In this episode Saifedean talks to libertarian author and comedian Dominic Frisby about the history of taxation, the rise of Bitcoin and whether we are moving towards a more or less statist world. They cover the story of how Dominic first found out about Bitcoin in December 2010, how voluntary taxation worked in ancient Greece, the rise of digital nomads, and whether land value tax represents the “least bad tax”.
Books referenced by Dominic
[00:03:39] Saifedean Ammous: Hello, and welcome to another Bitcoin Standard podcast seminar. In today's seminar, we have as our guest, english comedian and political activist and libertarian author, Dominic Frisby, who has written one of the earliest books on Bitcoin, if not the earliest book on Bitcoin, back in 2014, it was called Bitcoin the future of money.
And he's also written a couple of interesting political books, "Daylight Robbery" on taxation and life after the state has first book, which makes the case for a dramatically reduced role of government in society. Dominic is a pretty active on Twitter and he's always fun to listen to. And I'm very pleased to have him here as a guest.
Dominic, thank you for joining us.
Dominic Frisby: Thank you very much Saifedean. Now I'm really concerned that I'm described as active on Twitter because that means I'm not doing what I should be doing and I'm wasting time on frivolous [00:04:39] activity that achieves nothing.
Saifedean Ammous: Well, it's the quality of the contribution. Not necessarily the amount of time...
So, um, I guess we'll begin by talking a little bit about Bitcoin. What got you into Bitcoin? How'd you find out about it? What interested you about it? And why'd you write a book about it back in 2014?
Dominic Frisby: Well I actually was looking in my emails once upon a time to find out when I first found out about Bitcoin. And the first reference I could find about Bitcoin in my old emails was December, 2010, how about that? And a Bitcoin was 22 cents. And there's this newsletter that I follow about how to sort of escape the system and become an ex-pat and so on and, or a sort of digital nomad. And he had copied and pasted an article about Bitcoin from PC World magazine. PC World magazine is a magazine for a chain of computer shops in England, sort of low rank computer shops.
But for some reason, [00:05:39] they were just really, really early on the Bitcoin story amazingly. So I remember reading it and thinking, oh, that looks like a good idea. And then doing absolutely nothing about it. And then would have been about six months later, I was quite a well-known gold bug. I was very pro gold and I'd written my book "Life After The State", in which I argued that if we're to save the world, then we need an independent system of money over which governments have no control.
We need to remove the power that governments have to print. And that was the sort of central argument for that. And so it was very pro gold and I used to be very pro gold in my column. And I've written a film called "Four Horsemen", which was very popular as well in which there was a strong case that we need independent money.
And so Bitcoiners knew that I was an easy target. Let's put it that way. I would be easily persuaded to their argument because I was in the same place politically. And so back in those days, people just used to give you them, just to try and [00:06:39] get you hooked on Bitcoin, they would just get a wallet.
I'll send you some. So people just used to give 20 bucks worth or something and that'd be 20 Bitcoins. It's a very different world now, of course. People got in touch and just started giving them, I think the first guy who gave me there was a guy called Johnny Bitcoin. He used to call himself. And notice, he's changed his name on Twitter. And like a lot of those guys are in the Bitcoin space really early on they sort of, keeping a much lower profile now. And I think it's because they've earned a lot of money and they know that either the government's going to come after them or maybe some Russian criminal... Doesn't have to be a Russian criminal, could be criminal from anywhere is going to come after them.
So a lot of those guys who were really early in the space have sort of changed their online personas. And even though they're very pro Bitcoin, they don't advertise the fact that they were there very early, if that makes sense.
Saifedean Ammous: Yeah. And so in your book it was 2014, but you still made some pretty outlandish price predictions saying things like Bitcoin will hit [00:07:39] $17,000, which was insane at that time.
So, what drove you to be so insanely wrong that you were actually right?
Dominic Frisby: I don't actually even remember making that prediction and what the logic for it was, but I remember very clearly when a Bitcoin first went to the same price as an ounce of gold, which at the time was about 1200 bucks. And I think that would have been maybe November 2013 as it was it 2013. Was it 2012? It was November, 2013. And I remember thinking that's it. It's reached its peak. Now it can't go higher than an ounce of gold. I was still a big gold bug in those days. I still am a gold bug. I like gold. And I used to think that gold was going to go to the price where gold was going to balance the books of the United States.
So effectively US gold holdings. And let's assume that they are what they said they were, would be enough to pay off us debts. And so that I [00:08:39] forget how much, I think it's 77,000 tons or something? The United States government's got, oh, no, no. Sorry. It's yeah, 8,000 tonnes. That's right. And so with 8,000 tons, it will be able to pay what was the national debt of the United States have their own 22, 23 trillion, 25, 28.
It's gone up. I must have blinked and it's gone up when I wasn't watching, but yeah. So I used to think that the United States would be able to settle its debts with its gold. And that would mean a gold price of X hundred thousand dollars per ounce. But I'm not entirely sure that's the case anymore. I suppose I thought Bitcoin peaked at 1200, but you know, how wrong I was.
Saifedean Ammous: Yeah, I think it's quite interesting because I mean, once you start getting it, that it works and then you start just extrapolating. Well, what if 5% of the world's population is holding it or 5% of Gold's value is in it. And then you can't help but come up with these insane numbers. It's kind of what my book tries to explain, that it's not a fluke that this thing has grown faster than anything else. [00:09:39] And it continues to grow. And interestingly, I know we both come from a similar background where we were both old bugs and they could see the Bitcoin case. I'm wondering, did you have strong hangups? Did you spend a lot of time being no, no, it's going to be gold, it has to be gold. Or were you sold on Bitcoin pretty early, because I was pretty dumb about it? I was Peter Schiff for a few years in my life, which was probably one of the stupidest, most expensive things I've done in my life. And that's a lot of competition. So did you go through that phase or?
Dominic Frisby: Yeah, I did. I think mine a lot of the time was like I'm 51. And so I would have been in my, what would I have been, I would have been around about 40 when Bitcoin came along and I would go to gold conferences and I would be the youngest person there by some considerable margin. So yeah, everyone was over the age of 50.
And then if I would go to a Bitcoin conference, I'd be the oldest person there by some considerable margin. I [00:10:39] think there's a real generation gap with Bitcoin and I'm at having been born in 1969. I'm right on the, sort of on the cusp of it and sort of born post 1970, are largely pro it and born after 1970, people are like, nice.
It's, Gold's gotta be gold. And the reason I didn't perhaps embrace it as early as I should have was more technological. I never really got round to getting a wallet and playing with it and sending it. And I didn't understand the value of the digital economy as opposed to the physical economy. I was one of those a lot of the time.
I said, no, that sounds like a good idea. They need to invent a gold backed Bitcoin. And I didn't understand that it's just not possible. You can have digital tokens representing gold, but it wouldn't be a fully decentralized phenomenon. So a lot of it was just sheer laziness, not learning the tech early enough. And there was that lazy sort of thing: just have a gold backed Bitcoin, that'll be perfect. [00:11:39] And so I think the biggest barriers were almost technological. And as I say, like I've almost only come to realize this in the last two or three years, I think is the two different economies, the digital economy and the physical economy and the growth in the digital economy has eclipsed anything that the physical economy has to have over the last 20 or 30 years, 40 years.
If you look at Silicon valley in 1990 compared to Silicon valley now, and the value in the world now is in trademarks, intellectual property shares in dotcom companies, digital assets, Bitcoin, and so on. And things like the traditional big money industries, farming, mining industry, they have just been eclipsed by the growth that you've seen in the digital economy.
And so here is a digital money for the digital economy, and that was a simple concept that I failed to grasp.
Saifedean Ammous: Yeah. It's actually quite remarkable how similar the blind spots, I think [00:12:39] you and I shared in this regard. There's an aspect of it, of just that fiat mentality of I don't really need to figure out what's going on there before I pass judgment on it of just I don't really need to go and actually play around with it and figure out how it works in order for me to know what's going on and to have a very strong opinion about it.
And yeah, I think underestimating the digital economy is something that a lot of hard money people will have missed over the past few years. And I would say it only really probably hit me clearly, and I only really understood just the enormous meaning of Bitcoin as being a digital token for the digital economy after Michael Saylor came and explained it in his own terminology, based on his book "The Mobile Wave", and just the understanding of Bitcoin as just this new network. You've mentioned all these immaterial digital things that have value. And I think what Michael said helps us understand is that perhaps the most valuable of [00:13:39] these things is a network. If you just have a network where people are locked into a service that is provided very efficiently and they like it, and it reaches some kind of critical level of growth, that's just a trend toward growth.
We've seen it with big software networks, the big online networks, like the FAANG, and we're seeing it with Bitcoin. And I think a lot of hard money libertarians miss this aspect because they remain almost a little too fixated on the physical nature of gold, perhaps.
Dominic Frisby: Yeah. Gold is the most analog asset.
There is it's physical and its only purpose is to be money. It's pure wealth, it's pure money, but it is physical and it's an analog asset in a digital world. So that's a big problem for gold. I mean I agree about Michael Saylor. He has been the most brilliant man and I religiously seek out if I see there's a new interview with him, I just love hearing him talk.
And he's [00:14:39] been such a positive force for Bitcoin. I think so much of the extraordinary appreciation that happened in 2020 can be attributed simply to him and how eloquently he spoken about Bitcoin and all the associated issues. And I think he's absolutely right. You can look at the code of some of the other coins and say, actually, this coin is better.
As transactions are quicker, or it's more efficient, or it's got some little widget feature that makes it much better than Bitcoin. You can look at all of those things, but there's no other coin that has anything like the network that Bitcoin has. And so much of bitcoin's strength is that network effect and the value of a network, it's just extraordinary. And it was already there, but perhaps Saylor noticed it better than anyone else and brought it to the public's attention. I also love his concept of money being stored energy.
Saifedean Ammous: Yeah, that's an excellent way of putting it. He's got a very, very strong [00:15:39] engineering way of thinking and he's extremely eloquent at expressing those things.
A lot of people have thought of these ideas before, but he's peerless in the way that he communicates them. It's amazing to watch. So I wanted to talk about your last book, Daylight Robbery, in which you talk about the history of taxation and how taxation came about. So can you tell us a little bit more about the thesis and the ideas in the book?
Dominic Frisby: The central thesis of that book is that my earlier work Bitcoin and life after the state, I was convinced that if we're going to save the world, we need to change our system of money and only independent money of some form or other can save us. We have to remove the power that government has to print money, and then I just carried on thinking and I stumbled across a book by an author called Charles Adams, who's a tax historian, now sadly no longer with us, that he'd written in the 1980s and his central theory, which became my central theory is that [00:16:39] you shape the entire course of human history by taxation. You can take any great event from human history, and if you dig around, you can find a tax story there, often an untold one. So that became the central theory of my book. I'll ask you a question in a second Saifedean related to that, but I'll just expand on it. So pretty much every great event from history, every great war, every great revolt, every great revolution, every...
it's hard to find a great event in history that didn't have a largely untold tax story behind it, without which that event could never have unfolded in the way that it did. So taxes had this impact. I believe that taxation should be taught in schools in the same way that we teach chemistry and mathematics, is that important to subject and we overlook it completely.
So this incredible impact on history, you shape a society by the way that you tax it, you determine the destiny of that society, how [00:17:39] prosperous it will be, how poor, how free its people will be or how subordinated. And in fact, taxation itself is a measure of freedom. At one end, you have totalitarian states where ordinary works do not own any of their own labor.
And then at the other end, you have an anarchy, a totally free society in which it's citizens own it all. And there is no taxation. But another theory of my book is that there has never been a civilization without taxation of some kind. There has been civilizations where taxation has been voluntary. We haven't taxed labor, we've taxed other things where taxation has taken a very different form to the society that we have today. But even the Bitcoin network, even with something as inherently libertarian as that, taxes exist in the form of the fees, paid to miners, transaction fees and so on.
So, it's impossible to escape it. Rather than hankering after a world with no taxes, I argue that we can hanker after a world with much better forms of taxes. [00:18:39] I think taxing labor to the extent that we do and taxing income to the extent we do has created very badly distorted societies, where the incentives are all wrong. So that's the central sort of thesis of the book. If you watch a zombie film, one of the tropes of a zombie film is the patient zero, the patient where the virus originated and the hero of the zombie film has to get to patient zero and kill the patient.
And that way either patient zero has the antibody, or if he kills the patient zero, he eliminates the virus. And I used to think that money was patient zero. And now I've sort of come around to the idea that in fact, our system of tax is patient zero. And if we can fix our system of tax, everything else will quite naturally follow.
So the little game I was going to play with you Saifedean. This whole theory started off as a standup show. And I used to play a game with the audience where I'd get them to shout out great events from history. And I would endeavor [00:19:39] to tell them the tax story, the untold tax story behind that great event.
So if you just shout out any event from history, not too obscure, because if it's some like obscure Lebanese war, I won't know the answer.
Saifedean Ammous: Yeah. But all right. Well, I mean, there's one that I did want to discuss with you as a world war one, which is a big one.
Dominic Frisby: Every war in history is paid for by some kind of tax. Without the tax the war cannot happen. Often the tax happens in the form of debt, which is a tax on the future. In the case of world war one, it was also paid for with the inflation tax. Germany, France, and England all took their countries off the gold standard in order to print the money for that war to happen. If they'd stayed on the gold standard, that war couldn't have gone on for anything like the length that it did, but there was lots of other things.
Yeah. World war one brought income tax to every man in the UK, before that it had been just something that hurt the very rich, but world war one brought it to every man. And there were lots of weird little like, because [00:20:39] women started playing taxes in world war one. This was one of the big arguments why women should have the vote. They got the vote shortly after world war one. And the key arguments were they're paying taxes same as everyone else's so they should have the vote. So there are all sorts of there's one, a hundred tax stories behind world war one.
Saifedean Ammous: Yeah, for sure. It's something that I mentioned in my book, the Bitcoin standard, but I wanted to get back to something you said earlier, which is that the Bitcoin network has a tax because you pay the miners a transaction fee.
I'm going to push back a little bit on that because in my mind, what distinguishes a tax from service fee that you pay for any kind of service is the fact that the service fee is voluntary. You don't have to buy that thing. Whereas the tax is involuntary. You can just decide, I don't want to use the Bitcoin network. I'm going to actually lug around bars of gold across oceans myself, and I'm not going to pay the Bitcoin network and Bitcoiners can't stop you. The Bitcoin miners can't stop you from doing that. Whereas you can't [00:21:39] do the same with your local taxes. You can't just say, well, I'm not going to the parks.
I'm not using your roads and I'm not paying the taxes. And I'm not part of your wars. You can't do that. So wouldn't you say there is a difference there?
Dominic Frisby: Absolutely a hundred percent and I a hundred percent agree with your observation. And also when you're using the Bitcoin network, you can change the fee that you pay according to how quickly you want the transaction to be effected.
So you've got different levels of tax as well. I share the same issue as you do well, as I imagine you do, and probably pretty much every Bitcoiner does with the idea of forced taxation. There have existed societies in history, ancient Greece for example, taxes were voluntary. It was expected that the super rich would shoulder the expenses of the city because of the unequal proportion of the city's wealth of their enjoyed, but it was voluntary.
And not only was it voluntary if, for example, the city needed a new building or it [00:22:39] needed some games put on or some entertainment or some sports, or it needed a warship or whatever it needed, not only with the rich expected to pay for the funding of that thing. They were expected to carry out the work themselves and put their name on it.
And this created a very different incentive where the rich would actually compete with each other to put on games or to build a warship or whatever it was and put their name on it and as their reputation was on the line and their wallet was on the line, a) that work tended to be carried out to a very high standard for a low cost because the person who was paying for it was risking his own capital.
So there's one very good incentive there, but because not only his work was on the line, his reputation was on the line. That made the work carried out to a good standard as well. And so rich people actually competed with each other to carry out work. And the person who benefited from that was the city itself, but it was all done on a voluntary basis.
And so, ancient Athens was one of the most enlightened civilizations there was we've ever had in history. So it is possible to [00:23:39] have voluntary taxes. The history has proven that it can work. And I would like to in the same way that for example, you go on Twitter and you put a tweet up and a hundred people retweet your tweet and a thousand people like it and you get a little buzz, oh look aren't I important, but actually it's pretty meaningless.
It's just a dopamine hit that you've had on Twitter, but similar. Psychological incentives could be used in the tax system whereby you could pay, say a minimum, say you could redesign it. You could have a minimum that's payable. And then if you pay that minimum, you only get this level of service, but then you we're allowed to pay extra, let's say, but you hypothecate where those taxes go.
So let's say I want to pay a tax and make sure there's a good road built in front of my house. So you pay that. And as your little bit of thanks for having paying the money to have that road built in front of your house, you get a little plaque that's on a tree next to the road that says Dominic Frisby helped fund this road.
So somebody says, thank you. [00:24:39] And you get some recognition. It's really important in the charitable process that somebody says thank you and you get some recognition. And you might find with situations like that, that with a much more flexible and voluntary tax system, and it'd be quite easy to get some coder along to design it if you thought about it hard enough, they just don't, with little things like that, you can have a much more effective tax system, which actually ended up being carried out on a voluntary basis. But by which people end up giving more than is necessary because they like the rewards of having their name on it, or somebody saying thank you or whatever it is because human beings are essentially giving. We like giving.
So I hope that answers some of your questions.
Saifedean Ammous: Yeah, absolutely. And I think there's some empirical studies which show what you would expect from passing familiarity with human nature, which is that when taxes go up, charitable giving goes down. People think that already doing their part by paying taxes. So they don't really need to give them...
Dominic Frisby: Sure, under [00:25:39] the current system we are incentivized to pay as little as we legally can. Now that essential fundamental incentive is wrong. And it also shows zero trust of leaders on behalf of their people to do the right thing.
Saifedean Ammous: Yeah, of course. I think the main issue is that the idea that you're paying to go to an actual improvement in the life of your fellow citizens requires quite significant leaps of imagination because ultimately what your taxes are going to fund is a giant bureaucracy of people who get jobs based on concern trolling about the plight of the people that you're after helping.
And in a sense, I think this is ultimately a highly intertwined with the issue of sound money and Fiat money, which is under a system of hard money without the very powerful ability of government to interfere in all markets and affect the way that economic activity takes place in that kind of world, people end up having a [00:26:39] lot more capital in their pockets because they're not paying an enormous amount of tax and inflation every year. And so they end up accumulating capital. They end up accumulating liquid wealth over time, and they live in a community where they see people around them and they don't want to be surrounded by in this functional community so that they see somebody fall on hard times, they like to help. They see that the town doesn't have a library, they'll want to contribute the library. So historically we see this happen all over the world in many different societies and many different periods of time. It always happens. And in a sense, taxation ruins this to a very large extent because it gives people the idea that you shouldn't be out there helping people.
You should give it to the professionals, just pay your taxes on time. And then the pros will take care of handling and helping people, but...
Dominic Frisby: The system of tax in its current form removes the responsibility to do that. And if you want a low tax [00:27:39] state with great high levels of freedom, then with that come high levels of responsibility as well.
But with forced giving a large government, the responsibility to do these kinds of things is removed. And I think it's essential to the happiness of the people that responsibility falls once again on their shoulders, people are happy when they have responsibilities.
Saifedean Ammous: Yeah. So what are your thoughts on first of all, the likelihood and the political possibility of some form of tax reform and secondly, what kind of tax reforms do you advocate and what kind of taxes do you prefer?
Dominic Frisby: Well, I think looking at the UK, the possibility is maybe half a basis, point up from zero.
Uh, it's just so low as to be a... I imagine the U S has probably about three basis points above zero, but I think it's more possible in small countries. They tend to be more nimble, but I do think we [00:28:39] tend to think of countries with national borders, but we forget that many countries, as we now know them are barely 200 years old. Italy is what ,150 years old? Germany is maybe 150 years old. The United States is 250 years old, all the nation states, as we now know them emerged with the revolutions of the late 18th, early 19th century, and the wars, the French revolution, the American revolution, Napoleonic wars, and then the industrial revolution, and these sort of define many of the countries that we now know today and the tax system, which funds those nations states, which makes them possible. And by the way, tax is power. No matter where there's a king or it's a ruler or it's an emperor, or it's a government, no matter what the form of rule is, if it loses its tax revenue, it loses its power.
And in fact, you could say the same if we go back to the Bitcoin analogies, as soon as Bitcoin [00:29:39] miners lose their fees, the whole thing falls apart. Taxe is essential in the power structure of any given society. And we're going into this world, we talked about it already, where wealth is digital.
There's still physical wealth, but there's still this, the shift. By the way I do think there's a road in the shorter term. I'm talking a year or two out. I think we're going from a bit of a rotation back into real things at the moment. I think we're in a bit of a bull market for commodities, but longer term the value is digital. 50% of government tax revenue worldwide comes from income tax, 50%. And this physical economy where physical goods are transported within borders or across borders from A to B has been an easy economy. That's the system around which our tax systems have been devised. A man goes to work in one company, the company has the responsibility to collect the taxes, and that man goes to work in that same place every day. The economy has changed. We're now in a sort of borderless globalized internet economy, and [00:30:39] borders aren't that clear and where a large percent of the workforce particularly. And this is accelerated because of COVID is turning freelance.
And many of those freelance workers are moving from one country to another. Again, you'd think it had gone down because of COVID. But for example, how many people have gone to America or how many people have left New York and gone to Florida or Texas, how many people are leaving cities and going to the country?
I had a conversation with my voiceover agent the other day. And I was like, where are you? And he was sitting in a chalet in Switzerland, in a ski resort. And he'd been there for three months. And I'm like, aren't you supposed to be representing me for voice? He said yeah, but the lockdown came and I thought I'd rather be in the mountains, skiing in Switzerland. So I came here and I'm just running the business from there. I had another conversation with my solicitor and I'm like, where are you? And he's gone to his house in the south of France. So we're seeing more and more people leave home and become digital nomads. And the estimates are and Ernst and Young run these estimates, E Y as they're now called that 50% of the U S workforce will be [00:31:39] freelance or contingent by 2030, 50%. And all the studies show that contingent workers doing the same jobs as in the gig economy, is people doing, working for the same company, pay far less levels of tax.
The compliance is much poorer, either deliberately or accidentally. If you're looking at half the world's workforce of those it's estimated one third will be remote workers working and digital nomads in many cases. Now, if you're a digital nomad going from one country to another, and you spend less than half the year in any given place, it is very hard, it's not clear to whom you pay taxes. The systems aren't designed, they're not that adaptable. And then when you look at the fact that many, many people who work in the digital economy are now using crypto money, which is much, much harder to tax and regulate. And in fact the burden of reporting your crypto currency gains in Fiat money, it's such an onerous accounting job, that many, particularly at the lower end do not even bother. It's just easier not to do it. It's not I'm bunking off the tax, I [00:32:39] literally cannot face doing my accounts, so they just don't report them. But all in all, you're just seeing this huge economy emerge where the taxation revenue isn't going to nation states.
And I think as a result at the same time, you're seeing nation states debase their money, increase their obligations, promise lots of goodies to win elections. Then they have to make good on those promises. You're seeing the spending of nation states go up just as their tax revenue is compromised. And say, you'll see them, they'll place more pressure on the physical economy in their own economies while the digital, your sovereign man, if you've read that book is escaping scot-free and this is the dynamic. Nation states are simply going to go bust. And so we'll see fragmented nations occur in this sort of trend of fragmentation.
Anyway, UK and Brexit, Catalonia in Spain, Scotland wants independence. What was once Yugoslavia is God knows how many goodness knows how many countries now, and as these new nations appear that is their opportunity to put in new [00:33:39] systems of tax. And even if you get a little Bitcoin citadels among mining operations in remote jurisdictions and little society, you might just see, a lot of people are gonna make so much money from their Bitcoin they're just gonna approach some country in Africa, Chad, or something, and go, Hey, can you just sell me one corner of your country? And you might see that kind of thing emerge where and you just make a sort of little libertarian Haven where a nation state with huge amounts of land, will just sell off a chunk of it.
And so there will be a few nations states that voluntarily adopt and embrace new systems of tax. There'll be the smaller ones, maybe those competing to get digital nomads to come and live there. But a lot of the time, I just think countries are going to sort of dissolve and new countries are going to form.
Saifedean Ammous: Yeah, I think this is becoming a bit of a recurring theme in the seminar. Just last week we had Rahim Taghizadegan from the free private cities initiative and they're working on something similar to this. And I think that's [00:34:39] the optimistic take, which is that there'll be more jurisdictions. There's more mobility, governments will have to compete and adapt or die. And you'd think, I mean, I used to be inclined to think that this is a good thing because you're generating more competition. And it's kind of similar to what drove us prosperity, which is that since the U S has a 50 states, essentially, and each one has its own rule book, but they all have a freedom of movement and freedom of trade among them.
It becomes extremely competitive. The tax environment and the policy environment becomes extremely competitive. And that's why state laws in the U S are generally much better than federal laws because there's a lot more competition. And so the states are held to account, but...
Dominic Frisby: That is a healthy dynamic that the United States has. The problem is taxation at the federal level. Generally speaking, local taxes have been falling in the United States for a couple of hundred years. No, sorry. About a hundred years, [00:35:39] 120 years. Lot more taxes collected locally. The problem is taxation at the federal level, particularly income tax.
Saifedean Ammous: Yeah, absolutely. But if this is supposed to be what we would be expecting, but I think 2020 was a little bit of a, let me give you the pessimists take for why 2020 was basically the empire striking back, if you want. We saw that mobility was massively disrupted.
People have to learn, they had to stay somewhere and we saw how the digital revolution and all of that stuff can be utilized in the most ugly way possible, which is what we're developing into right now, this massive panopticon of surveillance and a totalitarian control of health and individual body decisions.
So yeah. So the idea is if you look, a lot of that technology is being used for surveillance and for complete totalitarian control of people. And you won't be able to move around without getting the right kind of medical treatments done and based on the [00:36:39] latest pronunciations of medical authorities.
So I wonder just how much this entire... putting Bitcoin aside for a minute, but I'm talking about all of the digitalization of the economy, how much of that is actually going to lead to more or less because you look around, you don't see tax competition heating up. You don't see European countries beginning to slash tax rates to compete with one another.
In fact, you see the opposite happening. They're all becoming more fiscally reckless, more monetarily adventurous, and they're just printing, money printer, go brrrrr all the time and tax numbers go up all the time and they shut down borders for months because they saw videos of people fainting in China.
And we had to just shut down the planet just to be sure. Maybe this thesis is being disproven. What do you think?
Dominic Frisby: No, I think you're right. Let me tell you, this is a headline in the daily Telegraph, which is an English paper right today. Death rate in England [00:37:39] lowest since records began.
The death rate in England, this is supposed to be global pandemic. We are locked down because of a global pandemic and the death rate in England is that the lowest since records began, I mean, you know, it's just unbelievable. So I agree. All sorts of precedents have been set this year, which, again, another one of the rules of my Daylight Robbery book is all sorts of taxes and controls getting forced during a crisis, which would not be accepted where that crisis not to have exists in times of peace, if there was no crisis.
And after the crisis has passed the taxes and controls never go back to the levels they were at before the crisis began. That's one of the rules. And I think we're going to see that with COVID. I'm still not sure we're going to get [00:38:39] vaccine passports. I do hope we won't because that forces people or what, anyway, I won't get into it, but you know, it is that as a major form of control.
And by the way, I was on the dark net looking at I was interested in false vaccination certificates and a lot of the sites on the dark net, they won't even sell them. I thought even after that was interesting. They won't even study false vaccination certificates. That's how, what a dodgy area it is.
Yeah. The precedent for control is extremely worrying. And also the tech, like, for example, I have to, I want to go to Guernsey in the channel islands and I've been trying to get there for three months. I've been trying and just need to go out there for like four or five days. Cause I'm want to look at a property that I want to buy.
And I just want to go and spend a week four or five days and see if I like it or not. And I have not been able to get there for four months now. I've been trying to get there each time and they keep changing the rules [00:39:39] and it used to be if you, they changed the rules recently, if the COVID cases in your area are less than 30 per 100,000 for two weeks, then you can come to Guernsey.
And it doesn't matter if you've had the vaccination or not. This is the criteria. And then you have to, when you land in Guernsey, you have to have a COVID test and you have to quarantine for 24 hours while we get the results of the COVID test. And I was like, all right, fine. And then they just changed the rules and said, no, actually you can't come from London because we are still worried about COVID even with death rates at their lowest ever.
And so, and that's just a simple one hour flight. And so these controls track and trace all the various sensors you have in your house. What was it? I was recording a podcast the other day with this guy who makes prosthetic arms. And I was asking him what inspired him to make prosthetic arms.
And he said he used to be an iron man used to like the iron man movies when he was a kid. And he was that's was the basic inspiration. And, I used to like iron man, but I don't think [00:40:39] I've mentioned the word iron man. I don't think it's come out of my lips once in the last 20 years. But in the course of that conversation with that podcast and my phone was on silent on airplane mode, by the way.
But in the course of that podcast, I must have mentioned iron man, 15 or 20 times I come back home. I go on my computer and suddenly, I go on a blog reading somewhere in some that suddenly iron man figurines are being advertised at me. Like, how did it know my phone is listening a hundred percent and it's sort of not that bad if the information that's being taken is used for selling you stuff.
I thought, I think, well, that's not too bad, but what if that information then starts being used to, for example, to monitor your speech, make sure you say the correct things and what if they start using that information when we get central bank digital currencies. And what if you can get loans or the interest rate you're paid in your central bank, digital wallet is reflected not just so much by your credit [00:41:39] rating, but by your social credit rating.
Yeah. And I think there's all sorts of dangerous patterns in play that jeopardize and threaten everything we just described.
Saifedean Ammous: Yeah. And I think people kind of miss the point that once you've set the precedent for one of these things, you don't get to then pick and choose which ones you think are worth surveying people over and coercing people into.
So you might think that masks...
Dominic Frisby: Masks like, the jury, there's a lot of heavy scientific evidence that argues that masks don't actually work and create more problems than they solve. I don't know. And I don't know where I stand on it, but a lot of people say because you're wearing a mask, you handle your around your mouth and that actually makes you more infectious.
You don't wear the mask. And I personally don't like masks because I think they remove relationships between people, it'smuch harder to build up a relationship with somebody if they've wearing a bloody mask, you know, they're antisocial. It's much harder to breathe that too precisely, which is the one thing that COVID gets you is your [00:42:39] breathing.
So mask, you know, we're not going to be able to go on a plane now, ever again and not wear masks.
Saifedean Ammous: Yeah. The ridiculous thing about just that it's a great example of the central planning mentality. The central planning mentality thinks well, germs are transmitted. So therefore if we cover up everybody's mouth, then we'll reduce transmission.
But in reality, it's not a lab where you're just testing a couple of dummies and that's how these studies that show effectiveness work. They put a couple of dummies and they spray droplets and they show that the mask reduced droplets. Therefore they conclude it must make people healthy, but you know what, in the real world, what you're actually causing is millions of people are breathing through dirty cloth all day. That's what it really comes down to. They're still breathing and they're still breathing in and they're still breathing out. So they're still filling their room with their breath. And they're still...
Dominic Frisby: We are probably breathing those microfibers into their lungs, horrible little microfibers that you can't see. I bet they're in the same way that they find fish in the ocean, it's got loads of plastic on their [00:43:39] insides. There's going to be autopsies of people dying because of some kind of cancer caused by microfibers. And they're going to discover all these microfibers inside somebody's lungs in the same way that coal miners used to have coal inside their lungs.
Saifedean Ammous: Yeah. And I think, for me, we've discussed this before for me, the idea that you'd think a mask is a more necessary intervention than looking after your own health and your own diet is ridiculous. I need to see a lot of the people that are obsessed with promoting masks are not people who take care of their own health, which I think is absolutely insane because you look at the risk factors at the risk involved with COVID, when you're overweight and when you're unhealthy.
And when you basically have metabolic syndrome, it's much, much worse than if you were healthy. And so it strikes me as pretty obvious that the first thing you should be doing, if you're worried about this thing is to get in shape before you start demanding others go around, do things. Just get into shape yourself.
But of course, this really isn't about health. And that's why none of the public health dictators in the [00:44:39] world is talking about, maybe you should cut down on sugar and maybe you should eat a little bit more meat and get healthy and strong. And nobody likes to talk about that.
They're not, they don't really care about health. They care about control. And so they're interested in the things that allow them to have more power over people, but they're not interested in the things that actually can bring about health and that's what bureaucracies do. So, yeah. And as you were saying, we're heading to a world in which that is integrated with your health score and your social credit system and your credit. All of it is going to be one big giant score, and all of it is going to be tied to your central bank money. And of course, once you've set the precedent that you accept this kind of intervention, for one thing, if the central bank is going to prevent people who don't wear masks or people don't take vaccines or people who don't tweet to the correct things about the latest virus by only tweeting approved CDC and the world health organization propaganda, if you start blacklisting those people, because they're evil, soon enough, this is [00:45:39] going to be twisted around into blacklisting you one way or the other. Like people imagine themselves delusional statists think that the government works as this benevolent omniscient, omnipotent God, that can just write the wrongs of society. And so, you know, oh, we have illness. Well, then we just pass a law that says wear a mask and then we kill the disease. Well, what happens if somebody doesn't agree with you? How dare they not agreed, we're going to be putting them in jail.
And they just think that these kinds of things can just be enforced or you threaten people and that people go along and then life goes on and then your ideas of how to fix the world happen. But it's just going to lead to very dangerous increase in the scope of the state. It's going to lead to politics becoming much more bitter, much more high stakes, and everybody's going to get their way in controlling others in the way that they want, because this is what governments do, and everybody's going to not get their way in the fact that they're going to be controlled and all kinds of [00:46:39] ways that they don't really care about.
And when you tie that to money, I mean, it's just going to be absolutely cruel for people who don't have Bitcoin, because ultimately I think when we keep coming back to this, ultimately the Bitcoin fixes this because there's gonna come a point where it's not going to be legal to buy meat with your central bank digital currency because soon they're going to be talking about climate change and the dangers of meat eating, and then banks are just not going to open accounts for dirty meat eaters.
There is no limit to the slippery slope of where special interests are going to milk this. And only Bitcoin remains as a free monetary system outside this.
Dominic Frisby: I've just finished a really good book called "Why We Eat Too Much?". And I know you're into diets and I can't begin to hold court about diets.
But one of the things that he argued is that the major cause of obesity is one. Too many vegetable oils in our diet, modern vegetable oils, as opposed to [00:47:39] things like olive oil and two is sugar, and then three, not enough the type of fat animal fats and the kind of fats that you get from oil, fish oil, like eating mackerel and so on.
And he argues that this diet has caused people's metabolism to change. And so that they think that they're hungry and they're caught in this sort of vicious cycle where their body is giving them false signals. And so they keep on eating, even though they're not hungry, but their body thinks they are hungry.
And he described how government health guidelines actually promote the eating of food that is bad for you. He argued that we need to go back to the traditional diets that our grandparents or our great grandparents would have eaten heavy and fish, heavy meat, heavy in certain vegetables and so on... The reason government gave these health guidelines as they came under extraordinary pressure from various industries with vested interests in increasing the [00:48:39] content of these much cheaper food alternatives. Government is so slow to change, but I just find it outrageous that even in something like diet, their guidelines are so wrong and mistaken and misguided.
Saifedean Ammous: Yeah, this is the topic of chapter 10. I think from the Fiat standard, my next book it's called Fiat food. It looks at just how much of government policies around the world, particularly in the U S have been driven by the interests of the manufacturers of this industrial goo that gets peddled around as if it is food and effectively, the way that I like to think about it is that the 20th century Fiat money allowed governments to essentially shift the overton window of what is diet, what is food.
What you think of as food has been heavily distorted by essentially a hundred years of governments trying to feed you crap, because it looks better for their inflation statistics to get you to eat the cheap stuff [00:49:39] that they can manufacture quite easily.
Dominic Frisby: Oils that they put in those modern vegetable oils mean that food can last on a shelf life much, much longer.
Saifedean Ammous: Exactly. So that's why they use it. Not for health. Yeah. And effectively, the industrial manufacturers of agribusiness food, they stand to gain enormously from being able to peddle off these industrial waste as food. So think about all of these and what they call vegetable oil. None of them have anything to do with vegetables.
They are produced from grains and seeds, and they're produced in an manufacturing process. These things are not, you can use those in a car. Thank you. Can you use them to power a car? You should definitely use them for a car before you could put them in your body, but just imagine the margins on that thing, you're taking effectively what was the leftover of soy production process and selling it to people as if it is a food and it has a shelf life and it can scale.
And [00:50:39] so if you could just bribe the right government officials and get the right diet messaging, you're able to promote this stuff. So it's in my mind, I don't think it's a coincidence that in the century in which government has the ability to print money, it has taken an enormous liberty in telling people what to eat.
I think it's done as brilliant a job, as you would imagine from it as it, you would imagine it would do from with anything that it tries to handle.
Dominic Frisby: I had this friend from school and he used to he was quite entrepreneurial and he set up a sort of bakery a sort of street stool, hipster, bakery, kind of thing in the north get road, close to where I used to live.
And he had wonderful breads that he used to sell. And then he started selling pizza and I used to go in the north Corona every now and then, and I'd go and always go and sat down and have a chat. And I said, oh, you're selling pizza. I see, I see, I see pizza and his words, his word was exactly the same word you used Saifedean, I'll never forget him saying it. And he just went the margins, [00:51:39] the margins on pizza. Um, you know, it's just such a cheap food to make. And he was making a killing on pizza without realizing that all that terrible white flour. He was poisoning people with it.
Saifedean Ammous: Yeah. Fortunately, Bitcoin fixes this too.
A couple of interesting stories from your book on the window tax, which is the inspiration behind the title. Can you tell us a little bit more about that?
Dominic Frisby: Sure. The beautiful thing about the window tax is it shows the lifecycle of a tax. There's quite a funny backstory to the window tax. The window tax was enacted in 1696. And it was almost exactly the same time that the bank of England was founded and what had happened is in England had had its glorious revolution in 1687. And William of orange had come over from Holland and overthrown the evil king James the second, the evil unwanted Catholic king.
And it was known as the glorious revolution. It gave us the English bill of rights, which is sort of the [00:52:39] successor to Magna Carta and one of the great documents about freedom and so on. But. At the time the English played what was known as half taxes, which was a half being a fireplace or a chimney or a stove.
And you had to pay a tax for every chimney or stove or fireplace that you had in your house. And so tax collectors would come into your house twice a year and count the number of fireplaces you had. And then you would have to pay a tax. And the English actually absolutely despised this tax. It was considered a violation of the Englishman sacred privacy.
It was a bit like the TV license inspectors coming to check if you've got a TV or not today, and then demanding you pay a TV tax to the BBC anyway. So. One of the things that William of orange did in order to ingratiate himself with the newly conquered people was to get rid of the half tax. And of course that made him extremely popular, but then he discovered that actually the half tax was the Crown's biggest [00:53:39] source of revenue.
And he just given it away to make himself popular. And he had various wars he was fighting at a war in Scotland, a war in Ireland and a war in the continent. I think it was the eight years war I forget, but he had various wars going on kings in those days had to do. And he had to find a way of raising the money to pay for these wars.
So he founded the bank of England and the next thing he did was he introduced this window tax where, because the tax infrastructure was all already in place from the half tax, but a tax collector didn't need to go into somebody's house and actually sort of deal with the taxpayer. He could just simply walk past their house, count the number of windows and you would have to pay a tax based on that.
So it was very easy tax to collect, very hard tax to avoid, and it was introduced and like all taxes it was introduced in a very low level and then gradually over time, the levels were increased. And so the reaction to the population of course, as is always the case was to then try and avoid the tax and they did this by blocking [00:54:39] up windows. And France had its own version of the tax.
I think various other nations in Europe have their own version of the window tax. I think it existed in Germany somewhere. And the reason I say that is because in America, about a hundred years later, there were some people going round on behalf of president Adams, John Adams, riding around their horses in Pennsylvania, doing some kind of census and all the German and Dutch settlers there thought they were enacting a window tax.
And so they wrote rose up and had a revolt and it took president Adams two years to put down the revolt. They hadn't even imposed the window tax. They just thought it was coming. That was the fries rebellion of, I think, 1798 or something. Anyway. But that tax informed architecture, it informed how buildings across Europe would look.
And you see, even now you see many buildings were built with the windows blocked up, giving the owner the option to knock through and put a window in if he wanted to and to pay the higher tax. But the unintended consequence of that tax, especially during the under industrial [00:55:39] revolution is that it made people ill because the tax fell on the landlord.
The landlord didn't want to pay the tax. So he would simply build houses, these huge tenement blocks with no windows at all. In many cases, people lost their daylight. Altogether, if you think in those, there's no electricity, no gas lighting. It was all tallow candles and rush lights and that kind of thing.
So to lose your daylight was no small sacrifice and all the diseases in the industrial revolution, the typhus, the chollera or whatever it was, they were made far worse by these cramped damp windowless dwellings. So at around about the turn of the 19th century, there was huge pressure to get rid of this tax.
But William Pitt actually put it up because he was then fighting Napoleon and there was another war and he needed more money. So there was scientific evidence was presented in front of the government that this tax made people ill songs were sung. Pamphlets were handed out. Charles Dickens was writing huge articles railing against this tax.
And it still went [00:56:39] on for another 50 years. It wasn't ended until 1857, 1854. And at the, they were only able to get rid of it cause they just brought in income tax. But anyway, but when they were having these big arguments in parliament about whether they should get rid of this tax or not the room.
The word is that the MPS all shouted out daylight robbery, and that's where we get the expression, daylight robbery from the title of the book. That's the story of the window tax, but in this sort of evolution of the window tax, in the context of history, it wasn't even that long lived attacks.
It was only 150 years, but you see the typical life cycle of a tax it's enacted at a time of need, usually to fund some kind of war it's presented as temporary, but it becomes permanent. We've talked about that. The amount payable is low at first, but increases over time. It violates basic freedoms in this case, the right to light and fresh air, many go to great lengths to avoid paying it.
And thus it distorts how people behave [00:57:39] and the decisions they make. There are all sorts of unintended consequences, which get worse as the tax matures, much of the money it raises is wasted or spent in a way with which the tax payer wouldn't agree. And finally people have had enough and there's some kind of movement to campaign a protest, even a revolution to get rid of it, which government is slow and reluctant to do.
And there's a lifecycle of a tax. And we were talking about COVID and the government's reaction to COVID. If you extend tax and say tax is a form of control, which it is, and leaders do use tax to guide behavior, you exceed exactly that cycle going on with all the measures to control behavior that have gone on since COVID came on the scene.
Saifedean Ammous: Very much so. You're not going to get an argument with me on that one, but this brings us to the topic of your favorite form of tax. So you think that a land tax is better than a taxing windows?
Dominic Frisby: Uh, anything's better than taxing windows.
[00:58:39] Saifedean Ammous: Well, I don't know. Taxing labor? Yeah. It's hard to find the, which is the worst and stupidest form of taxation, but what is your case for the land tax?
Dominic Frisby: I actually call it location usage tax and the philosophy, and I see some form of land value tax coming, but I see it coming in addition to other taxes. And I think it can only work if it replaces other taxes and the great proponent of land value tax was Henry George, the 19th century American philosopher.
He called it the single tax. So there should be no other tax. Let me have a rail against income tax for a moment. And then we'll come back to land value tax. I rail against income tax because if you are starting out in life and you have nothing, the only thing you have is your labor. And yet we tax labor heavily and constantly.
So it makes it very hard for somebody who only [00:59:39] has his labor to advance in society. And it's why we have these economies geared around the ownership of assets because assets go untaxed. So capital and labor are not taxed equally. And the result is inequality. It's actually quite simple. And I think income tax creates lots of bad incentives for people.
Most of all, it does not inspire them to be productive and hardworking. So that's my little rant against income tax. The case for land value tax is a very hard case to make, but it goes back to the philosophies of the physiocrats who were around a bunch of French philosophers. I think in the enlightenment, they argued that there are two forms of wealth.
There is the wealth that nature gave us, and there is the wealth that is manmade, and they argued that anything that is man-made any kind of wealth that arrives as a result of your endeavor, as a result of your intelligence, as a result of your creativity should be yours to keep [01:00:39] yours and yours alone.
Whereas any wealth that nature gave us should be owned by all. And if you want exclusive rights to that particular bit of wealth, then you have to pay a fee, a rent to the community, and a bit like your Bitcoin fees, the amount you pay is voluntary. And I'll explain why in a moment you have to pay a rent to the community, and if you expect the government to then protect your title to whatever it is you want exclusive rights to. And so if you want to pay a low tax to the community, you simply occupy less land. You make fewer Bitcoin transactions, you use gold instead, whatever, but if you want to occupy huge amounts of land, then you pay a larger fee to the community. Now, obviously remote farmland has an extremely low annual rental value.
So you'll pay you. People always think land value tax is a tax on farmers. It isn't because farmland has very low rental value. It's more the prime real estate in city centers [01:01:39] because that's the most desirable real estate. And that's where you would pay the highest amount. The other thing I like about land value tax is it's based on the amount you use rather than what you produce.
It's more like a consumption tax and it is a transparent form of tax because in utopia Saifedean, we will have some money that governments can't print, whether it's gold or Bitcoin or some new technology that hasn't been invented yet. But this sound money will exist and governments can't print it. So the tax system will be much, there will be no inflation tax, but if a government is then spending too much, all the people who are paying the government spending hits the taxpayer directly. And so the taxpayer will say, no, you're spending too much. And it will hopefully reverse in sensitize incentivize democracies to elect leaders who promise to tax less, rather than leaders who promised to tax more.
If that makes sense, it there's a much healthier [01:02:39] dynamic between tax payer and government with a land value tax. So that's why I argue for it. The chances of a land value tax existing as a single tax and no other taxes are one basis point above zero, but there's a wonderful quote, which I always liked, which I don't know who said it was just some random blogger I read on the internet in some chat bull, but he always used to say, find the right answer, realize you'll never see it in your lifetime, but argue for it anyway, because it's the right answer.
And so that's why I argue that value tax.
Saifedean Ammous: Yeah. I think I'm not entirely sold on the idea. I can see the case from an operational efficiency perspective. I mean, there's a limited fixed amount of land and if I'm the sovereign on this land and I control it and then, ultimately if things go bad in your land, you're going to go to my jail you're going to have to meet up with my police, my courts in that kind of situation where a government exists. I [01:03:39] think there's a kind of operational neatness.
Dominic Frisby: You can just sell your land.
Saifedean Ammous: I'm sorry?
Dominic Frisby: You could just sell your land.
Saifedean Ammous: Well, yeah, but still, if you're in my country, if you're in my sovereignty, then you're going to be somewhere.
Or, even if it's somebody else's land, you are on land that belongs to me. And ultimately I'm going to be the de facto arbiter of what's going on there. So there is the kind of neatness of all of the land is ultimately belonging to the, in a sense, the land tax is just an admission of the fact that nobody owns anything.
The government owns everything and you're essentially renting from the government. And because that's really the reality because the government can take away your home.
Dominic Frisby: It's a much more, it's very socialist for sure.
Saifedean Ammous: Yeah. And I think the problem with that is that ultimately it is not voluntary. You can't choose to opt out of it. It's still coercive. And of course, there's also, I think the problem with [01:04:39] the distinction that they draw between things that are given to us by nature and things that humans made effectively, everything is made by humans. Even if it's given to us by nature, the ability to enjoy it, the ability to build houses on it is what gives it.
Dominic Frisby: When you're assessing the rental value of land, you do not take into account what is on the land. You assess the land in its unimproved state. That's essential. So if you had two identical plots of land in a city center, and one had the Taj Mahal on it and the other had nothing on it.
Those two plots of land will be taxed at the same rate.
Saifedean Ammous: That's true, but, if you want land given to you by nature and there's land in the north of Canada, that you could probably buy for a dollar, an acre or something.
Dominic Frisby: I own some of it and I can't sell it.
Saifedean Ammous: Well, you see, that's, that's what land is like a given to you by nature. It's also, yeah. Well, you said that
Dominic Frisby: The beauty of that, because it has no value, then [01:05:39] people are incentivized to move there because they pay low taxes.
Saifedean Ammous: But we don't even need the taxes for that. People will move there because it has a low value, but of course the fact that they don't move their money, it means that it doesn't have value. That's ultimately what it comes down to. So this is kind of the problem, but ...
Dominic Frisby: Milton Friedman used to call it the least bad tax. And I think that's quite a nice way of looking at it.
Saifedean Ammous: Yeah. You could maybe look at the example of Hong Kong as a way in which it was implemented efficiently because that's the tax that they had in Hong Kong.
And you also mentioned the example of Hong Kong. So, how did it work out for the Hong Kong?
Dominic Frisby: The main thing that Hong Kong did is it had taxation never exceeded 14% of GDP, and that's where we need to go back to it. At the moment where taxes around 50% of GDP higher, if you include the stealth tax that is inflation, Hong Kong tax has never exceeded 14% of GDP.
Only the very rich paid income tax and 40% of government revenue derived from land value tax. The tax code was one and a [01:06:39] half percent, the length of the UK tax code. Imagine that. So it was like 70 times smaller or something. Western tax codes are so complex and complexity causes inequality because one group have the resources to navigate the complexity and the other don't.
So it was beautifully simple. It was low and it was based around land. And in terms of economic growth, Hong Kong was the success story of the second half of the 20th century. It went from a GDP per capita on a par with much of Africa at the end of the second world war to having a GDP that per capita, that I think is twice the UK by the turn of the century.
And in two generations it was just extraordinarily successful and its population went up 10 times. Loads of people move to Hong Kong voluntarily because to better their own lot because of the opportunities it offered. So they went there voluntarily and paid Hong Kong taxes voluntarily, and it was so successful.
Singapore copied it, South Korea, copied it. To an extent [01:07:39] China is now copying it and has copied it. Everyone thought when Hong Kong was returned to the Chinese in 1997, that China would simply annex it. But if anything, the opposite happened and the Hong Kong capitalist mentality spread to China and he's also copied it and them and tell him, no, I'm not defending what's going on in Hong Kong at the moment, because it's not very nice.
And China does have a very authoritarian government, but it is much more capitalistic instinct now than it was 30 years ago. And I think Hong Kong's tax code also had an influence on Japan. And so a lot of the Asian miracle can be traced back to Hong Kong tax code and Hong Kong's tax code was down to this one chap called John James , who is an Adam Smith acolyte who just grew up studying Adam Smith, loved Adam Smith.
And he was the financial controller of Hong Kong. And his main policy was what he called positive non interventionism. In other words, at every opportunity, whenever government had to take a decision, [01:08:39] he would always try and take the decision that involved, not getting involved, not intervening.
And I just think that's a wonderful attitude for a government to take, but he was only able to do that because of the fact that Hong Kong was a colony. It wasn't a democracy. And so he was in charge and whatever he said went, it just happened that he was a benevolent dictator who believed in Adam Smith.
And, he was a big voluntaryst. He thought the aggregation of a million individual decisions will result in a better outcome than one decision made by a bureaucratic central planner. He was a great, great hero and the extraordinary economic growth enjoyed by Hong Kong in the second half of the 20th century is down to that.
Saifedean Ammous: Yeah. Well, Peter has another question he wants to ask you, Peter. Hi, Peter. Hello?
Peter Young: Good to finally meet you Dominick.
Dominic Frisby: I had no idea what he looked like.
Peter Young: Great discussion. I had a follow-up question on the Hong Kong, small government question, which is [01:09:39] given the Hong Kong, Singapore, Dubai, like all of these smaller metropolises that have introduced these lower taxation policies have been so successful.
Why is it that you think that they're still very much a minority in the world? Why is it that you think that the vast majority of states as they exist, either aspire to have higher levels of taxation or de facto do like the kind of European levels of 40, 50, 60% or being developed states where basically they can't collect the revenue effectively.
So developing nations when they can't collect the revenue effectively, why do you think it is that there isn't more active choice of the kind of taxation policies that you advocate.
Dominic Frisby: I wish I knew the answer to that. There's a certain mentality of a certain person that goes into government. And I think it's particularly common in the EU. They genuinely think they know better than you, that [01:10:39] it applies to much of the British civil service as well. They think that they know better than you and politicians think that people are stupid and they know best, and they're better equipped to make decisions than you are.
So that's one, there's that mentality. There's also like I've noticed you sort of get two different types of people. There's the sort of person who becomes an entrepreneur and a businessman is often got this sort of, well, let's just do it and we'll figure it out how it works as we go along.
And we'll, don't worry about that now, let's just do it and we'll work it out. And that type of person with that mentality will be, you know, they'll be an Explorer, there'll be an inventor, there'll be an entrepreneur, those kinds of businesses. And then you get that sort of health and safety mentality where we must know what the plan is.
We must stick to the plan. The plan must be logical, and it's a very cautious approach. And maybe in a balanced society, you need a bit of both of those ideas, one person to push the boundaries and another person to rein them in. But you just [01:11:39] get a prevalence of people with that sort of planning mentality safety first. And it just means that everyone constantly has to seek permission to do anything. That's a huge barrier. And I think another major problem is this no politician who's going. We need to fix the tax system. It all starts with that. Let's fix the tax system and they all just add a little bit here or change a bit, little bit there.
There's never wholesale reform. And it is very hard. Adding new taxes in peace time ends very badly for politicians. Thatcher tried to do it with her community charge, poll taxes brought her down Britain's most successful post-war prime minister. It was brought down by introducing a new tax, which actually wasn't that bad attack, but their enemies used it against her.
And it was designed to bring accountability to local government. But unfortunately the accountability fell to her. You have to be very careful if you try to introduce the single, the land value tax in England, you just wouldn't stand a chance. You'd be laughed difficult to explain [01:12:39] you'd be, and everyone thinks their house is that.
Everyone in England worships the value of their house and you just wouldn't be able to, it just wouldn't cut the mustard. But it would be wonderful. I mean, there's sort of vaguely talked about it in England with these free port things that they're introducing, but it's not a Dubai, it's not a Hong Kong.
It's not a Shenzen, one of those tax-free zones. And they sort of admitted that lower taxes boost the economy with all the tax cuts to stamp duty. And so on that brought in it has boosted activity. So if you can recognize that lower taxes boost activity, and ultimately lead to greater revenue for the government, because society is more prosperous, you'd think they would reduce taxes across the board, but they're just too much health and safety.
And there's so much reluctance, but crikey, do we need a conviction politician to go in and reform the tax system? Not just in the UK, but pretty much everywhere.
Peter Young: The fact that [01:13:39] historically Western nations had better protection of property rights. So with a small government, and that gave them a really big headstart on the rest of the world.
And so people look at Western nations and say, whatever they're doing, we need to copy them. In reality, I think they're learning the wrong lessons. They should be looking at what those, what policies Western nations had in the past when they underwent the industrial revolution, not in terms of all policies, but in terms of least size of government and property rights, and then should be learning lessons for that.
And also, Singapore, Dubai, Hong Kong. And I think that as we move into the 21st century, we're going to see Asian countries start to overtake Western countries. And at the moment, people are tending to interpret that as oh these are like Asian authoritarian states, and that means we should be more authoritarian, but I think they really misunderstand [01:14:39] what's happening in countries like China.
Like I've lived in China for 10 years and I think people massively misunderstand how statist China is relative to countries like Britain, because China is more statist in certain ways, in terms of it's control of the media and in terms of it's rule of law and certain individual rights, but it has none of like the welfare spending at all that we have in Britain.
It has a lot of autonomy at the local level in China, but people look at it and they say, oh, this shows the authoritarianism is the way to go. So let's vote for labor. Let's vote for the more left wing parties. But I think eventually these views are gonna kind of crash against the shores of economic reality.
People are going to have to realize actually it's the smaller size of the government intervention in the economy. That's the important bit. And the negative bits of China, the kind of more authoritarian bits that are actually holding it back. So I wonder whether this might [01:15:39] change in the future, as the global economy develops and the dynamics of power start to shift towards the east.
Dominic Frisby: That's very interesting. I hadn't thought about that China and China's authoritarianism doesn't extend to the welfare state because you know, the welfare state is the new religion in the UK. We worship the NHS and so on. But yeah, the fact that they don't have the same welfare state, that sort of forces people to look after themselves. And I guess it is a great incentivizer. I'd never thought of that. You said Asian countries are going to be ahead of us. I was in Seoul a couple of years ago. South Korea is already ahead of us. Maybe not culturally, but technologically it's way ahead of us.
Peter Young: Yeah. That, it's incredible because you look at GDP statistics and they just don't paint the, I mean, Saif and I had a conversation about CPI and these kind of aggregate statistics and they just don't capture what's actually happening. I mean, if you're on the ground in Asia, I've spent time in a lot of east Asian countries in particular. And [01:16:39] it's just a completely different mentality. Even like the government announcements in China, like I used to have to go cause I used to work with the British embassy in China. I used to have to go to these government meetings every year where the government's announced things. And if you compare this style of announcement to the style of like a queen speech in Britain, the queen speech has always, we've decided that we're going to introduce a new, like equality bill or a new fund to support single mothers or whatever.
It's all like, we're going to decide to spend more money. And these are our inputs for that process. Whereas in China, it's all like last year we built six bridges. We built 10,000 miles of highways. We built a new airport with seven runways, it's just like we built this, we built this next year.
We're going to build that. And yeah, I just think the direction of travel is very clearly towards east Asian countries, in my opinion.
[01:17:39] Dominic Frisby: And how much gold does China own? It has been buying extraordinary amounts of gold and I've done a sort of audit on it. And my calculation, I mean, China's stated gold reserves are probably a 10th of what their actual reserves are.
Peter Young: I saw your video on that. It's very interesting that you estimate 20,000 tons or something?
Dominic Frisby: I think I said 14. Double Americas. But if you combine all the gold that's been imported into China with all the gold that it has produced, and it doesn't export a single ounce. If you total up the two, you get a figure of something like 30,000 tons.
And then you assume that roughly half of it's owned by the state and you arrive at 14, 15,000 tons. And you know, Bitcoin mining is centered in China as well. I think it's 80 or 90% of Bitcoin mining. So it seems that, yeah, China has probably got some designs on Bitcoin as well. When empires rise, their taxes are low and their money [01:18:39] is sound.
When empires fall, their taxes are high and their money is fiat. The money is trash. And you may disagree with it's all authoritarian thing, but assuming it's got all that gold and possibly a little bit of conjecture has got some Bitcoin or some influence on Bitcoin as well. You have to say China's money when it decides to launch its international RNB.
And also there's a tremendous loyalty. And I heard this from a reader who was describing a lot of Chinese were encouraged to buy gold, Chinese citizens were encouraged to buy gold. They would happily lend their gold to their government as a kind of war bond. So China needed more gold in order to launch its international currency.
And if China launched a gold backed international currency, that the US dollar would be toast almost overnight and sooner or later it's going to do that.
Peter Young: Yeah. All right. Thanks for that. Yeah. I'll let someone else come in with their questions as well.
Saifedean Ammous: Adam is asking, did [01:19:39] you support Brexit? And do you think the UK will be quick to grab a CBDC central bank digital currency?
Dominic Frisby: I did support Brexit. I actually wrote a song all about Brexit as a standup comic, which became this sort of the Anthem of Brexit called 17 million fuck offs. Um, excuse me, excuse my language. And I supported Brexit because it was a move towards less government. Basically it removed a layer of government. If I was in charge, I wouldn't have handled it. Like, I think they've wasted the opportunity that Brexit has presented to make government smaller and so on. And. The the UK. So hypocritical our chances of Rishi sooner on the one hand, the FCA, the UK financial conduct authority has banned all forms of crypto derivatives, right?
It's banned. So you can't buy like crypto ETFs and that kind of thing. So that just excludes retail investors, particularly old, the over fifties who were I've got the hand of wallets or someone, but they might want to buy some Bitcoins through their [01:20:39] brokerage. They are now excluded from that.
And then at the same time he dubs the UK CBDC Brit coin. So he's using Bitcoin's reputation to try and cash in for himself at the same time as banning crypto derivatives. It's so hypocritical. And I do know for a fact, the bank of England is full of loads, loads of hard money people, maybe not at the top level, but behind the scenes.
And they were obsessed with Bitcoin. When it came out, there was so many papers. They were so interested by it. So there they do know about it. There's a lot of Austrian economic sympathize is working within the bank of England. Thank God. So I don't think we'll be first, but we won't be lost either.
We'll probably be 17th, roughly where we are in per capita GDP in the world rankings, I'd say that's about right. I say the UK is about the 17th best country in the world.
Saifedean Ammous: This is it for the questions that we have for today. Dominic, thank you so much for joining us. This was a lot of fun and I've enjoyed it [01:21:39] and I wish you all the best of luck on all of your future projects.
Dominic Frisby: Thank you very much Saifedean and good luck with your next book, Fiat Standard. I commend you like when I published my Bitcoin book and we came out in the first crypto winter. And there was so much negativity towards Bitcoin. I literally, I could not give it away. It was sold quite right in the UK, but I couldn't get a release anywhere.
I think the only place we sold it was abroad was China. We can sell it anywhere else. And I, and Russia brought it as well, but like America or whatever, and your book's done so well. And it's just been a bit like Michael Saylor, it's brought Bitcoin to so many people, so congratulations on doing that.
Saifedean Ammous: Thank you very much, sir. Thanks a lot. All right, we'll see the rest of you guys on the next seminar on Monday next week. Take care.