Ansel Lindner Bitcoin podcaster and writer of joins me on the show to talk about his framework for assessing:

  • Inflation or Deflation? 
  • The money stock
  • Credit cycles over time
  • What bitcoin does for the world
  • Could inflation and fractional reserve happen again on top of bitcoin? 



Stephan Livera links:

Podcast Transcript:

Stephan – 00:00:08:

Hi. You’re listening to Stephan Livera podacast. Show about Bitcoin and Austrian Economics. The question today is, is it inflation or deflation? Ansel, Bitcoin podcaster and writer over at, joins me to talk about his framework. And we chat about a range of things inflation, deflation, the money stock, money supply, credit cycles over time, and what bitcoin does for the world. The show is brought to you by Swan bitcoin. And Swan is organizing a conference, pacific bitcoin in November this year, so keep an eye out for that. If you have friends who are new to bitcoin, this is a great opportunity to bring them along to the conference where people can learn about bitcoin and also chat and meet other likeminded bitcoiners. There’s an awesome range of speakers who are coming. Alex Epstein, Lyn Alden, CJ. Wilson, Jeff Booth, Mark Moss, Alex Epstein, Pierre Rochard, just to name a few. And there’s more coming. This is going to be an awesome week, filled with events, educational opportunities, meetups, coworking and parties. So come and join us at the inaugural Pacific bitcoin conference in LA. November 10th and 11th, 2022. Go to and use the code LIVERA for a discount on your tickets. Are you a bitcoin builder or are you a bitcoin merchant looking to take payment? With bitcoin and the Lightning Network, Voltage can help you out. They have constructed the leading enterprise grade Lightning solution for bitcoin builders. Now, this can apply to you whether you want to scale bitcoin nodes instantly by the thousands, or whether you want some quality inbound liquidity easily with Voltage, you can go to the website and it’s really fast. You can set up your bitcoin node, your LND node or your BTCPay server node in the cloud very quickly, within minutes. What was once a headache is now simplified. So go and check it out for yourself. That website is If you’re looking for bitcoin hardware security, you can’t go past Now, they are well known for the cold card, but they’ve got a range of products. They’ve got the tap signer, they have the block clock. These are all kinds of different devices that you can use, all as part of your different security setup. And interestingly, they’ve got the tap signer, which they are collaborating with the nonchal team to have NFC support. So this is an interesting development in the world of multi signature. Now, of course, the really cool device that you want to have is the block clock. They’ve got different versions. They’ve got the block clock mini and the block clock micro. Now, we have seen Jack Dorsey and the former Prime Minister of Thailand have this in the background while they are having their interviews. So if you want yours, go to, use the code LIVERA to get a discount on your cold card or some of your other bitcoin merchandise. And now onto the show with Ansel. Ansel, welcome to the show.

Ansel – 00:02:47:

Stephan, great to be here. It’s an honor to be here. You share my love of Austrian economics. So great to be here.

Stephan – 00:02:54:

Yeah. Look, I think for some of us who were well, I presume you were into Austrian economics even before you got into Bitcoin. I mean, it just feels like this perfect synergy of ideas. So, you know, I’ve been chatting with you in the background and always interested to see your take on things as well, because there’s this whole debate going on right now in the world about inflation or deflation. And I think that would probably be an interesting spot to start. So I guess from your perspective, what does this debate or idea look like?

Ansel – 00:03:25:

Okay, jumping right into it, right in the deep end here. Okay, so inflation versus deflation. I would define inflation, I think you would agree, as an increase in the money supply. And deflation is the opposite of that. I see. Right now we are at the end of a multidecade credit bubble, and so the end of that credit bubble is going to be deflationary and not inflationary. A lot of people like to say QE is money printing and government spending is money printing, but I don’t think that’s the case. I think money is printed when banks make loans, and so that’s not QE and that’s not government spending. The end of this credit bubble will be deflationary. And that’s Bitcoiners don’t like to hear that.

Stephan – 00:04:08:

Yeah, that’s really interesting because I think I probably slightly disagree, but kind of also agree on other points. So, I mean, the way I’m seeing it is obviously QA is a form of money printing, but it’s just that that’s not the dominant form. I think it’s that the the loan credit expansion is the main form of money creation or inflation, in this case, in the Austrian definition. So to be clear, we’re talking about the Austrian understanding of inflation, which means money creation or debasement also, whereas in the mainstream, they’re thinking of it more from a CPI point of view, consumer price inflation, which is a different, I guess we can call them, as two different kinds of inflation. So back to this whole question around inflation, deflation and money supply metrics. Maybe that’s also a good spot to just get your view. How are you considering the money metrics? Because there are different ones, right? There’s M0 base money, there’s M1, M2, M3, etc. Some of these metrics get discontinued over time as well. So could you just give a bit of an overview how you are looking at this in terms of the different money metrics?

Ansel – 00:05:11:

Yeah, measurements of money. This is a common one that people like to throw at me on Twitter because I don’t think M2 really matters. M1 doesn’t matter. None of these things matter because they don’t measure the shadow money, they don’t measure the euro dollar money that’s offshore. If we’re in a dollar as global reserve currency and the US is 20% of global GDP, that means M2 only really can even hope to capture about 20% of reality. 80% of reality is offshore. So I don’t think that m two is useful. It’s actually kind of less than worthless because it distracts us from looking at the shadow system and trying to look at measurements that we can, where we can see what’s going on with the money supply. So we can’t observe it directly, but we can observe it through interest rates and both in euro dollar rates and US treasury rates and bond rates and all of these things spreads, we can see what’s happening with the money supply that way.

Stephan – 00:06:13:

And so a common name that gets thrown around with the euro dollar is Jeff Snider, as I’m sure you are aware as well. I’m curious, where would you distinguish your views from, say, a Jeff Snider?

Ansel – 00:06:25:

Okay, yeah, I think Jeff is brilliant at what he does, but I would say he relies pretty much solely on his euro dollar thesis where I kind of rely on Austrian thinking, my understanding of Bitcoin and Bitcoin. I would say it’s important to understand cryptography, crypto, anarchy and those types of things decentralization. And then on top of that, I also add in some geopolitical thinking on like geographic determinism and that would be Mckinder, Kaplan, Friedman, Zion, those in that kind of school. So I add all those things together plus the euro dollar system. So, I agree with Jeff on probably 75% of things.

Stephan – 00:07:08:

Got you because that’s the other component. Obviously. I think there are parts where I think lots of Bitcoin is would disagree with Jeff because he is coming from this idea that money supply should be elastic. Whereas obviously, as Bitcoin is, we’re going the other way, we’re saying no, it should be inelastic, it should be 21 million and no more than that, of course. But I think there is an interesting component there around understanding what’s going on in the banking system outside of the US. Because the US regulators, the Federal Reserve, treasury, et cetera, they don’t have as much of an insight into what’s going on outside in that rest of the world. And so I’m curious, how do you try to assess what’s going on in the rest of the world?

Ansel – 00:07:51:

Well, I start from my framework that the euro dollar system is a credit based system. And so everybody I wouldn’t even call it a fiat, it’s not fiat money because it actually has backing and that’s the credit. So when you make a loan, you also make an asset on the other side of the balance sheet. So it’s actually all money today at least national currencies are backed by that asset that’s printed with the money. So the loan on the asset side of the balance sheet. So it’s credit based money. Every dollar in the world is someone else’s debt and I forgot where I was going with that.

Stephan – 00:08:31:

I guess taking it back to how, let’s say the traditional Austrian is reading it like, let’s say you just read Mises or Rothbard and there’s this basic idea that, okay, there’s base money, there’s monetary reserves by the commercial banks held at the Federal Reserve. And then because when they issue out a loan, that’s the creation of new money. And then when somebody is paying down a loan, that’s in a sense destruction of money. And now I guess if you just read the typical textbook sort of level answers, it will be okay, there’s a reserve ratio and that’s the amount to which they can print more. Now, I think in practice, others have written about this idea, like my friend Vijay Boyapati, who’s written about this idea that actually maybe they’re being more constrained more by capital requirements, things like basel, basel III and so on, where they say, oh, okay, you’re only allowed to you have to maintain certain ratios in terms of capital. But then layering on, there’s this whole euro dollar idea of all this money happening that’s outside of the US system. And so then it just becomes very difficult to even put our finger on. Exactly what are we even counting here from a money supply point of view in talking about USD.

Ansel – 00:09:38:

Right, we’re not really counting anything. It’s all backed by credit. And we can tell if there’s a problem in the credit market because of interest rates and because of financial crisis and that kind of thing. So we know that the market is healthy if there’s no financial crisis. And we know that the credit market is not healthy if there is a financial crisis. Everything is interwoven. Everybody’s debt is owned by somebody else who is rehypathicated 13 times and everyone’s so closely integrated that no, we can’t like today we can’t even count the supply of gold really, because there’s all these paper receipts on top of gold, right, and then it’s re hypotheticated and lent out and uses collateral in some loan and etcetera, etcetera. So we can’t really measure the amount of gold either. It’s the same with dollars in the world. All we know is that when there’s pressure in deflationary pressure in the economy, we’re going to see it in interest rates and we’re going to see it in financial crisis. That happens.

Stephan – 00:10:36:

Yeah. So in a way, it’s like going to sort of make the point that the money supply metrics are just highly misleading. That if you look at M1, M2 and so on, they’re just going to mislead you the wrong way. And I think there’s a lot to this because they’ll be changing classifications as well. So even in 2020 there was a big reclassification on M1. And so that also can lead people astray because then everyone’s out here saying, oh look, they printed 40% of the dollars in that year, or whatever, but there was like a reclassification, and it makes it difficult to sort of disentangle what’s actually going on. Bringing it back to your point around, looking at credit markets and looking at, okay, if there’s a problem in the credit markets, that’s how we can, let’s say, infer some understanding of if there’s a problem or not. I’m curious then, how would you distinguish between a genuine change in people’s time preference? So in the Austrian understanding, there’s Mises who talks about the PT PT, the pure time preference theory of interest. And so the idea is if we’re very impatient, we should be having a very high interest rate. And if we’re very patient, I have a low interest rate because I’m patient, I guess, all things considered. So in your view, how would you distinguish the time preference part of that from what’s going on out there in the world?

Ansel – 00:11:54:

Well, I don’t agree with that. I agree with the interest rate fallacy. So as people are fleeing towards more safe and Liquid assets, they push the price down. So it’s kind of opposite. When your time preference increases, you’re going to run into safe and Liquid assets. And when your time preference is longer, then you’re willing to carry more credit. You’re willing to expand credit into the economy. And so interest rates will go up because money printing is the same as inflation, is the same as growth in a credit based system. Does that answer the question?

Stephan – 00:12:30:

Right? I think I probably don’t agree, but okay, I’m curious to understand because wouldn’t you just naturally demand a higher because I guess what we’re talking about here is all other things equal? Because maybe what you’re getting at is maybe not everything else is equal. What we’re talking about here is people will change what assets they hold as opposed to for the same given scenario, what interest rate would you charge to relinquish your control? Like, as an example, if I’m lending you $100 and I’m a very patient man, I might only charge you until 2% for one year’s worth of time using my $100. But if I was a very impatient man, I’d say, oh, no, I want you to pay me 20% interest rate. Pay me $20 for this freedom to use my $100 that I’m relinquishing. I’m giving up control, right?

Ansel – 00:13:19:

Yeah, on a micro scale, but on a macro scale, you have competitors, right? And so you want the most return on your money, so you will go to the person that’s willing to pay the highest interest rate. So, yeah, maybe on an individual basis, one to one, and there’s no other alternatives, that’s the case. But once you put it into a broad global market, you’re going to have a competition, and it’s going to obey different dynamics. Like I said, if you have a booming economy, you don’t necessarily need to hold safe and Liquid assets. You can hold riskier assets that that yield, that have a higher yield. And so the demand for those Treasuries or those bonds will go down because people don’t want to hold them. They can hold something that’s higher yielding and the interest rates will go up. But in risky times, the demand for safe and Liquid assets increases. And that’s on a global scale. And I would tinge it with there’s a difference between credit based money and commodity money because in commodity money, the dynamics would be different because you can always default back to the basic commodity. In a credit-based money, there’s nothing to default back to, right? That’s why we have to do all these bailouts and all this government spending to reflate the bubble. Because if it does deflate, we’re in a madback scenario and they can’t let that happen. So there’s different dynamics in a pure credit-based system and a commodity system.

Stephan – 00:14:50:

I see. And so I think what you’re getting out there is just deciding or trying to explain why people are holding different assets given the interest rate or given what their choices are. And I think part of what you’re getting out there also is around that question of safety, what do we really view as safe? Obviously, if we were speaking a year ago, obviously maybe you and I wouldn’t have been running to all the quote unquote DeFi or the C5 platforms that were gambling out on these DeFi things. But a lot of people would just say, oh look, you can get whatever 8% or 20% on anchor or whatever thing, but once they realize, oh wait, that’s not safe, I’m running back to safety.

Ansel – 00:15:31:

Yeah, I think this recent NFT bubble and DeFi bubble was just a mini Austrian business cycle, right? Credit expanded, we had a boom and now everything collapsed back to hopefully back to more sound valuations. So yeah, I would agree with that.

Stephan – 00:15:50:

Yeah. Okay, so then I think it’s also interesting to get this, get your views around central banks and how they are responding because I know you’re big into this component of it. So let’s start in the US. So we’re looking at this whole idea of the Fed saying they’re going to raise rates. What’s your view on that? Are they going to continue on that pathway or are they going to walk it back eventually?

Ansel – 00:16:19:

I don’t think the Fed is in control of anything. They will follow the market. Their main tool is job owning and expectation management. And they rely on this Fed mythology, the mythology around the central bank that they’re all powerful, that they can control interest rates, that it matters if they do QE and all this stuff. So they depend on it’s pounded into people that don’t fight the Fed. So that’s just an example of the mythology that surrounds the Fed, that gives them the ability to kind of massage where the market is going. But in this case, I think they will be forced to pivot when the market dictates that and it’s getting closer. I tweeted probably last month when the three month treasury bill was still below the Fed funds range. And I said, well if it doesn’t get into the current Fed funds range, there’s no way they’re going to raise it again. Of course then it has since with Fed expectations, the rates have come up into that the current range. And so I do think that they will be able to raise rates again. But if the interest rates don’t move, then the Fed must pause or must pivot. They are always following the system and eventually they will face a financial crisis, right? Like September of 2019, the repo rumble or when TARP was getting passed back in the great financial crisis. These are things where 24 hours make a big difference and the entire system is freezing up. The Fed will be forced to act. So yeah, that’s what I think. And I do think it could come before the end of the year, but we’ll see.

Stephan – 00:17:58:

So if that’s the case, this idea of jawboning, meaning the central bank governor or the President and so on in various countries, they sort of have this power to just talk the market up or down, then what does that mean for, I guess, the other investable assets that people are typically going into, whether that’s bonds or equities or even physical property.

Ansel – 00:18:20:

Can you clarify that? What exactly do you mean?

Stephan – 00:18:22:

Yeah, so as an example, like, do you believe that they can jawbone the price of I guess primarily we’re talking here about bonds, right? Because if the idea is that they can jawbone something by saying, hey, this is what we want to do with the Fed funds rate and therefore probably the most closest connection to that is the bonds, right? Because that’s probably the most close alternative. Because I guess this is also another interesting idea around what some people call moneyness, that there are different levels of things that people would call money. And it kind of comes back to that idea of safety as well because sort of in terms of university finance, your finance lecturer will tell you the ten year bond is the risk free rate. Of course we all have our disagreements with that. But I suppose from what your point of view, you’re saying that the jawboning part of it is that they can influence the bond market in that way.

Ansel – 00:19:14:

They can influence some market conditions in the short term and they can influence market sentiment. But market sentiment will always have to obey reality in the end, right? So just like they’ve said recently that they can’t affect the supply side, they can only affect the demand side. So they’re saying they’re like we have to actually obey objective reality and that’s the supply, our powers only extend to the minds of the people because that’s the demand side. That’s what I think that they follow the market. And you made a good point there about teasing out the differences and the functions of money. And moneyness, I think that’s an interesting topic that I think we can all agree that the unit of account is the US dollar, at least the global reserve currency unit of account. But medium of exchange is a little bit different. Like can we say like in repo transactions we have cash and cash equivalents. What exactly is the medium of exchange here that we’re dealing with? And also the store value. The store value isn’t dollars. The store value is treasury. So when you’re trying to define money in this Euro dollar system, you’re trying to measure all these different aspects of moneyness and how much they are actually considered US dollar. They’re all part of the dollar system and they all kind of function in this big credit, global credit market.

Stephan – 00:20:35:

Yeah, fascinating to think about. And so then if the government wants to, let’s say, monetize its debt because in some way the government and say the Federal Reserve and the treasury can sort of act in a way to help the government have a cheap cost of capital and that’s what actually funds a large state. So I’m curious your view, like how much power do they realistically have there? Or are you saying in a way that they have limited power in terms of jawboning? But actually the market and the reality of the rest of the world, this whole broader Euro dollar system is actually what drives their ability to do things or not do things. Yeah.

Ansel – 00:21:12:

So I don’t agree necessarily with the definition of monetization of the debt like the Fed buying buying it. I think that Treasuries are useful in and of themselves. Most Treasuries are not held for the coupon. They’re held for the utility in the market. So I can trade them for cash, I can use them to form chains of collateral, et cetera, et cetera. So they’re very valuable. And by law the banks are forced to participate in QE. They have to do that. They wouldn’t want to because they want those Treasuries. They’d much rather have Treasuries than reserves at the Fed because reserves at the Fed are inert where Treasuries are not inert. And so I don’t agree with the kind of saying that it is monetizing of the debt. It’s actually deflationary, it’s adding a deflationary pressure because as you take useful collateral out of the system you’re increasing the stress in that system, right. Because you’re decreasing the amount of liquidity by taking the useful collateral out. And that’s what happens in QE. And you can look at this in interest rates. So when QE is well, I’m not prepared with the exact dates, but it’s kind of the reverse of what we would expect, right? Kiwi is supposed to push down interest rates but usually when QE is happening, interest rates are rising and when QT is happening, interest rates are falling. So yeah, that’s how I describe that.

Stephan – 00:22:41:

In your hypothesis then, are you saying that’s because the market is moving against the Fed and the jawbones is that the market the reality is pushing it this way despite what the Fed is doing.

Ansel – 00:22:51:

Yeah, I would say the Fed job owning is a dependent variable. It’s not an independent variable. So they are job owning in a certain way. They have a certain narrative because the market is a certain way. So the market isn’t following the Fed. The Fed is following the market. They’re dependent. So whatever their narrative is, is because that’s the way the market is. So QE actually is kind of a it symbolizes stress in the system. So if I’m a risk taker, if I’m a large financial institution and there’s QE going on, I would say, well, the Fed thinks it’s really bad out there. So I’m not going to extend credit. I’m going to only extend credit to the most credit worthy borrowers. I’m going to pull back, increase my lending standards, pull back on the amount of risk that I have on my balance sheet, etc. Because the Fed doing QE actually says that it’s bad. And the only way it can get out of that is by reversing, right? If they start quantum tightening, then they’re saying, hey, it’s good out there. So it’s reversed and the Fed is dependent on the market conditions.

Stephan – 00:23:58:

Right. And so what about this whole idea about the notion of being a lender of last resort or the notion of bailing them out? And so the other idea I’m thinking here is if there are commercial banks who have made bad loans, the typical example is the 2008 with the mortgage backed securities they had all these bad loans that they had stuffed package into a security and this idea that the government is essentially bailing them out. So do you agree with that idea then, or are you disagreeing with that idea?

Ansel – 00:24:29:

Well, I think they can bail them out. But the way I think the bailouts work is that it’s balance sheet mechanics. So they take an asset on the bank’s balance sheet that is nonperforming or underperforming and they swap it for another asset, a reserve held at the Fed. That’s what QE is. Supposedly. They take underperforming assets and they replace it with more safe assets, which the reserve held at the Fed is pretty much the safest asset you can have because it’s at the Fed. So where was I going with that?

Stephan – 00:25:05:

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Stephan – 0:26:35:

So, basically I think I get where you’re going though, because I think, as I understand you, I think we pretty much agree on that idea that they are basically taking this toxic asset off the commercial bank’s balance sheet and saying okay, I the Fed will hold that and you have these bank reserves instead and you’re able to now use that for your loans, credit creation. And I guess in your paradigm you’re also getting at this idea that they really want the treasury is not having bank reserves, correct? Central bank reserves, to be clear. Yeah.

Ansel – 00:27:08:

So the reserves when they’re on the bank’s balance sheet, QE is supposed to make the bank’s balance sheet look better so that they will go out and lend. So the inflation that they want is the bank lending. So this is QE is balance sheet magic. I called it at one point, balance sheet magic on the backside, making banks want to go out and lend into the economy and inflation and growth. That’s the way it’s supposed to work. But it doesn’t because it’s pulling collateral out of the system and it’s telling the system that we’re in bad times. And so as long as QE is happening, it’s pulling collateral out and it’s also signaling to the market that there is a financial crisis approaching or is in progress and so the banks will be hesitant to lend.

Stephan – 00:27:55:

Yeah. And so how do you view the limits on lending for commercial banks in this scenario? They’ve got these additional they’ve managed to palm off the non performing loans and so is the limiting factor for them creditworthiness? Like they’re not able to find enough creditworthy customers to actually give a loan to.

Ansel – 00:28:20:

Yeah, but I would put it at the bank’s credit worthiness. So the bank will on their balance sheet, they’re constantly in the repo market, sourcing cash, lending collateral, doing all these things. And the limit to their balance sheet, the limit to how much they can expand their balance sheet is their credit worthiness in the interbank system. And as soon as their credit worthiness in the interbank system goes down, then they won’t be able to expand their balance sheet as much. So I wouldn’t say it’s the borrower at all. It is all banks. It’s all bank centered.

Stephan – 00:28:56:

Got you. So it’s almost like an upstream problem that let’s say if they look really good to the people lending them money, then they are in turn able to issue a lot more loans and have a lot more customers and therefore grow a lot faster. Whereas if they don’t have a good reputation, then that’s where they can get into trouble. Yes.

Ansel – 00:29:15:

And then they own each other’s debt, right? And they have credit default swaps on each other and they do all this stuff. So some maybe not major five big bank in the United States will own a credit default swap with bank of America or something. So they can use kind of bank of America’s credit rating to help them access capital and help them expand their balance sheet. But everything is interwoven and dependent on each other in the interbank system. So that’s the problem when you have a financial crisis, a deflationary shock in the system, it can all go down.

Stephan – 00:29:49:

And so then curious from your perspective as well, because even in the Austrian world there are people with differing views here, do you view fractional reserve as being fractional reserve banking as being a bad thing? Or do you sort of see a role for what’s called like some people who call it free banking? So where are you at on that kind of question?

Ansel – 00:30:09:

I try to not put some sort of moral judgment on it. I think that there will be people that fractional reserve, that’s a fact of nature and we can put restraints on it or there will be more restraints on it depending on the form of money. So bitcoin or commodity backed money will put natural restraints on fractional reserve banking. But if you have a credit backed money, there are no natural constraints to fractional reserve banking. So I try not to do a moral judgment on that.

Stephan – 00:30:37:

I see. Yeah. I think there are different approaches even here, like even in some of the debates where some Australians will start to say even setting aside the fraud question of whether it is fraud. I think personally I am in the camp of saying it is fraud. But even if we set that aside, there are those who believe that given a free market will, we tend to one or the other. And there are some who believe that, okay, that reserve ratio will naturally, it may be at 2% or 5% of the bank’s balance sheet, whereas others in the, let’s say, the full reserve camp might believe that naturally markets under sound money system will be up near 100% and it will be near a full reserve system. And so I think I fall into that camp where I believe naturally, over time, we will just kind of be near that full reserve because people will just get wrecked and then they’ll learn and then people will sort of understand the difference between holding bona fide bitcoin on chain that you hold in your wallet versus trusting an IOU. And I think in some sense that’s where this whole insight of what your coins come from.

Ansel – 00:31:43:

Yeah, I think that’s dependent, like you said, how the free market will attend one way or the other, I think that’s dependent on the kind of climate that’s out there in the market. So if we’re in war, if we’re in a period of war, we’ll tend towards full reserve. If we’re in a period of peace and prosperity where people can get wrecked and bounce back easily and there’s a lot of excess credit and it’s easy to get credit and things are growing very quickly, I think people will tend towards fractional reserve, more fractional reserve. So I think that you can’t stop it from happening. It just is kind of dependent on the global macro environment that’s around you, what the free market will tend towards.

Stephan – 00:32:22:

I see. So in your view then, there’s this almost legend of people saying the Volcker way of fixing things is to just have the interest rates really high and that will let the market normalize. So would you count yourself then as a non believer of that story?

Ansel – 00:32:44:

Yeah, I would say I don’t believe in the Volcker myth, but I am less hardcore about not believing in it than Jeff Snider is. I think there is the central bank has easier ability to influence things in that direction than the other direction. So there’s something to be said about the Vulnerabilities. But really the whole inflation of the great inflation, I think is that was at the birth of the Euro dollar system and there was so much space to expand this credit into. I kind of think of it like maybe 20 or 30 year blocks. You know, you have the Western Europe was the place where credit expanded. Then we had Japan was the place where credit expanded and then we had China, where credit has expanded in the last 20 or 30 years. So now we’re kind of out of places to expand. And the ‘70s was just like the initial phases of this system getting kick started.

Stephan – 00:33:43:

I see. So then are there any comparable historical periods, in your view to where we are now in the 2020s? Are there any educational, historical, financial periods for us?

Ansel – 00:33:54:

Not as a global system. I think that this post World War II was the first ever global liberal order that we’ve seen, where the US was the hegemon that guaranteed free trade, set up all these international institutions like the UN, the IMF, the WTO, the World Court, all of this stuff was set up and we had free trade reigned. So that doesn’t have a parallel in history. You might say a certain period of the British Empire was similar, but the British Empire didn’t trade too much with the French Empire and the Dutch Empire. They had their own trade networks. So, yeah, I would think you might be able to find some corollaries if you dive into maybe like the internal British Empire and how the credit expanded in there and credit and contraction and stuff, but not a global order where we can go continually go to the next country and find a new market to expand our credit into. But now we’re at the end of that. And that’s why I think we have the end of this credit bubble is happening because we’ve run out of places to expand this Euro dollar credit system. So it’s going to go the other way. It’s going to contract.

Stephan – 00:35:04:

I see. And so then taking what we’ve spoken about and also what you touched on at the start, where at the end of this big cycle, what are your expectations then for the end of this cycle?

Ansel – 00:35:16:

Well, I think I guess a characteristic of the Euro dollar system that Jeff Snider doesn’t talk about at all is this global order that the US had and we had this era of peace and prosperity and of course we had expeditionary wars for the US and stuff, but we didn’t have global war. We didn’t have war between the major powers. So this was a general era of peace and prosperity in the world. Now the US is pulling back. We’re de globalizing the US presence. And this is not a conscious thing. It’s a natural thing where the US has hollowed out its manufacturing base, it’s hollowed out its culture, its values and all this stuff. And so we’re kind of going to re shore all this and clean up our own house. Now that’s bad news for the rest of the world because the US was the one that was imposing this World Court, this UN, this WTO, trade rule-based world order. When the US pulls back, man, it’s going to really affect the world’s ability to carry credit. So credit is going to shrink dramatically in all of these countries. And I think we go back to a world where geography matters a lot more. We’re going to go back to our historical norms, like this thing with Ukraine and Russia right now, that’s one of the most fought over parts of land in history of the world is Ukraine. It’s not a coincidence that that was the first big flare up at the end of this US led order because we’re going to go back to normal historical norms. So areas that are wartorn in the last 2000 years and they’ve been peaceful for the last 50 because of the US imposed order, they’re going to go back to being wartorn again. And that’s going to affect their economies, of course, affect the ability for the US. To care or the world economy to carry credit while the US becomes more insular and takes care of our own house.

Stephan – 00:37:18:

So it’s almost like we’re going to see a bit of a shrinking of the economy in some ways. And let’s say the living standard that people have become accustomed to will have to drop, sadly.

Ansel – 00:37:32:

Well, it depends. I think some things will shrink and other things will expand or grow. We’ll get back to better values. I look at demographics as a result of just piss poor culture and piss poor values in the world. So we will get back to family, nuclear family stuff, regional, government, localism. And so it’s not that our standards of living will decrease, it is that we will change our standards of living. And that’s what I see going for. I’m very optimistic, I’m super optimistic about the United States, but I am very optimistic for a lot of other places in the world because they will get their culture back, they’ll get their traditionalism back. And I think that’s good for people. The reason why those cultures developed in the first place is because they were healthy. So I think we’ll see a rise in health, we’ll see a rise in happiness in the world, even though we might see smaller balances in the bank account.

Stephan – 00:38:31:

I see. So it may be that the cultural gains make up for some of the purchasing power losses in certain cases. I guess what’s important for us to also do is to separate what we want from what we think is likely. Of course. So of course people bringing back family values and those aspects definitely appeal to me. But I think for me, I’m sort of seeing the end of this fiat degeneracy cycle and not sure how much more they can kick the can because that’s the other component of it as well, because it’s difficult to sort of say this is it, this is the end of it. Because we don’t really know how much longer they can kick the can. Communism took five, six decades to fall. It may be that they and again, not speaking about what I want, I’m just kind of speaking about what do I think is likely? We don’t know. So I guess to put that into a question, in your view, how likely is it that they can kick the can and retain some semblance of the current world order?

Ansel – 00:39:33:

Yeah, so that’s part of my theory about how this ends. Right. I think that the current system ends in a deflationary grind, a postgfc normal, just low growth, low inflation going forward. They can kick the can pretty much indefinitely without an alternative. So I think that’s where bitcoin comes in. Bitcoin is that alternative that offers if you’re in a Geriatric deflationary economy, which is the old US dollar credit based system, and you see bitcoin, which is new technology on scurve of adoption and that’s where all the green shoots are and that’s where all the vibrancy is, you’re going to slowly move over to that new system. So I see the arrival of bitcoin as a way to get out of this trap, this trap that didn’t have an end before bitcoin came along. Like think about Japan. They’ve been in this low growth, low inflation environment since 1990 and the US would have ended the world, maybe to expand that entire world would be in a low growth, low inflation environment too for another 30 years. But I think bitcoin gives the alternative, gives us something to build a new economy on.

Stephan – 00:40:48:

Sure, I guess there’s two main points. Firstly, I want to ask about bringing it back to that whole question of are we in inflation or deflation? And as you’ve said, you’re saying we’re in a deflationary environment. So I’m curious then, what’s your view on where CPI goes over the short to medium term? Like do you see CPI normalizing soon?

Ansel – 00:41:10:

Okay, well, I think that most of CPI is due to a supply shock. I’m not going to say that there’s no inflation because I think that there is mild inflation out there. I mean you have to, a creditbased system has to grow a little bit because you have to repay principal and interest. So the amount of money has to grow if it’s not collapsing. So I do think that there’s some inflation, but if you look at CPI between say, 2010 and 2018, that is the average that we’re going to return to eventually. That’s just the minimum amount of inflation to keep the wheels from falling off and stuff like that. Recently we’ve had high CPI because mainly because of supply chains. But there’s nuance here because if you have government spending you’re pulling demand forward and that makes banks maybe think that there is this booming economy and so then maybe they will lend a little bit more after government spending happens, after a rescue package happens. So there is maybe a little bit more inflation after government spending, but it’s leaving a big gap of demand in the future and so they will very quickly see reality and pull back on their lending and go into a, go back to normal, go back to a just a mild inflation.

Stephan – 00:42:32:

I see. So in your view then, it’s the CPI, the current high prints that we’re seeing around the world, whether that’s in the US, the UK and other places, you’re saying that’s mainly driven by supply chain issues or the web of supply. The places that people can buy things from is being impacted because of trade around the world, obviously because of the hysteria and obviously because of the Russia Ukraine war. But in your view, you’re saying you anticipate that to normalize sooner than later, let’s say.

Ansel – 00:43:02:

Yeah, I think there will be echoes. So there’ll be volatility. Kind of an analogy is if you think of like a tank of water and it’s a timeline, right? So from front to back, it’s a timeline. And the water level is your amount of demand or growth in the economy. And government spending is like putting your hand down there, halfway down the water tank and pulling it forward. So you’re pulling forward all this demand, but then what happens is it sloshes back the other way and you get some volatility, but if you wait long enough yeah, it’ll just turn back to normal once all those perturbations have played themselves out.

Stephan – 00:43:39:

I see. So you think it like a displacement theory, if you will. I’m also curious on obviously we’re all bullish on bitcoin. So I think probably the main challenge, right? If I was a skeptic, I might be thinking, well, hang on, you two, bitcoin is pretty small right now. It’s something like 450,000,000,000 as a total market. That’s tiny compared to gold. Eleven or 12 trillion. Equity markets are probably about 900 trillion or more. So what’s your response? If a skeptic were to ask you that, why would bitcoin be the answer?

Ansel – 00:44:14:

Yeah, and I agree with that criticism, actually. I’ve been saying for the last few years that bitcoin’s market cap needs to expand right now. It’s a theoretical alternative. At 300 billion dollar market cap, it has all the right characteristics to get to where it needs to be. But you’re not going to move a trillion dollar market over to bitcoin right now or multi trillion dollar market. So bitcoin’s market cap needs to expand to I put the mark around gold. So ten to 20 trillion needs to be the market cap before it is seen as a major alternative and before the snowball really picks up a lot of speed.

Stephan – 00:44:55:

Yeah. So what does the process look like then for people to get there? Is it enough people getting burnt in the field system? Is that people who are in high inflation because it’s not just the US. Right? They may be in a country where they actually do have a lot of inflation, or the very high CPI. Do you see it like they were the ones who adopted bitcoin first? Or is it more like high net worth people in America and other places who will be the ones buying most of the coins?

Ansel – 00:45:20:

Yeah, I think well, there’s a couple of different routes. Like I talked about the S curve of adoption. This is where all the green shoots will be and so people will put more investment here. So it will expand naturally that way. But also I think that there is we’ve been talking about this a lot on FedWatch the podcast that I do with Bitcoin magazine is that there’s a fragmentation risk in Europe, right? So that’s the threat that, say, Italy leaves the Euro. And that’s really a scary prospect if you’re going against George Soros, right? So George Soros is famous for attacking currencies. Well, if you launch a new Italian lira, not backed by anything, it’s just backed by the credit of Italy or something, then it’s going to get attacked. So in this fragmentation that we’re going to see over the next few years in Europe and elsewhere in the world, as they might want to move away from, say, a dollar based system to launch their own currencies, they’re going to have to back it by something. So I think most places will turn to Bitcoin, but we could also see them turn to gold, things like that. So I think the fragmentation risk is actually bullish for Bitcoin.

Stephan – 00:46:31:

Yeah, interesting, because in a way, rather than fending for themselves, they can sort of opt in to this open, neutral network and anyone can join it. And there’s also the freedom aspect of this also, because many people in, let’s say, our camp are rightly wary of, let’s say, entities like the World Economic Forum. And we see that as an entity who’s driving a lot of authoritarian control. And obviously those of us more in the libertarian camp are looking for alternatives to that. So I’m curious if you have any thoughts on whether, let’s say, the WEF and these other related entities are actually going to drive Bitcoin adoption.

Ansel – 00:47:09:

Well, let me just talk about the WEF first. I think a lot of these kind of Marxist theories, the Marxist organizations out there, they thrive in a credit based system because there is a lot of excess abundance, right? And if we go into hard times and we go into a worldwide recession, we get away from credit based money and go to a harder money, then those ideas and those organizations will have a very hard time staying in existence. So I’m not really worried about the WEF long term, but I don’t like their current policies, right. And I think we can kind of see them flailing a little bit. They constantly are losing. They lost, I think really, I think that they lost during the corona virus. People accepted their lockdowns and things for the most part, but they didn’t like it. And I don’t think that’s going to happen again in the United States. It’s not going to happen again in many countries in the world, definitely not Russia. It’s not going to happen there. But I think that they wish that they would have gotten more buyin from the world, and they didn’t. They kind of failed that. It hurts their reputation, it hurt their ability to do that in the future. I see that as a loss, and I see a lot of this ESG stuff right now as a big loss because with Russia and the European union facing these high energy prices. And they’re only doing that because buying into this globalist dogma of ESG and climate change stuff that I think they’re really taking a hit in their reputation as well right now. So that’s what I would say about WEF, and even the UN. Because I saw that the UN just, like, approved some charter or something that was in conjunction with the WEF and how they’re going to work together to push this ESG stuff. So I think that when we get to sounder money, we won’t have to worry about those things.

Stephan – 00:49:11:

Right. And I’m also curious, and in a hypothetical bitcoin financial system, do you see that bitcoin would stop the creation again of some of these problems?

Ansel – 00:49:25:

Oh, man, that’s a good question. I think it will for the medium term. I’m talking 50 years, 100 years or so. But eventually we’ll get into a system once again that’s really inflationary, really credit based, and things will expand, and there might be war might change. So instead of being actually kinetic stuff, it’s more cyber war. So I don’t know. But I think that bitcoin can usher in a period at least 5200 years of very sound money, very sound values. And so I think that’s what we’re going to see. But long term, yeah, there’s going to be cycles in human history. Humans go through these long, broad cycles. And bitcoin isn’t going to cure us of our human nature or anything like that. There’s always going to be murderers. There’s always going to be countries that want to drive their tanks across borders and stuff. There’s always going to be that kind of thing. But bitcoin gives the world a better base which to build off of.

Stephan – 00:50:25:

I see. And I think it’s definitely fair to say at least in that 50 to 100 years, it’s going to make warfare a lot harder. Like, let’s say we were on a bitcoin standard. Obviously, funding that war is going to be a lot more difficult if you have to actually raise the funds for it in a bitcoin context.

Ansel – 00:50:44:

Absolutely, yeah. The warfare won’t be in the place where it’s economically vibrant. I don’t think the US is going to have like a north American war or anything like that. The war is going to be in eastern Europe. It’s going to be in central Asia. It’s going to maybe be in Africa or something. These places that are going to be economically less vibrant anyway. And they’re not going to want to they’re not going to want bitcoin because bitcoin puts these restrictions on the power to inflate the money and have war. Here’s an example. If I am living next to a guy that is constantly threatening me and constantly, like, throwing stuff over my fence, maybe firecrackers or, you know, he puts a sign on my house, like, I’m going to break in at night, and I’m just terrified. Right. That’s what a lot of these countries when they’re living next to their mortal enemies that have been in these ethnic conflicts for thousands of years, they hate each other. Now, those people don’t want sound money because they can’t inflate to keep their protection racket going. So they have a reason to inflate money, I think. But the more peaceful, prosperous areas are going to turn to bitcoin and it.

Stephan – 00:52:02:

Will remain to be seen. But it could also be that those countries and areas or zones. Regions operating on sound money will just be so much more productive that their technology would be vastly superior also. So they would be much more able and capable to defend themselves against attacks and also to make it less profitable to even go to war there because it’s just cheaper to trade with them instead of attacking them. It’s kind of like bitcoin mining. Eventually if you’re trying to take on all these bitcoin mining machines, it becomes a point where you can just earn more from being an honest miner than trying to attack the network.

Ansel – 00:52:40:

Yeah, absolutely. And I think we’ve seen that exact thing happen in history, right? Like China’s century of humiliation. They were extremely weak. Even though they had a big land empire, the British like, conquered them with 28 men or something. I mean, it was ridiculous, the difference in power that these two places had. So I think we’ll return to things like that. Places in the world will be extremely weak and places in the world will be extremely strong. That’s like kind of the rule of human history. And we’re just going to go back to it. Like I keep coming back to the last 50, 75 years has been a bubble. This has been a bubble of peace and prosperity. And that’s not going to happen. Not every place is going to benefit from this coming change that we’re going to see in the world, but I would say most places are. And it’s going to follow kind of the rhythm of history in a way.

Stephan – 00:53:33:

Yeah, that’s really interesting stuff. So I guess any closing thoughts? And I’m curious as well if you sort of see so CK is big on the sovereign individual. I’m curious actually. Do you have any thoughts on whether bitcoin enables that kind of vision?

Ansel – 00:53:50:

I think bitcoin will enable that for people. Certain people, certain individuals, but not on a broad scale. I think that like I am I hate to say it, but I don’t think bitcoin is going to be good for a lot of these poor countries that people think like, bitcoin is going to serve the Unbanked. And it’s going to bring savings to Africa, it’s going to bring savings to these places. I don’t think that’s going to happen. I think that bitcoin is going to pool into the places where it’s treated best. It’s going to pool with the most able people like we just talked about there. There is going to be a greater inequality between nations under Bitcoin. I don’t know if that’s a good thing or a bad thing. I try not to make a judgment call. I just try to use my kind of framework to try to predict what’s going to happen.

Stephan – 00:54:40:

Excellent. Well, I think that’s a good spot to finish there. So, listeners, make sure you go follow Ansel. You can find him on Twitter. His handle is @AnselLindner and his website is Ansel, thank you for joining me today.

Ansel – 00:54:52:

Thanks, Stephan.

Stephan – 00:54:53:

Get the show notes at Thanks for listening and I’ll see you on the Citadels.

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