1 00:00:00,040 --> 00:00:03,280 Speaker 1: Welcome everybody to another episode of Financial Heresy. I am 2 00:00:03,320 --> 00:00:07,000 Speaker 1: your host, Joe Brown, and today we are going through 3 00:00:07,040 --> 00:00:11,520 Speaker 1: part two of the history of money. So we started 4 00:00:11,520 --> 00:00:14,280 Speaker 1: off with money how it started. Now we're looking at 5 00:00:14,320 --> 00:00:18,239 Speaker 1: money how it changed. So in the last episode we 6 00:00:18,360 --> 00:00:23,840 Speaker 1: covered what economies and monetary systems looked like when gold 7 00:00:23,960 --> 00:00:26,800 Speaker 1: was money, when the supply of money didn't change, and 8 00:00:27,080 --> 00:00:32,080 Speaker 1: what the dynamics of that were. But obviously Matt didn't 9 00:00:32,120 --> 00:00:35,480 Speaker 1: stick around, and at some point it changed and people 10 00:00:35,520 --> 00:00:39,720 Speaker 1: started using paper for money instead of gold, and so 11 00:00:39,760 --> 00:00:44,159 Speaker 1: we're gonna talk about that transition. What caused that transition 12 00:00:44,200 --> 00:00:49,520 Speaker 1: to take place, and how the rules changed with economic 13 00:00:49,640 --> 00:00:53,559 Speaker 1: success when you started using paper for money instead of 14 00:00:53,720 --> 00:00:59,440 Speaker 1: everybody using those gold coins for money. So how did 15 00:00:59,640 --> 00:01:04,200 Speaker 1: this transition take place? Well, we covered in the last 16 00:01:04,240 --> 00:01:10,840 Speaker 1: episode how deflation naturally occurs when there's a fixed supply 17 00:01:11,080 --> 00:01:14,319 Speaker 1: of money. That makes sense, right, because if the money 18 00:01:14,319 --> 00:01:17,880 Speaker 1: supply doesn't change, we know that the wealth still grows. 19 00:01:18,200 --> 00:01:21,880 Speaker 1: The amount of goods and services in the economy still 20 00:01:21,920 --> 00:01:25,520 Speaker 1: grows over time because people still produce more things. As 21 00:01:25,720 --> 00:01:30,280 Speaker 1: wealth becomes more abundant, the cost of that wealth goes down, 22 00:01:31,080 --> 00:01:36,840 Speaker 1: and so deflation takes place naturally over time. Now we 23 00:01:36,920 --> 00:01:40,679 Speaker 1: can see this happening even today, while we have a 24 00:01:40,720 --> 00:01:47,000 Speaker 1: fiat monetary system with things that are extremely deflationary, where 25 00:01:47,040 --> 00:01:53,000 Speaker 1: the abundance and the production increases so quickly that is 26 00:01:53,160 --> 00:01:56,960 Speaker 1: it far surpasses the increase in the quantity of money. 27 00:01:57,240 --> 00:02:03,160 Speaker 1: One example of this is technology TVs computers, cell phones. 28 00:02:03,680 --> 00:02:07,720 Speaker 1: When you look at the modern iPhone, what that takes 29 00:02:07,760 --> 00:02:10,839 Speaker 1: the place of is a very shortlist here that I'll 30 00:02:10,840 --> 00:02:14,360 Speaker 1: give you is a cam qorder, an Atlas, or a 31 00:02:14,480 --> 00:02:19,160 Speaker 1: GPS system, UM, A an actual communication device you know, 32 00:02:19,240 --> 00:02:23,480 Speaker 1: for calling, for texting, UM and pretty much every app 33 00:02:23,520 --> 00:02:26,680 Speaker 1: you have in there, whether it's video editing software, photo 34 00:02:26,840 --> 00:02:30,120 Speaker 1: editing software, whether it is uh you know, you know, 35 00:02:30,240 --> 00:02:33,440 Speaker 1: something that is for creative purposes, something that is for 36 00:02:33,520 --> 00:02:37,240 Speaker 1: safety purposes. All of the applications that are built into 37 00:02:37,320 --> 00:02:44,239 Speaker 1: that one device means that that thousand dollar device replaced thousands, 38 00:02:44,240 --> 00:02:49,000 Speaker 1: sometimes tens of thousands of dollars worth of equipment and devices, 39 00:02:49,120 --> 00:02:52,800 Speaker 1: and savings on time and energy that you used to 40 00:02:52,800 --> 00:02:57,239 Speaker 1: have to get elsewhere. Even something as simple as as 41 00:02:57,400 --> 00:03:01,400 Speaker 1: Uber being able to schedule a taxi for yourself rather 42 00:03:01,480 --> 00:03:03,720 Speaker 1: than having to let's say, way out in the rain 43 00:03:03,880 --> 00:03:06,240 Speaker 1: for an empty taxi to come by and pick you up, 44 00:03:06,680 --> 00:03:09,280 Speaker 1: as something as simple as using door dash to deliver 45 00:03:09,400 --> 00:03:13,760 Speaker 1: a meal to you. Before that didn't exist, as something 46 00:03:13,800 --> 00:03:18,119 Speaker 1: as simple as uh Spotify or Apple Music being able 47 00:03:18,160 --> 00:03:20,960 Speaker 1: to deliver music to you on demand wherever you want, 48 00:03:21,040 --> 00:03:24,519 Speaker 1: for basically free. That used to be a couple hundred 49 00:03:24,560 --> 00:03:26,200 Speaker 1: years ago. You would have to have let's say, a 50 00:03:26,240 --> 00:03:31,520 Speaker 1: full time staff of musicians on on your payroll to 51 00:03:31,560 --> 00:03:33,200 Speaker 1: be able to play any music that you want at 52 00:03:33,200 --> 00:03:35,520 Speaker 1: any time of day. Like that's so unrealistic, Like nobody 53 00:03:35,520 --> 00:03:38,560 Speaker 1: has ever had that, even the richest kings never had, 54 00:03:39,000 --> 00:03:41,440 Speaker 1: uh never had the abundance of something as simple as 55 00:03:41,520 --> 00:03:45,840 Speaker 1: music as we have today. And so just one one 56 00:03:45,920 --> 00:03:49,200 Speaker 1: device there has replaced so much in terms of the 57 00:03:49,200 --> 00:03:53,160 Speaker 1: wealth that it provides for us, the abundance, the convenience, 58 00:03:53,240 --> 00:03:56,560 Speaker 1: the luxury, the utility, um and the ability to take 59 00:03:56,600 --> 00:03:59,080 Speaker 1: that time and effort and focus our efforts on other 60 00:03:59,120 --> 00:04:01,840 Speaker 1: things that are more product div we see how that 61 00:04:01,920 --> 00:04:06,280 Speaker 1: has accelerated the growth of wealth in our economy overall 62 00:04:06,440 --> 00:04:09,960 Speaker 1: um and that has far surpassed the speed at which 63 00:04:09,960 --> 00:04:13,480 Speaker 1: the money supply has increased and the cost of technology 64 00:04:13,520 --> 00:04:16,839 Speaker 1: as a result, has decreased over that same amount of 65 00:04:16,839 --> 00:04:20,360 Speaker 1: time over the last twenty thirty years. As technology increases 66 00:04:20,480 --> 00:04:24,000 Speaker 1: in its um in its abundance, in its power, in 67 00:04:24,040 --> 00:04:28,400 Speaker 1: its usefulness, we see the cost of that technology decreasing. 68 00:04:28,800 --> 00:04:34,200 Speaker 1: Now that decreases happening despite the increase in money that 69 00:04:34,279 --> 00:04:40,080 Speaker 1: is happening at the same time, because technology is intensely deflationary, 70 00:04:40,160 --> 00:04:44,960 Speaker 1: and so it's able to overcompensate for the inflationary forces 71 00:04:44,960 --> 00:04:49,920 Speaker 1: of the monetary system by because it's just it happens 72 00:04:49,960 --> 00:04:53,760 Speaker 1: at such a faster pace, and so there we can 73 00:04:53,760 --> 00:04:56,520 Speaker 1: see there there is no uh, just because we know 74 00:04:56,600 --> 00:04:58,840 Speaker 1: that there will be better iPhones next year, that doesn't 75 00:04:58,839 --> 00:05:01,719 Speaker 1: stop people from buying iPhone this year. I'm probably in 76 00:05:01,760 --> 00:05:04,680 Speaker 1: the minority. I upgrade my iPhone every year for the 77 00:05:04,720 --> 00:05:07,400 Speaker 1: marginal changes that I get UM, But there are a 78 00:05:07,440 --> 00:05:09,640 Speaker 1: lot of people who don't do that. They still upgrade 79 00:05:09,640 --> 00:05:12,000 Speaker 1: every two years, three years, four years, five years, and 80 00:05:12,040 --> 00:05:14,240 Speaker 1: every time they upgrade, they get a far You know, 81 00:05:14,440 --> 00:05:17,760 Speaker 1: the longer you go between upgrades, the more of a 82 00:05:17,839 --> 00:05:21,599 Speaker 1: jump you have in technology the next time you upgrade. UM. 83 00:05:21,640 --> 00:05:26,320 Speaker 1: And it doesn't stop these companies from making profits, from 84 00:05:26,320 --> 00:05:30,440 Speaker 1: being able to develop and increase production and increase the 85 00:05:30,480 --> 00:05:35,120 Speaker 1: technology on the next round, just because people know what 86 00:05:35,240 --> 00:05:37,240 Speaker 1: I can get right now will be cheaper and more 87 00:05:37,240 --> 00:05:42,080 Speaker 1: abundant later. That doesn't stop production, that doesn't stop profits, 88 00:05:42,360 --> 00:05:46,920 Speaker 1: that doesn't stop research and development. And so the argument 89 00:05:47,360 --> 00:05:52,599 Speaker 1: that deflation causes a collapse of wealth is UH is 90 00:05:52,920 --> 00:05:58,240 Speaker 1: on completely false. It's the opposite. Anything that's heavily deflationary. 91 00:05:58,320 --> 00:06:01,880 Speaker 1: We can see this in technology, UH causes an increase 92 00:06:02,279 --> 00:06:06,320 Speaker 1: in wealth. So that's what happened for a lot of 93 00:06:06,520 --> 00:06:09,840 Speaker 1: human history, is that the increase in wealth over time 94 00:06:10,160 --> 00:06:14,200 Speaker 1: was abundant and was very apparent with everything because the 95 00:06:14,240 --> 00:06:16,800 Speaker 1: money supply didn't change, and so you could see that 96 00:06:16,920 --> 00:06:20,080 Speaker 1: same thing happening at a slower pace, but same thing 97 00:06:20,680 --> 00:06:25,040 Speaker 1: across everything. Now, the question is, if that's so good, 98 00:06:25,240 --> 00:06:28,400 Speaker 1: why did people stop using it? Why did we ever 99 00:06:28,480 --> 00:06:30,599 Speaker 1: move away from it and move to paper which had 100 00:06:31,080 --> 00:06:36,080 Speaker 1: so many problems? And we can answer this very easily 101 00:06:36,480 --> 00:06:41,200 Speaker 1: with a couple of thought experiments. Imagine thousands of years ago, 102 00:06:41,240 --> 00:06:43,880 Speaker 1: I want to buy a sandwich. It might cost me 103 00:06:43,880 --> 00:06:46,960 Speaker 1: an ounce of gold. Let's just say, hypothetically, I slap 104 00:06:47,000 --> 00:06:49,680 Speaker 1: a one ounce gold coin down on the counter by 105 00:06:49,720 --> 00:06:53,320 Speaker 1: myself a meal. Well, fast forward a thousand years and 106 00:06:53,440 --> 00:06:57,360 Speaker 1: humanity has discovered UH far more powerful ways of growing food, 107 00:06:57,680 --> 00:07:00,680 Speaker 1: so food is more abundant. We discuss covered ways of 108 00:07:00,720 --> 00:07:04,360 Speaker 1: purifying water better and more efficiently. Water is more abundant. 109 00:07:04,560 --> 00:07:07,839 Speaker 1: We've discovered ways of building a little bit more robust LYE, 110 00:07:08,160 --> 00:07:12,600 Speaker 1: so our buildings are more resistant to UH, to the 111 00:07:12,680 --> 00:07:16,080 Speaker 1: external environment, to windstorms, to rainstorms, to floods, to things 112 00:07:16,120 --> 00:07:19,760 Speaker 1: like that. So we have more abundance. That means that 113 00:07:19,920 --> 00:07:23,320 Speaker 1: things and stuff is cheaper. That means a thousand years later, 114 00:07:23,320 --> 00:07:25,000 Speaker 1: when I go to slap down that gold coin on 115 00:07:25,000 --> 00:07:28,720 Speaker 1: the counter, it's that's way more than what a sandwich cost. 116 00:07:28,760 --> 00:07:30,720 Speaker 1: That might be enough for a horse, that might be 117 00:07:30,840 --> 00:07:35,800 Speaker 1: enough for a down payment on a house. So it's 118 00:07:35,840 --> 00:07:39,600 Speaker 1: would be like today, in your pocket carrying around, you know, 119 00:07:39,720 --> 00:07:43,040 Speaker 1: a couple of thousand dollars in cash. Really nobody does that. 120 00:07:43,200 --> 00:07:45,200 Speaker 1: Why would you? When you go to the grocery store, 121 00:07:45,240 --> 00:07:47,640 Speaker 1: you're spending a few hundred dollars, so you might carry 122 00:07:47,640 --> 00:07:50,080 Speaker 1: a few hundred dollars cash, but there's no need to 123 00:07:50,120 --> 00:07:53,000 Speaker 1: carry around ten or twenty thousand dollars worth of cash. 124 00:07:53,200 --> 00:07:56,000 Speaker 1: That's way more than you would ever need for any 125 00:07:56,080 --> 00:07:59,440 Speaker 1: daily expense, especially the small things like going to grab 126 00:07:59,440 --> 00:08:04,400 Speaker 1: a burger for lunch. So um. When time moved forward 127 00:08:04,600 --> 00:08:09,320 Speaker 1: under this sound money standard, people eventually got to the 128 00:08:09,360 --> 00:08:13,400 Speaker 1: place where they couldn't They couldn't use gold for the 129 00:08:13,440 --> 00:08:17,800 Speaker 1: smaller transactions anymore. The denominations weren't small enough, so things 130 00:08:17,880 --> 00:08:22,080 Speaker 1: like silver and copper did come in to make change 131 00:08:22,240 --> 00:08:25,360 Speaker 1: for gold. So you'd use silver because it was less 132 00:08:25,440 --> 00:08:28,680 Speaker 1: valuable than gold instead of your gold. Um and copper 133 00:08:28,720 --> 00:08:32,200 Speaker 1: as well. But you would need a place then to 134 00:08:32,400 --> 00:08:35,560 Speaker 1: store your wealth, and so what people did was they 135 00:08:35,600 --> 00:08:38,720 Speaker 1: went to the one place where it was already natural 136 00:08:39,000 --> 00:08:42,440 Speaker 1: to store your wealth, and that was the infrastructure in 137 00:08:42,480 --> 00:08:46,120 Speaker 1: place to keep gold safe. Well, who were the people 138 00:08:46,280 --> 00:08:50,079 Speaker 1: that were already keeping gold safe? It was the goldsmiths. 139 00:08:50,679 --> 00:08:53,480 Speaker 1: The goldsmith's already had the infrastructure because they had a 140 00:08:53,480 --> 00:08:55,200 Speaker 1: lot of gold, which is valuable, so they had the 141 00:08:55,240 --> 00:08:57,559 Speaker 1: vaults of the security. They were already keeping a lot 142 00:08:57,559 --> 00:09:01,679 Speaker 1: of gold safe. So you would have the goldsmith's store 143 00:09:01,679 --> 00:09:04,560 Speaker 1: your gold for you. You'd pay them a nominal fee 144 00:09:04,840 --> 00:09:07,960 Speaker 1: and they would store it for you. You might say, okay, well, 145 00:09:08,000 --> 00:09:09,360 Speaker 1: then how do you know you could get your gold 146 00:09:09,440 --> 00:09:12,640 Speaker 1: back from them. Well, they would issue you a paper receipt, 147 00:09:13,120 --> 00:09:15,880 Speaker 1: and this paper receipt would say something on it such 148 00:09:15,920 --> 00:09:21,720 Speaker 1: as this note is payable on demand to the bearer. 149 00:09:22,400 --> 00:09:24,720 Speaker 1: That means whoever holds this bearer means. It's like a 150 00:09:24,720 --> 00:09:27,080 Speaker 1: bearer receipt. Like a lottery ticket is a bearer seat, 151 00:09:27,120 --> 00:09:30,439 Speaker 1: cash as a bearer receipt, anything that is a whoever 152 00:09:30,559 --> 00:09:34,760 Speaker 1: holds it owns it. That's a bearer instrument. The one 153 00:09:34,800 --> 00:09:40,400 Speaker 1: who bears it owns the owns it. And so these 154 00:09:40,440 --> 00:09:44,040 Speaker 1: receipts would say that they are payable on demand to 155 00:09:44,160 --> 00:09:47,040 Speaker 1: the bearer in a certain weight of gold. So they 156 00:09:47,040 --> 00:09:49,360 Speaker 1: would say, hey, this is you know, if you turn 157 00:09:49,440 --> 00:09:52,360 Speaker 1: this into the goldsmith will give you five ounces of gold. 158 00:09:52,440 --> 00:09:54,040 Speaker 1: We'll give you ten ounces of gold, will give you 159 00:09:54,080 --> 00:09:56,720 Speaker 1: one ounce of gold, or where whatever it was. And 160 00:09:57,000 --> 00:09:59,160 Speaker 1: so people would do this, and whenever they needed to 161 00:09:59,200 --> 00:10:01,120 Speaker 1: make a large purchase, they would go give their paper 162 00:10:01,160 --> 00:10:04,720 Speaker 1: back to the goldsmith, get their gold, and then use 163 00:10:04,760 --> 00:10:07,040 Speaker 1: their gold for a purchase. And many times the people 164 00:10:07,040 --> 00:10:08,760 Speaker 1: who got the gold for the purchase. Like let's say 165 00:10:08,760 --> 00:10:10,360 Speaker 1: I want to go buy a horse, I'd go get 166 00:10:10,360 --> 00:10:12,840 Speaker 1: my gold, I'd buy the horse. Then the person who 167 00:10:12,840 --> 00:10:14,920 Speaker 1: sold me. The horse is going to then take the 168 00:10:14,920 --> 00:10:16,599 Speaker 1: gold that I just gave them, go back to the 169 00:10:16,640 --> 00:10:19,800 Speaker 1: goldsmith and deposit it and get their own receipt. Well, 170 00:10:20,040 --> 00:10:26,120 Speaker 1: you can see how um inconvenient this extra step was. 171 00:10:26,520 --> 00:10:30,079 Speaker 1: And since it's a bearer instrument, I can just give 172 00:10:30,760 --> 00:10:34,360 Speaker 1: the horse seller my piece of paper because it doesn't 173 00:10:34,400 --> 00:10:36,960 Speaker 1: have my name on it, it just says payable to 174 00:10:37,000 --> 00:10:39,839 Speaker 1: the bearer on demand. So instead of going to get 175 00:10:39,840 --> 00:10:41,520 Speaker 1: my gold give my gold, damn, and then him going 176 00:10:41,559 --> 00:10:43,400 Speaker 1: to deposit the gold again and getting his own piece 177 00:10:43,400 --> 00:10:44,640 Speaker 1: of paper, I can just give him my piece of 178 00:10:44,640 --> 00:10:47,360 Speaker 1: paper and anytime he wants he can then go get 179 00:10:47,520 --> 00:10:52,360 Speaker 1: that gold. So this was a very convenient way for 180 00:10:52,520 --> 00:10:57,160 Speaker 1: people to start storing their wealth in a safe environment 181 00:10:57,800 --> 00:11:00,400 Speaker 1: with goldsmiths. These were the first bank schools, were the 182 00:11:00,400 --> 00:11:04,880 Speaker 1: first savings uh deposit savings accounts. It was a very 183 00:11:04,880 --> 00:11:07,880 Speaker 1: convenient way for people to be able to spend money 184 00:11:07,920 --> 00:11:13,480 Speaker 1: smaller denominations of money as well, and still keep the gold. Now, 185 00:11:13,559 --> 00:11:16,560 Speaker 1: if we paused right here, if we stopped right here 186 00:11:16,559 --> 00:11:19,800 Speaker 1: in history, this would be kind of the best of 187 00:11:19,880 --> 00:11:24,440 Speaker 1: both worlds because at this point no inflation has taken place. 188 00:11:24,679 --> 00:11:29,520 Speaker 1: There's been no fundamental change to the monetary system. There's 189 00:11:29,559 --> 00:11:32,040 Speaker 1: not been any increase in the money supply because for 190 00:11:32,120 --> 00:11:35,120 Speaker 1: every gold coin that's in storage, there's one piece of 191 00:11:35,160 --> 00:11:39,199 Speaker 1: paper in circulation. There's no more, no less. And so 192 00:11:39,480 --> 00:11:43,520 Speaker 1: we get all of the benefits of a gold system, 193 00:11:43,559 --> 00:11:47,240 Speaker 1: but none of the drawbacks because I can take in 194 00:11:47,360 --> 00:11:50,120 Speaker 1: my pocket a piece of paper that says it's redeemable 195 00:11:50,160 --> 00:11:52,600 Speaker 1: for a hundred ounces of gold, and I can take 196 00:11:52,679 --> 00:11:56,320 Speaker 1: that much easier than I can take one ounces of gold. 197 00:11:56,480 --> 00:12:00,280 Speaker 1: Gold is heavy. It is hard to transport a cross 198 00:12:00,400 --> 00:12:06,280 Speaker 1: a large a large space simply because it is heavy. Um. 199 00:12:06,360 --> 00:12:08,800 Speaker 1: And so you have this uh, this paper come in. 200 00:12:09,640 --> 00:12:12,160 Speaker 1: You solve the problem of things getting too cheap for 201 00:12:12,200 --> 00:12:14,640 Speaker 1: a full ounce of gold. You have that. You haven't 202 00:12:14,640 --> 00:12:19,360 Speaker 1: solved the problem of transporting gold over long distances, um, 203 00:12:19,400 --> 00:12:21,360 Speaker 1: and so you have kind of the best of both 204 00:12:21,400 --> 00:12:27,840 Speaker 1: worlds here. Now what happened was uh goldsmiths the banks, 205 00:12:27,960 --> 00:12:32,600 Speaker 1: the original banks, realized there was an opportunity to uh 206 00:12:32,840 --> 00:12:36,840 Speaker 1: to profit here um off of fraud. Now, well, we 207 00:12:36,880 --> 00:12:39,600 Speaker 1: remember those pieces of paper. These are contracts. These are 208 00:12:39,679 --> 00:12:42,640 Speaker 1: legal contracts because they say that if you turn in 209 00:12:42,640 --> 00:12:45,160 Speaker 1: the paper at any time, they'll give you the gold 210 00:12:45,200 --> 00:12:49,400 Speaker 1: specified on the paper, UM, and so it says on demand. 211 00:12:49,400 --> 00:12:52,520 Speaker 1: It doesn't say anywhere on these receipts anywhere on these 212 00:12:52,559 --> 00:12:55,400 Speaker 1: notes that UM, only a certain number of people can 213 00:12:55,400 --> 00:12:58,280 Speaker 1: get their gold at a certain time UM. And so 214 00:12:58,360 --> 00:13:00,320 Speaker 1: what the what the banks did, though, was they were realized, 215 00:13:00,360 --> 00:13:03,440 Speaker 1: they looked around, they realized nobody was ever redeeming their 216 00:13:03,480 --> 00:13:06,760 Speaker 1: claims on the gold. So they thought, hey, we can 217 00:13:06,800 --> 00:13:09,839 Speaker 1: start up a lending service here. And so what they 218 00:13:09,880 --> 00:13:13,080 Speaker 1: did was they offered a uh, they offered loans to people, 219 00:13:14,000 --> 00:13:18,160 Speaker 1: and instead of uh, instead of loaning out their own money, 220 00:13:18,200 --> 00:13:20,400 Speaker 1: they would just create a new piece of paper. So 221 00:13:20,440 --> 00:13:22,640 Speaker 1: when somebody came in for a loan, they would give 222 00:13:22,679 --> 00:13:25,640 Speaker 1: them a paper that said redeemable on demand ten ounces 223 00:13:25,679 --> 00:13:29,600 Speaker 1: of gold. And so now at that moment money has 224 00:13:29,640 --> 00:13:33,480 Speaker 1: been lent into existence. There were ten pieces of gold 225 00:13:33,520 --> 00:13:35,360 Speaker 1: in the vault, and before there were ten pieces of 226 00:13:35,400 --> 00:13:38,599 Speaker 1: paper circulating in the economy. Now there's eleven pieces of 227 00:13:38,640 --> 00:13:42,000 Speaker 1: paper circulating in the economy, but still only ten pieces 228 00:13:42,080 --> 00:13:45,240 Speaker 1: of gold in the vault. So the money supply has 229 00:13:45,320 --> 00:13:48,760 Speaker 1: now increased for the first time. This is the invention 230 00:13:48,800 --> 00:13:53,680 Speaker 1: of something called fractional reserve banking because the amount of 231 00:13:53,720 --> 00:13:56,839 Speaker 1: reserves in the bank. Those ten pieces of gold are 232 00:13:57,080 --> 00:14:02,199 Speaker 1: are a fraction of the paper circulating which our claims 233 00:14:02,240 --> 00:14:04,840 Speaker 1: on those goals on that gold. That means that if 234 00:14:04,880 --> 00:14:07,559 Speaker 1: everybody suddenly at that moment were to go and try 235 00:14:07,640 --> 00:14:09,800 Speaker 1: and redeem their paper for gold, they would not be 236 00:14:09,840 --> 00:14:12,480 Speaker 1: able to. Somebody would be left in the dust without gold. 237 00:14:13,200 --> 00:14:18,040 Speaker 1: Now nobody noticed this at first, because why would you 238 00:14:18,080 --> 00:14:20,800 Speaker 1: notice it. The only thing that would happen then is 239 00:14:20,840 --> 00:14:24,040 Speaker 1: that new money that got lent into existence would get spent. 240 00:14:24,600 --> 00:14:27,080 Speaker 1: Let's say somebody took out a loan to go fix 241 00:14:27,120 --> 00:14:31,160 Speaker 1: the roof. Now the roof maker has more income than 242 00:14:31,200 --> 00:14:35,000 Speaker 1: they would have without that loan, because without that loan, 243 00:14:35,360 --> 00:14:39,200 Speaker 1: that person would not have bought that roof. And since 244 00:14:39,280 --> 00:14:43,080 Speaker 1: that roofmaker got extra income, now he has more money 245 00:14:43,080 --> 00:14:46,520 Speaker 1: to spend than he would have otherwise. So he can 246 00:14:46,560 --> 00:14:49,000 Speaker 1: spend that which gives somebody else more income than they 247 00:14:49,000 --> 00:14:52,000 Speaker 1: would have otherwise, and that money works its way throughout 248 00:14:52,000 --> 00:14:55,960 Speaker 1: the economy, the local economy. There and as that new 249 00:14:56,000 --> 00:14:59,040 Speaker 1: money works its way throughout the local economy, remember there's 250 00:14:59,080 --> 00:15:02,200 Speaker 1: more purchasing hour now taking place, more purchasing than would 251 00:15:02,200 --> 00:15:05,160 Speaker 1: have otherwise. So just like an auction. Just like supply demand, 252 00:15:05,400 --> 00:15:09,920 Speaker 1: this drives prices higher. As prices go higher, people feel 253 00:15:10,080 --> 00:15:13,200 Speaker 1: richer because the things they're selling are going up in price. 254 00:15:13,560 --> 00:15:18,400 Speaker 1: This drives investment in those areas that prices are going up, 255 00:15:18,840 --> 00:15:21,800 Speaker 1: because people want to make money on those areas where 256 00:15:21,840 --> 00:15:24,840 Speaker 1: prices are going up, so they invest in them. Well, 257 00:15:24,960 --> 00:15:27,760 Speaker 1: we have to remember the origin. The origin of this 258 00:15:28,000 --> 00:15:31,880 Speaker 1: is debt. What has to happen to debt, It has 259 00:15:31,920 --> 00:15:36,080 Speaker 1: to get repaid Eventually. That person, the original person who 260 00:15:36,080 --> 00:15:39,560 Speaker 1: took out that debt, We'll say, okay, I fixed my roof. 261 00:15:39,920 --> 00:15:41,680 Speaker 1: Now I just have to go save up enough to 262 00:15:41,720 --> 00:15:44,600 Speaker 1: pay off the debt. So he works. He sucks money 263 00:15:44,640 --> 00:15:47,600 Speaker 1: out of circulation by getting more income and working and 264 00:15:47,640 --> 00:15:51,000 Speaker 1: then saving. He takes that money, that paper back to 265 00:15:51,040 --> 00:15:53,280 Speaker 1: the bank and gives that paper back to the bank 266 00:15:53,320 --> 00:15:56,000 Speaker 1: and says, okay, I'm paying off my debt. I'm canceling 267 00:15:56,000 --> 00:15:59,200 Speaker 1: my debt. Now. Well, suddenly, now you have less money 268 00:15:59,360 --> 00:16:03,320 Speaker 1: in circulate action. So now whoever was going to get 269 00:16:03,360 --> 00:16:06,400 Speaker 1: paid after you know, when he paid back his debt, 270 00:16:06,600 --> 00:16:09,040 Speaker 1: he was paying back his debt instead of paying for 271 00:16:09,160 --> 00:16:12,920 Speaker 1: something else buying something else. Now they have less income, 272 00:16:13,200 --> 00:16:15,160 Speaker 1: so Now that they have less income, they have less 273 00:16:15,160 --> 00:16:17,680 Speaker 1: money to spend to somebody else, and the whole thing 274 00:16:17,720 --> 00:16:21,480 Speaker 1: now reverses. Prices spiraled up, and now once that debt 275 00:16:21,480 --> 00:16:23,760 Speaker 1: starts to get repaid, prices start to spiral down and 276 00:16:23,800 --> 00:16:26,760 Speaker 1: there's a crash. And then when prices stopped increasing, the 277 00:16:26,840 --> 00:16:30,200 Speaker 1: investments get pulled. Everything. Everybody starts to sell because they 278 00:16:30,200 --> 00:16:32,400 Speaker 1: realize it was a false wealth effect that prices were 279 00:16:32,440 --> 00:16:35,320 Speaker 1: going up artificially based on the expansion of money that 280 00:16:35,360 --> 00:16:38,920 Speaker 1: was built on uh, fake credit, on debt that was 281 00:16:39,000 --> 00:16:42,400 Speaker 1: loaned into existence. Now you can see how this system 282 00:16:42,480 --> 00:16:45,920 Speaker 1: is very different than debt in a sound money system 283 00:16:45,920 --> 00:16:48,840 Speaker 1: a hard money system, because when there was just gold, 284 00:16:49,120 --> 00:16:51,560 Speaker 1: if I wanted to borrow money from you, that means 285 00:16:51,840 --> 00:16:54,360 Speaker 1: that I'm spending the money that you now can't spend. 286 00:16:54,520 --> 00:16:57,360 Speaker 1: The money supply doesn't change with debt. But now that 287 00:16:57,480 --> 00:17:01,880 Speaker 1: banks invented loaning money into exist stints fractional reserve banking, 288 00:17:02,280 --> 00:17:06,800 Speaker 1: every time alone takes place, the money supply increases, so 289 00:17:07,000 --> 00:17:12,040 Speaker 1: eventually that unwinds. Now, another thing that started to happen 290 00:17:12,080 --> 00:17:15,159 Speaker 1: around this time was that people started to get suspicious 291 00:17:15,160 --> 00:17:19,040 Speaker 1: of banks. Right, Why wouldn't you because if you start 292 00:17:19,080 --> 00:17:22,119 Speaker 1: to see prices going up, and you look around and 293 00:17:22,200 --> 00:17:24,720 Speaker 1: you think, that person has more money than they used to. 294 00:17:25,480 --> 00:17:28,000 Speaker 1: That person has more money than they used to. That 295 00:17:28,040 --> 00:17:30,399 Speaker 1: person has more money than they used to. There's a 296 00:17:30,440 --> 00:17:34,080 Speaker 1: lot more money going around right now than there used 297 00:17:34,080 --> 00:17:37,560 Speaker 1: to be. Now, if I know that everybody has their 298 00:17:37,640 --> 00:17:40,919 Speaker 1: gold in the same bank, and I know that we 299 00:17:41,000 --> 00:17:46,120 Speaker 1: haven't had an influx of gold from outside of our economy, 300 00:17:46,160 --> 00:17:48,879 Speaker 1: from another state or something like that, well I also 301 00:17:49,000 --> 00:17:52,560 Speaker 1: know then that that paper is fake. So I'm gonna 302 00:17:52,680 --> 00:17:54,840 Speaker 1: run to the bank and I'm going to get my 303 00:17:54,960 --> 00:17:58,199 Speaker 1: gold out because i think fraud is taking place, and 304 00:17:58,440 --> 00:18:00,840 Speaker 1: I'm not going to tell anybody. I'm gonna go and 305 00:18:00,920 --> 00:18:03,800 Speaker 1: just get my gold. So I do it. I redeem 306 00:18:03,800 --> 00:18:05,720 Speaker 1: my gold in the banker thinks, say this is fine, 307 00:18:05,760 --> 00:18:08,679 Speaker 1: because you know not everybody's gonna do this. So I 308 00:18:08,720 --> 00:18:11,280 Speaker 1: get my gold. But once I get my gold, I 309 00:18:11,359 --> 00:18:13,840 Speaker 1: do have friends and family that I care about, So 310 00:18:13,880 --> 00:18:15,600 Speaker 1: I'm gonna call it my brother. I'm gonna call it 311 00:18:15,640 --> 00:18:17,159 Speaker 1: my sister. I'm gonna call it my best friend. I'm 312 00:18:17,160 --> 00:18:19,000 Speaker 1: gonna call it my parents. I'm gonna say, do not 313 00:18:19,160 --> 00:18:22,960 Speaker 1: tell anybody, but first go get your gold. Because I 314 00:18:22,960 --> 00:18:24,800 Speaker 1: don't think there's enough for everybody to get there, and 315 00:18:24,840 --> 00:18:27,760 Speaker 1: as soon as somebody finds out, then you know, you 316 00:18:27,840 --> 00:18:29,800 Speaker 1: might be left in the dust. So I'm gonna tell 317 00:18:29,800 --> 00:18:31,840 Speaker 1: everybody after I've gotten mine, and they're all gonna go 318 00:18:31,840 --> 00:18:34,200 Speaker 1: and get their's, And what are all they gonna do. 319 00:18:34,520 --> 00:18:36,800 Speaker 1: They're all gonna go get their's first, and then they're 320 00:18:36,800 --> 00:18:40,200 Speaker 1: gonna tell everybody they know because they've already gotten theirs. 321 00:18:40,840 --> 00:18:43,359 Speaker 1: And you can see if everybody tells just two people, 322 00:18:43,520 --> 00:18:47,200 Speaker 1: three people, how quickly this will compound. And very quickly 323 00:18:47,240 --> 00:18:50,120 Speaker 1: this turns into a bank run, and there's not enough 324 00:18:50,160 --> 00:18:52,919 Speaker 1: gold in the bank to redeem for all the claims 325 00:18:52,960 --> 00:18:55,600 Speaker 1: on the gold. So we see this is another way 326 00:18:55,640 --> 00:18:59,359 Speaker 1: that this false boom, this false bubble can be unwound 327 00:18:59,520 --> 00:19:02,280 Speaker 1: is with a bank run. And sometimes they both happen 328 00:19:02,359 --> 00:19:06,359 Speaker 1: at the same time. Sometimes you get the deflationary bust 329 00:19:06,520 --> 00:19:09,520 Speaker 1: where prices start to collapse at the same time as 330 00:19:09,560 --> 00:19:12,520 Speaker 1: the bank run. Everybody's trying to go get their gold 331 00:19:12,560 --> 00:19:15,359 Speaker 1: before the bank closes down. We've seen that happen plenty 332 00:19:15,400 --> 00:19:18,639 Speaker 1: of times as well, and so these can both happen, 333 00:19:18,680 --> 00:19:23,399 Speaker 1: and these are both results of fractional reserve banking. Now 334 00:19:23,920 --> 00:19:28,080 Speaker 1: we have to be a little bit uh not not compassionate, 335 00:19:28,080 --> 00:19:30,320 Speaker 1: but we have to be a little bit more logical 336 00:19:30,400 --> 00:19:33,879 Speaker 1: and understanding about the other reason why paper money was 337 00:19:33,920 --> 00:19:38,160 Speaker 1: invented here and uh, this was to solve what safety 338 00:19:38,200 --> 00:19:43,440 Speaker 1: and a moose calls saleability across space because saleability means 339 00:19:43,480 --> 00:19:47,760 Speaker 1: you're basically it means the ability to preserve its value. Now, 340 00:19:47,800 --> 00:19:51,680 Speaker 1: if I UM, if I have gold and I keep 341 00:19:51,680 --> 00:19:55,080 Speaker 1: it for a thousand years, the chances that I'm going 342 00:19:55,080 --> 00:19:57,639 Speaker 1: to be going to be able to buy the same 343 00:19:57,680 --> 00:20:01,520 Speaker 1: amount of goods and services with that gold across a 344 00:20:01,560 --> 00:20:05,120 Speaker 1: thousand years is actually pretty high. We we talked about 345 00:20:05,160 --> 00:20:06,920 Speaker 1: this in the last episode. You can go back through 346 00:20:06,960 --> 00:20:09,320 Speaker 1: time and you can track the prices of things that 347 00:20:09,440 --> 00:20:13,240 Speaker 1: still exist, and you can see either the prices measured 348 00:20:13,240 --> 00:20:17,639 Speaker 1: in gold stay the same roughly over time, or the 349 00:20:17,680 --> 00:20:21,879 Speaker 1: prices slowly dwindled down as measured in gold um. And 350 00:20:21,960 --> 00:20:25,320 Speaker 1: so your chances of preserving your purchasing power across time 351 00:20:25,400 --> 00:20:28,280 Speaker 1: with gold are very high. But what happens if you 352 00:20:28,320 --> 00:20:31,320 Speaker 1: need to make a purchase in another country and you 353 00:20:31,359 --> 00:20:34,000 Speaker 1: have to make a very large purchase, If you have 354 00:20:34,040 --> 00:20:37,000 Speaker 1: to make a very large purchase in another country. It's 355 00:20:37,320 --> 00:20:40,520 Speaker 1: very difficult to do with physical gold. You've got to 356 00:20:40,560 --> 00:20:42,720 Speaker 1: get a ship, you've got to load it up with 357 00:20:42,760 --> 00:20:44,520 Speaker 1: the gold. You've got to load it up with a 358 00:20:44,600 --> 00:20:47,640 Speaker 1: crew that you've vetted, so they probably cost more because 359 00:20:47,680 --> 00:20:50,520 Speaker 1: they're high integrity and you're not going to risk a mutiny. 360 00:20:50,560 --> 00:20:54,200 Speaker 1: You've got to have lots of weapons to protect your 361 00:20:54,320 --> 00:20:57,879 Speaker 1: shipment of gold from pirates people who would steal from you, 362 00:20:58,600 --> 00:21:01,879 Speaker 1: and then you have to take time and money to 363 00:21:02,119 --> 00:21:05,880 Speaker 1: staff everybody to do that across your whole voyage over 364 00:21:05,920 --> 00:21:09,240 Speaker 1: the risky sea waters where you're risking pirates and attacks 365 00:21:09,359 --> 00:21:12,440 Speaker 1: and uh storms, and then you have to get there 366 00:21:12,640 --> 00:21:15,800 Speaker 1: and you have to uh deliver that gold for your 367 00:21:15,840 --> 00:21:21,480 Speaker 1: large purchase. That is extremely expensive. So gold has a 368 00:21:21,600 --> 00:21:27,760 Speaker 1: very low saleability across space. It's great for close contact 369 00:21:28,080 --> 00:21:31,760 Speaker 1: UH commerce because everybody just carries their gold coins around. 370 00:21:32,080 --> 00:21:34,199 Speaker 1: But as soon as you have a little bit of 371 00:21:34,200 --> 00:21:38,400 Speaker 1: globalization come into play, where you have cities and states 372 00:21:38,800 --> 00:21:43,680 Speaker 1: and countries and large corporations that are doing business across 373 00:21:44,560 --> 00:21:49,160 Speaker 1: vast amounts of space, now you suddenly have gold being 374 00:21:49,200 --> 00:21:54,360 Speaker 1: a hindrance at a huge cost. And so the natural 375 00:21:54,400 --> 00:21:59,840 Speaker 1: development of this as well is um is third party 376 00:22:00,080 --> 00:22:05,320 Speaker 1: vaults that are trusted by both parties. So if if 377 00:22:05,359 --> 00:22:10,479 Speaker 1: Spain wants to do business with UH with France, and 378 00:22:10,520 --> 00:22:13,639 Speaker 1: you have a third party vault that both Spain and 379 00:22:13,720 --> 00:22:18,040 Speaker 1: France trust, and that vault holds a ton of gold, 380 00:22:18,240 --> 00:22:19,879 Speaker 1: and they hold a ton of gold for Spain and 381 00:22:19,920 --> 00:22:22,600 Speaker 1: they also hold a ton of gold for France, well 382 00:22:22,640 --> 00:22:27,200 Speaker 1: then when Spain wants to buy something from France, all 383 00:22:27,240 --> 00:22:28,840 Speaker 1: they have to do is go to that third party 384 00:22:28,920 --> 00:22:32,639 Speaker 1: vault and say, hey, uh, you have a lot of 385 00:22:32,640 --> 00:22:35,440 Speaker 1: our gold. Just take on your piece of paper, scrash 386 00:22:35,520 --> 00:22:38,879 Speaker 1: that out, and say now they own that gold. So 387 00:22:39,000 --> 00:22:41,919 Speaker 1: it doesn't have to go anywhere, it doesn't have to 388 00:22:41,960 --> 00:22:44,960 Speaker 1: be transported, doesn't have to be paid for to be shipped, 389 00:22:45,000 --> 00:22:48,359 Speaker 1: doesn't have to worry about anything like that. That third 390 00:22:48,440 --> 00:22:51,080 Speaker 1: party vault will take care of that, and so you 391 00:22:51,080 --> 00:22:53,680 Speaker 1: have an instant transfer. So this is the same thing 392 00:22:54,080 --> 00:22:57,160 Speaker 1: as a small bank. This is the same thing as 393 00:22:57,200 --> 00:22:59,760 Speaker 1: people in the village paying each other with the paper. 394 00:23:00,560 --> 00:23:04,520 Speaker 1: It's just done at a at a larger scale. And 395 00:23:04,600 --> 00:23:08,480 Speaker 1: so the paper ownership of gold was something that was 396 00:23:09,119 --> 00:23:13,560 Speaker 1: naturally going to come into existence at this point simply 397 00:23:13,600 --> 00:23:18,639 Speaker 1: because you have more and more large transactions needing to 398 00:23:18,720 --> 00:23:23,919 Speaker 1: be needing to take place across longer and longer distances, 399 00:23:24,000 --> 00:23:26,680 Speaker 1: and so this is the invention of the central bank. 400 00:23:27,160 --> 00:23:31,280 Speaker 1: The central bank is the bank for banks. They oftentimes 401 00:23:31,280 --> 00:23:34,240 Speaker 1: will store gold for other countries. We still see this 402 00:23:34,320 --> 00:23:37,200 Speaker 1: today with the Bank of England storing gold for many 403 00:23:37,200 --> 00:23:40,520 Speaker 1: other countries. In recent years we've seen Poland try and 404 00:23:40,560 --> 00:23:44,760 Speaker 1: repatriate their gold from England. We've seen Venezuela try and 405 00:23:44,760 --> 00:23:47,560 Speaker 1: repatriate their gold from the Bank of England. And so 406 00:23:47,720 --> 00:23:50,240 Speaker 1: there are many central banks that store and hold the 407 00:23:50,280 --> 00:23:53,840 Speaker 1: gold as a as a non interested third party for 408 00:23:54,119 --> 00:23:58,359 Speaker 1: other large transactions to take place. And as commerce happens 409 00:23:58,440 --> 00:24:01,959 Speaker 1: between countries, everyone in a while they'll say, hey, we 410 00:24:02,000 --> 00:24:05,760 Speaker 1: own this much gold. Now it's owned by somebody else, 411 00:24:06,160 --> 00:24:11,159 Speaker 1: and so UH, the paper ownership of gold solved salability 412 00:24:11,200 --> 00:24:15,479 Speaker 1: across space for gold. Now, that wasn't the only reason 413 00:24:15,520 --> 00:24:18,600 Speaker 1: for the invention of the central bank. There's also another 414 00:24:18,640 --> 00:24:21,119 Speaker 1: reason for the central bank to be UH to come 415 00:24:21,160 --> 00:24:23,760 Speaker 1: into existence, and that's because at that local level we 416 00:24:23,800 --> 00:24:27,280 Speaker 1: talked about earlier, when that when those bank runs started 417 00:24:27,280 --> 00:24:30,560 Speaker 1: to happen, governments should have looked at that and said, hey, 418 00:24:30,560 --> 00:24:34,080 Speaker 1: this is fraud. This is illegal. Factional reserve banking is 419 00:24:34,119 --> 00:24:37,359 Speaker 1: fraud because the contract state anybody can get it at 420 00:24:37,359 --> 00:24:40,639 Speaker 1: any time, and that's clearly not true. So it should 421 00:24:40,640 --> 00:24:43,560 Speaker 1: have been outlawed, but instead it was licensed. It was 422 00:24:43,680 --> 00:24:47,679 Speaker 1: legalized at the national level. So they said, let's just 423 00:24:47,720 --> 00:24:50,199 Speaker 1: do it bigger. So they said, in order to do banking, 424 00:24:50,240 --> 00:24:51,720 Speaker 1: you have to get a banking license, you have to 425 00:24:51,760 --> 00:24:54,439 Speaker 1: participate underneath the central bank. And then if you, as 426 00:24:54,480 --> 00:24:57,680 Speaker 1: a little bank experience a bank run, the central bank 427 00:24:57,680 --> 00:25:02,440 Speaker 1: will bail you out. Now means that if everybody goes 428 00:25:02,520 --> 00:25:05,199 Speaker 1: to go get their gold from their local bank and 429 00:25:05,280 --> 00:25:07,320 Speaker 1: there's a bank run and there's not enough gold to 430 00:25:07,760 --> 00:25:10,520 Speaker 1: to redeem everybody, that bank just gives a call to 431 00:25:10,560 --> 00:25:12,720 Speaker 1: the central bank and says, hey, we ran out of gold. 432 00:25:12,840 --> 00:25:16,520 Speaker 1: We need more. So then that central bank, that central 433 00:25:16,520 --> 00:25:18,399 Speaker 1: bank is a bank for all the banks. So what 434 00:25:18,440 --> 00:25:21,160 Speaker 1: does bank do. A bank holds the money for the people. 435 00:25:21,280 --> 00:25:24,199 Speaker 1: So a central bank holds the bank's money for the banks, 436 00:25:24,520 --> 00:25:26,359 Speaker 1: and so when the bank calls and says, hey, we 437 00:25:26,400 --> 00:25:29,760 Speaker 1: need more money, that central bank then just gives them 438 00:25:29,880 --> 00:25:33,960 Speaker 1: some of the gold from the other banks. Now, going 439 00:25:34,040 --> 00:25:37,040 Speaker 1: back to last episode, could have Could there ever have 440 00:25:37,160 --> 00:25:41,960 Speaker 1: been a bank run in that in that situation, No, 441 00:25:42,040 --> 00:25:44,880 Speaker 1: not really, Because you have the first person who's concerned 442 00:25:44,880 --> 00:25:46,520 Speaker 1: and they say, give me my goal. He's able to 443 00:25:46,560 --> 00:25:49,520 Speaker 1: give them the gold. Then the second person says, I 444 00:25:49,520 --> 00:25:51,480 Speaker 1: guess okay, so this isn't the last episode. This is 445 00:25:51,480 --> 00:25:54,000 Speaker 1: early on in this episode where we're talking about paper 446 00:25:54,040 --> 00:25:57,800 Speaker 1: that's fully backed by gold. If everybody goes to redeem 447 00:25:57,960 --> 00:26:00,680 Speaker 1: their paper for gold and there's enough gold, will eventually, 448 00:26:00,840 --> 00:26:03,000 Speaker 1: you know, the vault doors open, everybody can see if 449 00:26:03,000 --> 00:26:05,600 Speaker 1: there's enough gold. Now there's no reason to go redeem 450 00:26:05,600 --> 00:26:08,280 Speaker 1: your paper for gold, so the bank run stops. So 451 00:26:08,560 --> 00:26:12,840 Speaker 1: if everybody can get the gold that they need, nobody 452 00:26:12,920 --> 00:26:15,919 Speaker 1: will get the gold that they need. They'll leave it 453 00:26:15,960 --> 00:26:19,320 Speaker 1: there because there's no risk. With the invention of the 454 00:26:19,359 --> 00:26:21,760 Speaker 1: central bank, you have the same thing happened. You have 455 00:26:21,840 --> 00:26:24,800 Speaker 1: big drop off in bank runs happening once central banks 456 00:26:24,920 --> 00:26:28,600 Speaker 1: started to become popular around the world, simply because if 457 00:26:28,640 --> 00:26:31,959 Speaker 1: you notice your local bank doesn't have enough gold, so 458 00:26:32,040 --> 00:26:34,240 Speaker 1: you start a bank run. But then they're able to 459 00:26:34,280 --> 00:26:36,720 Speaker 1: continue to redeem all the claims simply because they've got 460 00:26:36,760 --> 00:26:38,480 Speaker 1: a central bank backing them up and giving them all 461 00:26:38,480 --> 00:26:42,040 Speaker 1: the gold they need. Well, suddenly, now everybody's gold is safe, 462 00:26:42,320 --> 00:26:45,680 Speaker 1: so nobody runs on the bank. There's no reason too. 463 00:26:45,880 --> 00:26:47,639 Speaker 1: It's safe. You can get it if you need to. 464 00:26:48,359 --> 00:26:51,480 Speaker 1: So central banks did solve that problem as well. However, 465 00:26:52,080 --> 00:26:56,040 Speaker 1: it covered up a bigger problem. So we know that 466 00:26:56,240 --> 00:27:00,480 Speaker 1: in with risk, you cannot eliminate risk, you can only 467 00:27:00,520 --> 00:27:04,200 Speaker 1: transfer it. Um. The example I like to use for 468 00:27:04,240 --> 00:27:07,000 Speaker 1: this is um if you are if you're at the 469 00:27:07,040 --> 00:27:09,119 Speaker 1: edge of a cliff, there's a big group of you 470 00:27:09,359 --> 00:27:12,679 Speaker 1: site seeing there's this cliff, great views, there's no railing. 471 00:27:12,680 --> 00:27:15,119 Speaker 1: Though one person gets too close to the edge of 472 00:27:15,160 --> 00:27:19,320 Speaker 1: the cliff, they accidentally slip and they fall off. From 473 00:27:19,320 --> 00:27:21,520 Speaker 1: that moment on, what do you think everybody else will 474 00:27:21,560 --> 00:27:24,679 Speaker 1: do near that cliff. They're not going to get close. 475 00:27:25,200 --> 00:27:27,640 Speaker 1: If they saw somebody slip and fall, they'll realize there's 476 00:27:27,640 --> 00:27:30,479 Speaker 1: a huge risk of individual failure and everybody will be 477 00:27:30,520 --> 00:27:34,880 Speaker 1: far away from the edge. The risk of individual failure 478 00:27:35,760 --> 00:27:39,720 Speaker 1: gives the incentive to each individual to be safer so 479 00:27:39,760 --> 00:27:44,840 Speaker 1: that they reduce their risk of failure. You cannot eliminate 480 00:27:45,080 --> 00:27:47,840 Speaker 1: that risk, you can only transfer it. So now let's 481 00:27:47,880 --> 00:27:52,600 Speaker 1: say we give everybody one big rope. We give everybody 482 00:27:52,600 --> 00:27:57,120 Speaker 1: one big rope. Now one person, uh, you know, everybody's 483 00:27:57,119 --> 00:27:59,480 Speaker 1: holding onto this rope. One person gets too close to 484 00:27:59,480 --> 00:28:02,000 Speaker 1: the edge of the cleft, they slip, but they're holding 485 00:28:02,040 --> 00:28:04,520 Speaker 1: onto a rope that everybody else is holding on, and 486 00:28:04,520 --> 00:28:09,160 Speaker 1: everybody else have everybody else pulls them back. That individual 487 00:28:09,400 --> 00:28:14,520 Speaker 1: now does not fall. Now every individual has no risk 488 00:28:14,800 --> 00:28:18,440 Speaker 1: of individual failure. But you haven't eliminated the risk. You've 489 00:28:18,440 --> 00:28:22,480 Speaker 1: only transferred the individual risk to the entire system. And 490 00:28:22,600 --> 00:28:26,720 Speaker 1: since every individual now has no risk of individual failure, 491 00:28:27,280 --> 00:28:31,520 Speaker 1: there's no incentive to try and be safe. So everybody 492 00:28:31,560 --> 00:28:33,919 Speaker 1: then has the ability to inch closer and closer and 493 00:28:33,920 --> 00:28:36,000 Speaker 1: closer to the edge because they know if they slip, 494 00:28:36,320 --> 00:28:39,840 Speaker 1: everybody else can pull them back. But if everybody's inching 495 00:28:39,840 --> 00:28:42,640 Speaker 1: closer and closer to the edge of the cliff, you 496 00:28:42,720 --> 00:28:44,680 Speaker 1: might have one person fall at the same time as 497 00:28:44,720 --> 00:28:46,720 Speaker 1: another person falls at the same time as another person 498 00:28:46,800 --> 00:28:50,360 Speaker 1: is too close to the edge. And now everybody falls 499 00:28:50,360 --> 00:28:55,560 Speaker 1: because everybody is attached together. So by inventing a central 500 00:28:55,600 --> 00:29:00,520 Speaker 1: bank that tries to eliminate risk by bailing out one 501 00:29:00,560 --> 00:29:05,240 Speaker 1: individual through every other individual, now you increase the risk 502 00:29:05,360 --> 00:29:09,720 Speaker 1: of total systemic failure. And that's why through the invention 503 00:29:09,760 --> 00:29:13,600 Speaker 1: of central banks, you have a reduction, a severe reduction 504 00:29:13,840 --> 00:29:19,080 Speaker 1: actually in individual failure. Bank runs slowed down a lot, 505 00:29:19,880 --> 00:29:25,120 Speaker 1: but you also have an increase in systemic failure for 506 00:29:25,160 --> 00:29:28,360 Speaker 1: the first time. And so with the invention of the 507 00:29:28,400 --> 00:29:31,560 Speaker 1: central bank. One example of this is about three years 508 00:29:31,600 --> 00:29:35,040 Speaker 1: ago John Law invented a central bank. He started one 509 00:29:35,120 --> 00:29:39,360 Speaker 1: in France, started a Mississippi bubble, got everybody to give 510 00:29:39,360 --> 00:29:42,080 Speaker 1: in their golden silver, gave them paper. That paper was 511 00:29:42,120 --> 00:29:44,959 Speaker 1: backed by a basket of gold and silver and land 512 00:29:45,200 --> 00:29:49,840 Speaker 1: UH ownership of land in the United States, UH in Mississippi, 513 00:29:50,040 --> 00:29:53,880 Speaker 1: the Mississippi Company, and so the Mississippi Company was used 514 00:29:53,960 --> 00:29:57,200 Speaker 1: to back up the value of the paper money. The 515 00:29:57,240 --> 00:30:00,280 Speaker 1: paper money was used to print to purchase is the 516 00:30:00,280 --> 00:30:02,719 Speaker 1: shares of the Mississippi Company to prop up that value. 517 00:30:03,160 --> 00:30:07,240 Speaker 1: And eventually it created this giant bubble, massive hyper inflation 518 00:30:07,760 --> 00:30:09,840 Speaker 1: and a collapse, a bank run, and he was run 519 00:30:09,840 --> 00:30:12,600 Speaker 1: out of town. Um That was their first central bank, 520 00:30:12,840 --> 00:30:15,560 Speaker 1: Bank of England. Same around that same time, you have 521 00:30:15,880 --> 00:30:19,880 Speaker 1: the central bank starting in Germany as well that funds 522 00:30:20,400 --> 00:30:23,640 Speaker 1: world wars. You have hyper inflation in the Bymar Republic. 523 00:30:23,840 --> 00:30:26,760 Speaker 1: You have the Federal Reserve started in the United States 524 00:30:26,760 --> 00:30:30,640 Speaker 1: and thirteen, within seven years there's a recession so severe 525 00:30:30,680 --> 00:30:34,040 Speaker 1: they called it the Great Depression at the time. And 526 00:30:34,040 --> 00:30:37,760 Speaker 1: and then within nine years after that one uh was 527 00:30:38,360 --> 00:30:40,680 Speaker 1: was resolved, there was another one that was even worse 528 00:30:40,680 --> 00:30:42,360 Speaker 1: than the last one. So now that's the one we 529 00:30:42,440 --> 00:30:45,880 Speaker 1: call the Great Depression. And so with the invention of 530 00:30:45,920 --> 00:30:49,800 Speaker 1: central banks, you have the ability now for um for 531 00:30:50,000 --> 00:30:55,480 Speaker 1: systemic collapse because no individual has that risk of individual failure. 532 00:30:55,720 --> 00:30:58,040 Speaker 1: So there's something we call moral hazard where it gives 533 00:30:58,040 --> 00:31:00,440 Speaker 1: everybody the ability to become more risky because they know 534 00:31:00,480 --> 00:31:03,840 Speaker 1: the system will bail them out. Now, there's a third 535 00:31:03,880 --> 00:31:07,200 Speaker 1: problem with centralizing things like this with a central bank. 536 00:31:07,560 --> 00:31:11,800 Speaker 1: The third problem is government spending. Prior to central banks, 537 00:31:11,800 --> 00:31:14,400 Speaker 1: when governments wanted to spend There's two ways that the 538 00:31:14,440 --> 00:31:17,360 Speaker 1: government can spend money um or I should say two 539 00:31:17,560 --> 00:31:20,360 Speaker 1: sources of income for a government. One source is taxes, 540 00:31:20,400 --> 00:31:22,240 Speaker 1: so that's just telling people, hey, you have to give 541 00:31:22,280 --> 00:31:25,880 Speaker 1: us this money. Um The other sources borrowing, and borrowing 542 00:31:25,960 --> 00:31:28,320 Speaker 1: is saying does anybody want to give us more money? 543 00:31:28,320 --> 00:31:30,719 Speaker 1: And we'll pay you back if you do. Those are 544 00:31:30,720 --> 00:31:33,400 Speaker 1: the only two sources of income for governments because they 545 00:31:33,400 --> 00:31:37,640 Speaker 1: don't produce products, they don't produce profits, they don't generate wealth. Uh, 546 00:31:37,880 --> 00:31:42,200 Speaker 1: they subtract wealth either by borrowing or by taxes. Now 547 00:31:42,440 --> 00:31:45,000 Speaker 1: you can argue whether that's a net good or net bad, 548 00:31:45,080 --> 00:31:47,520 Speaker 1: and whether it depends on the country or the politics. 549 00:31:47,560 --> 00:31:49,960 Speaker 1: But that is the fact is that it is a 550 00:31:50,080 --> 00:31:54,080 Speaker 1: net transfer. It is not that wealth is not created 551 00:31:54,440 --> 00:31:57,360 Speaker 1: through profit creation. It is transferred away from the economy 552 00:31:57,400 --> 00:32:00,080 Speaker 1: through either force that is taxes saying you have do 553 00:32:00,480 --> 00:32:03,720 Speaker 1: or borrowing saying do you want to? It's borrowing is voluntary. 554 00:32:04,520 --> 00:32:07,640 Speaker 1: And so because of this, when the borrowing gets too high, 555 00:32:07,720 --> 00:32:10,320 Speaker 1: then people say, well, i'll lend to you government, but 556 00:32:10,400 --> 00:32:12,720 Speaker 1: only if you give me a higher interest rate, because 557 00:32:12,920 --> 00:32:14,520 Speaker 1: now there's a chance you can't pay me back because 558 00:32:14,520 --> 00:32:15,840 Speaker 1: you've got a lot of debt and so you might 559 00:32:15,840 --> 00:32:19,320 Speaker 1: go bankrupt um. And so what that was how government's 560 00:32:19,320 --> 00:32:22,120 Speaker 1: operated for a long time until central banks. Because central 561 00:32:22,120 --> 00:32:25,200 Speaker 1: banks have that monopoly on the creation of the paper 562 00:32:25,200 --> 00:32:29,040 Speaker 1: money for that economy. And since there's one central bank 563 00:32:29,360 --> 00:32:32,040 Speaker 1: that has the ability to create money for that economy, 564 00:32:32,320 --> 00:32:40,560 Speaker 1: you have a very visible and uh uh uh, you 565 00:32:40,600 --> 00:32:42,680 Speaker 1: have a you have an attack a surface area of 566 00:32:42,720 --> 00:32:46,440 Speaker 1: attack that is both visible and vulnerable. So you've got 567 00:32:46,440 --> 00:32:49,240 Speaker 1: a small group of people that the government can say, hey, 568 00:32:49,840 --> 00:32:52,040 Speaker 1: you need to do this for us, or else we're 569 00:32:52,040 --> 00:32:55,240 Speaker 1: gonna shut you down. Um, it is very centralized, and 570 00:32:55,280 --> 00:32:57,080 Speaker 1: so you've got the people in charge of the central 571 00:32:57,080 --> 00:32:59,160 Speaker 1: bank that the government can go to and say, this 572 00:32:59,240 --> 00:33:01,959 Speaker 1: is how we want this happen. And so governments were 573 00:33:02,000 --> 00:33:05,320 Speaker 1: able to use central banks to basically print money for themselves. 574 00:33:05,600 --> 00:33:08,440 Speaker 1: So governments would still get their income from either taxes 575 00:33:08,520 --> 00:33:11,040 Speaker 1: or borrowing. But when they borrow too much and nobody 576 00:33:11,080 --> 00:33:13,320 Speaker 1: wants to lend to them anymore, now they borrow from 577 00:33:13,320 --> 00:33:15,680 Speaker 1: the central bank. So the central bank prints money and 578 00:33:15,720 --> 00:33:18,640 Speaker 1: lends that to the government. Yes, it goes through the 579 00:33:18,680 --> 00:33:21,240 Speaker 1: banking system. The banks acts like a middleman, is like 580 00:33:21,240 --> 00:33:23,800 Speaker 1: a market maker in between the government and the central 581 00:33:23,840 --> 00:33:27,000 Speaker 1: bank most of the time. But still the reason, the 582 00:33:27,000 --> 00:33:29,200 Speaker 1: net effect is that the central bank prints money and 583 00:33:29,240 --> 00:33:31,480 Speaker 1: loans that money to the government. And since you have 584 00:33:31,520 --> 00:33:33,840 Speaker 1: a money printer that is lending to the government, you 585 00:33:33,840 --> 00:33:37,320 Speaker 1: can do it at really low interest rates. So government's 586 00:33:37,320 --> 00:33:42,720 Speaker 1: got unlimited financing. Um, close to unlimited financing, i should say, 587 00:33:42,880 --> 00:33:45,680 Speaker 1: for the first time. And that is why upon the 588 00:33:46,560 --> 00:33:50,240 Speaker 1: popularization of central banking around the world. You have the 589 00:33:50,280 --> 00:33:55,280 Speaker 1: twentieth century happen, the ninets where you have hyper inflation happen. 590 00:33:55,440 --> 00:33:59,280 Speaker 1: You have multiple global depressions happen. You have endless global 591 00:33:59,280 --> 00:34:02,120 Speaker 1: wars happen. Prior to this, when a war would take place, 592 00:34:02,320 --> 00:34:05,960 Speaker 1: the war would stop when the attacking country ran out 593 00:34:05,960 --> 00:34:09,200 Speaker 1: of money. But now if you if you run out 594 00:34:09,200 --> 00:34:11,319 Speaker 1: of money to tax as a government to keep on 595 00:34:12,000 --> 00:34:14,279 Speaker 1: pursuing your war, and then nobody will lend to you 596 00:34:14,360 --> 00:34:16,359 Speaker 1: to keep on pursuing your war, you can just tell 597 00:34:16,400 --> 00:34:19,160 Speaker 1: your central bank, hey, print me some more money, and 598 00:34:19,200 --> 00:34:21,960 Speaker 1: I will continue this war. And then you devastate your 599 00:34:22,000 --> 00:34:25,239 Speaker 1: local economy because you run your currency into inflation and 600 00:34:25,320 --> 00:34:28,120 Speaker 1: hyper inflation because you're pumping it so full of paper 601 00:34:28,120 --> 00:34:30,759 Speaker 1: currency to get the goods that you need to continue 602 00:34:30,800 --> 00:34:32,920 Speaker 1: your war, that you suck all the real wealth out 603 00:34:32,960 --> 00:34:35,200 Speaker 1: of the economy to continue your war past what the 604 00:34:35,200 --> 00:34:39,120 Speaker 1: people would have allowed you to under the old system. 605 00:34:39,160 --> 00:34:42,480 Speaker 1: And so that is what led to World War two, 606 00:34:42,800 --> 00:34:46,319 Speaker 1: UH and World War one and many other atrocities around 607 00:34:46,320 --> 00:34:49,720 Speaker 1: the world. Is unlimited government spending funded by central banking. 608 00:34:50,560 --> 00:34:54,000 Speaker 1: Now it should have ended there. It should have ended there. 609 00:34:54,320 --> 00:34:57,719 Speaker 1: The problem is UH governments didn't want to give up 610 00:34:57,800 --> 00:35:00,560 Speaker 1: on that system, and so after World War Two in 611 00:35:00,640 --> 00:35:03,080 Speaker 1: nineteen forty five, the governments around the world got together 612 00:35:03,120 --> 00:35:06,520 Speaker 1: at Bretton Woods, the Breton Woods Conference, and they said, hey, look, 613 00:35:07,640 --> 00:35:09,759 Speaker 1: America still has a lot of gold, but we're all 614 00:35:09,800 --> 00:35:12,719 Speaker 1: out of gold because we we blew ourselves up into 615 00:35:12,719 --> 00:35:14,279 Speaker 1: the ground and we wasted all of our gold on 616 00:35:14,400 --> 00:35:17,440 Speaker 1: fighting each other. So what they did was they said, okay, 617 00:35:17,440 --> 00:35:20,359 Speaker 1: we still have our paper currencies. Instead of starting from 618 00:35:20,400 --> 00:35:23,879 Speaker 1: scratch trying to get real money gold again, what we're 619 00:35:23,880 --> 00:35:27,560 Speaker 1: gonna do is we're gonna have our currencies redeemable for 620 00:35:27,680 --> 00:35:30,800 Speaker 1: dollars for U S dollars, and those U S dollars 621 00:35:30,840 --> 00:35:34,719 Speaker 1: are still redeemable for gold. And so this turned and 622 00:35:35,120 --> 00:35:37,160 Speaker 1: it was, you know, the same thing that happened last time. 623 00:35:37,239 --> 00:35:40,880 Speaker 1: This took it up another scale. We went from UH 624 00:35:41,080 --> 00:35:46,520 Speaker 1: local banks to national banks to one global bank. This 625 00:35:46,600 --> 00:35:49,719 Speaker 1: was the rest of the world pegging their currencies to 626 00:35:49,800 --> 00:35:51,880 Speaker 1: the US dollar, which was pegged to gold. So now 627 00:35:51,960 --> 00:35:55,400 Speaker 1: the Federal Reserve got to operate as the central bank 628 00:35:55,800 --> 00:35:58,520 Speaker 1: to the other central banks around the world, and then 629 00:35:58,560 --> 00:36:00,759 Speaker 1: those central banks operated as the central bank to their 630 00:36:00,760 --> 00:36:04,719 Speaker 1: own banks, and then those banks for the people. This 631 00:36:04,920 --> 00:36:09,080 Speaker 1: gave the United States a massive advantage over the rest 632 00:36:09,080 --> 00:36:13,640 Speaker 1: of the world at after, because the United States could 633 00:36:13,680 --> 00:36:16,280 Speaker 1: then do to the rest of the world what central 634 00:36:16,280 --> 00:36:20,160 Speaker 1: banks have been doing to their own economies for decades 635 00:36:20,560 --> 00:36:22,919 Speaker 1: and what banks have been doing to their smaller local 636 00:36:22,920 --> 00:36:25,719 Speaker 1: economies for a few hundred years, which was print more 637 00:36:25,760 --> 00:36:28,640 Speaker 1: money than there was gold to back it up. And 638 00:36:28,680 --> 00:36:30,840 Speaker 1: that's exactly what the United States government did, the Federal 639 00:36:30,880 --> 00:36:34,080 Speaker 1: Reserve did. We created more dollar bills and then spent 640 00:36:34,200 --> 00:36:37,200 Speaker 1: them on stuff. So we shipped out dollar bills to 641 00:36:37,239 --> 00:36:39,879 Speaker 1: other countries and they said, yeah, we'll take them, because 642 00:36:39,920 --> 00:36:42,480 Speaker 1: at any point we can get the gold. And in 643 00:36:42,560 --> 00:36:44,799 Speaker 1: return for those dollar bills that we shipped out, we 644 00:36:44,920 --> 00:36:48,640 Speaker 1: got stuff, we got goods, we got wealth that they 645 00:36:48,680 --> 00:36:52,080 Speaker 1: created and gave to us. Now, this is why for 646 00:36:52,160 --> 00:36:55,040 Speaker 1: those few decades, a lot of old people think back 647 00:36:55,080 --> 00:36:58,319 Speaker 1: to that uh, that time frame, and they think that 648 00:36:58,480 --> 00:37:01,480 Speaker 1: was a great time. That is the time where America 649 00:37:01,560 --> 00:37:05,400 Speaker 1: was booming. We were doing everything right, everything was great, 650 00:37:05,920 --> 00:37:10,040 Speaker 1: and wealth was increasing. But it was fake. It was 651 00:37:10,080 --> 00:37:12,839 Speaker 1: fake because we were printing extra dollars shipping them out 652 00:37:12,880 --> 00:37:16,240 Speaker 1: to the world well, eventually the bill comes due, people 653 00:37:16,320 --> 00:37:19,040 Speaker 1: realize there's not enough gold to back up all this 654 00:37:19,080 --> 00:37:23,080 Speaker 1: paper that's floating around. So in the late sixties people 655 00:37:23,080 --> 00:37:25,719 Speaker 1: started realize that. So countries around the world started to 656 00:37:25,760 --> 00:37:28,839 Speaker 1: ship their dollar bills back to America and said, give 657 00:37:28,920 --> 00:37:33,080 Speaker 1: us our gold. Sometimes warships were sent to go get 658 00:37:33,120 --> 00:37:36,200 Speaker 1: their gold because they didn't want any shenanigans. Well, we 659 00:37:36,239 --> 00:37:40,160 Speaker 1: all know what happened in we were about to run 660 00:37:40,200 --> 00:37:43,160 Speaker 1: out of gold. The rest of the world had started 661 00:37:43,200 --> 00:37:47,920 Speaker 1: a bank run on the United States because they thought 662 00:37:48,000 --> 00:37:50,319 Speaker 1: there was not enough golden vaults. They were right, so 663 00:37:50,360 --> 00:37:52,840 Speaker 1: they started saying, give us all your give us the 664 00:37:52,880 --> 00:37:56,160 Speaker 1: gold that you promised us with these paper dollars. And 665 00:37:56,320 --> 00:38:00,720 Speaker 1: we were two weeks away from completely runing out of gold, 666 00:38:00,880 --> 00:38:03,520 Speaker 1: which by the way, wasn't ours. This was the gold 667 00:38:03,560 --> 00:38:05,880 Speaker 1: we were storing for the rest of the world. And 668 00:38:06,000 --> 00:38:08,960 Speaker 1: Nixon decided, nope, we're going to close the gold window. 669 00:38:09,160 --> 00:38:11,239 Speaker 1: Now at that point, it wouldn't have mattered if he 670 00:38:11,239 --> 00:38:13,480 Speaker 1: would have done that or not, because there was not 671 00:38:13,680 --> 00:38:17,400 Speaker 1: enough gold to redeem all the dollars in circulation, So 672 00:38:17,440 --> 00:38:20,080 Speaker 1: the bank run would have continued until the gold ran out, 673 00:38:20,320 --> 00:38:22,160 Speaker 1: and then the gold widow would have been closed and 674 00:38:22,239 --> 00:38:25,880 Speaker 1: still not everybody would have gotten their gold. So whether 675 00:38:26,000 --> 00:38:28,719 Speaker 1: or not he did it that on that day or 676 00:38:28,760 --> 00:38:31,719 Speaker 1: two weeks later, the gold standard would have ended because 677 00:38:31,719 --> 00:38:34,280 Speaker 1: there was not enough gold to back up all the claims, 678 00:38:34,719 --> 00:38:38,239 Speaker 1: and the gold would have been the gold would have 679 00:38:38,239 --> 00:38:40,080 Speaker 1: been gone. We were either two weeks away from gold 680 00:38:40,120 --> 00:38:41,600 Speaker 1: being out or we would have let it run out 681 00:38:42,120 --> 00:38:44,200 Speaker 1: UM and so that it was baked into the cake 682 00:38:44,239 --> 00:38:48,480 Speaker 1: already from decades of overspending and overprinting at that time, though, 683 00:38:48,520 --> 00:38:52,560 Speaker 1: the dollar was so integral in the global financial system 684 00:38:52,640 --> 00:38:57,000 Speaker 1: that it's stuck. And so, yes, there was turmoil, Yes, 685 00:38:57,040 --> 00:38:58,920 Speaker 1: there was a lot of geopolitical issues that had to 686 00:38:58,960 --> 00:39:02,239 Speaker 1: be worked out, UM, but the and and there was 687 00:39:02,239 --> 00:39:04,520 Speaker 1: a lot of inflation as well, right the seventies, lots 688 00:39:04,520 --> 00:39:09,200 Speaker 1: of inflation. But it's stuck, and the dollars stuck around 689 00:39:09,320 --> 00:39:12,800 Speaker 1: as the global reserve currency UH, even though there was 690 00:39:12,840 --> 00:39:15,480 Speaker 1: no gold to back it up. So the United States, 691 00:39:16,200 --> 00:39:18,719 Speaker 1: even though there was a long period of time there 692 00:39:18,760 --> 00:39:22,640 Speaker 1: where it was painful during the seventies, UM held on 693 00:39:22,760 --> 00:39:27,480 Speaker 1: to the advantage and UH still to this day holds 694 00:39:27,520 --> 00:39:31,839 Speaker 1: that title of of owning the global reserve currency. Now 695 00:39:31,840 --> 00:39:35,840 Speaker 1: at this point, we've had a transition to a pure 696 00:39:35,960 --> 00:39:40,879 Speaker 1: fiat global money economy. This has never existed before in history. 697 00:39:40,920 --> 00:39:44,279 Speaker 1: For the last five thousand years, there's always somewhere been 698 00:39:44,440 --> 00:39:47,320 Speaker 1: some sort of a sound money standard, a gold standard 699 00:39:47,400 --> 00:39:50,319 Speaker 1: or silver standard. So this is the first time over 700 00:39:50,320 --> 00:39:52,680 Speaker 1: the last fifty one years, fifty two years, this is 701 00:39:52,719 --> 00:39:56,640 Speaker 1: the first time where the whole world has been operating 702 00:39:56,680 --> 00:40:00,400 Speaker 1: on a paper money standard um. And that is why 703 00:40:00,440 --> 00:40:03,799 Speaker 1: since nineteen seventy one there have been more episodes of 704 00:40:03,880 --> 00:40:08,080 Speaker 1: hyper inflation then there were in all of history leading 705 00:40:08,120 --> 00:40:11,719 Speaker 1: up to that point. That is a fact. So because 706 00:40:11,800 --> 00:40:15,560 Speaker 1: now you weren't even restrained to borrowing from the central bank. 707 00:40:16,239 --> 00:40:18,120 Speaker 1: You are just restrained to how much the central bank 708 00:40:18,120 --> 00:40:21,919 Speaker 1: could print, and nobody was at risk of a gold run. 709 00:40:22,640 --> 00:40:26,759 Speaker 1: Now you can spend an unlimited amount. The only thing 710 00:40:26,760 --> 00:40:30,240 Speaker 1: holding you back is political will. And when that political 711 00:40:30,280 --> 00:40:33,960 Speaker 1: will does not restrain you from printing money to spend it, 712 00:40:34,840 --> 00:40:38,720 Speaker 1: now you risk hyper inflation. And so we we've seen 713 00:40:39,360 --> 00:40:43,359 Speaker 1: endless wars, especially the United States, We've seen uh, We've 714 00:40:43,400 --> 00:40:45,720 Speaker 1: seen endless spending. We've seen a build up of debt 715 00:40:45,800 --> 00:40:48,120 Speaker 1: that at this point is not really debt because you're 716 00:40:48,200 --> 00:40:51,000 Speaker 1: just printing money to create that debt, and you're printing 717 00:40:51,000 --> 00:40:53,600 Speaker 1: money to pay off that debt. So we've entered into 718 00:40:53,600 --> 00:40:58,400 Speaker 1: a period of history where financing all government spending is 719 00:40:58,440 --> 00:41:02,719 Speaker 1: done through the printing press. Now, over the last couple 720 00:41:02,760 --> 00:41:06,200 Speaker 1: of decades, a couple of cool things have happened, Like 721 00:41:06,440 --> 00:41:08,719 Speaker 1: one of them is the example about technology that we 722 00:41:08,760 --> 00:41:14,560 Speaker 1: gave earlier. This has allowed some deflationary forces to offset 723 00:41:14,640 --> 00:41:17,799 Speaker 1: some of the inflationary forces that are at work, and 724 00:41:17,880 --> 00:41:20,200 Speaker 1: so we haven't had to experience, at least in the 725 00:41:20,280 --> 00:41:22,719 Speaker 1: United States up to this point, you know, hyper inflation, 726 00:41:22,840 --> 00:41:26,040 Speaker 1: because there have been increases in productivity, increases in wealth 727 00:41:26,239 --> 00:41:30,120 Speaker 1: that have somewhat offset uh the increase in the money supply. 728 00:41:31,120 --> 00:41:34,320 Speaker 1: But we are now getting to the end of this system. 729 00:41:34,360 --> 00:41:37,600 Speaker 1: We are seeing signs of the foundations of this system 730 00:41:37,680 --> 00:41:41,880 Speaker 1: cracking everywhere we look. We are seeing countries discussed with 731 00:41:41,920 --> 00:41:45,799 Speaker 1: each other ways to stop using the dollar, creation of 732 00:41:45,840 --> 00:41:49,240 Speaker 1: new currencies backed up by commodities like oil and gold 733 00:41:49,680 --> 00:41:52,160 Speaker 1: in order to do international commerce with each other. The 734 00:41:52,200 --> 00:41:58,320 Speaker 1: bricks countries we're seeing China, Russia, Brazil, India, Saudi Arabia, Egypt, 735 00:41:58,560 --> 00:42:02,480 Speaker 1: Turkey all talk about creating kind of like their version 736 00:42:02,560 --> 00:42:06,520 Speaker 1: of the euro, a new international currency made for international 737 00:42:06,520 --> 00:42:10,000 Speaker 1: trade that none of them control, but that is redeemable 738 00:42:10,640 --> 00:42:14,239 Speaker 1: for a basket of commodities, in order to get themselves 739 00:42:14,280 --> 00:42:17,680 Speaker 1: off the dollar. Because the United States has held that 740 00:42:17,760 --> 00:42:21,879 Speaker 1: supreme advantage of global reserve currency for decades and they 741 00:42:21,880 --> 00:42:24,440 Speaker 1: have abused it, and so other countries do not want 742 00:42:24,480 --> 00:42:26,719 Speaker 1: to be under the thumb of the control of the 743 00:42:26,800 --> 00:42:30,080 Speaker 1: dollar anymore, so they're looking for ways around it. We're 744 00:42:30,080 --> 00:42:34,120 Speaker 1: seeing wars and rumors of wars start up everywhere we 745 00:42:34,200 --> 00:42:37,680 Speaker 1: look because of this. We see currency wars and trade 746 00:42:37,680 --> 00:42:42,360 Speaker 1: wars and shooting wars all tied together throughout history, and unfortunately, 747 00:42:42,800 --> 00:42:47,160 Speaker 1: those the signs of financial systems cracking. When we track 748 00:42:47,280 --> 00:42:52,680 Speaker 1: back through history, we can see empires, global reigning superpowers 749 00:42:53,160 --> 00:42:57,360 Speaker 1: never hold on forever. Rome it is not a superpower today. 750 00:42:57,719 --> 00:43:02,000 Speaker 1: Greece it's not a superpower to a day clearly, Uh, 751 00:43:02,040 --> 00:43:09,239 Speaker 1: the Ottoman Empire, Uh, China, the the you know, Great Britain. Um. 752 00:43:09,280 --> 00:43:15,280 Speaker 1: We've seen many superpowers, many global reigning supreme powers, rise 753 00:43:15,960 --> 00:43:20,520 Speaker 1: and fall, and typically they don't last that long. The 754 00:43:20,640 --> 00:43:25,920 Speaker 1: nations are very old themselves, but their position as being 755 00:43:26,000 --> 00:43:30,520 Speaker 1: that global reigning power does not last for long, typically 756 00:43:30,920 --> 00:43:35,200 Speaker 1: hundred hundred fifties, sometimes two hundred years. During that time, 757 00:43:35,360 --> 00:43:38,239 Speaker 1: usually they're the ones that meant the money that the 758 00:43:38,280 --> 00:43:42,640 Speaker 1: rest of the world uses. One thing that is consistent. 759 00:43:42,680 --> 00:43:44,600 Speaker 1: This is researched put together by Ray Dalio in his 760 00:43:44,680 --> 00:43:49,080 Speaker 1: book UH Principles for Dealing with the Changing World Order. 761 00:43:50,040 --> 00:43:53,160 Speaker 1: You see that the global reserve currency is kind of 762 00:43:53,200 --> 00:43:56,520 Speaker 1: the last thing that sticks around. And so when we 763 00:43:56,560 --> 00:43:59,360 Speaker 1: look around and we say what advantage does the United 764 00:43:59,400 --> 00:44:03,879 Speaker 1: States as the global reigning superpower offer the world, one 765 00:44:03,920 --> 00:44:05,880 Speaker 1: of the last answers that we have for that today 766 00:44:06,120 --> 00:44:10,080 Speaker 1: is the dollar. Take away the dollar, and there's really 767 00:44:10,120 --> 00:44:12,879 Speaker 1: not much. When you go back and track the fall 768 00:44:12,920 --> 00:44:17,480 Speaker 1: of empires throughout history, you can see that the empire 769 00:44:17,520 --> 00:44:21,360 Speaker 1: starts to fall by many measures like education and military 770 00:44:21,400 --> 00:44:25,399 Speaker 1: strength and UH being a financial center and technology and 771 00:44:25,520 --> 00:44:29,319 Speaker 1: many many areas of measurement. It starts to fall way 772 00:44:29,360 --> 00:44:33,640 Speaker 1: before that currency gets displaced. The currency sticking around is 773 00:44:33,719 --> 00:44:35,880 Speaker 1: global reserve currency is one of the last things to go. 774 00:44:37,040 --> 00:44:38,920 Speaker 1: And given the fact that when we ask what is 775 00:44:38,960 --> 00:44:40,799 Speaker 1: the advantage of the United States has over the rest 776 00:44:40,840 --> 00:44:43,840 Speaker 1: of the world today, Given the fact that the dollar 777 00:44:44,440 --> 00:44:47,840 Speaker 1: is one of the most common answers. Is an indication 778 00:44:47,960 --> 00:44:50,120 Speaker 1: that there that the rest of the stuff has kind 779 00:44:50,120 --> 00:44:52,839 Speaker 1: of fallen to the wayside, which is an indication that 780 00:44:52,920 --> 00:44:55,320 Speaker 1: it's about to fall. So we are on the cusp 781 00:44:55,640 --> 00:45:00,480 Speaker 1: of a new financial system, a new global currency, a 782 00:45:00,640 --> 00:45:04,040 Speaker 1: new monetary system which lays the ground rules for a 783 00:45:04,080 --> 00:45:07,520 Speaker 1: new economy built on top of it. The question is 784 00:45:08,000 --> 00:45:12,799 Speaker 1: what will that new system be. We have four options, 785 00:45:13,160 --> 00:45:18,640 Speaker 1: and four options only. There are only four choices for 786 00:45:18,680 --> 00:45:23,960 Speaker 1: the future monetary system, and that, unfortunately is we're out 787 00:45:23,960 --> 00:45:26,960 Speaker 1: of time for today. We will discuss that in the 788 00:45:27,000 --> 00:45:30,400 Speaker 1: next chapter and in the next episode, I should say, 789 00:45:30,640 --> 00:45:34,080 Speaker 1: We're gonna look at the next possibilities for the financial 790 00:45:34,120 --> 00:45:37,319 Speaker 1: system going forward into the future, and what each of 791 00:45:37,320 --> 00:45:39,720 Speaker 1: those might look like, and I'll give you my thoughts 792 00:45:40,000 --> 00:45:44,600 Speaker 1: on the likelihood of each outcome. As always, I really 793 00:45:44,600 --> 00:45:47,200 Speaker 1: appreciate you guys, Thank you so much for listening. See 794 00:45:47,200 --> 00:45:47,759 Speaker 1: you next time.