TFTC: A Bitcoin Podcast - #293: Bitcoin and the Looming US Fiscal Crisis with Avik Roy

Episode Date: January 5, 2022

Join Marty as he sits down with Avik Roy, President of the Foundation for Research on Equal Opportunity, to discuss: - Think tanks - Energy policy and its affect on lower income individuals - Education - Healthcare - The looming US Fiscal Crisis - Why Bitcoin is an imperative for America moving forward - Educating DC about the opportunities Bitcoin provides - much more Follow Avik on Twitter Check out the Foundation for Research on Equal Opportunity Shoutout to our sponsors: Cash App Unchained Capital Braiins HodlHodl Bitcoin 2022 - use the code TFTC for 10% off

What is up, Freaks? It's your boy, Marty Bitt, here to introduce this episode of Tales from the Crypt. I have the immense pleasure of sitting down with Ovik Roy, the president of the Foundation for Research on Equal Opportunity. In November of last year, he wrote a piece, Bitcoin and the Looming U.S. Fiscal Disaster. It was a really good piece, one of the best pieces on Bitcoin and U.S. federal government policy, I believe that has been written to date uh in the first 13 years of bitcoin's existence uh happy uh day after genesis block day freaks i don't know it's the birthday i'm just going to say genesis block day yes it was officially mined on january 8th whatever like he just stamped it and the network started january

who cares january 3rd genesis block okay back to the interview incredible interview we get really into it i think this is the type of level-headed uh representative uh for bitcoin or somebody advocating for bitcoin on capitol hill whether you like the fact that people are advocating for against bitcoin on capital capital hill whether you think it's inconsequential whether you think it's going to only harm bitcoin in the long run i think you definitely need to listen to this episode because it gives a very compelling case that we should be getting out there and educating people about Bitcoin. Bitcoin, if you're an American, aligns very closely to the ideals that this family, we are a big family, this country was founded on. It embodies the ideal

of freedom and private property rights in a protocol that we like to call Bitcoin. I think you guys are going to like it. Let me know what you think. This report was brought to you by our good friends at the motherfucking Cash App. Cash App's here to help you stack sats, send sats, receive sats, and sell sats, if you so please. We're saying sats, sats, sats, sats, sats, because sats are the standard. There's 100 million sats in one whole Bitcoin. If you're out there, you're thinking, oh, I need to buy a whole Bitcoin. You don't have to buy a Bitcoin. You don't even have to buy a fraction of a Bitcoin. You can stack whole sats instead. Cash App makes it very easy. If you haven't downloaded the app yet, make sure you use the

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When you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. probably should be okay for we're finally getting this recording in the books uh we had to reschedule

once and then i'm sorry you've been driving all over austin before before we sat down here you're trying to figure out how many sats i could have mind driving my car around downtown austin but i couldn't do the math in my head yeah i was telling over we've been recording at my house uh and that was where the original episode was uh going to be recorded but we record outside of my house and it's a bit too cold today. So I snuck in to the offices of Unchained Capital where our new studio is going to be here in Austin to get in the setup so we can record indoors. But I'm very excited that we're finally doing this. I'm extremely grateful that you agreed to do this because I think the work that you're doing is very important. Thanks a lot. And thanks to Unchained

for putting you in this really nice new space. I'm looking forward to all the meetups we're going to do over here. Yeah, there's going to be a lot of meetups for you to get ready for it. Um, but let's jump into what you're doing. You're the president of the foundation for research on equal opportunity. And in preparation for this interview, I mean, I've been reading your mission statement and a bunch of the articles that you guys are putting out. And there's always been, uh, at least I'm 30 growing up, uh, in my life, uh, whenever a think tank has been mentioned, it's always been, uh, with a negative connotation, uh,

attached to it. But it seems like what you're doing at FreeOp is attempting to sort of change the connotation around think tanks and bring people across both sides of the aisle together. This is a fair assessment. Well, tell me, I'd just be interested in your perspective. When you say that there's a negative context to think tanks, what's your sense of what the reputation of think tanks is as a group? a bunch of academics getting together and trying to craft policy that maybe a lot of the times they aren't best equipped to draft because they don't have the real world experience or they are just hyper partisan and are trying to do things at one edge of the spectrum yeah both of those things

are definitely true and um yeah i i think you know it's so interesting because if you uh if you'd asked me 10 years ago that i'd you know tell and told me that i'd be starting a think tank today i would have been pretty surprised but um you know i i've had this kind of random career with a lot of zigs and zags i was uh you know i was training to be an academic scientist a molecular biologist and i went to med school and then i went into biotech investing and um know in the hedge fund business and then you know got interested in in um sound money and and austrian econ and all that during the financial crisis um and certainly had no problems with volatility dealing with the biotech sector and uh uh and at the same time this is all happening i

i got interested in public policy i got recruited to to help mitt romney with his uh health reform plan in 2012 because my first job out of med school was at bain capital which he had founded And so full circle, all of a sudden I'm working in public policy. And I'd always been interested in public policy but never had been directly involved in it. And, you know, long story short, I ended up working on a couple of presidential campaigns, one of which brought me to Austin. And that experience helped me to realize how important think tanks are. You know, when you run for president, let's say Marty Bent is running for president. And you hire one of your buddies to be your policy director

to help you come up with your plans for your agenda for running for president, all the things you want to fix, whether it's Bitcoin or anything else. And let's say you said to your staffer, you said, staffer, I want to fix the problem of student debt. Can you come up with a plan for me for fixing student debt? That staffer isn't going to come up with that plan on his own. He's going to call up his favorite three think tanks and find the scholars at those think tanks and say,

okay, what plans do you have? And then synthesize from there and come up with something, right? Because you're not going to come up with it yourself because you're worried that if I'm your staffer and I go to you, Marty, and say, okay, here's my plan that I just cooked up overnight, and then you go on CNN and have to articulate that and you get shredded in a debate or by a reporter or something else, you're going to look like an idiot, right? So you need plans that have been thought through and vetted that are also consistent with your philosophy in order to to come up with a plan to do the things you want to do. And so what I realized having this front row seat to presidential campaigns is that think tanks were really, really important,

but at the same time, what think tanks were providing policymakers, members of Congress, senators, presidential candidates, presidents, was not very good on multiple fronts. One, it wasn't just very good technically, like the actual policy outcomes that you would achieve would not be what the think tank experts would promise, to your point about the real world outcomes relative to the academic theories. And the other problem is a lot of times people will come up with plans that, whether they would work or not, have no chance of getting through Congress because they're politically impossible. And so you kind of have to do both, right? You have to have ideas that would actually achieve the result that you're hoping to achieve. And you also have to

come up with plans that can get enough public support to have a chance of becoming law. And that gets us to one of the problems you hear a lot about in America today, which is that we're fundamentally divided. You know, there's the left and the right, and they always hate each other. And, you know, we have this fundamental contest of values, right? And I think my observation and our argument has been the opposite, that actually most Americans want the same thing. Most Americans want this country to be a place in which anyone has a fair shot at success. If you work hard and you apply yourself, you can make it in America. That's what America has historically stood for, at least when we were growing up and kind of took for granted that idea, right? That's what makes

America exceptional. The idea that you can come here from anywhere, you can be born on the wrong side of the tracks and you could still make your way up in this country, right? That's supposed to be what America is about. And to the degree we're falling short on that, I think, you know, you'd find Republicans, Democrats, Libertarians, all sorts of people would agree that that's something we should aspire to, right? So in that way, our observation, our thesis at FRIO, the Foundation for Research on Equal Opportunity, and that name is very deliberate, our argument is that actually most Americans agree that equal opportunity is a principle that we all stand up for. We all want Americans to stand up for. And we may quibble or disagree about how to achieve it. We may disagree

or quibble about how to define it. But if we have that value that unites us, then we're actually not in a contest of values in which we should all hate each other and treat each other as enemies. We should actually try to get together and come up with ideas that we can persuade the public will achieve those goals of making America an economically fairer place. And by economically fair, I don't mean it in the way that, say, a Bernie Sanders means it. I mean in a place where everyone has that fair shot at success. And so that's why we started FreeUp. We thought, A, we had some insights into economics that allowed us to come up with ideas that could work.

And, B, we felt like we had some insights into politics in terms of coming up with an approach to these issues that could bring more people together and, most importantly, bring the rising generations together. Because, you know, the old codgers like to say about millennials and Gen Zers, oh, you know, you're all socialists, you know, you just don't understand what made America great, blah, blah, blah, blah, blah, you know, get off my lawn. And that's not what I'm a Gen Xer, and I don't observe that.

I observe, actually, millennials in general wanting an inclusive economy but believing in entrepreneurship, believing in innovation, not really being impressed by government bureaucracy and all the things that previous generations have kind of clogged us up with, right? So I'm actually very optimistic about the values that rising generations have. And I think our job at a productive think tank, hopefully, is to generate the ideas that can help realize that vision. Yeah. And I think you're putting great ideas out there. I mean, one, I've become passionate about the last two years is energy policy. And I'm very happy to see you pushing nuclear. It's like, all right, if we can agree, we want to use cleaner energy and we want

to bring cheaper energy, which is good. It benefits the people in the lower rungs of the economic ladder the most because it helps them reduce their cost of living on a month-to-month basis so that they can go do other things with their money, maybe save some money and reinvest capital into their own lives and their own well-being. And it's hilarious watching like the Green New Deal, the policies that they want to push through that particular act, which if enacted, you can make a very strong argument. I think we're seeing the products of these types of policies already playing out and proving the point that it's actually going to make these people worse off because you're just going to increase electricity costs for these people

while also making it less reliable. Yeah, you know, this is a great example of a free op issue. So one of the things that we do, the way we bracket what we do and make sure that we don't get distracted and we stay on point, is we require all of our scholars to center their work around ideas that expand economic freedom and improve the lives of Americans whose incomes or wealth are below the U.S. median. If it doesn't meet those two tests, we won't work on it.

And we are of the view, the kind of core idea in a sense behind FREEOP is that the most progressive idea ever invented is freedom. Freedom is the thing that has created more economic equality than any other idea that Humanity has ever conceived of and energy policy is a great example of this because the the standard Environmentalist progressive like left environmentalist policy menu is In order to reduce carbon emissions and save the planet We've got to make energy scarcer and more expensive so fewer people consume it and that's how we're gonna save the planet which is problematic on two fronts. First of all, it's profoundly pessimistic about human ingenuity,

right? It's profoundly pessimistic about our ability to come up with ways through technology to solve the problem of generating abundant energy that doesn't emit carbon dioxide. And the second problem with it is that it's highly anti-progressive economically, right? Because when you make energy more expensive, yes, the venture capitalists in Marin County are going to be fine. But if you have to commute two hours every day to your waiter job at a hotel in Santa Barbara from inland California, your costs have gone up. And then you have the Secretary of Transportation saying, well, we're going to create a commuter tax on you, basically punishing you for driving that two hours to the place that you can't afford to live to take this job so uh it's

profoundly regressive what uh what kind of the standard policy menu on the left on environmental policy and and and the thing is that the thing that's so um uh kind of crazy about about energy policy is that the technology exists today to solve a lot of these problems nuclear fission technology today, like 1960s era technology, is available to generate electricity in ways that reduce carbon emission. I mean, in France, I don't know what the exact numbers are today, but historically, 70% of all electricity in France is generated through nuclear power. There's no reason why that couldn't be true in the US. And now we have a whole swath of new technologies based on nuclear energy that can do even better, that address some of the problems

around waste. There were some of the problems around systemic risk. If your giant power plant somehow was to have a meltdown, which is a very, very, very rare event to begin with. But new technologies are even raising the standard further on that. So there's a lot to do there. And what's really cool is our new nuclear energy scholar is actually a guy who I found because he was a Bitcoiner. He was a guy who was on a Bitcoin telegram group in Austin. And he was announcing that he was having a meetup for people who are really interested in nuclear energy as the path for Bitcoin. I'm like, hey, I'm looking for a nuclear energy scholar. Let's have lunch. And here he is. I'm very bullish on nuclear and Bitcoin working together in the future. There's

small modular reactor companies coming to market and they want to solve, Oklo being one of them, I believe the problem they want to solve is bringing cheap electricity to cities and towns that are away from large population areas that are usually running off something like a diesel engine or a very expensive energy source. And they have this problem, like, all right, we can get to the city, we can get the reactors there, but it's going to take us time to build out the transmission lines to actually connect to the grid to then serve that electricity. city. And that's a lot of opportunity costs. We're waiting there for 18 months with this reactor and it's not making any revenue. Well, guess what? Bitcoin miners can show up and you don't have to build a miles long transmission line. They can hook up right to the source and produce revenue for you while you're building that out. Once that's built out, Bitcoin miners peel off, go to the next city. Yeah. I mean, it's really the deal that

Oklo signed with Compass Mining is a great example of how Bitcoin can help make the economics of nuclear power are more feasible because the one of the biggest challenges with nuclear energy is you have all these upfront costs to build the the power plant and uh and so you you have a lot of risk up front when you do that and so if you could sign a contract with a bitcoin miner say hey we're gonna we're gonna pay you for this energy uh so you don't have to build the grid or build the transmission lines or build the demand for your electricity that you're generating You have enough guaranteed coming in that it makes the plant more economically feasible. That's an incredible advantage.

And as you know, a lot of people have been kind of making this point more generally that Bitcoin actually can accelerate the implementation of nuclear energy and other cleaner power sources because of that. Because of the fact that it can address the economics of building the infrastructure. Yeah, one of the common sayings that Bitcoiners say is Bitcoin miners are the energy consumer of last resort. But in a lot of cases, I think people get it wrong. It's the first resort. Like when you want to build and bootstrap these operations, you need a first buyer. And then Bitcoin miners will always be that first resort if you're willing to give them a fair price. Yeah, I mean, the big problem in nuclear energy, and this is why we really wanted to invest in it from a think tank perspective, is the regulatory environment.

Basically, we have a federal agency, the Nuclear Regulatory Commission, that has not approved a new nuclear plant in, I don't know the exact number of years, but several decades. And there needs to be a complete overhaul of the way we regulate the construction of new plants. Basically, what we're doing is, you know, you have nuclear energy has enemies on both sides. The renewable guys, wind and solar, hate nuclear because they see it as a rival, as a threat, as a competitor. And then natural gas and the fossil guys don't like nuclear because, similarly, they see it as a competitor. And so everybody gangs up on nuclear, and nuclear has no friend. It's kind of this orphan in the energy debate. and the end result is nuclear plants are not only not getting approved by the NRC,

but various localities, big localities like New York City and California are closing their nuclear plants, which is crazy because like in California, they're saying, well, we're going to require everyone to have electric cars, but we're also going to shut down the nuclear power plants that provide us with electricity, which means you're going to have to have more coal-based power plants. So there's just, you know, the irrationality and stupidity is incredible for people who care, who claim to care a lot about these policy problems of CO2 and energy supply. So, you know, we're really excited about investing more. Like, you know, our past, historically, our energy department, our energy vertical has been more generalist on energy.

Like, basically, yes, let's move to a more carbon-free environment, but let's also do so in a way that recognizes the near-term needs for a cheap, affordable, abundant energy. And I think what we've decided, what we've realized is that the nuclear piece is really important to focus on because without people like us pushing for it, it's not going to happen. No. I mean, I love natural gas, oil, even coal to some extent, but I think anybody who is rational and logical can look at nuclear and say it's the most energy-dense resource out there. It is illogical that we're not trying to push this forward. It is weird, but the fact that they shut down Indian Point,

now they want to shut down Devil's Canyon, and Indian Point, replacing that with natural gas substations, Like you mentioned, in California, they're just going to import coal electricity from somewhere like Wyoming or somewhere else. And we live in a clown world. Why can't we just come to understand that this doesn't make any sense

and nobody's benefiting from this at the end of the day? Yeah, I mean, obviously in the last year or so, we've talked a lot about the energy FUD in Bitcoin land. And I'm not super worried about the energy FUD in the sense that, you know, as a think tanker, I spent a lot of time worrying about what Washington is trying to do to us, right? And the energy FUD, while there's a lot of rhetoric around it, I just don't see a lot of regulation or activity from the government on the horizon on the basis of Bitcoin, you know, requiring energy for its security. Yes, it's a talking

point. A lot of people talk about it, but I don't see it as a dominant factor in what Washington cares about. They care a lot more about the threat of money laundering, terrorism, evading SWIFT, evading taxes. Those are the things that they are particularly concerned about. Yes. Which leads us to what was the impetus for us getting together was the article you wrote in national affairs uh was a bitcoin in the u.s fiscal reckoning that's right and and so there was something you mentioned earlier that wanted me to tag that article which was the the uh baby boomers basically looking at millennials and zoomers and saying ah you guys don't work hard you just want things given to you but i think in that article there was a section where you

basically highlight like the last five decades specifically after 1971 were an anomaly in not only US history, but monetary history that that generation benefited greatly from. And we need to recognize that we are experiencing an anomaly in monetary history. And we should probably focus on transitioning out of that and not curbing Bitcoin adoption, which is potentially a lifeboat away from a fiscal reckoning, which seems inevitable at this point, when trillions lose meaning? And when somebody says the word trillions, they don't even blink anymore. You know, it was a very hard article to write. It's about 7,000 words or so, which might seem long. But actually, each kind of subtopic in the article, I had to kind of really breeze through.

Like the section on Bretton Woods and the departure of Bretton Woods is like a pretty short summary of that very complex period. Or, you know, talking about the Treasury bond market, like, which is a very important topic. Like you could easily write 20,000 words about that. I had to basically, that was a couple of paragraphs. So it was, it was challenging to put it all together, but, uh, uh, really gratified, uh, that, that people in the Bitcoin community and, and in Washington, uh, uh, uh, found it useful. So that's been, um, it's been really cool to see that. How bad is the fiscal situation in, in your opinion, from your perspective? it's worse than you think.

And what I mean by that is, one of the reasons I wrote the article is that, you know, Bitcoiners are fond of talking about, okay, we've got this monetary inflation, you know, all the money printing, the debt, the deficit, that's going to have this,

there's going to be this comeuppance, right? And the counter argument you hear from the establishment in D.C. of both parties is what we might call the mainstream policy community is that, well, you know, people have been saying, you know, you cranks out there, you sound money cranks have been saying this for decades, right? People were saying this in the 70s when the Bretton Woods departure happened. People were saying this in the 80s. People have been saying this for decades, literally,

and it hasn't happened yet. So why should we believe you? You know, you've been crying wolf for 40, 50 years and nothing has happened. So, you know, you're clearly wrong. And so one of the audiences I was really trying to address in this article was that audience to say, look, you're right. It's true that it hasn't seemed to have gone wrong yet. That's not exactly right because there are subtle and important things that have gone wrong. But it's also true that things haven't gone the way that the monitorists predicted they would, say, in the 70s, 80s, and 90s. And let's talk about that, why that is, and why you shouldn't be assured that that happy time will continue. So that was one audience I was trying to address in the piece.

Another audience I want to talk to in the piece is the audience that basically, obviously, has heard of Bitcoin in Washington. But again, they look at it as a negative, right? It's all about, well, people are using it to, you know, evade U.S. SWIFT, the SWIFT regime and the sanctions regime and our ability to tax you. And that's why we've got to clamp down on all this stuff because it's basically being used by criminals and terrorists and ransomware hackers. So that group, you know, I wanted to address like in terms of like this national security nationalist side of U.S. policy debate. If you're pro-America and the thing that matters to you more than anything else is America's success. You know, a lot of Bitcoiners say, well, who cares about America's success? Bitcoin success is what matters.

I'm not tied to the U.S. I'll leave and I'll go to El Salvador or wherever if I need to, right? But there are lots of people, particularly people who have a lot of power in Washington, who don't share that point of view, right? They're like, no, I want America to succeed. I don't care if Bitcoin succeeds, right? And so that was another audience I want to address. It's, okay, what is the pro-America case for Bitcoin?

And then I also want to address the Bitcoin audience, Even though, you know, because I was publishing in National Affairs, not Bitcoin magazine, I'm obviously really particularly gearing it towards the Washington crowd. But I also wanted to speak to the Bitcoin audience in the sense of, you know, we're all obviously those of us who've made money on Bitcoin and watched it go up. We're obviously all thrilled about that. And we love how Bitcoin has performed over the last 13 years. But we should be aware of the fact that if we are right, if Bitcoin does ultimately become the global store of value, the reserve asset of the world economy in the next 10, 20, 30 years, there will be a lot of social disruption in the U.S. and around the world as a result of that. And that could be both harmful to Bitcoin, the network, to those who participate in it, and certainly, especially to those who don't participate, who get left behind.

And we, the Bitcoin community, I think, have to think harder and more seriously about that problem. Because if we don't think hard about that problem and figure out how to transition the US and the world out from the fiat system to the Bitcoin system, it could be costly to us and to them both. Completely agree. It's somewhat of a precarious situation because I think a lot of Bitcoiners, particularly in the last six months, are mentally preparing like they're going to blame Bitcoin. They're going to blame Bitcoin. That's why I love your piece because I think you acutely highlight like they're these problems are uh long in the making and are not bitcoin is solving these

problems not causing them but the crowd the masses don't don't always have the time to dig deep and understand these problems uh themselves unless we actively get out in front and say hey bitcoin is a solution to this problem uh this fiscal reckoning is inevitable you can't just print money ex nihilo uh forever and not have consequences there have been a lot of consequences i would argue obviously the canteen effect is one that bitcoiners talk about a lot like the inequality between the super rich and the super poor has been uh expanded drastically particularly over the last 15 years uh and many bitcoiners would argue that's that's money printing uh on top of that a few other things you mentioned in your article is that we were only supposed to go off the gold standard

temporarily it wasn't temporary like that should that should tell you something's up and then on top of that even worse uh you talked about the bond market a little bit but you have foreign countries that typically would use the u.s treasuries as a safe haven asset actively unwinding their positions and treasuries which should be a a canary in the coal mine like people are losing faith in the U.S. government's ability to, in conjunction with the Federal Reserve, to maintain the status of the dollar. Yeah, you know, I mean, I mentioned before that the fiscal picture is worse than you think. And a big part of, in fact, the reason I got into Bitcoin, other than just having a bunch of Austrian economist friends who were in my ear

about it from the beginning, was I'd done a lot of work on health care policy. And the debt and deficit in the United States is driven entirely by the runaway growth in health care entitlements, Medicare, Medicaid, to a lesser degree, Obamacare. And that's a big part of another big area for us at FreeOp is trying to solve that problem. How do you actually make health care affordable for people, but in a way that doesn't bankrupt the country? And unfortunately, we're going in the opposite direction. We're increasingly bankrupting the country, driven really by health care policy health care entitlements growing every year at an unsustainable rate. And so being acutely aware of how difficult that problem is to solve politically, let alone technically, is what

led me to believe, OK, my day job is going to be trying to solving this problem, trying to fix the health care system. But as a hedge against my day job, I got to be aware of the fact that there's a good chance I'll be wrong. I won't succeed at doing this. And the others who care about it won't succeed at doing it. And the monetary and fiscal runaway printing problem will be something you have to hedge your portfolio against. And that's how I first started to build a position in Bitcoin in 2014. And obviously, nothing has dissuaded me of that thesis over the last seven, eight years. And the COVID period in particular, the financial crisis and the COVID period combined have been really, really problematic. And, you know, the thing is,

you know, as you said, Bitcoiners talk about the Cantillon effect. And for those who don't know what the Cantillon effect is, it's this idea that there was an Irish-French economist named Richard Cantillon who articulated this idea that basically what happens when you print a lot of money is the inflation doesn't distribute equally through the economy simultaneously, which is this, Milton Friedman has this very simplistic articulation where he says, well, if you print more money, there will be, you know, prices will go up by X, right? If you print, if you print, if you expand this monetary supply by X and the velocity of money stays constant, then the prices will go up by X. And that's overly simplistic. It's one of the many things

actually that I would argue Milton Friedman gets wrong and Cantillon gets right. And what Cantillon argues is that, well, the way inflation works is when you print the money, the people who get the money first benefit the most because the things they buy with that money are still cheap. And eventually, as the money flows through the system, the people who get it last are the ones who are left holding the bag. And translated into the modern context, what that means is that the people who receive the Fed's money that the Fed prints, which are basically large banks, hedge funds, venture capitalists, and other large financial institutions, and the wealthy, they get the money first. And then they use it to buy the things they want to buy, which are

basically other investable assets like stocks, bonds, real estate, venture capital, private equity. And the value of those things continues to go up. And the average person wakes up one day and realizes that the price of the home they wanted to buy has gone up by 2x. And so it used to be when I was a kid that the average person could aspire to own his own home. And now that's out of reach for at least half the population, possibly more. And so what's interesting is it's not just Bitcoiners who understand this. As someone who spent a good chunk of my life in the financial community on Wall Street, pretty much everybody on Wall Street understands that this is happening, that there's an asset bubble in the US and around the world that's being driven

by expansionary monetary policy. And if you're at a bar with a bunch of hedge funders, they'll talk about it. They'll be like, yeah, this is crazy. But while they would complain about it intellectually, same time, they're all making money off of it, right? And I'm not saying that to criticize their motives at all. It's just like when you're getting rich because of it, you're not as motivated to solve the problem as the people who are getting poor because of it, right? And so that is the political economy problem we have right now is that there are a lot of people who realize that this is totally unfair and stupid and crazy who are part of the financial community. But, you know, they just don't have the economic incentive to really stop

it because they benefit from it in the short term. Yeah, it's all incentives. And I mean, this is a classic don't hate the player, hate the game scenario where the game is so rigged and these people are, whether you like it or not, you can say smart enough or fortunate enough or lucky enough to position themselves on the chessboard in such a way where they know they're Like, what do you do? Do you get mad at these people? Which there are certainly some of them, yes, you can get mad at. I would argue, however, like you should focus a layer below that, which is the game board that they're stepping on in the first place.

Like, that's not fair. Why even play the game? Yeah, and this is why, you know, this is again going back to our initial section of the conversation. That's why FreeApp exists, right? You know, I think a lot of our take on the economic challenges that millennials and Zoomers and everyone face today, you know, our critique of the system in terms of how it's rigged is not that different from what Elizabeth Warren or Bernie Sanders might say. You know, I'll hear Bernie Sanders rant and with his hair flying in every direction. I'll be like, you know, I agree with 70% of what he's complaining about. The difference is the solution. Their argument is the solution is actually doubled down on the things that got us to this point.

And our argument is that we have to break through and restore an innovative, free entrepreneurial economy in which incumbents are challenged by disruptors. And one of the interesting things about our work has been when we started FreeUp, we thought, okay, you know, it's going to be interesting to see who sort of basically tries to knock us down and criticize us and stuff. And there's been some of that in terms of, like, the left-right debate, right? But actually, we found that much too—it's been very gratifying, actually, that we've had an audience in both the Democratic and Republican parties. We've had people in the center-left and the center-right and the libertarians and a whole range of people who found our work worth engaging and thinking about and incorporating into their own work. the the biggest uh hurdle that we've uh found in terms of getting turning our ideas into law has been the power of incumbent industries that uh that basically you know in in washington the mentality is there's the socialists on one side and there's the business business interests on

the other side and if you're not a socialist the only other side to choose is the side of business interests the organized business interests and the average consumer the taxpayer the the individual is kind of left out of that conversation and and that's the big problem and again energy is a great example we're talking about that right it's like basically nuclear particularly these these new startup nuclear companies should be uh doing a lot more than they're being able to do they're being allowed to do right now but they can't because the organized incumbents basically are lobbying Congress all the time to say, don't allow them to get a foothold. It's dangerous. It's risky. And that's not just true in energy, but across the board. It's true

in healthcare. It's true in banking. It's true in a lot of areas. Yeah. Is your most recent piece on healthcare about ripping the red tape off of research? Yeah. Yeah. That's a great example. You know, there's a, the default argument you hear in say the Wall Street Journal, which I respect a lot in a lot of ways. But the Wall Street Journal editorial page will say, you know, anything that involves calling the pharmaceutical industry to account for the prices it charges is communism, it's socialism, it's leftism. And that fails to take into account the fact that patents are government-enforced monopolies. And we may believe that they're legitimate in many cases, but they're still government-enforced monopolies.

When you apply for a patent, there's a bureaucrat at the U.S. Patent and Trademark Office that decides whether to issue that patent or not. And that bureaucrat may not know what the hell he's doing, right? He may issue you a patent for something that really isn't that innovative. And then on top of that, you take the fact that our entire health care system is this highly regulated, subsidized thing where you and I as taxpayers are giving money to Medicare

to pay for these drugs, and the pharmaceutical companies are basically treating your money as an ATM and saying, oh, well, Medicare is paying for it, and Medicare by law is required to pay for it, so I'm going to charge a million dollars for this drug because Medicare is going to write me the check. So maybe next year I'll charge $2 million for the drug. And if you try to criticize that, the Wall Street Journal says, well, you're a bad person, you're a leftist. It's like, no, it's like that's crony capitalism, that's corporate welfare, that's not a free enterprise system at all. That's funny because then they'll look at the university system and say they're just leveraging the easy money for student debt to raise their prices. Oh yeah, it's exactly the

same thing, right? So there you have a system where the government says, oh, we're going to subsidize student loans. We're going to take over the student loan industry so everyone can have their college paid for by the government, by the taxpayer. So what do the colleges do? They say, oh, this is great. I can double my prices and I don't have to feel guilty about it Because the government is going to pay the student or lend the money to the student, which the money the student can default on and nobody, quote unquote, cares. But the taxpayer cares, right? Because the taxpayer is on the hook for that.

Yeah. And this is funny. This is actually where trickle-down economics plays in because it trickles down to private schooling in high school and then in grade school where they raise tuition because, hey, your diploma from this high school is going to get you into a college worth X amount. Therefore, we can charge higher. even though people aren't getting government loans at the high school level or before that.

It's just trickle-down price increases. That's the way it works. It's crazy. We've been looking at some of the private schools in Austin, which is not that expensive compared to, say, New York City, where I used to live. But I've been looking at some of the private schools in Austin for my kids.

And there was a school that was charging $40,000 a year for tuition for first grade. That's more than I paid to go to medical school. you know and it's like first grade so it's just like that's just crazy and that's you know you know going back to the bitcoin piece of it right like this is why the standard consumer price index type measures of inflation are are not accurately measuring what's going on right that housing um post-secondary education um uh and so many other things healthcare uh services right that can't be quantitatively eased where there's a limit on the supply those are the things that are going up

and and you know one of the quotes you hear a lot of bitcoiners mention about about inflation is again a milton freedom court where he says mon inflation is always and everywhere a monetary phenomenon and this is another example of something i would argue that friedman gets wrong it's not always an everywhere monetary phenomenon one of the things that we end up spending a lot of time at free up on is rising cost the rising cost of living yes some of that's driven by money printing but a lot of it's driven by things like regulations that force businesses to add on a lot of things to their products that drive up the cost of those products now some of those regulations may be good in the

sense that you you know protect consumers and from a public safety standpoint things like that but others may be unnecessary but that drives up the cost when we subsidize things like when we subsidize the student loans then then the colleges raise their prices, and that makes college less affordable. That's a driver of inflation also. So it's not just monetary policy that drives inflation. On the flip side, there have been some massive deflationary trends over the last 40 years. The rise of free trade around the world is really a recent global phenomenon. It really started in the 80s and 90s, and we've been benefiting from it now for, again, 30, 40 years. Technology, the invention of the

personal computer, let alone the smartphone. That also drove a wave of deflation. And so when people say, oh, we've had these easy money policies, we've printed all these dollars, and there hasn't been any inflation. And since Milton Friedman tells us inflation is always and everywhere a monetary phenomenon, we must be good, right? And that has been a catastrophic mistake to believe that, right? In fact, what's happened is if there hadn't been this revolution in the personal computer and the smartphone, if there hadn't been this revolution in global free trade, then inflation would be running rampant right now,

more than it already is. Obviously, we've had high inflation this past 12 months. But inflation over the last 40 years would have been far worse if it hadn't been for this unique period of time when we had massive deflationary trends in the world economy. And so what I see now is a world in which the global regime of free trade has matured. There's not a lot of low-hanging fruit anymore in terms of reducing trade barriers. There's some, but not much.

Technology in terms of smartphones and things will perhaps continue to improve, but can you really reduce further the cost of making a T-shirt or growing bananas? Probably not. so we're at a point where that that that thing that we've enjoyed on the deflationary side for the last 40 years is starting to plateau which means that even the consumer price index with all the ways in which it's gamed and rigged to underestimate inflation monetary expansion is going to start showing up there it's not going to be able to hide yeah especially if moore's law is right and we are hitting limits to which these technologies can increase in productivity

efficiency. It's going to happen. We'll see. I mean, innovation, you don't want to bet against innovation and ingenuity, but there are reasons to be concerned on that front. And as you mentioned in the piece, in the national affairs piece, Bitcoin and the US fiscal reckoning, one of the things I spend a fair amount of time on that I think I haven't seen articulated elsewhere, at least in the Bitcoin community, is this point about how the treasury bond market works and how it is manipulated is a strong word, but just there are structural aspects of the way the U.S. is able to issue its debt and borrow money that have uniquely contributed to this period of time where we've been able to run so much debt and print so much money and not pay the piper for

those policies. And that's something that I think, again, a lot of people don't understand, The fact that banks, based on certain international banking accords, are effectively pushed, if not required, to own Treasury bonds because it's calculated as a risk-free asset. It's defined as a risk-free asset. So if you own anything other than Treasury bonds, you're penalized for that in terms of having a capital cushion as a bank to protect yourself against downturns. And so banks have to own Treasury bonds. And you have the fact also that because the U.S. is the biggest economy in the world and is the most indebted country in the world in absolute dollars, it's the most liquid security in the world. And so if you are a financial institution of size and you need to park your money somewhere, you know, big treasury bonds, 10-year treasury bonds, for example, are something you can come in and out of. You can buy a billion dollars worth of treasury bonds and not move the price.

That's really important if you're a very large financial institution, right? So those kinds of factors, among others, have artificially inflated the value of the U.S. Treasury bond and thereby compressed the interest rates at which the U.S. can borrow money. And the most important of these factors is the fact that the Federal Reserve has now started to directly control the interest rates and the price of these Treasury bonds in a way that is a radical departure from prior Fed policy. So it used to be, prior to the financial crisis of 2008, that the Fed only controlled or manipulated the overnight federal funds rate, which was the rate at which financial institutions lend money to each other overnight.

After the financial crisis, and this was something that Ben Bernanke first proposed in the early 2000s and was able to basically implement when he became the Federal Reserve chairman, was to basically manipulate the entire spectrum of the treasury bond market by buying the debt directly. It's kind of like, you know, if I run up a debt on a credit card and then I take out another credit card to pay off the first credit card, you know, that's basically what the U.S. government has done. And the trend lines are really, really concerning that over the last 10 years, the amount of Treasury bonds and Treasury securities owned by the U.S. government has skyrocketed, and the share owned by foreign investors, whether governments or foreign

financial institutions, has steadily declined. And we're going to get to a point in the next 10 years where a majority, or a plurality at the very least, of the U.S. debt on the market is owned by the U.S. government. And that is just a recipe for disaster. And you get to a point where like right now our federal debt's $30 trillion, right? Imagine very soon the federal debt's going to be $100 trillion, right? It was $8 trillion at the end of George W. Bush's presidency, if I recall correctly. And now it's $30 trillion, right? In 10 to 20 years, it could be $100 trillion. You know, there's only $250 trillion of wealth in the world. You know, so eventually you run out of money. There's not enough wealth in the world to lend

to the United States as we scale up our debt. And that is the coming crisis that we hope Bitcoin will help us, at least as average people, get out from under. It's pretty scary when you put it so plainly like that. And again, going back to incentives, when you have something like Basel III dictating that these large capital allocators and banks have assets on their balance sheet, a lot of which have to be risk-free. And you designate treasuries as risk-free. And just think of the incentive that creates for the government and the treasury. It's like, oh, we can be complacent. They need to buy. They need to buy these assets. There's nothing we need to back it up with. It's a necessity. It's part of the game. It's part of the rules that have to

do it. So we don't have to back that up with any effort or productivity. And they probably don't think that, but it's just like the natural incentive is like, ah, we weren't that productive this quota, but don't worry, people need to buy our treasuries anyway. Yeah. And that is the vicious cycle that we're in that's very hard to get out of. And that's kind of what I walked through in the piece, right? Is that, you know, solving the entitlement problem is hard, right? Reforming the healthcare system is hard because the hospitals and the drug companies that benefit from how expensive our healthcare is are going to fight like hell to keep all that money and get more of And they have a lot of money, so they have the resources to fight that fight.

So reforming health care is hard. And so if you're the government and you can't reform the health care system and the health care entitlement so that the taxpayer can spend less money on it and the debt keeps going up, well, how are you going to pay for that debt? if Russia and China are going to stop buying treasury bonds, and foreign investors are going to stop buying treasury bonds, and even Ray Dalio is going to stop buying treasury bonds, or buy certainly a lot fewer of them, what's left? You've got to buy them yourself to just keep things going. Because if there's a massive spike in interest rates, because basically the way the bond market works is if the price of the bond is higher, the interest rate is the effective interest rate that's implied in that price is lower. So high bond prices mean low

interest rates. Low bond prices mean high interest rates. And so when you're the government, you say, OK, I'm going to buy up all the treasury bonds to goose up the price. And that lowers the interest rates. That's why we have this economy that everyone's partying in today. But you're worried, right? You don't want to. If you pull back, then interest rates go up. And if interest rates go up, what happens? The price of a mortgage goes up, which affects the housing market. The stock market goes up. And the stock market starts to go down. And people say, wow, interest rates are going up. That means I can't borrow as much money to plow into the stock market or other things. So I'm going to have to invest less in the stock market because I can't borrow as much because the interest

rates, the cost of borrowing has gone up. And so you see a pullback in the stock market. And every Fed governor is terrified, Jay Powell in particular, that if they pull back on what they're doing, the stock market will crash, the housing market will crash, and the financial system will crash. And it will be on their tombstones that they allowed that to happen. And they're more worried about that than anything else. The congressmen are more worried about getting reelected than anything else. And so the path of least resistance, unfortunately, is to keep doing what we're doing. And the only way out is for good men and women in Washington and in the country to take those risks and solve these problems. And that's what we're trying to

help happen. Yeah. Number one, I do feel for Jerome Powell. You can see it on his face during these fed meetings like he is visibly stressed out about the situation uh that he finds himself again like he that's the the federal reserve chair uh chairman or chairwoman position you get handed this hot potato and you don't want to be the last one holding it specifically with bernanke janet yellen and jerome powell he's probably thinking i just need to get it to the next one and and then it's not my problem i'm the i'm not the one holding the bag i'm not the one who was fed share when when all this went to shit but it is a stereotypical textbook case study and sunk cost fallacy like we all know this is unsustainable into perpetuity i mean i guess the

last the last uh arrow in the quiver is to try to validate mmt which isn't going to happen or i mean they may certainly try but i think we all know that it's just going to perpetuate what has already been happening for the last five decades. And not only that, but put some accelerant on it. Yeah, I mean, look, intellectually, MMT has no credibility. Even Paul Krugman says MMT doesn't work. But the problem is, operationally, that's what we're doing, right? The policy that our country has embarked on is the policy of MMT, that we can just print our way out of the problem. We don't actually have to solve the debt and deficit. We don't have to even tax people. We just print the money in and it'll solve it, right? Like that is what we're doing. And that's what's

so dangerous about this situation. And again, like, you know, if you're a Bitcoiner, you may think, oh, this is awesome because this means Bitcoin is going to go up and I'm going to make more money. But the social dislocation and the temptation of government to do a lot of things to bring the hammer to Bitcoin, that temptation is going to be very high. And there are things that the government can do to make the Bitcoin network less useful. But it can't obviously ban the Bitcoin network. The Bitcoin network will go on whether the US wants it to or not, just like it did in China. But I think what the China experience has led to, I think, a lot of complacency among

Bitcoiners. Oh, well, China banned Bitcoin. Nothing happened. so what's the big deal, right? And I think that's too complacent, too optimistic, because you don't have to ban Bitcoin to make it very hard to use for Americans. You can basically say, as Janet Yellen wanted to do, you could say, well, we're just going to tax capital gains on Bitcoin transactions at 80%. And that basically makes for institutions, for Michael Saylor, for people who have to abide by the tax laws of the country,

it makes Bitcoin an unusable asset for them because all the gains from it basically evaporate. And so that not only affects the price of Bitcoin and the demand for Bitcoin, but also the decentralized nature of Bitcoin, right? Because for Bitcoin to serve its purpose, as many people as possible have to own it and help operate the network.

Yeah. And then you get in the KYC AML, they can force people to hold it on exchanges not take self-custody which is 2022 my goal is to be more level-headed i've been very hot-headed about all this because i see it and it's just frustrating this is like bitcoin the protocol is very much aligned with the ideals this country was founded on if you are an american you believe in and the ideals that this country was founded on like bitcoin is a no-brainer it literally embeds the right to free property into free private property, excuse me, into code. And

private public key pair is private key is private property that should be respected and not only respected, but celebrated by Americans and the politicians that are running this country. And it has been hard to see it maligned by the likes of Elizabeth Warren and many others, brad sherman uh and and a few other politicians and uh i think education is the way out okay this and that's what you have it on on your mission statement you mentioned bitcoin your mission statement is uh giving equal and open opportunity to everybody it's an open source uh protocol that anybody can can latch into if they want to and i think that's the message we have to drive drive home in in dc because whether i obviously all the anarcho-capitalists out there listening

this show are screaming right now but you can't ignore that we're going to have to deal with with these entities to some extent yeah i think that um i you know i have great great sympathy for the anarcho-capitalists but um i am also acutely aware of the power of the us government and and uh it has been brought to bear on a lot of people who who share our values and uh over the years and And that's why Satoshi Nakamoto went into hiding, right? I mean, because he or it or they have that awareness. So it's something to be very, very concerned about. And, you know, I think we're at a particular moment in time where the situation is fragile, right?

because Bitcoin is not yet strong enough and robust enough to ward off a full frontal assault from the U.S. government. But it will be in the future. I do believe that you can get to a point in five to 10 years, hopefully sooner, where there are enough publicly traded companies that are Bitcoin ventures, where enough people own Bitcoin in the United States, where if the government does try to do something they'll face massive political and legal opposition and the the political power of the bitcoin community will be sufficient to ward off those attacks it for it hasn't been to date like you know uh the the infrastructure bill that uh that uh that you know that that all that did all this weird stuff around saying you know if you if you

facilitate a proof of stake transaction you you know you're going to be you're going to have to report that somehow. Like, you know, obviously members of Congress were caught off guard by how many people called in and yelled at them for doing this, but they still did it, right? So for all that satisfaction that the Bitcoin community got, hey, look, we showed our might and our power by yelling at our congressmen, didn't stop the law from passing, right? And so the Bitcoin community is not yet politically strong enough to get to that point, and I think has not also done a sufficient job of persuading Washington of the virtue and value of Bitcoin. I think that's started to change. You know, you were mentioning before, you know, that Bitcoin

is the most American thing there is, or it very much embodies American values. And one of the passages I quote in the National Affairs article is from Ludwig von Mises' theory of money and credit where he describes sound money as a companion, a philosophical and moral companion to bills of rights. Because just as the American Bill of Rights says the government cannot arbitrarily take your property, condemn it, invade it through a search warrant, build a railroad over it, they have to respect that it's your property and compensate you accordingly and respect your rights to your own property and your liberty. The right to sound money is exactly the same because when the government doubles the supply of U.S. dollars, it has cut the purchasing power

of your U.S. dollars in half. And so this idea that monetary expansion is, you know, sound money is fundamentally American is absolutely true. It was very much true. It was a universally held view in the 18th and 19th centuries. I shouldn't say universally, but nearly universally widely held view. That was sound money was the thing, right? The free-floating system that we have today of fiat currencies is only 50 years old. And that's kind of one of the points I try to make in the article too, right? Is that we've all, you know, been born and living our entire lives in this system, but the system is unprecedented. It's new. It's not the way the world has worked in the past. And the conceit of, again, the mainstream policy community as well,

that old system was terrible. There were all these financial panics. And that's not exactly right. The financial panics were not because of the gold standard. Financial panics were because of the absence of deposit insurance. Once we had the FDIC saying your deposits of the bank are insured up to $200,000 or $150,000, you know, that really limited the runs on the banks at the retail level because you knew that, you know, if you didn't have more than $150,000 at the bank, the FDIC insured and you were fine right and that that solved the problem more than you know the the peg of the the us dollar to gold yeah then on top of that like people completely dismiss the mini depression of like 1922 i believe it was where we're under a gold standard and we recovered

pretty quickly and then you had a massive expansion of debt between that that period in 1929 when things eventually blew up and everybody blamed the gold standard didn't look at the expansion of of debt throughout the economy and the stock market particularly and it's hilarious because it came full circle uh what did the class steagle act do they went they're like all right how did this how did this happen in 1929 like uh why did this get so out of control and crash so vigorously and it was because we were letting these financial institutions trade amongst each other and lever up their their assets so we're going to create this this separation between them and then boom, Graham Leach Bliley in what, 2001, 2002, tears those walls down.

It was 1996, but maybe you're right, it was 2001. It was that era. It was in that era, yeah, it was the Clinton presidency. Yeah, you know, I mean, look, it's, you know, there's obviously a lot of rabbit holes you can go down in terms of all the concepts that the piece addressed and that Bitcoiners should obviously think about and reflect on. But your central point that Bitcoin is very American was something I really did want to drive home in the article because an underappreciated component of the opposition to Bitcoin is what we might call conservative nationalists who worry that Bitcoin will undermine U.S. global power and worry that Bitcoin is not, it's this newfangled thing. And if you're a conservative, your instinct is to support old things, right?

That's the nature of being a conservative. And so one of the points I wanted to bring into the conversation about Bitcoin for that audience is, hey, actually, the intellectual tradition of sound money is actually a very, very old tradition. Satoshi Nakamoto was not the inventor of sound money. Sound money has been around for a long time. And many of the people who conservatives say they admire, like Hayek, like Mises, are people who articulated these concepts well before Satoshi Nakamoto was born. Yeah. Hayek, we won't have a good money again until we wrest control of it from the government. That's right.

That's right. And that work, the Denationalization of Money, which is a great book that every sound money advocate should read because it's just so interesting. He wrote it in the late 80s, early 90s, you know, so there was basically no Internet. There was certainly no Bitcoin. But he was trying to contemplate this. He expressly said it's a radical concept of, like, how would we have a system of private money again instead of money that is controlled and dictated by governments? How would we do that? And his theory or his vision was that private enterprise banks basically would, like they did in the 19th century, basically create their own paper notes that they would issue that would be backed by some inflation resistant asset like gold or something else.

And there would be this free competition of banks based on what consumers thought the most reliable bank was. And that's maybe how we'd get it done. He could obviously never have contemplated something like Bitcoin. But if you read the denationalization of money, it's just so impressive how much of the intellectual underpinnings of Bitcoin are anticipated in that monograph. And it also, again, goes to show that in Washington, there are lots of people who profess to love Hayek, who profess to love Mises and say that they're great. but don't appreciate how much Bitcoin is the avant-garde of that tradition. And so I think, I hope that by presenting in that way that we gain some new converts over there.

Yeah, it's literally a sly roundabout way. Sly in the fact that it was snuck into this obscure mailing list, a roundabout, open source, depending on individuals, going around the government and other things. And it blows my mind, too. That traditional conservative is like, Bitcoin's anti-American. I don't even think he's a conservative. Dave Troy's been going off on Twitter saying it's Bitcoin and cryptocurrency can destroy American values.

I mean, you can make the argument that dollar hegemony, particularly in defense of the petro dollar, has done more to harm us over the last two decades, particularly, I want to say, post 9-11, than benefit us for just going out there, expanding our empirical reach or empire reach, making people pissed off, less likely to do trade with us and more likely to want to harm us. And it's all to defend this reserve status.

Not all of it, but a lot of it. You know, what I'd say is the way I approach it is I actually don't think it's an unreasonable concern or fear. Like if you are if you are, you know, if you're someone who's grown up in the Defense Department or the national security apparatus and you really are passionate about the fact that America has been a force for good in the world over the last 75 years, that if someone else was running the world since World War II, the world would be a much more dangerous place than if the U.S. were the leading power. And there are lots of people out there who really believe in that and believe in the value of an America-led global order and worry that if that America-led global order is undermined,

that the world will be more dangerous than it is today. And I don't think that that is an unreasonable position. And I think the way I try to approach it in the article and in conversations with that kind of person is to say, look, it's the nature of technology to make old ways of power obsolete. It's true in military terms, right? There's ABMs and, you know, anti-ballistic missiles that make certain types of missiles obsolete. There's, you know, the catapult that made castles obsolete, right? Technology is always moving in a way that makes old forms of power, hard power, obsolete. And Bitcoin exists now.

Cryptocurrency exists now. And there's no putting that genie back in the bottle. The SWIFT system is never going to be as effective as it was prior to 2008 because the technology has made the SWIFT system obsolete. It has made the sanctions regime increasingly obsolete. There's no going back. So you can't just wish away the new world in which the Internet of money exists, just like you can't wish away the existence of email. So the question then is, if you can't wish it away, and there are real costs, real transition risks to a world in which the U.S. doesn't have those leverage points in the global world order,

then what is the way that say 10 20 30 years from now america can be as strong as possible and as constructive of a global participant as possible given that reality and what i try to argue in the piece and certainly intend to develop continue to further develop as as a line of thinking is is that america actually has a huge strategic opportunity with bitcoin right china has banned Bitcoin. And understandably, from their point of view, right, if you're an authoritarian country that wants to control everything that your citizens do, what you really want is a central bank digital currency where you, as the People's Bank of China, have complete visibility into every time, you know, a random person in China buys a can of Coke. That's what you want. And Bitcoin

doesn't allow that. But a central bank digital currency version of the Renminbi does, right? So that's what China wants. And China is not capable. It's one of the few areas in the global economic rivalry between the U.S. and China. It's one of the few areas where the U.S. is basically guaranteed to win if it chooses to play the game. If America chooses to play the game, it's guaranteed to beat China when it comes to Bitcoin-related ventures, Bitcoin-related institutions, Bitcoin-related enterprises. And, you know, what's ironic is that is certainly happening.

Obviously, we're recording this in the offices of Unchained Capital, which is a great example of that kind of high-growth business that's being built here in the United States. Far more businesses would be built in the United States if we weren't doing stupid things through the SEC and elsewhere to prevent a lot of these businesses from being based here. They're being forced offshore by the U.S. regulatory regime, which is stuck in this 1930s mentality.

Um, but, but the strategic advantage is still there despite our own bumbling from a, from a government standpoint. And if we take advantage of it, the amount of wealth we can generate for Americans, the ability we can generate for Americans to protect themselves from the inflation that Congress is incapable of combating for the reasons we've articulated, uh, these are important things to do. And the thing we have to remember is yes, the dollar is supreme now, and it's been supreme for probably 100 years, plus or minus. But for most of American history, the dollar was not the most important reserve currency. And yet the U.S. still grew spectacularly. The second half of the 19th century, particularly after the Civil War, was a time of enormous economic growth in

the U.S. But the U.S. dollar was not the world's reserve currency in the late 19th century. And yet the U.S. still was an incredibly booming, prosperous place where everyone got wealthier, living standards went up dramatically, right? And so we are sort of fixated on this idea, oh gosh, what happens to America if Bitcoin replaces the treasury bond as the world's greatest store of value? And yes, in an ideal world, the treasury bond would revert to a hard money policy and continue to be a better store of value than it's been. But if we assume that that doesn't happen in the base case scenario, there's still a path for America to continue to grow, for living standards in America to continue to improve, and for Americans to do well despite

all these challenges we have ahead. So I think a lot of it is we've got to not sugarcoat the problems and wave them away. We have to take them seriously and understand that they are risks, they are dangers, they do mean a very different world in which the U.S. isn't guaranteed its place at the table the way it's been in the past. But there are massive opportunities for America as a country, as a community of people to succeed in that environment. Yeah. You have to risk it for the biscuit. You got to, you got to realize that things are changing, times are changing, technology's changing, and you can't be a Luddite about this stuff. And you have to recognize the problems that sit right before you and are glaring, are obvious and

seem somewhat insurmountable at this point. Like it is a bit risky. It is venturing into the unknown. But like you said, we should be confident. It would be a sign of lack of confidence in America's ability to actually succeed if you try to curb this, right? Like what happened to American ingenuity and innovation and the pick yourself up from your bootstraps mentality? Like why are you not confident that we can do that moving forward? It would be a very weak position to try to curb Bitcoin adoption and innovation in the United States if you truly believe in the ideals that we just described, which worries me and honestly worries me because I do think there are a lot of people in the federal government who see what China's doing with their social credit

score and their control over the money. And they want that as well, which is very frightening as an American citizen. It's a huge problem. And, you know, when we thought about how to get involved as a think tank in this space, you know, and we didn't for a long time, right? We We've obviously been sitting there watching, you know, the crypto world evolve over the last, the free op is now five years old. We've watched it evolve over the last five years and kind of sat back for most of that period because it wasn't clear what the compelling intersection of economic freedom and improving the lives of lower income Americans was.

Not to say that we all know that Bitcoin can help obviously lower income Americans, but from a public policy standpoint, what are the laws and regulations that if change would make a material impact on lower-income Americans. There wasn't a lot to do. Most of the policy conversation in, say, 2017 was about ICOs, which is not really about lower-income Americans. Not really. I mean, you know, at least not in the way that we think about it. But what's happened in the COVID environment is this, you know, we pushed the pedal to the metal in terms of driving over the cliff with the massive monetary expansion, the $6 trillion in additional federal spending that was unpaid for. So we did some things on the fiscal and monetary side that really

accelerated and worsened the problem and destabilized the dollar a lot more. And on the flip side, what we're doing in terms of the Federal Reserve's serious consideration of developing a CBDC has been of great concern to me. And I think one thing I observed from my vantage point is that I didn't see the level. To me, CBDCs are alarming, truly alarming. It's authoritarian, if not totalitarian money. When I talk to people in the Bitcoin crypto world, I think, yeah, obviously, look, I mean, Bitcoin maximalists think anything that isn't Bitcoin is terrible, right?

But in the sort of, you know, mainstream crypto world, people are sort of like whatever about CBDC. Oh, yeah, you know, it's blockchain for the US dollar. This is great. You know, I mean, there's this kind of feeling that, well, even the Federal Reserve thinks blockchain is cool now. Isn't that cool that they think that this is cool? Like, that makes me feel like I was the outcast before and now I'm the cool kid, right? Like, so there's that kind of mentality.

And I think even a lot of people in the crypto community don't appreciate how a CBDC is really completely antithetical. It's the exact polar opposite of Bitcoin. The exact polar opposite. If Bitcoin is censorship-resistant money, a central bank digital currency version of the U.S. dollar is censorship, total censorship-capable money in a way that cash, hard cash is not. And that is incredibly dangerous. And we've got to do everything we can to defeat the development of a central bank digital currency in the United States. And that is a project where I think Freeop can actually make some headway. And the one virtue of our system, it's actually a virtue and advice, I guess you could say,

is that it's very hard to do new things from a government standpoint, right? And for better or for worse, the creation of a central bank digital currency is not something the Federal Reserve can just do on its own. It has to have the authority of Congress. Congress has to vest the authority in the Federal Reserve to create a central bank digital currency, because it would be a meaningful expansion of the Federal Reserve's mandate. And I think we've been pretty successful in just a few months in making a lot more people in Congress aware of how dangerous a CBDC is.

And I think that if it were ever to come to a point where the Fed asked Congress for permission to develop a CBDC, it wouldn't happen. But not just because of us, also because the banks wouldn't want it, right? Because if you have a central bank digital currency, you don't need banks, which is kind of like Saul Omarova, who was Biden's nominee to replace Brian Brooks as the head of the Office of the Comptroller of Currency. What a nominee. I mean, I loved it because, like, she wrote this, like, 50-page paper where she walked through exactly what I'm talking about. Yeah, she's like, this is great. if we had a central bank digital currency, we could wipe out the entire banking sector

and the Federal Reserve could basically take money out of your bank account and put it in there whenever it wanted. Isn't that awesome? And I'm like, you see, I'm not the only person who understands what a CBDC can do. And so that was actually very helpful to the policy discussion. I think it brought it to the fore in a way that accelerated the education of Congress. um but but i do i i but this is a fight that has to be fought because i think if we don't fight it if we don't actually explicitly take the time to make this case to congress um the fed will get its way yeah biden should have went with ken rogoff a much more approachable uh representative of that type of dystopian central bank digital currency but that's who we have to like who's

ken rogoff uh advising right now we need to get to that person like don't listen to this guy because He wrote the book. He wants to eliminate cash, bring in negative interest rate policy. Essentially, I think he described a CBDC before it even became part of the nomenclature. Yeah, I mean, look, the Federal Reserve is called a central bank for a reason because it's a centrally planned management of the money supply and the economy. And if you're the kind of person who likes that, likes central planning of the economy, then obviously a CBDC is great because you can control fiscal policy and monetary policy on a much finer scale than you have the ability to do today. You can do the thing where you send the stimulus checks with an expiration date, which a lot of people have talked about.

You can't do that today with conventional stimulus. So when you're a central banker, you love that. You're like, ooh, I can manipulate people even more. I could do more social engineering. Isn't that awesome? But that's not all you can do. And so, you know, I've been very concerned by the, even among crypto fluent, and there's, of course, very few people in Congress who are crypto fluent. But even among the ones who are, I think that in general, the level of concern that they have about CBDCs is one one hundredth of mine.

And so I've really tried to make an effort to change that. Yeah. Which, again, the anarcho-capitalist, I mean, is this trend inevitable, though, for the federal government? Power corrupts, absolute power corrupts, absolutely. Like, are we at the point, is there a point of return? Can we claw this back? Well, yeah, I mean, clawing it back, it depends on what you mean. Like, I think the CBDC, I think we can stop because that involves explicitly giving the government more power. Even more broadly, higher level view, just trying to top-down control, like COVID response, top-down control of an economy, of a way in which the economy reacted, the government said, here's how you have to react.

Obviously, we have QE before that and other types of activities where you try to control these complex systems like an economy or a response to a virus outbreak. We're finding that there's terrible negative externalities. Nobody's talking about the excess deaths created by fentanyl and suicide. We're trying to. we're trying to number number one and two cause of death are people my my age group our age group uh last year and it's not talked about and it's a direct negative externality of of these policy implementations where the government tries to step in and be be big brother and say hey here's what you need to do and it's just proving to be woefully incompetent

yeah just as a side note i mean for for people who are really uh worked up about this topic of how the government has shut down society, shut down schools, shut down the economy, arrogated a lot of power to itself during COVID. I mean, that has been probably the number one thing that we've spent time on in the last two years is making the scientific case for why that was not necessary, not merely the moral case. And I think particularly on the school debate and on reopening the economy broadly, we were vindicated in terms of, we were making those arguments in April of 2020. And so, that was something we spent a lot of time on. But, you know, just to go back to your original question, which was, you know, can we unwind the power that

has been accumulated? Not directly, in the sense that, for example, once the Federal Reserve has decided that it wants to control the entire interest rate market, it's very hard to put that genie back in the bottle. It's very hard for the Fed to say no, unless Congress passed a law saying you can't do that anymore, which it's not going to do because not enough people in Congress understand why it's dangerous. Fed's going to keep doing what it's doing, right? The ability to print money, the ability to run debts, right? We're going to keep doing it because we already have that power to do it. And it's hard to unwind because the political costs of unwinding, let alone the temptation, the incentive is too much of a hurdle. But what have we seen over and over again in

history? What we've seen over and over again in history, and even in recent history, even in the history of your young life, Marty, we've seen technology overcome government power. You think about Facebook and Twitter helping people overthrow the Egyptian government. And whatever you think of the government that succeeded, it's still pretty remarkable that Facebook and Twitter allowed ordinary people to overthrow their government in Egypt, which is not an easy place to overthrow the government, right? In the Cold War, you had kind of the earliest implementations of email and electronic communication

that helped people kind of basically end the Cold War because they were able to get books in a free market or pro-liberty books into Eastern Europe and the Soviet bloc and vice versa. uh there there are throughout history technology has helped people overcome the power of governments and bitcoin is one of those things that if we are successful in in continuing to build the bitcoin network and the bitcoin ecosystem and it's already pretty robust right but as time goes on it will be even more robust it will be even more secure even more decentralized uh then um it just becomes hard for government to have as much control over the economy as it does today. And that's what

we all have to work towards. Yeah. And so you're doing a lot of work at FreeUp. What advice would you give to anybody listening to this, any Bitcoiners listening? It's like, all right, how can I help? How can I put Bitcoin in a better light for my representatives, my congressmen? What should anybody listening to this do? Is there any action that can be taken to help the cause? Yeah, I would say that what I'd love for every Bitcoiner to do is think hard about how the least among us can benefit the most from Bitcoin. Because if we are able to make, successfully make the progressive case for Bitcoin, the case for why those who are most vulnerable to inflation, those who live paycheck to paycheck, have the most to gain from having an asset that is protected from inflation and being allowed to own an asset that's protected from inflation,

the more we can do to make that case, I think the harder it becomes for the politicians to take it away from us. And also not just from a messaging or rhetorical standpoint, I think it's really important that we do as much as possible to enable and evangelize lower-income people to own Bitcoin, people who don't have a lot saved up in the bank, because only then will Bitcoin have the political strength to withstand the challenges that are ahead of us.

Yeah, don't do it just because it's going to help Bitcoin win. It's actually the right thing to do. Right, it's the right thing to do. It's rooted in truth. It's not even the right thing. It's rooted in truth. It literally does help these people. Exactly.

Yeah, no, I mean, that's the most important reason. I should be very clear. The most important reason is because it will help them. And I think that too often, and I respect it, look, there's obviously a great strain of that sort of, you know, objectivist, you know, rational egoism kind of thing in Austrian economists, libertarianism and Bitcoin. And I respect it and there's a lot of truth in that. But if we want Bitcoin to be as successful as possible, the best thing that we can do, the most valuable thing we can do is to help the least among us benefit from Bitcoin. That's the right way to put it.

Teach people how to spin up wallets, protect their private keys, and accept Bitcoin for their work. We can start there. I think that's an easy one. Yeah. And obviously a lot of good people like yourself are doing a lot. I have been so impressed by what Jack Dorsey has been doing in this space, right? I mean, just, you know, one of the things that I think is so impressive about Bitcoin, and it really was driven home to me in the last Miami conference,

social movements succeed because the people who are committed to that social movement are willing to sacrifice their own interests for their values to succeed. And when you look at the people who are behind Bitcoin versus the people who are behind the status quo, I am absolutely convinced that the people behind Bitcoin will win because they're far more committed and doing much harder work to build Bitcoin and strengthen it in a way that the Janet Yellen's of the world are not solving the entitlement crisis. They're not saying, let's not print more money to protect the dollar and the treasury bond. They're just saying, we love the status quo and we think you guys are all nuts, right? That's not enough to defeat this committed band of millions who are building Bitcoin to be that reserve asset that the least among us can hold and use to protect ourselves from fiat inflation. And so, yeah, it's the most important thing. I think all of us should just be thinking as hard as possible about how to help the least among us benefit from Bitcoin.

And also to think harder about a future in which this transition, this disruption happens, where Bitcoin really does become the world's premier reserve asset. Because there are going to be a lot of people left behind when that happens, despite our best efforts, right? Because it's not going to be unanimous. Not everyone is going to do it. And not everyone is going to buy Bitcoin or own it. So we've got to be thinking hard about how to help those along who are too late to the

party, so to speak, to benefit as much as we have. Pensions out there, good exposure. That's a great example of, you know, and that's something that I had to leave on the cutting room floor of the piece, actually, of the national affairs piece. But that's something we want to spend a lot of time on from a policy standpoint is pension. Pension funds are a great example of where Bitcoin can be really useful. Right. Because, you know, everyone's like, oh, yeah, Bitcoin's a volatile, blah, blah, blah, 65K, you know, yesterday, 45K, today, whatever. But, like, from a 40-year time frame, which is how pension funds think about life, the appreciation is pretty much guaranteed, right?

Because inflation, even at 2% inflation of the U.S. dollar, is guaranteed to wipe out the value of that savings over time, right? So pension funds are a great example of the kind of fund or investment fund, I guess you could say, that benefit the most from a hard asset. And unfortunately, there are a lot of legal constraints or hurdles that prevent pension funds from owning Bitcoin. Basically, you know, there are these kind of rules around fiduciary duties where you basically have to have this kind of like 60-40 portfolio of stocks and bonds. And if you deviate from that, you're seen as not adhering to your fiduciary duty to the pensioners.

And that has created this kind of barrier, ironically, to those pensioners' funds being protected over that 40-year time frame. And so that's a great example of an area where if we can do more to enable pension funds, whether private pension funds or state government pension funds, to have a 3%, 5% allocation of Bitcoin, that could be very, very important to the financial security, the retirement security of a lot of people. Social cohesion of the country as well. Yeah. Well, Ovik, this has been a fascinating conversation. Thank you for joining me. Sorry again for the confusion about the location of the interview today. It's great because this office is two blocks from my office. So I'm going to have a great commute back and really grateful for everything you do, Marty, to bring so many interesting people to light that contribute to this community and help people learn about Bitcoin. It's such

important work. Well, the feeling is mutual. I think what you're doing at FreeOp is very important, too, because, again, the partisan divide in this country is so wide. I think what you're doing, trying to go nonpartisan, down the middle, classical liberal, is much needed in today's discussions. And I think we're going to win. I think we are. We have smart people like you in very, very good places. I'm very optimistic about the future. 2022 is a year of optimism, Freaks. We're going to do it. Where can we find out more about you, about FreeOp, about any of the initiatives that you have going on right now? Our website is freeop.org, F-R-E-O-P-P dot O-R-G, 1-E, F-R-E-O-P-P dot O-R-G.

And if you scroll down on the website, you can type in your email address if you want to get our email updates. And my Twitter address is A-V-I-K, or my Twitter handle is A-V-I-K, and FreeOp's Twitter handle is F-R-E-O-P-P. and I tweet a reasonable amount, so that's a good place to get my thoughts as well if you're a Twitterer. Great follow.

Great follow. Go follow Ovik. That's all we got this week, freaks. Peace and love. Okay.