We Study Billionaires - The Investor’s Podcast Network - BTC065: What does the BIS, IMF, & World Bank even do w/ Sam Callahan (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, everyone. Welcome to this Wednesday's release of the podcast where we're talking about Bitcoin. On today's show, we are covering what the heck the IMF, the BIS, and the World Bank are and why they're important. Our guest to help make all this understandable is Mr. Sam Callahan. Like many of us, Sam is a bitcoiner and avid reader that has taken an enormous interest in this particular topic. And as you'll discover during this interview, he has an extensive amount of knowledge on how these non-governmental organizations operate, how they're funded and why they even exist in the first place. So if you've always wondered how

Starting point is 00:00:35 these organizations work, sit back and enjoy this chat with the talented Sam Callahan. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. All right. Hey everyone. Welcome to the show. As I said in the introduction, I'm here with Sam Callahan. And Sam, I am excited to have this conversation. I've been wanting to bring a guest to talk the IMF, to talk the World Bank, to talk the Bank of International Settlement, the BIS, mostly because I don't understand it that well. I've been in this space for quite a while talking all this financial stuff, but I've never really had an in-depth conversation with somebody about any of these particular world

Starting point is 00:01:32 organizations and how they've got stood up and what in the world their actual mission is versus is what they're actually doing, what they're chartered to do and what they're actually doing, and we can get into that. So I know you've been on other podcasts. I've listened to some of your interviews. I was thoroughly impressed with your depth of knowledge in this area. And I'm thrilled to have you here for this conversation. So welcome to the show.

Starting point is 00:01:56 Yeah, thank you. I'm a big fan of the show and super excited to get into this stuff. I mean, it's funny you say that because it's almost like they're purposely complicated. So it's hard for outsider to understand how they function. which is why I usually like to dig into them. And I've been reading about them for a while. But how they fit into the global financial system and their purpose, it's confusing because it's actually changed many, many times throughout history.

Starting point is 00:02:23 So I'm happy to get into it. Big fan of the show. Happy to be here, man. So let's just start here. Let's just go through those three organizations and just one by one and kind of do an overview. And if you want to get into the history of each one of them, go in as in depth as you would like on each one of them, but let's like tackle each one of them. And then maybe we can talk about how they kind of fit together or whatnot after that. So the first question is, what is the BIS?

Starting point is 00:02:51 So the BIS is best explained as like a bank for central banks. And so just imagine like a commercial bank like a Wells Fargo or a J.P. Morgan. And the services that they provide their clients, Now, bring that up and where the clients are central banks. And so they make money from like fees and commissions that they charge central banks for their services. That could be like short term liquidity and credit, gold swaps or like providing a range of investments and opportunities. They actually have their own deposits and they have their own investment strategy where they're trying to get their best risk adjusted return just like everybody else. And on top of that, they do a couple different functions. in the global economy.

Starting point is 00:03:38 And one of them is that they're one of the largest databases of financial data in the world. And so they have a mainframe computer that sweeps all the data and kind of they are the eye in the sky, best vantage point to understand the flows of international finance. And so because of that, they're also kind of like a research center for essential banks. And then the last thing they do is they are basically like an event planner. So they have an innovation hub. They have a nice headquarters in Switzerland. And central bankers go there to get away from, you know, those pesky politicians and those journalists. There's no cameras there. There's no recordings of those conversations. They can let their guard down and behind closed doors just kind of speak candidly with other central bankers about issues facing the global economy, what they're doing policy-wise. And so they have all these kind of events and committees and big time kind of planning sessions with other central bankers and members of high finance. So that's kind of what their functions are.

Starting point is 00:04:41 They're essential bank that they move through all the services of a commercial bank. They are a research center where they collect all the data and then as well as an event planner where they kind of host all these very elite exclusive events for people of high finance. In preparation for this discussion, I read the book, The Tower of Basel, which is all about the BIS. One of the things that I highly recommend the book for people that are interested in this, it gets into a lot of the historical standing up of it, which I think Sam will cover next. But before we go there, one of the things that kind of surprised me in what you just said was this idea of them trying to achieve their own risk-adjusted returns, especially considering that, from reading the book, one of the really big points that it made was that they have complete legal immunity there in Switzerland for their activities. They don't fall under any jurisdiction

Starting point is 00:05:40 whatsoever. So it's just mind-blowing to me. Yeah. So they are a bank beyond the reach of any national or international law. And it's because they're set up under international treaty. So they're in Switzerland, but the Swiss have no authority or they can't even enter the business premises and their assets can't be seized. Employees and the biz are exempt from paying any kind of taxes on any profits that they get. They just have extraordinary legal privileges that extend not just to the bank, but also the bank managers and the directors. They're basically treated like ambassadors or diplomats, just like the UN or the IMF. And so these bank officials that are traveling are immune under Swiss law for life for all acts carried out in the act of duty, which is, I guess, just going to their headquarters

Starting point is 00:06:34 and hanging out. I don't know. But yeah, it's pretty phenomenal that, or I guess not phenomenal, just like insane, that they have complete legal immunity. So let's talk about how this. So somebody's hearing that is probably saying, well, how does something like that stand itself up, right? How does that stand itself up and how does it get the buy-in from every single country around the world for this to even happen, right?

Starting point is 00:06:58 So tell us, tell us the Cliff Notes version of in your point of view, how it all kind of came to be. Well, it's amazing because it always goes back to the Treaty of 1919, the Versailles Treaty to end World War I. It's amazing that how poorly that treaty was made and how many after effects was caused by it. It was a very emotional treaty. There wasn't a lot of logic to it because they basically put all the blame of World War I on the losers on Germany. And they made them pay outrageous war reparations. And it was very unpayable for Germany because they went back and they had no productive capacity. Their land was destroyed.

Starting point is 00:07:36 Their labor force was killed off. Millions died. And there's just no way that they could pay back these unreasonable war reparations set up by that treaty. And so what followed was the Weiber hyperinflation because they tried to prick their way. out of it and they tried that they were just had these war reparations and they were trying to rebuild and the easiest thing to do was print money right and so once they stabilized in about 1924 when they had created a new currency called the ret mark and they started to stabilize well something was happening across the ocean and that was the roaring 20s and everyone was making money over there and they saw

Starting point is 00:08:12 germany stabilizing and americans thought you know i'm going to buy low and sell high in germany i'm going to go invest all my money over in Germany. It's Germany. The worst is behind them. How could they not rebuild? So they pile money. All these American investors pile money into Germany. And then, of course, 1929 happens.

Starting point is 00:08:32 And the stock market crashes. And all those foreign investments dry up. And then suddenly Germany is in another terrible situation where they're worried that they're going to have another Weimer hyperinflation event. And coming out of that was a kind of nations got together at the Hog Convention. And they realized that to facilitate these war reparations and to rebuild Germany, they first had to kind of restructure these war reparations so it was more reasonable. But then also they wanted to create a bank, a neutral bank that worked above the law that could

Starting point is 00:09:05 kind of facilitate loans to help rebuild Germany, to help stabilize it, and then to help facilitate the war reparations. And that's how the biz was born. It was just because of these war reparations. amazingly. And so that's how they all agreed to basically give all these legal protections to this neutral bank because they thought it would be a really good idea. And now we fast forward, you know, 90 years later, or almost 100 years later, and they're still in existence because they're so legally protected. And so that's kind of how they came to be.

Starting point is 00:09:37 Well, and I think your point earlier, too, about how secretive a lot of it is and how there's no auditability to go in there and really kind of even fully understand the context of everything that's happening. So when that environment persists and there's huge beneficiaries and an interest and incentive to keep it that way, I guess we can see why there's very little known about it and it still hangs around, right? It's pretty fascinating. Yeah. And, you know, they still have a lot of power and they still have a lot of use. I think it's just, you know, most people think about the financial system and they just think about, you know, the Federal Reserve, the U.S. Treasury, and that's where they think it stops. But we live in a very globalized world. And there's these organizations

Starting point is 00:10:26 that are filled with unelected, you know, they're non-governmental. Like, I didn't vote for anybody at the biz, but they work in this stratosphere, like above everything else. And actually, it just, when they make these plans and they have a lot of influence over what happens in the design of the global financial system. And so I think that it deserves to have some oversight and some accountability, but unfortunately, that's pretty much non-existent today. So who are the partners? Who are the, as the bank of central banks? Who are the participants? What's that governance look like? So there's a board of governors. It's pretty much like the who's who of central banking. Like right now, I think Christine Lagarde is one of the board of governors, which is the, you know, ECB.

Starting point is 00:11:11 And it's basically finance ministers, central bankers and other members of high finance that sit on the board of governors. And then there's, they vote for a managing director, which right now is Augustin Carstens, who's been at it since 2017. So that's kind of like the structure. And then they answer to their shareholders who are central banks. And so there's 63 member banks, which make up 95%. of GDP. And they're just the biggest central banks in the world. And those are the shareholders in the business. So, you know, they receive a portion of the profits that the biz makes. And it's just like any other, you know, business essentially.

Starting point is 00:11:53 That's just crazy because those shareholders. And I think it's important for us to really kind of quantify this. Central banks, at least here in the United States, are these quasi-private entities yet government entities that straddle. And I don't know how that is in other countries. Are you familiar with what that governance is in other countries? Yeah, it's a little different in every single country from my understanding. So it just like differs from case to case. But it gets confusing because you're like, okay, there's this huge organization that's making profits and then they pay out dividends to central banks. Like, what's the point really? But when you look at Bank of Canada and the Federal Reserve, when they receive the profits or the dividends

Starting point is 00:12:40 from the Bank of International Settlements, they have a system where it just goes straight to the Treasury. So in a way, it's just like basically feeding into the treasuries of both of those countries. And I think a lot of countries are similar structured. So which would just be a reduction in the tax burden. Yeah. Not that anyone's being fiscally responsible, but You know, it is interesting. I've tried to dig into the profits of the Bank of International settlements. Yeah. Their profits are up like 169% compared to 2019 when it was a more normal, you know,

Starting point is 00:13:15 year before the pandemic. Since the pandemic, their profits are up 169%. And that really was curious to me. And then I looked into where the profits go. And like about 25% go to dividends to member banks. And then there's like these three opaque funds. that I'm not sure what happens to those profits or what they're used for. And I don't know if anybody does.

Starting point is 00:13:35 To be honest with you, that's where they get really secretive about their internal operations. I know one of them is used for like emergencies to provide liquidity for countries that go through financial crisis. But yeah, it gets mysterious once you understand like, where do these profits go? And then they have 180 clients. And there's 63 member banks who have, who received the dividend of the profits, but there's 180 clients. And all I can surmise is that those are smaller central banks from, you know, third world countries that haven't gotten big enough to become member banks. And they still use the services of the

Starting point is 00:14:10 Bank of International settlements. And so they pay fees and commissions. They add to the profits. And then, but they don't receive any of the dividends. And so in my mind, it's like, is this just like a perpetual machine of almost wealth inequality at a level that I haven't even thought about? because if the only member banks are large central banks from large developmentations, and they receive part of the dividends that go straight to their treasuries and the smaller clients that aren't member banks are using their services, like, you see what I'm saying here? It's like, is this just like a massive perpetuation of wealth inequality on a level that I never thought about? Yeah, with no auditor. So, yeah, I've thought about this and, you know,

Starting point is 00:14:52 there's still questions that arise around it. But, you know, the Bank of International settlements, They're really open about their research. They're really open about, you know, what their plans are. So they kind of promote transparency, but what they're not transparent about is their internal operations. And so like I said, there's nobody above them. So it's hard. There's nobody, there's no audit, like you said. So it's really interesting.

Starting point is 00:15:16 The thing I question and think about is when I'm looking at the currency, especially right now, if the dollars scream in higher, the markets are getting crushed. And if the dollar's selling off, I mean, the markets are just bidding like crazy. And it's almost like you've got this total polarization of market performance just based on how the currency is performing. And so when I'm watching that interaction and I'm watching Europe close in the afternoon here in the U.S. And then I'm watching the U.S. markets either go up or go down and you're looking at the currency moves as soon as that European market closes. I'm thinking to myself, how much of an interaction is something like the B.I. playing in the valuation of that currency relative to all these other Fiat currencies.

Starting point is 00:16:02 Are they stepping in aggressively and manipulating those currency markets to maybe try to to create stability between these opens and these closes of U.S., Europe, Asia? Or are they much more kind of out of pulling those strings than maybe the tinfoil hat me might think that thing that's happening. You know, it does. You know, the secrecy of these organizations makes it so you feel like you're being a conspiracy theorist by thinking about these things. But in reality, you know, we're just looking at this stuff and wondering about their

Starting point is 00:16:38 role in the global financial system, right? And so their mission is financial stability to promote stability and economic growth and prosperity for all. And in 1947, basically there was an agreement made between central. banks that they wouldn't transact between each other directly, they would work through the biz to do like foreign currency transaction, cross-border transactions. So they do play a role there, but from what I've read, it's more of just like an infrastructure and they're just moving funds around.

Starting point is 00:17:12 Sam, think about that. Don't go direct. Use this central entity that we can claw a tax out of for its quote unquote service. But, yeah, Canada, don't go direct to the U.S. Fed or what. That's crazy to me to think that. Yeah, they didn't want to have direct relationship with the, you know, the borrower and the creditor between central banks. They wanted this neutral bank in between for whatever reason.

Starting point is 00:17:41 And this is, it's amazing because this was 1947. And this is the same system we have today in a world that has changed so much since then. But, you know, this is just the world we live in where the biz is like in between. everything. And it's amazing because they take a fee and commission when they use their services. But it all goes back to the central banks. And so it's like this, it's like this, I picture like an octopus. I know it sounds funny, but who has tentacles who just moves everything around for these central banks above them and also keeps an eye on all the flows and then shares their research with them and warns them about maybe some cracks in the system here and there and what

Starting point is 00:18:20 they're seeing. And that's kind of what I picture the is being. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo fjord. And every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse,

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Starting point is 00:22:45 of these various jurisdictions and regions that, you know, most countries have elected officials there in place to represent the population. But if you're controlling the purse strings and you're one of these privileged central bankers to participate in this very niche, secretive way at doing business, you're actually implementing policy beyond, I think, any type of comprehension without any representation, which is just crazy. It's crazy. That's why I read into this stuff, because I feel like it's an infringement on sovereign nations. Like, if you think about America as a republic, we elect representatives that represent sovereign individuals who make policy for our country, but you have this organization full of unelected officials. And it just so happens,

Starting point is 00:23:36 like, they're in the ears of politicians all the time because it's their job to track everything. It's their job. They have the best vantage points. And they have all the data. And so politicians increasingly listened to them. And I didn't vote for them. And nobody voted for them. And you have to wonder, like, what are their intentions? And it's unfortunate because there's, there's no way for us to know. And if you look at history, what they plan to do becomes our reality, like 10 or 20 years later. Like the perfect example is the euro. Like they had planned the euro as early as the early 1980s. And then fast forward 20 years later, the euro becomes a reality for the people of Europe. And this was all the business plans. And so who elected them to make these plans that

Starting point is 00:24:23 became, you know, vital part of the global financial system. And for the people of Europe, I know that they didn't vote for that. It was really kind of decisions made above them. And so it's just really interesting to think about. All right. Next. What is the IMF? So the IMF, man, this is, you know, the IMF was created out of Bretton Woods. So everyone remembers Bretton Woods as being the creation of the U.S. dollar reserve system. All right. And, you know, coming out of that, it's basically the way that was, was there's a fixed rate of the U.S. dollar to gold at $35 an ounce.

Starting point is 00:25:02 And then you had all the different currencies that were, had adjustable rates to that dollar. And what they were worried about was in the 1930s, there was a lot of competitive devaluations occurring when people went off the gold standard, and then they devalued their currencies, essentially currency wars. at the expense of their trading partners.

Starting point is 00:25:22 So there's a lot of disequilibrium of the balance of payments between countries. And so the IMF was created to be almost like a monitor and supervisor of all the countries and make sure that they maintained competitive exchange rates, but they didn't do it in a way that they were devaluing their currencies excessively at the expense of their trading partners. And there are certain ranges that they kept watch on. And then if it came out of, it became came out of whack and it wasn't, it was disequilibrium between the balance of payments.

Starting point is 00:25:55 They would provide loans and liquidity to certain trading partners. And then it would kind of soothe everything out. So that's kind of what the IMF was originally created for. And then that lasted until 1971, when Nixon overnight just took us off that and, you know, suspended convertibility of gold. And suddenly there was a free. floating exchange system and the IMF no longer had a purpose, like literally. I wonder what they thought when they went to work that day and they were like, well,

Starting point is 00:26:27 what do we do? Because it's just a completely different system and our purpose is gone now, right? And then in 1976 at the Jamaica Accord, they basically gave the rights to manage exchange rates back to the countries. So the countries can look at their own economies, set their own interest or at their own exchange rates and the IMF couldn't tell them what to do anymore. But there is a very important stipulation where quote unquote, they said the IMF is still going to do firm surveillance and there is no justification or no detail explanation what that meant to make sure that they

Starting point is 00:27:06 didn't competitively devalue their currencies. And so it kept the IMF kind of alive because there's really no reason for it to exist. What type of executive authority did they have to enforce a bad actor? Yeah, if somebody's not playing nice, like what can they do? Well, nothing really. That's the funny part because in 1976, like I said, all the rights went back to them after the Jamaica Accord to the original sovereign nations to control those interest rates. So that's why it's kind of funny because they just say firm surveillance, but they really had no authority. But before 1971, they had all the authority. They could tell anybody what to do with the exchange rates. And if they got out of whack, they just,

Starting point is 00:27:52 they just said, no, you're not doing that. We're going to, we're going to fix this right now and sue everything out and make sure that all the exchange rates are, the balance of payments are, you know, in a good equilibrium. But after, after 1971, and especially after the Jamaica Accord in 1976, they really didn't have any authority. And this is when the IMF shifted its purpose into an organization that maintained exchange rates, into a basically international development agency that focused on providing loans to distressed nations. And this happened in the early 1980s

Starting point is 00:28:28 when the Latin American debt crisis happened. And then the IMF kind of shifted roles completely. Like just think of them as like no longer being the same role post-1971 than pre-1971. So when I hear that, so they're going around with a tin cup to various central banks saying, hey, let's raise a rainy fun day. And then we will be the determining body of how that gets applied and who it gets applied to, depending on whether we like them or not.

Starting point is 00:29:00 Is that pretty much the impetus of it? Yeah. I mean, there is some kind of like discrimination. And this is where it gets into, you know, who actually is a part of the IMF. and it gets into their voting rights. So the voting rights are based on the quotas, and the quotas are determined on two things. They're determined on the GDP of the country and the openness of the country. And meaning like with trade, so that's why the U.S. has a lot more voting rights than, say, China,

Starting point is 00:29:30 because technically they're more of a closed economy, you could say. And so the U.S. has about 18% of the voting power in the IMF. To give you a sense, the next highest is 6%. So we almost have triple the voting rights of everyone else. And so over time, it can be said that the IMF kind of is used to push U.S. interest because the U.S. has greater voting rights than everyone else. And that's kind of what you see historically in terms of the IMF and who gets loans and who doesn't. Now, let me ask you this, Sam, is 18% of the funding that's being provided to the IMF to be lent out coming from the U.S.? Is it proportional to the amount that's being allocated into the fund? Yes, yeah, exactly.

Starting point is 00:30:17 So if you have a greater quota, you're also providing more funds to the fund, if you will, right? And so the IMF has basically two forms of how it gets revenues or money. And one of them is quotas, so every year, you know, depending on. how many voting rights you have or what your quota number is, you receive money from that nation, as well as just interest from their loans that they give out. So that's kind of the two ways they make money. Recently, I want to say like in the last five to ten years, I know China was really vying to become part of the IMF where before they were not part of it. Strategically, why would they be so interested in being a part of this process? Yeah, that's a good question. The thing about the

Starting point is 00:31:01 IMF is they kind of have control over a lot of these third world countries because the third world countries have come to the it's come to they depend on them they depend on them for loans to keep going and so when you have that power over a third world country you can kind of decide through conditions in those loans what they do policy wise and so I think China maybe thinks it's a way for them to influence policies in other countries. countries to their benefit to kind of spread their policies around the globe. So that's probably my best guess. Yeah.

Starting point is 00:31:39 And I know they have an interest in many developing nations in order to resource capture, especially you see it in Africa a lot where they're going in and they're strategically setting up hubs and influencing and doing some really dramatic, not in a good way, deal structures with those developing nation countries in order to extract what they find. to be the strategic resources. So I'm sure that that kind of plays into what you were just describing there with the IMF. Right. Let's go to the World Bank. This is the one that I know the least about. So the World Bank has the most like, I'd say like benevolent or altruistic mission because they were created at Bretton Woods as well. And they were created for the purpose of post-war reconstruction

Starting point is 00:32:24 and to foster economic development. And so they were always meant to be that lender for developing nations to help foster economic growth and reduce poverty. Okay. Now, over the years in about when it was created in 1944 into the 1950s, third world countries kind of became ideological battlegrounds for the Cold War. You know, each of them wanted to support countries that were in alignment with their interests. And 1950, up to that point, the World Bank was pretty much used the way it was meant to be used. World Bank chiefs actually went to third world countries and walked around and met them and understood the problems that they were trying to solve and were empathetic for poverty.

Starting point is 00:33:12 It was around in the 1960s in the midst of the Cold War that I would say that World Bank funds and loans became almost geopolitical. And it went because of when Robert McNamara became leader of the World Bank, Robert McNamara was a secretary of defense for JFK as well as Lyndon B. Johnson in Vietnam. And after Lyndon B. Johnson left, he became the chief of the world bank. So this was a man with a military background and an economy background. He was an economist. But he decided that he would control these nations by basically,

Starting point is 00:33:53 entraping them in debt. Because once you own them, when they have a bunch of debt, you can kind of control their policies. And so the World Bank kind of shifted from a organization that had really good intentions to one with ulterior motives, I would say. So after Robert McNamara became the leader of the World Bank, from 1968 to 1973 in five years, the World Bank granted more loans than the last 23 years combined. And it was mostly to pours. South American countries, and they were massive loans. And in hindsight, they were pointless infrastructure projects. They had insufficient social programs. They built these expensive dams that went nowhere, energy products that went nowhere. And they had no action to curb embezzlement or corruption.

Starting point is 00:34:42 And most of the funds were siphoned to the political leaders to their personal accounts. And so they granted loans to these countries that were adopting political policies that when it, you know, against the capitalist model to basically stabilize them and control them to basically align back with the U.S. interests. And this is like the, even the World Bank's own research looks back on those loans and those projects of Robert McNamara's, and they call them failures. They were complete failures. And so the World Bank was almost co-opted to have a different purpose around the 1960s

Starting point is 00:35:18 in the midst of the Cold War. And so it's kind of wild. But that's exactly what happened. And that's what the World Bank themselves say what happened. So it's really interesting. That's really fascinating. So here's the yes or no question. And this is more from my own entertainment to what you respond to this.

Starting point is 00:35:40 Do they understand Bitcoin? Do the people in these organizations understand Bitcoin? You know, six months ago, I'd say no. But so recently, recently, so the IMF has. reports, annual reports of all their recipient countries of their loans, and they just monitor them and make sure that they're spending the funds the right way. And El Salvador's came out like five days ago, and I read it. And Bitcoin's mentions 236 times in that report. And so they're on it now because I think not only the legal tender, but the Bitcoin bond hasn't shook.

Starting point is 00:36:17 Yes. Because they have had a monopoly on distressed sovereigns for a long, long time. And it's basically, like I said, it's a way for them to control the policies of these countries and to basically infringe on their sovereignty for a long, long time. And El Salvador is basically like a proof of concept in my mind. And they're on it now. So it's going to be really interesting how it plays out. One of the things that I think was totally missed with this bond down in El Salvador is

Starting point is 00:36:50 the special coupon that is part of the deal. This special coupon is massive, massive, hundreds of millions of dollars in value at the time of issuance of the bond itself. And so if you're a fixed income investor and you're chartered in fixed income, you're chartered in fixed income. Now all of a sudden, you can get practically direct access to a portion of the amount that you're buying in the bond. In this case, I think it's 50%. They're raising a billion. Half of it is going straight into Bitcoin. It is a Bitcoin buy from the very first day that they received the funds. El Salvador is then custodying that Bitcoin and then

Starting point is 00:37:37 paying it as a coupon at a date in the future. So now, if you're a fixed income chartered entity, wherever you're at in the world, right, you now have direct access to Bitcoin-like performance, even though yields everywhere on the planet because of organizations like the ones we're talking about is nothing percent. I think it's a way that the structure of this bond is so intelligently constructed, and I don't think it's received nearly enough air time on what the implications of that are because of the access that it provides to fixed income investors. Yeah. I mean, in this low-rate environment, it's kind of looking pretty attractive with the upside

Starting point is 00:38:22 potential of just Bitcoin's price appreciation. And then you have 50%. Yeah, 50% of it's just Bitcoin and the other 50% is infrastructure to build out their operations and the city. And so it kind of depends on their execution a little bit as well. Yes. But for El Salvador, it's no, it's no detriment to them to be a custody holder of something that they've declared as legal tender, right, organically inside of their jurisdiction, to custody that on behalf of that fixed income investor and then just handed back to them at a later date. They're not out anything, right? But they've created an insolnsic.

Starting point is 00:39:01 incentive structure to attract what I would describe as locked up capital that has to force itself into a zero yield environment. And now it's almost like a relief valve on a pressure tank that I think has never been there ever in a situation like this. It's totally crazy. I'm with you 100% on that comment about the bond being a big deal here. Let's let's back up a little bit about the IMF. All right.

Starting point is 00:39:30 So the IMF, I mean, it's amazing. There's basically two critiques of the IMF. One of them is why do they exist when their original purpose no longer exists after 1971, right? Because they basically do the exact same job as the World Bank. They're both just like developmental agencies now, giving out loans to distress third world countries and influencing their policy and advising them on what to do to, to, achieve economic growth. And there's a long, long history of the other thing is that their loans,

Starting point is 00:40:08 you can make a really good argument that the IMF has not come through on their mission and reduce poverty and help these nations, but actually made their lives worse. And this is, there's statistics for it. Like, I'll give you an example. And there's a study that looked at all the recipient countries who received loans from like 1947 to 1989. And it looked at how long the countries relied on the IMF. So the ideal situation is that they take the loan, they create economic growth, and they don't have to use the IMF again. They don't have to go into debt because the policies worked and they grew their way out of it and they're self-sustainable, right? Well, six of those countries relied on the IMF every year for 30 plus years. And 24 countries relied on them

Starting point is 00:40:58 from 20 to 29 years and 47 countries relied on them from 10 to 19 years. And 83% or 83 of those developing nations who received IMF loans relied on the IMF every year for 60% of the years from 1947 to 1989. So it creates long-term dependence on these external creditors. And so are they actually doing their job? And then do they actually create economic growth? in these less developed countries. In another study, they looked at from 1965 to 1995,

Starting point is 00:41:34 they looked at about 48 out of the like 90 loan recipient countries were not better off than before in terms of real per capita wealth. And 32 of those 48 countries, their economies actually shrunk by an average of 50% after they've received a loan from the IMA. And so there's real data to support the fact that, like, is the IMF actually helping these countries? And I think when you look at El Salvador, like El Salvador has finally trying to get themselves out of relying on the IMF.

Starting point is 00:42:07 And they're using this open monetary network that doesn't have any gatekeepers that is completely permissionless to raise money and to use it the way they want to without any conditions attached to it, like the IMF loans. And, you know, if you look at even since they made Bitcoin legal tender, 30% had bank accounts before Bitcoin became legal tender. And that's after 40 years of IMF and World Bank policies, 30% only had bank accounts. Four months later, after making Bitcoin legal tender, that number has doubled. So they have doubled the amount of people who have access to financial service in four months what the IMF and World Bank policies did in 40 years. And so this is like a huge deal.

Starting point is 00:42:53 It's insane. It's insane. It's insane. And they estimate that the potential benefits of remittances alone could save them about 0.25% of GDP a year. So about $54 million in savings back to Salvadorians by using the Bitcoin. And they expect Bitcoin tourism to bring in an additional, you know, $5 million a year, which isn't a lot. But still, like this is a man. who's trying to lead his country and bring in innovation and use a new technology to bring in entrepreneurship. And the IMF is sitting there and they're like, their arms are crossed and they're like, no, because they don't like it because they've had a monopoly on this distressed sovereign debt for so long. And what they're really worried about is other nations looking at El Salvador and being like, hmm, this is interesting. I don't like the IMF either. They've actually made our lives really hard for the last 30 years, let's try something different. And that is a huge deal to me. And I'm very empathetic to the millions of faceless and nameless victims of these policies

Starting point is 00:44:03 throughout the entire world from the IMF and the World Bank. And to see them take their sovereign rights back into their own hands and use Bitcoin to do that, I mean, it makes me incredibly excited, incredibly excited. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust

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Starting point is 00:47:36 at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. It's crazy to understand that stat that you're doubling the remittance or the number of people with a bank account access in four months, but yet the IMF is still making statements telling them that they think that this is bad policy or whatever it is that they're saying. I don't have a word for it other than discussed. Well, it raises the question, the question that a lot of, a lot of people have had for a long time is what the true intentions of these organizations are. Because it doesn't seem like it is to help the people of these developed nations.

Starting point is 00:48:21 It seems to be very, very different. Parasitic self-interest. Parasitic self-interest as well as pillaging the wealth of these nations. And so the chief economist of the World Bank, Joseph Stiglitz, in the 90s, he was one of the first whistleblowers of these policies. He came out in 1999. He was the first one that had really high ranking in these organizations, Nobel Prize winning an economist. He said, we need to reform these policies because they are doing the opposite of what the goals are. They are worsening these third world countries.

Starting point is 00:48:58 He said there's basically a four-step process here. they basically privatize state-owned assets in industries, particularly, you know, electricity and water companies in a process that involves a ton of backhand deal, you know, handshakes behind doors and significant amount of corruption. And then he basically explains how they open up the third world countries with deregulation and liberalization, opens up their financial markets, which allows capital flows to go into these nations. And then once things hits the fan and there's a recession, all the money flows out. It's a hot money cycle. And all the capital flows go out and all the investment. And then the IMF recommends that they increase the interest rates. And then suddenly the interest rates go up 60, 70, 80 percent in these countries and the economies are just wrecked.

Starting point is 00:49:52 And this happens over and over and over again. And then when there's a recession after it's wrecked, the IMF recommends austerity. They recommend cutting spending. And what they cut is subsidies for food, essential consumer products. They cut everything, all those health care programs, all the education programs, in order for these countries to afford to repay their IMF debt. So they take all the programs that are meant to help the poor and they cut them to pay off the debts that they brought on these people.

Starting point is 00:50:24 And that happens time and time again. And if you know anything about the history of the IMF, after they do that and they cut the subsidies, it leads to riots. It leads to protests. It leads to civil unrest. In the 1980s and 1990s, there was literally a term called IMF riots because they were so frequent. In 1976 to 1992, there was 146 IMF sponsored projects against IMF sponsored programs in almost 40 different countries. So when we say these things that they hurt the poor people and hurt these developing nations,

Starting point is 00:51:02 like the data supports it and their track record is not pretty. And so this has been going on for a very, very long time. And so to see El Salvador finally stand up against these people and use a technology finally that's there that they can use that they don't have to ask permission. They don't have to ask the IMF, can I do this? But they just did it. It's incredibly empowering for these. third world countries. And I just don't think people really understand the history of how hard

Starting point is 00:51:31 of a time these third world countries have had dealing with these organizations. That was one heck of a response to the yes or no question. I was trying to have a little fun with you and you had a whopper of a response. So let's go to, so you think that Bitcoin is making a splash. They are paying close attention to this. I know Jack Mallers, he recently, he recently, provided a presentation to, was it the IMF that he, or no, was it the world economic form? Who did he provide that presentation to? I think it was the IMF. Yeah. I think it was. So he went in there provided his presentation to the IMF. I just caught a little bit of it. I know he was talking about French fries and stuff and really kind of having fun with it. So they're all, they're aware of

Starting point is 00:52:17 this. I think this is my personal opinion. I don't know. I think for them, they're looking at Bitcoin and they're saying, hey, that's a cute little movement that's happening over here. But at the end of the day, we control everything. And we're going to roll out a central bank digital currency. And this whole Bitcoin thing is just going to kind of disappear. I think that's how they, that's not my opinion. I totally disagree with that. I know you disagree with that opinion just because of the game theory that's going to play out here. But from their point of view, I think that's how a lot of these people that are running these organizations kind of view how things are going to play out moving forward here. What do you think those conversations sound like, look like with respect to central bank

Starting point is 00:53:02 digital currencies and how they plan on stepping into this new tech insertion with respect to monetary policy and economics around the world moving forward? Well, this is where it gets into basically the Bank of International Settlements, because like I said, the Bank of International Settlements is more of like the research and innovation. And they're the ones putting out all these working papers on central bank digital currencies. And then they interact with the IMF and World Bank and kind of let them know what's going on. But to them, like Bitcoin is still just like a speculative asset. It's not really a threat.

Starting point is 00:53:39 I think maybe the Bitcoin bond woke them up a little bit. But in reality, they still just think it's like a play toy. They don't really respect it as an actual threat to their power. And really when I look at them, they've held down to power. for a very, very long time. You know, it's going to take a lot to take them out, if you will. But, you know, when you're looking at the central bank digital currencies, there's a lot of different ways that they can kind of go about this.

Starting point is 00:54:07 They're figuring it out. Basically, they're in the design planning stage of how a global CBDC system would work in our world. And it's moving quite fast. So it's early days in terms of like what they're thinking. about, but I think like 83% of central banks are doing research and have their own programs of central bank digital currencies. So a lot of people say like Bitcoin's inevitable, but CBDCs are also inevitable. They're coming and they're going to come in some kind of shape or form and it's

Starting point is 00:54:43 going to be interesting to see, you know, how it plays out. But even though they're coming, they still have, they still control the central ledger, each one of these countries, and they still have to debase the number of units inside of that central bank digital currency in order to compensate for all the momentum and trends and policies of a fractional reserve system. It's just part of a fractional reserve system. So I guess what I'm getting at with that comment, that's much more of a statement than any type of question. But when I'm looking at it, they're really competing with stable coins. And because the stable coin market is just representing the existing currency, but the

Starting point is 00:55:29 differences is that it immediately clears unlike the dollar that you might have in your traditional bank account, which doesn't clear immediately. And it does it permissionlessly over that network that it's on. So they're saying, and I think that's what you're implying here is as they're coming in with their central bank digital currency, they are saying we're going to basically pull that authority away from these private entities that are putting that technological feet in place today. Yeah, I think most of the regulatory pressure that you're seeing today is not actually about Bitcoin. I think it's mostly about the stable coin adoption, which has been explosive, really in a lot of these things. third world countries in reality. And the thing about it is, this is when like centralization comes into play because they're

Starting point is 00:56:24 all also centralized. So it wouldn't be hard for these governments and central banks to shut down these private stable coins. I mean, in reality. And so what I see, though, is government's not very good at tech. And in the Federal Reserve, I really question their ability to come out with a really good stable coin. And so it's my theory that actually they're going to eventually talk to really well-regulated stable coins into maybe using their technology to create their Fed coin.

Starting point is 00:56:59 So I see kind of a merge happening with especially some of these US-based stable coins that have been really regulatory compliant and kind of like the Fed reaching out to them being like, hey, can you help us create a Fed coin? And that's kind of how I see this playing out. Totally agree with you. The research and development and everything else that would have to take place for them to kind of hit all the roadblocks in the government acquisition type process is not something that happens in six months or a year. That is a five-year plus type time frame to get to something that could actually start to be issued. Yeah. And they usually, you know, think about the government.

Starting point is 00:57:40 they usually use the private sector, you know, to make things for them. It's not like they do it all internally. And, you know, with stable coins, it's one of those things where the Fed has to think about, they don't want to rush this. Like, think about if my biggest worry, actually, is that Bitcoin starts to put a ton of pressure on them quickly. If Bitcoin starts to explode and then they rush out their CVBC and it has some kind of like critical bug in it or something like that, think about how devastating that would be.

Starting point is 00:58:10 in this environment for a country's currency to have like a inflation bug in the code. Like it's kind of a crazy thought to have or a vulnerability where it could be like hacked or something. And so you want to make sure that you get this right. I mean, this is this is going to be the foundation for the new digital financial system. Like you want to take your time with this. So the recent report showed that the Fed coin was coming out in 20, 25 to 2030. And, you know, I think that's probably realistic.

Starting point is 00:58:40 I would go further, I would say probably closer to 2030 that we're actually going to see like a functional product here. Because they move slow. They know that this is like a very important. This is going to be the foundation here. So that's kind of how I see this playing out. Sam, and I agree with your timeline. I agree with your timeline. But I'm smirking at the same time because I'm thinking 2030, might as well be 20, 300 in the timeline here because 10 years is hundreds of years in a relative comparison to how fast this is moving out. Exactly. I mean, that's two halving cycles. So we'll see what happens with that.

Starting point is 00:59:24 Well, and I don't, I'm not even looking at it from a halving cycle. I'm looking at it from the macro backdrop of how broke the fixed income spaces today. That's like, it is so broke. And they're going to have to do so much. more QE, and they're going to have to do so much more UBI in the coming five years that

Starting point is 00:59:47 whenever I hear a number like 2030, I'm just like, it's just crazy to think that that's going to have any type of impact of slowing down Bitcoin. It's true. And there's also kind of like a competitive nature. I mean, we know that China has been making their digital wand and experimenting on it for a long time. So it's kind of like a race there too with Bitcoin, but also between China and America in terms of like who's going to be the digital currency of future.

Starting point is 01:00:19 You know, obviously I think the dollar has a big. Privacy wins. Privacy wins. And I think that's when I hear that China's moving out on the gym, I'm thinking, yeah, but who the hell would ever want to hold that? Who's going to want that? I don't know who would want that. But that's what I'm saying.

Starting point is 01:00:35 Like it is moving fast and the system seems to be breaking or seeming increasingly fragile, let's say. Yeah. And so it's it is a moment in time where they have to be thinking about this stuff really seriously. And that's what that's what it seems like is happening behind the scenes. Like you're seeing more reports coming out, more research reports. The Fed just came out with their first research reports, which was kind of a huge letdown, honestly, they didn't really say much in it. They've been thinking about it for three years,

Starting point is 01:01:09 and there wasn't really much that we didn't know in that report that came out, like I think a month ago. So we'll see what the CVDCs come out with. But when I look at this and I think about how the CVDC can be implemented in a way that protects the privacy of everyday people, it's tough to see a scenario where people would want to use that. And it's basically just a fancy dollar that still has the inflationary policies behind it. Why would somebody want to hold that when there's something that nobody can control that has much more,

Starting point is 01:01:47 it preserves its value over time? And so that's when it's like, who would choose to use a CBDC that surveils, that's being surveilled by politicians and bankers and has, you know, less attractive monetary policy versus something that's open, permissionless, that's not controlled by anyone that has a much more attractive monetary policy. And so it's going to be really interesting to see how it all plays out. Hey, I want to talk to you about the SDR a little bit. Just to kind of capture your thoughts, kind of describe what it is for people, and then kind of whether you see that playing any type of role moving forward, or is it just going to really kind of diminish its influence

Starting point is 01:02:29 going to diminish moving forward. Yeah. Well, especially special drawing, right? You know, it came out of the Triffon dilemma. So that's why the special drawing right became a thing. It was actually the idea for it. We kind of started it with John Maynard Keynes with the Bank Corps in 1944. But in the paper that Robert Trippin described the tripping dilemma, and for everyone

Starting point is 01:02:51 who doesn't know that, in the Brettonwood system, it was the dilemma where the U.S. dollar was the reserve currency of the world. And so they had to run constant current account deficits. And so if they wanted to reduce the deficits, it would actually remove liquidity from the system and create kind of depressed economic activity. So that wasn't good. But if they kept running deficits, it kind of jeopardized confidence in the dollar itself if they had enough gold reserves to back the dollar. So it was this dilemma where they couldn't really figure out what to do. And so Robert Triffin in that paper where he turned that, he said, hey, let's let's have the IMF create a currency that can be used for liquidity for reserves.

Starting point is 01:03:38 And so that the dollar can have a little bit more flexibility. And so that's when the SDR kind of came about. And so it provided a new source of liquidity for these banks. And so you could kind of allow the U.S. to have a little bit more flexibility with its deficits. And so that was created in 1968. And it's basically a basket of currencies now. It used to be in that area. It was backed by about, like, 0.88 gold, which equaled $1.

Starting point is 01:04:07 Today, it's a basket of currencies that changes weights every five years. And it's equal to about $1.4 for every one SDR. And it's used as the unit account for the Bank of International Settlements and the IMF and these, you know, international global organizations. And I don't really see it. Like, it's, it seems like it would be almost like going backwards to, to like change the system to an SDR. And then you're trusting these organizations full of unelected officials with

Starting point is 01:04:39 seniorage, which that doesn't sound like a good idea for anybody. Like, how would that work in terms of governance when you have one organization that has that exorbitant privilege over the rest of the world. So I really don't see the SDR becoming like a big thing. Yeah. And if it's a basket of Fiat currency underneath of it, with none of them being backed by anything, they're all, it's all getting the base. Like you're not fundamentally solving anything by it just being a unit that represents

Starting point is 01:05:11 all these other Fiat units that are getting the base at a breakneck pace. Yeah. And it's, you know, it reminds me of it's like Facebook when they tried to come up with their DM where they actually included some other things besides the Fiat currencies. And so it is something like that. That's kind of what it reminds me of with the Bitcoin bond, because when Facebook came out with the DM, that's what kind of lit the fire under the essential banks to start really looking into CBDCs. And now I feel like the Bitcoin Bank or Bitcoin bond is lighting the fire under the IMF and World Bank into looking at Bitcoin as well. So things should

Starting point is 01:05:48 get interesting here in a bit. Who's more powerful, the BIS, the IMF, or the World Bank? That's interesting. That's an interesting question. I'd probably say, man, to the IMF and World Bank are more like arms of the United States because we have the most voting rights and control over there. The biz is really like its own thing. So I think the biz probably has most independence and outside of politics.

Starting point is 01:06:17 So I think the biz kind of acts in its own stratosphere. And so I'd probably say the biz, to be honest with you. What is something that we haven't covered that you think is really important in this particular area? You know, I tried to go on my rant of like all the history of the IMF. And, you know, I really just touch the surface. It's like, man, when I'm doing my research and you can, you can think what you want. and I implore everyone to just, you know, do your own research here. Like, obviously, I'm biased.

Starting point is 01:06:51 I have my own life experience that I'm looking at this stuff through, and I'm a Bitcoiner. So I'm going to have like a more negative connotation towards these organizations. So I hope that everyone just kind of does their own homework here. But what I'm doing my research, there's a couple of things that come to mind. And that's, you know, I'm looking at, I'm watching videos in YouTube of a random economist in Ghana, who's saying the exact same. thing about the IMF as a protester in Argentina who's saying the exact same thing as a Nobel Prize winning economist who's saying the exact same thing as somebody else. If you get my gist,

Starting point is 01:07:27 and this is across multiple decades. So this is real. And these countries have suffered. And I can't get that message out enough that, you know, I don't know Bitcoin is the all and be all of the solution here, but at least it's something that's going to free these people from these organizations that have basically just entrapped them. And one of the things I did in my research was I looked at political cartoons. And it sounds funny. But when you look at political cartoons, it gives you an idea of the sentiment on the ground about these organizations.

Starting point is 01:08:02 And I looked at political cartoons from 1984, 1996. And they're all telling the same story about these organizations, about what they do to these countries. And I just can't get that message through enough that we're in a situation here where finally there might be a sly roundabout, like Milton Freeman said, of working around these organizations and taking a little bit of power away from them and providing an option, just an option, an alternative for these countries to look to. And so I hope I got that message through.

Starting point is 01:08:41 But I hope everyone just kind of like thinks about that. and understand the history here because it's a big deal. It's a big deal that there's at least just some alternative that these people can go to. And that's kind of the message I wanted to get across. I love it. And for anybody who likes free and open markets and freedom in general, competition is a good thing, right? If the IMF, from the IMS perspective, if there's this other thing over here that's competing with their model and what they're doing, for a person who is truly about free and open markets, they want

Starting point is 01:09:19 competition because it's going to breed further success and maybe a better way of doing business. We're seeing nothing of the sort based on the messaging that's coming out. And it's funny because you're just seeing it with El Salvador, which is a very small country relative to everything else in the world. But boy, are they making a stink about it, which I think tells you everything you really need to know. Yeah, and it's ironic because they have. actually preach free market, you know, neoclassical. That's what the IMF and World Bank always,

Starting point is 01:09:49 they want competition. They just don't want competition in their monopoly and distressed. Exactly. Exactly. It's a little bit ironic. And I, you know, just one more thing. This is just more of an interesting thing because when El Salvador did this, I immediately looked at their history with the IMF. And I just think this is interesting. People should know about this where they say that El Salvador has a debt problem. And they say, well, like their fiscal position isn't well, and they're 100% right. They have about 84% debt to GDP right now. You know, they've had a hard time building their labor market over the last 30 years. And we talked about the unbanked situation there too. But this has all happened on the IMF and World Bank's

Starting point is 01:10:39 Watch under their policy direction. and advisement. And nobody thinks about how the debt problems happened a long, long time ago. And El Salvador was the recipient of one of the largest, most controversial political IMF loans in history in 1982 during their Civil War. And it really, they're still working off the loans from that super controversial loan in the early 80s. And it builds and it builds and it builds.

Starting point is 01:11:09 And the IMF to turn around and say like, well, well, you know, they haven't listened to our reforms. They just put the blame on them. They should look in the mirror and say, why are they are, why are they in this position when we were supposed to be the ones advising them to build economic growth? And so who has really failed here in El Salvador? And I just, I think everyone should look into the history of IMF and El Salvador. It's really quite fascinating. Sam, I've loved this conversation. Is there anything? thing that you want to hand people off. I know you're active on Twitter. Is there any other thing that you want to highlight? You know, I write blog posts at Swan. So I work at Swan Bitcoin.

Starting point is 01:11:53 So we're just, we're a place to buy Bitcoin for cheap. We match that with a lot of education. And so I write a lot of content. So you can check out some blog posts by going to Swan.com. I write a lot of more kind of beginner friendly Bitcoin stuff on there. And so that's kind of where you can find some of my work. And then, like you said, Twitter at Sam Kala, S-A-M-C-A-L-A-H, where I kind of share some of my thoughts around some of this other stuff, which I, when I'm not busy teaching people about Bitcoin at Swan, I like to read about organizations like this. Well, thanks so much for coming on the show. For people that are interested in that, we'll have links in the show notes to Swan and your articles and also your Twitter handle.

Starting point is 01:12:38 So, Sam, thanks for making time. Thanks, man. Thanks for having me on. I really appreciate it. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening,

Starting point is 01:13:14 and I'll catch you again next week. Thank you for listening to TIP. To access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC065: What does the BIS, IMF, & World Bank even do w/ Sam Callahan (Bitcoin Podcast)

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