February 25th 2022.
In this episode, Saifedean appears on The Tom Woods Show for a discussion on how the damage caused by fiat money extends beyond economics. Saifedean and Tom discuss why fiat money increases the power of governments and heightens societal time preference, disincentivising long-term planning. They also talk about the rise of “fiat mentality” and how societal attitudes have changed in areas such as diet, education and energy. They then discuss the “misery industry” of debt-based development aid – promoted by International Financial Institutions like the IMF – and how this industry has held back economic progress in the developing world.
- The Tom Woods Show official website.
- Tom’s free ebook Our Enemy The Fed
- Guido Hülsmann’s book The Ethics of Money Production for a discussion of the moral implications of inflation.
- Gold Wars: The Battle for the Global Economy by Ferdinand Lips
- Saifedean’s podcast episode with Nina Teicholz for a discussion of seed oils and government dietary guidelines.
- The Ultimate Resource 2 by Julian Simon for a discussion of failed predictions about resource scarcity.
- Saifedean’s podcast episodes with Alex Epstein here and here for a discussion of fossil fuels and unreliable energy.
- Introduction to the concept of opportunity cost on Mises Wiki.
- Saifedean’s first book, The Bitcoin Standard
- Saifedean’s second book, The Fiat Standard
Enjoyed this episode? You can take part in podcast seminars, access Saifedean’s courses and read chapters of his forthcoming books by becoming a Saifedean.com member. Find out more here.
Tom Woods: [00:03:01] Hey everybody, Tom Woods here and Saifedean Ammous is back with us again today! We’re going to continue our conversation about his book, The Fiat Standard, the Debt Slavery Alternative to Human Civilization. So we’re going to continue a little bit on the economic angle, but then dive straight in to other topics and we’ll see how many of them we can get to, but my gosh that table of contents is just full of things you’re dying to flip to. So again, I cannot recommend this book highly enough. Saif, welcome back!
Saifedean Ammous: Hey Tom! Thank you for having me again.
Tom Woods: All right, now we’re going to get into some different topics let’s say. I remember an essay, it might be an essay, but also then it was incorporated into Guido Hülsmann’s book, The Ethics of Money Production, where he talks about not strictly economic consequences of fiat money inflation.
And he says there are cultural [00:04:01] consequences to having a money that loses its value. Even if it loses its value slowly and not always rapidly, it still is losing its value and that loss accumulates over time. And this has effects, it for one thing, it makes younger people feel contemptuous of older people who try to teach them old fashioned values like thrift, because thrifts seems stupid in an inflationary environment.
And so you can take and extend these insights into various aspects of human life, into which you might not have peered to find effects of fiat money inflation. Your table of contents, I think, it drew me in more than probably any table of contents I’ve looked at in several years. I’ve never commented on a table of contents before in all the books I’ve talked about on this program, but your table of contents talks about fiat food and fiat energy and fiat universities.
And I thought, wait a minute, I have to skip, I already know the economics, I got to skip right to [00:05:01] this stuff! So I want to talk about that.
I know from reading your Twitter, how you feel about food and what a lot of people eat and I’m going to say a little something by the way, I was in Las Vegas a week ago, and just for fun, we went to an interesting place and maybe I won’t mention the name, but I’m sure you can Google it easily enough, and the idea is that you are going to eat in the dark and it’s pitch black in there. The staff has to have some kind of special glasses to be able to see in the dark to bring you your food.
But it’s a fascinating experience. You have all the other senses, but you can’t see anything and they won’t tell you what it is. Afterward, they’ll show you what the menu was. And I’ll tell you this was a wonderful time, but there’s an exception. On the menu at the end, one of the things that we had eaten was so called beyond meat.
And I thought only way you’d ever get me to eat this as if I was sitting in the dark and had no [00:06:01] idea what was going on. Then I read, I was looking at your book and I thought, oh, he would just be mortified. If Saif was ever in this situation, it would be very bad. So what do you mean about fiat food and what is the connection between, I thought your discussion of the way inflation is concealed in connection to this was very interesting. How are these things related?
Saifedean Ammous: Yeah. So this is something that has really been brewing inside my head for at least a decade Hülsmann’s book and essay were very influential in that. I’d also add, not particularly on diet, but I think the discussion of fiat and money and time preference.
And also I’d add a great book by Ferdinand Lips, a Swiss banker who died a couple of decades ago. Hugely influenced by the Austrians, and he wrote a book called Gold Wars on the history of gold as money. And that book really also drove this point home. [00:07:01] So based on our discussion on yesterday’s episode, I’d said how the way that this VR system functions is that it takes away power and money and wealth from individuals and grants to government.
So on the one hand, it gives government the ability to shape reality increasingly, because they have a lot of resources available to them and they don’t have a lot of resource constraints. On the other hand, the flipside to this is that the money is being devalued. And so people are witnessing their ability to provide for their future getting compromised increasingly, the more that the money is devalued.
So you look at a society where people have no way of securely saving something for five years. And you will see that it will be very different from a society that runs on a gold standard, where everybody knows that if you earn a gold coin and you hide it under your mattress and you take it out 10 years later, at the very [00:08:01] least, it’s going to buy something very similar as to what you could buy 10 years ago.
Most likely it’ll buy you slightly more. It appreciates. So with a gold standard, you have a reliable way of providing for your future. With fiat money we took that away. So I think if you combine those two points, on the one hand government having more money and power, individuals having less money and power.
And then on the other hand, the money losing value increases individuals time preference, you combine those two things and apply them to any issue in the world. And I think they are going to be massively significant. They’re going to be hugely influential about it. So in this second part of the book, which is called Fiat Life, I begin by analyzing time preference and the how fiat affects people’s time preference, family, capital, destruction, architecture, and then I apply it to food, I apply it to science, I apply it to education and the entire education system and to energy, the [00:09:01] discussion of energy, fuels and what we see in the destruction of the reliable fuel technology that has built the modern world.
We see there’s an insane crusade out there to try and get rid of the technology that’s built the modern world and to replace it with unreliable forms of energy. So apply this to all kinds of different criteria, I found it to be very productive, and I think
Tom Woods: Can you take just a minute to explain what time preference is? Just to everybody knows.
Saifedean Ammous: Oh, yeah. So time preference refers to the degree to which an individual discounts the future compared to the present. So it’s always positive because people always value the present more than the future. So if I gave you the choice between, I’ll give you a new phone, would you want it today or would I give you the same phone in a year?
You’ll obviously take it today. If I gave you the choice between a million dollars today or a million dollars in a year, assuming no change in purchasing power, it’s the same million dollars, the same purchasing power, you’d prefer to [00:10:01] take it today. So people always prefer the present to the future because the present is certain, whereas the future is uncertain and human life is unpredictable. You never know when you might die, and because you want to consume the things you want to invest them, you want to have them. So having things as better than not having them. So people always prefer the present over the future. Now the degree to which they discount the future is what we call time preference.
So somebody with a high time preference discounts the future very heavily. So if I told you, you have a choice between a million dollars today and a million dollars next year you’ll choose today. But if I started raising the sum that I can give you next year, the more that I raised it, the more likely you are to decide to wait for a year.
So somebody with a high time preference will require me to raise the amount significantly. I need to offer them 3 million next year in order for them to give up on a million this year, because they really want the 1 million right now, and they can’t wait.
Somebody with a low time preference will accept [00:11:01] maybe 1,050,000 or 1.1 million next year, instead of the 1 million today because they can wait and they value the future a lot. And so they think, yeah 1.1 is probably better than one, so I’m going to wait. So for Austrians obviously, time preference is an enormously important foundational aspect of economics.
In fact, it’s how we get interest rates. It’s how we understand where interest rates come from. And I argue in my book and I think this is, as far as I can tell, I think it is an original argument. I’ve not seen another Austrian make this argument and it wouldn’t be made by anyone other than an Austrian.
I argue that the hardness of the money is like a control knob for our time preference. Because if you are able to, if I take you and I put you in a society where money is being devalued at 50% per year, [00:12:01] and that’s your only option for saving, the only way you can save for the future is hold money that’s going to be worth 50% less next year, you’re going to become a very high time preference person.
You’re not going to save anything, and your future is going to become uncertain. Let’s say you’re a 20 year-old or your 15 year old. You have no scope of thinking about what am I going to be doing in 10 years from now?
If you saved money at 15 for you to get married at 25, By the time you were 25, the money that you saved at 15 will basically be worthless. It’ll be worth approximately zero. So you’re going to have less of an incentive to think of the future in all aspects of your life. You’re going to have less of an incentive to invest in a family, less of an incentive to invest in anything that requires delayed gratification.
Whereas if I moved you to society where the money was very hard, so the money supply can’t be increased, nobody can inflate the money supply easily, and you expected the value of the money is going to go up [00:13:01] every year by 10%, because we make more of everything every year, there’s more houses, more cars, more computers.
And we don’t make more money because the money is fixed in a supply. So every year you expect your money to increase in purchasing power by about 10%. In that kind of world I’m going to expect you to have a very little type preference.
If every dollar that you have today, all you need to do is just not spend it today, and the next year you’ll have 10% more in terms of real purchasing power. You don’t have to invest, you don’t have to take on any risk. You don’t have to get into any businesses that you don’t understand. You just take your money, whether it’s a gold coin or a Bitcoin, and you stuff it under your mattress, physical or digital, and one year later it can buy you 10% more apples, oranges, cars, houses.
In that kind of system, that kind of world, I’m going to expect 15 year old you to have a lot of time thinking about their future. Financially you’re going to save, at 15 you’ll [00:14:01] start mowing lawns and collecting as much money as you can. And guess what, 10 years of 10% accumulation, that’s more than double. So the money that you earned at 15 mowing lawns, by the age of 25, when you want to get married, it’s going to be worth something like a 2.5 times as much as when you earned it.
So this is a very strong incentive for you to save. And it’s a way for you to think more about the future. And I think this is a very powerful explanatory tool. If you look around the world, if you look at a society that goes through hyperinflation, you see everybody’s very high time preference.
Everybody gets their paycheck, runs to the supermarket, spends it all as soon as they get it because they know holding onto the money is a bad idea and people live their entire lives, and I know this, I was living in Lebanon until very recently, and we saw hyperinflation over the last couple of years there.
I’ve been to visit and I see it, everybody’s lives is just about [00:15:01] making ends meet for today, for this week, the end of the month. And then next month, God knows what’s going to happen. You don’t have the ability to think about it much. This is a very strong effect of fiat money that it has had on societies.
Just historically humans have moved toward harder and harder monies and our monies keep getting harder and harder to make. We used seashells and these kind of primitive forms of money in glass beads. Then we started using metals. Then within the metals we started, the more successful monies were the harder metals.
And then by the end of the 19th century, practically the entire planet was on a gold standard. And gold was increasing in its supply every year by around 2% only. So anybody anywhere on the planet by the end of the 19th century could save in a money that was only getting inflated in its supply by around 2%.
This really is human progress, this is what human progress has been. We’re finding a harder money. [00:16:01] Our money keeps getting harder because we keep accumulating more of it, and the new production is still very tiny. So our money is harder, our ability to provide for the future increases, our desire to save and invest increases.
And as a result, that’s civilization. Our interest rates drop because time preference rises, people have more savings. So interest rates to borrow those savings decline. Capital is abundant, we have a lot of capital, we accumulate capital, productivity rises, living standards rise. This is civilization.
And this is how humanity was progressing until the beginning of the 20th century, when we took a giant detour of the path of civilization and decided to try out this new form of money that increases by anywhere between 5% and 500% per year. The average increase is around 30% per year over the last 60 years, if you just count the numerical average. [00:17:01] If you did a weighted average where each currency’s value on the market, the market capitalization of each currency is the weight of its inflation in that kind of system.
The 30%, you’re counting the Lebanese Lira and the U.S. dollar as both equal valuations. That’s not entirely fair because a lot more people use the dollar.
If you did it to weigh things according to the size of each of the currencies, you still end up with about 14% annual increase average over the last 60 years. So between 1960 and 2020, the world’s money was increasing at an average of about 14%. The average Fiat money user witnessed a 14% increase in the supply of their currency every year. Which is astonishing because a century earlier their grandparents could save the money that was only increasing at 2% per year.
So the result of this is that it causes [00:18:01] everybody to discount the future more and prioritize the present more. That’s the kind of underlying fundamental explanation of all the bad things that we saw in the 20th century. We’ve reversed the process of civilization. That’s why the subtitle factor for my book sounds outlandishly crazy at some point, but I think I’ve tried to make the case for it, initially, and when I the universalization of debt, everybody has to get into debt and everybody becomes a debt slave, and also it’s an alternative to human civilization. We stop lowering our time preference, we stop accumulating more and more capital, we accumulate less capital, we destroy the capital that we have, we consume a lot of the capital.
We really reverse and destroy human civilization. We launch world wars because insane governments now have access to endless money printers. I think most of us have this idea that progress is inevitable, that the world gets better, the technology gets better, and the world gets better.
But [00:19:01] I think writing this book made me realize that the last century has been a regression in the human condition in many ways. Yes, technology has continued to advance. Mainly it was the 19th century technology that we just continued to develop in the 20th century. But I think if we continue on a fiat system for another 50 years, It’s now becoming apparent to more and more people just how unsustainable it is and how destructive it is.
And I think if we continue on fiat, I think things will get much much much worse, because of these underlying trends that I mentioned. Because we’re going to continue to have more money increases supply by 10, 20, 30% or so, and we’re going to continue to see people discount the future more. We’re going to get to the see governments have more and more power and money, but fortunately Bitcoin fixes this!
Tom Woods: All right, but let’s go to the connection between all this and food.
Saifedean Ammous: Yeah. So with food, food and energy are basically the two most important things that people buy. The two [00:20:01] biggest, most price sensitive items on people’s shopping lists. So everybody needs to eat and everybody needs to have energy sources if they want to live in the modern world.
You need machines, you need electricity, you need fuel, you need to move your machines around, move your cars. So those two things are a big chunk of everybody’s budget, a big chunk of everybody’s spending. And so they’re extremely politically sensitive issues. If the price of food goes up, politicians are very worried that people will be out in the street and elections won’t go the way that you want them to go.
If you look at how governments have dealt with food since the 1970s, in particular after 1971, because 1971 is when the U. S. removed the last link of gold redemption. So gold was still redeemable from the U. S. government. From the central banks of the rest of the world. They could still redeem gold up until 1971.
After 1971, [00:21:01] nobody could redeem any of the dollars for gold. And so the restraint on the U.S. government to print money or to lend the money, create new credit was removed. And so the money supply started increasing very quickly. As a result of course, surprise, prices started to increase very quickly.
Both for prices of food and prices of energy. And what we saw there is that, of course, as with every government that has ever existed in history, every single thing on Earth was blamed for the rise of prices, except of course for the printing of the money, for the increasing the money supply.
So what governments did in the 1970s, particularly the U. S. government was that they tried to get their people to eat cheap stuff instead of the expensive stuff whose price is rising. And that’s really the best way to understand all of the idiotic pseudoscience that is thought in modern universities [00:22:01] under the pretext of being nutrition science. It’s all motivated by the idea that we need to get people to eat cheap crap instead of eating the expensive stuff that makes prices go up.
So you look at the 1970s, I mean the stories are almost unbelievable. When the price of eggs rose, president, I think it was Johnson, not sure who it was, I have the story and the details in the book, but the president called the sergeant general and told them, listen we have a problem with eggs, prices of eggs keep going up, we don’t know why that’s the case.
Tom Woods: Yeah, this is Johnson. I read this in your book, yeah, it is johnson.
Saifedean Ammous: Johnson, yeah. The price of eggs keeps going up, we need to find a fix for this. Can you tell people that eggs are bad, that they shouldn’t be eating a lot of eggs? And lo and behold, the sergeant general goes and says, yeah actually eggs have cholesterol and that’s not good for you, you shouldn’t be eating a lot of eggs.
Tom Woods: This seems impossible, right? This seems like something you and I would make up!
Saifedean Ammous: I know, [00:23:01] it’s amazing. They just continue to come, like all of these stories. I read about a lot of this stuff from the context of reading about nutrition, reading about the equivalent of the Austrian school in nutrition. There are heretics in nutrition just like us in economics.
And they mentioned those things without much focus on the economic underlying factors, without much understanding of the inflation and so on. But if you have that idea of, if you know what happened with the inflation, then you can connect the dots and you see in the 1970s, suddenly all of these government agencies are telling people to eat cheap stuff.
And then perhaps the more significant example is the rise of industrial agriculture, which was deliberate government policy. Nixon appointed a guy called Earl Butz as department of agriculture secretary. Earl Butz went to American farmers and said go big or go home, we need to industrialize, we need to do mass scale farming in order to [00:24:01] bring costs down.
And so we moved from the model of small farms, ranches, a family of six who have a farm with a few cows and a few crops that they grow and they sell in the local market. All of that became unfeasible in the 1970s. Earl Butz came to all of those small farmers, bought them out or forced them to consolidate and got big massive corporations to buy up all the land.
Tear down all of these small little veggie patches here and there and small little barns and turn everything into these massive monocropped fields because that’s more efficient. And so it’s more efficient economically. Yeah, you can make more corn if you take 100 small farms and you raise everything, a hundred small farms with a hundred small families growing various crops, including corn and growing their own animals.
You have 100 healthy farms, and if [00:25:01] you get into how the soil is managed, you need the animals along with the crops because the crops deplete the soil of nutrients, the animals replenish the soil when they defecate in it. And that’s the cycle that keeps the Earth healthy, it keeps the soil healthy and fertile.
So you take out those 100 farms and you get Archer-Daniels-Midlands to all those 100 farms and raise everything and turn it all into just one row after row after row of corn with these giant massive combine harvesters running through it. You make much more corn than you did with the 100 families, but of course the quality of the corn declines, and the nutritious value of the corn declines.
So this is what started in the 1970s. It’s, let’s find a way to make food cheaper, and the way that they made it cheaper was to compromise on the quality. And then the other way that they made it cheaper was to compromise the quality and to tell people that it’s actually better for you to eat the cheap crap that’s [00:26:01] making you sick and that the healthy things that all of your ancestors have eaten for millions of years, the reason that we as human beings became human beings is the fact that we eat meat and that we can hunt it. It’s why our brains are so big because we eat a lot of meat and that somehow in the 1970s became unhealthy.
We’ve had government being extremely activist in trying to tell people to stop eating meat because it’s bad for the environment, because it’s bad for you, because it causes heart disease, it causes colon cancer, it’s bad for your kidneys. All of that is completely rubbish pseudoscience, and basically inflation is propaganda.
The only problem with meat is that it’s more expensive. And that it’s not easy, well there’s two problems, it’s expensive and it’s not easy to industrialize it and bring costs down like you can with corn and soy and all these other crops. Because with these crops, the more industrial power you bring it to the production of the crops, [00:27:01] the cheaper you can make them.
It’s almost like producing plastic goods. In the sense they are plastic, you’re putting plastic fertilizer on the soil, throwing in a seed, and a few weeks later you’ll harvest that plastic fertilizer in these crops that are very cheap and very harmful. So we witnessed in the 70s the rise of the dietary guidelines, where the government is telling everybody you need 6 to 11 rations of grain a day, and that you should cut down on meat and that you should cut down on saturated fat, and then you should use, and this is maybe the biggest crime of the century, that’s a lot of competition in this century, but perhaps the biggest crime of the century was the idea that you shouldn’t use animal fats, but you should use industrial seed oils.
You should use all of these very cheap oils that are produced in mass scale, canola oil and rapeseed oil and mazola oil, and corn oil. All these industrial oils, they might just be [00:28:01] the worst thing that you can do for your body. If you don’t want to take anything from what I say about food, seriously, you just want to take one thing, remove all of that seed oil from your house, never ever use it in your house ever again, and only cook with gi or tallow or butter, animal fats only.
That on its own, you can still eat all the things that you want to eat, but just cook them in that fat, you’re going to witness an indescribable improvement in your health. If you just get rid of that absolute poison, the seed oils, vegetable oils is another word that people call them. They’re not made from vegetables, that’s marketing.
But anyways, all of these plant oils, you just get rid of them and you replace them with animal fats, it’s an enormous improvement. But of course that’s not what the government has been telling you. So since the 70s, we have the government on the one hand pushing for the industrialization, pushing for bringing costs down and pushing people to eat [00:29:01] the industrial food that is low cost. So 50 years on, what has been the harvest of this?
Well the harvest has been that people eat a lot of junk and people get sick. And so we see that as the consumption of those things went up, the government policy has actually been successful. They’ve managed to get people to eat a lot more of this junk and the result has been massive increase in obesity, in diabetes and in all kinds of health problems.
And of course, massive depletion of the soil, which is an excellent example of a high time preference. Keeping the soil healthy is a very low time preference thing that we do, but exploiting the soil for maximum gain today is a very high time preference thing. You milk the soil dry in order to get the biggest paycheck you can get today.
And then you end up with barren land. And that’s what a lot of the U.S. and the world is [00:30:01] today. If you fly over the U. S. you see a lot of the land there is just, for a couple of months in the year it’s full of crops, but for the rest of the year, you fly over and it’s just barren. And it’s land that wouldn’t produce anything without fertilizer.
There’s no nutrients left in the soil. And this has been going on for 50 years. Recently, a lot more people are waking up to it. You witness the rise of people becoming aware of the damage of seed oils. People becoming aware of the importance of meat, the rise of people eating carnivore diets and low carb diets, and witnessing amazing improvements.
And of course, the astonishing thing here is, I mean there have been millions of people all over the world who have improved their lives by bucking the recommendations of the U. S. dietary guidelines by doing the exact opposite of everything that nutrition departments and doctors have been telling people for 50 years.
And of course, because this is all fiat world, absolutely no interest among the fiat institutions to [00:31:01] reverse track on any of this. I mean Harvard Medical School and Harvard Nutrition School are still telling people to eat the industrial waste, and they’re still telling people that eating meat is bad for you.
Tom Woods: How does this analysis though get applied to energy policy or preferring inferior energy over superior energy? The health effects of these industrial seed oils are not instantly evident as soon as you consume it, whereas most people can get that these alternative forms of energy are unreliable and more expensive.
They can see that right off the bat. So what’s the mechanism here?
Saifedean Ammous: Yeah, I think it’s a similar process. Also in the 1970s, the price of energy went up and also governments started supporting any kind of stupid excuse they could come up with that explains why it’s actually not the fault of all of the money printing that we’re doing.
It’s the fault of the Saudis and it’s the fault of the Arab-Israeli war, [00:32:01] and it’s the fault of peak oil, we’re just running out of oil, it’s nothing to do with inflation, and it’s actually the fault of climate change. Well we can’t use oil anyway, even if we’re not running out of it, we shouldn’t be using more of it because it’s going to destroy the planet.
So once we get into this inflationary world of the 1970s, governments have a serious problem with people consuming oil because oil just keeps getting more expensive. Because being able to deliver it in the right place at the right time, getting it and being able to consume it, if there’s inflation, the people who run the supply chain, they have to be very responsive to it. Because it’s a very sophisticated supply chain and it’s a very liquid good.
So you’re constantly burning oil, like literally burning. And so you’re running oil through the pipeline of the supply chains all the time. And as soon as the inflation hits, the price has to rise. And so in the 1970s, the price of barrel of oil went from $2 [00:33:01] to about $30 or $40 by the end of the 1970s, this was an enormous increase.
And by the 1970s, America in particular had become completely dependent on oil. And I don’t say the word dependent in a bad way, that’s a good thing. It’s good that we’re dependent on oil because the alternative is that we’re poor and broke and miserable and immobile and cold and dying in the winter.
Technology is a good thing, energy consumption is a good thing. The more energy that we consume, the better our life is. And if you look historically since the start of the industrial revolution, we’ve had a global trend of 2% per capita increase in annual energy production. 2% increase in energy consumption per capita per year.
And that trend continued from the early 19th century up until 1970. So for a century and a half to two centuries or so, that trend was continued. And then in the [00:34:01] 1970s, it broke down and we’ve basically been flat since the 1970s, the energy consumption per capita. I mean not exactly flat, but it hasn’t kept up with the increase that has been going on.
And I think what happened was that because of the inflation, we’ve witnessed the rise of all of these insane death cults. And again, there’s a lot of it that’s religious, similarly with food, a lot of these Christian groups that view meat eating as a sin started becoming extremely popular and influential in the 1970s because governments liked that message.
And similarly, you have a lot of religious and arguably pagan influenced groups that view humanity as a burden on errors and that view nature and earth as being pure, and that humans are evil who come and ruin everything. That suddenly started becoming really popular in the 1970s and you have the cranks like Paul R. Ehrlich come up with all these ideas about we’re running out of resources and there’s a [00:35:01] population bomb, and we’re all gonna die, we’re all gonna starve and all these incredible predictions about, by the year 1982, there’s not going to be any more oil left. And by 84 there’s not going to be any nickel left and so on.
And all these doomsday cults basically, started to flourish in the 1970s. And I think there’s a reason that all these doomsday cults flourish in the modern cult factory that is the modern university, because the university is funded by government and governments want to hear these messages.
Again, this isn’t some overarching conspiracy where somebody is sitting in an office, planning all of this out, it’s just if you come up with a story that says, hey people need to consume more oil in order to survive, that’s going to be pretty inconvenient for people who are signing off on your budget.
And again, we live in a world in which scientific research has also become all fiat because it’s all captured by government resources. It’s all funded by government. [00:36:01] So we get all of these insane ideas that, and of course then that mutated to the biggest one, all of the doomsday scenarios, they have a natural problem that they couldn’t run with these doomsday scenarios for very long because you can only say the sky is falling tomorrow so many times before people stop believing you. So you lose your credibility after a while you’ve made hundreds of these predictions.
So in the statist fiat marketplace of ideas, the idea that I think was most suited for surviving was the doomsday cult of climate change because that’s like a very good cult leader. Because it makes no testable predictions whatsoever, everything confirms climate change. If it rains too much this year it’s because of climate change.
If it rains too little, that’s also because of climate change. And if it rains close to the average [00:37:01] guess what, there’s annual temperatures and there’s the number of storms and there’s all kinds of other things that you could look at that are different and whatever is outside of the 95% opposite of observations, whatever’s an extreme observation anywhere in the world is evidence of climate change.
And that’s how this insane doomsday cult functions. Obviously there’s always extraordinary things happening all over the world. Every day hundreds of people worldwide win the lottery, it’s an extremely unlikely thing.
There are so many extremely unlikely things that could possibly happen that we get so many of them actually happening. So every day there’s a place that’s witnessing record rainfall or record high temperature, record low temperature. And of course as technology expands and as the world expands, we’re just collecting more and more of this data in more and more places and being able to come up with new extremes.
So all of these can be [00:38:01] attributed to climate change, what the implication of all of these doomsday scenarios, highest level of rainfall in Arkansas this year, oh no doomsday! The implication is you need to stop consuming the expensive forms of energy, and you need to start consuming the forms of energy that don’t work basically.
That are extremely cheap and that are useless. The motivation is that solar and wind, for them is that they’re going to reduce the damage from climate change. But in reality, solar and wind cannot provide us with a reliable energy to meet our needs, and they cannot provide us with the high power that we need.
That’s really the key point that I stress. Is that what hydrocarbons and oil and gas allow us is high power on demand, whatever we want it, anytime, at the margin that’s why it’s very valuable. Whereas wind and solar, you can’t control how much energy they give you. They are basically completely [00:39:01] useless for a modern industrial society.
They’re completely superfluous. I mean, we can build an economy on solar and wind and that’s a 15th century economy, since the 15th century we’ve started using coal and that’s really changed the world. The use of gas and oil has completely transformed humanity because of the availability of high power.
And now fiat is trying to take that away from us because inflation makes it impossible for us to maintain the extremely sophisticated division of labour and supply chain that we need in order to make this work. When you’re constantly robbing everybody, you are making it very hard for them to continue to buy those sources of energy that they need.
And you’re making the supply chains more and more tenuous. And we see this in the 70s, where I discuss it in my book, but I think you see this now, the same people, the same exact people that tell you that inflation is not a problem, that [00:40:01] Bitcoin is a bad idea, Bitcoin is stupid, gold is stupid, austrian economics is stupid, it’s an astonishing coincidence, isn’t it?
That these very same exact people also happen to believe that hydrocarbon energy, that fossil fuels are bad for the planet and that the alternatives are cheap pre-industrial, unworkable technologies like solar and wind. And they also happen to believe that meat is bad for the planet.
That cow farts are boiling the oceans and that CO2 by rising from 0.02% to 0.04% of the atmosphere, CO2 is going to basically destroy life on Earth. I don’t think it’s a coincidence that those same people believe all of those ideas. It’s the inflation cult, it’s the people who are paid by inflation and their entire worldview is shaped by inflation and shaped in a way that defends inflation.
They want to see more and more inflation [00:41:01] and they want to secure more inflation and there’s an enormous intellectual industrial complex out there to tell people to stop consuming the things that they need for their life, because these things are inconvenient for inflation. And it’s an extremely unpopular position to take in this book, but in this book I’m standing up and I’m calling their bluff, and very few people will say this.
Very few people will tell you that this entire climate change hysteria is a load of complete nonsense, and that’s what I’m saying. And the entirety of modern nutrition science is a load of complete nonsense. And not only am I saying is it both those things nonsense, they are nonsense because they are motivated by hiding inflation.
I’m arguing that this is just how the inflation beneficiaries, the fiat privilege, the people with fiat privileges as I like to call them, this is the world that they need. They need a world in which people eat bugs, they eat soy, they eat [00:42:01] industrial manufactured crap, and they consume very little energy.
And if you have that, then yeah, inflation won’t be bad. This is what we’re seeing right now. And I think the lockdown cult, the insane fanatics that promoted this insane massive mass crime against humanity that is the lockdown, are also motivated by this to an extent. And then now this is, you’re already hearing the same insane people talking about well we are going to need lockdowns for climate!
It’s not a lockdown for climate, it’s a lockdown for inflation. If you stay home, if you don’t leave your house, if you eat bug soy burgers delivered to you at home with the tiny little drones, and if you stop living in a big house, that you get to live a comfortable life in a big house, we should stop that because that consumes a lot of oil and that’s bad for boiling oceans or whatever.
So if we convince you to move everybody to tiny little apartments, where the [00:43:01] cost of heating goes down significantly, and the cost of transportation goes down significantly, everybody’s locked up, everybody’s eating bug soy burgers. Guess what, the inflation problem has been solved, Tom! There is no inflation!
Tom Woods: The point you made, and I know that the problems with measuring inflation and one of the problems is the quality of the goods that you’re buying. It is hard to make these hedonic adjustments, because if I can no longer get that ribeye steak for $20, because the ribeye steak is now $100, so instead I get a very low grade of meat for $20, it looks like my basket of goods still has “meat” in it, and so officially everything looks okay. But it’s really not okay because I wanted the ribeye steak and I can’t have it anymore.
Now, as I mentioned at the beginning, your table of contents absolutely drew me in. I don’t want to give the impression that this is the [00:44:01] entirety of your book, but some of your section titles run like this, fiat architecture, fiat capital destruction, fiat family, fiat farms, fiat diets, fiat foods, fiat soils, and then fiat schools, universities, academics, fiat science. I think we’ve endured plenty of that.
And it just goes on and on. This is a fascinating application of these important ideas, but then also there’s a lot of great and important economics in this book. And if we had more time, I would have talked a little bit more about the cost benefit analysis of Bitcoin versus fiat. I’ve done that a little bit.
It’s as if they try to say Bitcoin uses up too much energy or gold mining as Milton Friedman thought was a waste of resources if we can just print piece of paper. I’ve hit on that before, and I think people can get the sense of what the way to think about that is if fiat has all these terrible consequences and sound money has these good consequences, then whatever expenses are associated with sound money are an absolute bargain.[00:45:01]
Give us a final word before we wrap up for today.
Saifedean Ammous: Yeah, this is exactly it. I think a lot of these insane fiat privileged people are always going on about, oh no, Bitcoin is consuming so much energy. The same people who fly their private jets of course all over the world and consuming energy.
And I have no problem with them flying their private jets, I dream of a world in which we have 1000 times as many airplanes flying all over the world at cars and much more energy consumption. I’d love to see the world cause you 100 times more energy than it does today, because I think that’s a good thing because energy consumption is how things get better.
We used to wash our clothes with our hands and now we use washing machines. Washing machines consume a lot more energy than hands. And a lot of the people that want to defend Bitcoin, I think make a very big mistake which is, no actually Bitcoin doesn’t cause you that much energy, and here’s a bunch of complicated math to show you why it’s actually not that bad.
No, it does consume a lot of energy. The [00:46:01] washing machine does consume a lot more energy than you sitting there and trying to wash your clothes with your own hand. You don’t need a generator with electricity connected to you in order to wash it. But there’s basically nobody in the world who can have a washing machine who doesn’t have it.
I’ve never heard of anybody who had a washing machine and then decided, no you know what? I’m going to spend three days a week doing my own laundry with my own hands.
I’ve never heard of somebody like that. People like to virtue signal all kinds of nonsense, but when it comes to actions, that’s when you can tell what they really believe.
And everybody believes in a washing machine, everybody believes in spending more electricity on washing than just using their hands. And I am one of those people and the difference between me and most people is that I defend it and I’m not ashamed of it. Yes, I want to consume as much energy as I possibly can.
I’d like to automate more and more things in my life so that I have more time to do things that I enjoy to do, that I can spend time with my family instead of having to spend time [00:47:01] washing. I’d like to drive my family in a car rather than having to walk with them everywhere. And so if you want to cross the Atlantic, you can take a kayak.
You can also take an airplane. Again, we don’t see many people taking a kayak, even though it doesn’t consume a lot of energy. Why do all of these people still insist on taking the airplane? Because it’s faster, it’s safer, it’s cheaper and it’s much better. The energy consumption is definitely worth it.
So why is it that people want to spend all of this energy on Bitcoin? To answer that question, I think we need to look at the opportunity costs, and this is really the economic way of thinking. You can’t just look at one thing, you have to look at the seen and the unseen. So it’s not that people are just spending this money on Bitcoin in a vacuum.
They’re spending it on Bitcoin because there is an alternative and the alternative is the Canadian Dollar, the Lebanese Lira, the Venezuelan Bolivar, all these [00:48:01] dysfunctional socialist shitholes that have dysfunctional currencies that are destroying their societies. That are making people literally starve. That are making people hungry, that are making people broken destitute.
This is what fiat has done. Fiat, as I was saying earlier, offers us 14% inflation per year, so we’re having the supply increased by 14%. So anybody who holds fiat is just getting poorer. So there you go, that’s the first reason. We’re getting a 14% devaluation of everybody’s wealth in order to finance insane governments and their spending, it’s a very high tax.
And if you think about 14%, 14% of the liquid wealth of the world, there’s about a hundred or $90 trillion of liquid beyond money around and checking accounts and saving accounts and cash around the world, and that’s being diluted around 14% per year. So we’re talking about several trillion. I can’t remember the exact [00:49:01] numbers, but we’re talking about something in the range of $10 trillion a year that are being lost to inflation. That’s what Bitcoin fixes.
Just like we know with crossing the Atlantic with an airplane, why don’t you take a kayak? Exactly. Why don’t the Lebanese people just stick to the Lebanese Lira, it’s environmentally friendly, it doesn’t consume a lot of electricity and it doesn’t need all of this complicated machinery that Bitcoin uses. Sounds like a very reasonable thing to ask of them, right? Well no, as somebody who survived hyperinflation in Lebanon, thanks to Bitcoin, I’ll tell you that Bitcoin is more valuable for me than any of the machines that, well maybe not more valuable than my laptop, maybe my phone, actually probably yeah, probably more valuable than them, definitely more valuable than my washing machine, than my car, than all of these things.
If I had to choose where do I put my energy, where do I get to spend the energy, if in the coming ESG dystopia, where you need to [00:50:01] do carbon accounting for everything, I would have happily given up all my rest of carbon emissions in order to keep the Bitcoin carbon emissions. It’s really worth it.
It was very much worth it. I don’t just write about Bitcoin as somebody who’s a big fan of Bitcoin because I enjoy it, actually it’s saved my life. I’d be in a very bad place today if I didn’t have Bitcoin. And if I’d listened to all those insane fiat people who tell us that Bitcoin is too expensive, if I had a woken up from the hysterical education that I got at Columbia University about carbon and all of this nonsense, and if I believe this bullshit and I thought to myself, oh yeah Bitcoin, that’s consuming too much energy, I’m not going to use it. If I was that stupid, I’d be destitute today.
And because I understood that this is technology and because I’m not an insane Luddite who thinks machines are bad, I understood that this is a machine that’s going to consume more electricity [00:51:01] and it saved my life. So if we think about the costs of fiat that Bitcoin is allowing people to escape, number one we have the inflation which is very clear and very obvious, you have all the economic destruction that inflation brings about.
Business cycles and the financial crises and all of that stuff, which as an Austrian, I’m sure you’re very familiar with. Then you have the problem of government spending, the fact that it just creates all these omnipotent governments all over the world. And people think of government spending as a benefit from fiat.
For me, it’s destructive on top of its cost. I think the best thing that you could do with tax money. The best thing that the U. S. government could do with the tax money or any government for that matter is take all of that money and put it in the president’s own private bank account in Switzerland.
If all of the U. S. taxpayers money went to Switzerland in one person’s bank account, the U. S. would be better off than the government getting that money and spending [00:52:01] it. The problem with taxation, I think Peter Schiff says this, the problem with taxation is not just fact that they take money from you. That’s like when they put the knife in and then taking the knife out, which hurts even more is when they spend that money and then distort the economy.
So then we have all of these distortions that are being enabled, which I discuss in fiat life, food and education and science and all that stuff. All of these distortions are being enabled by fiat money.
And of course, I think the biggest one, the most important one, even bigger than inflation and business cycle is conflict. Ultimately fiat is might makes right. There’s no restraint on how much money the top dog in a fiat system has.
As we saw in Canada, being Prime Minister of Canada right now, and being Prime Minister of any fiat country in the world, allows you basically unlimited access to money. Like all of Canadian society’s [00:53:01] wealth is Justin Trudeau’s. He can do with it as he pelases. He can shut down your bank account, he can give you money, he can take money from anybody, give it to anybody else.
The entire system functions in a way where the people in power get to control it. So what does lead to? It leads to a lot of conflict over power. It leads to a lot of domestic conflict. Politics becomes a very high stakes game with fiat because being the person in charge, like being the president of any particular country, allows you to assign and confiscate wealth as you please.
So people are going to go to great lenghts to secure that for themselves. And that means getting into a lot of conflicts. Domestically, but also internationally. War, that’s the real cost of the fiat system. First of all, it allows governments to finance themselves into war, and that’s why World War I and World War II happened.
Maybe not started, but that’s what allowed them to drag on for so long, because governments could just [00:54:01] keep printing more and more money. But also it creates bigger incentive for conflict beyond just the financing, which is that the stakes are very high. Iran and the U.S. the stakes are extremely high because of the fact that the U. S. can weaponize its financial system against Iran.
So Iran has a very strong incentive to not play along, and the U. S. has a very strong incentive to use its ability to control the fiat monetary system to try and impose its will on Iran. All of that stuff is because we have this insane monetary system where value is determined by a bunch of people who are in charge, who are in power. Which is not the case with gold and not the case with Bitcoin.
You need to mine the gold, which costs money in order to make it, or mine the Bitcoin, or you got to earn it. You got to provide something of value for others. Fiat destroys society because it makes [00:55:01] it so that all of the productive people can’t get ahead, and the parasites can. And the people who get into conflict, the violent people, they are the ones who can get ahead because they get to control the printing presses.
Tom Woods: On that note, I guess it should be obvious by now how important it is for you all to read this book, which is once again The Fiat Standard, the Debt Slavery Alternative to Human Civilization, linking to it at tomwoods.com/2071. I know that we might think at a time like this that the issue of money is abstruse and technical and not really our central concern, but if you’ve been really paying attention, you see that it always is really, at the very least beneath the surface as an issue and say with the situation in Canada, now it’s even above the surface.
It’s very obvious how important it is to get the money right. This is not just some academic question that we can relegate to the nerds in our movement. We all need to be engaged on [00:56:01] this topic because it is so fundamental.
It is the base upon which so much else rests. So we have to get this right, and getting it right begins by reading the Saifedean books, The Bitcoin Standard, and now more recently The Fiat Standard. Thanks so much for your time today, Saif!
Saifedean Ammous: Thank you for having me Tom. It’s always a pleasure!