What’s the relation between fiat money and slavery? How did easy money and government suppression of honest money lead to this outcome? What’s the story with aggry beads and panos? How does Bitcoin change this? Robert Breedlove (CEO & CIO Parallax Digital) joins me to talk about these questions.
Links:
- Twitter: @breedlove22
- Article: Masters and Slaves of Money
- Parallax Digital: ParallaxDigital.io
Sponsors:
Stephan Livera links:
- Show notes and website
- Follow me on twitter @stephanlivera
- Subscribe to the podcast
- Patreon @stephanlivera
Podcast Transcript:
Stephan Livera:
Robert welcome to the show.
Robert Breedlove:
Hey Stephan, thanks for having me
Stephan Livera:
Robert, I’ve been following your work for some time now, and I had the pleasure to meet you. Pleasure of meeting you in it was around Bitcoin 2019. So it was that the beefsteak barbecue. So that was, that was a great time, a great chance to meet you and chat about economics as well. You’ve been writing some excellent pieces and wanted to dive into what you’ve been doing. But perhaps first, just introduce yourself a little bit just for the listeners who are not familiar with you.
Robert Breedlove:
Sure. I’ll keep it brief. My name is Robert Breedlove. I’m the CEO and CIO of Parallax Digital. We’re a global multi-strategy crypto asset hedge fund. We also do some consulting and kind of the Bitcoin universe. And then, you know, Bitcoin has given me an impetus to write I’ve been a lifelong reader, but more recently I’ve been writing just to sharpen my own understanding and people have enjoyed it. So I’m going to keep doing it
Stephan Livera:
Phenomenal and you’ve been writing some excellent pieces. And so today I wanted to really focus on your piece around masters and slaves of money. And obviously there’s a lot of ideas to unpack here. So I guess let’s just start with, why did you write this one?
Robert Breedlove:
Yeah, I think the more I’ve studied Bitcoin which naturally, you know, because you are actually studying the concept of money, it takes you into this entire bottomless rabbit hole of history. But so many Bitcoiners talk about, I think the more closer I’ve studied, that the more I’ve realized that essentially the monetary standard and the moral standard are inexorably linked. And there’s been a lot of great writing about this in Austrian sphere, a couple of books that inspired, this were Honest Money by Gary North and The Ethics of Money Production, by Hulsmann, which I know you’ve talked about a lot on your show. And I just wanted to, it felt timely to write a piece kind of with all the racial tensions going on, especially here in the US I actually think that a lot of what we saw in the wake of George Floyd’s killing, it’s a symptom of a much deeper problem, which is we have this moral decay at the root of money. And I just wanted to really make a strong argument against Fiat currency and make the case for how Bitcoin sort of actually helps heal a social morality.
Stephan Livera:
Right. And so before we dive into slave masters in the past, I suppose a skeptic might be thinking, obviously, I agree with you, but a skeptic might be looking from the outside and thinking, Oh, well, aren’t you guys just drawing this longbow connection between money and immorality and slavery? Is that just a massive longbow? Why is that not a longbow?
Robert Breedlove:
I think there’s actually a great example in the piece that I lifted from Gary North and the book, honest money. And he talks about the case of a hypothetical wine maker who is operating in a centrally banked economy. And he knows that his central bank recently say doubled the money supply just for simplicity’s sake. So this wine maker that’s accustomed to selling his wine for $20 a bottle. All of a sudden he faces a dilemma essentially, and kind of ignoring the unevenness of inflation in an economy. Just again, for simplicity sake, he basically has three choices. The wine maker can continue to sell his bottle of wine for $20 a bottle, knowing that he’s going to take a 50% haircut, right? The money supply doubled, all his cost of inputs effectively doubled. So if he holds his selling price constant, he will eat that full loss due to inflation.
Robert Breedlove:
His second option is he can actually start using cheaper ingredients or even water down his wine, but continue to sell it for $20 so that he could maintain his margin. And then of course, third option would be to double the selling price to $40 such that he receives the same value for his wine denominated in post inflation dollars. And what’s really interesting about this is even if this hypothetical winemaker decides to go with option number three, and to sell his wine at full brass $40 post inflation, $40 per bottle in post inflation dollars to maintain his own margin. He will actually face competitive pressure from other wine makers that may be a little more unscrupulous and go for option two, right? And it could just be at the margin. Someone could just be adding a few ounces of water to their wine, or just using some slightly cheaper grapes.
Robert Breedlove:
But it’s essentially this process that actually links inflation to the incentive to defraud your customers. So inflation actually quantifiably, incentivizes merchants and producers to be dishonest. And even, and again, even if you’re the honest, morally virtuous winemaker choosing option, number three, you’re now forced to weigh your moral integrity against your financial wellbeing, because the other winemakers with less scruples will actually out-compete you, right? If they can keep selling the same wine at $20 a bottle using a few drops of water or whatever it is, they actually put you at risk. So you can, it pushes honest producers out of business. And so it’s something very deep. It’s almost as if inflation is a very misunderstood concept, but as I think most Bitcoiners understand it is taxation without representation. It is it’s theft. That’s all it is. It’s not good for an economy in any, there’s not a single equitable benefit.
Robert Breedlove:
It only benefits those who can inflict it on others. That theft that’s integral to the current monetary system is actually infectious in a way, right? So in the same way that this winemaker is incentivized to defraud his customers, who it actually radiates out from them, right? So if the customer receives an inferior product for their dollars, then all of a sudden they’re incentivized to cut costs elsewhere, and it pushes it out further from there. So it’s almost like a moral or deceitful cancer that riddles an economy. when you centrally manage a money supply and inflate it to the benefit of governors at the expense of everyone else. So I was telling you kind of before the show, I still get arguments from people who I think are really smart that will boldfaced tell me no inflation is good for an economy. You need rising prices, you need rising wages. And I’m just blown away, frankly, that this, what I consider to be the greatest con in human history has been so successful that they’ve duped otherwise really intelligent people into believing inflation is a naturally occurring phenomenon, or it’s even healthy for an economy when it could not be further from the truth.
Stephan Livera:
I’m curious, why do you think they believe that is that they have a higher trust in the system? Is it that they just were taught incorrectly? And so they’ve fallen down some kind of economic fallacy and that’s, that’s caused this kind of knock on error of believing in the necessity of inflation?
Robert Breedlove:
It seems to me to be a combination, you know if you only think one level deep inflation does seem great, right? Your stocks are going if you want assets, right. I suppose people strive to do, strive to own stocks, house. Your wages are increasing. So all this nominal increase, I think, is very deceptive for most people who don’t, don’t think in a penetrating way, you know, a lot of people I think really do focus on kind of the symptoms of the system. And then two, I would argue that it’s been integrated into the psychological and intellectual sphere for over a hundred years, right? Like every PhD Economist goes to work for a think tank or central bank or some other you know, institution very close to the Fiat currency spigot, let’s say. And I think I saw this the other day I saw Oh, who’s Krugman and one of his other Keynesian Economist guys, they were on TV and the jargon that they use it’s, it’s so pompous and false right?
Robert Breedlove:
They’re just they remind me of the analogy I use is like, it’s the priest of 500 years ago who were saying that you had to come through me to get into heaven. You needed this certain blessing. And we had to do these and you had to pay me this money. It’s almost as if the Economists today, the Keynesian economists are these false priests, just speaking in any form possible to obfuscate the truth. Because there is no, it’s just, when you look at it from first principles, there is not a single moral justification for inflation. It’s just a mechanism for inflicting wealth inequality. And I go into this in the paper, like countries in war time, there was a point when Nazi Germany had plans to bomb London with counterfeit pounds. They’re actually trying to induce inflation on their enemy by bombing them with their own counterfeit currency. There were, there were strategic sessions done in the North Beto laboratory in Japan to do something similar. So the ability to produce someone else’s currency is only a mechanism for transferring wealth. That doesn’t, it adds no value to our economy whatsoever. But because it affects the nominal value, I think Keynesian economists, I’ve just been able to pull the wool over everyone’s eyes for, you know, a hundred plus years.
Stephan Livera:
Certainly very concerning. And I think the other part I’m really interested to dive further into is this discussion around slavery, right? So in your article, you mentioned counterfeit is as slave masters. What are you getting at there?
Robert Breedlove:
Yeah, so I start the piece with an example of a couple of ancient monetary systems, the first being aggry beads, which Saifedean touched on in his book. And the second one being panos. Which is a form of cloth money, both of these were used in Western Africa and this ancient wasn’t Africa around this was for thousands of thousands of years before, but Europeans actually landed in the 16th century. And what happened with aggry beads is the glass making technology was relatively primitive in Africa, such that these glass beads were relatively scarce to goods and services. So that gave them a monetary property, which supported their market value, right until European explorers appeared in Africa in the 16th century they quickly realized that these beads were being used as money and that they could be produced much more cheaply back in Europe.
Robert Breedlove:
So glass making technology was very sophisticated back in Europe, and it wasn’t long before Europeans were actually crafty cunning Europeans as well, packing the ships there holes full of glass beads and take making expeditions into Africa to basically buy up their wealth with these counterfeit beads. And a similar dynamic played out with panos and that the cloth strips were used as money for a long time. They apparently came to Africa from trading with Muslim traders, North of the Sahara. And it wasn’t long before the when the Portuguese became began trading with them. They soon monopolized the production of panels and they would actually enforce this monopoly violently, right? So anyone that tried to produce panos, they would, they would stop them out, so to speak. And another kind of, and they use the same approach with aggry beads actually using the counterfeit money to acquire real wealth.
Robert Breedlove:
And another kind of perverted aspect of that that played out is a lot of the panos were actually constructed by expert weavers who were African weavers. So they would actually weave these panos. And so when they monopolize production, they began to actually enslave these weavers and use them to produce the very money they would take out and going confiscate wealth from their countrymen. And it’s the punchline of all this is. And it’s, I’ve thought about this a lot too, because in one aspect it’s just a technological disruption, right? And someone’s coming in, they can produce money more cheaply than you. They can sort of siphon your wealth which, you know, again Saife touches on a lot in his book. And we saw with the global switching to the gold standard from the silver standard the countries that stayed on silver, the longest suffered the most.
Robert Breedlove:
Right. but the moral of it is that if you have an exclusive right to produce money, without regard to competitive market pressures, it basically acts as an apparatus of enslavement. And it’s a privilege that can, that a monopolist in this case can only preserve through deception and violence. So it’s, people will fight and kill for the privilege to control the production of money. And that single line governs a huge swath of human history. And if you, when you do that, you’re basically manipulating the free market signals that would keep the cost of money production near its market value. And you’re creating this discrepancy that allows you to go out and acquire human labor in the market at an unfair price. So it actually becomes this weapon that I argue for stealing time. And, you know, when you look at what you know, aggry beads actually became instrumental in the transatlantic transatlantic slave trade, and they actually were, came to be known as slave beads. It started with the corruption of the currency, which leads to this again, a moral corruption and actually enslaving population. So monopolized money is a weapon for stealing human time. And that’s the point I’m trying to make looking at some of these ancient systems. And then later I compare it to central banking.
Stephan Livera:
Excellent. And so the point as we can understand with Aggry beads and Panos is that if somebody else can produce your money cheaply, then you’re in trouble. And so I would say, let’s talk a little bit about the parallel in Bitcoin world, right? So in Bitcoin, what secures Bitcoin is the proof of work, right? So if you can do Sha-256 hashing, that’s what essentially secures a Bitcoin and also is the way the mechanism by which new coins are distributed. So I guess hypothetically, if there was some alien who turned up to earth with incredible SHA-256 hashing capability, well beyond our human capability, then they would be able to create new Bitcoins. But this is probably where we would then say, well, hold on, there’s also the difficulty adjustment. And there’s also the fact that about 18 million of the Bitcoins have already been mined. What’s your reflection?
Robert Breedlove:
Yeah. I think you’d make a great point that it’s very simple economics that actually the market price of a monetary unit converges to its marginal cost of production over time. Right. That’s essentially what gold is. And that’s what Bitcoin, you know, Bitcoin functions in the same way, kind of in the free market, but it’s valuation mechanics, but with Fiat currency, we have something much more insidious. And that as it, most of us know the dollar just focusing on the dollar, there’s plenty of Fiat currencies in the world, but the dollar was introduced to resolve a couple of the shortcomings in gold in terms of monetary properties, right. Gold was not especially portable. Gold is also, there are ways to counterfeit gold, right? Like people can put gold plating on other metals and such. So it’s suffers a little bit in the recognizability department and then go to, although it is very divisible, it has such a high value to weight.
Robert Breedlove:
It’s hard to use for day to day transactions. So by abstracting gold into a paper currency, right. That resulted in, made it more portable, more recognizable and more divisible basically. And that’s what, when the world finally settled on a gold standard, it was because it was abstracted into a paper currency why we essentially kept all the properties of gold, but put them in a form that was highly transactable for a global economy. The problem with that of course, was the custodian, right? The warehouser of the gold, which is the bank, which became the central bank. They over time revoked, redeemability to gold. And now we have something that’s irredeemable. The, there is no real market value, like Fiat currency didn’t arise on the free market whatsoever. Right. It was basically imposed. So the way I like to describe it is that we have this monetary system today where it’s demand is compelled, right?
Robert Breedlove:
We have governments that force you to pay your taxes in their currency where it’s supply, whereas its supply is continuously violated via inflation. So they’re pushing the demand on people, forcing people to use it, to pay taxes, and then gradually, usually siphoning value off of the supply through inflation. And it’s only like you never, I don’t think it would be possible to coerce a citizenry to accept Fiat currency, had it not been redeemable for gold or monetary metal in the beginning. So I look at this as one giant pulling of the rug out from under our proverbial feet which sort of harkens back to this manipulation of education and, and whatnot surrounding money. You know, we don’t, we don’t learn about it in school. The Austrian school has been almost entirely stomped out in Western curricula. So I think, yeah, it’s just, we have Bitcoin, as I like to describe it as a first principles, disruption to money, right? It’s there’s money has to do five things which gold did best be divisible, durable, recognizable, portable, scarce, and Bitcoin is superior across all monetary properties. And that’s why it eats the lunch of all these inferior monies and stores of value.
Stephan Livera:
Excellent. And so when we’re talking about money, one of the important parts is, as you mentioned, governments over time, transitioned humanity, basically from monetary metals over to their paper fiat money, but they couldn’t just do it straight away. It happened just slowly and steadily over time. And the other key component, as you rightly mentioned, and as you know, Guido Hulsmann and others point out, it comes down to things like legal, tender laws that force the use. And essentially the government is suppressing competitive money. Basically. It’s not, they’re not competing on a level playing field. Now, I suppose people could say, well, could the government try to then suppress Bitcoin? And it would just be, you know, straight back to meet the new boss, same as the old boss?
Robert Breedlove:
Yeah. It’s they absolutely can stand in the way of Bitcoin in a lot of ways. But Bitcoin is fundamentally different than gold. And the, I think the biggest shortcoming of gold at all was its physicality, which cause two things caused us, gave us an economic impetus to centralize its custody and transact in paper currencies that redeemable for gold to overcome that cost. And then it also, because it’s physical, it can be confiscated, right? You can come in and physically take someone’s gold. And these two things are what led to central banking, in my opinion, right? You have a money that is vulnerable to theft being centrally warehoused. And then that of course is the source of virtually limitless power. Anyone that can control that money you’re controlling human time. Right. I argue in the piece that money as a tool is human time implementized, right?
Robert Breedlove:
It is literally a token for human labor. So it can be redeemed to get anyone to do almost anything for you in the marketplace. So we’re looking at Bitcoin, it overcomes the first shortcoming in that it’s nonphysical, right? It’s something being just pure information. I sometimes call it theft proof money. But it’s still, if someone can extract information from you, they can extract Bitcoin from you. If you’re not custodying it correctly, right? There are ways to do it in collaborative custody or circles of trust or a distributed key shards that you can actually overcome even a physical attack. I’ve even heard some people talking about putting their private keys into a certain type of algorithm and publishing it in a paper such that it’s there forever, right? As long as you could ever have access to that paper and you know, the key to unlock the key from the publication.
Robert Breedlove:
So I thought that was interesting, but it’s a game changer in regards to custody and confiscation resistance. And the other thing about Bitcoin is that so long is, you know, at least in Western society, we have here in the United States, we have the first amendment, right. Which is the freedom of speech. I know this isn’t everywhere in the world, but, it is the foundation to Western civilization, at least here in the United States. And as we saw with PGP case law, open source software is speech. So Bitcoin is protected under freedom of speech laws, and even if they were violated it seems incredibly difficult to try to enforce something like that. Because as soon as you violate freedom of speech, you get into a really weird domains, like illegal numbers and things of that sort. So Bitcoin’s a game changer. It and the other aspect is that these institutions that is disruptive to even if there’s a politician of central bank that doesn’t particularly like it, they almost have an incentive to hold some as an insurance policy against its success. So with gold it’s just different. Gold was always centralizing and wounds were being fought over it. And I just think that Bitcoin, it’s confiscation resistant properties is sort of disruptive to that recurrent pattern throughout history.
Stephan Livera:
I agree. And I think it’s kind of like a really, it’s a big invention, just like, you know, like the printing press. It was just this game changer technology. And so I think in that sense Bitcoin allows people to, in some way, it’s like a defensive technology that allows them to protect their value and in some ways resist the slavery of Fiat money. So I suppose would you frame it that way? Would you say Bitcoin essentially allows people to be less of a slave?
Robert Breedlove:
Yeah, I, and this term, I don’t like throwing this around necessarily, but it is central banking via the mechanism of inflation. And this is true of any currency counterfeiter. They are able to steal human time in perpetuity so long as that monopoly can be preserved, right. We saw it again with aggry beads. It happened, with panos, and now we have it legally instantiated in central banking. So although it may not be the same same visual visceral, awful experience as physical bondage, this is a system of time theft. And I actually quantified some of this in the piece to argue about it. So the transatlantic slave trade took place from about the year 1500 to the mid 1800s was a 365 year stretch, 12 and a half million human lives were stolen directly. So these are slaves that left African shores and went to American or European shores about 2 million of those died in transit.
Robert Breedlove:
So this is a massive, massive number, right? Like we talk about the Holocaust in Germany was I think 6 million Jews killed. So this is twice that number, just over a much longer period of time. And if you look at just the direct lives stolen, this is not counting their children, right. Their progeny who were born directly into slavery all of the follow on consequences that we’re still suffering from today, frankly. And you just quantified each slave saying that they labor 5,000 hours a year for an average life of 40 years, the transatlantic slave trade was responsible for stealing 6.8 billion hours of human time every year for 365 years on average. Which came out to about two and a half trillion hours stolen. And to set that side by side with central banking, I ran an analysis just looking at, since I think this is 1981 to current showing the average hourly wage rate.
Robert Breedlove:
And comparing that to for I’m sorry, the average annual wage, compare that to the average increase in US M2 production. So we’re just focused on the fed. I was actually calculating how many hours of human time the Fed is effectively printing through quantitative easing and looking at that 40 hour or at 40 years stretch rather the number came to almost 1 trillion hours, which was about a little over 30 billion human working hours stolen per year for 40 years straight. And it’s just in terms of scale it’s, monstrous, right? It’s not, it’s insidious because it’s taking place over a much larger population, right? We have, you know, arguably three to 4 billion dollar users in the world, right. A lot of countries and a lot of people internationally, depend on the dollar. So they’re able to confiscate a little bit of time from all of them slowly and surreptitiously, but in terms of absolute scale, we’re talking about something that’s three, almost four times as many hours stolen annually, then the transatlantic slave trade.
Robert Breedlove:
And then the other number I compare that to is there’s there’s ancient texts saying that the Egyptian pyramids took a hundred thousand men, 20 years, a hundred thousand slaves, 20 years to construct. So each pyramid basically took about 10 billion hours of human time. So if you look at it that way, the fed is basically printing enough labor or stealing enough labor each year to build two and a half pyramids, assuming we could do so technologically. So it’s just a, it’s a massive pyramid scheme that is vacuum cleaning, you know, parasite style, wealth and time from productive people. And I just, I don’t see how that type of institution will continue to hold up in the digital age. I just don’t think they can keep the the veil on it much longer. And Bitcoin clearly has been just this huge beacon of truth. That’s inspired, you know, dozens of people to talk about this, to come out about this, to write about this. And yeah, I mean at the lowest level, that’s why I’m in the game. And I think, you know, a lot of people are so.
Stephan Livera:
Absolutely, and it’s very shocking, the level of essentially time theft or labor theft, or just value theft that is being engaged in by central banks or enabled by central banks and engaged in by governments. I suppose the inflationist, nocoiner person might try to rejoin them here. They might try to come back and say, well, hold on a second. You don’t necessarily have to keep all your money in cash. You’re meant to do things like keep it in, you know, TIPS treasury inflation protection, or that you’re meant to keep some of it in the stock market, or you’re meant to invest in housing. So therefore it’s your fault for letting the inflation just drain away the value? What would you say to them?
Robert Breedlove:
Well, I would say, just look at the exacerbation of the business cycle since the inception of the federal reserve, right? The booms and busts are getting more severe. The volatility is increasing and I think that’s just another false narrative, frankly, who is to tell you, like who is to tell the free market where you should be storing your value, right. There’s a reason gold was outlawed. There’s a reason Alan Greenspan came out and said, the United States cannot legalize a sound store of value. Otherwise it would eviscerate their business model. I just, before Fiat currency, it was common to hold cash and savings, right? There’s a, the way I put it, is money as an insurance policy against the future. So long as the future is uncertain, which is forever, there will be a demand to hold cash savings. But the problem with Fiat is that there’s basically the technology that’s being used as cash has a technological backdoor in it that someone can siphon wealth from you continuously.
Robert Breedlove:
So this pushes you to take on more debt, pushes you to divest your savings. And I just, yeah, it’s another, that argument, I think is just another lie in the central bank temple of lies. Like it’s all a bunch of bullshit, frankly. And that’s, I argue this in the piece that Bitcoin is the truth. Basically, if you look at free markets as these forums of free exchange, that zero in on truth and the American pragmatist described truth, which I think pragmatically makes sense as the end of inquiry. So when you’re competing in the free market, you’re actually inquiring right about the nature of your business, your customers, your product, you’re constantly tweaking, making changes and whatever the free market generates for pragmatic purposes can be said to be truth and free markets generate three things. One is accurate prices. Two is useful tools and three this individual virtue or competitive competence, depending on how you want to look to look at it.
Robert Breedlove:
And if you look at a price, price is just an exchange ratio, denominated in money, right in the sphere of human action. We’re all trading things all the time. Everything is tradeable at a ratio of anything else, the most tradeable thing, which ends up being used to denominate all of the trades money by definition, it’s a free market phenomenon. It’s not a product of the government whatsoever. And then you look at useful tools, right? If you have a shovel, that shovel is the result of countless people inquiring about what is the best way to dig holes across human history, right? Where to put the bolts, how long the shaft should be, what the handle should be shaped like, well, how the head should be pointed. Like this is not just one guy. I sat down one day and constructed a shovel and we all use it forever.
Robert Breedlove:
Like it’s a constant process of inquiry. And that process of inquiry creates the end, which is innovation itself. So even tools that we use that are successful in the marketplace are, can be said to be a form of truth, that knowledge structure in which they are based is a form of truth. It’s the best the sharpest way to solve a problem that we have based on our current knowledge, essentially. And then finally in free markets, you’re incentivized to be accountable to your customers, right? If your customers don’t like what you’re doing, they’re going to go elsewhere and you’re going to go out of business. So in a free market, you’re actually incentivized to be virtuous. Like I said, accountable, you actually have to listen to the preferences of your customer. You just have to be a good person all around to do business with other good people and central banking being this legal monopoly that turns free market on its head, basically blows all of that out of the water.
Robert Breedlove:
And we see it in today, totally annihilated price signals, right? We have stock market hitting all time highs with 40 million unemployed in the US it’s asinine. The tools there’s been hardly any innovation in the businesses closer to the Fiat currency spigot suffer from lack of innovation. You just look at banking, healthcare, all these things. It’s sucks the, innovative spirit out of markets. And then finally, as I kind of argued in the beginning, it actually incentivizes you to be wicked instead of morally virtuous. It is the most rent seeking backstabbing, insidious unscrupulous people that make it, that rise in these hierarchies. So it incentivizes the creation of pathological hierarchies, which I think that’s what central banking is. It’s the, you know, the 20th century showed us that socialism or communism doesn’t work. Yet this is the one market that no government in the world has ever allowed to be truly free market.
Robert Breedlove:
Right. We had glimmers of it in the late 19th century with the global gold standard. But constantly the pressure from banks to monopolize money has always conquered it. So in that sense, I look at Bitcoin as this monetary technology that can’t be pathologized. It’s a hierarchy of money that can’t be corrupted. It can’t be changed. And it is actually saving us from ourselves because at the end of the day, it’s this ego, egoic self seeking behavior. That’s encouraged people to be violent and try to commandeer money and monopolize it and weaponize it to their own benefit against everyone else. And, you know, in that sense, argue the Bitcoin is a weapon of peace. It’s an assassin to time theft. And yeah, just very exciting finally, that we have that sly around about way that was discussed so many years ago.
Stephan Livera:
So some people might believe that say money is the root of all evil and others might believe it’s more like a coordination tool. How would you think of it?
Robert Breedlove:
Yeah, so people talk about money or the love of money being the root of all evil. And I actually argue instead that it is the root of all sovereignty and sovereignty. It’s a word that has also been bastardized. I think that we, today, we associate it with the state. We think the state is sovereign, but what’s actually at the foundation of again, Western civilization is probably the greatest idea people ever had. And it’s the reason Western democracies have been more successful than any other economic system in the world is that we actually hold that the individual, the sovereignty of the individual supersedes that of the state and this belief it’s embodied in certain legal principles, like in the US we have innocent until proven guilty. We have Habeas Corpus these things that actually say every human life has an intrinsic value, even if they’ve done something awful and terrible.
Robert Breedlove:
And this is a far cry from where we began say an ancient Egypt, right, where the Pharaoh was sovereign everyone else was a slave. So if you look at that grand arc, sovereignty has sort of been decentralizing over time to more closely mirror, natural law. And, you know, against sovereignty is the simple definition is the authority to act in the world, as you see fit, right. It just, you had the ability to go out and as a free market participant in the world to carry out the actions and conduct the labor and create the fruits of those labor, that benefits you so long as you’re not stealing from anyone or hurting anyone, right. It’s just as long as you honor, basic morality, don’t kill don’t steal. And so this, I actually consider money to be kind of the root of all sovereignty, or maybe the greatest expression of it.
Robert Breedlove:
In that we started trading. We had this system of what we call capitalism it’s basically just honoring private property rights such that if you work on something that you actually exclusively own, the fruits of your own labor, no else has a right to them, right? And the most treatable thing or the most important property, right in any economy is money. So money is kind of the highest expression of human sovereign action in the world. And I go into this a bit in the piece, it gets quite philosophical. Jordan Peterson talks a lot about this, but the concept of the logos, the logos is the principle of reason that mankind possesses, that separates him from animal, right? Our ability to tell and believe stories is what distinguishes us as a species. There’s a reason human beings can unite, you know, 10,000 people on a battlefield, under a flag symbolic flag.
Robert Breedlove:
Whereas a primate troupe can only congregate in groups to say 150, right? They can’t abstract to that level. They can’t tell this grand unifying story and mobilize their efforts collectively, whereas humans can. And that’s what we do with these stories like money nation states human rights, all these things, these symbols that we create for ourselves that orient us across time. And I argue that that, and this is in accordance with natural law, that the logos that lives within each of us is the generative source of sovereignty. That is what we honor in our societal substructure is that that principle, the ability to convert order from chaos as Jordan Peterson might say it is that’s the most important thing in the world. It’s not any one individual, it’s not any one nation state. It’s not any one organization. It is the actual honoring of the process of the sovereignty of the individual to go out into the world, freeing experiment, learn, and then diffuse those learnings back into society through trade, right?
Robert Breedlove:
That’s what the free market is. The free market represents a platform that optimizes for expression of the collective logos. Whereas an unfree market essentially planned market is the exact opposite, right? It’s a suppression of the logos. And if you look at history, it’s clear as day, like the first thing any aspiring dictator does is they come in and they try to silence the voice of dissent. I think in the piece I talk about Soviet Russia taking over the press or Nazi Germany basically suppressing anti Nazi journalism. It is sovereignty arises from the logos. So the more that we honor that principle, that inviolable principle within us all the better off the world is. And we’ve just, we’ve gotten in our own way so many times throughout history by you know, through greed, frankly, through this, will to power. And I think Bitcoin by actually optimizing for truthfulness and individual sovereignty it sort of actually saves us from ourselves and hopefully rectifies this pathological hierarchy, we call central banking.
Stephan Livera:
I like to frame Bitcoin as this idea whose time has come, right? It’s an idea. And that’s kind of related to what you were saying that it’s this rallying call that people can get around and say, no, we want monetary justice. That’s what we want. Now, some might mistakenly blame capitalism for the many economic problems in the world. What would you say to those people?
Robert Breedlove:
Yes. Another false narrative written by what I would argue is the bastardization of the money, but capitalism versus socialism to me is very simple. Capitalism means you have the exclusive rights to the fruits of your own labor, right? Basically you own your own time. How do you spend your time? How do you who has the rights to the value you create with your time? You spend it investing manufacturing, learning, whatever it is who owns that? Is it the individual that creates it, or is it some other people which would often be the state and at the opposite end of that spectrum, I think is the hallucination we call socialism, which has a great ring to it, right? It has the word social in it. A lot of new age millennials are really getting behind it, but it’s total bullshit. It basically means it implies that the state can collectively people can collectively own capital to the benefit of individuals.
Robert Breedlove:
Whereas in practice, what happens is the individuals that own, that capital collectively inevitably use it for their own benefit. So what we have in the world today, we don’t have free market capitalism, right? We’d say in the West, most of our markets are free market capitalist. But the monetary system is the opposite. It’s monetary socialism, right? It’s a centrally planned and governed network. The federal reserve here in the US has a set of undisclosed, private shareholders. They receive a 6% annual dividend just from producing our money. So we have capitalism being based on sort of three things. It’s like the rule of law, which gives you a a means for nonviolent dispute resolution the respect for private property rights, which again just means you get to own your own time, your own efforts, and then honest or hard money which arises naturally kind of from the first two, but what we have in the world today is the perpetual violation of private property rights via monetary inflation.
Robert Breedlove:
So we have socialism actually ingrained in the economic network of the world. And that’s as true for here in the US as it is for communist China, as it is for anywhere else. So I think people are, again mistaken as to what capitalism actually represents. And in a grand sense, I don’t think pure capitalism was possible before Bitcoin because the temptation to violate the private property right of money has always proven too strong for humanity. We have never been able to resist the temptation, right? Someone always gets into that seat to violate the money supply for themselves at the expense of everyone else and Bitcoin with the first incorruptible money supply in the world. And by providing this mechanism for global near instant, final settlement in this ethos of don’t trust verify it just shatters that once and for all.
Robert Breedlove:
So I actually think we’re moving into a different world. This is it’s going to cause the history books to be rewritten. I don’t know what it’s called yet necessarily, but we’re going to move past this dichotomy between capitalism and socialism to something that’s like, Oh, now we have capitalism, actual capitalism is possible. Now that we have Bitcoin, now that people can’t steal the money, now that the money can’t be violently coerced and commandeered now capitalism is possible. So I don’t know if it’s going to called the same name. But it’s definitely a net benefit for humanity.
Stephan Livera:
Absolutely. I suppose one other thing is we could say, well, looking back historically, things may have started off in a certain way, and then they get corrupted every time. Right? So it’s sort of like initially, you know, or during, let’s say the classical gold standard era, you know, where it wasn’t perfect, but at least it was better, but it just degenerates over time. I’m wondering, do you see that Bitcoin could have this kind of a similar phenomenon happen over time that let’s say layers get built up on top of it and then those layers get corrupted? Or would you frame it more in the other way and say, well, say Bitcoin just is fundamentally the game changer that allows people to, you know, allows it for those layers to be built in an honest way, let’s say?
Robert Breedlove:
Yeah. So if we look at the institutional framework we have in the existing financial system, it’s they’re designed to alleviate these, this problem with gold and that it can’t be settled with finality quickly and easily and cheaply, right? So all these paper promises going all over the place and that in some, those promises are often violated as we’ve touched on a lot today. Even recently I think I forget which country in South America asked to have their gold and England said no. So like there’s still all of this institutional trust built into the world to overcome the lack of global settlement finality in gold, basically. So I think that in a Bitcoin world, you’re going to see lots of corruption at higher layers, right? Which we’ve already seen. We saw Mt.Gox Fall, countless exchanges have been knocked off whatever, all types of fraud in the crypto space.
Robert Breedlove:
But what happens is I think with each one of these failures, right, as Taleb would say, it’s almost like the food in the city gets better from restaurant bankruptcy to restaurant bankruptcy. The system as itself becomes more anti-fragile. And I think as customers, again, in a free market, able to impose their preferences, essentially on producers, then as more of these failures and thefts happen, they’ll shift to more trustless settlement mechanisms. So it’s gonna be a wild ride who knows how long people can get away with stuff. I mean, there’s rehypothecation is part and parcel almost every Bitcoin business practice right now. Like, so I don’t know how long it will take or how many failures it will take, but over time, I think people will naturally demand the don’t trust, verify ethos and the cryptographic certainty possible with Bitcoin, right? It’s why would you stand by patiently if someone’s sending you a paper IOU or a promise, or even an audit from an accounting firm saying, Oh, this is okay. Just trust our accountants, versus just signing a message, right. Or just cryptographically proving a quantity. So I think in a digital age, there’s just going to be this increasing demand for verification. And that cuts through that incinerates. A lot of the institutional falsity we have in the world today.
Stephan Livera:
One other topic I was keen to touch on with you, and perhaps we’re sort of touching into one of your other articles, the one about the number zero, but you’ve been talking about the implications of absolute scarcity. So why is absolute scarcity important?
Robert Breedlove:
Yeah, so that again, if we consider the free market as this system that actually generates truth over time, right? Looking at gold through that lens, gold is perhaps one of the most important tools that mankind has ever had, right? It was the best monetary technology across the five properties of money that we ever had even despite the shortcomings. And it was as if because the main difference between gold and everything else was that it had superior relative scarcity, right? It was equally divisible, durable, recognizable, portable to many other metals, but gold was especially hard in terms of scarcity as quantified by stock to flow model. So said differently. It’s the most inflation resistant store of value the world had, right? So that was the truth for the past 5,000 years, gold is the truth of money. And if you look at Bitcoin through that same lens, it was as if the free market, it would have zeroed in on perfect scarcity, ideally.
Robert Breedlove:
Right. Perfect scarcity would be the truth, the ultimate truth of money, but it’s just not possible with anything physical. It’s impossible to guarantee the supply of any physical substance, because it’s there. Everything physical in this universe is just a function of our time necessary to produce it. Whereas with Bitcoin, we have this one time breakthrough for money and that it is absolutely predictably, definably, scarce, forever. And no one can do anything about it, right? Back to your example about the aliens earlier, right? They could come in here even with superior hashing technology and they can out compete the shit out of us in mining for maybe a long time, maybe forever. But the difficulty adjustment would constantly adapt to make sure that they weren’t getting to 21 million any more quickly than Satoshi originally laid down in mathematical bedrock. So that is just a, and if a little more philosophically, if money is this tool that is human time emblematized the only other thing in the universe before Bitcoin, that was absolutely scarce was time.
Robert Breedlove:
Right? So it’s, as if we were trying to find this tool to trade time, gold was the best thing we could get because it best satisfied these properties and was the most scarce of the monetary metals. And now Bitcoin almost perfects all of these properties. So it is, you know, I’m sure, you’ve been down the rabbit hole longer than me. I mean, people who study this thing closely, it’s you just keep going deeper and the smartest people in the world, they’re just captivated by it. So I just, I struggle. I said this recently, actually, I don’t see, I’ve actively, always researched intelligent counter arguments to Bitcoin. They’ve all dried up. I mean, the smartest people I see like the best counter argument is that, Oh, maybe it’ll just function a little bit in the black market at the periphery, but no, one’s like, no one intelligent is calling Bitcoin a Ponzi scheme anymore.
Robert Breedlove:
Right? So like these minds are turning, you know, we saw the most recent announcement from Mr. Saylor over at MicroStrategy. And several other businesses have made a similar announcement that they’re making Bitcoin their cash. It is their reserve asset for their operations. So I think the game theory just gets out of control really fast on Bitcoin because not only is it absolutely scarce, but it’s perfectly predictable, right? So long as its price continues to adhere to its diminishing supply curve to some extent that incentive to front run, it becomes larger and larger and larger. And I just think it’s going to evolve into an adoption frenzy at some point that, you know, a lot of us call hyperbitcoinisation. I don’t know how long it will take. I don’t know how, but you know, who will be first and whatnot, but I that’s the direction I see it going. And I think that’s all rooted in absolute scarcity.
Stephan Livera:
Yeah. Excellent comments around the shift in the way people are thinking about it. I think the Michael Saylor and MicroStrategy use is very, very interesting. And I know some of your work has been influential in some of that as well. One of the point I wanted to touch on, and I think you’ll agree with this. If we talk about this idea of sound money it’s and I recently heard Bob Murphy talking about this, and he was basically explaining, looking back to the way Mises explained this, the way it Mises was talking about it is he was saying it wasn’t just purely like an economic thing, but it belongs in a similar category as things like, you know, a bill of rights, it’s a protection, so sound money. And you know, this idea of honest money sound money it’s, it’s, it belongs in a similar category because it’s there to protect as it’s there as a check against abuse. It’s a check against government overreach.
Robert Breedlove:
Yeah. I think that’s a great point. And, again, as I break free market capitalism down into those three legs, right? The rule of law, private property rights and honest money, but the, that third check on government, or it’s a check on tyranny, frankly, right? Because if someone can commandeer the most important tool in society, the one that we all use to interoperate with one another, right beyond our sphere of whatever the Dunbar number is 150 trusted people or people that we can possibly know on a first name basis, the other 7 billion plus in the world, like we’re interacting with them through money, through the price signal. So if a institution or individual or group can come in and sit on that network and twist the rules to benefit themselves at the expense of everyone else like that is that’s an economic tyranny, right.
Robert Breedlove:
Even if it’s not a gun in your face telling you what to do, they are manipulating your logos, right. They’re manipulating your free will. And I think that’s a great point from my seat that we, I would argue that that too is sort of pointing toward the inability of us to have true capitalism before Bitcoin. Right. Because it was just, how could we do it? How could you do it with gold? I mean, you could, I mean, maybe cryptographically wrap it and audit the vaults constantly, you know, something to that effect. But it just seems like Bitcoin is like this major fruit from capitalism, right? Like in digital space, the software and internet technology that is the best expression of a free market we’ve ever had, right? Ideas are flying around the world at the speed of light. Anything anyone can enter the market, anyone can exit, it doesn’t matter necessarily about your political clout in digital space.
Robert Breedlove:
It matters about how effective the tool is. How many problems is it resolving? Inquiry is super rapid, which again, if truth is the end of inquiry, then the internet age really accelerated the power of free markets. And if you look at it in that lens, it’s like Bitcoin is, might be the most important invention of capitalism or in capitalism or enabling capitalism. It is monetary capitalism. So I love looking back at you know, reading Mises, Rothbard and these guys that, that you could hear the frustration in them that they had it. So excellent excellently enumerated, like the problems in the world, but nobody was listening. It just fell on deaf ears. And there was one point too, I talked about this before that, you know, my Mises was deployed to the front lines of battle. And this was at a time when he was essentially the last man in the Austrian school. Like had he been taken out? I don’t know if we would have Bitcoin necessarily, like how much did Mises inspire Satoshi? We don’t really know. But it’s just, it’s a beautiful historical arc and it makes me feel like Bitcoin is going to work because it has to work. It’s like, otherwise we’re going into this Orwellian future.
Stephan Livera:
Excellent. so look, Robert, I’ve really enjoyed chatting with you. If listeners would like to find you online, where can they find you?
Robert Breedlove:
Sure. I’m on Twitter @Breedlove22. That’s @Breedlove22. I posted most of my writings to medium medium blog. And I also put them on digg.com are also on our website, parallaxdigital.io.
Stephan Livera:
Fantastic. Well, thank you for joining me today, Robert.
Robert Breedlove:
Thanks, Stephan. This is great.