make Bitcoin more robust. Check out their mining profitability calculator.

What's up, freaks? It's your boy, Marty Ben, here to introduce this rip of Tales from the Crypt. The immense pleasure of sitting back down with our good friend, Matty Bezingtius, from the Crypto Voices podcast, from the CryptoVoices.com website that has been tracking the global monetary base for some time now, for many years. He dropped the update for Q1 2021 this morning, And I was lucky enough to catch him literally minutes after he sent the most recent monetary base update out to the world to discuss it, among many other things. So why the detractors to this comparison to Bitcoin are wrong, mainly those in the mainstream, who don't understand the difference between assets and liabilities on the central bank balance sheet. So I think you guys are really going to like this beyond the global monetary base.

we get into metrics outside of inflation that probably make more sense to pay attention to because they're more tangible and inflation is very hard to measure at any given point in time again because different humans have different preferences prices react differently people people have different baskets of goods so one metric that we we talked about for a bit in this episode that i think you freak should look deeper into is comparing uh how how much productivity a dollar gets in terms of gdp uh today compared to years past so i believe in 2000 um a dollar spent would get you 17 of gdp or invested will get you 17 gdp today it's three dollars around there uh so the purchasing power in terms of productivity of those dollars is going down

pretty significantly matthew explains it much more eloquently than i can so enjoy this rip always enjoy speaking with matthew um he's got a really interesting perspective too as he's over in eastern europe we talk about the lockdowns and the authoritarianism around the world right now so enjoy this rip is brought to you by our good friends at the motherfucking cash up cash up some of you stack sets and sets receive sets sell sets we're saying sats sats sats sats sats because sats are the standard they're on sale right now too one cuck buck is going to get you 2057 sets last time i read this it was like 1700 cuck bucks going a little longer than it did earlier this week uh again you can dca into

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very dense economics talk in this episode if that tickles your fancy which i hope it does it's important to know this stuff words matter words are important freaks understand the words you've had a dynamic where money's become freer than free if you talk about a fed just gone nuts all 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 probably should be boom maddie mazingtious what's going on sir doing fine my friend nice

to be here marty it's uh it's uh you know uh we've had some great great weather actually uh in eastern europe uh past week but now it's uh raining and probably will be for another two weeks so i gotta stay inside and work on uh economic stuff i actually just published the old monetary base and it's good because you know i've been doing these audio compendiums when i do the the cube the quarterly updates and you know they definitely get a bit dry but boring and it's either me talking to myself or me talking to fernando which is even worse um hey good we've done it we i think we did it even last time or one of the last quarters and uh done with a couple of people it's more enjoyable just doing this with uh as a pod well i feel honored i'm able to

to catch you literally minutes after you set out the q1 2021 update let me pull it up here so for you freaks we just jumped into this having a powwow conversation for any of you guys listening uh who don't know what we're here to talk about today maddie and fernando at crypto voices have been doing a quarterly update on the global monetary base and where Bitcoin falls in line compared to other base monies in the global economy. We've done, this is probably our third update episode, but for anybody new here, this is one of my favorite update episodes that we do because this is just an infinitely fascinating topic. And I think it is a signal in a world in which many people are trying to figure out what

is the best thing to compare Bitcoin to. And I think Maddie and Fernando have really honed in on global based monies as as the perfect comparison um as i pull up this chart is there anything you want to add to to that yeah no that pretty much uh does it i think it's actually good to do it uh live on youtube because there are a lot of charts and you know just speaking over it on the audio uh forum only is not necessarily always uh the best so yeah it is very good i think to do this um uh you know do it do it this time of video that's cool um and yeah i mean this is something like i sound like a broken record for those uh loyal listeners of mine you know fernando and i we've been talking about this for four years i mean this is as you see it's update

number 12 so it's a complete three years of updates that i've done um it's mostly me now uh fernando is is uh he's he's focusing more on his uh portuguese audience uh brazil you know brazilian portuguese speaking audience uh doing a lot of economic stuff these days but we still talk about you know a lot of these developments and uh jump you know you know throw ideas off of each other but yeah we've been talking about it for years and years and i think um it's always a topic. It's a perennial topic on crypto Twitter or in the media. What do these 21 million units of Bitcoin, what do they compare to in the existing legacy financial system? Do they compare to gold, silver? How does it fit in? And so I didn't really see anything over the years that was

doing the job. So I just thought I got to create one on my own. And yeah, I'm flexing a little bit there because I am proud of it. You won't find this anywhere. It's not in the IMF, BIS, World Bank. There are no databases where they publish the global monetary base of all currencies. We do 30 currencies as a top floating 30 currencies in the world. Before I get into it, and I'll say i'm sure well later in the episode as well i've been spending a lot of time on this actually uh personally for the website uh it's going to be majorly boosted um you know those that are really interested this into this will know it's extremely slowly loading website into a lot of these charts live uh like through google sheets some of them some of them through excel like it's

just uh it's a one-man band doing a lot of this stuff so i've got you know they'll be very interactive they'll be very good uh in the next few quarters it's probably going to take a couple quarters still honestly but because there's so much data i mean i've been through like 55 balance sheets this is the top 30 uh we'll keep it growing and it's just the point is just to really try to systematize and you know these these supplies do exist you just got to try to understand them economically work through them and then from there i think you know you you you know the dear listener or or viewer uh bitcoin fan or not you can make your decision on like sort of what that means from there what steps you want to take but definitely i i think that bitcoiners around the

world have been like educating tons of people about um finance and economics and personal financial sovereignty as we all know uh this goes from like the developer technical level to doing maybe a little bit more like economic stuff like we're doing um you know it's just uh it's it's a great thing and and that that i think that bitcoiners like sort of uh are always there with with hard facts and charts and graphs uh you know no matter what you what sort of uh fallacious claim you might make you know like olive oil standards or whatnot you're going to get bitcoiners swoop in uh with the real numbers and just really really um really i provide you know a lot of hard data. And so that's what I'm trying to do here as well. And then just to remind people again,

why we call it the monetary base, that that's the one that compares to Bitcoin. The very first person in the Bitcoin space to recognize this was the great Al Finney. I did a post on Bitcoin Talk way back in the day. I've quoted it many times. Many other people have quoted it many times. and i would say again not to flex too much but i'll say fernando and i probably have been the most rigorous of this is like we've interviewed economists we asked them this question like is this the one do you think this is the supply that makes most sense um why does it make the most sense and yeah so i do this in one of these days i'm gonna have to stop doing these lengthy introductions about you know why how what is it but um i think at this point you know it's just

people are still starting to understand bitcoin starting to understand its value its value proposition so um you just got to keep explaining it at the beginning here so we're setting the stage like we're laying down the landscape you know we're in the arena here of uh like a financial asset that compares to bitcoin so that's called the global monetary base in the fiat world it's just two things it's the physical notes and coin that you uh know and love or hate uh you stick in your wallet, the actual cash, the actual currency units that each central bank produces. Only the central bank produces this. This is a centuries old thing. They have a monopoly on the money supply. And then the other thing is what you call the reserve account or the commercial bank

reserve account with the central bank. That's kind of like a digital supply, I call it. But we don't need a digital world for that to happen. Back in the day, pre-internet, gold exchange standard you can look at central bank balance sheets around the world they still call it at the monetary base it was notes and coin and circulation plus the uh reserve account which is basically it's basically each bank's account with their respective central bank so it's the end of the line that's how banks settle among themselves so you can think of it sort of as banking level and as a like we as a public level like we as a public the end of the line final settlement will always take place with these notes and coins. There's also other

similarities, obviously, as we know with Bitcoin there, they're freely floating, they're kind of anonymous, even more anonymous than Bitcoin, notes and coins, and other things that have similar characteristics as Bitcoin. And then of course, the commercial bank reserve account, that's how literally the end of the line of settling in the banking system occurs. So at the end of the day, literally, you have all these checks, Venmo payments, whatever, you know, we call those things money. And they are in some respects, you know, they're moneyish type things, you know, moneyness is a term that Hayek used. All of those things are used to settle debts all around the world all the time. But those are claims with each banking system, sorry, each bank in the banking system. And the only way that you can actually see, okay, where do those banks sit at the end of the day, when you go up, up, up, literally to the end, is How do those banks clear with one another? Does one bank owe another bank $100 billion or whatever, and they net it all out, and that's where they net it out at the central bank level.

So that, again, would be analogous to the Bitcoin system. We're already having plenty of layers in the Bitcoin system, whether it's lightning, which is unique in itself to economics and banking history, or whether it's simply exchanges, which are basically Bitcoin banks. um how finney wrote about that as well you know we have exchanges with you know when you have the bitcoin when you when you log on an exchange and you see you know x amount of bitcoin on your exchange dashboard that bitcoin is not any bitcoin are worth their salt will know that that bit that bitcoin does not belong to you that's the exchange is bitcoin it's not yours but that doesn't mean

you have nothing you just know people don't ask answer the second question what do you have you have a claim. So you have a claim on that Bitcoin, but that's not base money Bitcoin, that is it. So to find that base money Bitcoin, you got to go all the way back to the chain. Every 10 minutes, Bitcoin balances the budget. Every 10 minutes, these UTXOs, they're settling again and again and again. That is those Bitcoins that will eventually be a little bit under 21 million uh bitcoins globally final settlement that's perfectly analogous completely analogous to what happens in the modern financial system today with what we call these bank reserves that's how the banks literally the giants of the financial system uh banks and financial

institutions how they settle among each other so this is why bitcoin is settlement media settlement money uh and that's why it's uh compared to base money so well before we jump into the update q4 2020 to q1 2021 a lot has gone on uh you've received some hate on twitter from the the traditional financial media coming at you particularly francis coppola and uh our friend joe eisenthal saying that this is not the correct metric to to benchmark bitcoin bitcoin with what would your description of their argument be in your response to that argument yeah so uh i'm absolutely delighted that uh the more and more uh post this the more and more uh just posting facts and data and numbers triggers people in the traditional financial news arena,

the traditional financial marketplace, whatever you want to call it. I'm absolutely delighted that it's triggering more and more people. Ms. Coppola, she's not very kind usually in her words to many Bitcoiners. I think many Bitcoiners will relate to this. At one point, she blocked me, then she unblocked me to talk about how it wasn't right more. But she's never really given an argument. It's clear that she hasn't read anything of it. The only thing I can say that what she has written, the most hilarious one was, I don't think he knows what the monetary base is. And I mean, if you want to engage in real debate, first of all, it's not going to happen on Twitter. like you're not going to gaslight me like i i do not i just do not care uh what you think

if if you know if you don't understand what it is but just to say that i don't understand what the monetary base is just to make that statement as like you're you're going in argument when you know this is update number 12 quarterly update number 12 as i said we've been talking about this for years obviously uh that doesn't really merit um a response and and based on what little i have read of what she said it's clear that she hasn't read anything uh that i have written about it and so many uh many things would indicate that she probably herself doesn't understand what the monetary base is so that would be her um joe is uh is funny as well he uh wrote an article after the uh q uh four 2020 was released and i was speaking with nick actually

did two shows with nick it was funny one of them got lost and then it wasn't lost so he posted the original one so it's a little bit late it wasn't that long ago maybe less than a month ago we posted the pod april 7th i believe yeah about a month ago uh listeners can find it but that was that was regarding q4 we we recorded that actually like uh you know start of february it takes about of a month to get to the full prior quarter you know of the data so so here we are in may talking about uh start of may talking about q q1 uh in any event what to say about joe uh i should find the tweet i was thinking about it but i don't have the tweet well here's here's the the funny thing so i saw this a couple times i've engaged with him on it before um one of the going in

arguments and also this throwaway line, so he wrote a newsletter about it, was that he doesn't see the value of the exhibit because Japan is so high as far as the global monetary base comparable value. He doesn't see the value of that. He thinks that it's kind of a worthless comparison. Now, he didn't go any further, but this is very curious to me because again, And this is someone who works for Bloomberg, presumably understands how data-driven a network it is. And so just to shrug off mountains of research facts, inflation rates, we can, if you want to go to tweet, actually, let me find it for you really quick.

Just go a couple of tweets down. the first uh picture we'll show you how big japan's monetary base is uh it's tweet 10 it's tweet 10 i got you i got joe's um response up sorry and i can paraphrase it it's fine i mean go to go to sweet well i can't prefer all that actually in fact but i can i can i know the one of the main ones he was talking so there's so tweet 10 here uh there we got the dollar the the Chinese Yuan, the European Euro, and the Japanese Yen. Those are the four largest currencies in the world. Most people probably believe that and understand that. It's not a surprise to them. And then the formerly Great British Pound is that lighter blue that's just

above the Japanese Yen. And then the remaining 25 currencies, the top 25 floating currencies in the world are above that. So you see just the massive rate of distribution already just with that chart. But there have been many quarters where, so actually, hopefully to please Joe, this quarter, the dollar is larger than the yen. So maybe he will, maybe if he cares, again, I don't care if he cares one way or another, but the dollar is larger than the yen this quarter. So maybe he'll think it's a bit more valid. But as I understand what he was saying was Japan, since it has such a large monetary base, it's just worthless because obviously the dollar is the largest currency in the world. A fact that I have repeatedly talked about again and again and again, I do it every update. And I also do it with every auto compendium. I'll do it here as well. When we're talking about the monetary base, we're talking about something that is not a claim. If you're going to talk

about all the other claims, euro dollars and contracts that are priced in dollars, gold is priced in dollars, oil is priced in dollars. Obviously, yes, the network effect of what we call the dollar is gigantic, but that is not what we're talking about here. That is not what compares the 21 million Bitcoin. Bitcoin has claims as well. I just talked about it. It's a bit nebulous. It's not as hashed out as these regulated banking industries are in banking markets. But we got the creditors for Mt. Gox still. We got Bitfinex, Tether, sort of other holders that have mixed some interesting... There are plenty of claims that have floated about on top of the actual UTXOs, the actual Bitcoin that underlies those

claims. So Bitcoin is no different than the rest of the financial system there. In any event, going back to this thing about Japan, my question to Joe about Japan, and I've said this before, is like, what are you actually saying about Japan? If Japan, you know, we could go full SJW if we want, like what, I just want to know what, what does he have against Japan? So let's actually break this out. So, you know, I am sitting here talking to you in the former Soviet Union. I've been very vocal about my criticism towards, you know, Putin and all this other stuff that's going on today. We can maybe talk about that if we have time. But in any event, I love bringing all actual race in actual economic discussions because it just, you know, the Soviet Union just

blasts and nullifies any argument that any SJW BLM type in America might have today. I'm getting to Japan, but you'll see. So, you know, what was the Soviet Union? It was a super state of mostly, mostly uh white eastern european people uh you know uh colonized by uh moscow this town which um you know has never really been ruled whatever we talk about the history of that but uh all mostly white in the soviet union uh all of the eastern european uh countries were white uh that were not in the soviet union some that were like the baltics the occupied ones and they all failed miserably in the 50s 60s 70s 80s as far as the economic growth um just absolutely demolished destroyed in terms of their growth compared to the west a complete mirage uh come here i'm always

i've said i think i've said it on your show i'm always happy to buy people beer if you come over to eastern europe whenever you get your vaccine or whatever you need to do to travel uh happy to buy your beer outside here whatever you want you got whatever you're comfortable with and we can see how on the countryside, they're vastly, vastly behind the Western world as far as their development. Their capital cities are great, but whatever, they're behind. It's a bunch of white people in Eastern Europe, all white, horrible, horrible economic circumstances for the entirety of the Cold War. So if there were some SJW, BLM type person in the Western world today saying, our problems, our economic problems are rooted in racism. My shining example is simply the white

former Soviet Union countries who has just been absolutely destroyed economically during the Cold War, after World War II. What was the reason? Had nothing to do with racism. They were all white. I'm going to say it again and again and again. They were all white. They simply practiced socialism. Socialism, autocratic, dictatorial, awful regimes, price controls. They didn't have market. That's why they were horrible. Now, I'm going to get to Japan. For 50 years, the United States was number one in economic growth. Soviet Union was number two. I just told you how fake Soviet Union was. The numbers were absolutely fake. They had massive debt from Western Germany secretly in the 70s and 80s. And one might actually ask, why did this super state collapse

in 1991, if it was supposedly the second largest economy in the world in the 80s, obviously, because they didn't have any private property rights, socialism, et cetera, et cetera, et cetera. It's the greatest example in the world. Of course, there are many other failures, Mao and Asian atrocities these days in China. I'm not a fan of their communist party, either the party, not the Chinese people, but the party. So here we have Japan. marty do you know where japan was ranked in the 70s 80s and 90s as far as all the countries gdp is like the power of their economy electronics weren't big yet so i'm gonna guess outside the top 10 they were getting there

actually they were getting uh sorry no no it's much higher electronics were getting there in the 80s and so if you were a person in the u.s uh the financial headlines in the 80s would be like japan is coming to take us over because you had sony you had all of these um you know any any uh i just love the example of nintendo i mean you know 80s 90s i know you're a little behind me but like and once you beat the big ball what what do the credits say 99 of the time they're all japanese right massively creative country uh they did have a huge tech boom in the 70s and 80s so the answer is marty they were number three literally neck and neck was the soviet union i just told you again soviet union was a complete mirage failure catastrophic uh destruction of a

huge generation of wealth and uh you know morally just absolutely destroyed a generation of people in eastern europe all white by the way all white so japan was number two japan 70s 80s 90s uh they like tokyo uh anywhere like the you know nintendo sega sony these were this this was a juggernaut of a country that was working extremely hard after being on the opposite side of the western world in world war ii and was absolutely an economic powerhouse i mean millennia of civilization and organization. Absolutely beautiful country, fantastic people, and very, very powerful when it comes to the economy. Japan is number two. Japan is number two economy, basically through the entire Cold War into the 90s. Now, they did have a credit boom and bust. They have a lot of

problems. The US also had credit boom and bust, lots of problems. Everybody has lots of problems, growing economy you know sometimes there's uh uh slowing uh age uh there's this age gap that japan has talked about a lot they have um you know slowing uh you know demographics these types of things but plenty of other people in the western world have that in europe europe as well so my question again him just you know this is actually a lot of answer than i was you know imagining when i was thinking about whatever he was saying about japan because he never clarified it but he basically said throw out the whole exhibit because japan is at the top doesn't make any sense what does he have against japan i mean japan is a massively powerful powerful historically

amazing juggernaut in the economy and by the way after the united states china and the block of eurozone nations not the european union eurozone nations which is less 17 uh 19 countries japan is number four, barely, as far as GDP goes. So Japan is a massive economy still in the world today. And yeah, Japan prints money like the best of them. They've been printing money 10 years before the Federal Reserve's been printing money. They've had lots of inflation. They've been doing what Murray Rothbard said. I always mention this, right? The Austrians, the hardcore, or usually they were kind of gold money types. But one of the things that they would always say, and which never really happened during their lifetime was, look, central banks may be buying

government bonds today, but they'll start buying other assets tomorrow. They never really got to see that. Now it's happening. And Japan is leading the pack. Japan actually paradoxically has been the reason why its monetary base is kind of high as well, is it has a lot of investments in, It has Apple, Facebook. It has stock in real estate companies. It's not just its government bonds, which it owns. But in any event, Japan's a major country. I don't know what he's got against Japan. And just to sort of, I don't know, shrug it off because Japan is in there, it just shows me that he doesn't know enough about Japan. And I'd like to hear from him what he's got against japan so that's about japan that's way longer than i thought it would go sorry um i love the

context is incredible and i feel incredibly ignorant for not realizing that the electronics boom happened in the 70s and 80s but yeah i mean yeah it's maybe it's exemplifies what he's thinking as well maybe he's just not thinking about it that way uh i didn't mean it to come off that way for you marty i'm just saying uh yeah they were leading the way like if you were reading financial uh news in the 80s you say japan is coming like they're coming to take us over this national crisis and of course they had their own credit bubble they had problems just like we had our own credit bubble we had problems i'm not saying anyone's perfect any which way but i'm just i'm bad i'm literally baffled to just x off like literally you just want to cross someone off

this list for some reason like i don't know i don't know what his problem with japan is it's a great country it's a great economy and i'll get to the tweet in a second if you want to say something i get to this uh no and i think i think joe's discounting of japan and just throwing it to the wayside like japan's in there it doesn't make any sense just highlights the high time preference nature of our society right like the like you just described how big of a juggernaut japan was only decades ago and still is and still is number four in the in the world after these three blocks yeah yeah it is it's pretty weird that you're just able to be like oh no it's not the euro or the dollar yeah so he didn't like that

it wasn't a dollar basically so he wanted to just throw the whole thing out that was the main part but he never he never backed it up never said anything and then all i want to say uh as well as this this i responded to him he didn't respond to me um this is his like his little you know words sort of word you know word summary of his article he tweeted i just read this because literally every single word in here is wrong like financially economically accounting wise This is conclusion. And again, monetary base is really just a reflection of the term structure of government liabilities. Does the central bank want to have long-dated liabilities, treasuries, or short-dated ones, reserves? Says nothing about the relative size of the currency.

All right, let's just break this down. And again, monetary base is really just a reflection of the term structure of government liabilities. I don't even know what he's saying. It doesn't make any sense. But apparently, he's saying that the central bank has a lot to do with government liabilities. I actually agree with that statement. But what he might not know is the mouthpiece that he is representing, the mainstream media, they don't say that at all. Remember, central banks are supposed to be independent of their governments. They're supposed to be independent. They work, in the US's case, they work for maximizing employment and they work for lowering, keeping as low as we can, managing inflation. Those are the two, the dual mandate

of the Federal Reserve. Other central banks have different mandates. Europeans are just about keeping inflation in check because of their ravaged past after World War I and World War II. Anyway, in any event, monetary base is really just a reflection of the term structure of government liabilities. He doesn't seem to understand. I'll go back to the statement, but he doesn't seem to understand how the monetary base actually works. So the next point, does the central bank want to have long-dated liabilities, treasuries, or short-dated ones, reserves? So he's saying, as far as I can tell, is the central bank has treasuries as liabilities or reserves as liabilities. This is just, I've said it again and again and again, the reserves and the currency,

they are liabilities of the central bank, but what they hold are treasuries. That is their asset. So what he's saying here, as far as I can tell, is just he doesn't even know how it works. He doesn't know where treasuries sit on the central bank balance sheet. He doesn't know where reserves sit on the central bank balance sheet? Does the central bank want to have long-dated liabilities, treasuries, or short-dated ones, reserves? He's making it seem like there's some either or or some sort of managing it this way. It's never either or. It's always and. If the central bank wants to print money, they increase reserves. And once they do that, they buy treasuries from the market. They buy them from banks. So it's always and. They're opposite sides of the balance

sheet. And I wrote this to him. Reserves go up, they're treasuries. The Federal Reserve's treasuries on its balance sheet as an asset goes up. Reserves are liability, treasuries are an asset. So again, it shows me he doesn't understand what he's talking about when we're talking about the monetary base. Does the central bank want to have long-dated liabilities, treasuries, or short-dated ones, reserves? Treasuries are not a liability on the central bank's balance sheet. They're an asset. And reserves are liabilities, correct. But again, it's not either or, it's always and. So he's not even accounting-wise explaining how the process works. So I just, I don't get it there. And then last one, says nothing about the relative size of

the currency. This is groundbreaking. Says nothing about the relative size of the currency. The last I checked, monetary policy, which is implemented via the manipulation of the monetary base, which is the central bank's balance sheet, monetary policy, last I checked, had to do with money, had to do with the size of money. So to say that monetary policy that is manipulating the monetary base has nothing to do with the relative size of the currency. I mean, where does one go from there? I mean, it's almost like he's afraid to admit that, yes, this is the money supply that you need to be looking at because it is exploding, which is another thing. But we're talking about monetary policy. So again, it seems like a bunch of jumbled words that weren't really put together with any sort of understanding of actually how it worked.

So I don't know. Does that make sense to you? Do you have any questions there? yeah it does it makes it makes a ton of sense and then even going back to like the treasuries long-dated treasuries the fed is openly like this is like semantics argument but they've also been buying short short-dated treasuries as well correct like yeah they primarily buy short-dated treasuries they have this thing these operation twists remember they were buying some longer but the uh he's not he's saying that like the liabilities are not in the central bank the like treasuries or gilts what we call them from from the uk or owns is the german treasury or jgbs is the japanese government bond they're not liabilities of the central bank they're assets

of the central bank he's not even using the right words like he he doesn't know the difference and this is why i hate i'm getting to the first step so i hate economic arguments and economic blustering so full of hubris economics is the only it's the only field that i know where you literally just say the opposite of the fact of the definition and people like kind of take you seriously because they don't understand difference like if i was a surgeon and i said you know hand me that fork and i was talking to my you know colleague give me that fork that fork and think what what that fork right there and like you mean like the scalpel oh right the scalpel like i mean I mean, any other field of professional, rigorous professionalism, let's say, where you actually need to do a job, you can't just speak in words where no one understands you.

You can't just not use factual words, like real words that mean something. That's why I was never a Bitcoin cash person because I understood the word Bitcoin. I understood the network Bitcoin. It's the same type of thing. He's not even using the right language and he's trying to, I don't know, make some groundbreaking thing about the monetary base is really not that big a deal. He doesn't understand why it should be a part of any sort of scholarly analysis or anything. It doesn't make any sense at all. And so, again, that goes back to the first statement. Monetary base is just a reflection of the term structure of government liabilities. Central bank's not the one that issues treasuries. The treasury is.

The government, when it runs a deficit, when it can't pay for stuff, it has to sell debt. It has to sell bonds. It's like basic economics 101. The central bank does not issue the debt. The treasury does. And so this is really the crux of it. Like economists today, George Selgin, who we can talk about later as well, he's always mentioned this. I thoroughly agree with him.

Like economists, papers, people that talk about stuff, they never want to talk about the supply. Another beautiful spotlight that Bitcoin has shined a light on directly, succinctly, clearly, and wonderfully is the supply matters, right? I mean, in economics, Cadillac, like in very simple terms, price, supply, demand, price, supply, demand, these things matter. Bitcoin is very, very clear, but we don't even know what the money supply is of the US or like we're trying to figure that out. That's why I'm doing this exhibit here. That is the money. The central bank controls the money. They do not control the amount of treasuries. The amount of treasuries is controlled by the treasury. And so if he's saying that, oh, they work hand in hand, I'd actually agree with him. But he should, you know, that's not openly admit that. Yeah. First of all, that's not the argument to hear on mainstream media. The central bank is independent. They're working for the people, controlling unemployment, all of these things, and also interest rates. People love to talk about interest rates, like a marginal change in interest rate here will change the debt payments here. We can afford to do this stimulus there. All of that stuff is just very, very short-term, short-term stuff. But it completely ignores the main thing, which is the supply. where where would that impetus to change interest rate comes from it comes from the supply of money

so to clarify to clarify monetary policy like why does the central bank exist it exists for one reason it exists for the government to uh pay for its unpaid debts and it's those debts that the government doesn't want to simply borrow from the general public by itself that's why it's there it's definitely there as well for the banks. There's monopolistic things, all this other stuff about keeping interest rates low for its banking friends. And I really like banking history. We can talk about banks. I have no problem with banks, but banks that are in this monopolistic structure of central banking, that's where I would have a problem with. And I think many other Austrians and Bitcoiners do as well. So to clarify, the only thing that central bank

does at the end of the day is it buys its own government's bonds out of the marketplace. So if you're buying, and it does that by printing money, you print money, you buy bonds. What happens if you did not have this buyer before? All of a sudden, you have this huge buyer that has monopolistic privilege. It can print money. It can buy bonds. What does that do to the government, the price of government debt? It will go up. It'll go up because you have this buyer here, this massive buyer that was not there before. That's what the central bank is there. So it's there to prop up. It's the creative floor in the price of government debt. It's to keep sort of the wheels turning, but in a way that seems better because presumably,

again, economically, all I can say is like if Ceteris Paribus, if the central bank was not there buying those bonds, the price would fall. And again, bonds, just like real estate, price is inverse to yield or the interest rate. So if the price falls, rates will rise. It'll be painful for people yeah so essentially central banks stepping in lender of last resort holding that price stable so the interest rate remains relatively low so that the government in the economy that the government represents doesn't have to grow at a rate at which it would not be able to pay back the debt it's accrued is that at a rate at a rate that's just ceteris paribus uh clearly going to be a higher interest rate than if that central bank was not there so that's

what they do. That's what the central bank does. It buys the government's liabilities. But again, monetary base is just a reflection of the term structure of government liability. Monetary base has nothing to do with the term. The treasury sets the term structure. They set it in the market. Investors, okay, I want to buy a one-month bill, or I want to buy a 30-year bond. Austria, I think, has a 100-year bond. There's different marketplaces, different things. Some are crazy. Some are normal. The market sets those things. And that's a reflection between the market and the government. And is government good? Is government bad? Monetary base, it's just words that clearly show that he doesn't understand the economics of how it works. And again, so just to

say, does the central bank want to have long-dated liabilities, treasuries, or short-dated ones, reserves? You just got to look at a balance sheet, man. I mean, that's accounting 101. This is Economics 101. The central bank has nothing to do with the production of government debt, at least so your networks say. They're completely independent. The government does its thing. If it needs someone to buy its debt, well, the Federal Reserve might decide to come in and buy it. But that has nothing to do with it. Any buying or selling of government debt will never change the term structure of government liability. The Treasury, when the federal reserve owns the treasury bonds except instead of like a pension fund or a bank

or family office the treasury still has to pay interest the federal reserve like it didn't change you know it is true that central banks typically give back most of the uh not most but a certain percentage of the uh interest back to the treasury after they pay their expenses that is true that is true but still they pay interest i mean the the the debt is still sitting there it's just a question is it owned by banks or is it owned by the central bank um but again at the end like again i'm giving longer answers than i thought when i was just thinking about talking about with this with you but uh the words matter yeah the words matter in this summary it clearly shows he doesn't know what the monetary base means uh it clearly shows he doesn't know that when treasuries sit on a

central bank balance sheet, they are assets. They're not liabilities. They're assets for the central bank and the reserves, the monetary base is what matches that typically, mostly on the other side. And that's how they get money into the system. That's how they print money. And that's also how the state kind of keeps ahead of the market in general, keeps the price of its bonds higher in general than otherwise it would be, ceteris paribus, because there's a floor being set by this monopolistic central bank, which has apparently the independent privilege or independent authority to buy its bonds out of the marketplace if it chooses. Again, if it buys the bonds, more reserves are going into the economy. That is an increase in the money supply. If it

sells the reserves, sorry, if it sells the treasuries, did I say reserves? If it buys the treasuries. It prints money, prints reserves into banks. The reserves go into the market. That's an increase in the money stock. It has everything to do with the relative size of the currency, going to his last statement. Treasuries come out of the market. They sit in the central bank, but they still need to have interest paid on them. The term structure has nothing to do with it. Then when the central bank wants to decrease the money supply, it sells those same bonds back to the bank, those banks and pension funds, family offices, whatever, they pay for those bonds with reserves, which go back into the central bank, central bank, and then burn them

or whatever and remove that money. But it has everything to do with the money supply. This is a definition of monetary policy. Last I checked, monetary policy had to do with money. Like we're talking about money. We're talking about Bitcoin. Bitcoin is money. This has everything to do square on with what you know bitcoin is about money is about and and and just the the word basic money basic money so it's it's a it's a laughable statement um you got to get you got to get correct with the words and you know treasuries on the central bank balance sheet assets they're not liabilities yeah i mean it should be pretty straightforward that the treasuries or liabilities of the treasury you have to pay that back you have to grow your economy

a profitable economy a growing gdp if you will to pay back the interest on those treasuries that you've issued yeah yeah it should be pretty straightforward i mean that is economics 101. yeah and i i'll also say i i believe people like francis coppola never give us many many many Bitcoiners actually producing content, the benefit of the doubt. If you had tuned into our podcast, if you actually listened to what we were saying, from 2014 to 2019, we were never saying that the Federal Reserve was printing money. You never would have caught that from us on our show from 20... Well, we started in 2017. But if you're looking at this chart, it's still on the screen, right um look at that green that's the base uh monetary base of the u.s dollar see from 20

mid 2014 down to 2019 they were trying to take money out of the economy they're letting um they you know they weren't uh they were letting some of those uh treasuries expire they weren't rolling them over they weren't putting more money into the banking system they were trying to use this this word that was used all the time normalized normalized from the huge qe that happen after the global financial crisis. So words matter. There is a money supply that means something. We talk about the printing press. This is the printing press. So you would never heard it from us that the central bank of the United States was printing from 2014 to 2019. Other central banks did. European Union did. China did. Other central banks were increasing. Japan did. But

But, you know, the point is, like, they're very unfair to Bitcoiners in general because Bitcoiners come up with a lot of great content. They educate people. They're very friendly. They're very good with their time. And it's just real stuff. Like, if I was a, sorry, get on these tangents. If I was, like, in my 20s. On the tangent.

Don't worry about the tangents. Keep tangent. I would. And I was this person as well, right? I was trying to get to the bottom of this. understanding the money printing understanding the monopoly understanding legal tender laws understanding fdic insurance yeah you get you know if this stuff matters and you believe it matters and you want to understand it you know you you do like i can understand why some bitcoiners a lot

who are young or in their 20s that might say stuff like you know central bank is printing all the time or this and that you know it's just it's it's natural but the great content is not coming from like these you know harvard economists or whatever who larry white always mentions larry always uh makes this uh this caveat or this like points out that you know where where is the budget for these economic papers and these you know uh rationalizations for quantitative easing where are they coming from it's obviously government grants and subsidies so you know it's it's clear who's wagging what tail there that's coming up. But Bitcoiners, they don't have that. Of course, we have our biases. We have what we appreciate and what is important to us.

You and I, we might not agree on everything, but our... And you might not even do... Well, this is why I'm on your show, right? And this is how it works with everything. People have things that are important to them. This is one of the things that I do in my own time. Maybe I can get it into something a little bit more money-making in the future. but I'm doing what I do because I think that it's important. I think it's important to understand. I think it's important to educate people about it. Likewise, you're doing the same with a lot of other people every day,

all day, right? Other guests. And like, yeah, we do have biases. Sometimes we're going to agree here or there. And it is true. We, we, at the end goal, we all agree, right? We all agree that there is no control of the money supply with these legacy fiat financial systems. Bitcoin solves so many other problems. And then technologically, what developers are working on is just incredible. I mean, with Schnoor Taproot, I mean, that gets going like it's just going to be, there's

incredible developments of the legacy financial system. My point of just saying all that is, if you look hard at the Bitcoin community, they're educating very specifically with very real things like very tangible things very real world things and these sort of train spotting no skin in the game um just sort of fluff words when you just look you just you just look at like one paragraph concluding paragraph in this case it's it's obvious to see that there's no skin in the game and just does not does not have any understanding of what the facts of the matter are i think it's i think it's it's mind-boggling it's mind-boggling that i don't know if i were if i were a subscriber to to him or any of these other people that

talk so much shit about bitcoin you know what what is what does joe know about japan that i don't like should i be shorting the japanese yen i mean put your money where your mouth is i mean like if you just think that we should just scratch japan off this list because you know something that we don't uh tell me you know i i don't i just don't know where they're going right like we're we're putting like real cold hard facts real numbers i mean the development behind this stuff is incredible uh yeah our conclusion is we're biased we have you know we we have we're invested for sure um but at least we have skin in the game and so again if i was a 20 year old reading this stuff i would not waste my time i've done this i've done this by the way i might say like don't if

you're going to read newsletters and stuff um you're just going to get a few charts and then a bunch of basically uh basically your biases will be confirmed for the rest of that stuff and uh so go for it you know do it if you want but like really if you want to really understand it get an education on it i would say you know read a lot of the old austrian uh literature venture, Macy's, Rothbard, Hayek. I'm a huge fan of the free banking school as well, which I think we can derive some nuggets about the importance of banking without a central bank interfering. So that would be Dr. Selgin and Dr. White. My listeners know that as well. Those are the places where you're really going to start to understand if you want to really get a grasp of how the

financial system works or this, or I'm happy to flex a little bit and pump what we've been doing. I mean, I'm not going to stop publishing this just because some random, you know, trolling mainstream known coiners or whatever you would call them. I don't know. Just don't think Japan should be on there. It's just it's it's it's really mind boggling. It is mind boggling. We all have our biases. I don't deny that I have biases, but you've got to start from a place of solid ground. Like you've got to you've got to start from real facts, real definitions, real words. you got to understand how the balance sheet works how the mechanics of money creation work and you know newsletters just aren't going to get it get you that you're going to get some charts that

confirm your bot some charts some words that confirm your biases or if you don't agree with that you're not going to read that newsletter so um i it's that's another general tangent like no i think maybe i will start a newsletter someday but uh now i'm just worried about putting out the facts man i'm just i'm taking real numbers and putting them down now somebody writes a newsletter and i fucked up like the monetary base last month it's not easy but i i do agree big winners wear their biases on their sleeves like i had marty's bent literally top i didn't even think about that talking with you about your newsletter no it's okay it's okay this comes with the territory that's the risk i take writing every day but that's what i say like

hey this is my bent this is my inclination of the information that i've digested in the last 24 hours just wear that on your sleeve like hey disclaimer this is what i'm thinking and i again i'm a bitcoiner i want bitcoin to succeed i own bitcoin uh you make that apparent and i think that's completely ethical whereas like you're saying the the other side the traditional economic side is not always as as transparent of of their intent and their biases as well there's no skin in the game and um they're great writers i mean matt levine uh he uh has great uh bloomberg newsletter i subscribe to uh fantastic but it's just hilarious to watch him get triggered from bitcoin and crypto and dogecoin um he just gets triggered again and again and you know writes

great stuff but um it's it's just really interesting to see because it's growing i mean you can't you can't deny it obviously the only thing we care about is price not we you and me but like the collective we as a society like price really really will push the needle as far as you know interest and adoption everything that's that's true it's a it's an unfortunate truth right like not as many people like us like digging into the numbers trying to understand it um so yes it's always this push-pull stuff i don't know i i'm starting to maybe ramble on a little bit more than i than i wanted to there but uh i think i think this is important nailing down on on the definition of the words that we're talking about and the comparisons

that we're making and and accurately portraying what we're trying to to articulate here that's that's why i keep having you back on and i always write about your monetary base update because i think it is again like i said in the beginning of this episode the the most clear signal of bitcoin comparing it to its competitors which are base monies and i appreciate that my friend definitely do definitely do and uh yeah like my point about newsletters just to be clear uh go for it i'm speaking specifically like bitcoiners in their 20s trying to trying to absorb this stuff uh everybody's going to push their bias for sure try to stick with you know some classical stuff that stood the test of time you know you know what has government done to our money

old sort of books pamphlets like this and then yeah read like if you really want to know like what's happening to the money supply look at the numbers so that's like what we're we're trying to do there but but yeah i've you're always going to get there's always going to be bias and whatever any anyone puts out like lynn alden's great right she's fantastic um she'll put she'll bombard you with information and she does a pretty good job i think of not letting her biases uh come through but um you know and then you start to get in the world of investing you know this or that so there's there's definitely there's uh there's challenges to wade through some of this stuff i think if you're a young person trying to soak up a lot of this a lot

of this education and and again economics this again this is what i was thinking about in the back of my mind the whole time it's like what other industry can you just say a word backwards opposite the like not only incorrect but the opposite of correct like just you can say these words they make no sense in the context of how you know of what you're critiquing or whatever but then you know people just kind of shrug and say oh yeah that makes sense you know yeah like i was even looking at some of these other quotes like there's mainstream financial bloggers now quoting oh yeah that makes sense good good point joe or whatever and uh i'm just like these guys don't know how it works they don't know uh they don't know how it works and uh it's one thing

to just say okay money print money print money print you know printing press go burr government's bad this and that this and that i'm just saying look at the numbers and uh and decide for yourself yeah well let's look at the numbers let's dive into it like you said between middle of 2014 to was late 2019 yeah the fed was was taking money out of the economy correct um but that that has since changed since the the onset of the economic lockdowns and the the stimulus that ensued and we've seen an insane amount of base money growth over the last year and a half now or year and a couple months to be specific what what stood out to you from q1 excuse me q4 2020 to q1 2021 well uh canada is uh is a country that um traditionally was pretty stable and pretty uh

pretty modest as far as like its money printing went its uh supply of its uh monetary base had a lot of uh historical good policies surrounding banking and money they did start a central bank one of the last to ever start it in the modern world in 1935 i believe um we've talked about that i think on your show as well i've talked about other places uh canada actually has a lot of success um in banking they didn't even feel like they needed to own gold which was a stupid decision because they sold a lot of their gold and then gold went up but um yeah in in really recent years they have just exploded on scene they weren't even in the top 10 um last year and then because of covid uh and the amount of printing that they did i actually made one chart

for ridolfo um let me see if i can find this link and i'll send it to you uh but basically um you They were going along at 7% a year, which is a lot, by the way, but a stable 7% a year for 80 years. And then since basically January of last year, March of last year, whatever, they've gone at a 280% annualized growth rate, which is obviously just exploding. And also to be clear, when I write these things and I talk about these percentages, it's not like I'm saying, All right. It's just fantastic. The numbers are going high. Bitcoin has to do great. Yada, yada, yada. It's not a good thing. I mean, like, you know, COVID is not a good thing. The way the governments respond to it's not a good thing. I'm not happy that these things are happening this way. That's just, again, that's another point. By the way, the only sort of catalactic statement, the only economic statement that I make in this exhibit is when I talk about, you know, what does a rising base money supply mean? Well, ceteris paribus, that is all things equal otherwise, a rising base money supply has to equal a rise in prices.

It's like one of the most basic economic things again, right? like catalactic economics, supply, demand, price. We have to focus on these things. You can't just look at interest rates. You can't look at what the Federal Reserve is targeting or the ECB is targeting. You got to look at the supply to understand this. Now, there are plenty of things in economics. There's a lot of hubris. There's a lot of things happening from all angles. It's hard to understand some of this stuff, but just focus on the basics, ceteris paribus, all things equal a rising base money supply has to it has to mean uh rising prices now the world doesn't work in ceteris paris right so we you know you will have some increase in

demand for money you will have some chronic capitalism you will have some projects that are fueled and do great because of low interest rates and money printing you'll have certain people that gain a small percentage of people that gain you have more people that lose um but those are those are the things that really i want to talk about there so canada has been really uh crazy um also another one that i added uh let's see if i can find the tweet it's just again going back to the u.s because that's uh it's your market it's many people's market um that i talked to as well my home market as well if you go to tweets uh 55 55 here we go i thought i only sold 26 on the uh uh i started i have you twitter lets you only do

25 at once and then i add on more behind the curtain there because i have like a database of all those different tweets and change some and whatever let me see a 55 here we go that's a good one too we'll go back to that but so talk about like things that might surprise you or change i wasn't doing this one and this by the way when i get the website up and running and much better can you click on that the picture yeah yeah so this is something that you'll see as well from the from the new and improved website in hopefully not too distant future. Starting to, again, take these hard and real figures of the money supply and then look at other things. And we can start to talk about inflation as well here, Marty. But look at

other things that this affects. So let's just run through it. In 2000, so I'm picking, I am obviously being, I'm well aware that most of the money printing that the United States did happened after the year 2000. I've been after the dot-com boom and bust and then from then on out. But nonetheless, the monetary base was only about 600 billion in 2000. Now it's 5.8 trillion.

Okay, so compounded from those 20 years, that is a 12.1% compound growth or doubling every 6.1 year. Doubling is very important, I think, for a lot of people who don't understand when they're trying to learn this stuff. Compounded is the figure you want. That's what a yield is of a government bond.

It doesn't matter if it's a six-month bond, a 12-month bond, a 36-month bond, a 30-year bond. It's always going to be quoted as a price of the yield. That is basically how much money you're going to earn once all is said and done. Your coupon payments and if there was any discount up front paid back, that's the money that you make annualized. And that's the same thing as an IRR, yield to maturity. You hear these things, compound annual growth. It's a very strong number. the rule of 72 is very helpful, I think, for people learning this stuff. So

10% fits perfectly with the rule of 72. You would think that a 10% growth over a certain amount of years would mean that the thing would double after 10 years, but that's not how compounding works. Thomas Jefferson said it's the eighth wonder of the world, compounding. The rule of 72 works perfect with 10. So 72 divided by 10, forget the percent sign, just forget the percent side. 72 divided by 10, a 10% return that's going to grow, that's going to double. That tells you the doubling time every 7.2 years. So that's what a 10% return would do. So just keep that in mind. That's why I always show compounding. I don't show anything else. I don't track prices. And let's talk about prices in a

second because inflation is always these stupid debates make their way back into the media about inflation. Again, this is real inflation. This is money growth. This is a classical definition of inflation. So we've got the annual GDP in 2000, it was about 10 trillion, now it's 21 trillion. So GDP, as far as a growth rate, only grows 3.7% a year, but money grew 12.1%, something to keep in mind. Another way to put that, $1 base money in 2000 would get you $17 of GDP. In 2021, March, $1 of base money, $3.61 of GDP now. So again, I really like looking at things this way. Looking at things as multiples. We don't have to inflation adjust this. Just look at it, how it was at one period. Look at how it was in this period. The numerator and the

denominator didn't change as a thing. So you don't have to inflation adjust it. Got unemployment as well. Obviously, we're at a higher unemployment, but we're at a way higher monetary base. So you had $87 billion of base money printed per 1% of unemployment in 2000, $87 billion. Now you have $546 billion. So just for 1% of unemployment, right, was this Federal Reserve supposed to be their mandate. It cost them $546 billion in base money, just for 1% of unemployment today. It only cost you $87 billion. You don't have to inflation adjust this. This is just a multiple. It cost you $27 billion in 2000. Debt obviously has grown. It was $5 trillion in 2000. Now it's $27 trillion. That's an 8.3% compounded growth. They're doubling almost

every nine years. Gold cap is about $1 trillion in 2000. Now it's about $10 trillion. Again, around this 12% growth rate. S&P with dividends. These numbers are with dividends in case you're wondering. 7.7% growth. So even if you were invested in stocks, you wouldn't have kept up with gold. You wouldn't have kept up with government debt. You wouldn't have kept up with the growth of base money. And then bonds is actually just a total return index by Bloomberg, 4.7% for government bonds. So again, just putting the numbers out there really without much analysis, make of it what you will. But you want to start to look at things this way rather than look at an inflation. It's because these sort of metrics, like when you look at just how many X

Did it take, you know, how many dollars of base money per unemployment percentage or per GDP? Those things are more interesting to me than inflation. And this debate comes, you know, every like couple quarters, you know, Peter Schiff gets on CNBC before he starts badmouthing Bitcoin. He talks about inflation. Everybody talks about it. It's interesting that this inflation debate is rearing its head again. uh one thing i can say i'm never ever ever gonna have inflation on the website or amazing it gets or people like it or they don't you will never ever see a government

inflation a government cpi ppi a government created index of prices on my website it's just worthless i mean it's completely worthless thing to analyze as john williams you and i did that uh calculation on shadow stats a while back john williams uses the calculations that they did in the 80s, in the 80s. And he gets a very different number than the numbers they produce today. But even then, look, John Williams says he's kind of typically a bearish guy. I'm not typically bearish in general about a lot of things. Like I said, there's great things about the Japanese economy. Maybe not so great things. There's great things about the US economy. Maybe not so great things. But if you want to look at what we're interested in here, which is money,

then you got to look at the actual numbers. You got to look at the balance sheet, look at the supply look at the real thing this made-up thing about prices it's just never going to be accurate i remember after the 2008 crisis like 10 you know 11 11 years ago 2010 maybe um i forget i can't remember if it was a new york fed governor but it's in new york i think it was a new york fed governor was like talking to a group of people in like brooklyn and he's saying you know because inflation was just prices obviously were skyrocketing i know you've written about this wonderfully as well about just samples, obvious samples of prices that are so much higher than they were a year ago, two years ago, three, four, five years ago, 10 years ago. But even in 2010,

prices were skyrocketing and people were struggling. And obviously they were struggling for their credit problems as well. But he's like, it was like a town hall kind of thing. He's like, you got to look at the whole picture. Technology is helping you. iPads are going down. And this one person in the audience is like, I can't eat an iPad. That's the basic thing. I mean, it's just, it's, it's, it's nonsense, man. I cannot, I can't even, I have no patience for the inflation deflation debate or like the, the, the, the, what the CPI means.

It's just worthless. It's impossible. It's impossible. It's literally impossible. Your, your, uh, your threshold for some price index is going to be different than mine because you're going to buy things that are different than mine. you you might have a different uh threshold meaning like some tolerance than i do it doesn't mean anything at all there's no way that you can manage prices well that's why i think of this chart

um on tweet 55 that you have pulled up uh the one dollar base money will get you x dollars of gdp compared to 2000 2021 i think that purchasing power or that productive productivity of that dollar is that how you describe it yeah they call it they use a multiple they call it a multi like a multiple that that's been used in the media and you do not need to inflation adjust that it's the numerator is the same denominator is the same it's just a multiple you can you don't need dollars so you can say x like one one dollar of uh base money used to be 17x on gdp gdp was 17x one dollar base money now it's only 3.6x yeah so you have to spend a lot more dollars to get the same amount of gdp that was being produced in 2000 which is but you do not need to inflation

just that number you do not no i mean that's that's what i'm trying to get at it's like maybe a better metric than inflation that's what i'm hoping to do right numbers out yeah yeah no that's that's a pretty stark number too so you would need more than five x the amount of dollars today to produce one dollar gdp than you would have in 2000 which isn't that's scary so like i guess jumping back into like the update q1 2021 and where the fit is right now and i know you don't want to put inflation in your numbers that's like the big topic this week cpi came out at 4.2 percent april year on year growth um and that's shocked a lot of fed officials so i don't want to focus on the actual inflation

numbers but just the fact that the the fed expanded the monetary base significantly over the last 14 months and is is shocked that inflation is running hotter than they expected um and mind you the fed has set a target above its typical two percent target um because it actively wants to um overshoot their their inflation targets to attempt to stoke the the economy yeah and it's obvious i mean like uh what a lot of people don't know is from march basically about a year ago in march obviously when covid stuff started uh another drastic step the Federal Reserve took was it abolished this thing called the reserve ratio. And I don't know what the reserve ratio is. You don't know what the reserve ratio, the Federal Reserve damn near

doesn't know what the reserve ratio is, but it is a ratio that is supposed to be there for the safety of depositors. So basically that is a, for all the demand deposits that are out there, banks are supposed to keep about 10% in base money. This is this base money. It can be reserves or it can be actual cash and actually in fact it's about four cents on the dollar in reserve is in cash actual money in the vault it's impossible to think you can't keep this money in the vault there's no vault big enough to do it that way so most of the reserves anyway are in bank reserves they're not in cash in the vault but um anyway they abolished that last year and the reason they did that was because massive stimulus massive uh money printing and the uh there was no possible way that when

the treasury starts sending all these checks out also the treasury has a huge balance with the fed now which i don't want to confuse listeners based on what we're talking about before it's just another uh it's another uh uh uh what's a good word here to use it's just yet one more finagling uh um changing the definitions right like they they changed the facilities the definition of facilities and all of those two all of those two i'm just it's just it's another sneaky thing they're trying to do it's a sneaky thing it's it's a little bit of some uh some trickstery that um that they uh they have a huge balance so this again back to the i'll get into a little bit if the fed was independent all right they could do whatever

they want they you know never have any like if it really was independent they would never ever listen they wouldn't have to ever come in front of congress wouldn't do anything they just do whatever they want. And they manipulate the money supply as they see fit for the betterment of the economy. That's what would be independent. They're not independent, as we obviously know. But they're really not independent with this treasury balance. So they have about over $7 trillion in bonds as an asset. Treasuries as an asset, as we talked about on their balance sheet, which is huge. Because remember, this is another thing that I have yet to put on, but I will. $7 trillion is on their balance sheet, the debt, as we see on this slide, is 27 trillion. That ratio is the highest it's

ever been, no doubt. That's a huge number that they themselves control. But on the liability side, the reserves, which go into the economy, the money supply, that's only, as we see here, 5.8 trillion. But that difference, about 1.2, I haven't even checked it. It should be around 1.2, 1.3 trillion dollars that's the most hilarious like amazing thing that anyone would love to have it's basically the treasury having a checking account with the fed buying its own debt like there's nothing more hilarious about that like it's just it's completely off market right it's like sitting at the federal reserve they have their accounts and other nations are doing this too norway has some weird ones it has some big fluctuations i think it has to do with their uh

with their pension fund scheme. They have some really weird fluctuations in their trust. I haven't analyzed it enough to say anything more about that, but I will in the future. Norway does it. Federal Reserve is another one that's doing it like crazy. And European Union, a little bit, but not as much. But basically, this 1.2 trillion, it's like, I don't know, I'm going to sell some bonds to raise money for a hotel, but I'm going to print the money myself and then keep it on my own balance sheet and people are going to accept that money and build it.

I mean, it's just, it's complete distortion of the market. It's like the most extreme distortion of the market as you can think for that 1.2 trillion. It's a small-ish number compared to the 27 trillion in debt, but it's still a big number.

In any event, a lot of that has to do with the stimulus checks. That's sitting as a, like it's the treasury's account. the treasury pays their contractors, their expenses out of this account. It's sitting as a major checking account asset for the treasury, even though they have the liability outstanding and sitting with the Fed as an asset. So they just have this trillion dollar balance with the Fed and stimulus checks are coming out of that and all sorts of other payments.

And once that starts to circulate through the economy, there's no way you can hold these reserve ratios. I'm bringing it back to the reserve ratio point. The reserve ratios, there's no way. So they just abolished them a year ago. So they're doing different things. Europe has different reserve ratios entirely. They have something like 1%. In the US, it's like 10% for the biggest banks. It was 3.5% for the mid-sized banks. There was no reserve ratio for the smallest banks. There's another problem I have with central banking, as I've said before. None of us know what the reserve ratio is. You need the free market to do that. You need banks competing in the market with one another central bank doesn't know that they can't know it it's

impossible it's a planning board it's socialist there's no way um but uh that's just it's some more shenanigans shenanigans was the word i was using what looking for earlier just more shenanigans and trickery that the uh central bank is doing and yeah these are reasons why you're seeing this inflation uh money supplies are shooting up in all ranges now like demand deposits because people are depositing these treasury checks there's no way that the reserve ratio can stay intact so it's been abolished um the ratio just keep getting more insane i mean from that date that i have on this chart 2000 that was like the last time you had something normal and then once you had dot com and certainly once you had 2008 but even after dot com like nothing is normal like

it's just not again normal was a was an important thing i mean people use that for 50 years it's at 40 years uh post brentwood's collapse to talk about like what central banking should be and um everything is just completely off the map now so again i don't know where that's going to go i don't know exactly you know i'm not saying bitcoin goes to a billion dollars tomorrow um but obviously there are signs you know that that uh that that's pointing to yeah i mean it started in september 2019 when you had the overnight repost spasms yeah they they expanded their facility there to allow the ficc to access the fed window so they could essentially bail out margined hedge funds correct pre-covid pre-covid so it's not just covid that you know this stuff

was not working out there was no way that we're that we're not going to start printing money in 2020 anyway anyway because of those problems as you rightly put um so well let's get back to the topic of like have the fed and the treasury merged i talk about you mentioned earlier lynald and i last time she was on the podcast we talked about 1940s uh the inflation that was going on there and during that decade the fed and the treasury basically essentially publicly merged and made it made it very public and she would make the argument i believe that in the last year the fed and the the treasury have essentially merged but haven't made it public yet and you see signs of this like last week janet yellen sort of posturing as the treasury

secretary to force jerome powell to act in a certain way and then they had like a little back and forth and what you just described like them holding 1.2 trillion uh that would just create a thin air as a bank account uh with the fed and then the fed holds their treasuries it's like it's completely removed from the market it's like most it's like twilight zone i mean it's just just the most made-up thing you could have there's no market participants at all in that in that transaction just the fed and the treasury and then us getting stimulus checks and other things which will go into the economy um it is going into the i mean yeah that's what's frustrating is you have the the biased financial media pundits just just staring you straight in the face through the tv

screen like there's no inflation yeah what you're feeling at the grocery store at the gas station as you're trying to to rent or buy a home or go to college don't worry about any of that that's what are some good arguments if any that you hear from people trying to say that there is no inflation do you hear any no good arguments i mean there isn't it it's hard it's hard to take the argument seriously when you're looking again at your grocery bill or at your your how much money you just paid to fill up your tank or right now i'm looking for apartments um potentially not apartments i'm going to rent a house a home potentially buy a home but i i think i'm just going to remove myself from even thinking about buying a home because it's just so overheated

right now like i just hear stories family members buying homes having to go same day cash offer 20 over asking and 10 over asking if you don't need to do that you're not going to get the house and just keeps small suburbs in philadelphia that should not i should not be appreciating the way they are their real estate markets are are running crazy i spoke to a gentleman last week he's got a cabin in the middle of oklahoma he bought last year he's like yeah i could sell it for 80 above what i bought it for just like in the middle of oklahoma it's like what what is going on like how's their name yeah and let alone the most important things with you know medicine health care food and and education i mean who even knows what's gonna happen education in the western world

these days but um i'm hoping it implodes can you honestly tell me there's no inflation in those sectors i mean the quality's worse the prices are higher i mean i can guarantee you like my i went to you know public university university of cincinnati graduated in 2006 i can guarantee you it's over um it's maybe 2.5 x what tuition was when i was there you know 15 i mean it's well above this two percent doubling every 30 years uh which federal reserve targets and it's leaking down it's leaking it out in the high school i went to a private high school it was twelve thousand dollars my freshman year like 14 my senior year it's like 25 now i graduated in 2009 so it's 12 years yeah that's a doubling in 12 years so it's not a 30 year doubling it's less than half

that yeah exactly exactly uh so i think when they say two it's at least four and then it just doesn't matter other i mean like it's it's different for every person it's just it's just no way this is a planning board it's a planning board go back to what i say has nothing to do with racism or sjw or blm or whatever i mean look at where i am right now former soviet union is doing fine now we do have some uh saber rattling from our easterly neighbors but um like all white people over here had nothing to do with it their economies were shit for 50 years uh generations of people truly were like they lost um their identity like they you know they of course they find a way to get by but like there are a lot of tragic stories coming out of the soviet union uh

suicides and all this other stuff um it's socialism that's socialism it's starting to happen here and then you had the fed the new york fed specifically posturing like they're gonna they're going to solve social inequalities social inequities i think is actually the word they used you have the biden administration leveraging the treasury to go print this money to do a green new deal shutting down fracking on federal lands forcing the economy towards unreliable renewable energy and just which will inevitably drive up electricity prices we've seen this happened in germany already germany's a perfect use case for this they've had this transition over the last two decades and the residential price per kilowatt hour is like 35 cents which

is insane it's like three times what your average price is here in the united states and then you're seeing all this central planning in terms of money printing and then directing the the goods and services that american citizens can can actually leverage and and work on and it's completely distorting the markets in more ways than than one it's uh i mean and again i've told this story many times on the podcast saying when i worked at the managed futures fund i had a cio who was grew up in soviet russia he immigrated here in the 90s and after uh the patriot act specifically uh he he began to like pay attention he was like oh shit this is turning into the soviet bloc i fucking ran away from and it's hard to deny that we're not

becoming this this very centrally planned government or economy excuse me that is that the government whether it be trump or we're biden right like it doesn't matter it's bipartisan you pass the baton and just keep keep taking us further down the decentralization road yeah and that's that's a scary thing for sure and i i um i've been started to allude to it earlier right but I've been through that route um as I said I'm a bit older than you you know almost 10 years and so like I was doing a lot of this uh maybe um you know I was bearish a long time following these like perma bears like Peter Schiff or Jim Rickards or John Williams and uh at some point like I didn't want to do it anymore just because you know you got everybody has their

life you gotta protect your family and just have fun and everything and i was actually okay with that like you know we had bitcoin we had uh we were where we were uh economically it wasn't that great but we had bitcoin so like i felt okay about just you know being kind of a lazy anarchist like not really working to uh they're not really caring too much i mean like dated other than following the monetary base because it relates to bitcoin like i wasn't following like all the other inflation numbers and stuff like that. I just got tired of it. Lazy anarchists was one I'd use a lot. I'd rather go to a good cocktail party and talk to people and just enjoy conversation rather than trying to immediately, after the weather, get political and be mad about it and stuff.

I'm not saying that's what you do. I'm just saying I definitely know where you're coming from. I've changed definitely over the last 10 years, but I will say it's very depressing to see what's happened over the last year uh not only in the u.s but in uh western europe western europe's like u.s is actually doing better right now covid wise for like a freedom and stuff that you know you have and the rights that are afforded to americans compared to like canadians or europeans is better in the u.s and that is better but here it's not at all and they're like i mean you know the the the i don't know it's just like this inner workings of this like fear of like someone coming over your border and like the dictatorial arm of the government has to just

like immediately like just shove its fist in the air and like where you have to just all right like you're not going to be able to go outside you know for a period of three months like you're not germany you're not going to be able to cross borders even if you're just a regular trucker uh which they were doing for like three months now and like even if you had if you were vaccinated like all this like they're really hardcore draconian things that are happening all around europe and it's it is it is pretty scary and it's tenuous it's very tenuous and i i have a my perspective is a bit maybe unique or not unique but i guess different than let's say like a libertarian like in texas right so texans are awesome they're independent and they love

their uh you know freedom and and all that um i would say that probably libertarian in texas wouldn't even really care which i understand why but they wouldn't even really say like us should be meddling where they are uh in eastern europe but that's just a hard route like again we're like we're not 500 years into like an amazing future where private property and insurance and bitcoin and everything like this is just now it's really tough because we're seeing i mean my wife is from belarus i mean she's lithuanian but you know her family's from belarus uh they're just going through massive uh revolutions like staged suicides um protests i mean they're just getting beaten down russia it's happening now uh ukraine it's been happening since 2014 i was there

actually just before it erupted uh it was the mid of the middle of the second week in the sochi olympics the second week of sochi olympics and then you know he went and put and went into crimea a couple uh weeks after that um i don't know why that these crazy dictators feel like they need to uh you know just take well i do know why there's power is addictive and you can take advantage of this when the chips are down but it is bad it's tenuous right now i would say like it's unnerving because this is like i'm in the four-person union none of these like i can understand if a if a libertarian from texas would be like all right just don't fuck with the policies there like we have to like let these people solve it on their own like we say with much of u.s foreign policy

right like bring troops home stop you know messing with stuff but i'll just say at least for now where i am thank goodness that we do have this alliance which i also know is contrary to jefferson right trade with everyone alliance with no one okay it's contrary but um we have the nato alliance which is important the baltics where i am uniquely as well one of the three of the few countries that make their quota of defense spending to gdp very unique i mean and trump actually said that at the beginning of his term like you know you guys got to raise your spending right i mean we're picking up all the slack and it's true i mean it's embarrassing for europe really i mean like there was a time when the u.s had more than 90 of the nato budget like it was just i mean it

is embarrassing that that europe can't keep it up more but where i am they absolutely understand it they absolutely understand the tenuous delicate like situation of freedom that uh just just how delicate it is and unfortunately big countries like to play ping pong with smaller countries you have these proxy wars we're having proxy wars and in ukraine you know syria was about to be a proxy yeah it's just like there there's proxy wars that that big governments like to play and it's it is it's scary especially with the virus like i thought you could sort of get around it travel stay independent stay free but the virus they've shown they've shown us that they can just ground us and it's it's it's it's really unnerving to be over here i can say unfortunately not to be

too much of a debbie downer but it yeah i mean it's scary here i mean luckily here in the united states this is one thing that's been very encouraging if we're on a silver line the last year is this i don't want to say regression but like a retreat to states rights and letting the states sort of figure out which has been good incredibly incredibly encouraging to see and a trend that i hope only gets stronger from here on out and i think will get stronger the united states particularly but like you meant like canada is fucking insane right now not only the amount of money they're printing like what what they're doing to people is like dragging pastors out of church forcing people to stay in hotels and then pay for it when they when

they travel abroad when they come back literally being able to pull people over without any any suspicion other than the fact that they may be infected it's it's insane yeah it's incredibly scary right now like what is the future gonna look like like what like so back to like monetary policy it seems like you're just gonna print and print and print and so that's like the other thing the newsletter i read earlier this week the the pipeline shut down here even though it was driven by a ransomware attack and um a cyber attack if you will pipelines still shut down you have gas stations in the southeast of the country running dry um whether what regardless of what the impetus for that that lack of of gas in those areas is it's it's just something a little

tinder a little fire on a little bit of tinder that that can lead to a little bit of confidence collapse in the system and that's enough so maybe this is an interesting conversation we could have towards the end here is like how much of currency debasement is the expansion of the monetary base versus the collapsing confidence and the ability of the central bank or the government to maintain the monetary system can you ask that question another way so the fed has printed a bunch of money right over the last decade particularly right um yeah like things are okay inflation's not reported inflation's not that high people

are still living yeah but we know that it is right yeah but like it is currency debasement part monetary expansion like what we got here like how does it get to this point was it more expansion or lack of confidence and the ability to maintain the monetary system yeah good question i don't i don't think i know the answer i do think i understand that it can happen quickly and i do think that a good system can be resilient i've said this as well i believe on your show i've said it many places but um the first the the basically the worst of the canadian great depression which they had one as well uh was worse than the u.s depression comparatively and u.s had umpteen thousand bank failures canada had zero and zero bank failures so their system

was resilient it was more decentralized uh there was no central bank at the time in canada so you see what a you can at least with those examples you know in scotland is why i talked about this on nick's show as well they have this examples like the ir bank or certain banks that fail certain banks that don't um sweden had a free banking uh history as well in certain times like there are systems that can show us that a decentralized uh free of any government monopolistic control and mandating of this stuff with the iron fist like that can help you um and this what i say as well to bring it back you know i'm gonna get a jet soon but like to bring it back to the to i'm definitely speaking to like the bitcoiners are trying to learn this stuff trying

to figure it out they're hearing you know information overload from so many different places like yeah it's it's it's hard to it's hard to make sense of it all but i would just say you know thank goodness that we have bitcoin that is that escape hatch it is that escape valve it's practical right like because even though we we talk about like this there's real geopolitical geopolitical issues again i wished we were in you know some free completely anarcho-capitalist society 300 years from now and we'll take where we just everybody is protected relatively on balance with some private uh property private insurance private health care just don't have that so it's going to be uh probably a battle but i would also say um i hope the cooler heads

will like prevail from like the geopolitical issue but even if they don't definitely bitcoin is like the biggest tool that we have to protect our wealth from this inflation where you know they basically steal your savings so um i'm jumping around a lot of topics but like you know establish good relationships like i'm work with your bank like i i'm not against banks i know that that's like there's a lot of hardcore bitcoiners like totally against banks but like work with your bank try to get a good relationship if you don't like your bank you know caitlin long is uh i don't even know the latest what she's her bank should be launching soon well i think it's already launched is it launched has it launched great so i have to check that but

like there are you know competitive centralized crypto systems maybe competitive decentralized crypto systems i'm sure besides bitcoin but there are plenty of ways now where you can take control of your financial freedom and just step by step start to manage this stuff which is just incredible compared to when i was in my 20s when i was first time i heard about austrian economics and fraction reserve banking and all this stuff was post 2008 financial crisis where like you know i'm watching youtube videos from the 70s of milton friedman trying to you know stumble upon free banking uh stuff from you know hayek and dr selgin dr white um you know works for marie rothbard whatever there's a there's definitely like an academic side of this which i really really appreciate

really like and i think that just stick with the facts like stick with the numbers definitely try to find the signal over the noise you can do it that way uh by just looking at real numbers and yeah if you're going to read newsletters that reinforce your bias read marty's for sure and um and yeah just get after it i mean as far as you know be entrepreneurial work for yourself become free if you can't work for yourself at the moment do it in your spare time you know that's the best way to become entrepreneurs get paid by someone else but then in your spare time uh start uh you know start start your thing start your gig do whatever you're passionate about etc etc so i'm really a big fan of that like just try try as much as you can to bootstrap whatever whatever

interests you um i i've i'm not like a super super duper uh business owner entrepreneur whatever but i've been working for myself for like 10 years now and it's been uh it's been great you know i've been doing things like this like spreadsheets and where i love to talk about them and crunch numbers and you know um i i hope to continue that and i hope that younger bitcoiners can uh can i'm just i mean it's an it's amazing obviously like we're definitely we've gotten very serious i know we gotta you gotta go soon but like i i've got i've got at least 20 minutes so okay okay cool well i was just saying like i'm just to maybe switch it back to more of the positive stuff i'm super super stoked for all of the great stuff that is coming in bitcoin and yeah i'm i'm not

necessarily like just sell everything into bitcoin only do bitcoin like diversify if you want you know manage some income try to get some passive income maybe a bank can help you there maybe an exchange can help you there maybe uh avanti can help you there i'm speaking obviously mostly to an american audience here um so yeah just establish those relationships and uh and keep looking at the signal not the noise right well let's jump into this more like a free banking system built on bitcoin i mean you mentioned it earlier we mentioned selgen selgen called me out particularly oh yeah yeah we a little we had a little back and forth on twitter earlier this not again as listeners might know i mean with my uh delayed responses i'm just i don't have it on

my phone so i'm like no you're better off for that but but yeah what has studied selgen studied larry white free banking how finney december of 2010 described how a free banking system may evolve on bitcoin first i want to touch on get your get your thoughts on why like a selgin larry white of the world is so repulsed by bitcoin if you will what how do they not see this can bring their vision of the world into and to fruition then how would you envision a free banking system growing on bitcoin because how when he did it i don't think you can envision something like the lightning network or liquid at that time like does that right change the game yeah um to immediately answer that last question i'm not sure that lightning changes the game a federation like

liquid might a bit more because i feel like there's a bit more flexibility there among as much as i hate to say like a centralized party that can be more efficient uh which is basically all bank is as well but uh i do think that lightning is it's amazing it's unique and it's never been done before in the history of money and that you can actually lock bitcoin and then immediately transact with it in a less secure but more amazing way and it's locked like it's it's locked on the main chain there's some fees you got to pay to work that out and that's the question still and ease of use and all the rest but there's never been the case where you can lock base money basically lock it in place everybody sees it you know where it is it's

just like you know locking gold or something um instead of locking in a vault and trading paper you're actually trading little pieces of it but you know a representation of it it's not a representation of it but it's hard to describe the stuff in lightning you know sometimes in the traditional thing but it is locked it is absolutely locked on the main chain fully reserved you don't want to call it a note what would it be like um i don't know it's a it's a it's a peter todd actually said this i always use in the presentations as well it's a middle ground it's a middle ground it's not fully a uh claim it's not fully a claim like a banker's check like a credit card debit card venmo payment all that stuff is a is a is a claim that's why again

base money everything else is a claim that's why it's simple bitcoin everything else is a claim exchanges or claims uh so it's not fully a claim but it's also not fully under your control there is a potential security risk there's a potential risk with fees everything's you might not get it back once you dpeg so it's a middle ground he uses the word a middle ground state which is amazing i think that's like that's like a perfect way to describe it it's a middle ground state where it's not there's just i look at things very simple like there's m1 m2 m3 there's claims and there's base money lightning is somewhere in between anyway uh i do want to get back to your question about selgen because um i've seen this as well and and i i like him i like his scholarship

i like larry white's as well our listeners probably know you know he's the first one that we interviewed external guest i would still say that the interview that we did my it's our very first episode with a guest if you can find it uh he uh he he gives great we talk a lot about money credit bitcoin the differences all that stuff which you know again just trying to educate and understand that stuff for myself as well so i thought that was actually one of my favorite episodes that we've done but uh i don't i can't get inside of his head i have he's been on a second time we've talked to him a little bit about some of his things he ended that first episode in in one way which i think is very important because i said like you know what what is the role like

Like, sorry, I asked the question to him in the very first episode that we did. I said, when we talk about money, you know, it's just different. Again, like economics, it's hubris. There's all this stuff, right? But in something like, give me a comparison. So like in physics, we have the physicists that are like theoretical. They do their equations. They do their formulas.

They have to balance. They have to this, that. But like really in reality, like what we care about when we want to live, get on with our day, it's the engineers that make things work, right? Like an engineer does not have to have an exact 90 degree angle for like the house not to fall down. Right. I mean, it's, you know, it's not having to be exact, you know, like pure pristine, like how long is a meter? Like how long is a second?

Like these things don't have to be exactly correct. They can still work. Society can still work. Right. So in physics, the theoretical realm is physics. The real realm is engineering. As I see, like explain to me, Dr. Selgin, what do you see? How would you make that comparison with, with money? and he agreed with me he said i see where you're going and i would say he would say yes he said all this he said it's certainly not governments it's certainly not economists it's certainly not um you know he's he and i compared economists to physicists in that example right because

they're the theoretical ones are the ones that do the equations and that but he said as far as actually the system making this monetary system better it's not the physicists it's it's not the economists it's it's certainly not governments he said those words uh it's it's as you said he says it's the engineers or it's you know it's it's extracting extra gold from from the mine using cyanide or you know doesn't sound very environmental friendly for their woke some woke uh haters these days but like there are many things that happen in the monetary world um claim banking basically uh fractional reserve banking is one of those as well which i don't have a problem with, but then let's table that for another discussion. It is the, it is the

engineers, the creative people, the business people that make money work in reality. It's certainly not economists. It's certainly not governments. Like they're not the ones that make things work, which is something I completely agree with. So I would, I would keep that frame of reference in mind. And then you watch some of these tweets or things that these economists say sometimes about bitcoin i see where he's going like i know the tweets you're alluding to and uh you know because you sent them to me and i like i know i know um the uh we sent me some i didn't actually see the ones where you interacted with him but i read his i read his uh he had that he had that thread where he's just trying to say bitcoin will never become money because it's

got to compete with the dollar like money adoption comes down to network effects you're never going overcome the dollar's network effect yeah so here yes so so again like on our show he's told me like it's not going to be like the economists or governments they're going to do this and i look at the dollar as a government thing yeah the government could go away the dollar would still function absolutely as money for a time it would i mean the somali shilling did this in the 90s somali shilling uh was just going around like you know pirates and bandits using it and there was no somali central bank it's an it's an experiment in economics it's worked you don't need a government to have it work so the dollar could work without the government but i i look at the

dollars of government project right i mean it's it's a it's it's government that that's that's putting this stuff together whether you're talking about national defense or the quality of our treasuries or whatever which are always an asset if you hold them liability to the government um the the point that i'm getting to here is that um he's talking about these like big picture things about money and Bitcoin like he's like he knows that the dollar is definitely an insurmountable giant that just can't be overtaken but you know I don't know he knows as well as anybody I mean there hasn't every hundred years or so there's that has happened like the dollar overtook the pound a hundred years ago before that uh the Dutch had the reserve currency before that you

know the spanish the portuguese the peseta de ocho uh was one of the most popular floating uh freely floating pieces of silver around latin america um so there are a lot of like and these are they are government uh government currency yeah government issued currencies but that there's been one over the last you know couple hundred years so like i don't really necessarily see why he takes a stand that the dollars network effect needs to be or is insurmountable just because it's the dollar or just because it's huge because that's the argument that i would that i seem to get that he was taking that stance yeah it's perplexing it's like how do you expect bitcoin to develop that network effect overnight yeah 12 years even like it's gonna take 12 years exactly

it's gonna take i mean it's already remarkable i mean jesus fucking christ it's number six i mean it's number six right now uh seven if you include gold if you don't include gold if you don't include gold you have uh let's go in the let's go in the ranking of monetary bases we have now we have the euro is in u.s dollar equivalent more euros represented out there uh units uh as far as value goes you have the euro the dollar then the yen then you end and the pound and the bitcoin that's it and it's passed as of last year as i'm sorry as of this year as of february that passed the swiss franc that was a major one major major it actually passed it on musk's tweet his original tweet back in february about tesla using bitcoin um hasn't gone down below it when tesla made their

other comments about bitcoin and energy but anyway uh it's it's number six which is very interesting and again i i even saw something he said like oh i know there's a lot of bitcoiners saying that oh, it's bigger than Venezuela or whatever. And it is, but they still got to get in line behind the dollar. I agree. I mean, the network effect of the dollar, both base money and of claims that are people that have contracts derived in dollars, Euro dollars that are dollars that are held abroad, dollars meaning accounts, not actual physical dollars, because we're showing the physical dollars in our exhibit. I don't know what to say. I mean, like, of course, of course, the dollar is is the large it's been the largest network effect affected currency for the last 100

years um it's going at some i just don't think that it can continue forever especially look at these jokers that come in and out of government these days yeah and well you're already seeing its network effect waning a bit and you have the prize states russia china iran they're beginning to settle their exports in euro to go into your dollar another reason to show the euro itself is a powerful currency again i don't know why the euro shouldn't be in there or japan as well again it's very internal currency in japan but still um yeah there are i think it's important this is also another thing i want to say like i i'm like if you want to be an economist and make these prognostications you want to make some

i don't know even predictions i guess go for it but that's just not my not my bag i much more enjoy educating tracking uh finding the actual thing describing it in real economic legal and accounting terms and then trying to educate people about that and then bitcoiners they're so grateful with their time and education of everybody else anyway they're going to spread it they're going to talk about it and they you know make your own decisions that way so like i think i think it's just going to be natural organic but um there yeah there's plenty of like there's another guy uh so those like three of the guys that kind of did this modern free banking school was dr selgin dr white there's another guy's kevin dowd he um english i guess i think he's or is he i think

he's english anyway uh he um he was talking back in the chihash days about how bitcoin was going to suffer from mining centralization and the whole project was doomed and all this and i don't know should be saying this, but I was talking to Dr. Selgin and he was telling me that I was not a fan of him saying that. I was just coming into my role as Cato. Selgin is a nice, proper guy. He was like, I'm sitting there next to Kevin. We're looking for monetary alternatives and Kevin's just demonizing Bitcoin. Obviously, that was wrong. These are days like 2014, 2015. Obviously, that was way wrong. So for anybody who's relatively new to Bitcoin, the g hash story what we're describing here uh in 2014 2050 and i forget what it was uh g hash was a

mining pool it amassed more than 50 of the network hash rate i think it got up to 55 um and obviously that makes the network susceptible to a 51 attack people are freaking out peter todd who we mentioned earlier famously um came out was like all right this may be it i believe he sold some bitcoin too at that point um but great case study in decentralization and the natural incentives built into bitcoin the hash rate on gh collapsed basically overnight miners went to other mining pools to to make sure that the network was not susceptible to a 51 attack right right and i only use that example because again this is someone supposedly supposedly in the same ilk same school i i've read some of his writings enjoy them he appreciates free decentralized banking in the

golden days, which is absent of the central bank. I appreciate that as well. I think there's a lot of great scholarship. There's great things to learn. Unfortunately, what we have found always, and maybe this gets into sort of the end of your questions, like how does Bitcoin fit in and what can we do? Or how does Bitcoin fit in a free bank system? I think it's impossible. Basically, sorry. What is impossible is I think it's impossible to have a free banking system based on the reality that we've seen over the last few hundred years. I mean, If you have a system that works well, if it's in Sweden or Scotland or Canada or the Caribbean or somewhere remote, you can make some moats and you can make some interesting little experiments. But whether it has to do with national security, spending, debt, your bigger neighbor, war, which is a scary thing to talk about now, hopefully cooler heads will prevail.

But if there's something that these powers that be don't like, and Scotland and Canada in particular are good examples. I talked about this, Nick, as well. Britain, England was just south of Scotland. Same thing, US, just south of Canada. Both of these systems were running beautifully for hundreds of years in either case. and they were free of central banking and they eventually just succumbed to it they couldn't they couldn't keep it up they had to they had to start their own central banks they had to join the central bank in the case of scotland and uh and that was it so i i think it's impossible to go back to any sort of a fiat system gold has been tried you know the austrians mises rothbard they were so fond of gold they loved gold there are a lot of debt coiners that love gold i like gold i have no problem with gold but a lot of people you know take it too far there is only one shot, as far as I can tell, that's left as far as a free, sovereign, decentralized system

where you can truly control your money and not have to worry about it being shut down or capital controls or KYC, AML or whatever. But it's going to be a battle. It's going to be a battle. I'm saying nothing new here. I know you've talked about it with plenty of guests on your show, and we're trying to educate people about it. Like I said, I would take the route of diversify a little bit, try to open up dialogue with the bank about Bitcoin. I don't know if your bank really hates bitcoin or if it's like i don't know if b of a still hates bitcoin or like chase might be on some services like these obviously these banks have been typically averse to bitcoin in the past just move banks i don't know you know it's it's not going to get any better from that

side digital currencies are starting it's another thing uh there is a proto digital currency in brazil it's called a pix account uh fernando didn't actually point out a listener did a very uh kind of him to show that it's actually started there's this kind of it's not a blockchain based you know whatever that even means blockchain based cryptocurrency that's state-backed cbdc but it's it's a centrally controlled app that you open on your phone and it's working and brazil is a major economy and so they're actually doing it you know like china's like rolling it out they're doing it they're going to do it but like like that's that's actually a proto cbdc that's actually working i expect cbdc to continue i'm ready for them i'm ready for them on my exhibit uh cbdc

will be a part of it i'm prepared i'm ready for banks to start reserving bitcoin i'm ready for central banks to start reserving bitcoin i'm ready for all this so uh i know yeah you had a fed official come out this week i believe and say that the fed plans to launch the cbdc open source they're going to open source the code um and implementation and that's something like again i wish i had a need to need to talk to peter todd or someone about this like the technological side of this is is just baffling to me i mean how how could it be that uh if it is if it is somewhat exposed electronically like the the balances of these currencies floating around whether it be password protected or what i mean these things are gonna get hacked they're gonna get hacked

well or bitcoin's gonna get hacked so that's another risk from those but they're gonna happen they're gonna try that's why they're doing it slowly let's see what happens with brazil's currency here it started it started in like november um so i'm ready for it i'm tracking them uh i would just say you know keep your eye on the ball look at real numbers don't listen to gobble the gook people that don't you know understand the definitions of these things are just trying to like i don't know sway you for whatever strange reason like i don't even know the skin in the game that some of these people have that are no corners like what what are they getting like daily updates from the treasury you know or you know the central

government to tell them to say things i don't know why it means so much to them if they don't like bitcoin just stop talking about it move on but yeah it's again like is it like the concept of the elite overproduction is it something like they some of these people don't like seeing plebs the common man take part in this they need to be the the arbiter that's what i that's the sense i get from seljans of the world and and like the the mainstream economists the matt levine's the not that he's an economist but joe weisenthal and others like i didn't create this like there's no way some anon on the internet could create like the new global reserve currency and all these shit posters and basements are are participating getting a rich off of it there's no way

my my priors have taught me that this is not the way the world works and it's just fucking with people's brains yeah so i i'll read it i'd like to see your interaction i'll bring it back to selgin and your original question like uh i'm still giving him the benefit of the doubt as far as uh i know he's open to it i just think he has some very entrenched even though he said on my show you know it's certainly not governments it's certainly not economists that have come up with these monetary revolutions and support the money just he said that and i he said that humbly which i i believe that he has uh humility yeah humility compared to many other economists certainly state run economists uh i mean i've seen dr selgin i saw

him in uh excuse not an interview but debate safe at the soho forum a few years ago and i thought it was a very earnest and interesting back and forth i do think safe won the debate and like so like the context of our first our first interaction was yeah you were at that debate uh that was uh larry white what's his name um rogoff or was that the other one yeah that was rogoff and white yeah that's the one you were at selgin and save debated as well um i saw it yeah dr selgins he basically said there's no way bitcoin can compete with the u.s dollar network effect like would have to be same song same swan song it would it would have to be like like a massive improvement i just quote to you it was like bitcoin is a step function improvement on the

u.s dollar reserve system in the sense that it's scarce it's a distributed peer-to-peer scarce cash system so it beats it on policy where you have a cap supply and then it beats it on centrality um where it's distributed compared to the dollar so those are two step function improvements and then the network the digital aspect of it being able to create lightning and transfer this stuff globally uh instantly well not instantly but settlement time compared to final settlement in the traditional financial system is orders of magnitude better quicker balances his budget every 10 minutes yeah um and then he came back with like we're working on instant set final settlement within the traditional system and i was just yeah that's

strange to me that's strange to me i don't uh it's like my wire my recent wire transfers would beg to differ and and yeah uh i don't know i mean he he keeps trying to hedge like from what i read those that sweet sweet thread that you sent me like you know saying that i'm i am a fan of bitcoin hope succeeds but of course it's up against this and this like he knows better than anybody that this stuff happens shifts it's juggernaut type stuff takes 100 years you know currency can switch over 100 years might not take 100 years but it switches every 100 years and um it's just logical where we are in the digital age and everything but you know i'm more i'm more concerned so anyway i i don't know he does what he does and he's an economist um you don't have

speak on behalf of him no no i just say because i know you you know that i like his scholarship and i've been you know i do i would encourage people to read it i like a scholarship too i would encourage people to read it too it's like very important work yeah but the uh but then but then it is which is it's funny because going back to that pod like he said it's certainly that government's certainly economists that are going to come up with these innovations it's the engineers it's the developers but he doesn't talk like that when it when it comes down to it so he still talking the points of of the economists from on high really i mean from the economist in the beltway from the economist uh working with the federal reserve so um we'll see we'll see what

those uh if he changes his tune but um i don't i don't find anything interesting in following the next innovation of the federal reserve i'd rather just track the monetary base and then follow the innovations of Bitcoin because it's so much clearly better money and you have more control of it, more sovereignty. And, you know, if you want to dip your toe into or keep your toe in the existing financial system, like I said, keep working with your bank, try to get them involved in Bitcoin, try to, you know, just establish that dialogue. But like, there's just so many options now. It's amazing. It's absolutely amazing where we are. Yeah. God, you mentioned rogoff and now i want to ask you a question about nerp again before we get to nerp before we get to

to zerp and nerp and all of this goofy you know shenanigan type stuff huge huge treasury balances with central banks um all sorts of stuff uh the uh the the bottom line as far as uh as far as i can tell there is that it comes back to the money supply i mean monetary policy is about is about the money supply so they're going to tell you like okay it's it's about unemployment it's about controlling prices they can give you their own definition of prices it's it's it's this it has to be this right i mean maybe it's a little bit there's a margin for error this and that but it is this it's where it needs to be those are all those are all steps below and and i would i would argue uh confusing steps below on purpose to confuse the public like talking points again

the fed is independent all these things talk talking points from these journalists and from these whoever they're taking their their notes from their cues from none of that is as important as the money supply itself which they solely have control of and then of course that relationship with the central bank is putting a floor of price on their bonds buying their bonds when no one else will buy their bonds therefore increasing the price of bonds lowering the interest rate of bonds which will lower the rate of debt that they have to pay back those are the most important things when it comes to money supply it's that it's that symbiotic relationship between the central bank and the government and i don't see that ending anytime soon we can't end it like

this is you know i was railing about this in my 20s did me no good um like you know there's no reason to talk about we have bitcoin so uh i i honestly like when someone shows me it talks about like NERP or something in Europe versus the US. I showed them a picture of the monetary base of both. This is the supply. This is the actual supply of money. Don't talk to me about the interest rate. I don't care what some bank that's connected to the Danish central bank who might be getting some money actually to borrow. I don't care what they're getting and what that is doing to the economy. I care about the value of the money in my pocket and the money supply is what's going to affect that. So show me the money supply. I don't care about the interest rate,

the target rate, all that stuff. It's secondary. It's sort of a don't look over here what the hand is doing. It's secondary stuff. Money supply, as Bitcoin, again, shines that spotlight. That's where the action is at. Especially because that interest rate is only a target and they try to reach that target by manipulating the money supply. Yeah, exactly. I mean, no one says that anymore. They reach the target by manipulating the monetary base has everything to do with the money supply with interest rates uh you know with like the the money supply is the the crux of the matter it's the source it's the you know you can't go any further back and uh it would be great if we didn't have central banks manipulating the money supply

causing these price controls causing uh boom and bust cycles great if we didn't have it but unfortunately we do there's you know national security welfare all these sorts of you know The politic comes and you can't get away from these discussions, unfortunately. They're clearly dependent on each other. It's a symbiotic relationship. They're not independent. The central bank is never independent. It's obvious.

And yeah, just look at the money supply. If you don't worry about the value of the dollar in your wallet or the yen in your wallet or the euro in your wallet, look at the money supply. And that's the only economic statement that I make. Ceteris paribus, ceteris paribus. your rising money supply is always going to lead to an increase in prices well freaks matthew is diligently tracking the money supply over at crypto voices where can we find out more about you your updates well thanks marty yeah i mean at least i can do compared to what some of

the real developers and people are doing out there in bitcoin crypto voices.com crypto voices.com i've said this again people are just a broken record it will get better it will get faster it's going to be awesome hopefully get a little subscription site going as well for some uh dedicated listeners to actually uh you know see this a little bit better and more more intuitive more interactive crypto voices.com slash base money for what we're talking about and then we have a podcast as well uh sporadically at the moment i've said this many times my favorite bitcoin economics podcast out there i learn a lot from your podcast and i always learn from our conversation so thank you for your time this evening where you are this morning where i am and

uh can't wait to do it again man absolutely absolutely brother really appreciate it it's great peace and love freaks