March 17th 2022.
After the Russian invasion of Ukraine, the US confiscated the Russian central bank’s significant monetary reserves, and banned some Russian banks from the SWIFT network. Serious questions are being asked about the survival of the postwar dollar-based world monetary order. Will Russia, China, and other countries actually build an alternative international settlement system, after years of threatening to do so? Will global central banks stop accumulating US treasury bonds and replace them with gold and commodities? Will we witness the birth of a new commodity or gold-based monetary order? In this seminar, we use the insights from The Bitcoin Standard and The Fiat Standard on temporal and spatial salability to explain why reports of the death of the dollar and the emergence of a new gold standard may be exaggerated.
- Bretton Woods III memo by Credit Suisse analyst Zoltan Pozsar
- Arthur Hayes’ blog Energy Cancelled
- Reuters report on commodities crisis
- America’s Quiet Default by Nic Carter
- Saifedean’s first book, The Bitcoin Standard
- Saifedean’s second book, The Fiat Standard
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Handre van Heerden: [00:03:06] Saif, I told you guys I started working for Incrementum now. I’m working on the ingoldwetrust.report. I went back and re-listened, last year you had a debate with with Mark Valek regarding the demonetization of gold and a lot of stuff has happened since then.
And they have this theory at Incrementum, Ronnie and Mark in particular, that Bitcoin and gold aren’t a threat to each other. They should be seen as two assets that you can diversify into. And I don’t agree with all this, Bitcoin will destroy the value of gold because it’s taking over, argument.
And recently I’ve been listening to a lot of and reading Luke [00:04:06] Gromen, and a lot of the other macro analysts. And a lot of them seem to agree that there’s a large possibility that China and Russia will start selling their resources for the oil, and their wheat and stuff for gold.
It’s a possibility that could happen soon. And I think personally, because I’ve been working and listening to all this stuff every day now, I think that as long as we get off the dollar standard that’ll be great. And also then with gold and dollar and Bitcoin, and if it’s now renminbi, or the Russian currency coming into play, if that happens over the long run with Gresham’s law and all that stuff, Bitcoin will just take that all over.
It could be worth our [00:05:06] while to, almost wanna say punt gold, in order for them to just start using that as an opposing currency to the dollar, and it’ll give Bitcoin a chance to slip in the back, if you understand what I mean.
Saifedean Ammous: Yeah. I was just thinking of the same thing. I thought maybe we could have an episode about this.
I was reading a very interesting article that was just, I think, published yesterday by Arthur Hayes, the CEO of the BitMEX. That’s a very nice title, it’s called Energy Canceled. And it just says, the modern west has decided that they’re going to cancel energy because children, or Ukraine, or virus, I can’t keep up with the current thing, but [00:06:06] people are mad and they decided to cancel energy because that will fix everything, obviously.
But I think it’s a very interesting idea. It’s fascinating to think about it, on the one hand we have something that is really, for the first time since the end of the Soviet Union, we have the emergence of an independent alternative to the dollar system.
So basically from 1990, until 2022 the whole planet was on the SWIFT system, except for Iran and North Korea and a few renegades that were basically isolated and in deep trouble. But the whole world was on the SWIFT network and on the US Federal Reserves full node. The whole world was using one full node, which was the US Federal Reserve.
[00:07:06] And there was always this idea that this is just a technical solution, that the Federal Reserve is out there out of the goodness of its own heart, giving the rest of the planet, basically running a node for all of us because we are all unable to run our own node.
And the US is providing us with this enormously valuable service that allows the rest of the world to trade. And that’s basically the main topic of The Fiat Standard. And I discuss the architecture of how this fiat network works.
But the ugly underbelly of this network is that it’s not just a technical solution. It’s not something that’s just a technical thing, it’s a deeply political issue, and it’s a deeply invaluable economic asset to have because it allows the US to basically first of all, [00:08:06] export its inflation to the rest of the world because they just keep printing dollars, and the rest of the world has to keep taking on those dollars because that’s the only thing that you can use to pay.
And secondly it allows the US to impose its will by sanctioning others. And they’ve used this mainly against Iran and North Korea, a few other countries, but after 2014 they start using it to some extent against Russia and Russian banks. And now in 2020, 2021 was really the Canary in the gold mine when after the Taliban took over Afghanistan, the US just basically confiscated all of their reserves.
And now the Afghan people are in a major financial crisis and major humanitarian crisis because they lost all of their financial reserves. All of the money that they were using to settle trade with the rest of the world, which was held at the US Federal Reserve, it’s now no longer theirs.
And it’s a [00:09:06] wonderful example of just how American politics is so hysterically stupid, that 20 years later they just decided we’re gonna give this money to 9/11 victims even though Afghanistan likely had nothing to do with 9/11, especially the people that are alive today in Afghanistan.
And this money was put there by the government that was installed by the US. But anyways, regardless of what we think about politics and the implications of the political aspects of this, putting that aside and focusing on the economic implications, this is an enormously significant period, it’s an enormously significant development because the US is basically saying you only get to use our node if you do what we want. And if you don’t do what we want, we take your toys and go away.
And I [00:10:06] really liked the way that Nick Carter framed it in an article for Coinbase the other day, he said, this was basically a default. The US defaulted on its obligations to Afghanistan and the Afghani government had a bunch of money and they could use this money to settle their payments. They could use this money to buy goods from Germany or Brazil or India through the US central bank, which is what this fiat network does.
And one day the US said, nope, you can’t do that. Now, you can argue whether the US is really defaulting. Obviously the US is not defaulting because they don’t have the money to pay this, they can print it. But it is a default, technically. It truly is a default. The US had a financial liability and they just decided they’re not going to meet that liability, so it is a default.
But now we see the same thing happening with Russia, and that’s a much bigger deal. We’re talking hundreds of billions of dollars in reserves that is just getting canceled. [00:11:06] No more reserves for you, which is an astonishing thing to watch, but also I think the implication of this is deeply problematic for the US dollar.
So I think this is one of these knee jerk reactions, kind of like the lockdown and all of the Corona hysteria stuff that people who watch TV just get really emotionally worked up when they get emotionally manipulated by the stupid TV, and then they lash out and they do things that seem cathartic.
We’re gonna show them, we’re gonna fix this, we’re gonna lock everybody at home forever. And that will show the virus or we’re just gonna take all of the Russians money and that will show them. It’s an extremely childish, an extremely high time preference kind [00:12:06] of reaction.
Because sure you’re hurting the Russians, but you are probably hurting yourself more down the line. It’s gonna hurt the Russians a lot, but the Russians, they’ll eventually move on and they’ll have to learn to use another monetary system, but you’re hurting yourself a lot more because you are telling all the rest of the world that all of your politics, all of your national sovereignty, all of that stuff.
Is basically up for us to dictate. And if you don’t do what we want, we take all of your toys and that’s it. We take your toys and run away, we do the Eric Carman, you know Eric Carman in South Park says, screw you guys I’m going home. This is basically US foreign and economic policy at this point.
You either do what I want or screw you guys, I’m going home. I’m taking my ball and going [00:13:06] home. It seems cathartic for Eric Cartman at the moment. And yes, I manage to show them I’m taking my ball and they can’t play anymore because I own the ball and that’ll show them.
In the long term, it’s just gonna mean that everybody’s going to figure out how to play without Eric Carman and his ball. And then, he’ll just be stuck at home eating the industrial waste that his mom always makes him to make him the eat continues to get fatter and fatter and have no friends.
The parallels are really endless, I think, between US foreign policy and Eric Cartman, and domestic policy too. So the implication now is you look at the US treasuries that the foreign countries hold, they’re enormous. The US has [00:14:06] several billions of dollars that are held by foreigners.
I think it’s somewhere in the range of 3 trillion that are held by the Chinese government. And several other trillions are held by countries like Japan, Saudi Arabia, various sovereign wealth ones. And these countries, it’s a new world out there. It’s not 1975 anymore.
They are not reliant on the US, like they were in the seventies and sixties and eighties and nineties, it’s a big world out there. And in fact, they’re really more reliant on the Chinese in many ways. So what do they get from the US? They get basically the most important thing that they buy from the US is US treasuries.
The most important thing that they get from the US is just financial services. They use the US full node, The Federal Reserve, [00:15:06] and they hold the treasuries, which are liabilities of the US government.
Sure that a bunch of US cars and a bunch of US companies and a bunch of US tech services and a bunch of stupid social media companies that the rest of the world relies upon, but people need food more than they need Reddit and Facebook, let’s face it.
You can build national alternatives and you can have balkanized social media networks that emerge much easier I think than you can replace the really essential industrial goods that you get from places like China, and the energy sources that you get from places like Russia and Saudi Arabia and food that you get from places like Russia and Ukraine.
And with this development, we are [00:16:06] seeing, I think one very interesting development was the Saudi crown prince basically saying to the US, we don’t care what you want to do. When the US said, you should increase your output of oil, and he said, you can’t tell me what to do, I have options, as somebody put it.
And yeah, they’ve pivoted to the Chinese and they’re dealing with the Chinese now. And they’re considering pricing the dollar in yuan. I know a lot of people talk about how this is extremely significant that the dollar is priced in oil and that now they’re going to price it in yuan.
I don’t see this as particularly important. I don’t see it as being all that important because you price the oil in dollar, you’re also pricing it in all other currencies, because the dollar is priced in other currencies.
And so all that your buyer needs to do is to just multiply by the dollar you want exchange rate, and then the oil is priced in [00:17:06] yuan. It’s not that big of a deal how you price it. But I think what is really very important is which payment network you use and which reserve assets you use. And this is what’s getting endangered.
I don’t think what’s really important is that the Saudis and the Chinese are going to start trading oil in yuan, I think what’s important is that they’re going to start thinking very seriously about moving away from holding treasuries and from using the US Federal Reserves fiat network.
I think that’s enormously significant. We’re going to see the emergence of probably a second global monetary network built around the Chinese yuan almost certainly, because Russia now is going to be enormously dependent on the Chinese. And I think the Chinese are going to be massive winners from this Russia Ukraine situation because of this monetary aspect.
[00:18:06] Because the network effects are such that really, the only one that can compete with the US is the Chinese. They have an enormous trade network all over the world, everybody buys Chinese goods, everybody needs Chinese goods, and Russia is now entirely dependent on China.
It’s their major trading partner or it’s definitely going to be their major trading partner with all of these sanctions. And now with all of the damage that’s happening to the Russian economy, with all the bankruptcies and the default that are gonna take place with all of the infrastructure that’s going to be bankrupted, it’s gonna be an enormous opportunity for Chinese companies to come in and make massive investments in Russia.
It’s a very heavy price that Russia is paying. And again, I’m not getting into the geopolitics of whether this is correct or whether they should have done it or whether they shouldn’t have done it, I’m just analyzing the economic implications.
The economic implications [00:19:06] are that Russia’s gonna pay a heavy price and China’s gonna benefit enormously from this, whichever way you look at it. So with the emergence of a second monetary network, it’s very interesting how that’s going to function.
I think the initial idea, the initial thing we’ll see is that’s going to lead to a reduction in demand for treasuries, and it’s going to lead to a reduction in the use of the SWIFT network, most likely. Many people are saying, we’ve heard these obituaries before, and I kind of sympathize.
If you’re a gold bug, and I was a gold bug before I was a Bitcoiner, we’ve been hearing this stuff basically every year, people like James Rickards or Marc Faber, they’ve repeated these kind of claims pretty much since 2000 or [00:20:06] so, every year it’s gonna be the end of the dollar.
Every year, the Chinese are gonna start trading with the Russians and the Indians and the south Africans and the Brazilians, the bricks are gonna build their own monetary system and they’re gonna start using their own currency, or they’re gonna introduce a gold standard and that’s gonna be the end of the dollar.
Now it’s getting a lot more attention, and I think, if I’m gonna make the skeptical case, I’ll say, if you’re new to this rodeo, if this is your first rodeo, it sounds like oh God, it’s gonna end. If you’ve been down the rabbit hole of monetary systems for a while, It sounds extremely familiar.
The Chinese are always making noises about, we don’t wanna be holding treasuries and we want to move away from the dollar, and Putin has always made those noises, and Iranians and many other countries have always made those noises. [00:21:06] So there is perhaps a case to be made that ultimately network effects rule, and this is just going to suck enormously for the Russians.
And it’s gonna cause a lot of problems for the Russians for as long as they continue this war, and as long as the sanctions continue, but the shelling point of using the biggest network is going to remain unchanged for the vast majority of people all over the world.
And so unless you’re Russia and Iran, you’re still going to be pretty much stuck on the biggest network, which is the US dollar. It becomes less convincing with every day that the war lasts longer. I think what’s different now, we’ve always had reasons for people like James Rickard and Marc [00:22:06] Faber saying now it’s different and this really is the end of the dollar.
And at the risk of sounding like them, I’ll say that this time it is different because this time, we genuinely do have the US dollar basically, or the US government basically pissing away the US dollars reserve status in order to act out in a fir of rage at the Russians.
Confiscating the reserves for the Russians is a massive signal to all the other countries that you don’t wanna hold treasuries, and you don’t wanna be reliant on our trade network, and you do wanna have a plan B. And I think it’s worth thinking about it this time.
Having been a gold bug who’d been through this for many years, who’d seen this for many years, lately I’d just given up on this ever happening. And in my mind, we’re not going to see a move away from the dollar until basically [00:23:06] the Bitcoin just grows and takes over. But I think this brings things further to the forefront. It accelerates the process at a time when Bitcoin is arguably not big enough to absorb all of these things yet.
We don’t have any major economies that have any reserves of Bitcoin that we know of at least. El Salvador is a pretty insignificantly small country in the grand scheme of things. And China just banned Bitcoin mining in their country and gave up on millions of Bitcoins being Chinese and just exported them abroad.
So it’s highly unlikely the Chinese would switch to a Bitcoin standard at this point. And I’m not sure that the Russians are keen on it. And I say this in The Fiat Standard, I think the idea that these countries hate the dollar is pretty well [00:24:06] established. It’s true, yes, they do hate the dollar, but I think they love their own fiat more than they hate the US dollar.
And that’s why they’re not very likely to jump on the Bitcoin bandwagon just yet. So we have a very interesting moment now, we have a very interesting development, which is what’s gonna happen now? What’s gonna happen to all of these countries and their reserves and their trading network.
And I think that there’s a lot of analysis saying most likely what’s gonna happen is that they’re going to move toward, instead of stock up on treasuries, they’ll stock up on commodities and gold. And I find that very interesting because we could be witnessing a revival of the gold standard.
In a sense, if you’re China right now, you are probably not gonna be buying any more treasuries and they have cut down on their buying of treasuries significantly in the last few years. They were buying and [00:25:06] accumulating at a very high rate previously, but now they’ve cut down on their buying, and I think they’re likely to cut down much more.
They’re unlikely to want to dump all of their treasuries at once because just dumping your treasuries right now is gonna be a great way to devalue them. Because if the Chinese start dumping their treasuries, then you know, let’s say they dump half a trillion, they’re just gonna make the rest of their treasuries worth a lot less.
So it’s not a very wise move to drop the treasuries now, if you hold a significant amount. Particularly for the bigger countries that hold the biggest holdings of treasuries. And once one of them starts to blink and dump, it’s likely going to incentivize the rest to do the same, and then you get a cascading crash in treasuries.
Maybe they won’t dump their treasuries, but I think they’ll let the treasuries expire, [00:26:06] mature, and then when they mature, they’re not going to roll them over by buying into more treasuries. They’re probably gonna take the money and buy gold. I think that’s the most likely candidate at this point, more likely than Bitcoin, because I can’t see the Chinese communist party deciding to go full Michael Saylor just yet.
Although who knows, we never expected Michael Saylor to go Michael Saylor, but he did! But no, let’s face it, chinese communist party doesn’t sound like somebody who’s going to start stacking Sats anytime soon. If they were even in the frame of mind to consider something like this this year, then they wouldn’t have banned last year. But so that means they likely stock up on, I think, commodities, and we’re seeing some of this all over the world, that countries are giving up on exporting.
Many countries that are massive [00:27:06] exporters of food stuff are deciding we’re not gonna export anymore. We’re just gonna stack our produce and add to our reserves. Effectively, that’s one way of not buying treasuries and buying wheat and corn and other kind of food stuffs, because what you would’ve done usually is you’ve sold the corn and that would’ve gotten you foreign reserves and you would’ve used those foreign reserves to buy treasuries and you’d hold treasuries on your balance sheet.
Not selling the corn and stacking the corn and wheat in your warehouses in your country is another way of dumping treasuries. Instead of buying T-bills, instead of getting foreign exchange, you’re just stacking these commodities.
So I think we’re gonna see a big commodity boom, we’re already seeing a massive commodity boom and it’s been happening for a while even before the Russia Ukraine war. But we’re probably going to see this increase more [00:28:06] and that’s obviously going to exacerbate the catastrophe of inflation that is hurting the world very badly, all over the world.
And likely it’s gonna lead to more and more stacking of gold, more and more countries holding onto gold. But the interesting thing is then what happens next? Can we actually go back to a gold standard?
Because for all of the bluster and all of the politics, we still have billions of people in both camps. There’s gonna be 2, 3 billion people in the Chinese camp, depending on who ends up being there. Russia and China alone are more than a billion and a half people, and then they’ll likely manage to get another couple of hundred million people. So probably at least 2 billion people in the China and Russia can a, if we end up with an alternative system being built there and then we have another 4, 5 billion, [00:29:06] 6 billion maybe, in the US camp. Or maybe it will be more balanced.
But the notion that we can split the world economy into two is I think absurd. Politicians might think that this is possible, particularly politicians in countries with an ex-communist history where they believe very strongly in the ability to centrally plan things. Communist regimes might see this as an opportunity that yeah, we can stack more gold or we can use our national currency, the yuan, and then we’ll just trade with the yuan and the ruble and all of our national currencies for one another, and we’ll build an alternative system.
And then we’ll stop relying on the products of the US government and their allies. But [00:30:06] realistically, I think the world is far too intertwined for this to happen. The world is just far too interconnected. The economies of the world are way too meshed together for this to really happen.
And all the talk about independence and self sufficiency, I think it is not manageable today. It’s never been manageable, countries that decide to isolate themselves from the world end up impoverishing themselves massively. And I can’t see this repeating today in a world that’s becoming increasingly more and more interconnected.
So whatever you do, even if you end up building two alternative systems, two systems that are exclusive, they’re away from each other, the vast majority of people in both systems are still going to want to buy things from the other system.
So the vast majority of dollar users [00:31:06] and yuan users are still gonna wanna trade with one another. And the benefits of trading are just going to be so enormous that I don’t think governments can just shut them down, I don’t think governments will be able to. I can’t see the American government telling its people, alright no more Chinese stuff.
And I can’t see the Chinese government telling its people, no more American stuff and also no more selling stuff to the Americans. I think that would be absolutely devastating. So even though the central planners would like to have independent monetary systems. The central bankers might want to build this ideal world where they don’t need to deal with the enemy central bank.
Economic reality, I think is going to compel them to do that. And as a result, trade is going to continue between them. So then what happens? I think there are two scenarios here that we could [00:32:06] consider, the first is we go back to a gold standard and the second is obviously Bitcoin fixes this.
So let’s think about the first one. If we go to a gold standard, is it doable? I think initially it sounds interesting. And it sounds like it’s the logical conclusion. And as an ex gold bug, this is what I would’ve been saying at this point. I would’ve been frothing at the mouth at the excitement that finally the global monetary system is breaking apart.
It’s become obvious that it is politicized, and the only way out of this is a neutral global money, and that’s gold. And so the Chinese government is going to stack more gold because they don’t wanna hold treasuries. The Russian government is gonna stack more gold because they don’t wanna hold more treasuries.
And then the Saudis, the Japanese, all kinds of other government gonna start stacking more gold because even if they’re not hostile to the US, they’re gonna [00:33:06] see the massive appreciation opportunity presented by gold because gold number go up is going to be significant. And treasuries are offering negative yields in real terms, if not in nominal terms.
Economic reality is gonna compel them to start stacking more and more gold. And the more people stack gold, gold is the original number go up technology. The more people stack gold, the more the value of gold goes up. And then the more those governments want to get in, and then the less demand there will be for treasuries.
Then economic reality hits the US hard, and they can’t hold on to the massive bond bubble that they’ve been inflating over the last few decades. That’s one way of looking at it, or I should say there’s a third alternative before I get to Bitcoin. There’s a third alternative, let me discuss it, which is more [00:34:06] stacking of more commodities.
We end up with a much more diversified global monetary system where central banks are now stacking wheat and corn and nickel and zinc and all kinds of different things because they don’t wanna hold treasuries. And these things essentially become more and more monetized. But I think there’s a massive problem with that, and it’s extremely unrealistic. This is the part of this analysis that most people are missing in this example here, it’s the thing that I discuss in my book, The Bitcoin Standard, the easy money trap. These things are not money and they can’t function as money and they’ll never be good money because they’re easy to make.
And the only thing that’s gonna happen if the Chinese, and the Russians, and the Saudis, and the Japanese, and the Norwegians, and the Europeans start stacking copper and zinc and wheat and corn, is they’re gonna end up with a lot of [00:35:06] depreciating warehouses with a lot of rusting zinc, and copper and nickel, and a lot of roting corn and wheat.
Also rotting physically and deteriorating and disintegrating physically, but also roting economically. All of this stuff is gonna lose its value significantly. Why? Because yes the price is gonna go up, and there is a shortage now, but eventually the market is gonna catch up.
Wheat is not rocket science, people are gonna continue to make more wheat. They’re gonna dig up more nickel, more zinc, more everything, and they’re just gonna keep dumping it on the market. Doesn’t matter how big those things pump, the dump will be bigger. These things have a stock to flow that is close to 1, it’s somewhere in the range of 1.
So no matter how much the [00:36:06] prime pumps, increased supply is going to bring the price down and it’s gonna dump harder. I don’t know how long it’ll take different governments to figure this out. I wish them best of luck reading The Bitcoin Standard and figuring it out early, most likely they’re gonna want to learn it the hard way, as governments always like to do. So expect to see a lot of warehouses fill up with food stuff that are going to feed the rats basically and drop in price significantly as production picks up.
Eventually this is not going to be a winning strategy. If you’re looking for an alternative to the dollar, the dollar is still infinitely better than wheat and corn and zinc and copper and nickel and all these things, because there’s no limit on how much these things can be produced. It may be true for the dollar, but [00:37:06] it’s even more true for nickel and zinc and copper because these things can be produced in enormous quantities all the time.
I don’t see that happening with all these commodities. And some people are discussing, maybe we’re going to get a global monetary system built around commodities. That you’ll have a Russian Chinese currency basket, say a new currency that is based around commodities.
And this is a common idea that comes up during moments of monetary turmoil and none other than our old friend Friedrich Hayek has actually made this point repeatedly, when he discussed the denationalization of money.
He said maybe what we should have is a form of money that is backed by all these different market commodities, where a government authority or a free market authority says it would be a free market authority, [00:38:06] is going to try and make the price of is gonna try and make the price of the money or the value of money be fixed in terms of these market goods. And I get, and I think this is a horrific idea and it’s it’s it’s one of the worst things about high ex economic ideas.
It’s completely unable again, for the reason that I mentioned the easy money trap. If you’re going to back your currency by copper zinc, nickel, coal oil, and a bunch of other commodities that are non monetary commodities, you’re asking for trouble. The only way that you can guarantee that the price of your currency will be fixed in terms of this basket of goods is if you are able to make a market in these basket of goods yourself.
So you need to hold onto these Goods and you need to make a market in them where you tell people the price [00:39:06] of copper is always going to be X in my currency, and I’m going to hold a shit ton of copper, and I’m going to buy more copper if the price of copper drops and I’m going to sell my copper if the price of copper declines.
And If you were to do this, again you’re just stacking more and more industrial commodities thinking of them as monetary commodity. And then the producers of those commodities are gonna be able to make more and more of them, and that’s just going to bring the price down. The end result is going to be, you’re stuck with an enormous quantity of market commodities, and you just keep having to buy more and more in order to maintain the currency.
I really hope that if the Chinese and the Russians are thinking about this, I really hope they don’t do it because [00:40:06] it’s going to be an enormous waste. It’s going to be a human tragedy to have governments basically bid up the price of essential commodities that people need to consume like copper, wheat, corn, well arguably copper, arguably wheat and corn are not essential, and people shouldn’t consume them, so maybe that wouldn’t be so bad.
But unfortunately people are still gonna consume them, and the price is just gonna rise more and more. And governments are gonna keep stacking these commodities more and more, so if they do that, it’s just gonna end in tears.
It’s just gonna be fill up massive amounts of warehouses with these goods, drive up the price and try and to try and keep the currency stable, but it’s going to be doomed eventually. It’s not gonna work. So that’s the first kind of obvious scenario, I think the [00:41:06] analysis of The Bitcoin Standard makes us realize why this won’t work and they don’t fit the easy money trap.
They can’t escape the easy money trap individually. They won’t escape the easy money if they’re stuck together collectively. So then we go to the second scenario, or the first scenario that we mentioned, which was gold. Is gold going to beat this? In theory it should, because its stock to flow is much higher. But I think in practice, there are good reasons why it can’t and it won’t.
And that is first of all, the ability to produce gold is in by no means limited by the ability to produce real gold. Because a very significant amount of gold out there is actually just tungsten plated with gold.
So many coins and bars out there [00:42:06] are just full of tungsten and covered with gold, because it’s very hard to verify gold. It’s extremely expensive to verify gold. The only way that you can truly trust that a gold bar given to you is 100% what it says, if it’s actually 999 grade gold, meaning 99.99% gold, the only way to verify this is to melt the whole thing down and recast the gold bar all over again.
So every time you carry out a transaction with a big gold bar, if we’re really going back to this kind of world where governments can’t trust each other with their own credit as money. And they need to go back to using something that is not trusted. That means every time you’re gonna do it, you’re gonna have to melt down the gold bar, or you’re gonna end up with an enormous amount of tungsten [00:43:06] circulating out there. And the significance of this is first of all, a lot of people are gonna spend and a lot of money on tungsten and then they’re gonna find out that it’s tungsten one day, and then they’re gonna get wrecked.
This is the equivalent of buying Bitcoin Cash instead of buying Bitcoin basically, it’s gonna be horrible for those people. But I think a secondary effect that is probably more significant for gold is that the fact that a lot of new tungsten is being produced every day, tungsten is an industrial metal with a stock to flow closer to 1.
So there’s very little limits on how much more tungsten we can make. We can always keep making more tungsten, we can always dump more tungsten on the market. If we get to a world in which gold is being monetized, and the price of gold is rising, we’re not going to have the growth in the supply of gold stuck at around 2% as a [00:44:06] monetary metal.
It’s going to probably be much higher because every year we’re gonna get a significant amount of tungsten being put into the gold supply. And then every year we’re gonna be getting a significant amount of tungsten being discovered as part of the gold supply and then being taken out of it. So what does this look like? Does this look like a monetary metal?
No. It’s back to being an industrial metal. It’s an industrial metal because it gets consumed. The supply of gold is supplemented with tungsten, so instead of a 2% increase every year, maybe we’re getting a 4%, 5%, 10%, maybe 20% increase in the gold supply.
That’s not piling up in a way that’s increasing the stockpile and then bringing the stock to flow ratio down. It’s not piling up because every year, so we’re adding say 10% tungsten, but then on the other side, there’s another 5% or 10% of the [00:45:06] existing gold that’s basically being destroyed and taken out of the supply because people are discovering that their gold coins are actually full of tungsten.
And so then the gold coin is 90% tungsten so that’s 90% of the gold coin thrown out of the money supply. And the gold supply is reduced again. So that shifts the dynamic of how the gold market works from a monetary metal back to an industrial metal.
And I genuinely think this is a very important reason why gold has been demonetized on top of just government banning it from playing its monetary role, the fact that it’s so expensive to verify and so expensive to figure out whether it’s golden tungsten means that basically we are in a world in which we are monetizing tungsten. And tungsten is just another shit coin. It’s just another industrial metal. The supply keeps increasing [00:46:06] and gold is, it’s more accurate to think of it as we can’t have a gold standard, we can have a gold tungsten standard.
And the gold tungsten standard has a stock to flow ratio that is much lower than that of gold. Because of the consumption of tungsten that gets found out and gets thrown out, and because of the new tungsten that gets added in. So more likely the stock to flow ratio for gold is not 50, 60 or 70 as it has been historically, more likely it is closer to who knows, 30, 20, 10, maybe even 5, maybe we’re getting a 20% increase every year in the stockpile.
And then we are getting another 15% being wiped out as tungsten gets discovered, so we’re getting something like a 20% [00:47:06] increase, stock of low ratio of five, that in my mind is going to be the biggest impediment for the monetization of gold, but not the only one.
Second one is that the market for gold is not very different from the market for treasuries. It’s tempting to think of gold as nobody’s liability. It’s tempting to think of it as being very different from treasuries because it’s credit.
And there was a very interesting paper that everybody’s been discussing by an analyst for Credit Suisse named Zoltan Poszar who distinguishes between inside money and outside money. Inside money being basically money that is somebody else’s liability, like dollars in treasuries and outside money being money that is nobody’s liability that is like gold.
And I think the framework is correct, and as a gold bug it’s something that I used to think of and repeat for a very long time. But I don’t think gold fits the bill [00:48:06] really, because realistically gold’s settlement and clearance and trade relies on an insider network.
It relies on a bunch of people fulfilling their liabilities and obligations. You can’t really just move physical gold around every time you trade with somebody. You can’t send a gold coin every time, you’re a Chinese supplier and you’re selling to your clients in the US, they’re not going to find a way to ship you three gold coins from the us to China.
It’s just not gonna work that way. They’re gonna have to centralize their gold holdings at a gold bank in the US. And you are gonna have to centralize your gold holdings at a Chinese gold bank in China. Both of whom are gonna have to deal with a central bank, central gold bank, that are both going to have to deal with one another and settle trades with one another [00:49:06] because they can’t keep lugging around coins for every single individual transaction, and verifying them.
You’re not going to have the Chinese supplier, every time they get an order from the US and they receive say five ounces of gold or half a kilogram of gold, they’re not gonna be shipping the actual gold from the recipient of the goods to the exporter of the goods, and the exporter is going to independently verify them and melt them down. That’s just extremely inconvenient and expensive.
So in reality with gold, it’s gonna end up having to be inside money. It really doesn’t solve the apolitical problem that treasuries pose. It’s still going to be the US government that is vouching for the quality of the gold.
And those are the same people that are selling you the treasury bonds. Those [00:50:06] are the same people that are selling you bonds with negative interest rates, so what do you expect? Executive order 6102, all the gold confiscation that has happened, all the opacity of the gold market and the inability of outsiders to verify what is going on there is not something that could just be wished away.
I don’t think that we are going to be able to move to a gold standard with these problems, with the scale of global trade that we have today and the amount of international trade that we have today. That is I think the case against gold. Let me be clear here, I think there is a bullish case for gold here and gold may well hit $10,000.
Maybe even more than that, it might well go up significantly and we might well see significant amount of reserve [00:51:06] accumulation by central banks. We might see the Chinese and the Russians and all kinds of central banks all over the world stack enormous amounts of gold. And we might see the price of gold shoot up significantly.
But I think ultimately it’s going to be a false dawn. A lot of gold bugs are gonna get their hopes up and they’re gonna get really excited, but I think if they’re gonna have their hopes dashed again. Because of the two reasons that I mentioned, it’s very expensive to move it around and it’s very expensive to verify it.
And as a result, you’re gonna end up with basically fiat gold, and you’re gonna end up with centralized mechanisms for clearing and moving gold around. And you’re gonna end up with the price of gold likely crashing with all of the fake gold that’s being dumped. And with all the manipulation that gold market makers can bring onto the market, because if you cannot [00:52:06] run your own gold node, that’s to use Bitcoin terminology, if you’re unable to run your own gold node, if you’re unable to verify the transactions that you receive on your own node, every time that you move gold around.
And if you’re unable to settle and trade gold internationally on your own. If your government tells you, hey we’re gonna take away your gold, and you have no way of sending it, of just clicking a button and sending it to your Chinese supplier, you’re just not gonna make it. I’m sorry to report to gold bugs.
These are the fatal flaws that have stopped gold from being the money of the 20th century. And I think they are they are by no means solved. There’s no cheap way of sending gold abroad and there’s no cheap way of verifying gold. And that’s just going to lead to [00:53:06] governments being able to take over the clearance of it, and I think continuing to use it as a way to prop up their fiat Ponzi’s.
So you’ll stack a lot of gold, but it’s going to be the central banks of the world that are going to be in charge of your gold’s monetary clearance, they’re not gonna let you have a free market bank in gold. They’re not gonna allow an international independent apolitical mechanism for the settlement and verification of gold to emerge, that is able to perform this legally, cheaply and without having to rely on the authority of fiat authorities.
And that of course brings us to the conclusion of every single seminar we have here, which is that guess what fixes this? Let’s take a wild guess, anyone? Bitcoin! Yes [00:54:06] exactly, Bitcoin. But before we move to that, Stefan was asking a question saying I thought that tungsten is quite easy to detect using a commonly available machine or even a simple magnet, isn’t that so?
No. It’s possible to detect it with coins, like with small coins you can check, yeah there are machines that can detect, they’re expensive machines and they can detect, but only with gold that is not thick. There’s a specific, I think limit on the thickness of the gold that you can detect. But in in the case of the gold bar, there’s no.
Stefano: So you’re talking about the big bars that you need to hold in order to have large quantities of gold. Not just individual coins, okay.
Saifedean Ammous: Yes. And if you’re going to have an international settlement.
Stefano: Sure. No, that makes sense. I was thinking from the perspective of individual, if you have a hundred coins that’s a lot of money, [00:55:06] but that doesn’t apply to an institution or a government of course.
Saifedean Ammous: It’s a lot of money. The coins are a lot of money, they can be a lot of money. A kilogram of gold is about the size of your iPhone, and that’s something in the range of, I think, what is it now, maybe $50, $60.
Stefano: 30 ounces, yeah.
Saifedean Ammous: Something like $60,000.
Stefano: Yeah. $60,000, yeah.
Saifedean Ammous: So that’s pretty significant value in a small amount of volume, but it’s extremely inconvenient and unworkable to have a settlement network built around these. Like you can’t just keep shipping around.
Stefano: I got it, I was thinking about the verification process, if I understand. When I went to buy a few gold coins maybe a year ago, not too many, but I bought some, the dealer has a machine where you can basically put a gold coin on top of it, you can buy the machine, it’s maybe a thousand dollars, it’s not cheap, but it’s not outrageously expensive if you have,
Saifedean Ammous: But it’s much more expensive than a Bitcoin node.
Stefano: Yes, that’s for [00:56:06] sure. Okay, I understand, thank you Saif.
Saifedean Ammous: Yeah and the other thing is that, the Bitcoin node can verify a $10 billion transaction. You can send a billion Bitcoins and it’ll verify them just like it can verify 1 cent or one Satoshi transaction.
Whereas the spectrometer, I think what those machines are usually called, is only for coins.
Stefano: It’s a spectometer yeah. But also I read, I haven’t read it yet, but also a strong magnet. You can buy a small magnet which is quite powerful, if it’s pure gold, you will just not attach to it. If it’s tungsten, that’s what I haven’t had a chance to try because I cannot get my hands on a tungsten coin, which I’m trying to do.
Saifedean Ammous: You probably have got your hand on a tungsten coin, I think.
Stefano: The ones I have, I checked all of them, they seem to be fine.
Saifedean Ammous: Okay. You know, the [00:57:06] problem is so pervasive and this is after becoming a Bitcoiner and thinking less emotionally about gold, like you go to Alibaba, and you can buy tungsten coins coated with gold and you can buy them at a fraction. They make them to be exactly the same weight as the famous, say the Canadian Maple Leaf or the US Eagles or the English Sovereigns, you can buy one of these, it’s gold plated and it’s filled with tungsten.
You can buy it on Alibaba just regularly. So it’s highly likely that if you buy gold coins, that you’ve you’ve shit coined with some tungsten. I think it’s far more common than people would like to believe, unfortunately. And then of course, the real issue is the big bars and [00:58:06] there’s a lot of opacity about how the big bars function.
And I discussed this in detail in The Fiat Standard, so in The Fiat Standard when I explained the emergence of fiat, and this was me changing my mind as a gold bug happened after I started to study fiat critically. And the key concept that I mentioned is the saleability across space and the difficulty of verifying gold.
And so the thing is that the only way that you can send large quantities of gold worldwide , and use it as a financial settlement and use it as collateral, and use it as a part of a financial network is to use gold in the LBMA, The London Bullion Market Association.
And that’s an association of banks based in London and all over the world and they have their own bars. It’s very similar to how Bitcoin works of Bitcoin has its own little coins inside it, and the LBMA has its own gold bars that have their own serial numbers, that [00:59:06] they verify.
And that you cannot verify unless you take custody of it. You buy a gold bar, one of the big gold bars that are used for settlement, they’re called the Good Delivery gold bars. They’re about 12 and a half kilograms or 400 ounces. So worth something in the range of, I think, around $800,000 today.
So this is the basic unit of account in gold. If you want to do settlement, you do it in chunks of $800,000, giant gold bars on the LBMA. That’s just not gonna cut it with people who have used Bitcoin because you’re trusting the LBMA that they have your gold bar with a serial number and that it is not tungsten.
But how do you know that it’s not tungsten? You can’t know it’s not tungsten. You can only [01:00:06] know by taking delivery of the gold bar, which is extremely expensive and then melting it down and checking it. And of course, even if you take delivery of the gold bar that does not in itself assure you that you weren’t getting tungsten before, because it might well be the case that there’s a lot of tungsten running around in the network, but when somebody wants to take delivery of their bar, they make a new bar for them that’s free of tungsten and they give them the gold.
If you’re a giant financial institution with a thousand different gold bars on there, they can have a significant number of them in tungsten, full of tungsten, and then when you ask for delivery or they don’t even have to have the actual gold bar on hand, when you ask for delivery, they cast the gold bar, and they put the serial number on it and they give you a new fresh one [01:01:06] that’s actually made out of gold and you take it out and you melt it and you see all right, it’s real gold.
And if you have a thousand of them, you take five random ones, let’s say, to test them, they’ll just give you real gold on the five that you asked for, the serial numbers that you asked or, and then the rest of them could remain there. I’m not saying they’re doing that. I’m saying that they could, and you can’t verify it. You don’t have a node so you just have to take their word for it.
These are the same people that have screwed over the planet before many times with their tungsten, well with their fiat. It’s the Bank of England ultimately that supervises this racket, and the Bank of England has a lot of incentive to mess around with people’s gold.
Again, this is I think where the new [01:02:06] gold standard fails, where I don’t think it can work out. And I think most people are obviously not going to believe this. Most people don’t think in these terms, most people don’t understand the concept of stock to flow. Most people don’t understand the importance of running your own node, and they don’t understand the importance of verifying.
Most people believe everything that’s on their TV. And most people have spent the last two years locked up at home in order to protect themselves from respiratory illnesses and eating junk and seed oils. But again, this is economic reality, as I say in the book, it’s not optional.
And just because you refuse to believe in it doesn’t mean it won’t work on you. It’s gonna impose itself through the fact that there’s just gonna be more and more tungsten than on the market. And it’s going to prevent gold from doing what everybody expects it to do. And I think it’s going to [01:03:06] massively frustrate gold bugs, and it’s going to massively frustrate nascent governments that are going to shift to a gold standard or think of themselves as shifting to a gold standard.
They’re just gonna realize these limitations and they’re arguably going to learn them the hard way as Andre says in the chat, it’s likely we’re gonna have the tungsten standard, not the gold standard. More accurately, it’s the gold and tungsten and LBMA standard, I think this is the real thing.
In theory, the gold standard sounds wonderful. Yeah, we run it on gold, stock to flow ratio that’s in the fifties or sixties or seventies, and gold is great, it looks nicer than Bitcoin. Bitcoin doesn’t even look like anything. And you can touch it, you can drop it, and you can even taste it if you like, and you can hear the sound that it makes.
And people have all these fetishes around [01:04:06] gold. It sounds wonderful, but in reality, in order for gold to do what a monetary system needs to do, it’s gonna end up with a lot of tungsten and a lot of LBMA type centralized entities that can derail its functioning. So it would be nice to have gold, but I think the reality is you can’t get gold today. In today’s world, you can get gold tungsten and LBMA, that’s really the monetary standard.
And that’s why Bitcoin fixes this. Because Bitcoin has no room for tungsten. You will never ever be able to pass off BSV or Bitconnect or Ethereum or any of those stupid centralized shit coins as a Bitcoin. I challenge you to get any of those through my node. Good luck. There is nothing you can do to do that.
And the cost for anybody to run their own node is a few dozen dollars or a [01:05:06] few hundred dollars. . Some people complain about I don’t wanna spend a few hundred dollars on building my own node. It’s obviously much more expensive than say downloading PayPal or Venmo in your computer, but it’s not equivalent to downloading PayPal and Venmo, it’s equivalent to being a member of the LBMA. And so to be a member of the LBMA today, you basically have to win a world war and defeat the US army and prevent the US government from imposing things on you. That’s the equivalent of running a node on Bitcoin. If you wanna run a full fiat node, you need to defeat the US army.
Good luck with that one. If you want to run a Bitcoin node, $100, $200, $500, if you get a ready made neat solution, that’s independent of your computer, and it’s plug and play and you can [01:06:06] get it from Nodl or Umbrel or any of these makers. It’s likely that we’re going to end up with a lot more full nodes on Bitcoin than gold. We already do, there’s really only one full gold node, but there are tens of thousands of Bitcoin full nodes, and they can verify Bitcoin very cheaply, and they protect the sanctity of the supply. They protect the integrity of the stock to flow ratio.
There’s no way to increase and inflate the supply with fake shit coins. And there’s no way to, arguably there’s really very little that governments can do to stop a settlement of Bitcoin. It’s very easy to shut down the settlement of gold. You go to the gold businesses and you tell them you can’t send gold abroad anymore.
And then, we hear stories a lot in a lot of countries where people smuggle gold using all kinds of [01:07:06] extremely creative and extremely disgusting use of parts of their anatomy that really should not be used as monetary infrastructure. Should be used for defecation, but they end up being an integral part of the gold tungsten standard.
That’s no way to compete with Bitcoin. Again, that’s the other way that you can run a full gold node and settle gold internationally, you get a mule and you hire somebody who’s going to take the gold and put it in places where it should not go and then ship it across the world.
But obviously that’s just unworkable, because on top of the health damages and on top of the high cost, there is a very high risk of getting caught. And so you’re losing the gold every time you’re conducting this. [01:08:06] So I can’t really see this picking up, I can’t really see this taking off. The world is far too advanced industrially.
A few hundred years ago, it was very hard for people to make gold. And so there were a few gold makers and it was easier to verify. But now, industry is so cheap, you can order the fake coins off of Alibaba and they’ll be delivered to you and you can’t use mail for settlement. You can’t use government infrastructure, you can’t use banks, government’s gonna shut down all these things.
So I think gold might pump, might go up significantly, but I think ultimately this game only has one winner and it’s just a matter of finding out how long it takes the world to figure that out. Does that answer your question, Handre?
Handre van Heerden: More than answers my question, yes! Thank you, Saif. That was very interesting. I was hoping you [01:09:06] would go into all stuff, and yeah it’s excellent to hear your opinion regarding the whole situation unfolding in China and Russia as well.
Saifedean Ammous: Yeah it’s extremely interesting times, extremely interesting time. I can still see the case for why you might want to get into gold at this point. Particularly if you’re not a Bitcoiner, I think gold is very compelling, and I think a lot of people are gonna buy a lot of gold over the coming few years, but I still see the limitations.
Handre van Heerden: For a more risk averse type of investor, a gold with Bitcoin, or a combination of the two might be [01:10:06] an excellent choice of investment coming for the next five or 10 years. Rather than bonds or stocks or whatever.
Saifedean Ammous: Perhaps. I think it’s a matter of degrees of conviction in Bitcoin, perhaps. That’s really the issue. The reason it makes sense for most people to have a gold allocation rather than a Bitcoin allocation or a gold allocation next to a Bitcoin allocation is primarily, probably down to the fact that they don’t have enough of understanding of Bitcoin and enough conviction in it.
But I guess, having said that, I’ll end this with making the kind of the steelman case for gold is [01:11:06] even for somebody who’s very familiar with Bitcoin’s robustness, and Bitcoin’s resistance to attack, I’ll still say that even though governments probably won’t be able to kill Bitcoin, I think that they can’t kill it, I think it is not entirely out of the question that we witness a global crackdown on Bitcoin, similar to what happened in China.
And if China did that, if they can manufacture an international consensus around Bitcoin policies, similar to what they managed to do with the voodoo pseudoscience of lockdowns and virus hysteria.
Two years ago, February 2020, most people looking at what was going on in China, most people were astonished [01:12:06] like, how can the Chinese do this? They’re just locking down in entire city. Oh my God, this is just horrible, what a totalitarian regime. And within a few weeks we saw, everywhere from New York to Italy to Peru and to South Africa and all over the world, all kinds of political systems were all going along with this.
So I think perhaps as inflation gets worse we get to see more and more of these kinds of clampdowns on Bitcoin. The China clampdown took us from a price of what, 64 down to 28 or 29, about a 55% drop. The price recovered later, but then it crashed again.
We could see something like that. We could see another major, big drop. We could even [01:13:06] go below the 2017 high, maybe we go below 17,000, 19,000. Maybe we go below 10,000. If there’s a global coordinated ban on mining in the EU and in the US and in a lot of regions in the world, that’s gonna be a lot of Bitcoiners, a lot of Bitcoin miners who need to sell a lot of their Bitcoins and that’s going to lead to a lot of price crashes.
Given the bullish scenario for gold that I mentioned and given this tail risk for Bitcoin. Yeah, probably makes sense to have some. I can see how most people would see the case for holding some gold. That’s the steelman case, but I would say, in my initial analysis that in the long run I think there’s only going be one winner, and it’s going to be the fastest horse that wins or really the hardest money, as we always [01:14:06] like to say here.
Handre van Heerden: I’m still probably going to sell some of my Bitcoin and buy gold. I might. If I get some more savings, I might buy some gold with it in the future, but I’m not sure if that is completely convincing enough.
I personally still think that the chances of that, of a worldwide Bitcoin ban is very low. If someone bans it, other countries will embrace it and it’ll be a competition, is my personal opinion of how something like that would play out.
Saifedean Ammous: Yeah. I obviously agree, but I think in the meantime that there could be significant [01:15:06] downside to the price, but I think in the long term, the upside potential for Bitcoin has just gotten massively improved. Incidentally, obviously after the war broke out, there was a lot of fiaters and no coiners going on about how well, here we go, Bitcoin’s use case has been disproved.
We have a war breakout and you look at Bitcoin, it went down 10% or 15% or whatever it was, and so clearly Bitcoin doesn’t work as a way to diversify and as a hedge and as a store of value, because this is the time when you would expect it to do well. And I remember the day the war broke out, the gold bugs were so jubilant because for the first few hours, gold spiked and Bitcoin crashed.
And this is something that all of these people had been waiting for for so long. And they couldn’t wait for [01:16:06] 24 hours to pass before they were already doing all of their victory laps and celebrating. But of course, typically, as always, within a few hours gold crashed and Bitcoin rallied again.
And I think the short term, I think the news has a massive impact on Bitcoin in the short term. We saw it with the Russia war, there was a big crash right after, we saw it with the coronavirus, the Bitcoin price crashed about 50% over a few days. I think it’s true, the short term liquidity squeezes in Bitcoin can brutally affect the price.
It can crash significantly and it will happen. But obviously this is just fiat mindset. Fiat people think [01:17:06] in very short timeframes and have a very high time preference because they’ve been trained to do it, because they use shitty money that is like a melting ice cube.
Basically, I discussed this in detail in The Fiat Standard, if you get into fiat, you are constantly forced to gamble. You can’t just earn your money and keep it earned. You earn your money and then you need to take it to the casino in order to keep it.
It’s like a ticking time bomb and you need to take it to the casino every day to play with it in order to try and make more so that you can beat the time bomb that’s built into the money. And this means that fiat people have to think in terms of day to day, they can’t have a long term strategy.
Value investing is just, it’s been decimated as an industry because there is no long term fundamental [01:18:06] analysis. It’s all momentum driven, it’s all technical analysis, it’s all driven by all these people who have cheap money are looking at the same charts and figuring out what to do.
And they all follow the same group think patterns for what to do in order to allocate their money. And if you follow them, Then you win because you put your money right in the, if you follow the group think, you win. Because if the group think says we should put our money in X, everybody’s gonna put their money in X, X is going to go up and in a real market, obviously if people are doing group think based on stupid ideas, then it eventually reality catches up with them.
But in fiat world, because reality doesn’t matter and reality is just a fake quaint part of the past that we don’t need anymore, government is just constantly giving the people who make this stupid mistake more and more money to invest and to keep making more of this [01:19:06] mistake.
So it’s really the way to win, is to just follow the herd and do what everybody does follow the same trading strategies. And you have to take your money to the casino every day, because every day your money is losing. And as a result, you become very short term focused and you could lose a lot of money every day. And as a result people end up with a very high time preference and they can’t just see that Bitcoin is not about what it does in a day or two or three or five.
It’s a long term thing. That’s really where they miss the point. That’s why even, and when I say fiat people, I unfortunately mean a lot of gold people as well, because let’s face it, gold is just another fiat shit coin at this point, because it’s controlled completely by fiat world.
So Peter Schiff is a wonderful example of this, he’s been celebrating, he’s been getting [01:20:06] vindicated that Bitcoin has failed since Bitcoin was a under a hundred bucks. Every single crash, and he’s just like Roubini in this regard, Roubini has had 10 years or eight years of vindication when it comes to Bitcoin.
Every few months, Bitcoin crashes and Roubini is vindicated again. And because he’s a high time preference moron who can’t think beyond the next meal and the next undergraduate student he’s going to harass, he cannot think that it matters that, all right the prices crashed from 100 to 60 today, and now you’re celebrating the price crashing from 60,000 to 40,000.
It doesn’t register in his brain that in those 10 years, the price has gone up 1000 fold. You celebrated down to, the earliest time he celebrated bit crash was, it was down to 58. [01:21:06] So it’s almost a thousand fold higher, doesn’t register. He doesn’t see that he’s lost the war. He’s been completely routed in the war.
He only sees the insignificant tiny little battles all along the way that he won, because he’s just so myopic, so shortsighted that he can’t see the bigger picture that you’ve been losing this war a thousand times, like there isn’t enough money in the world to keep feeding you today if you had actually put your money behind your words.
The whole planet could have been bankrupted if they had kept giving you money to bet on your bets. Doesn’t matter, doesn’t register. Because he only sees all these tiny little crashes along the way as his vindication. And so you see this with everybody, it’s not just Schiff and Roubini, it’s also Taleb, it’s also the other day David Rosenberg was also doing this, and he went on gloating about [01:22:06] how Bitcoin failed as a store of value and as a hedge.
And again, none of these people can think at a five year timescale. And it makes sense, because they work in the fiat world. You can’t just sit on your money for five years in fiat world.
Like you can’t just go and say, all right, I’m just going to buy these stocks and I’m gonna wait five years. It doesn’t really work. You have to actively manage it. You have to figure out what is going on in the world. Have to follow tech trends. You have to follow monetary policy in all of the world’s major central banks.
You have to follow commodity markets. You have to tie all of these things together and you have to hire researchers and money managers and be on top of your money every day. And really only Bitcoin allows you to break out of this rat race, really. This financial rat race, only Bitcoin. You know that five years from now, the daily production of Bitcoin is going to be half of what it is today.[01:23:06]
And you know with very high degree of certainty that Bitcoin is going to continue to be working five years from now. And so almost certainly there’s going to be more demand five years from now, and there’s going to be less marginal supply and that can only lead to significantly higher prices.
And you can think in the long term, you can just keep stacking stats and forget about them and live your life. You can focus on being a good dentist and not have to worry about what the Chinese central bank is going to announce tomorrow, you don’t have to spend hours every week parsing the tea leaves of FED minutes.
You can just focus on what you actually are good at, providing value to the world and doing the thing that you’re good at, and then taking all the excess energy and value that you have and putting it into Bitcoin, and knowing that in five years time is going to be significantly more valuable [01:24:06] than what it is today.
It’s a whole different time preference, and worldview, and way of approaching life, it’s amazing, I highly recommend it! If you haven’t upgraded your monetary operating system to Bitcoin yet, I strongly recommend it.[01:25:06]