1 00:00:00,080 --> 00:00:02,800 Speaker 1: All right, Well, thank you so much Keith for joining 2 00:00:02,880 --> 00:00:07,240 Speaker 1: us today. Really excited for this conversation. I'd like to 3 00:00:07,440 --> 00:00:12,800 Speaker 1: start off with talking about interest rates, because interest rates 4 00:00:12,840 --> 00:00:16,159 Speaker 1: and debt, low interest rates, higher interest rates. Today in 5 00:00:16,200 --> 00:00:20,640 Speaker 1: our Fiat world, everything is controlled or at least heavily 6 00:00:20,680 --> 00:00:23,079 Speaker 1: influenced by the Federal Reserve, and so we have this 7 00:00:23,160 --> 00:00:27,240 Speaker 1: association that that that is part like inherently part of 8 00:00:27,280 --> 00:00:31,600 Speaker 1: the Fiat monetary system, and that you know, debt and 9 00:00:31,360 --> 00:00:34,879 Speaker 1: and interest rates going up and down are kind of 10 00:00:34,920 --> 00:00:40,519 Speaker 1: inherently negative features of the system. So I want to 11 00:00:40,560 --> 00:00:45,839 Speaker 1: hear from you because you've you've talked before about how uh, 12 00:00:46,720 --> 00:00:48,920 Speaker 1: that is an integral part of the of a free 13 00:00:48,960 --> 00:00:53,720 Speaker 1: monetary system and and a component for for growth long term. 14 00:00:53,880 --> 00:00:57,560 Speaker 1: So let's let's start off with as brief of an 15 00:00:57,600 --> 00:01:01,880 Speaker 1: overview as you can about how interest rates work on 16 00:01:01,960 --> 00:01:05,600 Speaker 1: a free economy, free money, and then we'll kind of 17 00:01:05,600 --> 00:01:06,200 Speaker 1: dive in from there. 18 00:01:06,280 --> 00:01:08,520 Speaker 2: Yeah, let me just start really really broad, and then 19 00:01:08,720 --> 00:01:11,320 Speaker 2: I'll try to narrow it down to that particular question. 20 00:01:12,560 --> 00:01:17,080 Speaker 2: You know, frame market is a forum or venue in 21 00:01:17,120 --> 00:01:22,679 Speaker 2: which productive people can coordinate their activities. This is the 22 00:01:23,560 --> 00:01:25,759 Speaker 2: this is the thing that the central planners don't believe 23 00:01:25,800 --> 00:01:29,160 Speaker 2: as possible. In some cases, the free marketers, you know, 24 00:01:29,200 --> 00:01:32,280 Speaker 2: are just you know, almost amused in wonderment, how in 25 00:01:32,280 --> 00:01:34,800 Speaker 2: the world do millions of people, let alone billions of people, 26 00:01:34,840 --> 00:01:40,000 Speaker 2: coordinate their activities. And so Leonard Reid wrote something very 27 00:01:40,040 --> 00:01:43,280 Speaker 2: brilliant called the Eye Pencil that basically says, there's no 28 00:01:43,360 --> 00:01:45,680 Speaker 2: one person that knows everything that one would need to 29 00:01:45,720 --> 00:01:48,120 Speaker 2: know to make a pencil. You know, the graphite is 30 00:01:48,440 --> 00:01:52,080 Speaker 2: produced over here, and the little ferules are produced over there, 31 00:01:52,160 --> 00:01:54,920 Speaker 2: That rubber comes from these trees in Malaysia, you know, 32 00:01:54,960 --> 00:01:57,880 Speaker 2: and so on, and then there's one one guy that 33 00:01:57,920 --> 00:01:59,840 Speaker 2: knows how to assemble it, but it doesn't know how 34 00:01:59,880 --> 00:02:05,600 Speaker 2: to produce or even procure their raw materials. And you know, 35 00:02:05,680 --> 00:02:10,040 Speaker 2: there are various people that coordinate around the borrowing and 36 00:02:10,080 --> 00:02:15,639 Speaker 2: lending of money. So everybody during their working years is saving, presumably, 37 00:02:16,680 --> 00:02:18,320 Speaker 2: assuming you have a free market and you don't have 38 00:02:18,440 --> 00:02:25,000 Speaker 2: some government guaranteed Ponzi retirement scheme. Everybody saving for retirement, 39 00:02:25,040 --> 00:02:26,840 Speaker 2: and the best way to save is to actually put 40 00:02:26,880 --> 00:02:29,440 Speaker 2: your savings to work and get interest, not to just 41 00:02:29,560 --> 00:02:32,800 Speaker 2: hoard gold and silver, And obviously that's some monetary metals 42 00:02:32,880 --> 00:02:35,040 Speaker 2: value propositions, put it to work and get interest on it, 43 00:02:35,320 --> 00:02:37,480 Speaker 2: and you get the compounding. So by the time you 44 00:02:37,520 --> 00:02:39,680 Speaker 2: turn sixty five, most of what you have is the 45 00:02:39,720 --> 00:02:44,040 Speaker 2: compounding effect and not the actual raw you set aside 46 00:02:44,040 --> 00:02:49,160 Speaker 2: from your salary. And so all those people are, you know, 47 00:02:49,200 --> 00:02:52,200 Speaker 2: looking to lend essentially usually through a bank or in 48 00:02:52,240 --> 00:02:56,840 Speaker 2: the financial intermediary. And then similarly, once you get through retirement, 49 00:02:56,880 --> 00:02:58,400 Speaker 2: you want to live on the interest and not on 50 00:02:58,440 --> 00:03:02,280 Speaker 2: the principle. Live on the interest only you never have 51 00:03:02,360 --> 00:03:05,880 Speaker 2: to worry about outliving your money eating the principle. Then 52 00:03:06,000 --> 00:03:08,280 Speaker 2: there's a you could plot what date it is when 53 00:03:08,320 --> 00:03:11,120 Speaker 2: you run out, and then you know, you become the 54 00:03:11,120 --> 00:03:15,280 Speaker 2: beggar on the steps to the to the church, you know, 55 00:03:15,560 --> 00:03:17,880 Speaker 2: hoping that enough people will give you something that you 56 00:03:17,880 --> 00:03:20,720 Speaker 2: can eat for a day. It's a terrible position that 57 00:03:20,760 --> 00:03:24,359 Speaker 2: nobody wants to be in. And so on. The other 58 00:03:24,400 --> 00:03:27,520 Speaker 2: on the other side of the equation is an entrepreneur 59 00:03:28,000 --> 00:03:32,560 Speaker 2: who needs to borrow money in order to expand, and 60 00:03:32,600 --> 00:03:36,680 Speaker 2: so there's a there's a win win deal. That is, 61 00:03:37,120 --> 00:03:41,200 Speaker 2: you know, one side has wealth but not income. You know, 62 00:03:41,240 --> 00:03:43,640 Speaker 2: something they've saved and they want to get income on 63 00:03:43,640 --> 00:03:45,560 Speaker 2: it and the other side as somebody who can produce 64 00:03:45,600 --> 00:03:48,640 Speaker 2: income but doesn't have the wealth or the capital to 65 00:03:48,720 --> 00:03:52,160 Speaker 2: make the investment. Now, if that, if that trade can't happen. 66 00:03:52,720 --> 00:03:54,960 Speaker 2: And historically we know there were times when this was 67 00:03:55,000 --> 00:03:58,280 Speaker 2: not possible either after the Fall of Rome, if you 68 00:03:58,360 --> 00:04:00,120 Speaker 2: revealed that you had gold, I mean, they'd kill you 69 00:04:00,200 --> 00:04:02,640 Speaker 2: for it. So the goal tend to be very deeply 70 00:04:02,720 --> 00:04:06,920 Speaker 2: hidden and not come out, you know, for trade or lending. 71 00:04:07,800 --> 00:04:10,840 Speaker 2: At other times, you know, lending was illegal, it was 72 00:04:10,880 --> 00:04:14,680 Speaker 2: called usury, and penalty was death. So you know, if 73 00:04:14,720 --> 00:04:16,760 Speaker 2: you kill people for the crime of lending, obviously you're 74 00:04:16,800 --> 00:04:18,719 Speaker 2: not going to get a lot of lending, and so 75 00:04:20,440 --> 00:04:23,120 Speaker 2: you don't get that coordination. And so those two parties 76 00:04:23,160 --> 00:04:26,320 Speaker 2: are kept, you know, kept apart. They're trying to come together, 77 00:04:26,400 --> 00:04:30,320 Speaker 2: but they're being kept apart by either lack of law 78 00:04:30,360 --> 00:04:32,359 Speaker 2: and order in the case of the Dark Ages, or 79 00:04:33,200 --> 00:04:37,440 Speaker 2: a bad law in the case of the High Medieval period. 80 00:04:38,800 --> 00:04:42,279 Speaker 2: But what they're trying to do is ultimately exchange wealth 81 00:04:42,279 --> 00:04:45,279 Speaker 2: and income. So one side as wealth, it says, okay, here, 82 00:04:45,400 --> 00:04:49,200 Speaker 2: use this, and then in the exchange, give me, give 83 00:04:49,240 --> 00:04:52,159 Speaker 2: me an income stream off of that wealth, and that 84 00:04:52,279 --> 00:04:56,000 Speaker 2: income stream is coming from the additional finance that difficult 85 00:04:56,040 --> 00:04:59,840 Speaker 2: production that you financed, and so everybody wins. Socidy gets 86 00:04:59,839 --> 00:05:05,920 Speaker 2: more goods and services, the entrepreneur gets to get rich hopefully, 87 00:05:06,040 --> 00:05:12,440 Speaker 2: and the savers get interests on their savings. And this 88 00:05:12,600 --> 00:05:15,719 Speaker 2: not only can occur without a central planner dictating to 89 00:05:15,760 --> 00:05:19,240 Speaker 2: everybody what the interest rate shall be, but of course 90 00:05:19,320 --> 00:05:23,440 Speaker 2: did historically occur without there being a central planner dictating 91 00:05:23,480 --> 00:05:25,080 Speaker 2: how this was going to occur and what the rates 92 00:05:25,080 --> 00:05:27,039 Speaker 2: and what the rate and other terms were going to be. 93 00:05:27,920 --> 00:05:31,320 Speaker 2: And you know today it's so difficult to envision. I 94 00:05:31,600 --> 00:05:35,520 Speaker 2: coined to term the otherwise free marketers. So these are economists. 95 00:05:35,560 --> 00:05:37,800 Speaker 2: I can tell you what's wrong with minimum wage and 96 00:05:38,200 --> 00:05:42,320 Speaker 2: hot dogs, stand regulation and zoning and you know, import 97 00:05:42,360 --> 00:05:44,800 Speaker 2: tariffs and all these things. On those issues, they get 98 00:05:44,839 --> 00:05:49,120 Speaker 2: the free market argument. But when it comes to money, well, man, 99 00:05:49,160 --> 00:05:51,600 Speaker 2: you know, we need to have an irredeemable fiat currency 100 00:05:51,880 --> 00:05:55,320 Speaker 2: and a central bank essentially planet and then you know, 101 00:05:55,400 --> 00:05:57,640 Speaker 2: dictated interest rates and all the rest of that. And 102 00:05:57,680 --> 00:06:01,240 Speaker 2: on top of that, maybe they'refore you know, regulated banks 103 00:06:01,320 --> 00:06:04,760 Speaker 2: or something like that, but almost nobody can really imagine, well, 104 00:06:04,760 --> 00:06:09,520 Speaker 2: how would it work in the free market? And you know, 105 00:06:09,720 --> 00:06:13,280 Speaker 2: but yet it did. And you know, historically you can 106 00:06:13,320 --> 00:06:14,480 Speaker 2: reserve out how it happened. 107 00:06:14,520 --> 00:06:19,080 Speaker 1: But so I have a question about that, that relationship 108 00:06:19,320 --> 00:06:26,240 Speaker 1: between the saver and the entrepreneur. What about the what 109 00:06:26,279 --> 00:06:29,960 Speaker 1: about the role of equity. Let's say debt and interest 110 00:06:30,040 --> 00:06:33,600 Speaker 1: rates didn't exist, it was outlawed, people didn't want it, whatever, 111 00:06:33,720 --> 00:06:39,279 Speaker 1: whatever the case, would would equity plus distribution of profits 112 00:06:39,320 --> 00:06:43,920 Speaker 1: not not be sufficient to replace that in the relationship 113 00:06:43,920 --> 00:06:45,640 Speaker 1: between the saver and the. 114 00:06:45,000 --> 00:06:47,560 Speaker 2: And I look at a question like that, I suppose, 115 00:06:48,800 --> 00:06:52,599 Speaker 2: you know, suppose you outlaw meat. You know, would fruits 116 00:06:52,640 --> 00:06:59,440 Speaker 2: and vegetables and maybe insects not be sufficient replacement for me? Well, yeah, 117 00:06:59,520 --> 00:07:03,440 Speaker 2: sort of. I mean, you can get your basic calorie intake, 118 00:07:03,560 --> 00:07:05,360 Speaker 2: and you can get the immuno assets you need to 119 00:07:05,400 --> 00:07:09,560 Speaker 2: survive biologically. I think life would be a lot less 120 00:07:09,560 --> 00:07:15,640 Speaker 2: fun without meat. Anyways. You know, yes, businesses, you know, 121 00:07:15,720 --> 00:07:19,480 Speaker 2: finance themselves with equity. But equity and debt are two 122 00:07:19,520 --> 00:07:24,040 Speaker 2: different tools that are appropriated in two different circumstances. Maybe 123 00:07:24,040 --> 00:07:27,000 Speaker 2: another analogy that I would use would be imagine you 124 00:07:27,040 --> 00:07:31,440 Speaker 2: couldn't have screws or screwdrivers. It was only nails and hammers, 125 00:07:32,000 --> 00:07:35,920 Speaker 2: could you not, you know, assemble a house, put drywall up, 126 00:07:35,960 --> 00:07:39,120 Speaker 2: and all these things with just nails and hammers. Well 127 00:07:39,160 --> 00:07:42,760 Speaker 2: you could. It turns out that nails don't hold drywall 128 00:07:42,760 --> 00:07:45,520 Speaker 2: as well as screws do, so maybe you need more 129 00:07:45,560 --> 00:07:47,520 Speaker 2: of them, and then the drywall tends to get loose, 130 00:07:47,560 --> 00:07:50,560 Speaker 2: you know, it works the nails out eventually and gets loose. Uh. 131 00:07:50,760 --> 00:07:52,960 Speaker 2: You know, the screws that was, you don't have that problem. 132 00:07:53,760 --> 00:07:57,320 Speaker 2: You know, it's a different tool. And of course there 133 00:07:57,320 --> 00:08:00,720 Speaker 2: are certain folks that are hammering away at equity and 134 00:08:00,760 --> 00:08:03,120 Speaker 2: trying to undermine that as well. And there's definitely a 135 00:08:03,160 --> 00:08:06,120 Speaker 2: movement in some cases by the libertarians of all folks 136 00:08:06,560 --> 00:08:10,200 Speaker 2: as well as the left to say that, you know, 137 00:08:10,280 --> 00:08:14,800 Speaker 2: corporation should not have a limitation on liability. And some 138 00:08:14,840 --> 00:08:16,960 Speaker 2: of the folks who are advocating this may not realize, 139 00:08:16,960 --> 00:08:20,520 Speaker 2: and others almost certainly do realize. What that limitation is 140 00:08:20,680 --> 00:08:24,800 Speaker 2: is a limitation that the owners, the shareholders, are not 141 00:08:24,920 --> 00:08:27,960 Speaker 2: liable for anything more than whatever they invested. So if 142 00:08:28,000 --> 00:08:32,200 Speaker 2: you put one thousand dollars into Apple shares, you know, 143 00:08:32,360 --> 00:08:34,440 Speaker 2: whatever bad things that happen to Apple, the most you 144 00:08:34,440 --> 00:08:37,440 Speaker 2: can lose is one thousand dollars, but they can't go 145 00:08:37,520 --> 00:08:40,520 Speaker 2: after you personally wipe out your family estate, you know, 146 00:08:40,600 --> 00:08:43,840 Speaker 2: three generations of legacy, you know, college kid, you know, 147 00:08:43,880 --> 00:08:46,679 Speaker 2: college fund for your kids, take your cars and your 148 00:08:46,679 --> 00:08:48,120 Speaker 2: house and all the rest of that and leave you 149 00:08:48,160 --> 00:08:50,360 Speaker 2: with the shirt on your back. They can't do that 150 00:08:50,400 --> 00:08:53,079 Speaker 2: because there's a limitation on liability. But there's some folks 151 00:08:53,080 --> 00:08:55,839 Speaker 2: that want to eliminate that, say that's an artificial construct 152 00:08:56,000 --> 00:09:01,559 Speaker 2: of the crony state. So if there's if liability is unlimited, 153 00:09:02,040 --> 00:09:05,280 Speaker 2: if putting one dollar in meant that my entire net 154 00:09:05,320 --> 00:09:08,360 Speaker 2: worth is now at risk, then nobody would buy the equity. 155 00:09:08,920 --> 00:09:11,000 Speaker 2: And then of course, if you outlawed debt or use 156 00:09:11,000 --> 00:09:14,560 Speaker 2: some monetary system that you know, borrowing and lending don't work, 157 00:09:16,160 --> 00:09:18,520 Speaker 2: then you take away debt as well, and then you 158 00:09:18,600 --> 00:09:21,880 Speaker 2: collapse all of society down to the you know, twelfth 159 00:09:21,960 --> 00:09:25,520 Speaker 2: century village where it's you know, it's a couple of 160 00:09:25,559 --> 00:09:29,280 Speaker 2: small farming families with a you know, a family owner, 161 00:09:29,320 --> 00:09:32,680 Speaker 2: a single person owned blacksmithy, a cobbler, and a cooper. 162 00:09:33,360 --> 00:09:36,440 Speaker 2: That's what the little subsistence village would have had, you know, 163 00:09:36,440 --> 00:09:41,200 Speaker 2: a thousand years ago, twelve hundred years ago, and you know, 164 00:09:41,280 --> 00:09:43,920 Speaker 2: I do think that borrowing is the right tool for 165 00:09:43,960 --> 00:09:47,680 Speaker 2: certain businesses or equity, you know, equity is too expensive. 166 00:09:49,120 --> 00:09:50,679 Speaker 2: And then if they were if they had a choice 167 00:09:50,679 --> 00:09:54,280 Speaker 2: between equity or not expanding, so a lot of businesses 168 00:09:54,280 --> 00:09:56,720 Speaker 2: would choose down to expand, which is exactly the opposite 169 00:09:56,760 --> 00:09:59,720 Speaker 2: outcome that you'd want. You should want more goods and services, 170 00:10:00,600 --> 00:10:03,760 Speaker 2: make things even more plentiful, makes society, you know, wealthier. 171 00:10:06,440 --> 00:10:11,800 Speaker 1: Yeah, yeah, that's a good point. So there's a quote 172 00:10:11,800 --> 00:10:15,760 Speaker 1: that you, you and I talked about. This is I 173 00:10:15,800 --> 00:10:18,319 Speaker 1: don't know, a couple of months ago now, and I 174 00:10:18,640 --> 00:10:23,480 Speaker 1: believe you said it was JP Morgan said somebody was 175 00:10:24,000 --> 00:10:27,679 Speaker 1: somebody was asking him how to solve the banking panic. 176 00:10:27,960 --> 00:10:30,480 Speaker 1: I believe it was like the bank pan of nineteen eight, 177 00:10:30,640 --> 00:10:33,840 Speaker 1: I think. And he said, raise the interest straight to 178 00:10:33,880 --> 00:10:35,600 Speaker 1: four percent and the gold will come out of the 179 00:10:35,880 --> 00:10:38,680 Speaker 1: you know, of every of every nook and crany or 180 00:10:38,720 --> 00:10:40,280 Speaker 1: something like that. So you can correct me on what 181 00:10:40,320 --> 00:10:43,600 Speaker 1: the actual quote is, and then could you explain, you 182 00:10:43,640 --> 00:10:45,920 Speaker 1: know what what what he was hinting at with the. 183 00:10:46,240 --> 00:10:48,160 Speaker 2: Way I heard the story and I had I had 184 00:10:48,160 --> 00:10:50,880 Speaker 2: googled it once, and I every time I think about 185 00:10:50,880 --> 00:10:53,440 Speaker 2: this I kicked myself because I didn't keep the link, 186 00:10:53,480 --> 00:10:55,160 Speaker 2: and every time I've tried to google it since, I've 187 00:10:55,200 --> 00:10:57,679 Speaker 2: never found it anymore. But the way I heard the 188 00:10:57,720 --> 00:10:59,920 Speaker 2: story was somebody mostly went up to him and said, 189 00:11:00,480 --> 00:11:03,160 Speaker 2: mister Morgan, there's a crisis. There's a shortage of gold 190 00:11:03,160 --> 00:11:05,480 Speaker 2: to Nee York. What are we going to do? And 191 00:11:05,520 --> 00:11:08,480 Speaker 2: he said, raise the interest rate four percent. He said, 192 00:11:08,720 --> 00:11:11,720 Speaker 2: we'll pull it off the draw it off the continent. 193 00:11:12,200 --> 00:11:14,320 Speaker 2: Right so in those days that would have been expensive 194 00:11:14,360 --> 00:11:19,320 Speaker 2: and risky, you know, journey by steamship. Five percent. He said, 195 00:11:19,320 --> 00:11:23,360 Speaker 2: we'll pull it down off the moon, which was you know, 196 00:11:23,640 --> 00:11:26,400 Speaker 2: pure high perpleg He could not have imagined that sixty 197 00:11:26,480 --> 00:11:29,720 Speaker 2: years later they would actually send somebody of the moon 198 00:11:29,760 --> 00:11:33,360 Speaker 2: and recover them alive. That was just pure fantasy at 199 00:11:33,400 --> 00:11:35,760 Speaker 2: that time. But what he's getting at is a really 200 00:11:35,760 --> 00:11:39,439 Speaker 2: simple concept, which is if there's no interest, then all 201 00:11:39,480 --> 00:11:43,240 Speaker 2: the gold disappears into private hoards. I used to use 202 00:11:43,240 --> 00:11:45,880 Speaker 2: the analogy of like an English muffin, you know, just 203 00:11:45,960 --> 00:11:49,679 Speaker 2: disappears into all the little nooks and grannies which are 204 00:11:49,720 --> 00:11:55,400 Speaker 2: effectively unlimited and doesn't come out. And even in cases 205 00:11:55,440 --> 00:11:58,440 Speaker 2: where you know it totalitarian governments have sent guys with 206 00:11:58,520 --> 00:12:01,600 Speaker 2: machine guns door the door to try to confiscate all 207 00:12:01,640 --> 00:12:03,319 Speaker 2: the gold. They don't I mean get some You catch 208 00:12:03,400 --> 00:12:06,240 Speaker 2: people either they don't have a place to hide it, 209 00:12:06,360 --> 00:12:08,600 Speaker 2: or you catch them by surprise and you get some 210 00:12:08,640 --> 00:12:10,959 Speaker 2: gold that way. Of course, we don't get that much 211 00:12:11,000 --> 00:12:13,280 Speaker 2: of it. What happens is people just bury it deeper. 212 00:12:14,160 --> 00:12:16,040 Speaker 2: Then it used to be buried a meter down, and 213 00:12:16,040 --> 00:12:17,559 Speaker 2: now they take it up and they bury it two 214 00:12:17,600 --> 00:12:22,360 Speaker 2: meters down, and you know, gold just goes into hiding. 215 00:12:22,360 --> 00:12:25,160 Speaker 2: And the only force that will pull gold into the 216 00:12:25,160 --> 00:12:28,280 Speaker 2: market is interest. And that was that was ours thesis 217 00:12:28,360 --> 00:12:30,160 Speaker 2: at monetary medals, that if you pay interest, it will 218 00:12:30,240 --> 00:12:33,720 Speaker 2: draw gold into the market. And so, you know, I 219 00:12:33,800 --> 00:12:36,920 Speaker 2: propose the thought experiment. It goes like this, suppose you 220 00:12:36,960 --> 00:12:40,800 Speaker 2: had an actual circulating gold coin standard. But yes, there's 221 00:12:40,800 --> 00:12:43,080 Speaker 2: bills and there's bank accounts, but there's also like actual 222 00:12:43,080 --> 00:12:47,680 Speaker 2: gold coins or in circulation. I suppose something happened without 223 00:12:47,760 --> 00:12:50,760 Speaker 2: getting into what this might be, that you know, interest 224 00:12:50,840 --> 00:12:53,439 Speaker 2: rate went to zero and it was no longer possible 225 00:12:53,480 --> 00:12:56,800 Speaker 2: to turn any interest. Then obviously nobody's going to deposit 226 00:12:56,840 --> 00:13:00,240 Speaker 2: their coins in a bank. Nobody lends for zero if 227 00:13:00,240 --> 00:13:03,320 Speaker 2: you have a choice anyways, Now an irridiable currency, you 228 00:13:03,360 --> 00:13:06,120 Speaker 2: don't have a choice, you're a disenfranchised But in gold, 229 00:13:06,160 --> 00:13:08,360 Speaker 2: you're absolutely a choice. You can take that gold coin home. 230 00:13:08,800 --> 00:13:11,959 Speaker 2: And that's exactly what happened. And then to because everybody 231 00:13:12,000 --> 00:13:15,079 Speaker 2: who's working for wages has to save the workers will 232 00:13:15,120 --> 00:13:18,440 Speaker 2: actually be pulling the coins out of circulation and putting 233 00:13:18,480 --> 00:13:21,400 Speaker 2: them under the mattress. And so whatever coins that were 234 00:13:21,440 --> 00:13:24,200 Speaker 2: in circulation would quickly be pulled out of circulation and 235 00:13:24,240 --> 00:13:27,319 Speaker 2: the whole thing would seize up. And then gold is 236 00:13:27,360 --> 00:13:29,600 Speaker 2: not going to be immutable exchange anymore. It's too valuable. 237 00:13:29,800 --> 00:13:34,400 Speaker 2: It goes into private hords, and any economy is going 238 00:13:34,400 --> 00:13:37,800 Speaker 2: to crash, you know, if that happened. And then today 239 00:13:37,840 --> 00:13:40,920 Speaker 2: we're in the exact opposite situation. We have payper money 240 00:13:40,960 --> 00:13:46,320 Speaker 2: that ceaselessly churns, and you know, gold there's no interest rate, 241 00:13:46,400 --> 00:13:48,200 Speaker 2: so gold goes into hiding. But if you pay an 242 00:13:48,240 --> 00:13:52,720 Speaker 2: interest rate, you pull it back into the market. So 243 00:13:53,040 --> 00:13:58,000 Speaker 2: that's interestingly, is the only reason why anybody would, you know, 244 00:13:58,040 --> 00:13:59,040 Speaker 2: bring their goal to market. 245 00:14:02,600 --> 00:14:08,160 Speaker 1: Does that same Does that same effect happen with fiacht 246 00:14:08,160 --> 00:14:10,280 Speaker 1: currency like the dollar, like I mean, like right, now 247 00:14:11,000 --> 00:14:13,839 Speaker 1: the Fed is obviously they've raised interest rates, they're keeping 248 00:14:13,880 --> 00:14:15,679 Speaker 1: them higher than they've been in a very long time. 249 00:14:17,120 --> 00:14:21,080 Speaker 1: Is that something then that should we see the same 250 00:14:21,120 --> 00:14:25,960 Speaker 1: result of that or is there like you said, it's 251 00:14:26,160 --> 00:14:30,000 Speaker 1: it's an unredeemable currency. It's not like we have a 252 00:14:30,160 --> 00:14:33,520 Speaker 1: choice and not everybody can go pull you know, payper 253 00:14:33,560 --> 00:14:35,920 Speaker 1: dollars out of the bank for the entire money to 254 00:14:36,080 --> 00:14:39,120 Speaker 1: money supply. So is the same thing going on. 255 00:14:39,920 --> 00:14:42,320 Speaker 2: Say, even if you pull the paper banknotes out of 256 00:14:42,360 --> 00:14:44,520 Speaker 2: the bank and put them under the mattress, you still 257 00:14:44,560 --> 00:14:48,120 Speaker 2: actually extending credit to the system. If you pull the 258 00:14:48,120 --> 00:14:50,640 Speaker 2: gold coin out of the bank, you have pulled credit, 259 00:14:51,360 --> 00:14:53,720 Speaker 2: which is why FDR broke the gold standard, made it 260 00:14:53,800 --> 00:14:57,160 Speaker 2: legal to gold confiscated it all is you know, you 261 00:14:57,200 --> 00:15:00,920 Speaker 2: are actually pulling capital out of the banks, causing a 262 00:15:00,960 --> 00:15:05,720 Speaker 2: credit contraction. But today if you pull paper banknotes out, 263 00:15:06,200 --> 00:15:08,280 Speaker 2: now you're just a creditor to the fat wade. A 264 00:15:08,280 --> 00:15:11,320 Speaker 2: dollar bill bill is an archaic word for a credit. 265 00:15:11,840 --> 00:15:13,680 Speaker 2: Of course, a dollar bill doesn't say the word bill 266 00:15:13,720 --> 00:15:17,240 Speaker 2: on it. It says federal reserve note. Notice, another word for credit. 267 00:15:17,280 --> 00:15:20,040 Speaker 2: So your creditor to the FAD that is lending to 268 00:15:20,040 --> 00:15:22,760 Speaker 2: the government and the banking system. So all you've all 269 00:15:22,760 --> 00:15:25,000 Speaker 2: you've done is you've hopped from one frying pan to another. 270 00:15:25,600 --> 00:15:30,680 Speaker 2: You haven't actually changed your economic position any but it 271 00:15:30,760 --> 00:15:33,800 Speaker 2: is different in paper. Paper does not have the same 272 00:15:34,520 --> 00:15:37,080 Speaker 2: properties as gold. One of which which I think is 273 00:15:37,120 --> 00:15:41,080 Speaker 2: extremely important and extremely underappreciated, is that the marginal utility 274 00:15:41,080 --> 00:15:45,640 Speaker 2: of gold is not declined. We've been mining and producing 275 00:15:45,680 --> 00:15:48,520 Speaker 2: gold so far as we know, for at least sixty 276 00:15:48,520 --> 00:15:53,760 Speaker 2: five hundred years. They found some warrior king buried in Bulgaria. 277 00:15:54,480 --> 00:15:56,120 Speaker 2: I read the article a few months ago. I don't 278 00:15:56,120 --> 00:15:57,560 Speaker 2: know when this find a card. It could be a 279 00:15:57,560 --> 00:16:00,520 Speaker 2: stale article, it could have bit new, and it's buried 280 00:16:00,520 --> 00:16:02,920 Speaker 2: with like seven kilos of gold. It was forty five 281 00:16:03,000 --> 00:16:06,640 Speaker 2: hundred BC. So you know, mankind has been valuing gold 282 00:16:06,680 --> 00:16:08,880 Speaker 2: for a very long time. They've been hunting for it 283 00:16:09,000 --> 00:16:12,840 Speaker 2: at least sixty five hundred years, and yet we continue 284 00:16:12,840 --> 00:16:15,760 Speaker 2: to produce more without any sign of a glot. The 285 00:16:15,800 --> 00:16:19,000 Speaker 2: market happily absorbs whatever the mind can produce, and so 286 00:16:19,320 --> 00:16:22,920 Speaker 2: that's evidence that the marginal utility is not diminishing, because 287 00:16:22,960 --> 00:16:26,000 Speaker 2: if it were, marginal utility would have hit zero. And 288 00:16:26,120 --> 00:16:29,600 Speaker 2: you know, gold production would have stopped a long dam 289 00:16:29,720 --> 00:16:31,720 Speaker 2: time ago, like as it would in any other commodity. 290 00:16:32,760 --> 00:16:35,640 Speaker 2: Paper doesn't quite have that the dollar has a pretty 291 00:16:35,680 --> 00:16:38,160 Speaker 2: slow decline on its marginal utility. But clearly it does, 292 00:16:38,680 --> 00:16:40,800 Speaker 2: and so the more of it's a issue. You know, 293 00:16:40,840 --> 00:16:43,720 Speaker 2: the dollar does sort of lose value, not in the 294 00:16:43,720 --> 00:16:45,920 Speaker 2: way that the quantity seria of money would predict what 295 00:16:45,960 --> 00:16:50,120 Speaker 2: it does. However, I do note so if you go 296 00:16:50,200 --> 00:16:53,680 Speaker 2: to maybe you can put in the show notes a 297 00:16:53,720 --> 00:16:55,440 Speaker 2: picture of this graph. But if you go to fred 298 00:16:55,480 --> 00:16:58,000 Speaker 2: which is the Saint Louis fed has a website with 299 00:16:58,040 --> 00:17:00,720 Speaker 2: all kinds of great data and charts. They have a 300 00:17:00,840 --> 00:17:06,160 Speaker 2: chart of money velocity for for M two, for instance, 301 00:17:06,680 --> 00:17:09,480 Speaker 2: and nothing has been in a long term decline since 302 00:17:10,119 --> 00:17:12,320 Speaker 2: at least a year two thousand. I mean I looked 303 00:17:12,320 --> 00:17:16,639 Speaker 2: at it recently, and sure enough it picked up actually 304 00:17:16,680 --> 00:17:19,800 Speaker 2: now that interest rates are up. Now, I don't really 305 00:17:19,800 --> 00:17:23,760 Speaker 2: think that velocity is a real thing. I've written a 306 00:17:23,800 --> 00:17:26,760 Speaker 2: lot about this so called equation that the monitors love 307 00:17:27,520 --> 00:17:30,359 Speaker 2: M vehicles p Q and VIA's velocity and it's a 308 00:17:30,400 --> 00:17:34,160 Speaker 2: fud tractor. I say that. You know, economists have physics envy. 309 00:17:36,040 --> 00:17:40,159 Speaker 2: You know, it looks like, uh, you know, the ideal 310 00:17:40,160 --> 00:17:44,520 Speaker 2: gas equation when is an end vehicles? Uh what No, 311 00:17:44,560 --> 00:17:51,440 Speaker 2: I'm forgetting the h Anyways, the p vehicles NRT the 312 00:17:51,640 --> 00:17:53,840 Speaker 2: ideal gas equation in physics. They sort of have physics 313 00:17:53,920 --> 00:17:56,000 Speaker 2: envy and they want to write this equation. Velocity is 314 00:17:56,080 --> 00:17:58,280 Speaker 2: kind of a fud tractor. It's like, well, the math 315 00:17:58,280 --> 00:18:01,320 Speaker 2: doesn't work, so now you plug in whatever number for velocity. 316 00:18:01,680 --> 00:18:04,600 Speaker 2: But conceptually you can sort of see that money is 317 00:18:04,600 --> 00:18:08,000 Speaker 2: either circulating or not, and the lower the interest rate falls, 318 00:18:08,800 --> 00:18:11,720 Speaker 2: the less circulation you get at least as a percentage 319 00:18:11,760 --> 00:18:15,760 Speaker 2: of the total amount of it that's out there. And 320 00:18:15,880 --> 00:18:19,120 Speaker 2: that that is actually has actually been happening for decades 321 00:18:19,720 --> 00:18:25,680 Speaker 2: in the dollar as well, not as clearly and not 322 00:18:25,800 --> 00:18:28,440 Speaker 2: as strongly, you know, not as powerful obvious as it 323 00:18:28,480 --> 00:18:33,320 Speaker 2: would be in gold, but yeah, it is actually a thing. 324 00:18:36,600 --> 00:18:39,959 Speaker 1: So it's it seems to me obviously, correct me if 325 00:18:39,960 --> 00:18:42,000 Speaker 1: I'm wrong in the way that I'm that I'm kind 326 00:18:42,000 --> 00:18:44,920 Speaker 1: of thinking through this. The reason why the increase in 327 00:18:44,960 --> 00:18:49,000 Speaker 1: the gold supply hasn't resulted in diminished utility is because 328 00:18:49,040 --> 00:18:53,480 Speaker 1: the free market has determined that when when it's when 329 00:18:53,560 --> 00:18:55,840 Speaker 1: it costs less to get an ounce of gold out 330 00:18:55,880 --> 00:18:59,000 Speaker 1: of the ground. People get announced out of an announce 331 00:18:59,040 --> 00:19:00,680 Speaker 1: of gold out of the ground. But if it costs 332 00:19:00,720 --> 00:19:02,359 Speaker 1: more than an ounce of gold to get an ounce 333 00:19:02,359 --> 00:19:04,000 Speaker 1: of gold out of the ground, then people are going 334 00:19:04,080 --> 00:19:07,639 Speaker 1: to stop doing that. And so the demand for money 335 00:19:07,840 --> 00:19:12,320 Speaker 1: influences the increased supply for money, And if we could 336 00:19:12,640 --> 00:19:15,920 Speaker 1: if we had a similar sort of influence on the 337 00:19:16,000 --> 00:19:19,320 Speaker 1: supply of dollars, then it would have the same result. 338 00:19:19,440 --> 00:19:23,399 Speaker 1: And this is obviously hypothetical, but let's say no federal 339 00:19:23,560 --> 00:19:28,280 Speaker 1: reserve banks are allowed to operate in complete freedom, so 340 00:19:28,400 --> 00:19:31,199 Speaker 1: they have if they fail, they fail, no bailout. If 341 00:19:31,240 --> 00:19:34,720 Speaker 1: a bank you know, operates conservatively enough, then they'll continue 342 00:19:34,760 --> 00:19:38,360 Speaker 1: to go. They can do fractional reserve banking if they want, 343 00:19:38,440 --> 00:19:41,399 Speaker 1: which would increase the supply of dollars, but then there 344 00:19:41,400 --> 00:19:44,440 Speaker 1: would obviously be a contraction at some point which would 345 00:19:44,480 --> 00:19:46,800 Speaker 1: reel that back in. And so you could see how 346 00:19:46,840 --> 00:19:49,760 Speaker 1: there might be a similar sort of dynamic that could 347 00:19:49,760 --> 00:19:53,440 Speaker 1: occur with fiat or dollar bills paper bills, where the 348 00:19:53,800 --> 00:19:56,360 Speaker 1: supply and demand for money based on you know, spending 349 00:19:56,520 --> 00:20:01,520 Speaker 1: the savings pool and production would u have an effect 350 00:20:01,520 --> 00:20:04,280 Speaker 1: where it increased and then decreased the supply of dollars, 351 00:20:04,440 --> 00:20:06,520 Speaker 1: similar to how that has happened with gold. 352 00:20:07,040 --> 00:20:11,920 Speaker 2: Yeah, I think there's a great analogy there. The difference is, 353 00:20:11,960 --> 00:20:13,520 Speaker 2: of course, it's not going to be the cost of 354 00:20:14,160 --> 00:20:18,000 Speaker 2: the paper dollar itself, which would just assume is trivial 355 00:20:18,320 --> 00:20:21,760 Speaker 2: effective as a zero. The cost to the bank is 356 00:20:21,800 --> 00:20:23,840 Speaker 2: the interest rate they have to pay to get the deposit. 357 00:20:26,359 --> 00:20:29,520 Speaker 2: So the banks have to pay interest to raise the credit. 358 00:20:29,640 --> 00:20:34,159 Speaker 2: So dollars credit, gold is money. That's a highly controversial 359 00:20:34,240 --> 00:20:37,080 Speaker 2: view that I have, by the way, but I'll die 360 00:20:37,160 --> 00:20:38,200 Speaker 2: in that hell if necessary. 361 00:20:39,800 --> 00:20:42,600 Speaker 1: So I want to circle back to that. Can you 362 00:20:42,680 --> 00:20:43,119 Speaker 1: restate that. 363 00:20:43,240 --> 00:20:45,879 Speaker 2: Dollar is money, the gold is money, and the dollars credit. 364 00:20:48,400 --> 00:20:52,320 Speaker 2: So banks are intermediaries and credit. They're dealing credit, so 365 00:20:52,480 --> 00:20:56,040 Speaker 2: they have to raise credit from their depositors and that 366 00:20:56,160 --> 00:20:58,960 Speaker 2: has a certain cost, and then they are putting that 367 00:20:59,119 --> 00:21:03,040 Speaker 2: credit to the barrow, where is typically businesses, maybe home 368 00:21:03,080 --> 00:21:06,240 Speaker 2: buyers that want a mortgage for their house, and that 369 00:21:06,480 --> 00:21:09,920 Speaker 2: has a price that they get to charge, and the 370 00:21:10,000 --> 00:21:13,879 Speaker 2: banks will do it when there's a positive spread, you know, 371 00:21:13,920 --> 00:21:17,840 Speaker 2: when net interest you know, margin is positive, then they'll 372 00:21:17,880 --> 00:21:20,159 Speaker 2: do that trade all day long. And you know, the 373 00:21:20,280 --> 00:21:23,760 Speaker 2: arbitrager is like everybody else. Everybody in the free market 374 00:21:24,040 --> 00:21:28,040 Speaker 2: is buying something in one market or several markets, because 375 00:21:28,080 --> 00:21:30,880 Speaker 2: usually they're buying labor is to buy some more materials. 376 00:21:30,920 --> 00:21:33,400 Speaker 2: They buy some labor and they combine it in a way, 377 00:21:33,440 --> 00:21:35,520 Speaker 2: and then they sell it in another market for a 378 00:21:35,600 --> 00:21:37,920 Speaker 2: higher price. So let's say you're a farmer. You know, 379 00:21:38,040 --> 00:21:41,520 Speaker 2: you're buying seeds and fertilizer. Let's assume you have the 380 00:21:41,600 --> 00:21:43,680 Speaker 2: land free and clear or whatever. You're buying seeds and 381 00:21:43,720 --> 00:21:49,399 Speaker 2: fertilizer and insecticide and labor and diesel fuel, and you 382 00:21:49,520 --> 00:21:53,119 Speaker 2: turn that into wheat that you sell in the wheat market, 383 00:21:53,280 --> 00:21:55,760 Speaker 2: and hopefully you're selling the weed for more than the 384 00:21:55,800 --> 00:21:58,679 Speaker 2: sum total of all the costs that took to produce it. Well, 385 00:21:58,720 --> 00:22:01,639 Speaker 2: a bank is a dealer in it, so they're buying credit, 386 00:22:02,640 --> 00:22:05,480 Speaker 2: you know, from savers at a lower interest rate. You know, 387 00:22:05,560 --> 00:22:08,200 Speaker 2: savings accounts have always had lower interest rates. Then let's 388 00:22:08,240 --> 00:22:10,840 Speaker 2: say the bond market, and then you're putting that credit 389 00:22:10,920 --> 00:22:14,480 Speaker 2: into the bond market at higher interest rate, and you know, 390 00:22:14,600 --> 00:22:18,560 Speaker 2: making the spread between the two. And if that spread contracts, 391 00:22:18,600 --> 00:22:22,200 Speaker 2: for instance, there's less demand for credit from businesses, then 392 00:22:22,240 --> 00:22:24,639 Speaker 2: the banks will stop because there's no longer money to 393 00:22:24,680 --> 00:22:27,800 Speaker 2: be made doing that trade. So in the free market 394 00:22:28,320 --> 00:22:33,000 Speaker 2: it's always the spread, you know, compresses to zero, and 395 00:22:33,119 --> 00:22:34,920 Speaker 2: that's the signal to everybody you might as well stop 396 00:22:35,000 --> 00:22:36,320 Speaker 2: doing this because you're not going to make any money 397 00:22:36,359 --> 00:22:40,560 Speaker 2: doing it anymore. Of course, when the government takes it over, 398 00:22:40,680 --> 00:22:43,880 Speaker 2: then you know, there's no limit as to how far 399 00:22:43,920 --> 00:22:47,119 Speaker 2: I can go. And until the regulators decide, you know, 400 00:22:47,440 --> 00:22:49,840 Speaker 2: it gets to their attention we should stop this because 401 00:22:49,880 --> 00:22:52,399 Speaker 2: this looks like this is bad. Maybe that you know, 402 00:22:52,440 --> 00:22:54,240 Speaker 2: should have stoped it three years ago, but who knows. 403 00:22:57,280 --> 00:23:01,600 Speaker 1: So so there is a similar dynamic as far as 404 00:23:01,640 --> 00:23:06,919 Speaker 1: the end result, but the causes and the mechanism by 405 00:23:06,960 --> 00:23:10,080 Speaker 1: which it actually takes place is you know, is very different. 406 00:23:10,520 --> 00:23:14,639 Speaker 1: It's not about the cost of producing a nuance of gold, 407 00:23:15,640 --> 00:23:18,000 Speaker 1: which actually at any commodity, you know, if we if 408 00:23:18,040 --> 00:23:20,600 Speaker 1: we were talking about seashells or silver or anything else, 409 00:23:20,640 --> 00:23:24,560 Speaker 1: any other commodity and that has a restraint of atoms 410 00:23:25,119 --> 00:23:29,760 Speaker 1: and molecules would be would be somewhat similar. But something 411 00:23:30,720 --> 00:23:35,080 Speaker 1: that is that is purely credit just has has that 412 00:23:35,160 --> 00:23:37,520 Speaker 1: different mechanism because there's no at the end of the day, 413 00:23:37,520 --> 00:23:40,000 Speaker 1: there's no cost to write another zero. 414 00:23:41,119 --> 00:23:42,800 Speaker 2: The only cost is what you have to pay to 415 00:23:42,840 --> 00:23:44,159 Speaker 2: get the you know, the bank has to get the 416 00:23:44,240 --> 00:23:46,760 Speaker 2: credit from the stain verse and has to pay for that. 417 00:23:47,359 --> 00:23:50,959 Speaker 2: And as that cost is going up, and it has 418 00:23:51,000 --> 00:23:52,840 Speaker 2: to find businesses that want to borrow. And the more 419 00:23:53,040 --> 00:23:55,760 Speaker 2: the more that they extend to businesses, the less hungry 420 00:23:55,800 --> 00:23:58,280 Speaker 2: businesses are for credit. So the businesses you're willing to 421 00:23:58,320 --> 00:24:02,800 Speaker 2: pay less, they say, are demanding more. And eventually that 422 00:24:02,960 --> 00:24:06,040 Speaker 2: spread will, you know, compress too tight. You wouldn't even 423 00:24:06,119 --> 00:24:08,400 Speaker 2: have to go negative, it'll just compress too tight. That's 424 00:24:08,480 --> 00:24:11,600 Speaker 2: no longer worth anybody's while. But if I said, here's 425 00:24:11,640 --> 00:24:14,600 Speaker 2: a great business opportunity, you know, you can drive across 426 00:24:14,640 --> 00:24:18,200 Speaker 2: the border and buy you know, wheat for one hundred 427 00:24:18,240 --> 00:24:20,680 Speaker 2: dollars a bushel, and then drive it all the way 428 00:24:20,720 --> 00:24:22,280 Speaker 2: back and you can sell it for one hundred dollars 429 00:24:22,359 --> 00:24:25,119 Speaker 2: and one cent. You were like, why am I going 430 00:24:25,200 --> 00:24:27,000 Speaker 2: to waste my time little in all the fuel and 431 00:24:27,119 --> 00:24:33,120 Speaker 2: everything else for a penny. It's every every business sort 432 00:24:33,160 --> 00:24:36,280 Speaker 2: of has a walking away point, and we can call 433 00:24:36,359 --> 00:24:38,800 Speaker 2: that the marginal in this case, the marginal bank or 434 00:24:38,880 --> 00:24:43,480 Speaker 2: the marginal financial intermediary will walk away when that spread 435 00:24:43,560 --> 00:24:44,880 Speaker 2: gets you know, too tight. 436 00:24:48,840 --> 00:24:50,959 Speaker 1: Okay, I've got I've got two questions and I had 437 00:24:51,040 --> 00:24:53,240 Speaker 1: both of them are follow ups to this conversation. So 438 00:24:53,560 --> 00:24:55,080 Speaker 1: we've got a fork in the road here. But I'm 439 00:24:55,080 --> 00:24:56,399 Speaker 1: going to try and remember to come back to the 440 00:24:56,560 --> 00:25:00,159 Speaker 1: to the second question. First question is Javier Malay is 441 00:25:00,200 --> 00:25:05,000 Speaker 1: a little bit of a side tangent here. Javier Malay 442 00:25:05,119 --> 00:25:08,000 Speaker 1: just won the uh he's the president of Argentina. Now 443 00:25:08,880 --> 00:25:10,359 Speaker 1: maybe the first stubitarian. 444 00:25:10,880 --> 00:25:14,320 Speaker 2: My economics are so cool that he copied my haircut. 445 00:25:17,359 --> 00:25:20,879 Speaker 1: That's true. You guys do have very similar hair and 446 00:25:21,119 --> 00:25:23,639 Speaker 1: very similar economics, it seems, unless he's a you know, 447 00:25:23,800 --> 00:25:27,760 Speaker 1: as some people say, a wolf in cheap's clothing. But 448 00:25:28,600 --> 00:25:30,879 Speaker 1: one of the things that he wants to do is 449 00:25:31,119 --> 00:25:34,280 Speaker 1: get rid of the central bank and dollarize the economy, 450 00:25:34,320 --> 00:25:37,920 Speaker 1: which is essentially from their perspective, it would be a 451 00:25:38,000 --> 00:25:39,959 Speaker 1: lot more of a free market in money. And if 452 00:25:40,000 --> 00:25:42,480 Speaker 1: you can dollarize, then you could as just as easily 453 00:25:42,520 --> 00:25:46,920 Speaker 1: switch to any other form of money easier than you know, 454 00:25:47,320 --> 00:25:50,200 Speaker 1: if you if you're still stuck in that rut of 455 00:25:50,680 --> 00:25:53,480 Speaker 1: using your own money controlled by your own central bank 456 00:25:53,520 --> 00:25:56,320 Speaker 1: in central government. So do you think that move is 457 00:25:56,359 --> 00:25:58,680 Speaker 1: a step in the right direction. Do you think that's 458 00:25:58,720 --> 00:26:03,280 Speaker 1: completely missing the mark? And what do you think the 459 00:26:03,320 --> 00:26:06,520 Speaker 1: effects will be of Argentina dollarizing if they're able to 460 00:26:06,560 --> 00:26:06,760 Speaker 1: do that? 461 00:26:06,960 --> 00:26:10,560 Speaker 2: Well, you know, obviously it should be obvious. I the 462 00:26:10,680 --> 00:26:13,840 Speaker 2: US dollar is significantly less bad than the Argentinian Payso 463 00:26:14,960 --> 00:26:18,800 Speaker 2: the Argentinian payso has you know, what's the official inflation 464 00:26:18,920 --> 00:26:22,280 Speaker 2: rate two three four? You know, more than and the 465 00:26:22,280 --> 00:26:26,119 Speaker 2: reality is probably more than that. Right, so you know, 466 00:26:26,119 --> 00:26:28,360 Speaker 2: if you switched to the US dollar, it's less bad. 467 00:26:29,280 --> 00:26:31,160 Speaker 2: So in a certain sense, okay, how can you argue 468 00:26:31,200 --> 00:26:34,119 Speaker 2: with that? Right? At least he made an improvement the 469 00:26:34,240 --> 00:26:37,400 Speaker 2: lives of the average on Argentinian You know, people got 470 00:26:37,520 --> 00:26:41,119 Speaker 2: less bad. They're less badly off than they were, and 471 00:26:41,240 --> 00:26:43,600 Speaker 2: of course most of them try to keep their savings 472 00:26:43,640 --> 00:26:47,760 Speaker 2: and dollars anyway, you know, and of course there's very 473 00:26:47,800 --> 00:26:51,119 Speaker 2: structural obstacles to doing so. And now, since I have 474 00:26:51,480 --> 00:26:55,000 Speaker 2: a family who came from Argentina and I know a 475 00:26:55,040 --> 00:26:56,920 Speaker 2: little bit more about the kind of history of it, 476 00:26:57,600 --> 00:27:00,760 Speaker 2: if you even if cases we're people were smart enough 477 00:27:00,760 --> 00:27:02,280 Speaker 2: to say I'm going to have dollars if you held 478 00:27:02,320 --> 00:27:06,440 Speaker 2: it in the Argentinian banking system, there's been instances where 479 00:27:06,520 --> 00:27:08,119 Speaker 2: the government, you know, you wake up one day and 480 00:27:08,200 --> 00:27:12,440 Speaker 2: they say, we're converting your new dollars that you hold 481 00:27:12,480 --> 00:27:14,840 Speaker 2: in your bank account to payos, and we're doing so. 482 00:27:14,960 --> 00:27:17,600 Speaker 2: It's the official one to one exchange rate. So you 483 00:27:17,680 --> 00:27:19,480 Speaker 2: thought you had one hundred thousand dollars, now you have 484 00:27:19,520 --> 00:27:22,280 Speaker 2: one hundred thousand pays sots. And of course the official 485 00:27:22,320 --> 00:27:25,520 Speaker 2: exchange rate is a complete ripoff. The reality is, you know, 486 00:27:25,640 --> 00:27:29,240 Speaker 2: ten to one, who knows what so not only don't 487 00:27:29,280 --> 00:27:32,480 Speaker 2: they trust the Argentinian currency, they don't trust the Argentinian 488 00:27:32,560 --> 00:27:35,920 Speaker 2: banking system, and they try to hold it principally either 489 00:27:35,960 --> 00:27:40,880 Speaker 2: in the US or Switzerland. So you know, I don't 490 00:27:40,920 --> 00:27:43,359 Speaker 2: know if this move is going to you know, earn 491 00:27:43,480 --> 00:27:46,919 Speaker 2: back the trust of the people over there. But assuming 492 00:27:46,960 --> 00:27:49,800 Speaker 2: he needs it, and assuming that they don't you know, 493 00:27:49,920 --> 00:27:53,119 Speaker 2: reverse it, then sure they're obviously better off saving and 494 00:27:53,200 --> 00:27:57,119 Speaker 2: dollars than in paysos. But the broader question is it 495 00:27:57,240 --> 00:28:00,840 Speaker 2: really a step in the right direction. I think there's 496 00:28:00,840 --> 00:28:03,160 Speaker 2: a lot of political issues today that you would seem 497 00:28:03,240 --> 00:28:06,080 Speaker 2: to get a big gain by, you know, by doing 498 00:28:06,200 --> 00:28:11,040 Speaker 2: this making some move. My favorite one to talk about 499 00:28:11,119 --> 00:28:15,640 Speaker 2: is school vouchers, but seemingly, you know, a good move, 500 00:28:15,680 --> 00:28:17,640 Speaker 2: but actually not really move in the right direction. They're 501 00:28:17,640 --> 00:28:21,240 Speaker 2: at best at lateral or worse, they're actually moving in 502 00:28:21,280 --> 00:28:25,879 Speaker 2: the wrong direction because they allow the corrupt regime to 503 00:28:25,960 --> 00:28:30,600 Speaker 2: continue to operate but alleviate some of the pain. You know. 504 00:28:30,720 --> 00:28:32,920 Speaker 2: So it's like you continue injuring yourself, but now you're 505 00:28:32,960 --> 00:28:36,200 Speaker 2: on painkillers. Is that really a step in the right direction? 506 00:28:38,480 --> 00:28:40,240 Speaker 2: And so, of course, what I would love to see 507 00:28:40,640 --> 00:28:44,200 Speaker 2: is an actual free market and money where they eliminate 508 00:28:44,280 --> 00:28:47,800 Speaker 2: legal tender laws, they eliminate you know, they let people 509 00:28:48,200 --> 00:28:50,800 Speaker 2: keep their books in whatever currency they choose, including gold, 510 00:28:51,480 --> 00:28:53,959 Speaker 2: and then of course most people right now choose dollars, 511 00:28:54,280 --> 00:28:56,920 Speaker 2: but at least they're free to choose. And if gold 512 00:28:57,000 --> 00:28:58,880 Speaker 2: can make your case or why you want to use gold, 513 00:28:59,480 --> 00:29:03,960 Speaker 2: then you know some of them would, and then you know, 514 00:29:04,000 --> 00:29:06,520 Speaker 2: you can begin to have a gold standard, you know, emerge, 515 00:29:08,440 --> 00:29:10,480 Speaker 2: which if you just declare it, we're going to dollarize, 516 00:29:11,480 --> 00:29:14,080 Speaker 2: you've just swapped, you know, one frying pan for another. 517 00:29:14,160 --> 00:29:16,320 Speaker 2: And okay, this frying pan happens to be cooler, it's 518 00:29:16,360 --> 00:29:19,080 Speaker 2: at a place further from the hot, hot part of 519 00:29:19,120 --> 00:29:23,440 Speaker 2: the fire. Okay, great, But I do see certain irony, 520 00:29:23,520 --> 00:29:26,480 Speaker 2: and that all the people that are constantly criticizing and 521 00:29:26,560 --> 00:29:30,760 Speaker 2: rightfully so criticizing the FED, criticizing the dollar and the incredible, 522 00:29:31,160 --> 00:29:34,000 Speaker 2: breathtaking growth and the quantity of dollars, and all that 523 00:29:34,400 --> 00:29:38,200 Speaker 2: cheering Argentina for jumping into that same frying pan. It's 524 00:29:38,280 --> 00:29:42,520 Speaker 2: like the dollar isn't good, it's just less bad than 525 00:29:43,320 --> 00:29:43,880 Speaker 2: than the paeso. 526 00:29:48,080 --> 00:29:51,720 Speaker 1: Now, you said something in there that I thought was interesting, 527 00:29:51,800 --> 00:29:55,480 Speaker 1: because you said that a lot of people in Argentina 528 00:29:55,720 --> 00:29:58,760 Speaker 1: already kind of choose to keep their savings in dollars 529 00:29:58,840 --> 00:30:01,360 Speaker 1: when and if they can, and it reminded me of 530 00:30:01,800 --> 00:30:06,360 Speaker 1: in the collapse of the Weimar Republican Germany. 531 00:30:06,720 --> 00:30:07,120 Speaker 2: When. 532 00:30:09,160 --> 00:30:12,080 Speaker 1: People as much as they could, we're trying to keep 533 00:30:12,160 --> 00:30:14,680 Speaker 1: their savings and dollars, which at the time was just gold. 534 00:30:16,080 --> 00:30:21,080 Speaker 1: And I've done a fair amount of reading about different 535 00:30:21,240 --> 00:30:26,760 Speaker 1: hyperinflationary collapses of currencies, and it seems like anytime a 536 00:30:26,840 --> 00:30:29,080 Speaker 1: government tries to come in and say, okay, our currency 537 00:30:29,200 --> 00:30:31,920 Speaker 1: is collapsing, we're going to make a new fiat currency 538 00:30:32,160 --> 00:30:35,640 Speaker 1: and here's the new declared value, it always fails. And 539 00:30:35,800 --> 00:30:39,320 Speaker 1: the only time something actually sticks is when the government 540 00:30:39,480 --> 00:30:44,160 Speaker 1: just chooses whatever the people have already chosen as their 541 00:30:44,360 --> 00:30:48,880 Speaker 1: preferred method of saving, which historically that's always actually been 542 00:30:49,200 --> 00:30:52,320 Speaker 1: gold or the predominantly go back to currency like the dollar. 543 00:30:54,000 --> 00:30:58,400 Speaker 1: And so it's like the government. We read about these 544 00:30:58,440 --> 00:31:01,600 Speaker 1: stories in hindsight, I know, you know, thirty years on 545 00:31:01,800 --> 00:31:05,760 Speaker 1: three pages of you know, of a history book, and 546 00:31:05,880 --> 00:31:08,320 Speaker 1: it looks like the government chose to go back to 547 00:31:08,400 --> 00:31:10,880 Speaker 1: a gold standard. But really, when you look at the 548 00:31:11,000 --> 00:31:14,920 Speaker 1: how how it played out, many times, it's the people 549 00:31:15,000 --> 00:31:18,360 Speaker 1: were already using that better money and the government really 550 00:31:18,400 --> 00:31:21,600 Speaker 1: had no choice. If they wanted to have any purchasing power, 551 00:31:21,800 --> 00:31:23,560 Speaker 1: the government would have to then use the money that 552 00:31:23,560 --> 00:31:30,120 Speaker 1: the people had already chosen. And so number one, can 553 00:31:30,200 --> 00:31:34,040 Speaker 1: you correct me if if I'm wrong about that that 554 00:31:34,160 --> 00:31:37,760 Speaker 1: impression that I have about history and collapses of currencies. 555 00:31:37,800 --> 00:31:42,400 Speaker 1: And then number two, what if what if people choose 556 00:31:42,680 --> 00:31:48,360 Speaker 1: something like bitcoin instead of instead of gold in the future. 557 00:31:48,960 --> 00:31:51,560 Speaker 2: So the first is pretty easy. I think that's a 558 00:31:51,640 --> 00:31:55,760 Speaker 2: really really smart insight that you know, if the government 559 00:31:55,880 --> 00:31:58,120 Speaker 2: orders people to do what they already wanted to do anyway, 560 00:31:58,560 --> 00:32:00,240 Speaker 2: they can declare it to be an unmitted in its 561 00:32:00,280 --> 00:32:04,320 Speaker 2: success victory. You know, we nailed it. Well, that's right, 562 00:32:04,400 --> 00:32:07,640 Speaker 2: because you know, you're forcing people to do what they 563 00:32:07,680 --> 00:32:10,440 Speaker 2: already wanted to do anyway, and you shouldn't need to 564 00:32:10,520 --> 00:32:14,200 Speaker 2: force it. But okay, yeah you can declare, uh, you know, 565 00:32:14,320 --> 00:32:19,320 Speaker 2: you one, you know you won in this case absolutely, 566 00:32:20,680 --> 00:32:23,440 Speaker 2: and especially you know, and after a hyperinflation, they have 567 00:32:23,520 --> 00:32:26,400 Speaker 2: no credibility. They can change the name of it, they 568 00:32:26,440 --> 00:32:28,920 Speaker 2: can change from pace out of boulevard to this to 569 00:32:29,040 --> 00:32:33,200 Speaker 2: that to the other thing. The government has no credibility 570 00:32:33,320 --> 00:32:36,880 Speaker 2: and and it's it's credit is shot. If you don't 571 00:32:36,920 --> 00:32:40,720 Speaker 2: have credit, nobody will extend you know, nobody will end you. 572 00:32:41,240 --> 00:32:44,840 Speaker 2: And that's what occurrency is. It's lending ultimately, So switching 573 00:32:44,880 --> 00:32:48,840 Speaker 2: top is a bitcoin. The problem with bitcoin, which you 574 00:32:48,920 --> 00:32:50,880 Speaker 2: alluded to, I don't know if we were on camera 575 00:32:50,960 --> 00:32:54,600 Speaker 2: or off camera when you said this, was that the 576 00:32:54,720 --> 00:32:58,760 Speaker 2: quantity of bitcoin cannot respond to changes in supply and demand. 577 00:32:59,600 --> 00:33:01,760 Speaker 2: And it's a quantity can't respond and the only thing 578 00:33:01,840 --> 00:33:06,360 Speaker 2: that can respond price, So the price of bitcoin is 579 00:33:06,760 --> 00:33:11,920 Speaker 2: inherently intrinsically volatile. I had a debate organized by the 580 00:33:12,240 --> 00:33:16,680 Speaker 2: Soho Forum, which was sponsored by the Reason Foundation, and 581 00:33:16,800 --> 00:33:21,680 Speaker 2: this particular debate was hosted by the Mesa's Institute in Auburn, Alabama. 582 00:33:22,160 --> 00:33:24,400 Speaker 2: So we had a full auditorium and then they televise. 583 00:33:24,440 --> 00:33:27,360 Speaker 2: It's on YouTube. Anybody can watch this, just Google soho 584 00:33:27,480 --> 00:33:30,880 Speaker 2: forum gold versus at Bitcoin and there's my smiling face 585 00:33:30,960 --> 00:33:37,560 Speaker 2: on the YouTube thumbnail. And my opponent, Pierre Rochard conceded 586 00:33:37,960 --> 00:33:41,400 Speaker 2: that bitcoin will always be volatile. It can never be 587 00:33:41,520 --> 00:33:46,000 Speaker 2: stable for this and other reasons. And so if it's 588 00:33:46,040 --> 00:33:49,760 Speaker 2: not stable, then of course that presents real problems. Even 589 00:33:49,800 --> 00:33:52,440 Speaker 2: in use of the medium of exchange. If I'm going 590 00:33:52,480 --> 00:33:53,920 Speaker 2: to make a payment to you and we kind of 591 00:33:53,960 --> 00:33:57,840 Speaker 2: agree on terms, you know, if I'm just buying a hamburger, 592 00:33:58,240 --> 00:34:01,360 Speaker 2: there isn't necessarily that much volatile in the thirty seconds 593 00:34:01,400 --> 00:34:04,360 Speaker 2: it takes to do the transaction. Although in bedcoin, I 594 00:34:04,440 --> 00:34:06,840 Speaker 2: mean it can move a percent or two even in 595 00:34:06,960 --> 00:34:10,760 Speaker 2: a few seconds, and it has so that that creates problems, 596 00:34:10,760 --> 00:34:13,680 Speaker 2: which means the merchant has to charge more for the 597 00:34:13,719 --> 00:34:18,200 Speaker 2: implied volatility. That where it really breaks down is borrowing 598 00:34:18,239 --> 00:34:23,360 Speaker 2: and lending. Imagine I borrow, you know, ten bitcoins to 599 00:34:23,480 --> 00:34:27,240 Speaker 2: buy house, and then bitcoin goes from forty two thousand 600 00:34:27,280 --> 00:34:29,239 Speaker 2: dollars to a million dollars, which is what all the 601 00:34:29,239 --> 00:34:33,120 Speaker 2: bitcoin is keep promising it's going to do. I don't 602 00:34:33,160 --> 00:34:34,799 Speaker 2: think they know where the price is going any more 603 00:34:34,880 --> 00:34:37,120 Speaker 2: than anyone. I don't know. I don't think anybody knows 604 00:34:37,480 --> 00:34:39,440 Speaker 2: where the price is going to be. But let's say 605 00:34:39,520 --> 00:34:41,680 Speaker 2: let's assume that everyone says it's going to go to 606 00:34:41,719 --> 00:34:44,400 Speaker 2: a million. So that means that the price of bitcoin 607 00:34:44,440 --> 00:34:47,080 Speaker 2: went up twenty five times, which means your mortgage just 608 00:34:47,120 --> 00:34:49,400 Speaker 2: went up twenty five times. You don't owe four hundred 609 00:34:49,400 --> 00:34:52,719 Speaker 2: thousand dollars anymore, you owe ten million dollars. Who in 610 00:34:52,800 --> 00:34:57,040 Speaker 2: the right mind would borrow with the promise that your 611 00:34:57,080 --> 00:35:00,200 Speaker 2: mortgage is going to go up twenty five times. It's 612 00:35:00,360 --> 00:35:07,360 Speaker 2: fundamentally unbulrowable, which means you can't use that financing, you know, 613 00:35:07,440 --> 00:35:12,800 Speaker 2: for anything. And that was a significant reduction in coordination 614 00:35:12,920 --> 00:35:15,560 Speaker 2: and a free market. And bitcoin is supposed to enable 615 00:35:15,600 --> 00:35:19,719 Speaker 2: free markets, but here it is undermining and destroying, you know, 616 00:35:19,840 --> 00:35:23,560 Speaker 2: coordination between savers and entrepreneurs. 617 00:35:26,239 --> 00:35:30,040 Speaker 1: So isn't that isn't that part of the process of 618 00:35:30,600 --> 00:35:34,520 Speaker 1: it becoming money and not something that would be a 619 00:35:34,560 --> 00:35:38,040 Speaker 1: feature of it once it is universally used as money. 620 00:35:38,280 --> 00:35:42,880 Speaker 1: And the second part to that question is the the 621 00:35:43,880 --> 00:35:48,640 Speaker 1: only quantity of any money. That actually matters is the 622 00:35:48,719 --> 00:35:53,040 Speaker 1: quantity of money that is actively entering and leaving circulation. 623 00:35:53,640 --> 00:35:58,080 Speaker 1: If we have, you know, a trillion tons of gold, 624 00:35:58,920 --> 00:36:02,480 Speaker 1: but it's in the center of the earth, it's inaccessible, 625 00:36:02,560 --> 00:36:05,480 Speaker 1: Therefore it's not actually part of the supply. If you 626 00:36:05,680 --> 00:36:10,880 Speaker 1: have ninety percent of the bitcoin held in cold storage. 627 00:36:12,360 --> 00:36:16,759 Speaker 2: There and this is a big difference between gold, you know, 628 00:36:16,840 --> 00:36:19,960 Speaker 2: in the center of the earth, which is a few 629 00:36:20,040 --> 00:36:24,880 Speaker 2: thousand miles underground, and that you know, temperatures and treasures 630 00:36:24,920 --> 00:36:27,520 Speaker 2: that would not only destroy human being, that would destroy 631 00:36:27,520 --> 00:36:29,520 Speaker 2: any kind of equipment you tried to get down there. 632 00:36:30,160 --> 00:36:34,360 Speaker 2: So it's effectively it's not available to human beings versus 633 00:36:34,520 --> 00:36:38,720 Speaker 2: cold storage is in somebody's hands, and that person doesn't 634 00:36:38,760 --> 00:36:41,000 Speaker 2: choose to bring it to market at the moment, but 635 00:36:41,160 --> 00:36:43,799 Speaker 2: could choose to bring it to market tomorrow under the right. 636 00:36:45,440 --> 00:36:49,719 Speaker 1: Right right. So that's but that's that's the point that 637 00:36:49,880 --> 00:36:52,960 Speaker 1: I'm trying to get at is that if you have 638 00:36:53,480 --> 00:36:56,960 Speaker 1: a potential supply that is kept out of the market, 639 00:36:57,560 --> 00:37:01,600 Speaker 1: then when price is you know, the price or the 640 00:37:01,640 --> 00:37:04,719 Speaker 1: value bitcoin would fluctuate. That in and of itself would 641 00:37:04,800 --> 00:37:09,160 Speaker 1: have a stabilizing effect on the value bitcoin by bringing 642 00:37:09,560 --> 00:37:14,320 Speaker 1: bitcoin from out of supply into supply and vice versa, 643 00:37:14,719 --> 00:37:17,120 Speaker 1: the same way that gold does. I mean, yes, there's 644 00:37:17,480 --> 00:37:19,759 Speaker 1: been a one percent increase of the supply of gold 645 00:37:19,840 --> 00:37:22,839 Speaker 1: from mining over the course of human history, but that's 646 00:37:22,920 --> 00:37:25,120 Speaker 1: not the majority of the increase or the decrease in 647 00:37:25,160 --> 00:37:27,279 Speaker 1: the usage of gold. A lot of gold is held 648 00:37:28,400 --> 00:37:31,719 Speaker 1: in vaults and it's you know, not actually in circulation. 649 00:37:31,920 --> 00:37:34,200 Speaker 2: So so two points. One of the beginning of the debate, 650 00:37:34,960 --> 00:37:40,280 Speaker 2: I made the point that, you know, the marginal utility 651 00:37:40,320 --> 00:37:44,200 Speaker 2: of gold doesn't decline, and I said this was something 652 00:37:44,280 --> 00:37:48,560 Speaker 2: that Satoshi was terrified that he knew the answer that 653 00:37:48,640 --> 00:37:52,799 Speaker 2: bitcoin did, which is why bitcoin is a cap. There 654 00:37:52,880 --> 00:37:54,799 Speaker 2: is no cap in gold, which the bitcoiners of course 655 00:37:54,840 --> 00:37:57,120 Speaker 2: think is a bug in gold, and that they fixed 656 00:37:57,160 --> 00:37:59,040 Speaker 2: that with a feature which is a cap and bitcoin. 657 00:37:59,360 --> 00:38:01,360 Speaker 2: But you don't need a cap in gold because the 658 00:38:01,880 --> 00:38:05,880 Speaker 2: rod the utility doesn't decline more goal doesn't mean that 659 00:38:06,000 --> 00:38:10,960 Speaker 2: the value collapses and a bitcoin you can't run that 660 00:38:11,040 --> 00:38:15,960 Speaker 2: experiment because they're strictly captain. But I say, let's, you know, 661 00:38:16,120 --> 00:38:19,320 Speaker 2: run at a thought experiment here for a minute. So 662 00:38:19,800 --> 00:38:23,720 Speaker 2: the idea is that as bitcoin monetizes, whatever that means, 663 00:38:25,600 --> 00:38:28,759 Speaker 2: eventually it's going to converge on a stable price or 664 00:38:28,800 --> 00:38:30,920 Speaker 2: at least a stable value. Right, so we all recognize 665 00:38:30,920 --> 00:38:34,160 Speaker 2: the dollars going down. So you know, bitcoin's price and 666 00:38:34,280 --> 00:38:35,920 Speaker 2: dollars would be going up, but only at the rate 667 00:38:36,000 --> 00:38:38,000 Speaker 2: that the dollar is being debased. You're not going to 668 00:38:38,080 --> 00:38:42,719 Speaker 2: have this crazed rocket ship journey upwards, which is you know, 669 00:38:43,000 --> 00:38:45,040 Speaker 2: the bitcoin aer say, oh yeah, I measure everything in bitcoin. 670 00:38:45,080 --> 00:38:46,680 Speaker 2: I'm like, do you really think the world is not 671 00:38:46,719 --> 00:38:50,120 Speaker 2: a hyper deflationary hyper collapse since two thousand and nine 672 00:38:50,719 --> 00:38:53,799 Speaker 2: with things, you know, things collapse forty two thousand to one. 673 00:38:53,880 --> 00:38:56,520 Speaker 2: I mean, come on, and clearly the value of bitcoin 674 00:38:56,600 --> 00:38:58,400 Speaker 2: has gone up, it's not that the value of the 675 00:38:58,440 --> 00:39:02,160 Speaker 2: world has gone down. So it's supposedly it was a 676 00:39:02,280 --> 00:39:06,480 Speaker 2: right price. Let's call it the MRPM. So the yeah, 677 00:39:06,600 --> 00:39:10,279 Speaker 2: MRP magic right price, and that's I don't know, ten 678 00:39:10,360 --> 00:39:14,799 Speaker 2: million dollars, just make whatever arbitrary number you want. Of course, 679 00:39:14,840 --> 00:39:16,680 Speaker 2: there are a lot of people in bigcoin today. I 680 00:39:16,719 --> 00:39:19,360 Speaker 2: would argue the vast majority of them that are in 681 00:39:19,440 --> 00:39:22,279 Speaker 2: it for the price speculation. They're not in it for 682 00:39:22,440 --> 00:39:25,680 Speaker 2: the free love and the drugs and you know, hippie 683 00:39:25,760 --> 00:39:28,480 Speaker 2: values and drum circles and all that and come by yah, 684 00:39:28,800 --> 00:39:33,000 Speaker 2: they're in it because number go up. So suppose everyone 685 00:39:33,120 --> 00:39:34,879 Speaker 2: knew that there was a magic right price of ten 686 00:39:34,920 --> 00:39:37,360 Speaker 2: million dollars, and once it gets to ten million dollars, 687 00:39:37,400 --> 00:39:39,360 Speaker 2: that's going to be stable and it shouldn't go up 688 00:39:39,360 --> 00:39:43,799 Speaker 2: anymore after that because that's it. It's fully priced, it's 689 00:39:43,840 --> 00:39:46,120 Speaker 2: been fully monetized whatever term you want to use fully 690 00:39:46,200 --> 00:39:52,440 Speaker 2: hyper bitcoinized. Well, if you were in it for the speculation, 691 00:39:53,200 --> 00:39:55,359 Speaker 2: then you should sell it at nine million, nine hundred 692 00:39:55,360 --> 00:39:58,200 Speaker 2: and ninety one thousand, nine hundred and eighty nine because 693 00:39:58,200 --> 00:40:00,560 Speaker 2: there's no longer I mean, you just look for whatever 694 00:40:00,600 --> 00:40:02,600 Speaker 2: asset it's going to go up. This one is going 695 00:40:02,640 --> 00:40:05,759 Speaker 2: to go up anymore's email as will dump it, and 696 00:40:06,560 --> 00:40:08,239 Speaker 2: of course all the other people that are in it 697 00:40:08,320 --> 00:40:10,640 Speaker 2: for the same reason will also be dumping it, which 698 00:40:10,760 --> 00:40:13,960 Speaker 2: means the price once it hits nine nine nine, the 699 00:40:14,000 --> 00:40:16,560 Speaker 2: price is actually going to go down, which means you 700 00:40:16,600 --> 00:40:19,880 Speaker 2: should really dump it at nine nine nine eight, And 701 00:40:20,000 --> 00:40:21,800 Speaker 2: then someone else is going to figure that out and 702 00:40:21,960 --> 00:40:23,520 Speaker 2: you know, it's all game theory stuff and sell it 703 00:40:23,520 --> 00:40:28,080 Speaker 2: at nine to ninety seven. And so ultimately you get 704 00:40:28,120 --> 00:40:31,120 Speaker 2: to realizing that if the price of something is set 705 00:40:31,200 --> 00:40:34,279 Speaker 2: purely by the marginal speculator and that there are no 706 00:40:34,480 --> 00:40:37,680 Speaker 2: other forces that set price, And that's that's my contention 707 00:40:37,840 --> 00:40:43,200 Speaker 2: for bitcoin, that price can never be stable because speculation 708 00:40:43,320 --> 00:40:46,920 Speaker 2: can never set a stable price. The when when prices 709 00:40:46,960 --> 00:40:49,600 Speaker 2: of things are stable, it's because they're being set by arbitrage. 710 00:40:50,440 --> 00:40:54,320 Speaker 2: There's an actual human need, this thing is serving actual 711 00:40:54,680 --> 00:40:58,280 Speaker 2: real world input costs of producing it, and the arbitrage 712 00:40:58,400 --> 00:41:00,279 Speaker 2: is between the two. And of course arbitra was just 713 00:41:00,360 --> 00:41:03,160 Speaker 2: between those inputs and all other markets that could use 714 00:41:03,200 --> 00:41:06,760 Speaker 2: him as inputs. So if let's say you're producing gold, 715 00:41:07,360 --> 00:41:10,600 Speaker 2: you need oil is probably your single biggest input. Well, 716 00:41:10,680 --> 00:41:13,759 Speaker 2: also oil is is an input to everything else, so 717 00:41:13,880 --> 00:41:16,200 Speaker 2: the price of everything else is tied together in so 718 00:41:16,280 --> 00:41:19,640 Speaker 2: many ways because they all require oil and labor as inputs, 719 00:41:21,680 --> 00:41:24,000 Speaker 2: and steel and you know a lot of other things. 720 00:41:25,800 --> 00:41:29,719 Speaker 2: So you know, since speculation is the only thing that 721 00:41:29,800 --> 00:41:33,160 Speaker 2: sets the price of bitcoin, it will never be stable, 722 00:41:33,280 --> 00:41:36,080 Speaker 2: can never be stable. And this and this was conceded 723 00:41:36,120 --> 00:41:38,440 Speaker 2: in the debate. He absolutely conceded the price is not 724 00:41:38,520 --> 00:41:41,440 Speaker 2: going to be stable. This is the Bitcoin proponent. Now, 725 00:41:41,480 --> 00:41:43,920 Speaker 2: it doesn't mean he's right. It could be that bitcoin 726 00:41:44,040 --> 00:41:45,719 Speaker 2: is going to be stable, and this guy got it wrong. 727 00:41:46,239 --> 00:41:49,000 Speaker 2: But I thought, I think it's interesting that he conceded 728 00:41:49,080 --> 00:41:52,920 Speaker 2: that readily not not ever to be stable. 729 00:41:55,560 --> 00:41:58,520 Speaker 1: All right, So two questions about that Number One, isn't 730 00:41:58,760 --> 00:42:04,160 Speaker 1: that isn't there a case to be made that the 731 00:42:04,280 --> 00:42:09,239 Speaker 1: price is not only set by the speculator, that there 732 00:42:09,280 --> 00:42:13,879 Speaker 1: are people who want to use it actually as money, 733 00:42:15,640 --> 00:42:18,719 Speaker 1: and so I save it as money until I use 734 00:42:18,800 --> 00:42:21,680 Speaker 1: it to spend to get other things. And if so, 735 00:42:23,080 --> 00:42:27,120 Speaker 1: then the argument by going down through speculation is the 736 00:42:27,160 --> 00:42:32,560 Speaker 1: same argument that if we had a long term consistent 737 00:42:32,600 --> 00:42:36,600 Speaker 1: amount of deflation, likely like we would if gold was 738 00:42:36,680 --> 00:42:42,920 Speaker 1: money again, then people would never spend any money because 739 00:42:43,000 --> 00:42:45,880 Speaker 1: prices would always be cheaper tomorrow, when in fact we 740 00:42:46,000 --> 00:42:48,040 Speaker 1: know that that's not the case because we have needs today, 741 00:42:48,560 --> 00:42:52,440 Speaker 1: and so it seems like it is possible that there 742 00:42:52,520 --> 00:42:58,200 Speaker 1: would be some amount of price volatility that would be 743 00:42:59,360 --> 00:43:07,560 Speaker 1: mostly dealt with through savers and spenders. If indeed it 744 00:43:07,680 --> 00:43:10,360 Speaker 1: was being used as money and people were using it 745 00:43:10,440 --> 00:43:13,719 Speaker 1: to spend, then when the price of bitcoin goes down, 746 00:43:13,800 --> 00:43:17,280 Speaker 1: that means things are you know, getting more expensive relative 747 00:43:17,320 --> 00:43:21,400 Speaker 1: to bitcoin, and vice versa, which would either incentivize saving 748 00:43:21,680 --> 00:43:27,879 Speaker 1: or then on the other side incentivize spending, which would 749 00:43:27,920 --> 00:43:32,400 Speaker 1: then other than the supply not going up, absolutely, the 750 00:43:32,480 --> 00:43:34,959 Speaker 1: supply that's in use would be going up and down 751 00:43:35,160 --> 00:43:39,160 Speaker 1: through those through those value incentives. 752 00:43:39,840 --> 00:43:45,759 Speaker 2: So a lot of nuggets to unpack there. I'm not 753 00:43:45,880 --> 00:43:49,000 Speaker 2: a fan of the idea that the prices are going 754 00:43:49,040 --> 00:43:53,600 Speaker 2: down then people don't spend. And we have one massive 755 00:43:53,680 --> 00:43:56,239 Speaker 2: elephant in the room, which is everything electronics or high 756 00:43:56,280 --> 00:44:02,080 Speaker 2: tech prices have been falling for many decades, and you know, 757 00:44:02,160 --> 00:44:05,040 Speaker 2: the more they follow, the more the people buy. So 758 00:44:05,960 --> 00:44:10,120 Speaker 2: you know, people have a supercomputer in their pocket nowadays, 759 00:44:11,040 --> 00:44:14,920 Speaker 2: which is a phone because they got cheap enough. But 760 00:44:15,040 --> 00:44:17,440 Speaker 2: it didn't discourage people from buying something that was slightly 761 00:44:17,480 --> 00:44:21,319 Speaker 2: bulkier and slightly less powerful, you know, five years ago, 762 00:44:21,440 --> 00:44:23,600 Speaker 2: and that didn't discourage people from buying something that was 763 00:44:23,680 --> 00:44:27,799 Speaker 2: less powerful, you know, the year before. So people buy 764 00:44:27,920 --> 00:44:30,239 Speaker 2: when it meets their need, when the price, when the 765 00:44:30,320 --> 00:44:32,520 Speaker 2: price and the and they need met, uh you know, 766 00:44:32,640 --> 00:44:38,040 Speaker 2: correspond that people buy. But anyway, so the price of 767 00:44:38,080 --> 00:44:41,080 Speaker 2: bitcoin is there are people that are just saving in 768 00:44:41,160 --> 00:44:46,080 Speaker 2: bitcoin and spending their bitcoin. They're not really they're basically 769 00:44:46,160 --> 00:44:49,000 Speaker 2: priced takers. Well, when they put their savings in they 770 00:44:49,080 --> 00:44:51,960 Speaker 2: get whatever bitcoin they get at that price at that moment, 771 00:44:52,560 --> 00:44:54,319 Speaker 2: and then when they spend it, they get whatever price 772 00:44:54,360 --> 00:44:56,960 Speaker 2: for the bitcoin that they get at that moment. They're 773 00:44:57,040 --> 00:45:00,520 Speaker 2: not when I say price being set by spec leaders, 774 00:45:01,320 --> 00:45:03,360 Speaker 2: you know, it's it's people saying, Okay, I want to 775 00:45:03,400 --> 00:45:05,680 Speaker 2: buy it because they're looking at a chart saying it's 776 00:45:05,719 --> 00:45:09,400 Speaker 2: going to go up or it's approaching the having or 777 00:45:09,480 --> 00:45:14,200 Speaker 2: whatever whatever the narrative is at that moment, versus people 778 00:45:14,320 --> 00:45:18,000 Speaker 2: saying that if bitcoin gets to thirty nine, nine ninety nine, 779 00:45:18,680 --> 00:45:21,759 Speaker 2: I'll buy it because it's an input into something that 780 00:45:21,920 --> 00:45:26,800 Speaker 2: I can sell for forty one oh oh oh, So 781 00:45:26,960 --> 00:45:30,200 Speaker 2: that's an arbitrage someone who says if copper gets below 782 00:45:30,239 --> 00:45:33,120 Speaker 2: four dollars, I can buy more copper to make more 783 00:45:33,320 --> 00:45:37,080 Speaker 2: you know, plumbing pipes and sell the plumbing pipes. So 784 00:45:37,239 --> 00:45:39,560 Speaker 2: copper is connected to the plumbing market, it's connected to 785 00:45:39,640 --> 00:45:42,720 Speaker 2: the electrical market, it's connected to so many other markets 786 00:45:42,800 --> 00:45:45,719 Speaker 2: because it's an input to these things. And so there's 787 00:45:45,760 --> 00:45:52,000 Speaker 2: there's various arbitrages there that you ultimately set the price 788 00:45:52,040 --> 00:45:55,160 Speaker 2: of copper. So what you need are bidders, not people 789 00:45:55,239 --> 00:45:57,719 Speaker 2: that buy and take the offer price but people who 790 00:45:57,800 --> 00:45:59,960 Speaker 2: put into bid and they don't move off their big 791 00:46:00,160 --> 00:46:02,880 Speaker 2: because it doesn't make sense to them economically. If it's 792 00:46:02,920 --> 00:46:05,319 Speaker 2: a penny higher, they're not profitable and they're not making 793 00:46:05,400 --> 00:46:08,000 Speaker 2: enough profit anymore to take their risk to do the trade. 794 00:46:08,760 --> 00:46:12,960 Speaker 2: And the bitcoin you don't really have any of that, so, 795 00:46:15,480 --> 00:46:17,280 Speaker 2: you know, even if people are using it for savings, 796 00:46:18,000 --> 00:46:20,160 Speaker 2: and you know, we discussed that in the debate too, 797 00:46:20,600 --> 00:46:23,400 Speaker 2: you can't really use something for savings that has this 798 00:46:23,560 --> 00:46:27,040 Speaker 2: kind of volatility. Ironically, it's a time it was a 799 00:46:27,120 --> 00:46:30,319 Speaker 2: debate and per was talking about savings then pointed loss 800 00:46:30,360 --> 00:46:34,360 Speaker 2: about seventy five percent between so that debate occurred. I 801 00:46:34,440 --> 00:46:37,040 Speaker 2: want to say it was August, you know, between November 802 00:46:37,120 --> 00:46:39,960 Speaker 2: and June the lost seventy five percent. We started to 803 00:46:40,000 --> 00:46:43,600 Speaker 2: come off the lows at that point. And of course, 804 00:46:43,719 --> 00:46:47,880 Speaker 2: nobody who was an actual let's say, retiree with no 805 00:46:48,040 --> 00:46:52,120 Speaker 2: further income potential in their careers can put their life 806 00:46:52,160 --> 00:46:54,439 Speaker 2: savings into something that could have a seventy five percent 807 00:46:54,520 --> 00:46:58,520 Speaker 2: draw down. Yeah. Sure, if you're thirty one and most 808 00:46:58,560 --> 00:47:01,120 Speaker 2: of your working careers ahead of you, most of your 809 00:47:01,160 --> 00:47:03,160 Speaker 2: working career will be at a higher salary than whatever 810 00:47:03,200 --> 00:47:06,040 Speaker 2: you make, right, now, and you know you want to 811 00:47:06,040 --> 00:47:08,839 Speaker 2: put one hundred percent of the really modest nest egg 812 00:47:08,920 --> 00:47:11,120 Speaker 2: that you have at the age of thirty one, you know, 813 00:47:11,200 --> 00:47:13,000 Speaker 2: i e. A few thousand dollars or whatever, you want 814 00:47:13,000 --> 00:47:15,239 Speaker 2: to put that into bed cooin. Great, but they don't 815 00:47:15,320 --> 00:47:18,240 Speaker 2: understand why. And in the debate I use the example 816 00:47:18,280 --> 00:47:21,839 Speaker 2: of an oxygenarian widow who cannot make any more money 817 00:47:21,880 --> 00:47:24,480 Speaker 2: in the remainder of her life. They don't understand her 818 00:47:25,120 --> 00:47:29,520 Speaker 2: economic situation. She can't do that. You know, if you're 819 00:47:29,520 --> 00:47:31,239 Speaker 2: thirty one and you have five thousand dollars to you 820 00:47:31,320 --> 00:47:33,120 Speaker 2: name and you put it into bitcoin, sure have at it. 821 00:47:33,640 --> 00:47:35,279 Speaker 2: The most you're going to lose is five grand, and 822 00:47:35,360 --> 00:47:37,880 Speaker 2: you're all your earnings are ahead of you anyway, and 823 00:47:38,080 --> 00:47:39,879 Speaker 2: you know you'll make that time as many times over, 824 00:47:40,600 --> 00:47:44,320 Speaker 2: you know, if you're good at what you do. So 825 00:47:45,320 --> 00:47:47,120 Speaker 2: you know, for those reasons, No, I don't. I don't 826 00:47:47,120 --> 00:47:49,760 Speaker 2: agree that it ever stabilizes. 827 00:47:52,960 --> 00:47:57,520 Speaker 1: All right now, Something that we both agree is currently 828 00:47:57,600 --> 00:48:00,759 Speaker 1: not stable and never will be stable is is. And 829 00:48:00,960 --> 00:48:03,359 Speaker 1: I think both sides of this debate I should say 830 00:48:03,360 --> 00:48:08,719 Speaker 1: agree is the dollar. Obviously, there are periods of time 831 00:48:08,760 --> 00:48:11,759 Speaker 1: where it's where it's fairly stable, especially compared to other things. 832 00:48:12,680 --> 00:48:14,719 Speaker 1: The Fed right now is raising interest rates, and this 833 00:48:14,880 --> 00:48:16,400 Speaker 1: was the other fork in the road earlier that I 834 00:48:16,440 --> 00:48:18,520 Speaker 1: mentioned that I wanted to ask, and so now I 835 00:48:18,600 --> 00:48:21,040 Speaker 1: have to circle back back to that as we're kind 836 00:48:21,040 --> 00:48:23,319 Speaker 1: of getting a little bit low on time here. There 837 00:48:23,320 --> 00:48:27,000 Speaker 1: are currently raising rates with the stated intention of fighting inflation. 838 00:48:27,160 --> 00:48:29,960 Speaker 1: And I've seen you stayed a few times on Twitter 839 00:48:30,040 --> 00:48:33,640 Speaker 1: that this seems ill informed. So I want to hear 840 00:48:33,719 --> 00:48:40,960 Speaker 1: your thoughts on the relationship between you know, general prices 841 00:48:41,200 --> 00:48:43,719 Speaker 1: going up or down versus what the Federal Reserve is 842 00:48:43,800 --> 00:48:45,839 Speaker 1: doing with interest rates. 843 00:48:45,960 --> 00:48:49,200 Speaker 2: So we got start out with an example that I 844 00:48:49,239 --> 00:48:52,200 Speaker 2: hope most people can relate to. Suppose you're in the 845 00:48:53,760 --> 00:48:57,439 Speaker 2: trucking and warehousing business, you're in the logistics business, which 846 00:48:57,480 --> 00:49:01,759 Speaker 2: is the capital intensive business, and you're coming out of 847 00:49:02,120 --> 00:49:06,200 Speaker 2: COVID lockdown and then the weblash where suddenly everybody's ordering, 848 00:49:06,920 --> 00:49:09,040 Speaker 2: you know, tons of stuff on Amazon, and you know, 849 00:49:09,520 --> 00:49:12,520 Speaker 2: but the ships are all wrong positions, and some of 850 00:49:12,560 --> 00:49:15,160 Speaker 2: the shipping companies went by, some of those ships were scuttled, 851 00:49:15,760 --> 00:49:18,759 Speaker 2: you know, during the long period of essentially lockdown. So 852 00:49:19,080 --> 00:49:22,280 Speaker 2: there's essentially a shortage of capacity in the logistics business. 853 00:49:23,560 --> 00:49:27,160 Speaker 2: So you're putting together your business case for buying you 854 00:49:27,239 --> 00:49:30,320 Speaker 2: whether whether it's building more warehouse base or buying more trucks, 855 00:49:30,600 --> 00:49:33,800 Speaker 2: commissioning more ships, depending on what segment of this industry 856 00:49:33,880 --> 00:49:37,080 Speaker 2: you're in. You're putting together your business case to make 857 00:49:37,120 --> 00:49:44,080 Speaker 2: a big capital investment and you know, buying more stuff 858 00:49:44,160 --> 00:49:48,160 Speaker 2: to you increase capacity because there's because there's a shortage 859 00:49:48,160 --> 00:49:52,319 Speaker 2: because COVID destroyed a great deal of it. Certainly it's 860 00:49:52,320 --> 00:49:55,000 Speaker 2: a margin it did. And you know, you're putting together 861 00:49:55,000 --> 00:49:57,120 Speaker 2: your business case and you're plugging in all the all 862 00:49:57,160 --> 00:50:00,320 Speaker 2: the costs, including the interest rate, and suddenly the interest 863 00:50:00,360 --> 00:50:03,319 Speaker 2: rate goes up. Well, what does that do to your 864 00:50:03,480 --> 00:50:06,800 Speaker 2: carefully prepared business case, Like you're about to go it's okay, 865 00:50:06,880 --> 00:50:08,040 Speaker 2: now we're going to go to the bank. We're going 866 00:50:08,120 --> 00:50:10,080 Speaker 2: to borrow and at that time we would have been 867 00:50:10,120 --> 00:50:12,880 Speaker 2: borrowing it let's say three percent, and now suddenly the 868 00:50:12,920 --> 00:50:14,520 Speaker 2: Fed is hiking and now it's going to cost you 869 00:50:14,600 --> 00:50:17,319 Speaker 2: four percent. Well, if that's one hundred million dollars worth 870 00:50:17,400 --> 00:50:20,840 Speaker 2: of capital, right, that's a difference of a million dollars 871 00:50:20,880 --> 00:50:23,920 Speaker 2: a year in interest. And depending on the margins you're 872 00:50:23,960 --> 00:50:26,560 Speaker 2: making in this business. That million dollars of additional cost 873 00:50:27,200 --> 00:50:30,479 Speaker 2: breaks your business case. So you say, well, I can't 874 00:50:30,520 --> 00:50:35,680 Speaker 2: do it. So every producer who's thinking of adding capacity, 875 00:50:37,280 --> 00:50:39,560 Speaker 2: their thoughts are put on hold as soon as the 876 00:50:39,600 --> 00:50:43,839 Speaker 2: interestrate goes up. So but conversely, if the interestrate goes down, 877 00:50:44,520 --> 00:50:46,600 Speaker 2: if you were on hold, you had a plan to say, 878 00:50:46,600 --> 00:50:48,640 Speaker 2: I'm going to open another Hamburger restaurant. I have a 879 00:50:48,719 --> 00:50:52,680 Speaker 2: chain of sixty seven Hamburger restaurants. I have a business 880 00:50:52,719 --> 00:50:55,960 Speaker 2: plan for sixty eights at the next marginal town where 881 00:50:56,239 --> 00:50:59,120 Speaker 2: growth at the edge of the city is. But it 882 00:50:59,200 --> 00:51:03,640 Speaker 2: doesn't really quite work, you know, it doesn't. It doesn't 883 00:51:03,640 --> 00:51:06,359 Speaker 2: produce enough of a profit to make the risk worth well. 884 00:51:06,520 --> 00:51:09,520 Speaker 2: And then they cut the rate of interest. Well suddenly ding, 885 00:51:09,840 --> 00:51:12,680 Speaker 2: you know, the bottom of your spreadsheet turns, you know, 886 00:51:12,760 --> 00:51:16,719 Speaker 2: from redding to black, and you say, okay, let's borrow, 887 00:51:16,800 --> 00:51:20,319 Speaker 2: let's go do this. And so if one here's how 888 00:51:20,360 --> 00:51:22,680 Speaker 2: I kind of frame it, because I'm not I don't 889 00:51:22,680 --> 00:51:25,000 Speaker 2: want anybody to interpret this as keiths Us saying the 890 00:51:25,080 --> 00:51:27,640 Speaker 2: fatch lower interest rates. I don't think there is any 891 00:51:27,680 --> 00:51:30,040 Speaker 2: good central plan, and I don't think there's any good 892 00:51:30,080 --> 00:51:32,520 Speaker 2: central planner. And there is no right interest rate that 893 00:51:32,600 --> 00:51:35,560 Speaker 2: can force down our throat by a gunpoint, which is 894 00:51:35,640 --> 00:51:38,920 Speaker 2: what it is. But if one's concerned we're consumer prices, 895 00:51:39,880 --> 00:51:43,680 Speaker 2: and one we're willing to overlook the many egregious harms 896 00:51:44,280 --> 00:51:47,239 Speaker 2: of falling interest rates, and there are many, and just 897 00:51:47,320 --> 00:51:50,800 Speaker 2: focus only on consumer prices, then one should want lower 898 00:51:50,880 --> 00:51:54,360 Speaker 2: interest rates because it's a constant and every time it 899 00:51:54,440 --> 00:51:59,359 Speaker 2: takes down, there's an increase in the incentive to borrow, 900 00:51:59,520 --> 00:52:03,080 Speaker 2: to expand and production. It's not only the Hamburger restaurant 901 00:52:03,719 --> 00:52:06,440 Speaker 2: that wants to borrow. It's a company that makes hamburg 902 00:52:06,480 --> 00:52:09,879 Speaker 2: grilling equipment. It's a company company that makes the tile, 903 00:52:10,120 --> 00:52:11,920 Speaker 2: that awful tile it was put on the floors in 904 00:52:11,960 --> 00:52:14,839 Speaker 2: those places, and the plate glass windows and everything else, 905 00:52:15,200 --> 00:52:21,320 Speaker 2: the lighted signs behind the counter. All those manufacturers have 906 00:52:21,440 --> 00:52:24,960 Speaker 2: a case to expand you know, the production capacity when 907 00:52:25,000 --> 00:52:28,279 Speaker 2: the interest rate goes down, and so the fat has 908 00:52:28,360 --> 00:52:31,560 Speaker 2: a sign backwards like they think that they're fighting inflation 909 00:52:31,719 --> 00:52:36,160 Speaker 2: by raising rates or you know, mon through medals. We 910 00:52:36,200 --> 00:52:39,800 Speaker 2: put out a cartoon I guess when when Powell started this, 911 00:52:39,960 --> 00:52:41,919 Speaker 2: or of the discussions about whether we should raise rates, 912 00:52:42,440 --> 00:52:46,279 Speaker 2: and so it was a picture of a factory or 913 00:52:46,320 --> 00:52:49,800 Speaker 2: something was on fire, those flames everywhere, and then Powell's 914 00:52:49,840 --> 00:52:52,719 Speaker 2: there with gasoline trucks bringing gasoline all over it, and 915 00:52:52,800 --> 00:52:55,800 Speaker 2: there's a reporter saying, do you think that's enough to 916 00:52:55,840 --> 00:52:59,960 Speaker 2: put out the fire? Like, we've got something very fundamentally wrong. 917 00:53:00,080 --> 00:53:03,040 Speaker 2: It's like a category error. Gasoline doesn't put fires out, 918 00:53:03,600 --> 00:53:06,560 Speaker 2: It only makes them burn bigger and hotter. Yeah, so 919 00:53:07,920 --> 00:53:11,320 Speaker 2: we're just in a very bizarre, uh you know world. 920 00:53:11,840 --> 00:53:13,200 Speaker 2: I don't know if I answered your question or not, 921 00:53:13,320 --> 00:53:14,600 Speaker 2: but I feel can ramblayer. 922 00:53:15,680 --> 00:53:18,680 Speaker 1: Yeah, so it seems like basically they're they're looking at, 923 00:53:19,000 --> 00:53:23,440 Speaker 1: you know, one small part of the equation and not 924 00:53:23,600 --> 00:53:28,759 Speaker 1: looking at the whole impact, which means that the the feedback, 925 00:53:29,920 --> 00:53:33,839 Speaker 1: the you know, feedback mechanisms, they're still happening, but they're 926 00:53:33,920 --> 00:53:36,960 Speaker 1: just not they're just not looking at them. And basically, 927 00:53:37,600 --> 00:53:40,400 Speaker 1: prices are a function of supply and demand, and the 928 00:53:40,560 --> 00:53:44,560 Speaker 1: interest rate is the cost or the price of money, 929 00:53:45,360 --> 00:53:50,160 Speaker 1: and if that's left up to the free market, then 930 00:53:51,640 --> 00:53:56,480 Speaker 1: the actual demand or or lack of it, will influence 931 00:53:57,239 --> 00:54:00,480 Speaker 1: the price of money to the equally to repoint the 932 00:54:00,480 --> 00:54:01,960 Speaker 1: place that it's supposed to be, and that may go 933 00:54:02,120 --> 00:54:05,880 Speaker 1: up or down at times, but that reflects the actual 934 00:54:06,440 --> 00:54:07,160 Speaker 1: demand for it. 935 00:54:07,280 --> 00:54:10,440 Speaker 2: Yeah, So to phrase that slightly more formally, if the 936 00:54:10,520 --> 00:54:15,160 Speaker 2: interest rate goes down below marginal time preference, people will 937 00:54:15,239 --> 00:54:17,239 Speaker 2: pull their gold coin and say, I'm not letting it's 938 00:54:17,239 --> 00:54:19,640 Speaker 2: not worth it. You're only going to pay me that 939 00:54:20,360 --> 00:54:22,680 Speaker 2: for this risk and this lockup for a year or 940 00:54:22,719 --> 00:54:26,440 Speaker 2: five years. I'm not thinking it. So credit is pulled 941 00:54:26,719 --> 00:54:29,640 Speaker 2: if the interest rate gets to that floor. The ceiling 942 00:54:29,760 --> 00:54:33,560 Speaker 2: is set by the return on capital of the marginal enterprise. 943 00:54:34,360 --> 00:54:36,920 Speaker 2: You can't borrow a ten percent to open up a 944 00:54:36,960 --> 00:54:40,680 Speaker 2: Hamburger restaurant that produces eight percent return on capital, so 945 00:54:40,920 --> 00:54:44,200 Speaker 2: the return on capital tends to be pulled towards the 946 00:54:44,239 --> 00:54:46,879 Speaker 2: interest If the interest rate is falling, you keep pulling 947 00:54:46,920 --> 00:54:49,920 Speaker 2: the return on capital downwards because anybody that gets a 948 00:54:49,920 --> 00:54:54,120 Speaker 2: greater return on capital will borrow to expand production. If 949 00:54:54,120 --> 00:54:57,040 Speaker 2: you expand production enough, you add enough supply, prices come 950 00:54:57,120 --> 00:55:00,600 Speaker 2: down until return on capital is marginally about of the 951 00:55:00,680 --> 00:55:03,880 Speaker 2: interest rate, and then you know. Conversely, if the interest 952 00:55:03,920 --> 00:55:06,440 Speaker 2: rate is way above your return on capital, the smartest 953 00:55:06,440 --> 00:55:09,880 Speaker 2: thing to do is to sell all of your capital 954 00:55:09,920 --> 00:55:12,799 Speaker 2: assets off to get the cash to go put them 955 00:55:12,840 --> 00:55:15,759 Speaker 2: in t Bells. I mean, why would you be working 956 00:55:15,840 --> 00:55:18,799 Speaker 2: your you know what off and taking risk to get 957 00:55:18,840 --> 00:55:20,960 Speaker 2: three percent if you can get five and a half 958 00:55:21,000 --> 00:55:24,520 Speaker 2: in T Bells. So it's an arbitrage in both directions. 959 00:55:26,840 --> 00:55:29,239 Speaker 2: And then I literally mean it as an arbitrage. If 960 00:55:29,280 --> 00:55:32,239 Speaker 2: you can borrow less than your return on capital, you 961 00:55:32,280 --> 00:55:36,440 Speaker 2: will borrow and increase your production. If they, on the 962 00:55:36,480 --> 00:55:38,520 Speaker 2: other hand, if you can deposit and get more than 963 00:55:38,560 --> 00:55:41,759 Speaker 2: your return on capital, you should sell your assets and 964 00:55:41,920 --> 00:55:43,920 Speaker 2: just park it in T Bells because it's held a 965 00:55:43,960 --> 00:55:49,560 Speaker 2: lot easier. So the fat is it's not just that 966 00:55:49,640 --> 00:55:53,479 Speaker 2: they're only looking at one part of the equation. They've 967 00:55:53,520 --> 00:55:57,600 Speaker 2: got the dynamic exactly backwards. If they want lower consumer prices, 968 00:55:57,640 --> 00:56:00,400 Speaker 2: you should have lower interest rates. And this is not 969 00:56:00,440 --> 00:56:02,400 Speaker 2: a recommendation for lower interest rates. There's a lot of 970 00:56:02,480 --> 00:56:06,280 Speaker 2: other harms caused by this, but from a consumer price perspective, 971 00:56:06,480 --> 00:56:09,239 Speaker 2: there's a reason why we had this benign what people 972 00:56:09,280 --> 00:56:13,319 Speaker 2: call inflation environment from nineteen eighty one through twenty twenty one, 973 00:56:14,000 --> 00:56:18,160 Speaker 2: and that's because we have a falling interest rate and 974 00:56:18,280 --> 00:56:22,279 Speaker 2: that that was a you know, constant stimulus to ever 975 00:56:22,440 --> 00:56:26,320 Speaker 2: greater amounts of production. And therefore, you know prices remained 976 00:56:26,520 --> 00:56:29,759 Speaker 2: not necessarily falling, but let's just say soft. There were 977 00:56:30,080 --> 00:56:32,480 Speaker 2: a lot of non monetary forces pushing prices up, like 978 00:56:32,800 --> 00:56:36,560 Speaker 2: relentlessly increasing regulation, you know, making things more expensive, but 979 00:56:36,719 --> 00:56:39,640 Speaker 2: then falling interest rates making things cheaper than That result 980 00:56:39,840 --> 00:56:42,680 Speaker 2: was prices are pretty soft. You know. Producers did not 981 00:56:42,760 --> 00:56:46,840 Speaker 2: have any pricing power, you know, the nineteen seventies and 982 00:56:46,920 --> 00:56:48,920 Speaker 2: I'm just old enough to have been a you know, 983 00:56:49,080 --> 00:56:53,319 Speaker 2: twelve years old in nineteen seventy nine, nineteen seventy nine. 984 00:56:53,360 --> 00:56:56,960 Speaker 2: Producers had pricing power. If they just decided, well, I'm 985 00:56:57,000 --> 00:56:59,879 Speaker 2: going to increase my price by this percent, they could 986 00:56:59,880 --> 00:57:02,640 Speaker 2: just do that and everybody had to pay. And that's 987 00:57:02,680 --> 00:57:07,120 Speaker 2: what it was. It's not the reality that we've grown 988 00:57:07,200 --> 00:57:12,160 Speaker 2: up on for the last forty years. Yeah. 989 00:57:14,160 --> 00:57:21,400 Speaker 1: With gold, this is something that we used to be 990 00:57:21,480 --> 00:57:27,640 Speaker 1: illegal when it was illegal for American citizens to own gold. 991 00:57:29,040 --> 00:57:32,960 Speaker 1: FDR also outlawed the gold clause, which was in debt 992 00:57:33,040 --> 00:57:40,080 Speaker 1: contract to be a headwind against money printing that I, 993 00:57:40,280 --> 00:57:42,760 Speaker 1: if you owe me money, I can say you have 994 00:57:42,840 --> 00:57:46,000 Speaker 1: to pay me back in gold instead of dollars. And 995 00:57:46,800 --> 00:57:50,080 Speaker 1: that gold clause in debt contract was also outlawed. And 996 00:57:50,200 --> 00:57:53,920 Speaker 1: then nineteen seventy one, we leave the gold standard. I 997 00:57:53,960 --> 00:57:55,840 Speaker 1: believe it was a few years later they also got 998 00:57:55,920 --> 00:58:02,000 Speaker 1: that clause out. It was seventy five, okay, repealed, But 999 00:58:02,160 --> 00:58:06,240 Speaker 1: for the longest time still nobody was denominating debt inh 1000 00:58:06,560 --> 00:58:11,880 Speaker 1: in gold. And based on what we've talked about interest 1001 00:58:11,960 --> 00:58:18,200 Speaker 1: rates and the utility of gold being money and putting 1002 00:58:18,240 --> 00:58:23,040 Speaker 1: it to work. You you've started this, I always say 1003 00:58:23,080 --> 00:58:26,120 Speaker 1: it's a it's it's revolutionary because you know nobody's doing it, 1004 00:58:26,200 --> 00:58:29,280 Speaker 1: and it's it meets so many needs. You know, win 1005 00:58:29,360 --> 00:58:34,640 Speaker 1: win win for everybody involved. Where I can, I can 1006 00:58:34,800 --> 00:58:38,880 Speaker 1: lend out my gold, I can earn interest on my gold, 1007 00:58:40,240 --> 00:58:43,320 Speaker 1: it's paid in gold. That interest is denominated in gold, 1008 00:58:44,600 --> 00:58:47,600 Speaker 1: which is just crazy. So my ounces actually grow and 1009 00:58:48,800 --> 00:58:52,360 Speaker 1: the person on the other side that is borrowing that 1010 00:58:52,480 --> 00:58:56,320 Speaker 1: gold actually comes out the other side much better because 1011 00:58:56,760 --> 00:59:00,160 Speaker 1: they are in the gold business and so it it 1012 00:59:00,400 --> 00:59:06,480 Speaker 1: eliminates price risk for them. So number one, how did 1013 00:59:06,560 --> 00:59:09,320 Speaker 1: you come up with this idea? And then number two 1014 00:59:10,520 --> 00:59:12,280 Speaker 1: tell us tell us a little bit more about what 1015 00:59:12,400 --> 00:59:15,800 Speaker 1: I left out there on what monetary metals is doing. 1016 00:59:15,960 --> 00:59:18,440 Speaker 2: You know, it's very daunting. I mean, I guess the 1017 00:59:18,560 --> 00:59:21,640 Speaker 2: entrepreneurship is always daunting. I always like to say in 1018 00:59:21,680 --> 00:59:24,520 Speaker 2: my lighter moments that everybody sees problems in the world, 1019 00:59:25,320 --> 00:59:27,000 Speaker 2: and most people what do they do is, you know, 1020 00:59:27,080 --> 00:59:29,320 Speaker 2: after work, they get together with their buddies at a 1021 00:59:29,360 --> 00:59:31,600 Speaker 2: bar and drink and kind of grasp about the problems 1022 00:59:31,640 --> 00:59:33,760 Speaker 2: a little bit, and then you know, go home and 1023 00:59:33,800 --> 00:59:35,760 Speaker 2: the next day they go back to work. Some people 1024 00:59:35,880 --> 00:59:37,680 Speaker 2: lobby the government, and they think the government's going to 1025 00:59:37,680 --> 00:59:41,160 Speaker 2: fix all the problems. The entrepreneurs the crazy guy that says, 1026 00:59:41,200 --> 00:59:43,160 Speaker 2: I see a way to make money solving this problem. 1027 00:59:44,400 --> 00:59:48,640 Speaker 2: And depending on the magnitude of the problem, it's always daunting. 1028 00:59:48,720 --> 00:59:50,680 Speaker 2: But the bigger the problem, the more daunting it is. 1029 00:59:51,560 --> 00:59:53,520 Speaker 2: And so I saw that there was a problem in 1030 00:59:53,560 --> 00:59:57,000 Speaker 2: the monetary system and that it isn't working anymore because 1031 00:59:57,040 --> 01:00:00,600 Speaker 2: the currency is irredeemable. There's two consequences. One, the interest 1032 01:00:00,680 --> 01:00:03,480 Speaker 2: rate is completely unhinged. It could shoot the moon as 1033 01:00:03,520 --> 01:00:06,160 Speaker 2: it did from into World War two to in nineteen 1034 01:00:06,200 --> 01:00:08,040 Speaker 2: eighty one, and it can fall into the black hole 1035 01:00:08,040 --> 01:00:12,360 Speaker 2: a zero as a dead post nineteen eighty one. The 1036 01:00:12,440 --> 01:00:15,240 Speaker 2: other is that because there's no extinguisher of debt, that 1037 01:00:15,440 --> 01:00:21,440 Speaker 2: the debt necessarily inevitably grows and grows exponentially. You have 1038 01:00:21,520 --> 01:00:23,560 Speaker 2: to keep producing more. It's a breeder reactor. It keeps 1039 01:00:23,640 --> 01:00:25,640 Speaker 2: producing more and more and it has to and if 1040 01:00:25,680 --> 01:00:27,400 Speaker 2: we try to stop it. That's the other problem with 1041 01:00:27,480 --> 01:00:29,400 Speaker 2: what Powell is doing. If we really want to try 1042 01:00:29,440 --> 01:00:32,760 Speaker 2: to stop credit growth, you're gonna blow everything up, starting 1043 01:00:32,800 --> 01:00:34,360 Speaker 2: not with the US gover. I want to look at 1044 01:00:34,360 --> 01:00:36,080 Speaker 2: the US government and they're gonna it's gonna be hard 1045 01:00:36,120 --> 01:00:40,160 Speaker 2: for them to pay their you know, t bells, window, No, no, no, 1046 01:00:40,240 --> 01:00:42,560 Speaker 2: it's all the other debtors that are gonna squeezed the 1047 01:00:42,640 --> 01:00:45,840 Speaker 2: default first. The US government will be the last debtor 1048 01:00:46,040 --> 01:00:51,160 Speaker 2: to be pushed into default. So I saw this problem, 1049 01:00:51,640 --> 01:00:53,880 Speaker 2: and I said at the same time I was I 1050 01:00:54,000 --> 01:00:57,440 Speaker 2: was working on this economics concept that interest is the 1051 01:00:57,520 --> 01:01:02,120 Speaker 2: force that pulls gold into the market. So well, historically 1052 01:01:02,280 --> 01:01:04,840 Speaker 2: we know there was enough gold to run everything. So 1053 01:01:05,160 --> 01:01:07,560 Speaker 2: a little bit trivia item, which is actually pretty important, 1054 01:01:07,920 --> 01:01:10,040 Speaker 2: how much gold do you think there was in London 1055 01:01:10,440 --> 01:01:13,760 Speaker 2: in eighteen ninety six, which was arguably the height of 1056 01:01:14,440 --> 01:01:17,120 Speaker 2: the gold standard international gold standard, when London ran the 1057 01:01:17,160 --> 01:01:19,640 Speaker 2: world's commerce and the world's monetary system. How much gold 1058 01:01:19,640 --> 01:01:24,000 Speaker 2: do you think they actually had behind it one hundred 1059 01:01:24,000 --> 01:01:29,120 Speaker 2: and sixty tons. The state of Nevada annually produces one 1060 01:01:29,200 --> 01:01:34,240 Speaker 2: hundred and sixty six tons. So there's plenty of gold, wow, 1061 01:01:34,920 --> 01:01:37,920 Speaker 2: we have out there, but it doesn't circulate. You know, 1062 01:01:38,080 --> 01:01:41,920 Speaker 2: whatever amount of gold comes to market, which today is 1063 01:01:42,000 --> 01:01:45,840 Speaker 2: something like three thousand tons, that gold disappears. It's a 1064 01:01:45,880 --> 01:01:48,120 Speaker 2: black hole, and you know the market will just absorb 1065 01:01:48,240 --> 01:01:51,439 Speaker 2: all of that just disappears. There's no amount of gold 1066 01:01:51,480 --> 01:01:54,520 Speaker 2: that would ever make it circulate anymore because the interesstrate zero. 1067 01:01:54,760 --> 01:01:56,600 Speaker 2: So I'm working on this idea that interest is what 1068 01:01:56,640 --> 01:01:59,040 Speaker 2: would draw gold into the market. And then I'm working 1069 01:01:59,120 --> 01:02:03,280 Speaker 2: on this idea that the monetary system is broken in 1070 01:02:03,480 --> 01:02:06,400 Speaker 2: a very fundamental way. It's not a matter of well, 1071 01:02:06,440 --> 01:02:09,640 Speaker 2: we need a new FED board, a new FED chairman 1072 01:02:10,120 --> 01:02:13,360 Speaker 2: who will just set better monetary policy. That's not it. 1073 01:02:13,480 --> 01:02:15,400 Speaker 2: I wrote an article called sound money is in what 1074 01:02:15,520 --> 01:02:18,960 Speaker 2: you Think? And I had a picture of the Norman 1075 01:02:19,080 --> 01:02:21,840 Speaker 2: Rockwell painting. It was on the Saturday Evening Post and 1076 01:02:21,920 --> 01:02:24,360 Speaker 2: it was called the Double Ride. So it's a woman 1077 01:02:24,680 --> 01:02:27,520 Speaker 2: buying some chicken or something like that, and it's on 1078 01:02:27,640 --> 01:02:29,680 Speaker 2: the scale, it's hanging on the chains from the ceiling, 1079 01:02:30,520 --> 01:02:33,720 Speaker 2: and she's got her thumb pushing up underneath it to 1080 01:02:33,760 --> 01:02:35,400 Speaker 2: try to lighten it, so she's going to pay less. 1081 01:02:36,000 --> 01:02:39,720 Speaker 2: And the butcher can't see that because the meat and 1082 01:02:39,840 --> 01:02:43,600 Speaker 2: the metal pan is blocking her. He can't see her thumb. 1083 01:02:43,840 --> 01:02:46,680 Speaker 2: But meanwhile he's got his finger trying to push it down, 1084 01:02:47,600 --> 01:02:49,640 Speaker 2: and there's a fold of butcher paper, so she can't 1085 01:02:49,680 --> 01:02:52,400 Speaker 2: see his finger putting it down. And I asked the 1086 01:02:52,440 --> 01:02:55,479 Speaker 2: rhetorical question. Suppose that the up force from her thumb 1087 01:02:55,520 --> 01:02:59,479 Speaker 2: and the downforest from his index finger exactly matched. What'd 1088 01:02:59,480 --> 01:03:02,320 Speaker 2: you call that an honest measurement? Would you call that 1089 01:03:02,400 --> 01:03:04,200 Speaker 2: a sound measure of the weight of the ticket? Of 1090 01:03:04,240 --> 01:03:07,120 Speaker 2: course not. They're both cheating, and even if the cheats 1091 01:03:07,160 --> 01:03:10,840 Speaker 2: happen to cancel out by pure luck. Right, So imagine 1092 01:03:10,880 --> 01:03:14,120 Speaker 2: if the central bank we're trying to debase the currency 1093 01:03:14,720 --> 01:03:19,440 Speaker 2: at precisely the same rate that industry is increasing its efficiency. Right, 1094 01:03:19,440 --> 01:03:22,360 Speaker 2: because every day, every producer of everything is constantly finding 1095 01:03:22,400 --> 01:03:24,880 Speaker 2: ways to do less with more or do more with less. 1096 01:03:26,800 --> 01:03:28,800 Speaker 2: So imagine those two rates canceled out, and then that 1097 01:03:28,960 --> 01:03:31,960 Speaker 2: result was prices weren't moving up or down. What do 1098 01:03:32,040 --> 01:03:35,800 Speaker 2: you call that sound money? Of course? Not. So you 1099 01:03:35,840 --> 01:03:37,640 Speaker 2: know what would sound money be would be when the 1100 01:03:37,680 --> 01:03:40,040 Speaker 2: people are free to choose what they want, and they're 1101 01:03:40,040 --> 01:03:42,520 Speaker 2: going to choose something that actually works. That thing we 1102 01:03:42,680 --> 01:03:45,160 Speaker 2: know is gold. It's not banan appeals, it's not seashells, 1103 01:03:45,440 --> 01:03:48,439 Speaker 2: it's not salt. It's gold. They're going to choose gold 1104 01:03:48,480 --> 01:03:53,640 Speaker 2: if you didn't impose, you know, legal restrictions in between 1105 01:03:53,680 --> 01:03:56,200 Speaker 2: them and the gold. So I'm wrestling with all these 1106 01:03:56,280 --> 01:04:00,080 Speaker 2: ideas and I'm you know, already my previous company he 1107 01:04:00,200 --> 01:04:02,720 Speaker 2: was pretty daunting. Anyways, I'm like, okay, I'm not going 1108 01:04:02,800 --> 01:04:05,600 Speaker 2: to be daunted by this. How oh you marry these 1109 01:04:05,600 --> 01:04:07,680 Speaker 2: two together and say we got to offer interest on 1110 01:04:07,800 --> 01:04:10,360 Speaker 2: gold and that will pull the gold into the market. 1111 01:04:11,400 --> 01:04:13,240 Speaker 2: And what are we going to do with it? Well, 1112 01:04:13,280 --> 01:04:15,920 Speaker 2: we're going to place it in businesses that could do 1113 01:04:16,040 --> 01:04:17,600 Speaker 2: something with it. And at first that's going to be 1114 01:04:17,600 --> 01:04:20,800 Speaker 2: the gold industry. So we lease gold to businesses that 1115 01:04:20,960 --> 01:04:24,360 Speaker 2: need gold as inventory or work in progress. So that 1116 01:04:24,480 --> 01:04:31,720 Speaker 2: could be refiners, mints, jewelers, recyclers, codings. Companies both high 1117 01:04:31,760 --> 01:04:34,919 Speaker 2: tech and low tech. You know, low tech would be electroplating. 1118 01:04:35,000 --> 01:04:38,120 Speaker 2: High tech would be sputtering. If you ever seen mirrored sunglasses. 1119 01:04:38,200 --> 01:04:42,320 Speaker 2: You've seen gold that's been sputtered onto a plastic substrate. 1120 01:04:44,040 --> 01:04:46,440 Speaker 2: We'll lease gold to these guys, and we'll lend gold 1121 01:04:47,680 --> 01:04:50,800 Speaker 2: to businesses that have a gold income, like gold mines, 1122 01:04:50,920 --> 01:04:53,360 Speaker 2: although there are other industries as well. So there's about 1123 01:04:53,360 --> 01:04:57,120 Speaker 2: a dozen verticals that we can serve in between these 1124 01:04:57,160 --> 01:05:00,640 Speaker 2: two products that can certainly mobilize and pay interest on 1125 01:05:00,680 --> 01:05:03,440 Speaker 2: a lot of gold. Beyond this, there's a lot of 1126 01:05:03,480 --> 01:05:05,400 Speaker 2: other things we can do. But it's a step by 1127 01:05:05,440 --> 01:05:08,720 Speaker 2: step process, and I kind of liken it too. Do 1128 01:05:08,760 --> 01:05:11,560 Speaker 2: you know what the first coin operated video game was? 1129 01:05:14,480 --> 01:05:17,080 Speaker 2: That's the second coin operated video game? And I'm sorry 1130 01:05:17,120 --> 01:05:19,280 Speaker 2: I set a chap for you with that question. So 1131 01:05:19,400 --> 01:05:21,720 Speaker 2: unless you're from the video game business, which I came from, 1132 01:05:22,040 --> 01:05:25,720 Speaker 2: you wouldn't necessarily know. So Atari developed this I think 1133 01:05:25,760 --> 01:05:28,360 Speaker 2: it was called something like Space War. So there were 1134 01:05:28,360 --> 01:05:30,080 Speaker 2: two players. They both had paddles, and they had a 1135 01:05:30,120 --> 01:05:32,680 Speaker 2: button to actually two buttons, one to thrust and one 1136 01:05:32,760 --> 01:05:34,560 Speaker 2: to fire, and there's a star at the center of 1137 01:05:34,600 --> 01:05:37,080 Speaker 2: the screen which had gravity, and so you try to 1138 01:05:37,120 --> 01:05:40,200 Speaker 2: slingshot around that to come from behind your opponent like 1139 01:05:40,240 --> 01:05:42,560 Speaker 2: there was a dog fight, and then you fire your bullet, 1140 01:05:42,600 --> 01:05:44,920 Speaker 2: which also followed the gravities that you could sneak the 1141 01:05:44,960 --> 01:05:48,600 Speaker 2: bullet around there. And it was complicated. So they produced 1142 01:05:48,640 --> 01:05:50,640 Speaker 2: this game. The test trialed it in a few bars 1143 01:05:51,120 --> 01:05:53,000 Speaker 2: and it didn't really do very well. And basically the 1144 01:05:53,040 --> 01:05:57,400 Speaker 2: feedback that came back was it's too complicated. Do something. 1145 01:05:57,640 --> 01:06:00,480 Speaker 2: Do the simplest thing you can do. The ears kind 1146 01:06:00,480 --> 01:06:03,520 Speaker 2: of stratched their head, hm hm, okay, what could be simpler. 1147 01:06:03,600 --> 01:06:05,520 Speaker 2: Then they both have a paddle and there's a ball 1148 01:06:05,560 --> 01:06:08,640 Speaker 2: that bounces back and forth, and that was problem. So 1149 01:06:09,400 --> 01:06:12,000 Speaker 2: they market that. They put it in a bar and 1150 01:06:12,160 --> 01:06:13,680 Speaker 2: they come back the next day and they said, had 1151 01:06:13,680 --> 01:06:15,200 Speaker 2: to do and the bartender said, well, it seemed to 1152 01:06:15,200 --> 01:06:18,520 Speaker 2: be really popular at first, and then your machine broke. Okay, 1153 01:06:18,600 --> 01:06:20,360 Speaker 2: so they go open it up. They put a one 1154 01:06:20,440 --> 01:06:23,160 Speaker 2: gallon milk jug in there for the quarters, and the 1155 01:06:23,240 --> 01:06:25,840 Speaker 2: milk jug had completely filled up, and then there was 1156 01:06:25,880 --> 01:06:27,880 Speaker 2: like a shoot that brought the quarters from the slot. 1157 01:06:27,920 --> 01:06:30,320 Speaker 2: It was jammed all the way up solid with quarters 1158 01:06:30,680 --> 01:06:33,760 Speaker 2: until they're practically sticking out the slot. And I said, okay, 1159 01:06:33,920 --> 01:06:36,120 Speaker 2: we can fix that, and they put in a five bucket. 1160 01:06:37,640 --> 01:06:39,240 Speaker 2: So you know, the idea is you have to make 1161 01:06:39,320 --> 01:06:42,280 Speaker 2: something simple enough for where the market, what the market's 1162 01:06:42,320 --> 01:06:44,800 Speaker 2: ready for at that moment in time. And then later, 1163 01:06:44,880 --> 01:06:47,360 Speaker 2: of course, video games became much more complicated, but the 1164 01:06:47,440 --> 01:06:49,560 Speaker 2: market was ready for them. So there's a ton of 1165 01:06:49,640 --> 01:06:54,000 Speaker 2: other things we can do. But right now it's leasing 1166 01:06:54,120 --> 01:06:57,880 Speaker 2: to you, as I said, a dozen verticals and lending 1167 01:06:57,960 --> 01:07:01,160 Speaker 2: to your gold mines and a few others. And then 1168 01:07:01,200 --> 01:07:03,640 Speaker 2: as it grows, you know, there'll be more products that 1169 01:07:03,680 --> 01:07:06,560 Speaker 2: we can roll out and ultimately bring back. So I 1170 01:07:06,800 --> 01:07:12,680 Speaker 2: argue to our investors or equity investors that a good 1171 01:07:12,920 --> 01:07:16,440 Speaker 2: working definition or a working gold standard is what anybody 1172 01:07:16,600 --> 01:07:18,960 Speaker 2: wants to can deposit their gold and the interest on 1173 01:07:19,000 --> 01:07:21,320 Speaker 2: their gold in gold. So you don't have to deposit 1174 01:07:21,360 --> 01:07:23,520 Speaker 2: your gold. You have the right to hold the gold 1175 01:07:23,560 --> 01:07:27,440 Speaker 2: at home, no taxes, no machine gun guards going door 1176 01:07:27,480 --> 01:07:29,240 Speaker 2: to door confiscating it is a right to hold it 1177 01:07:29,320 --> 01:07:31,680 Speaker 2: at home or you know, put it in a warehouse, 1178 01:07:31,760 --> 01:07:33,439 Speaker 2: or put it in a safety deposit box, or whatever 1179 01:07:33,480 --> 01:07:34,960 Speaker 2: does you want to do. Give it to your friend 1180 01:07:35,040 --> 01:07:37,560 Speaker 2: stick under his mattress. But if you want to, you 1181 01:07:37,680 --> 01:07:39,760 Speaker 2: have the right to deposit it and get interest on it. 1182 01:07:40,120 --> 01:07:42,880 Speaker 2: When that condition is true, that anybody wants to is 1183 01:07:42,920 --> 01:07:46,040 Speaker 2: depositing it and getting interested. That's a working gold standard, 1184 01:07:46,320 --> 01:07:49,120 Speaker 2: and you get all the other behaviors and activities you'd 1185 01:07:49,200 --> 01:07:56,160 Speaker 2: expect meetium, exchange, store of value, unit of account, et cetera, 1186 01:07:56,160 --> 01:07:58,840 Speaker 2: et cetera, et cetera, will all come as a consequence 1187 01:07:58,880 --> 01:08:02,920 Speaker 2: of it being used in finance. So therefore the gold 1188 01:08:03,000 --> 01:08:05,720 Speaker 2: standard is when we scale up. That is what we're 1189 01:08:05,720 --> 01:08:07,840 Speaker 2: trying to do. We're trying to bring the world to 1190 01:08:08,000 --> 01:08:12,760 Speaker 2: a better place in terms of monetary system. Something that 1191 01:08:12,800 --> 01:08:18,200 Speaker 2: actually works, something that re enfranchises the savior, reduces the 1192 01:08:18,360 --> 01:08:22,120 Speaker 2: arbitrary and capricious power of the government, not obviously not 1193 01:08:22,240 --> 01:08:25,320 Speaker 2: only just to take from you what you've earned, but 1194 01:08:25,439 --> 01:08:28,280 Speaker 2: then also to use it for political purposes, to increase 1195 01:08:28,360 --> 01:08:31,840 Speaker 2: the power in a myriad of other ways, none of 1196 01:08:31,920 --> 01:08:37,560 Speaker 2: which is really healthy. And so it's very daunting. But 1197 01:08:38,240 --> 01:08:40,320 Speaker 2: we prove the concept, we prove that the gold does 1198 01:08:40,400 --> 01:08:44,479 Speaker 2: come for interest. And now we're at the you know, 1199 01:08:45,400 --> 01:08:48,320 Speaker 2: ord in any ordinary business, once you've gotten traction, right now, 1200 01:08:48,360 --> 01:08:50,560 Speaker 2: you have to execute. Now you have to scale. So 1201 01:08:50,680 --> 01:08:52,599 Speaker 2: that's that's the stage we're at right now. 1202 01:08:53,800 --> 01:09:00,240 Speaker 1: So daunting, but exciting, very exciting, and it's you know, 1203 01:09:00,600 --> 01:09:03,080 Speaker 1: I've I've said this many times, but it's one of 1204 01:09:03,120 --> 01:09:05,919 Speaker 1: the reasons why I'm an equity investor and a customer 1205 01:09:06,680 --> 01:09:11,040 Speaker 1: of monetary metals, and you guys have been you know, 1206 01:09:11,160 --> 01:09:14,880 Speaker 1: long term partners in my YouTube channel as well. What 1207 01:09:15,280 --> 01:09:18,160 Speaker 1: I wanted to ask you this. I know, we're thank 1208 01:09:18,240 --> 01:09:21,160 Speaker 1: you for being so generous with your time. We're running 1209 01:09:21,160 --> 01:09:25,240 Speaker 1: over here. So I one of the there's a lot 1210 01:09:25,240 --> 01:09:28,439 Speaker 1: of people have been burned by like the crypto ft 1211 01:09:28,800 --> 01:09:32,439 Speaker 1: X collapse, and there's this idea out there right now 1212 01:09:33,120 --> 01:09:35,920 Speaker 1: that which you know, for for good reason, like people 1213 01:09:36,040 --> 01:09:39,960 Speaker 1: people got burned by this that if something pays you interest, 1214 01:09:40,439 --> 01:09:44,040 Speaker 1: it's inherently a Ponzi scheme or a scam. And it 1215 01:09:44,160 --> 01:09:46,280 Speaker 1: even goes back to you know, the Federal Reserve and 1216 01:09:46,360 --> 01:09:50,240 Speaker 1: the you know, FIAT monetary system. And how do you 1217 01:09:51,080 --> 01:09:53,720 Speaker 1: you know, have you heard people you know say that, 1218 01:09:53,840 --> 01:09:56,840 Speaker 1: and how do you kind of discuss that with people 1219 01:09:56,920 --> 01:09:57,920 Speaker 1: that that have gotten Yeah. 1220 01:09:57,760 --> 01:10:00,320 Speaker 2: I mean it's a natural question. Obviously, every time some 1221 01:10:00,479 --> 01:10:04,040 Speaker 2: crypto company blows up and turns out to be a 1222 01:10:04,080 --> 01:10:07,040 Speaker 2: fraud or a scam, then of course that question becomes 1223 01:10:07,120 --> 01:10:11,760 Speaker 2: very topical. I think in a couple of observations. One 1224 01:10:11,920 --> 01:10:14,840 Speaker 2: is that the whole ethos of cryptos get rich quick. 1225 01:10:15,720 --> 01:10:18,280 Speaker 2: That's why the investors. I mean, that's let's just call 1226 01:10:18,680 --> 01:10:20,720 Speaker 2: it for what it is. That's why the investors are there. 1227 01:10:21,360 --> 01:10:24,280 Speaker 2: And so that bread a whole industry of companies with 1228 01:10:24,320 --> 01:10:26,759 Speaker 2: the same ethos. And if you're a company with ethos 1229 01:10:26,800 --> 01:10:30,000 Speaker 2: that get rich quick, you may or may not be 1230 01:10:30,080 --> 01:10:32,240 Speaker 2: an outright Ponzi scheme, but at the very least you're 1231 01:10:32,280 --> 01:10:34,599 Speaker 2: going to be pretty lax. There's a lot of things 1232 01:10:34,640 --> 01:10:36,639 Speaker 2: you have to invest in to be a proper custodian 1233 01:10:36,720 --> 01:10:39,880 Speaker 2: in terms of internal controls and systems, and you know, 1234 01:10:39,920 --> 01:10:42,000 Speaker 2: if you're just there to get rich quick, you don't 1235 01:10:42,000 --> 01:10:47,840 Speaker 2: necessarily make those investments. But ultimately in crypto, since they're 1236 01:10:47,880 --> 01:10:51,080 Speaker 2: not borrowable by anybody produces anything real in the real world. 1237 01:10:51,600 --> 01:10:55,160 Speaker 2: I mean, there's nobody growing wheat. There's nobody mining steel 1238 01:10:55,280 --> 01:10:59,000 Speaker 2: or copper or aluminum. There's nobody manufacturing widgets. There's nobody 1239 01:10:59,040 --> 01:11:03,840 Speaker 2: who buys trucks or and warehouses to handle logistics. There's 1240 01:11:03,840 --> 01:11:07,880 Speaker 2: nobody who's a retailer or distributor. There's nobody with looms 1241 01:11:07,960 --> 01:11:11,120 Speaker 2: producing you know, fabric and turning that into gorments. Who 1242 01:11:11,200 --> 01:11:15,760 Speaker 2: borrows bitcoin, let alone any of the other you know cryptos. 1243 01:11:16,960 --> 01:11:18,320 Speaker 2: So how do you get a yield? Well, it all 1244 01:11:18,360 --> 01:11:22,720 Speaker 2: becomes self referential, it all becomes well, you know, you 1245 01:11:22,760 --> 01:11:25,240 Speaker 2: wrap it with enough complexity that maybe even half the 1246 01:11:25,280 --> 01:11:27,920 Speaker 2: people that are doing it don't really realize what it is. 1247 01:11:28,360 --> 01:11:31,519 Speaker 2: But it's borrowing in order to bet on the price action. 1248 01:11:32,560 --> 01:11:35,559 Speaker 2: It's just more leverage to bet on prices. And as 1249 01:11:35,560 --> 01:11:37,560 Speaker 2: long as prices are going up, everybody seems to be 1250 01:11:37,680 --> 01:11:40,559 Speaker 2: making lots of money, it seems to be working. Prices 1251 01:11:40,640 --> 01:11:45,160 Speaker 2: go down, it all blows up. So that is inherently ponzi. 1252 01:11:45,400 --> 01:11:49,080 Speaker 2: You know, by its nature, you cannot get a self 1253 01:11:49,160 --> 01:11:52,440 Speaker 2: referential yield. You can't build a software platform that intrinsically 1254 01:11:52,520 --> 01:11:55,960 Speaker 2: generates a yild internally, there's no economic purpose to it. 1255 01:11:56,000 --> 01:11:59,320 Speaker 2: And there's no economic purpose to it. People rightfully should say, well, 1256 01:11:59,400 --> 01:12:02,439 Speaker 2: what was going on here? What we're doing is fundamentally 1257 01:12:02,520 --> 01:12:04,760 Speaker 2: different than that. We're going to real businesses that are 1258 01:12:04,800 --> 01:12:07,280 Speaker 2: doing real things in the real world who need have 1259 01:12:07,400 --> 01:12:10,960 Speaker 2: a real finance problem. Suppose you're a jeweler and you 1260 01:12:11,120 --> 01:12:14,719 Speaker 2: have five hundred ounces of gold jewelry in your shop, 1261 01:12:15,320 --> 01:12:18,559 Speaker 2: lots of million dollars that I mean, if it was copper, 1262 01:12:18,880 --> 01:12:22,599 Speaker 2: you just buy it coppers a pound, who cares it's gold. 1263 01:12:22,640 --> 01:12:25,400 Speaker 2: That's two thousand dollars an ounce. That has to be financed. 1264 01:12:25,400 --> 01:12:28,080 Speaker 2: So if you borrow a million dollars to buy a 1265 01:12:28,120 --> 01:12:31,080 Speaker 2: million dollars worth of inventory and the price of gold drops, 1266 01:12:31,720 --> 01:12:33,760 Speaker 2: you now have a nine hundred thousand dollar asset, but 1267 01:12:33,800 --> 01:12:36,920 Speaker 2: you still owe a million dollar liability. You are insolvent. 1268 01:12:37,720 --> 01:12:39,560 Speaker 2: So then what you have to do, if you're you know, 1269 01:12:40,160 --> 01:12:43,040 Speaker 2: sophisticated about this, is you borrow a million and a quarter, 1270 01:12:43,600 --> 01:12:45,280 Speaker 2: you buy a million dollars worth of gold, You put 1271 01:12:45,280 --> 01:12:48,120 Speaker 2: a quarter million dollars in a brokerit account and trade 1272 01:12:48,120 --> 01:12:51,759 Speaker 2: gold futures. And then, you know, if you're a refiner 1273 01:12:51,800 --> 01:12:54,000 Speaker 2: and you have seventy five employees, most of them are 1274 01:12:54,040 --> 01:12:57,680 Speaker 2: basically blue collar, you know, either doing mixing assets and 1275 01:12:57,760 --> 01:13:00,720 Speaker 2: chemicals or melting and dealing, you know, basically working in 1276 01:13:00,760 --> 01:13:03,240 Speaker 2: a hot shop. And then you hire some twenty seven 1277 01:13:03,320 --> 01:13:05,840 Speaker 2: year old MBA and finance and give them the keys 1278 01:13:05,880 --> 01:13:08,320 Speaker 2: to appropriate your account with a quarter million dollars in 1279 01:13:08,400 --> 01:13:10,759 Speaker 2: capital in it and access to one hundred to one leverage, 1280 01:13:11,080 --> 01:13:13,960 Speaker 2: and say, please, don't do anything I wouldn't do, but 1281 01:13:14,120 --> 01:13:17,200 Speaker 2: just keep us hedged. You know, things can go wrong. 1282 01:13:17,560 --> 01:13:21,559 Speaker 2: Things can go So if you lease the gold, then 1283 01:13:21,640 --> 01:13:23,720 Speaker 2: it's not your asset. It's not on your balance sheet, 1284 01:13:23,720 --> 01:13:26,960 Speaker 2: which rest all protects the investor because the investor keeps 1285 01:13:27,000 --> 01:13:30,360 Speaker 2: the title to it. And then secondly, because it's not 1286 01:13:30,439 --> 01:13:33,280 Speaker 2: your asset, the price action isn't your problem. What you 1287 01:13:33,439 --> 01:13:35,040 Speaker 2: owe a return off at the end of the lease 1288 01:13:35,120 --> 01:13:37,759 Speaker 2: period is not a million dollars but five hundred ounces. 1289 01:13:38,280 --> 01:13:40,240 Speaker 2: So as long as your business is every time I 1290 01:13:40,400 --> 01:13:43,519 Speaker 2: sell Announce to a customer, I buy another ounce of 1291 01:13:45,240 --> 01:13:47,559 Speaker 2: more delily from the wholesaler, so I'm always keeping five 1292 01:13:47,640 --> 01:13:50,200 Speaker 2: hundred ounces of inventory in stock. As long as the 1293 01:13:50,240 --> 01:13:53,280 Speaker 2: business is run in a sustainable way, then you can 1294 01:13:53,320 --> 01:13:56,000 Speaker 2: always return five hundred ounces at the end. You never 1295 01:13:56,160 --> 01:13:56,519 Speaker 2: have that. 1296 01:13:58,080 --> 01:14:00,240 Speaker 1: Again, it doesn't matter what the price does because. 1297 01:14:00,320 --> 01:14:03,960 Speaker 2: It so it's very simple metal accounting, and so it 1298 01:14:04,040 --> 01:14:06,479 Speaker 2: simplifies not only as it gives them the finance they need, 1299 01:14:06,520 --> 01:14:09,120 Speaker 2: because they need finance, but it does it in a 1300 01:14:09,160 --> 01:14:13,800 Speaker 2: way that's simpler versus the conventional way of doing it. 1301 01:14:13,920 --> 01:14:16,120 Speaker 2: And they're of course happy to pay interest for the 1302 01:14:16,200 --> 01:14:18,360 Speaker 2: privilege of getting the finance and the built in hetch 1303 01:14:19,160 --> 01:14:21,960 Speaker 2: so that's how we generate interest by going into the 1304 01:14:22,000 --> 01:14:26,000 Speaker 2: real world and finding real businesses. Now, there is a risk, obviously, 1305 01:14:26,080 --> 01:14:28,439 Speaker 2: there's a risk if you at least the gold to 1306 01:14:28,520 --> 01:14:30,280 Speaker 2: the wrong guy and he just tucks it under his 1307 01:14:30,400 --> 01:14:35,200 Speaker 2: arm and he flies to a non extradition country, you know. 1308 01:14:35,280 --> 01:14:37,679 Speaker 2: And so we obviously do a lot of due diligence, 1309 01:14:37,760 --> 01:14:39,160 Speaker 2: We have insurance, there's a lot of things we do 1310 01:14:39,320 --> 01:14:45,960 Speaker 2: to mitigate, you know, those risks. But it's not it 1311 01:14:46,000 --> 01:14:48,160 Speaker 2: should be pretty clear and when people study or program, 1312 01:14:48,320 --> 01:14:50,880 Speaker 2: we don't really get pressed. How do I know it's 1313 01:14:50,880 --> 01:14:53,360 Speaker 2: not a ponsiting. I mean, you can see because you 1314 01:14:53,520 --> 01:14:56,400 Speaker 2: describe the transaction that we talk about the companies we're 1315 01:14:56,400 --> 01:14:58,519 Speaker 2: at leasting gold to. We do a press release on 1316 01:14:58,600 --> 01:15:01,960 Speaker 2: every deal. Can see that, Okay, there's some real activity here. 1317 01:15:02,600 --> 01:15:06,920 Speaker 2: And some of our customers are highly referenceable that they're 1318 01:15:07,479 --> 01:15:10,600 Speaker 2: you know, either publicly traded or well known names in 1319 01:15:10,640 --> 01:15:15,759 Speaker 2: the space. Asahi Refinery is symbol gold Refinery a Coba 1320 01:15:15,840 --> 01:15:20,160 Speaker 2: Minerals which is traded as public and Oslo. You know, 1321 01:15:20,240 --> 01:15:22,519 Speaker 2: you don't get to go do press releases with public 1322 01:15:22,560 --> 01:15:25,800 Speaker 2: companies if you didn't really do that deal. I mean, 1323 01:15:25,800 --> 01:15:28,080 Speaker 2: you'd get to see some desist letter, it'll blow up 1324 01:15:28,080 --> 01:15:31,519 Speaker 2: in your face really fast. So no, we don't. I 1325 01:15:31,600 --> 01:15:33,680 Speaker 2: mean people ask that question casually, but when they look 1326 01:15:33,720 --> 01:15:36,200 Speaker 2: at it, it's pretty clear that what we're doing is 1327 01:15:37,200 --> 01:15:39,840 Speaker 2: it's a pretty it's pretty straightforward, pretty simple business. Yes 1328 01:15:39,920 --> 01:15:42,720 Speaker 2: there's a risk, but it's pretty straight toward business. Well, 1329 01:15:42,800 --> 01:15:43,120 Speaker 2: I love it. 1330 01:15:43,240 --> 01:15:46,080 Speaker 1: I could talk to you for hours, So thank you 1331 01:15:46,160 --> 01:15:48,160 Speaker 1: so much for being generous with your time here. Going 1332 01:15:48,200 --> 01:15:50,320 Speaker 1: a little bit over and we'll have to have you 1333 01:15:50,400 --> 01:15:53,479 Speaker 1: back on, but really appreciate it. Thank you, thanks for 1334 01:15:53,560 --> 01:15:57,000 Speaker 1: having me. All right, we'll talk to you later, all right,