The Biggest Fiat Malinvestment

Hi, you're listening to Stephan Livera podcast, a show about Bitcoin. Have you wondered what the biggest fiat malinvestment is? Well, today Saifedean Ammous, my friend and the author of The Bitcoin Standard and the author of the upcoming Fiat Standard book, rejoins me on the show and we talk about a bunch of things. We talk about what Bitcoin truly replaces, how to think about inflation, the infinity- Divided by twenty one million meme, is that right or is it wrong? We talk about some of the incentives and the cultural impact into society, as well as what a hyperbitcoinized future would look like. Now, have you started your automated stacking plan with Swan Bitcoin? Swan is the best way to accumulate Bitcoin with automatic recurring buys and instant buys. It's got fast setup, it's cheap to automate your stacking, especially for US customers. It's an ACH pull, buy Bitcoin, and withdrawal is free. For international customers, you can wire in USD and set up your stacking plan that way. Swan Bitcoin takes a specific focus on education and content as well, so they're a great place to send your pre-coiner and new coiner friends. And for those of you who are high net worth individuals, or if you've got friends and corporates or businesses to refer, Swan Private is available. Swan Private provides a dedicated Bitcoin account expert who is available for one-on-one calls, and you get some additional guidance and assistance there. So to sign up, go to swanbitcoin dot com slash livera. HodlHodl is a peer-to-peer Bitcoin backed lending platform. You can lend out stablecoins or borrow against your Bitcoin globally and anonymously, so you can get extra income on your stablecoins, and if you-- on the other hand, if you've got bitcoins and you need some liquidity, you can now borrow against them without having to sell them. And in this model, you still hold one key in the two or three multi-signature, you know there's no rehypothecation because you can watch it and see it, and HodlHodl doesn't hold your funds. L With this platform, you set your terms and put up offers depending on how long you wanna borrow or lend and the interest rate. Go to lend dot hodl hodl dot com. Have you always wanted to get involved in Bitcoin mining but you just weren't sure where to get started? Compassmining dot io can help you out. Go to compassmining dot io and select an ASIC machine, you can purchase that and have that shipped to a hosting facility that has already been vetted by the team at Compass, and then you can join a mining pool, you select the pool and you receive Bitcoin. So this advanced technical knowledge and CompuS allows you to tap into the economies of scale because they are purchasing hardware at scale and they can help you get cheap industrial power rates. So go to CompuSmining.io and start mining Bitcoin today. Onto the show with Saifedean. Saifedean, welcome back to the show. Thank

you for having me, Stefan. Always a pleasure.

So Saif, I've been reading your new book, The Fiat Standard, which I highly recommend to my listeners. Go and get, get it. so today we're gonna talk a little bit about some of the ideas from there as well as just, you know, your thoughts on the fiat standard, today in the world. So, maybe let's just start with a little bit of your thoughts around, you know, how has the fiat standard evolved in,

Maybe the most, significant change in the way that I see fiat over the last couple of years since writing the Bitcoin standard was thinking, really hard about how fiat works and why it works and what it does has given me, I, you know, at the expense of pissing off some bitcoiners, it's given me some appreciation of the fact that there is some kind of, advantage to utilizing it, and I, I used to be a gold bug and I'm a fan of hard money and- So traditionally, I've always thought it was just a terrible idea, and I still think it's a terrible idea, but I can sort of see why it has come around. So I think, you know, the book starts with, the, the story of Chesterton's, fence. G, C.K. Chesterton, or was it G.K. Chesterton? he tells the story of, two men who are walking down a field and then they see a fence And one of them thinks, "Hey, this fence isn't serving any purpose. I don't understand why the fence is here. I'm just going to remove it." And the other one says, "No, if you don't understand why it's here, then you shouldn't remove it. First, try and figure out why it is there, and then, then see, if you should remove it or not. If you don't know why it's there, if you don't know why it was put there, then you can't really tell whether it serves a purpose or not." I had that kind of idea trying to look into fiat, and to be fair, I think, you know, the best case that I would make for fiat is that, if you remember in the Bitcoin standard, my focus was on salability across time, that gold was money and Bitcoin is becoming money because its, supply increases at a very slow rate of increase, which means that it, holds on to its value well across time, so it has great scalability across time, which makes it a, a good store of value. But thinking about, you know, looking at the genesis of fiat, looking at the fiat white paper as I describe it, when the Bank of England decided to go off gold, and looking at the circumstances back then. It's obviously it was very devious the way that fiat was installed, and it wasn't, it wasn't a good thing by any stretch of the imagination for the world, but you could see that when it happened gold did have a problem of salability across space. So sending gold from A to B entails a significant loss in its value, and it's usually, something in the range of zero point five percent or one percent. And in a sense, that's a serious, defect really, because it's good that your money holds onto its value across time, but you also want it to hold onto its value across space as you send it across. And so sending a gold bar across the Atlantic leads to a loss of somewhere between 0.1 to 1%, depending on what time and what, location and how it was done. And, you know, there was the risk that also the ship that it was carrying it could be sunk, and that has happened-- ships carrying gold. So it's not like it's something that's very, convenient to send across space. And in a sense, it's the same, it's the same kind of defect that fiat and easy monies have when sending, value across time. I don't think I, I don't think you can s-make a case that this one is, that losing value across time is, just a fatal flaw in money, whereas losing value across space is something that's, that, that's acceptable and it's just a normal part. And so as governments started using their own credit to settle their own bills with one another, it became, it became easier for them to just, you know, use fake credit rather than using, gold because it entails Less loss of value. So if it's all just digital entries in ledgers at the governments, banks, the central banks, then you can cross the Atlantic a million times and it costs the cost of a telegram or a phone call or an internet connection that's operating to continue to debit accounts between one and the other. So I'd say, you know, to, to, to think about why that fence is there in Chesterton's terms, or to think about why this- Fiat exists, you can't really deny the fact that it's just, very expensive to settle gold across space, and that makes it easy for governments to capture money. I obviously, I agree it would be ideal if they would, offer a free market in money and banking, and then if there is a free market in money and banking, then the hardest money would be chosen. You know, if there was a free market, then bank in any money they want, but most likely the hardest money is going to win. But the alternative, which is if governments- Prevent a free market in money from emerging. Well, the alternative is that you can't just take your gold and settle it outside of the government. It's very hard to take gold and run a financial system. I mean, you could maybe smuggle a few ounces or, maybe even a few kilograms of gold here and there, but you can't really run, global settlement network between banks and financial institutions across national borders without the government finding out. If you're running a banking system, they're gonna find out. And if you try and- Send the gold without them, it's gonna be very expensive, very uncertain, the risk of getting caught is very high. So that's, I think, just a, a, a failure of gold, it's, it's, it's compromised its salability across space, and that leads to, it, it becomes possible for governments to implement their, fiat systems with catastrophic consequences.

Yeah. And it's funny in some ways because sometimes when we're out here trying to teach people about Bitcoin, oftentimes they, they have The wrong comparative in their mind, that they think it's, it's, it's like a PayPal or that it's, you know, it's gonna be a day-to-day transaction, whereas, as you rightly point out in the book, and our great friend Pierre Richard also loves to call it savings technology, yeah, and so I think it really is, it's savings technology and international money transfer. That, that's what Bitcoin uniquely does. That is, it's in business school parlance, the unique, the USP, the unique selling point, that is the USP of Bitcoin. It's We're just gonna have a PayPal or that you could, you could just do away with it all and just have stable coins. Well, that's not exactly what we're trying to solve here, is it?

Yeah, because all of these things, stable coins or bank accounts, they're going to have to run on a monetary settlement network, and that's really the, challenge. What do you settle with? And either you're going to be using s-central banks and banks and their financial, instruments and their, s-settlement networks or The only alternative that exists is Bitcoin. It's, it's the only thing that's actually independent, and this is why I think, you know, the fiat standard gave me an appreciation of why fiat works, but it also gave me an even bigger appreciation of why Bitcoin fixes this, because not only does it have gold's great salability across time, it also has better salability across space than both gold and fiat.

Yeah. And it, it seems to me that oftentimes with government, things come in and then the institution- Incentives just build up around that, and so sometimes it just exists because that was what was there before, right? It's for a legacy reason. And sometimes, like, it's obviously while you and I have our criticisms of the government, both of which we are quite strong crit-crit, you know, quite critical of the government, it's, it's not necessarily that all the people in the government are evil and intending to do these things. It's more that as a system, it just drives these bad incentives and it just drives this bad outcome, wouldn't you say?

Yeah, it, it, it's kind of inevitable, once global trade, became such an important part of the world economy in the nineteenth century, because the entire world was trading with one another, because everybody was using the same currency, which is the gold standard, but also more importantly, because of the new technologies that made transportation possible. You know, when we had trains and airplanes and, cars and, modern steamships, it became much cheaper to move things from, Europe to the US And so not only did people move, but also, goods started moving more and more frequently. And so as goods started to move internationally much more, money had to move internationally as well, and that was the limitation of gold. And, in a sense, you can, you know, you can, you can be, ideological about it and say, you know, they should have done this and they should have done that, which I'm sympathetic to, but why could they get away with what they did? Well, the reason they got away with it is- is from an engineering perspective, you know, taking emotions out of it, once trade became such an important part of the global economy, then being able to provide the payment rails that would allow people to settle payments with people in other countries, being able to provide those payment rails became as important as, the actual monetary medium itself, in a sense The gold standard, the, the medium of exchange in the gold standard wasn't just gold, or the, the, the monetary asset underlying the gold standard wasn't just gold. It was gold and the banks that make gold's movement possible. The fact that you needed the banks, i-i-is a function of gold's properties. You know, it was just not easy to send, an ounce of gold halfway around the world. It's very expensive if you wanted to do it with an ounce of gold, you know, to pay somebody to send it, there'll be a significant, Cost. And so if somebody manages to build a settlement network that settles periodically, you know, you have a, a bank in England and a bank in New York, and they, you know, they perform one settlement transaction at the end of the year or at the end of the month, that's just enormously cheaper for people who trade in the US and, England to open an account with that bank and have their payments settled once a month. You know, that way you could get a hundred thousand trades between people in England and Britain for every physical move movement of a coin between, England and the US. So it's just natural that as trade grew, and the scale of, economic transactions grew and the size and the importance and the distance, started to increase, gold just couldn't keep up. It just wasn't able to be sent in a way that allowed people to hold onto its value. And we can, we can romanticize the gold coin and the way that the gold coin holds onto its value, but the reality is you can't- send the gold coin, coin halfway around the world, but your government, if it strikes a deal with the other government, it'll allow a central bank that operates in its territory to settle with a central bank that operates in the other territory, and then that's just an infinitely cheaper way of conducting trade and transactions, and that's why it won, because people need to settle trades in the present. by the twentieth century, you know, if you- By the, by the early twentieth century, the modern technology that we had, the modern life that we had, was not possible without globalization. There was, there was nowhere in the world that was industrialized and had modern machinery that could survive and, continue to thrive and to have all of these modern technologies without trading significantly with the rest of the planet. You had to trade. The division of labor had grown so much that you needed to be trading with other people all across the world in order to be able to have all of the nice things that you- Have, you know, the, the car and the, electronics and, all the heavy machinery and the engines, that was a highly sophisticated, division of labor that was involved in all of those things. And if you wanted to live in an isolated island, you couldn't have them basically.

Yeah, yeah. And so really what we have to do then is comparatively assess these different things, like gold versus fiat versus Bitcoin transactions, right? So when we're transacting gold, as you were saying, it's, it could be to one percent per transfer. And in the, in the Bitcoin land, it's, it's more like, you, you, you could be paying, today, at today's rates, on chain, you might be paying a couple dollars. Now we expect that to rise over time. If you're paying on Lightning, you might literally be paying a few cents for a transaction. But when we're using fiat, we have to-- I think that's the important comparative, is to understand what are the true costs of the fiat overarching system. And of course, this comes into the energy conversation as well, because people say, " And then people sort of argue back and say, "Oh, but look, look how much the finan-- the financial system is using." But it maybe even that isn't the right comparative, because as you rightly point out, people could build a financial system up on top of Bitcoin, and there would be Bitcoin companies who in turn have staff and offices and printers and all of the-- and the like. But what is the true comparative when we're talking about Bitcoin versus fiat and the costs of fiat?

Yeah, exactly. And that's what I try and focus on in the book, in that it makes sense way of settling payments, but then one century later, we look at all the drawbacks of having an easy money that governments can control, and then you see that the cost is enormous, and that as Mises used to say about the gold standard, you know, when you had, people like Keynes and, other clueless people would say that gold is useless because it costs a lot of money and it's a very expensive monetary system, Mises would rightly point out it's very cheap when you compare it to the cost of inflation. That's what Mises used to say. this is the thing with fiat. So initially it makes settling the payments quickly, but then, it, it makes settling the payments quick and cheap, but then the bill comes in later and the bill is very, very expensive because it involves, you know, destroying the capital stock of society because First of all, your money's losing value, so people start losing the incentive to save, and then without real savings, you need to rely on credit expansion in order to finance investments, and so that then causes the business cycle, and it causes all of the problems that we saw in the twentieth century, which most people today think it's just, you know, that's what capitalism does. Capitalism has crises and financial panics, and that's, that's the price to pay to not be a communist country, you know? Either we have a communist system or we have to have capitalism. Which involves a lot of crashes, and of course, that's nonsense. That's fiat that does those things, it's not capitalism that does it. And then, I think my favorite hobby horse is, time preference. I think the most important thing that fiat has done is that it has raised human time preference over the last one hundred years enormously. And if you look at the, if you look at the world up until the twentieth century, all over the world, we had a process where everybody was constantly moving toward a harder and harder money. People used Primitive forms of money, and then whenever a harder money showed up in their town, it destroyed the easy money and they had to move to the hard money, and everybody went on constantly hardening their money and therefore having a better mechanism for transferring value to the future, and therefore becoming less uncertain about the future. So as your uncertainty about the future declines because you can provide for your future, then you see that it becomes likely that you're discounting the future less and less. In other words, your time preference begins to drop, so you start thinking about the- future more, you start thinking about providing for your future more, and you see this as a natural process in human society. We're constantly, saving more and thinking more about the future. It's just like a, a millennia-long, journey. And if you look at, there's a book called Five Thousand Years of, or A History of Interest Rates, and they've got data for, for five thousand years of interest rates essentially, and you see that interest rates have been declining basically for all of human history. the long term trend is that they decline, and then occasionally you get wars and famines and, empire collapses and bad things happen. And during those periods, interest rates spike up and then they crash. But they-- the, the long term trend is in decline. We're constantly lowering our interest rate because we're saving more, capital is becoming more available, and therefore it's becoming cheaper to borrow capital. From its owners because they have more and more capital. So this is the process that is constantly going on, and then you look at the twentieth century and you can see that it's reversed. Interest rates start rising in the twentieth century, and they continue to rise up until the nineteen seventies, when interest rates become manipulated by governments and are manipulated to drop constantly. Well, I mean, they rise until the eighties, and then they, begin to decline from the nineteen eighties till now, now that we've hit zero. But it's-- I don't think interest rates Now are an accurate reflection of time preference because they're, essentially a centrally planned, market signal. It's been a century of people having something that is quite unheard of historically, which is the long-term use of a form of money that continuously gets easier over time. It doesn't get harder, it doesn't get, better at storing value, it just keeps getting easier and easier, and it just keeps becoming as a store of value. And so you see as the two- 20th century goes on, I think our time preference all over the world begins to rise more and more. People start discounting the future more, and you see it, I think, in everything. You see it in the fact that people don't save anymore, you see it in the fact that- You see it in art, you see it in music, you see it in, in architecture, one I think is a very interesting one. You know, in the twentieth century, we have the technology that makes construction cheaper than it has ever been. You know, we have machines that make moving heavy things around much cheaper. In the eighteenth and nineteenth century, we had to rely extensively on a lot of backbreaking human labor, which is very expensive compared to machines. You know, you get a machine to move things around and you pay once for them. machine and you pay a little bit of cost for the fuel, and it can do the work of a thousand workers, every day. So making houses has never been cheaper than it is now, and yet we look at the houses that we make and we see that they're, you know, instead of taking advantage of this advanced technology to build better houses and more durable houses, we're making cheaper houses that are shorter lived. I think this is quite interesting that the houses that are being built today don't- Don't live long. And I have an interesting example that I use, the two buildings for the Boston Public Library. the first one was built in the eighteen nineties or eighteen eighties, and it is the McKim Building. And that building cost something like, I think it was seventy million dollars in, today's money to build it back in the eighteen eighty, so it was two million dollars back then. And then you look at the, I think it's called the Johnson Building, the second, Boston Library Building, which was built in nineteen 1970. That building, well, you know, it's built in 1970s style, so it's nicknamed the mausoleum, the mausoleum, the, essentially the graveyard, because it looks, it's a big ugly box of concrete with tiny windows. And, the old building, the McKim building, is one of the nicest buildings in Boston, it's one of the main tourist attractions of Boston, and the new one is an ugly box. You would think, well, you know, now we can make these Building so much cheaper, so that's why we're using, you know, we're economizing, we can have more libraries now because we can make them cheaper. But that doesn't hold up, because the ugly building, that is short lived, that needs constant maintenance, isn't cheaper. In fact, in two thousand and ten, I think it was, the, newer building, the one that was built in the seventies, needed a massive overhaul that cost something like seventy million dollars. So for seventy million dollars in two thousand and ten or so, I may be off a little bit on the dates, but seventy million dollars back then, you built, you renovated the building that was built in the nineteen seventies, and for the same amount of money, in real terms, not in nominal terms, for the same amount of money in the eighteen nineties, you built the most beautiful building in Boston. Something doesn't add up here, you know? Why didn't they, instead of, instead of just re-renovating the old, the new ugly building, nineteen seventies building, why didn't they just replace it with a nice one Built in the eighteen nineties. Why don't they make it, why don't they make these anymore? It's a very interesting question, and I think it's because of time preferences, because they don't wanna build something that will last, so they'll build something that is as cheap as possible, but, they justify the, cheapness effectively because of the fact that you don't care about the long term, you discount the long term heavily under fiat, and that's why in the nineteenth century they built buildings so they could last a hundred years. Today Say, you know, twenty years tops is what people really care about. They don't care about building them in the long term. And if you think about it, if your time preference rises, your discounting of the future rises, and then, you know, small increases in the discounting of the future, they add up, they compound, and so things that, are taking place in your life more than twenty years from now, they have, they, they have a ze-value of zero. So the architecture is optimized for impressing people People in the present, it's optimized for making a statement and for, winning awards and for, you know, looking, interesting. The kind of the, you know, the novelty and shock value is what they spend their money on, but they heavily discount what's gonna happen to the building in fifty years time because they don't care about fifty years because everybody's time preference has risen and everybody's discounting the future more and more.

Yeah, very, very interesting way to put it. And I think there might be different contributing factors to this, and I think as correct- As you say, the fiat money is the underlying driver of so much of this in terms of economics, cultural, social elements of this, where people are now not thinking as much about the future, and also to the point that you're making around interest rates over five thousand years. Now, it, it's true historically, as society and as Hopper points this out, as, you know, as society, advances, it's because of capital accumulation, and over time, people were able to lower their time preference in a genuine sense. But I think what we're talking about Here, just for listeners who aren't clear, it's this, it's this idea that because of fiat and central banking and all of the rest of it, legal tender laws, capital gains tax laws, lender of last resort, all of that, because of those interventions, it artificially pushes the interest rates lower, but our actual time preference isn't that low, and so there's like a mismatch there. And so from an Austrian perspective, we would say, well, there's consumer goods and capital goods, and capital goods are the, what we use to create the consumer goods, but there are multiple- Stages to this, and so we talk about production, stages of production. And so this production structure, and so I guess the, the point we're getting to here is that because of central banking and because of that, creation of money without having underlying savings, people are sort of reaching their-- they, they think they can make this project profitable when really it won't be. And so this is kind of getting into that idea of how fiat money is causing this boom-bust cycle, in- The Austrian, understanding of economics. Do you have anything you'd like to add there?

Yeah, I, I think I agree with you entirely. It's, it's, ultimately when the money itself is manipulated, when the money supply itself can be manipulated, then all prices are, suspect, and interest rate is one of these. But I think, the effect that this distortion has, I mean, it's, it's, it's, it's like when you have a centrally planned economy and then the government says, you know, the potatoes are Are gonna be priced at this price. I mean, yeah, if you look at the statistics, then potatoes are cheap and affordable and communism works. But in practice, you go and you find that there's no potatoes on the shelves. And in fact, if you actually want potatoes, you know, you have to have a connection to somebody in the underground potato farming, industry and you have to pay a lot more. And it's, it, it, it's kind of like this, and I think the, you know, when you, when you put them together And the second part of my book looks at all of the impact, well, not all, obviously you can't, you can't, look at all the impacts in one book, because money is extremely pervasive, money is one half of every transaction in society. So, but I look at several of the, costs, and I think, you know, you, you reach a conclusion which is we'd have been better off paying the expensive, transaction fees on gold than having to destroy all of society basically in order to, Make these payments go through. I mean, it's just, effectively the way that the fiat standard works, when I describe it in kind of engineering terms, is that you're compromising savings, you're compromising the ability to accumulate capital, you're compromising increases in productivity, you're giving up on the integrity of the monetary system, and you're giving an enormous amount of money and wealth and power to governments to centrally plan and manipulate and control markets and control people People's lives, that's causing an enormous amount of destruction in the economy, and I discuss the impact that it has on energy markets, on food markets, and on all kinds of aspects. Effectively, what the fiat standard comes down to in engineering terms is, let's save up on gold transaction fees, and, you know, in order to save up on that, let's Will, will, will incur enormous, costs in the long run in terms of really civilizational destruction. I mean, it's, it's, it's breaking apart at the fundamental building block of civilization, which is lowering time preference, accumulating capital, and investing into the future and increasing productivity. Fiat literally reverses that process. It pushes us backward in the, human evolution and advancement, process, and it's just- It's not a price worth paying, in, in my opinion, for, for saving up on transaction fees. Just pay your transaction fees, kids.

Yeah, that's right. Sometimes you've gotta, you've gotta pay up front. Sometimes it's short term loss for long term gain, whereas the fiat world and the world we live in today is very much like, I wanna minimize my short term cost and I don't care about the long term pain that we're all gonna feel because of that very short sighted desire. And another way to think of it for listeners who might not be I think like an animal in the, in the safari or somewhere, they have an extremely high time-- they're thinking about survival. They're thinking, "Where's my next meal coming from? And how do I not be eaten?" Right? That's literally the level that they are at. And we as humans have the capacity to go the other end of the spectrum. We can plan and build things that will be around even literally once we're dead. That is the, like, the difference. But the time preference is what can shift that, and money, the money we use, has a big impact on I think it's probably also fair to say, and I think you and I have been quite vocal on this, is this idea of cultural impacts that nowadays people are all about short-term attention span. You know, they want to watch these little five-second TikTok videos instead of the one-hour lecture, or better, better yet, read an actual book, spend ten hours reading a book instead of these little five-second clips, and potentially it's impacted on all of us in some ways into our attention span, wouldn't you say?

Absolutely. I think, you know, obviously technology probably has a role to play in that, but I think people underestimate how differently we could be using all of these technologies. You know, the fact that we can make, houses much cheaper doesn't mean that we need to make, crappy houses. We could, use that to make better houses. And I think also the fact that we have such an abundance of media doesn't necessarily need to distract us to have such a low time pref-- such a high time preference and, to lose our focus. It could, it, it productively, and some people manage to use it more productively, you know, for a lot, a lot of people, the fact that there's a lot of, media out there, you know, doesn't, it, it doesn't turn your attention span low, it just, you, you know, you focus, and the extra technology allows you to get access to, better media and better, materials. but I think culturally, I don't think you can really deny that, and the more you think about it, the more you start seeing it, the more it's, the more pervasive it is. And the way that I like to think of it, the way I, I illustrate it in the book is, look at the example of a country that's going through hyperinflation. And then look at how people act under hyperinflation, and then just, realize that low inflation is just the same thing, but at a much lower scale. You know, if you look at, people in, Lebanon today or in Venezuela or in Zimbabwe or previously in, in Weimar Germany when there was hyperinflation, you see a lot of regularities in, in the way that people behave when their money is broken. You see, for instance, one of the most obvious ones is That as soon as you get paid any amount of money, you automatically rush to consume it as fast as you can. So you get paid your salary on the first day of the month. On the first day of the month, everybody's at the supermarket and everybody's trying to buy things. This is-- I, I lived in Brazil for a couple of years when I was a kid, and this is a, a memory that I remember, which is, you know, why was it that, and, and they'd show this on TV and- You'd see that on the first day of the month, the supermarkets would be a war zone because everybody's jumping in to try and, sell, to try and sell their fiat and to gain as much pos-stuff as possible, because within a few days, when everybody has their paychecks, everybody has spent them, in a few days, prices are gonna be up, and so you go and you buy all of your goods for the month today, or you get half if you buy them in two weeks. And so in that kind of world, everybody wants to spend their money as fast as they can. But also, you see, you see it happening in, other aspects of life as well. You know, people are constantly fighting with each other because and, and you can understand why they would do that. You can understand why crime increases, obviously not justifying it, but you can understand why, you know, the same people that were peaceful, and with very little crime when they had a money that held onto its value would be, becoming more rabid and violent. Because they're discounting the future more, because they need survival today, they need to figure out how to feed my family for the rest of the month. You know, I've spent all my paycheck in the first day, and it's now the third week of the month, and we've run out of food, and I've got one more week of hungry kids at home. And that's just, you know, the, the, that's a very pressing thing today that would make you do things that you otherwise wouldn't. You know, you'd consider breaking into your neighbor's home and stealing some of their money or some of their food. You'd consider breaking into a bank or into, supermarket and to do things like that because it's very pressing and because, well, you know, okay, maybe you get caught, but, no, that's a very high cost, but you're discounting that. Very heavily because if you don't get caught, if you don't, steal, you might die, you might starve, your kids might die. So, when we're constantly becoming less secure in the present than in the future, when the present is constantly becoming less and less, certain, then, people discount it more and more and people focus more and more on- the day to day, people start discounting, and so, people will, social bonds that tie people together become less and less significant. You know, this guy's your cousin or your business partner or your friend, usually you really care about maintaining a relationship with them because, you know, for twenty, thirty years, you've been family friends, and, y-y-y-under normal situations, you'd wanna remain on good terms for many years. But, If he's trusting you to look out for his stuff, or if you find a way where you can go into his house, you can risk that friendship because having another twenty, thirty years of friendship or a good relationship with this person, business partner, or family member is Far more difficult, i-i-is, is far less, is far less valuable when you're present is hunger. You know, you're hungry today, you might die this week, so who cares about what he can do to you in twenty years' time? So you're willing to sacrifice the trust and the relationship that has been built over twenty, thirty years in order to get a quick, meal for your kids today. So it's, you see this constantly, across societies that are witnessing hyper- Inflation, the, the future is very heavily discounted because it's highly uncertain. We can't provide for it. We don't have a mechanism for providing for our future. And so we start discounting it heavily. Back to the

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Yeah, I think, you know, Bitcoin shows us, empirically speaking, it shows us that you don't need the money supply to increase as much as the economy grows in order for the money to work. I mean, this is just something that's obvious to anybody who can think about the issue for fifteen minutes with clarity. It's very simple, you know, you, you don't need inches to be expanded in order for people to grow taller. And And you don't need the money supply to expand in order for the economy to grow. We can run the entire world economy on, one hundred trillion dollars or one hundred billion dollars or one hundred dollars, as long as the unit itself can be divided into smaller units. And of course, in the case of fiat, it's all fiat, so it's all entries on ledger. So w-we could have, you know, we could have spent the entirety of the last one hundred years on the supply, let's say, if in nineteen fourteen the whole world went down to a fiat standard, like if you If you really wanted to make it so that it is the best possible fiat standard for the users and not for the government, you would have said, like, if you really wanted to take Keynes' ideas about the cost of gold seriously, alright, gold is too expensive, alright, so let's move on to a fiat money where we replace the current gold stock, the, the current number of fiat notes that we have that are backed by gold, that's the amount of money that we have, and we're just gonna keep it fixed, and we're not gonna print any more money. Like in nineteen fourteen, Gold backed. If you wanted to really run a sane fiat standard, you'd just say, "All right, so we have, say, one billion US dollars. That's the only billion US dollars that will ever exist. There will only ever be one billion US dollars, and you could make them so that they're all trackable on, the fiat, centralized blockchain at the central bank. So everybody has a share of those, one billion dollars, and we could have run the entire world economy on those, one billion dollars up until today. And what would have happened is continue to fall for the last century. This is how you would have run a proper fiat standard, and there's no reason for the money supply to increase at all. So goods would have continued to be produced at increasing rates, and the amount of money that is, used is constant, and so prices would have been increasing every day. And so today, you know, I think we would be living in a world in which a house would probably cost something like five dollars, and, you know, an annual salary would be fifty cents, and that's fine, you know, we would have found names for, units that are subsense, and like, you know, your, your, your coffee would be worth something like, one millionth of a dollar, but that's fine. there'd be a name for it, and there'd be, fiat piece of paper, that is, issued by the The central bank, that is for that amount, and the economy would function. And, you know, if you saved up a million, coffees, you could trade them for a house if you saved up for the cost of a million coffees. And I think everybody in that kind of world, everybody would have had large cash balances of savings that they would have accumulated. So really, we know because of Bitcoin that you don't need the money supply to increase. We've seen how the Bitcoin economy grows on average at around two hundred percent per year nominal, face value in fiat terms But the Bitcoin supply now is growing at less than two percent, and before it was at four, and then it was at around ten or so. So the, the growth in the economy, can be many, many, many times larger than the growth in the money supply, and I don't see why it would be a problem if the growth in those money supply was zero percent. So effectively, all of the, inflation that we've had over the last century has been just unnecessary waste, taking money from money holders, taking economic value from holders of money, and, putting it and, and giving it to governments and allowing governments to essentially run crazy with it. And so trying to estimate how much that is, I think the best estimate would be to look at the growth, the supply growth rate of the M2 money supply. And And if you look at the, the most, consistent and comparable measure we have is, the World Bank's measure of, money M2, and you look at the average growth rate, it's been around twenty-nine percent. It has, for the past, fifty-five years, so from nineteen sixty-five until twenty twenty, it averages at twenty-nine percent. That's the average performance, that's the average increase in the supply of each fiat currency over the past fifty years, but this is- This is probably over, stated a little bit because for two reasons. First of all, this doesn't include Euro economies and the European economies have had, something closer to seven percent, annual increase in the supply. And also this gives each currency, equal weight. So we're looking at, oh, you know, this is the numerical average which puts the Lebanese lira and the Venezuelan, Bolivar, they're all equal to, you know, they all count as much as the US dollar. But of course, that's not really very, fair, on fiat, because the US dollar is used by far more people. So if you look at the better currencies, the better fiat currencies, they're averaging something like seven percent per year over the, this period. So the supply's increasing at around seven percent. So it's, I'm still struggling to figure out, a good way of- Making the weighing of the, of the, all, all of the currencies together, but basically if you wanted to weigh it by market cap in terms of how much each currency is worth You'll end up with something in the range of ten to fifteen percent. So basically, the average fiat user is using, is losing something like ten to fifteen percent of their, wealth in fiat every year because of inflation. And, even if the prices aren't rising by ten percent, that doesn't really matter because prices are dropping for many goods because of increases in economic productivity. But if there was no inflation, all of that drop in prices would be, reflected Affected in, essentially a, a negative, inflation rate, negative price inflation rate. So we're missing out on, you know, you're missing out on an average of ten percent, and even, even if your inflation shows up as, as five percent, you know, it could have been that we had five percent deflation, price deflation, we'd have had a five percent decline in prices in a world like that. And of course, I discuss how it's not Possible to think of inflation as a scalar metric, I'm with, Michael Saylor on thinking of it as a vector. inflation depends on the goods that you're looking at, and so for the more valuable and more desirable goods, inflation is always much higher than the CPI because the CPI includes a lot of industrial stuff that is, very cheap to produce at scale, and so it doesn't suffer as much from inflation, and because people substitute away from good things into buying cheaper things that severely undermine so severely understates the extent of inflation, you know? If everybody was still, eating, if, if everybody would eat the good food, inflation would show up at a much higher price, but people have to make do because they can't afford the, better food, so they eat the cheaper foods, and then the ma-the basket of goods looks like it isn't rising in price as much. But you could think of it as something, you know, conservatively we'll say ten percent per year as a, as a metric, and then, money Money is roughly a quarter of the world's wealth, world's financial wealth. So, people keep, you know, money and financial assets a lot more, there's a lot more money and financial assets than there is in, fiat money, and that's because, you know, fiat money is, broken. But, so that's basically ten percent of twenty-five percent every year. So two point five percent of the world's wealth is basically, conservatively speaking, two point five percent of the world's wealth every year is being destroyed through fiat. And that's a very conservative estimate, and it's enormous when you think about it, two point five percent of the world's wealth, and that's, that's, that's a really conservative estimate of it. It's, it's, it's an enormous amount. But what's even worse about it is if you really think of it, you know, the, who holds the, majority or who is being affected by it the most? If you were to think about who holds the majority of the cash The majority of the cash is held by rich people who don't, for which it doesn't constitute a major problem. You know, most rich people don't have most of their wealth in, fiat money, or not in physical cash and not in checking accounts. They have it in real estate, they have it in stocks and bonds and all kinds of, fiat financial instruments, but they don't keep cash on hand. And if they- Th-they'll obviously have a lot more cash than poor people, but it'll be a much smaller percentage of their, o-of their savings or their wealth. But, for the vast majority of people in the world, the vast majority of their wealth is in cash. So the poorest people in the world, you know, they're the people who have fifty dollars in savings, and they're in cash, and it could be in dollars or it could be in, their local currency. And these are the people that are losing the, the most, you know? rich people can protect themselves from inflation by buying financial assets, but poor people can't buy assets, and poor people can't buy, you know, gold and sit on gold and pay all the, costs of maintaining and moving gold around. They can't buy stocks, they can't afford to buy hard assets, and so they, their only hope of saving into the future is cash. Their only hope is just holding onto money, and then that's constantly being destroyed, and it's constantly being destroyed to pump the numbers for stocks and bonds and government, yeah, and all, all the fiat instruments that are held by the richest people. So it's, it's absolutely staggering, you know, you see so many fiat people constantly prancing on about, oh, in, inequality. Inequality is bad, inequality is bad, and yet nobody ever mentions this. Nobody ever mentions the fact that government money, which usually, you know, to be fair to these people that are always on about inequality, fiat economists that talk about inequality, you know, they're paid by fiat and they're, they're effectively parasites who don't have real jobs that would exist on the market. They're paid by government agencies that print money and hand them their money. So when you see people like Piketty or Krugman or all of these, fake fiat, social Socialist economists going on about the problems of inequality, they're not going to point out at the, they're not going to point the finger at the mechanism, at the root, at the mechanism that is every year punishing the world's poorest people but with something like, if they're lucky, ten percent inflation, and the majority of the world's poorest people don't have access to the world's best currencies, they're having to save in their local shitcoins, and so they're losing ten, twenty, thirty, forty, maybe ninety percent a year of their, wealth. And on the other hand, that inflation is going to pump the bags of, rich people and to pay the salaries of fiat parasites, like, fiat economists, you know? But they don't

talk about that. Yeah, yeah. So to Summarize then. Of course. talking about the people who are hurt by the fiat standard, these are people who are poor, people who are saving into cash, you're losing if you're a later comer in terms of the new money. Now, the people who are winning out of the fiat standard is government, because they have a lot of debt, the people who get a lot of debt, the people who get that new debt first. people who are able to maneuver the system well, such that they can play the debt game very well, they, they are all massively benefiting and profiting, and even this effect is, if anything, amplified during this COVID hysteria era over the last year or so, we've seen some of them just absolutely kill it in terms of how much profit they've made. I also wanted to touch on just those total figures as well, as you were saying, the total money stock of the world. So I guess just some rough numbers just to throw them out there so people have a concept. concept of what's going on. If we were to look at something like broad money, US, M3 globally would be something in that kind of ninety trillion range, and then global wealth, on some of the recent Credit Suisse estimates, is around four hundred trillion. So, and I think they rightly say part of that is because US dollar has gone down a little bit com-relative to two years ago, obviously there's been a lot of inflation. So, I think that's an interesting question as well, because some people in the Bitcoin world, there's this kind of meme of infinity divided I'm starting to think that's not quite right, because the global stock of money in the world is something like ninety milli-- ninety trillion, and the global wealth is like four hundred trillion. So I'm wondering what you think. As an example, let me give it to you this way. Let's say, let's just for a hypothetical, say twenty-one million bitcoins have been issued. Could it be the case that global wealth is actually eighty million bitcoins? You get what I'm saying?

Yeah, I think that's, yeah, I think so. I, I think that would

you're not storing all of that wealth in Bitcoin, a lot of that wealth is stored in actual capital that is outside of Bitcoin, and then if you measure the, the prev- the prevalent market price for that, you know, the, the mark to market, yeah, you could take this factory and sell it for, a hundred Bitcoin today, but, you're not, and so somebody else has the hundred Bitcoin, you have the factory, and the factory's worth a hundred Bitcoin. So if you measured the value of all the capital, all the stocks out there, it'll It'll be worth more than the amount of, Bitcoin that is, stored, yeah, for sure. I think, you know, we're not going to have everything going to Bitcoin, it's not all of the world's financial assets, because I think there will still be stocks, there will still be equity, but I think we're gonna eat pretty much everything, and there will still be real estate, a lot of real estate, but it won't be used as a store of value, you know, I think we'll go back to a world in which people buy houses that they need

consumer good, which I think is something the Bitcoiners have, and it's something that I've tweeted once, I tweeted it almost as an afterthought, as a response to somebody, and if somebody was saying, "Well, a house is a capital good," I said, "No, a house is like a washing machine or a computer. It's a long-lived, durable good. It's, you know, something that you use up and you need to maintain, and, it doesn't, pay you cash. Obviously, if you rent out a house, then Using a cash flow, but, people holding their house as an asset, as a, as a saving account effectively, is, I think, a phenomenon that is just fiat. It's just because of fiat. And once you up-upgrade to the fiat, to the Bitcoin standard, you have no use for that, you know? You don't need a house as a, you don't need to buy a house as a saving account. You buy the house that you need, and if you don't want to be tied down to a place, you don't have to buy a house and you move

This is, yeah, this is, this is, what's, what's likely to happen in my mind is that Bitcoin's going to eat the cash, portion of global wealth and the cash substitutes. So all these crappy substitutes for cash that people use. So all the monetary premium on real estate is likely to be eaten up by Bitcoin. All the monetary premium on art, is likely to be eaten up by Bitcoin. But I think the really big one, and, and of course, all, I would imagine, government monies, are going to be eaten up by Bitcoin for the bond market and things like that. Yeah. government monies would likely be, you know, either eaten up by Bitcoin or backed by Bitcoin, but I think the, the main course, the big one, is the bond market. I, I- I'm making the argument in this book that Bitcoin obsoletes bonds. I have a couple of pages of why I think, you know, we wouldn't have bonds in this world, and I think that would be a wonderful thing. And, I, I'd like to think of myself as a bond abolitionist, you know? I, I hope a hundred years from now, people look at me and say, "You know, one of the people who fought the bond market and destroyed it."

You'll be like the George Soros, you know?

Well, yeah, exactly. Like, I think I don't see, and I think the demand for bonds is driven by the fact that people need a store of value because cash is a shitty store of value. And so, in, in a world in which you had good cash Why would you wanna hold a bond and take on the credit risk? in a world in which you have no good cash, you have to do that, and you can't hold equity. And the reason people hold bonds is because bonds are,

They're senior to equity in terms of, repayment. So if your company goes bankrupt, you'll pay the bondholders first and then whatever's left, you'll pay the equity holders. So that makes equity dangerous to have in your balance sheet as a cash reserve asset. It makes bonds more secure because, you're more likely to get paid back a bigger fraction of your, investment if you, if you have significant- I-if it's in bonds. But then if you replace, if you put us in a world in which everybody has access to a form of cash that is a present good, that doesn't require anybody to fulfill any obligation, that has no credit risk attached to it, and it appreciates at, say, five percent a year, you know, imagine we're in a world in which Bitcoin's eaten everything, why would anybody wanna hold a government bond or even a private company bond? I think in that kind of world, everybody just holds Bitcoin. And then, if you want to take on risk, you get equity. I don't see why you would, need-- I, I don't see how bonds fit in. I think bonds are just, a, a, a, a make-do solution that is thriving because of the, Because of the peculiarities of the fiat system, and I think even under the gold standard, you know, gold is kind of a proto-shitcoin in a sense, because, yes, it has great saleability across time, but it has crappy saleabilities across space, and so financial institutions as I was saying earlier, their financial infrastructure is a part of the monetary system, and so, financial institutions and governments are able to Monetize that into bonds, perhaps, but hopefully Bitcoin fixes this.

Yeah, interesting stuff. And obviously, I'm, I'm with you on the idea that we are going to be living in a much more equity-based society as opposed to debt, but I'm curious Wouldn't we, wouldn't you see some possibilities there for other forms of debt then, maybe even loans, like just traditional loans or, maybe more, more like corporate loans or corporate bonds, but maybe they would charge a higher interest rate, and it would be a much, much smaller market than what we see today, wouldn't, wouldn't you see a possibility for something like that? I mean,

I think you might, but, I, I see many reasons why you wouldn't. I think, on the demand side, why would anybody wanna hold, this kind of asset where you have, you know, you have unlimited downside? but you have limited upside. So you get paid five percent back or ten percent back or whatever if the company, makes a profit. But if they go bankrupt, you lose one hundred percent. so limiting that upside is something that I imagine is done in the fiat system because of the lack of a good alternative. If you had, if, if you had hard money that would appreciate at five percent in real terms, then your downside is capped to zero. There's no way that you're going to lose if you just hold on to Bitcoin. You just huddle, yeah. Exactly. So when, when there's an, when, when your money is a melting ice cube, then yeah, you're willing to take on this crappy risk because, you know, the alternative is equity, which is even more of downside risk. So bonds are like what is the, what has the least downside risk in, in a fiat system, and it's kind of, you know, this is how the fiat scam really works, and that the government, Destroys the currency in order to, by issuing bonds, and by destroying the currency, it drives the demands for its bonds. So the inflation happens through bond creation, which is inflationary, and then that leads to governments, that leads to people having to want to put their money in bonds, which subsidizes governments to continue to destroy the currency. If you think about it, you know, I think the biggest Perhaps the biggest malinvestment in history is the bond market. I should add this to the book, it just occurred to me right now, but I, I'm gonna go add it right now after we get off the call. We'll, we'll title this episode "The,

the biggest malinvestment in history."

Yeah. I think that's probably a good way of thinking about it, because what happens when the government has the money printer is that They are able to borrow, you know, and, and I remember your episode with, Greg Foss when you were discussing, you know, if, if somebody looked at the balance sheet of a government, and, you know, ignoring the romanticism of the fact that it is a government and ignoring the fact that it has a money printer, if you just looked at, receipts and expenditures You would, they would be borrowing at ten x the current interest rates that they have. And so the bond market, the existence of the bond market and the existence of, the fiat money printers has just been, a massive, subsidy to governments to allow them to borrow at much lower rate than they otherwise would. And so the result of that is that, you know, you have all these- Terrible, incompetent governments being given endless amounts of money by investors because, look, you know, you-- they're managing to pay it off. You look at Lebanon, you know, they had about two hundred percent of GDP,

In, in, in, in debt up until a couple of years ago. A-on, and, and that money was being invested in a government that had a train authority that spent a lot of money but had no trains. There was not a single operating train in the entire country, and yet you had a train authority in the government. So you're investing literally in a company that has fake trains, and phantom trains. You're investing in an electricity company that, loses two billion dollars a year And employs thousands of employees who don't even show up to work, they just get their paychecks because the politician, you know, they're just basically the mafias of the politicians and they get their paychecks from the electricity company. Like nobody would invest in this kind of mess, in the real world. But because of the fiat, money printer, you get, you get a lot of people putting their money in there, and then of course, you know, it seems to work and they're constantly, All of the fiat people are constantly telling you, "Well, you know, it's working," and government and you don't understand because, you know, governments can make money. No, you don't understand, governments are able to make money, so therefore they can't go bankrupt. And then of course they do, and then the government collapses and, the, the currency collapses. And then of course, th-that same time, you know, the same idiots, the same, inflationists who are saying, "No, this can't be a problem." They'll use that as an excuse to promote even more idiotic and socialist, methods of economic central planning. So it's, it's, it's been a huge, huge malinvestment, in my opinion, and I think, I, I can't see it surviving in, in the long run because of, because, you know, you, if you really wanted, a cash with low downside, you'd just hold cash, and if you wanted to take on risk for returns, you'd want all of the upside, and so you'd get equity.

Yeah, interesting way to put it. And another way to put it, another way to frame it, just to summarize as well, is it's like fiat privilege. Bonds have existed and become such a huge market because of fiat privilege. So because of regulatory reasons. Reasons, so governments might mandate, oh, see, bank X Y Z or insurance company, you must hold X Y and Z percentage of bonds. Or there might be some financial plumbing system reason, as, discussed with Nick Bhatia on that episode, where he was saying, kind of, again, it's an institutional setup thing that because people who want a certain level of safety or security in the bond, like I'm using air quotes here, in the bond or in the government context or safety, that, that Because of this regulatory reason, and perhaps there is some inertia reason, so there's a lot of financial advisors who will go out there and tell their customers, with a straight face, "Go sixty forty stocks and bonds," and they'll be sitting there in bonds just losing money hand over fist instead of buying Bitcoin when they could have just told them, "You know, you could have done this." And so, I guess bringing it back to the point you were saying, which is that we are going to be moving into a world that is more equity based, and I'm, I'm a hundred percent with you

I'm, I'm speculating a little bit, but I'm trying to paint out a scenario what I think it might look like. We would be living in a growth deflationary world. We would be seeing something, let's just for-- to pick a number, let's say five percent growth in your purchasing power. So you might hold however many, like, one Bitcoin or whatever, and the purchasing power of that in one year's time would be one point o five Bitcoin, just, you know, making easy numbers. In last

year's Bitcoins.

Yeah, in purchasing power terms, but

Yeah.

Then the question is, okay, so let's say we're in a steady state hyper Bitcoinized world, the world is transacting in Bitcoin and we're using the Lightning Network and all of this, then the question is, someone comes to you and says, "Oh, hey, Saifedean, would you like to buy my bond? I'm gonna pay you, you know, five percent, yeah?" And then at that point, you've gotta be thinking, "Well, Stephan, you dodgy bond salesman, how much are you, you know, how You're gonna have to offer me a very significant premium, maybe forty percent, fifty percent. It might have to be like a, a, just a crazy punitive rate such that it just the market is so small and it, it's very, it's almost nonexistent or just a very small market, relative to the bond market of today. What do you think?

Yeah, perhaps, but I think, the other aspect of the situation is, and I, and I flesh out the argument in more detail in the book, and I urge you to, you can read the book now, Orders the book. The book will be out in December, but you can pre-order it now and you'll get the fir-the draft of the book, which is almost final, still gonna get a little few edits done to it over the next, week or so before it's, shipped off to the printers. But, I, I flesh out this argument in more detail there. I think another aspect of it is, Yeah, another, the, the other aspect to keep in mind here is that when you have, when, when we have a form of money that is appreciating at five percent and nobody needs to,

Do crazy financial, wizardry in order to just save their money into the future. You would expect the saving would be far, far more prevalent. So I think, we need to think bigger about the kind of transformative impact that it would have on capital markets. We wouldn't be living in a world in which everybody is in debt. For many multiples of their yearly income. We'd be living in a world in which everybody has multiples of their yearly income in savings. I think this is the thing that, you know, if we-- imagine if we, in the last one hundred years, we didn't have any of this fiat bullshit, and people just had kept on, witnessing their money get harder and better over the last century. think about, you know, everybody of the listeners here, and I'm sure you have listeners from all over the world, so they've experienced all kinds of different, episodes. Of inflation in their, family over the last four generations. Now look back at your family in the last four generations and think if all of that, all of these, people in your family in the last four generations on both sides of your family, if they all had a hard money to save into Think about how much wealth you would have today, you know, if there wasn't, if, if your country didn't experience the, hyperinflation it did in the 1970s and then again in 2005 and then all of the inflation that took place, before and after that, all of the high inflation and hyperinflation, if that wasn't happening, if your grandparents didn't have their business destroyed by hyperinflation, and if your parents didn't have to, you know, move from one country to another to start over again because of If all of that was happening, if all of that wasn't happening to your family over the last four generations, and even if you-- I don't care if you're from the poorest parts of the world, you would today have a lot more capital in your name. So think about a world in which everybody has a lot more capital saved up in Bitcoin. And then think about what's gonna happen to the cost of capital in that kind of world. As saving increases, there's an enormous amount of capital, so the interest rate is likely to be very, very low. In fact, the way that I see, this happening is, I, I essentially see that the market interest rate is going to drop towards zero. And if you read Austrian economics, you know, from, Mises' perspective, time preferences would-- obviously, time preferences would create, interest rates. But time preference isn't reflected on the market interest rates. Time preference is reflected on originary interest rate and then market conditions and, Adjustments for other things will, lead to the, market interest rate. So I think as people accumulate more and more capital, the originary interest rate could drop so much that it becomes indistinguishable from zero effectively, or close. It's, it doesn't become zero actually, it becomes a little bit higher than zero, but then, And I, and I fleshed this out in more detail in the book. The interest rate is closer to zero, the originary interest is closer to zero, but then you've taken into account the cost of, carrying the money, so the cost of saving and storing the money, and the risk of losing it, and then you get to a point where effectively it's a wash. You're willing to lend out your money for zero percent interest rate as long as you trust the borrower. So that's why I think we'll move towards something that's closer to Islamic finance in a, in, in a Bitcoin world, because I don't see, I don't see anybody wanting to, charge an interest rate, because there's an enormous amount of capital out there. And so if you can get capital, if you're trustworthy enough to be able to get capital, you'll get capital from people at zero interest rate if they trust you and they like you, and, you know, your cousin sees that you're in trouble, you need some money because, you know, the, An earthquake and your house got destroyed and you wanna rebuild. Well, your cousin has got ten years income of s-in savings and he's gonna be working for another ten years, so he doesn't really need these. So he can give you two years income to rebuild your house and then you pay him over the next few years. I can see that happening much more frequently. I can see that in a trustworthy, a trustworthy individual in a clear situation around people that they- trust, you'd get the loan at zero percent, and the lender would effectively be,

gaining, even though the nominal interest rate that they're getting is zero percent, they're still getting the, real, interest rate on their money without having to pay for the storage of the money and without having to take on the risk of it getting lost or stolen, and that's never a zero risk. There's always a risk that it could get lost or stolen, whatever you're doing, you know, if you're Holding your own keys or if you're storing it with somebody else, there's, you know, risks will always exist. So when you borrow from him, you're taking on that risk. If you lose the coins, he's still going to, you know, you still owe him. So I see that in, in this situation, I think, anybody who needs, credit for a situation where you actually need credit, there's gonna be such an abundance of capital that you'll be able to get it as long as you're credit worthy. Whereas anybody who needs credit for a business, I don't see why anybody would wanna part with their precious satoshis to give for your business. Unless they could share with all of the upside, because, here's the other thing, the only way that we can manufacture these crazy, instruments like, checking accounts and saving accounts and, bonds, which promise you no downside, which tell you, "Yeah, we'll give you a, an, an fixed upside of three percent a year, for instance," but Whatever happens, you're gonna get your money back. The only way we can have this, fiction is because of the magic money printer. The magic money printer is what makes this, Possible, because every business has a ca-has a risk. Every business can get wiped out. There are earthquakes that happen, there are crazy global pandemic hysterias that break out, and they can shut down your business, and you could have zero cash flow for a few years, and you could- You know, you might only be able to pay back your investors or your lenders, your creditors at five cents to the dollar. It can happen to the best business in the world, you know, things can happen like this. So nobody can promise you risk-free return, it's, it's impossible. And the only reason that some entities can provide that is fiat privilege, as you put it. It's, they have the printer and then they tell you, "Well, don't worry, if my business goes bad, you know, I'm connected to the printers and the printers will make good." Well, when you break away the printer, nobody can make you that offer. So they're telling you, "I'm giving you five percent upside," and they're lying when they're telling you that they're protecting you from the downside. If they run out of satoshis, they don't have a Satoshi printer that can bail them out. And so I don't like, I think Yeah, sure. It will exist in the sense that, some people will try it and some people will do it, but I think in the long run, people who try it are gonna get wrecked.

Right.

you know, if you do it, eventually there's gonna be that pandemic, that earthquake that wipes out the business and doesn't give you the return. And, in the case of the equity investor, yeah, they're also gonna go through that risk, but they will have been compensated in that on the good years. They get the upside. Yeah, they weren't

Occasional, great year.

Yeah, excellent explanation. I love that. And it's really that we are moving into a world where in the future, like assuming the hyper Bitcoinized world, people will just buy equity in a company that they know or they're advising or, you know, things like that, where they know the industry, they know, they're a technical expert in, in that field. Yeah. And they're like, "This guy, these guys are gonna make money 'cause I know it." And, you know, like even though I would have got my normal

percent per year, you know, so I, I think I can, you know, it's worth it, you know?

I see, yeah, absolutely. I think basically holding on to cash is the equivalent of index fund in that world, because you're benefiting from everybody's increase in productivity. Now, if you have a very good reason, to suspect that this particular company is going to outperform the market, is going to outperform my cash, index fund, then you would invest in it. But I can imagine it in, in that kind of world, for most people, investment Or like, you know, a marriage, you know, you spend years getting to know the company and you get to know them really well and then you invest in them and it's not something that, you know, you, you put the allocation there and you wait for a very long time and you don't, you're, you're not, you're not doing, short-term trading, you're not doing technical analysis on, day-to-day movements. It's, it's, it's, There's an enormous amount of capital in the market, and that capital is accruing, value just because of economic growth. And then the only people that risk their capital are the ones that have very good reasons to do it. And I think we'd have a lot less malinvestment in that world. You know, we would have zero bonds, and, we'd have no casino in the stock market. I can imagine the stock market being something very boring, where, you know- As a company, say a company introduces a new, technology or a new product, we witness, you know, you could look at the stock price of the company and you could see, you know, this is when rumors started to circulate that they're going to introduce their new product X, this is when they put out the prototype, and then, you know, this is when, the competitors or, or somebody from the industry issued a report saying this isn't going to work, so you can see that some people, you know, there was a little bit of a decline in the price of the stock, then they launched the product and it, exceeds expectations, so you see the price rise. Like you could see a rational movement in, the product as opposed to today when essentially all stocks are just monetary policy, all stocks-- Random coin. Monetary policy. All stocks. Well, they're just, yeah, they're random noise around M2 basically, Project M2 and they're just, their own circumstances are, why they are overvalued or compared to M2 or undervalued or compared to M2, but the trend is everything goes up with M2.

Yeah, excellent. And so it's over the last year or two, we've seen some of the crazy excesses of that. We saw random, you know, couples on TikTok talking about how they would just buy things based on momentum, thinking they'd invented some grand new strategy when really they were just, as you said, riding the M2 growth without knowing, Understanding what was going on, and so this whole idea of Robin Hood trade around the little stocks, it, it's not really going to be like in the future, that is not, this is very much a fiat thing, and it may be Guido Hulsmann, I think watching one of his lectures or maybe a book he's written, he spoke about this idea, and I think you will relate to this as well, is he has spoken about how in hard money societies, eventually people run out of things that they could invest into, and so then potentially they start seeing more patronage, and so A rich guy in the citadel with a lot of sats, and you might be like, "Hey, I'm gonna build a cathedral for the citadel, or I'm gonna build some grand project." And maybe that's the way it, it might operate in the citadels of the future. What do you think?

I think so, yeah. And I, I discussed this in the, in the Bitcoin Standard as well. You know, back then, people had a lot of savings, and the savings were hard money, and they were expecting those savings to maintain their value for hundreds of And if you're gonna buy something, you think of it as having to last so that your great grandkids could benefit from it. So, you look at how people financed art back then, you know, they financed things that they thought would live forever, and a lot of them have, you know, you look at, The Sistine Chapel today, it was financed with gold, and it's survived like gold, you know, it, it has been a good investment for the people who, put up the money for Michelangelo to build it, because, it's maintained its value. So you had to offer real value for people in order to get their money. And I think, yeah, as, a-as that amount of saving increases, I think this is really what I'm trying to, get the reader to imagine, which is in a world in which we don't have- to constantly destroy our currency by ten percent every year in order to make our payment system work in a world in which the payment system just has, Bitcoin transaction fees, which,

which, you know, the advantage of the Bitcoin transaction fees is that as the value of the transaction scales, the value of the transaction fee doesn't necessarily scale. So currently you're paying two dollars, but you could move a billion dollars with it, which is a negligible percentage, is almost zero basically. And so even if Bitcoin transactions go up to two thousand dollars, it'll still be negligible compared to moving around, two billion dollars, you know, you're still moving it, it's, it's, it's still one in a million if you're paying a thousand dollars per billion dollars. So, so in a world in which, you know, we're paying one millionth of the transaction fee, one millionth of the transaction value as a transaction fee, we don't have to put up with all of the fiat bullshit. And in that kind of world, I think You know, dare to dream, but yeah, we'd have a world in which everybody has savings, everybody has a ton of savings, and you'd have to, and, and I think, you know, we'd have a world in which people, think of the future and the long term much more. So people save more, people take care of their families much more, and so most people get born into the world with a lot of wealth that is just sitting there, safely stored, available for them at any moment. So in case there's an emergency, they always have enough money to And, if they ever want to invest in something, they always have ready cash. And so if you find an astonishing artist or if you find an astonishing cause or if you live in a town that doesn't have a cathedral and you think, you know, this town could really use a giant cathedral in the middle, something that my, descendants ten generations from now will remember me for, and you find a good cathedral builder, yeah, I think you'd do it. It's, it's not really much of an option today because for most people I think even rich people, you know, they need to continuously take their chips back into the casino in order to stay rich. You can't just get rich in fiat and go home and keep your wealth and be rich. No, you have to constantly take your chips back into the casino, run them again or put them on red or black and hope that you get it. You have to always be investing, you have to always be following up on the bond market and the stock market and, all kinds of different, things, because otherwise You just witness your money lose value.

Yeah. So it has huge implications for financial planning, family offices, financial institutions, all of these will have to dramatically shift their model, as opposed to the model today where, as you're saying, these rich families might have a family office or some wealth advisor, tax planner, everything doing all of these things. And of course, I mean, some of that will still exist, of course, but it's just the way they operate will be so different. It won't be, "Oh, here's your sixty forty stocks and bonds portfolio." It'll be more like, okay, here's your Bitcoin allocation, and here's how we're sorting out your generational trust and your, you know, these aspects, and it might be helping them manage their multisig keys and things like that for the long term. And, also an interesting point as well, as you rightly said, we anticipate fees will rise. Of course, right now the block space market is quite cheap, but we anticipate a bull market both in the price of Bitcoin and in the block space, aspect of it, and, hopefully with other improvements. Like Lightning and potentially channel factories, all of these aspects could even, give us even extra credit. Like even if we didn't have Lightning and channel factories and all these fantastical, magical things, even Bitcoin alone would have been enough. But with, with this Lightning network and all of these other layers and not just Lightning, but other aspects of it, it really, you know, if we, if we play our cards correctly, humanity could really do some good here. I think so.

I think, There is, there's a, there's a story in which, you know, peop- people constantly think, "Well, you know, fiat is gonna collapse and then the world's gonna fall apart." And I think, you know, the last century might have been the world falling apart. I think, you know, two world wars and hundreds of smaller wars and an endless amount of genocides and, government central planning and communism and all of that, maybe we've already experienced the worst of it. Maybe, maybe this was, maybe this was the damnation that we had to go through for our, ancestors' sins, and maybe we're now ready to, switch. Maybe, maybe the world is going to change and maybe we've found the technical, technical solution for the problem of money that is just going to improve life enormously. I, i-i-i'm, i'm quite optimistic this, this is the

case. So perhaps that is the white pill to finish up this episode. So listeners, make sure you go to saifedean dot com by, The book, sign up with Saifedean's course. I, I bought the book as well, and I definitely encourage my listeners also to do that. Saifedean, anywhere else you would like them to follow you or find you online? Well, I'm on Twitter at Saifedean,

so I'm always, very active on Twitter, as, you, usually. and yeah, on my website Saifedean dot com, you can get my, online courses and you can, pre-order The Fiat Standard

Pre-order the Fiat Standard now, you'll get the full draft of the book, and, you-- in December, you'll be able to get the, audiobook and the physical book and the digital book, and you can also pre-order a hardcover signed copy. And if you do so in the next, week or two, you-- if you order the, the hardcover signed copy, you'll be listed in the book as one of my supporters. So I'm self-publishing the book, and rather than, Selling the rights to, publisher so that I could get in advance. I decided I'm just going to sell, hardcover signed copies for, supporters. So if you wanna be one of my supporters, go to my website and order the hardcover signed copy.

Fantastic. Well, thank you, Saifedean. It was a pleasure chatting with you. Thank you, Stefan. Always fun talking to you. Share this episode with your friends who don't understand where the biggest fiat malinvestments lie. Go to stefanlivera dot com slash two nine six to