41. Can bitcoin obsolete bonds?

As insurance industry giants begin to enter the bitcoin space, we discuss the implications for bitcoin’s proposition as a store of value. Will the satoshi rate become the new risk-free rate? Are there any good reasons for bonds to exist in a world in which bitcoin works? What is the case for holding gold in a bitcoin world?

Links:

Podcast Transcript

03:40 

Saifedean Ammous:

Hello and welcome to The Bitcoin Standard podcast seminar! In today’s seminar we’re going to be discussing some news in the bitcoin space and also going over some questions that I received by email from some of our participants who are taking our saifedean.com courses in economics. You’re welcome to take these by registering for a membership on saifedean.com, register for Membership + to join these seminars.

We begin first with news from the insurance industry and bitcoin. Just yesterday, NYDIG, the institutional financial services provider for Bitcoin for Institutions and one of the sponsors of this podcast, a company that I’ve worked with, they’ve announced the appointment of New York Life chairman and CEO, Mathas, to their board of directors. I think this is a hugely significant bit of news because New York Life is one of the world’s biggest insurance companies. Its CEO is a well-known, well respected titan in the insurance industry, who’s been around for a very long time. This is a company that deals with life insurance, which is really the most conservative kind of asset, and has the most conservative policies.

The fact that this company is getting into bitcoin, in my opinion, is extremely important because not only is the CEO – Ted Mathas, not only is he the CEO of New York Life, he’s also the chairman of The American Council of Life Insurers which represents 280 member companies which collectively represent more than 95% of the life insurance industry in the US and more than 7 trillion dollars in assets. That’s just the life insurers that surround the 7 trillion dollars in assets that they have. I think the significance of this is quite enormous. Over the past few months, maybe the most important development that happened in the bitcoin space was the emergence of the case for Bitcoin for Corporations. Thanks to Michael Saylor in no small part.

The fact that he went out and announced the purchase of his bitcoins and put out the entire corporate playbook for how to buy bitcoin, spoke to the world about what bitcoin can offer and managed to convince some corporations all over the country and the world to buy more bitcoin is truly remarkable. The case for putting bitcoin on the balance sheet instead of holding dollars and negative yielding bonds for public companies is quite compelling. As Saylor puts it – these public companies have a fiduciary duty to look after their assets. Watching what is happening with bonds and with cash will make it their duty to look to protect themselves from it, and bitcoin provides the optimal protection. I think that’s a pretty compelling case and I think we’re going to be seeing a significant amount of corporate balance sheets holding cash positions in bitcoin. I also think potentially, the insurance industry getting into bitcoin is maybe even bigger.

The life insurance industry is about 7 trillion dollar and I’ve seen estimates that the entire industry, including property and casualty could be 9 trillion dollars or something like that. It’s probably a bit larger as well. That’s an enormous amount of money and most of it is in bonds. The implication of the insurance industry switching at least some of their negative yielding bond positions into bitcoin is huge. New York Life being one of the most conservative and one of the most well-known insurance companies, will definitely attract many of the other companies to pay attention. Also, a few months ago, MassMutual, which is also one of the largest insurance companies in the US, announced they’ve bought 200 million dollars in bitcoin and have taken a small minority stake in Nydig. It’s clear that people and influential companies in the insurance industry are getting into the bitcoin space.

I think this is enormously interesting because potentially, the size of the balance sheets that the insurance industry has are arguably even larger than the public companies. The general account for insurance companies, in order to be an insurance company and have a general account that backs people’s life insurance policies is probably the highest level of regulation and regulatory oversight that you could come across. The fact that these companies can get into bitcoin is just an enormous testament to how far bitcoin has come and just how much of a potential market is available for bitcoin from now on.

It’s quite incurring to see it if you’re a bitcoiner because that’s a huge market, but also, I think this is leading us more and more to seeing where the value proposition for bitcoin is, it’s becoming more and more clear that bitcoin is a replacement for bonds. It’s a very good replacement for bonds because now bonds are yielding negative yields. The reason people hold bonds is that they look for value preservation. Bonds are not the place where you’re trying to get rich. Bonds are the place where you’re trying to protect yourself from inflation, and then you take risks with stocks over the other kinds of investments. Bonds are generally what people look for when they are looking for something safe.

Insurance companies will generally gold a lot of bonds, so if they switch, if they can see the value proposition in bitcoin which is quite compelling if you’re in the insurance industry, I can see this massively disrupting bonds. It’s absolutely fascinating to see it, but the entities that issue bonds, you could say that the only reason they get to issue all of these bonds comes down to the fact that people need a store of value. People are looking for a store of value because there isn’t a good store of value anywhere because we don’t have a good money. The money is constantly being debased by the government. The entity that can issue money – the government, and secondarily the banks and financial institutions that have good credit worthiness because they have large revenues coming in, they’re able to issue bonds and these bonds will effectively become the closest we can come to a store of value.

These people have a constant cash stream from which they can compete to make payments. Because of this Keynesian idea of we shouldn’t hoard money, we shouldn’t have people hoarding money, we should keep the money running – people end up using bonds as a store of value. If you think about it, looking for a store of value function, there’s no reason why a hard money wouldn’t be better. Hard money would appreciate and would be protected from the downside, at least theoretically speaking, that’s what gold did. Gold never witnessed large crashes in its prices. Its price would just creep up slightly under the gold standard. It’s really becoming clearer and clearer that bitcoin is, as Max is putting it in the chat, bonds 2.0. Bitcoin is like an advanced form of running bonds. It’s also bonds 0.1, the prototype of bonds was to just hold hard money and watch the hard money appreciate.

Currently, the standard for storing value is government bonds. I think bitcoin is infinitely better than this. In fact, if you think about it as a risk-free rate, this is what bonds were, you’re getting this as risk free because it’s government lending. Government bonds are a risk-free rate and this is the rate that everybody can get if they just put their money in bonds. If you look at it and compare it to bitcoin, bitcoin continues to beat it regularly over time. I wonder why people wouldn’t want to start thinking about bitcoin as the risk-free rate. I was just tweeting something, while I was thinking about this seminar earlier today, anybody in the world can buy bitcoin. It’s available to everybody in the world. Everybody can find a way to get some bitcoin.

Therefore, everybody, every money they spent can be measured, its opportunity cost can be measured in terms of bitcoin. Bitcoin is basically, the universal measure of opportunity cost. It’s the universal unit for opportunity cost. Satoshi is the unit for opportunity cost, if you think about it. Anybody can always get bitcoin, so any money that you have could always have been into bitcoin. You can always track its performance over time, see how it’s changed, gone up. You can always really see how you could’ve done with bitcoin, how much wealth you could’ve had with bitcoin instead of whatever it is that you’re doing. If you think of it this way, the longer it continues to perform the way it has, the more likely it is to start becoming the de-facto risk-free rate of return in many people’s minds.

You can always just spin up a bitcoin node, bitcoin wallet and buy some bitcoin and hold onto it, get that kind of return. If bonds continue to offer negative returns and bitcoin continues to appreciate without offering any returns, it’s going to continue to be harder to keep up the pretense that bonds are better, and that bonds are the risk-free rate of return. When you think about it, when you see that insurance companies are getting into bitcoin, that the most regulated financial entities are able to put bitcoin on their balance sheet, like they would’ve put bonds, if you see that that’s the case, I wonder how long it will take until people start thinking of bitcoin as the risk-free rate. In other words, how long until we re-price the world in satoshis. How long until everything is measured in satoshis. Instead of it being a risk-free rate, it’s just satoshis, you’re thinking of everything in terms of satoshis. You think of any use of money, rather than calculating the interest rate, right now if you think of making an investment, you think of the alternatives and you discount based on the discount rate that you would get and the risk-free rate, but maybe you should instead just calculate it in satoshis.

The number of satoshis that you could’ve gotten and then what has happened to the number of satoshis over time. This investment cost me this many satoshis on this date and it will cost that many satoshis on that date. That just ends up being the equivalent of measuring the risk-free return. You could’ve just put it in sats. If you put it in sats, it truly is risk free. As Max has mentioned in the chat, there’s no risk of supply expansion. Let’s put it correctly, I guess, it’s the least risk of supply expansion anywhere in the world. You always know that you have a specific percentage of the bitcoin network – tokens. That’s the one constant in economics. You buy a chunk of that and you know that you’ll always have that chunk, you won’t have that chunk diluted. If the network continues to grow or it stays constant in terms of its size, you still store the same amount. Given the enormous asymmetry between the potential for growth and the potential for decline in the network, it could grow many multiples of how much it could decline. There’s a huge asymmetry which makes it worth taking the risk of volatility and the short-term volatility that’s involved. In other words, the more that number go up, the more we can continue to see this happening with bitcoin, the more we’re going to start thinking of bitcoin as the risk-free rate.

The more that things like the insurance industry get into bitcoin, the more that is going to reinforce this kind of thing in many people’s minds. I guess the end result might just be that bitcoin is out there to disrupt the bond market. Maybe Michael Saylor’s point that we don’t disrupt government moneys, there’s something to that when you combine it with disrupting bonds. If you get rid of bonds or if the market for bonds collapses and instead, governments have to switch to a bitcoin standard, in that case they could charge taxes with bitcoin and they could either peg their currencies to bitcoin or even if their currency continued to inflate next to bitcoin, they continue to devalue next to bitcoin, I think we’d have a very different world than if we had bonds. If we have bonds, the governments can continue to borrow and devalue the currency later. Without bonds they’d have to tax first, or have currencies that continuously collapse. I imagine it could be much harder for them to inflate in that kind of world. I’m wondering which is the best thing. Do you think bitcoin disrupts national currency or bonds, or both? What do you think?

 17:55 

Student 1:

All the things, Saif! It disrupts all the things, it truly does. It’s amazing, it’s crazy. We’ve all been focused on currency for obvious reasons but now, looking at this, risk and probabilities are our insurance companies’ games, right? That’s what they do, that’s what they’re expert at.

 18:22 

Saifedean Ammous:

Yeah.

 18:24 

Student 1:

If they’re going to allocate into bitcoin, what does that say to the rest of the market about bitcoin as a risk asset. I don’t know, I’m still trying to connect all these dots. This news has gone insanely under noticed in the community. It’s really flown under the radar somehow, I don’t know.

 18:44 

Saifedean Ammous:

Yeah, it’s pretty amazing when you think about it.

 18:47 

Student 2:

Currency doesn’t need fiat. The fiat currency, as we buy and deal, don’t need much of a push. They’ve taken care of destruction all on their own. I see a more grassy posture from bitcoin.

 19:06 

Saifedean Ammous:

I’m not so sure, let me make the case against fiat currency collapsing. Obviously, there’s always a fiat currency collapsing somewhere in the world. But the majority are holding out, at least relatively. Maybe the case is that as we start witnessing less and less debt creation in the financial system, maybe they can manage that creation and prevent it from becoming too hyperinflationary. There are forces of manipulation that are taking place. Our business is going under, there’s liquidation and there’s an increase in spending, all of which should lead in a deflationary direction.

The case for hyperinflation is not necessarily settled. How do we combine that, on the one hand you have this debt dynamic and on the other hand you have people buying bitcoin instead of bonds? If this continues, if governments demand for the bond’s collapses, they’re in trouble. They default or they need to devalue. It’s pretty hard to see the case where the bond market dies and the currency continues to survive. At least the survivors, you can make the case that survivors will be devalued massively. They’ll lose a lot of its value.

Maybe we just move to a new world where 100 dollars is the new 1 dollar. We pick up where we left off. Huge devaluation and we have fiat currencies without bonds.

20:44 

Student 2:

True, who cares what you use to buy macaroni.

 20:46 

Saifedean Ammous:

Yeah, it’ll be like theme park tokens. If you’re under the jurisdiction of the government, you have to use their Chuck E Cheese tokens. They do skim some profit from giving you the license to use their Chuck E Cheese token, but without a bond market, there’s only so much that Chuck E Cheese can do to rob you. I think they’ll be on a much tighter leash without bonds, if people hold bitcoin instead of bonds. What do you guys think?

 21:15 

Student 3:

Without bonds, how can they do anything? Let’s just get rid of them.

 21:21 

Saifedean Ammous:

Yeah, but if governments want to just continue to keep their currencies surviving, I’m not saying there’s any reason for money to continue to be provided by the government. I’m trying to make the case for why government money survives even as bitcoin eats the bond market. Can we think of it? I guess it’s a tough one. Whatever happens, it’s not going to be fun for people who live off the printing presses of today. I think bitcoin is going to severely curtail people’s ability to live off the printing press. How it does that precisely is still up for debate. Time will tell. Anybody have any questions regarding this or anything else?

22:07 

Student 4:

Another under noticed story is the ARRACO announcement. They’ve had a lot of hype going into it, we thought they would be announcing bitcoin and they didn’t so, we’ve moved on. They announced instead a 20-billion-dollar stock buyback, which is legacy thinking, legacy financial engineering, I’d just like to get your thoughts on that if you wouldn’t mind Saif.

 22:32 

Saifedean Ammous:

Michael Saylor really explains it. The idea of buying sharebacks compared to bitcoin, for him it was the second option, he was going to either buy bitcoin or buy sharebacks. I think, as the bubble continues to inflate in the stock market, because of monetary policies, you’re going to expect to see more of this trend of share buybacks and bitcoin buying. They can’t just keep putting 20 billion every quarter into share buybacks forever. Eventually, they’re going to try to experiment with bitcoin. This is the thing about it, if bitcoin continues to operate, it’s going to continue to be there all the time and all these other things are going to reach their natural limits.

You can’t just keep making more and more share buybacks, if they continue to make more money, they’re going to need to find other ways of doing it. They want to keep cash on hand and they’re going to have to buy bonds or cash or bitcoin. The case for bitcoin is going to become more compelling. People underestimate how quick Michael Saylor and MicroStrategy move, it’s absolutely amazing. They moved within a few months and started offering all these Convertible Notes in a few more months. It all started about a year ago. A year ago is when Michael Saylor began to go down the rabbit hole. One year later, MicroStrategy has more than 90,000 bitcoins.

Michael has got like 20,000, maybe more than that, I can’t remember the exact number. They got a whole bunch of Bitcoin for him and for the company. Michael Saylor is the CEO and founder of his own company, he’s the major shareholder for it, so he can have pretty significant leeway in moving the company. He’s extremely brilliant so he was able to get it very quickly, and he had the ability to act upon it very quickly. He got it and he could just go and execute. The vast majority of companies have much more of a separation or distribution of powers. There’s a CEO who was just hired 3 or 5 years ago – he’s an outsider, you have major shareholder groups who might have different views and different interests.

You have a legal team, accounting, and all of these people have their own opinions, it’s not easy to get a massive corporation to move and get everybody on the same page. Quell everybody’s doubts and superstitions and weird beliefs about digital currency. It’s going to be a while to move those companies. These kinds of companies eventually will be coming around, just because bitcoin’s better money. It’s got what corporations crave, if you remember that movie Idiocracy when they talk about electrolytes – it’s got what plants crave, well bitcoin’s got what corporations crave. It provides good storage of value. I think they’ll come around, I’m not too concerned. They should take their time and make sure they buy at a higher price so there’s more for us at this price. Another question I got was from Browning on the case for holding gold, Browning’s a long-time subscriber, back when I was on Patreon a couple of years ago in 2018, 2019.

He was in one of these seminars that I used to do then, which I paused releasing as a podcast back then, they were just for subscribers. He remembers asking me the case for holding gold. Back then I made a case for why gold is still the strongest money, or the second hardest money, and it’s still got much more liquidity. I can see the case for it. He’s asking me if my opinion has changed. I think my answer is yes. I think the case for holding gold today is far less compelling than what it was a few years ago.

That is because, quite simply because of number go up technology. The price of gold and the price of bitcoin really is the score card for this relationship. Since 2018, 2019, bitcoin at that point was like 5,000 dollars or something like that. Bitcoin has gone up about tenfold. Gold has gone up about, approximately 0%, plus or minus, not sure what it was around that time. In about 3 years and a few months, perhaps, the value of bitcoin and the liquidity of bitcoin has gone up tenfold. There’s ten times as much liquidity in bitcoin. The value of the bitcoin, in terms of real goods and services is ten times larger today than what it was back then. Clearly, the one advantage that gold has over bitcoin is being eroded.

That was really the key point that I mentioned, if you think of the hardness – of course bitcoin is harder, or is going to become harder, but if you think in terms of the liquidity – there’s far much more gold all over the world, so the chances of being able to use gold for trading with somebody else are larger than with bitcoin. There’s just so much more gold everywhere that you can trade. But that advantage is decreasing. Gold is not growing as much as bitcoin is growing, bitcoin’s growing much faster. It’s already up around 10x since then but it’s not quite as big as gold yet. Total gold market is about 8 trillion dollars or something like that, bitcoin is at around 1 trillion dollars, it’s only an 8th of it.

I think the last three years, it’s only three years but it’s still not nothing, it’s a decent amount of time, we’ve seen an enormous amount of monetary expansion all over the world. Yet, we’ve not seen the price of gold rise. We’ve not seen, this is perhaps more important, the development of a mechanism for trading gold and settling gold world-wide. This is the thing that continues to refuse to come out. The reason is that the government doesn’t let these things out. You can’t just build a bank based on gold. Holding gold has capital gain stack. If you are trying to use it, it’s not very convenient for it. There are no gold banks anywhere. This continues to make it harder and harder to use money as gold.

Even though there’s more liquidity, that liquidity is only accessible for you to some extent, if you move the gold yourself, pay with physical gold. That’s really very limited, very few people want the exact coin of gold you have in your pocket. You look at gold with banks, it’s pretty slow to move around and you don’t have payments nominated. Because this is not the case, the salability of gold is, across space, unlimited. Therefore, it continues to fail to rise in value, it continues to fail to increase in terms of its size. I think that is making it become demonetized, as we mentioned in one of the earlier seminars here. As long as the percentage of economic value that’s captured in gold dwindles compared to the rest of the economic value that’s in the other goods and services, then gold becomes relatively cheaper over time, in terms of real goods and services. Then it becomes more likely to be used in industrial uses, rather than held as a monetary demand.

If you start taking away some of gold’s monetary demand and it starts getting used for industry, you’re effectively lowering the stockpiles of gold on the world market and making the stock-to-flow for gold lower. If you’re making the stock-to-flow lower, you’re reducing the decree of how much of a money gold really is. Then, it becomes more sensitive to supply shocks. The reality is, in three years of prices going up in real terms, there is inflation. If you look at real estate and hard assets, there’s inflation in all of these assets.

But it’s not coming to gold, which means gold’s becoming relatively cheaper, which means it will start getting utilized in the industry more and more, lose its monetary premium more and more, and that in turn makes it less likely to appreciate with the growing monetary premium in the future. It becomes an industrial metal like copper and silver. With every day that bitcoin continues to grow faster in terms of euros and dollars than gold does, this becomes the likeliest scenario. The scenario that gold can go back to being money continues to get weaker and weaker with each day in which bitcoin grows.

I’ve written in one of my subscriber bulletins, which is something that is being transformed into The Fiat Standard now, I’ve written about how the best threat to bitcoin, the best way you could stop bitcoin would be to go back on the gold standard. If governments want to go back on the gold standard, it would really have the best shot at killing bitcoin. I don’t think it would kill bitcoin but it would be the best shot because it would undermine bitcoin’s value proposition. A lot of what has driven bitcoin is the fact that people are afraid of inflation and people are afraid of financial censorship.

If you go back to something like the gold standard, if you go back to a free market in banking, then you would undercut these two drivers of demand and get much more of a demand for government monetary systems. If everybody could use government monetary systems and they were neutral, easy to use, and they had a hard money, that would seriously take away from the case for bitcoin. Again, with each day that bitcoin continues to survive and the gold standard is not implemented, this risk becomes smaller and smaller. The more bitcoin appreciates, the more people will realize it doesn’t just offer protection from inflation, it also has serious number go up potential. It can increase in value. Even if you were to reinstate something like the gold standard now, so many people are hooked on the number go up smack that they’ll just keep coming back for it. It doesn’t really matter anymore.

The case for bitcoin and number go up has become quite compelling. Bitcoin could stop growing for another 5 years, and at the end of the 5 years there would still be a lot of speculators coming and expecting us to go back to what we had more than 5 years ago. The chances of gold monetization continue to decline every day. It doesn’t monetize and it’s declining more and more. The case for gold, to go back to the original question, is continuing to get weaker and weaker. Holding gold as part of a portfolio makes less and less sense. It’s going to be really hard for it to have anything like the returns that we expect from bitcoin. If you start thinking of the gold opportunity cost in terms of bitcoin, it’s not looking good for gold bugs. 

 34:33 

Student 3:

Wouldn’t it be a big challenge anyway to ensure a pact release, a trustworthy pact between the gold that you have in your vault and the money that you base on it. You never know whether the gold is still there.

 34:50 

Saifedean Ammous:

Well, I think we’re at a point now where you could, if you wanted to do it technically, arrive at something like this with pretty good levels of observation. If you had a free market, I can imagine that banks would have cameras 24/7 recording their vaults. They would be broadcasting all the movements of gold in and out of the vault. If you want to do something like this, I can see the market providing solutions like this if you have a free market, but the reason we don’t is political, it’s not so much technological limitations. At least the case of verification – well no, obviously it’s nowhere near the level of verification you get from bitcoin running on a full node, but you can improve on what goes on with gold significantly, which probably involves a whole bunch of tungsten being held by a whole bunch of people thinking of it as gold.

 35:55 

Student 4:

Saifedean?

 35:56 

Saifedean Ammous:

Yes?

 35:57 

Student 4:

Have you seen Breedlove’s conversation with Saylor? That nine-part series?

 36:05 

Saifedean Ammous:

Yes, I haven’t finished it all but I’ve seen quite a bunch of it.

36:09 

Student 4:

It’s interesting to hear somebody converse from an engineering perspective instead of a political science or economic perspective, not that he doesn’t understand both those issues very well. It was interesting to hear his engineering brain discuss how governments exist because they were needed to handle the arbitrage, the physical movement of gold. That led him to the perspective of why he’s in bitcoin. I had to listen to that about 3 or 4 times, he says a lot without directly saying it. I found that really interesting. What’s the purpose of government – not what’s the purpose but why do they exist? We need to handle this gold.

 36:57 

Saifedean Ammous:

Yeah, I think ultimately, the physical nature of it means that whoever can have the biggest gun in the surroundings of the biggest gold vault will end up with some margin for error in terms of their ability to print more of it. I’d say that’s how I think of it. Bitcoin really solved this because it takes it out of the physical realm, out of the realm of physical attack and made it digital which is amazing. I also got another question from you, Nathan, by email speaking of gold and gold bugs.

This one is by, you mentioned, Jim Rickards and Alasdeir Macleud, they make the point that bitcoin’s fixed quantity makes it unsuitable as a monetary standard and that it’ll have to fail. It’s the same tired Keynesian idea that there’s not going to be enough bitcoins. Bitcoin will fail because there won’t be enough and will become too expensive. Nobody goes to that restaurant because it’s too crowded, well if it’s too crowded some people must be there. Similarly, if bitcoin appreciates, it can’t be not attracting demand.

The question is, why would it be attracting demand if it is appreciating as money? The answer is because it is used as a store of demand, a store of value. Macleud and Jim Rickards argue that because its supply can’t increase, you won’t be able to get a bond market. It’s not going to be possible to have a bond market where people pay returns in a bitcoin vault. They present this as if it is a big gotcha – if you have bitcoin then you don’t have a bond market. I just want to shake them and tell them that’s exactly the point. If you have bitcoin, you don’t have a bond market, you just have bitcoin.

You don’t need bonds. There’s nothing physical in the planet that requires bond markets to run. Bond markets are a convoluted way of financing the government and providing people with a store of value. Bitcoin provides people with a store of value and provides the solution to the problem of government financing by cutting it off from the currency. The government has to finance itself, not by manipulating the currency. I don’t see why this would be a problem, and it’s quite funny to see supposed gold bugs bring up this issue. If this is correct, if gold’s growth supply is high and that’s the right answer, then why isn’t silver better money than gold?

Silver has even better, faster supply than gold. This idea that supply has to grow only at the magic percentage rate of gold, I don’t think can really hold much analytical water. I think it’s far more likely to be the case that the supply grows. The money is chosen because it has the lowest supply growth rate. Gold has been money for thousands of years because it has the lowest supply growth rate. If there was something with a lower supply growth rate, I think it would displace gold. I think the process that takes us from copper to silver to gold could take us from gold to whatever had the lower supply growth rate. I don’t see any need for a positive supply growth rate for any of these moneys. The question then becomes why would it be a problem or a limitation? It’s not clear why that would be the case. I think, in a bitcoin economy we’re likely to see equity replace debt. I don’t see why that is a problem. People can take on equity when they want it and then equity trades in financial markets, and closure to equity is how you take risk, and holding cash is how you store value.

These two functions fulfill what everybody wants from their portfolio. You want some things that you can guarantee for the future and you want some things you can take a risk with. Cash would be that 60-40 portfolio which has been very popular for quite a while. You put 40% of your money in bonds and 60% in stocks. I think you’ll see something similar, instead of 40% going to bonds, 40% will go to bitcoin. I don’t see why that is a problem. Can anybody see a problem with this?

 41:15 

Student 4:

It’s thin mathematics to the right of the decimal place! I’ve racked my brain, I don’t get their argument.

 41:28 

Saifedean Ammous:

Yeah, Jim Rickards has made a name for himself since he’s constantly pooping on bitcoin and bitcoiners recently. I’m going to take some liberty with giving my opinion. I read his book a while ago, one of his books which I highly don’t recommend.

Essentially, the business model for Jim Rickards is that he spent the last 20 years maybe, maybe more than that, going around telling stories about – he’s really the worst kind of gold bug. Those are the people that give hard money a bad name. He’s going around telling stories of how the dollar is going to collapse and gold is going to rise to 5,000 or 10,000 or 15,000, 20,000. This has basically been his same pitch for 20 years – gold is going to go to insanely high numbers. The shady thing about him is, he’s always going around pretending that he has knowledge of inside sources at intelligence agencies who are telling him all of this stuff. It’s ridiculous.

It’s not entirely clear why intelligence agencies would be giving this guy this information, classified information to put in his books that he sells publicly on Amazon. It seems to me like they would find a way of stopping him if he was giving out classified information, allegedly. But who am I to judge? The idea is that there’s always going to be this giant clash and gold is going to rise, a new global monetary system is going to be built around gold so buy some gold from him and his website. You know, he’s kept that shtick going over the last 10 years even as the price of gold has basically stayed the same. Imagine how these people feel when they watch bitcoin come and do exactly what they had been expecting gold to do for the last 20, 30, 40 years. They’re getting asked about bitcoin by gold bugs interested in bitcoin since bitcoin was around a dollar or ten dollars.

They’ve just continued to dismiss it and watched it go up and up and add another digit, add another zero. It’s understandable that they would come up with rationalizations of why this thing doesn’t work, in this case they’ve latched on to some Keynesian story about there not being enough bitcoin for their Keynesian fantasy. Unfortunately, they’re not going to be joining us on the bitcoin train. They’re going to continue to enjoy the collection of bedrocks.

 44:05 

Student 4:

It’s interesting that people that are public proponents of free market, when they see one, are the most afraid of it. Just total fear of a free market by people that constantly talk about it. 

 44:19 

Saifedean Ammous:

Yeah, it’s true. It’s quite interesting actually. It’s really the position of being a libertarian and not being into bitcoin or being into hard money and not being into bitcoin, is becoming quite untenable. It doesn’t make sense. If you’re akin to separation of money and state, if you’re into hard money, if you’re into the free market money, you have to be at least sympathetic to bitcoin.

You have to be at least willing it on, wishing it to succeed. You can’t square those two contradictory beliefs with one another. It’s the effective solution to the problem of money and government, it’s an actual actionable solution that anybody can adopt. Just get your money out of your government’s money and put it into bitcoin and you will have increased the degree of freedom that you have in the world, and you will have decreased the amount of power the state can take from you so, you reduce the power of the state. I can’t think of anything more effective to do but a lot of people are more interested in the journey. They’re more interested in the struggle than in the goal of the struggle.

They’re more interested in the fight than the outcome. The old saying, they’re more interested in fighting the guard than in securing the grapes. People can get emotionally stuck in the process and the mental models that they give for the world, then become more interesting in validating their struggle than they are in action triumphing. I think that’s where a lot of people get stuck with bitcoin. It develops this little glitch where it becomes a part of their identity. This thing can’t work and the more it works, the more it triggers them, the angrier they become and the more it doesn’t have to work in their mind. It can be frustrating being one of those people watching the price rise, so good luck!

 46:26 

Student 4:

Do you get much feedback from the Mises Institute too, regarding your work? I’m surprised that I don’t see more people competing with you, if you will. Not necessarily trying to sell a book, just in terms of Austrian economics analysis of the bitcoin phenomena. It seems that Austrian community would be totally fascinated with it. I don’t get that sense, what’s your thoughts on that?

 46:58 

Saifedean Ammous:

I think they’re quite interested and fascinated. Jeff Deist, the president of the Mises Institute is a good friend and he’s always promoting my work to their members. He’s invited me to their conferences and Tom Woods, Robert Murphy, Per Bylund are also quite sympathetic to bitcoin.

It’s quite interesting, actually, the Mises crowd have always had a much favorable take on bitcoin than most other hard money libertarian circles. If you look around, the furthest is the DC think tanks vs the Cato institute. They’ve been insufferable nocoiners for the most part, maybe not all of them but quite a bunch of them have just been quite negative nocoiners. This is the first free market alternative to central banks and they’re constantly talking about the free markets and yet, when the free market throws us an actual alternative, they’re sitting there and pontificating about why bitcoiners are stupid and why bitcoiners don’t understand proper monetary economics. They’re just sitting there trying to find something wrong with bitcoin. People like (???) and a lot of gold bugs also have the same kind of perspective. You start seeing that it’s not about the end goal with many of those people. they get lost along the way. 

They just get obsessed with their own pet struggles or their own little jobs. I think people in the Mises institute have had the most open mindedness to it. They may not be cheerleaders of it, they’re not constantly thinking only about bitcoin but they have other things they think about. They get the significance of bitcoin and they support it, I think, much more than other groups. Thank you very much guys for joining us today! It was fun as always, I’ll see you in the next seminar on Monday, take care!