In this episode Saifedean talks to Bitcoin Angel investor Simon Dixon about central bank digital currencies and Bitcoin in the context of today’s economy. They cover why CBDCs represent a radical monetary reform that would give governments unprecedented surveillance power, how the IMF is struggling to find relevance, why Bitcoin represents a lifeboat during times of uncertainty, and why we’re living in the most exciting time in financial history.
[00:03:39] Saifedean Ammous: Hello, and welcome to another episode of the Bitcoin standard podcast. In today's seminar, we are hosting Simon Dixon, the CEO and co-founder of online investment platform, BnkToTheFuture.com and the author of a book by the same name, and an active FinTech and Bitcoin angel investor in over 100 companies in the space and his online investment platform BnkToTheFuture is one of the largest online investment platform with 35,000 investors. Simon has been writing about Bitcoin for quite a while. He was quite early to Bitcoin, was also one of the people who understood the case for Bitcoin as an alternative to central banks and as an alternative to international governing bodies for monetary and financial affairs quite early on.
So it's great to have Simon here and we're going to be talking to him today about central bank digital currencies, something that he's written quite a bit about and of course, Bitcoin [00:04:39] as well. So Simon, thank you for joining us.
Simon Dixon: Yeah, thanks for having me. It's a real pleasure cause I really enjoyed your book and a big fan of your work, so.
Saifedean Ammous: Thank you. Thank you. Likewise, Simon it's mutual. Let's start with central bank digital currencies. What are your views of central bank digital currencies? And what you think is being prepared. Could you give us like a brief overview?
Simon Dixon: Rewinding back slightly... so before I got into Bitcoin, I was part of a community called the monetary reform community. So in America that was the American monetary Institute. And in the UK, it was a little thing, that's where I was living at the time, called Brahms Grove. And we were really debating the problems with banks being able to own your own money, banks having control over how you spend your money through anti-money laundering laws and censorship.
And most importantly, banks being able to create money every time they issue a loan and having an economy that is dependent upon ever increasing levels of debt for its money supply. [00:05:39] So I actually wanted to create a bank. That was my wife's idea. And we actually tried to do that. And the amount of investment you needed at a time and the way that the regulators wanted us to design our bank is really essentially wanted to be like a trust.
We wanted to give people the ability to own their own money. Spend their own money and just really not engage in money creation through fractional reserve banking. And it was because we just simply couldn't do that, that we discovered Bitcoin, spoke to the first Bitcoin conference and fell down the rabbit hole of discovering money that you can own, money that you can spend and money whose supply is fixed and independent of any government.
We were really having these conversations and Bitcoin was a solution to a problem at the time. Now in about 2016, I started getting pretty vocal about the Bitcoin community really poo-pooed the concept of central bank digital currencies and digital fiat because they just saw it as much of the same. So, you know, when you deposit your money at a [00:06:39] bank, the bank creates a retail bank digital currency.
It's a digital representation of the dollar or the Euro or the pound. And it's backed by debt and it's created by the private bank. So, when the whole conversations where banks were trying to pitch the whole, oh, we laughed at Bitcoin, but now let's try and get rid of it. Let's talk about blockchain good, Bitcoin bad. I started talking about the whole concept of central bank digital currencies being a way to disrupt banking. And the Bitcoin community didn't quite understand it at the time because everyone was poo-pooing and just thinking that it was trivial, a central bank digital currency, why would you use that relative to Bitcoin?
And I was saying, well, it's actually radical banking reform. This is the central bank taking back control of money issuance and disrupting banking, and taking banking out of the equation. And it is actually a de-leveraging of the economy in some sense, because you now don't have money that's created by a bank that's issued, [00:07:39] backed by debt.
And it also drives us towards a removal of free markets, capitalism, and slowly drives us towards a socialist and something that eventually looks more like a communist economy. And, I was trying to be pretty vocal about that and saying, actually, this is a very, very significant thing, and it doesn't disrupt Bitcoin. It really helps the use case of money that you can own, money that you can spend, and money that has a fixed supply, but it is incredibly disruptive to the existing model of banking. And so really when I look at central bank digital currencies, I started talking about them as: this is the central bank preparing for systemic risk in the banking system, the unwinding of the debt-based Ponzi scheme and a way to allow them to have a monetary tool or a mechanism for allowing banks to go bust if they've taken too much credit risk on their balance sheets. And so I saw central bank digital currency as a way of allowing a bank to go bust in an environment where [00:08:39] they don't want to be in or they don't want to bail out because there's too much social unrest and just allowing the bank to go bust and everyone having to download an app and get the equivalent of their central bank digital currency to what they had on deposit.
And consumers not losing their money, almost like a gateway drug for removing every single freedom and privacy that exists by just having money that's created one step removed from the central bank. And so I see this as a natural evolution and something that really only Bitcoin can counter because I just see it as the inevitable consequence of the debt-based Ponzi scheme called Fiat currency, that a central bank digital currency is the last monetary tool in order to just keep the system alive, reform it and take away everyone's freedoms, liberties, and privacies in the process of an environment that's going to be ever, ever increasing taxes, and evermore control in order to keep [00:09:39] the system alive.
Saifedean Ammous: Yeah, I should admit, when I first heard about central bank digital currencies, I was also quite dismissive of the idea because I was looking at it from a Bitcoin perspective, which is that they're not really a threat to Bitcoin.
They're more of an advertisement to Bitcoin. And in my mind it was vaporware. And I still think obviously it still is vaporware I guess only the Chinese have really started getting their currency out into people's phones and being used. It's still largely is vaporware, but I think if it does get out of the lab, if it's escapes the lab and is implemented, I think, yeah, as you say, the implications for the banking system are tremendous.
It's an enormous revolution really in the fundamental structure of modern capitalist societies in that you're going to get rid of banking as an institution almost, and you're going to replace all banks with one government monopoly. And we have a precedent for something like this. It has been done before.
It's been tried, it's called the [00:10:39] Gosbank, the people's bank. And that's what the Soviets had. There was one bank and everybody had an account with the people's bank and that was it. And I think your assessment is spot on. This is where this is going. And I think it's like the gloves are coming off in the fight. Well, it wasn't much of a fight. It was almost kind of, it was usually a bit of an Alliance between banks and corporations that benefits from government and leftists, because they both want the same thing, which is more government control. And so they always push in the same direction. But this seems to be a pretty drastic departure from the detante if you want in that central banks, if they move ahead with this, if the current central banking structures around the world start to use this, they are effectively disintermediating the entire banking system. And so, as banks fail, instead of bailing out your bank or just giving you cash or giving you an account at another bank, you just get your digital dollars from the central bank directly.
And now you're banking straight to the [00:11:39] central bank and you have everybody in the entire country basically running their monetary and economic system from having that economic and monetary life decided by one authority, which means one switch and complete surveillance of everybody.
And then it means, if we get to that point, the next step is going to be, who's going to take advantage of this massive amount of power that this thing unleashes in terms of censorship and surveillance and just getting people, punishing people for thinking in the wrong way.
I mean, the implications are enormous.
Simon Dixon: Yeah. And to be really clear when I say central bank digital currency, I'm not even thinking blockchains and mining and stable coins and anything like that. I'm just thinking a highly efficient centralized database that has no accountability. In one sense, it adds a layer of [00:12:39] transparency.
Not that it will be like transparent as in what we've come to use to where there's a public blockchain. In a sense, if you just replaced M1, M2, M0, M3 and four with just M then it's pretty easy to know whether the government or the central bank screwed up monetary policy, because it's so much easier to control inflation, deflation, and point fingers how to do that because the mechanisms for monetary policy are at the moment pretty obscure, manipulating interest rates in order to control the cost of borrowing and using different operations and tools that are all disappear in one by one. But just to have this database that really doesn't need any blockchain, doesn't need any mining, doesn't need to reward anything is the ultimate goal.
And in a sense, it took Bitcoin for the world to understand how money is created on a mass scale. Now, obviously when you're speaking [00:13:39] to most people, they don't give a damn about how money is created. But I remember when I almost got chucked out at the London school of economics for suggesting to students exactly how money is created and they were so dismissive of the idea and the academics were so offended by the idea of just explaining these concepts that they never invited me back again. But nowadays, like your average YouTuber and your average person that just got into a pump and dumb, you know, shitcoin is now having the education and conversation because they're debating different mechanisms for, when they're looking at Dogecoin, they're getting a first education and what a really bad monetary policy looks like on the private level through self-interest via investing in pumps and dumps.
And eventually they end up in the conversation around to the Bitcoin money supply. And it's been an incredible education around people actually caring about how money was created. And when your book [00:14:39] came out, it was like the pinnacle of interest in what was such a niche, boring subject. I remember reading the bank charter act of 1840s and things like that in order to try and learn how money is created, but thanks to Bitcoin, the amount of literature that now we really kind of have these debates and, and try and drive people to an understanding of what these central bank digital currencies right now.
And it really came like when you have things like helicopter money that came from, you know, the pandemic, it's really amazing how these debates are actually really, really people are actually just capable of engaging in these conversations outside of the economic, well kind of your world and my world of university before I'm getting into this stuff so that I do love, and this, the central bank digital currency is only gonna accelerate that.
And I think it really became a really interesting [00:15:39] conversation for the masses, with the Facebook Libra project. And now it's just fascinating that this tiny little thing, this tiny experiment called Bitcoin has just driven the impact that is now going to have, and the education that's come with that from so many to so many people.
Saifedean Ammous: Yeah, absolutely. I think perhaps the mean checkmate that Bitcoin has done is that it has normalized the use of the word Fiat to refer to government money. And this is something that 15 years ago was completely unheard of. I mean, very few people, basically 15 years ago, if you use the term Fiat money, you were considered the crazy fringe gold bug or Ron Paul supporter.
But now, as you said, even people getting in on some random shitcoin pump and dump, even exchanges, I loved that you go to crypto exchange and then there's the Fiat page on there. They just refer to it as Fiat and the term has been normalized and it's my mind, I think it's an enormous, [00:16:39] enormous, I wouldn't say psychological victory, maybe framing victory, because it makes it so that anybody can start to see that there's a distinction between this kind of money and that kind of money. That is that there's a difference in how Bitcoin works and how Fiat money works. And as a result, the gears begin to turn, people start to ask questions about what is going on. Okay.
So on another note, what is, as we see this idea evolve last year, October, 2020, the IMF managing director issued a call for a new Bretton Woods style monetary reform. And this is being bandied about in the same kind of language as The Great Reset. And since we have a pandemic, we need to restructure everything and we need to restart capitalism.
And one of the things we need to restart and reform is money. So what are the IMF plans and who are the IMF anyway? And why are they in this business?
Simon Dixon: Yeah. So the international monetary fund has tried to be [00:17:39] relevant in the money supply conversation quite a few times. So obviously they came out of the post-World war two reforms, and they've had their go at creating special drawing rights. People are confused between the IMF, The World Bank and the Bank of International Settlements, but these three global organizations, which are touted as having a certain agenda and representing the global interest really tried to inject themselves into the center of the monetary system on several occasions and failed because the dollar, the debt backed dollar that came from the final removal and well, the creation of fiat currency dominated this space. I guess you could say it's a 50 year anniversary this year of fiat dollars. And the International Monetary Fund has failed on several occasions.
They [00:18:39] created an overdraft facility as it were called Special Drawing Rights, giving countries the ability to draw on these overdrafts. And when you really go through the flow of funds, the IMF has touted as these countries put some gold on reserves and then they get access to these reserves and this new global digital currency.
But actually when you really follow the flow of funds, this is just money creation on a global scale, and really a form of, like a last little form of the gold standard because there still is some connection, but it is money creation. And when you look at The World Bank and these different organizations that just, you know, money creation, that's backed by products that were created.
So you used to have cash reserves and then it was replaced by asset reserves. And then it was replaced by products that were created through money creation that ended up creating the bond and all sorts of stuff. So the IMF [00:19:39] now has this final attempt at recognizing that in, during this global pandemic, the US needed to throw everything it got in order to have enough money as it were to try and rehypothecate the debt-based Ponzi scheme for as long as it could. And I think the IMF saw this as an opportunity to become relevant again, and maybe launch some kind of global central bank digital currency that is backed by some kind of basket of currencies and utilizes the buzzword blockchain in order to get buy in to these different things.
But to me is, global countries all around the world at the end of many, many debt cycles and they could look to the IMF. One of the strategies I've always tried to tell a government when they listen is to allocate a percentage of their electricity to mine Bitcoin, accumulate a large position in [00:20:39] Bitcoin, accumulate an interest and then announce that your central bank is going to be holding some Bitcoin on reserves, which then meets the definition of the Bitcoin standard as it were that you popularized through your book. But instead, I think, some countries are actually choosing that maybe mainly sanctioned countries at the moment, but other countries, I think that they're going to look to the IMF because only the dollar can print its way out of the amount of dollars that they've created, and then use the central bank digital currency as a way of disrupting the entire banking system, getting people to download an app in order to gain access to their deposits.
Again, deleverage debt based money, replace it with a debt free money that they issue with central bank digital currency, and try and remain significant in an environment where they're competing with a Facebook that's looking to do a similar thing and the IMF is just another competitor that's trying to gain significance [00:21:39] as we enter into this shift, every fiat currency fails, as you know, and we're hit the 50th anniversary of a dollar fiat. And I think everybody knows that there is going to be a shift. And so everybody wants to line up their play at trying to be the vast amount of power that comes from having the world reserve currency and the IMF is just one of the organizations that wants to play in that game of a monetary renegotiation, because really no one's going to voluntarily launch a central bank digital currency, and than make any impact, as you said, these are vaporware, but they will be launched by crisis.
So if we hit a 2007 style event, no one wants to bail out. No one wants to bail in, but you can just let the bank go bust and implement the central bank digital currency. And I think the IMF wants to be the knight in shining armor and just do this on a global scale in order to have a [00:22:39] new power play that circumvents geographical borders.
Saifedean Ammous: Yeah, I think so, too. And it's interesting to think about, how the IMF fits in this as an institution. Earlier you mentioned that the IMF and The World Bank are just constantly creating money. And I think that's very accurate. They have gold reserves, but they can get a credit line straight from the federal reserve.
So they are effectively a U S government institutions, but they aren't really U S government institutions. So they are at least, if you want to think about it in terms of funding, if you want to follow the old saying that he who pays the Piper, calls the tune, then they are American institutions.
But if you look at their actions, it does contain a large degree of independence. They're not out there just doing the bidding of the U S government. The US government obviously has an enormous amount of influence, but to an extent, they're out there looking out for themselves. I think my way of thinking about the IMF and I discussed this in the Fiat standard is that there are [00:23:39] bureaucracies and think about them from the perspective of public choice theory. They are people like any bureaucrat that faced a certain set of incentives that are unique to bureaucracy and not present in the market, namely, you can't really lose your job.
You assess your own performance and there are no hard limits on what you do with your budget. There's an infinite printer connected to your bureaucracy and your incentive like the incentive of every bureaucracy is to magnify and amplify the problems that you deal with in order to get more and more people to jump on board the idea of giving you more money from the printer. And I think that's probably a better way of understanding the IMF, because they seem to be pushing for something that is maybe not necessarily contrary to American interests, but ultimately the U S will have some authority and some influence on a global central bank reserve currency.
But the IMF [00:24:39] is effectively trying to push a central bank reserve currency alternative that it proposes and uses it as similar to the gold under a gold standard where all central banks will have the IMF currency as their reserve currency, and then they'll issue their own national currencies for their own citizens.
And what do you think of that? Do you think this is the dynamic it's really more of a competition between the IMF and the U S or do you think they're on the same team completely?
Simon Dixon: Yeah, I think it's like you said, it's institutions, it's power plays. The game of banking is you have this ability to create money every time you issue a loan.
So you want the largest loan possible with the least number of customers. So you can invest a lot of time in one loan or one ginormous loan rather than having to manage lots and lots and lots and lots of loans. So The World Bank, when you put it up, when you scale it up, they made these ginormous loans which is a [00:25:39] mechanism for money creation.
And then you need an event like a global pandemic, which drives people to invest ginormous amounts of money in health infrastructure. So they take these loans and then these loans are then tied to their tied loans. They're tied to terms and conditions when you take out the loan and when these countries take out this loan.
So rather than having, at the smallest level, you've got the individual taken on a credit card, then you've got organizations that are taking on new loans and then you've got countries. And then it goes up to these ginormous organizations. And when you have these tied loans you have the ability to really is one thing being indebted to your own central bank and your own currency.
But being indebted in a foreign currency, just like anyone in the Bitcoin community may will know that if you try and live day to day, the reason that Bitcoin becomes a store of value and something that everyone wants to hold is because it really, really punishes you when you try [00:26:39] and live your daily expenses on it. If you're at the mercy of the price and the market, and you're trying to pay your rent and you need to pay your rent with Bitcoin, and you just happen to have been on the wrong side of a trade or some manipulation in the market. Then you may not be able to cover your rent. So Bitcoin is really useless for planning your affairs when your expenses are in one currency and Bitcoin's denominated against that, and you have to trade it and become a trader essentially.
And that's what it's like for people taking out these World Bank ginormous institution loans. They're at the mercy of currency risk and the person that creates the money gets to control it. They can tie these huge infrastructure developments, so you might say, well, we'll lend you this money, but you've got to spend it back in the U S so if you want to buy all these healthcare equipment, and then you're buying it from our suppliers, if you want to buy all these vaccines, then you're buying it from our suppliers.
So the money is created as debt in the country, and it ends up back in the [00:27:39] US and you can use organizations like The World Bank and the IMF and if you have control over creating that currency, then you own the world. And so the IMF may just be an extension of a U S agenda. The U S is quite happy with the dollar.
But I'm sure they're going to try it, or they have their claws in to that. But at the same time, there's power plays here and currency wars are currency wars in game theory. And so if you have the opportunity to win the currency war, then that can change things. And if you can play the game of money printing control better than anyone else, just like the U S did when it managed to displace the pound off to the wars and then remove itself from the gold standards and now have this incredible power of the printing press and then replace it with a central bank digital currency.
And that's what this is now, whether the IMF is an extension of the U S or not, you got to really follow the money and follow the flows. And sometimes these things [00:28:39] are a bit tricky, but when you do follow the money, you can see that the U S certainly has a vested interest, but it's got a greater vested interest in the dollar.
So I think it will fight it. I think it will want to keep it. But it's also hedging it's bet. It's just like a central bank should be hedging their bet by holding some Bitcoin and not telling anyone about it. And then the day their currency is destroyed, making sure that they announced to the world that they're using it.
And this is the game theory. This is the currency wars. And that's why today is the most interesting time in financial history to be alive because we get to see this. And this has all been hyper accelerated by this 12 year cycle of Bitcoin going from nothing to a trillion dollar market. And that's just such an exciting thing to watch and be able to see and be able to participate in.
And the bit that scares the shit out of me is that all these people that just see Bitcoin as this get rich quick, speculative thing, just being gobbled up by these market [00:29:39] manipulators that are just driving them out of their Bitcoin. When Bitcoin to me is like this life jacket that every pension fund, every individual should have, and people are just seeing it as this get rich quick scheme to accumulate more fiat.
But the great thing is, is that each and every year we see that more and more people see the utility of Bitcoin. And so you got to learn your lesson as it were. And then more and more people are seeing that.
Saifedean Ammous: Yeah, absolutely. We're absolutely lucky to be alive in this time.
It's mind blowing.
Simon Dixon: What we've been through without Bitcoin, like this would just be such a crazy time if there was no exit, and this is so exciting to watch because there is an exit but I think this would be a pretty depressing time if that exit didn't exist.
Saifedean Ammous: Yeah, it has been a pretty depressing time, basically since the beginning of the 20th century for the vast majority of people all over the world. I would say Fiat has [00:30:39] taken an enormous, terrible toll.
Just pick any random place on a map and you'll see the problems of Fiat money, which people in Bitcoin can now begin to identify, inflation and business cycles and all of that stuff. Plus war financing and all that in governments killed 170 million people in the 20th century. I think you cannot separate that from the monetary technology that allowed them to finance all of this.
And, as technology advanced and as their ability to control and surveil those citizens increased. There's a beautiful harmony to nature that almost where as technology provides them with more ways in which they can suppress and control populations, technology also provides the exit hatch.
And so we're lucky that we have Bitcoin functioning as this escape practice. Before we get back to Bitcoin, I wanted to talk a little bit more about the IMF. You are obviously familiar with the history of the IMF. And when we think [00:31:39] about the starting of the IMF, you've written about this in your book it was Keynes and Harry Dexter White who were the founders of it.
And, interestingly enough it was based on the ideas of Keynes. Keynes was kind of an intellectual inspiration for starting the IMF because he had envisioned something like an international central bank, but his idea was to introduce something like the Bancor. That's what he wanted. And that was basically what we're seeing the IMF pivot to today.
Back then, the real politics meant that the Americans weren't just going to let some stupid economist from England and his friends come and set up a committee that issued money for the entire planet. Obviously the U S wanted to have that itself. And so they chose to have the dollar as the global reserve currency, and they made the rest of the world hold dollars and not Bancors, which was Keynes' idea because imagine a form of Fiat money that can be produced and is accepted by all governments in the [00:32:39] world and produced at no cost and accepted by all governments in the world just imagine the amount of power that would give somebody like Keynes.
So, his idea is now getting tried it looks like it. It looks like we're going to be doing something similar to that. Wouldn't you say?
Simon Dixon: Yeah, I mean, this is certainly the Bancor vision coming round and the IMF identified that there's Bretton Woods part two, and that's Bretton Woods was trying to launch the Bancor and we ended up with dollar semi gold and gradual moving away from that instead. I think it's quite interesting though, that if you look at Keynes's work and by no means, am I a Keynesian economists, but, Keynes always said that, classic Keynes economics in layman's term is that he believed that the government has a role in times of depression and the government should take on debt in order to try and make up for a shortfall of people, hoarding their money, where money is not being created, but there was a [00:33:39] part of Keynesian economics that everyone's kind of forgotten.
And that is that in the good times, the government's meant to repay the debt. And so Keynesian economics was always talking about the government can facilitate through fiscal expansion expansion and spending more recovery in the economy. But I think everyone forgot about the second part, which is once the economy recovers, the government's meant to repay that debt.
So even what we have today is not really the Keynesian economics as it were. It's just one half of it being re hypothecated again and again, and again. And selectively choosing the part of Keynesian economics that the government needs. So, yeah, but it's fascinating that we're getting to actually see the bank or rollout and you even get your crypto projects called Bancor that came from this original vision called Keynes. How ironic is that?
Saifedean Ammous: Yeah, it is. This line, a lot of people say this, that Keynes is not as bad as the [00:34:39] Keynesians. I generally like to disagree with that. I haven't read everything Keynes has written and not by a stretch, but I've read quite a bit of his work.
And I strongly insist that Keynes is a Keynesian. Keynes in fact is the caricature of Keynes. It's like, he's almost a parody of what Keynesians are. It's not like Keynesians have debauched his good ideas. Keynesians have tried to reform his embarrassingly bad ideas and try and make them sound a little less unhinged than they actually are.
But if you read what he thinks, particularly in the thirties, the thirties is really Keynesian Keynes before then he didn't have much substance to his ideas. He was just writing about economics with the conceit of somebody who massively overestimates their knowledge of his topic. In the thirties is when he developed Keynesian ideas, as we know them now.
And if you read his thoughts back, then you see that the motivation behind all of these equations, all of these ideas on aggregate demand, that there's a very [00:35:39] clear ideological intention behind all of that, which is that he wanted to give more power to the state. And he saw the importance of having the state manage and control society as being basically his life's calling.
And it was important in terms of economic central planning, but also in a much more comprehensive manner where he would essentially want to control all aspects of people's lives. Because he wanted to develop some kind of grand vision, like it was statism for the sake of statism. He wanted the state to build things that individuals couldn't do, just because that appealed to him as an idea.
And for him, the monetary policy and the fiscal policy where a way to achieve that. And that included eugenics that included complete control of savings, complete control of economic production and moving people away from producing for the whims of the market, [00:36:39] rather to producing for the whims of the central planner.
And I think the Bancor was to a very large extent the fulfillment of that vision. And I think moving toward that system, what CBDC's represent given what we seem to be hearing in terms of the potential for surveillance and censorship, so on. I think in a sense it is moving in that direction.
I'm wondering, what do you think in operational terms is the impact of having these CBDC so yeah. Surveillance, censorship, what else?
Simon Dixon: Yeah, definitely. So Keynes definitely is getting that vision, if that was his vision. So the way that I see this playing out is I thought we were going to get something during this pandemic where everyone just stops paying their mortgages.
They can't afford to pay their mortgages. And obviously mortgages and real estate is the mechanism for trying to create, generate a wealth effect and governments [00:37:39] around the world, try and stimulate people to own their own houses and real estate so that they can buy, well, so they can create more money through the banking system.
And I thought we were going to get that systemic risk event. Now, obviously I didn't imagine that how much money would be printed to try and perpetuate that. And so I thought we were going to get defaults and I thought that was going to expose the weaknesses of the banking system. And as people default on their loan or repay their loans, money disappears from the economy.
And so as people default and the balance sheets get worse and worse exposes it. Many banks sold all the toxic assets to your pension. So they may be saved by that. They may have got rid of enough of the assets to the central bank or putting them on the pension. Yeah, I thought there was going to be this exposure and I still think there will be, it's just a question of how much capitalism are we willing to remove until we expose that?
How far down the road of large government are we willing to go? [00:38:39] How much freedom, liberties and privacy are we willing to remove in order to keep the system alive? And it turns out as much as humanly possible. So the way that I see this is eventually you have one bank that exposes the weakness, the last one was a tiny little island called Iceland.
They've got taken over by investment bankers that exposed this domino effect, but I think that whether it be student loan crisis, whether it be credit crisis, whether it be credit card crisis, whether it be any one of these take your pick pension crisis, one of them gets exposed and it has a Lehman brothers effect on a retail bank.
The government then say, we're not going to bail out. There'll be riots on the streets, the socialist movement that we currently have, they're going to be out in full force rioting against the bank bailout and the banks not going to bail in because it's basically the end of your bank.
So don't worry. We'll let the bank go bust we'll be the white Knights in shining [00:39:39] armor, but you've got to download this app. And when you download this app, if you had $10k at a Chase bank, you'll have $10k of central bank digital currency. But when you opt in, you got to opt in to the terms and conditions.
And guess what, we'll also give you some helicopter money while we're there. Your a $10k will be $11k, but you've got to opt into this. And when you opt in, you're going to have to give your thumbprint. I don't want to get too conspiratorial, but this is happening. You know, we can see this, you give you a thumb print, you download the app, your money's there, you are now in the artificial intelligence led central bank digital currency, that starts to know everything that you've been putting on your phone about you. And the real vision of banking 2.0 as it were when FinTech companies started disrupting bank branches and coming up with your bank being a... You walk out of a store, you don't need to pay anymore. Your phone will just pay for you. You can't steal from the store. The barcode would just do it for you. So this combination of technology, which is [00:40:39] why China was so right to push forward with their technological innovation and central bank digital currency is a model for what is the rest of the world is going to be doing. And so your central bank digital currency is going to know more about your behavior because it's connected to your phone. And what governments all around the world trying to do right now?
Well, you know, one agenda you could talk about is anti money laundering, but that's code word for tax collection. Anti money laundering is very much about having the data in order to collect the tax. And so let's say me and you want to do a transaction. Let's say I'm in my country and Saifedean's in his country, and Zoom is routing via a server in China or something.
You now probably got three countries that all want to get a piece of the tax. Because they're trying to claim jurisdiction over that transaction. And if you pay with your central bank digital currency, then in order to settle that [00:41:39] dispute, there could be an algorithm that takes these three different taxes from these three different countries.
And then you need to try and claim back your tax, but it's automated into the transaction. And so it's really a movement towards what we have right now with the anti money laundering led system we have right now, which has everything is guilty until proven innocent and everything that happens with your central bank digital currency will be guilty until proven innocent.
It will automate your tax collection. It will have every government that wants a piece of that. Trying to get a piece of that. It will be surveilling your behavior and you will get massive convenience out of some of these services that will come when you have a central bank and all these financial technology companies building on top of the API that comes from the central bank digital currencies. There's no blockchain, there's no small contract. You might get some crazy country experimenting with that, but they don't want that. [00:42:39] They just want to control the API and FinTech companies will build on top and then FinTech companies own the data collection.
And that will be just ginormous pool of data that's going to just be the worst form of money we've ever experienced. It'd be very convenient. The user experience might be great. We'll get a load of innovation. You're not going to be able to own it.. You're not going to be able to spend it as you choose.
And it's certainly not going to be a fixed supply. It is the 1984 Orwellian nightmare, and it's just a slow progression and it'll be wrapped up with making sure you don't lose your money and more and more people calling out for bigger and bigger government. Why, why are so many people calling for bigger and bigger government?
Well, cause they're in the wrong side of the debt-based Ponzi scheme. The wealth inequality that's been created from their central banking system of propping up wealthy people's assets and driving everyone else into debt has driven them to be massive, massive dependency, a serious state of dependency [00:43:39] where they're crying out and calling for larger government and calling for the government because they've been shafted by this debt-based system and they just don't know how to get on the right side of that.
Bitcoin gave a niche of people the ability to get on the right side. But very few were doing that. Thankfully more people are, but the reason that the government gets bigger is because people are going to demand it. And that's because they're on the wrong side of this debt cycle. And the wealth inequality is just driving people to call for bigger government.
So they'll meet those demands and that's where I think there'll be opting in. And so that's where the fiat central bank digital currency goes.
Saifedean Ammous: Yeah. Well, it sounds like a lot of fun. I'll add the first of all. Yeah. It's definitely going to be inflationary and it's going to be, I think one way of understanding the appeal for central banks to shift to a central bank digital currency is that it's... I'm not going to say [00:44:39] it's a convincing story, but for a lot of people, it sounds like it could make sense as a convincing story that you'd tell them something along the lines of, you know, COVID broke your currency because of the virus and bad things happened and now you're a dollars broken and your Euro's broken, because the evil foreigners or COVID or whatever... every time a currency collapses, obviously somebody's going to find a way of blaming it on anything but the government that issues the currency.
So I think one way to get rid of the inflation in a sense, or to hide the inflation across the needed inflation, essentially, because there's just so many liabilities on governments in the system that inflation is their only way out. So they do want inflation one way or the other.
And this is a good way to package the inflation and that as the value of the dollar begins to collapse or to [00:45:39] devalue significantly, the government will essentially sell the story that something broke the dollar, but don't worry. You've got us here in charge, and we are able to fix this by introducing this new digital dollar. The story that's going to be sold, and I know this sounds ridiculous, and it sounds stupid for anybody listening to it right now.
But you know, if you think stupid ideas can't be sold, you haven't been paying attention clearly. I just need the right marketing, the right conditions. You need to scare people a little bit. And if there's a significant inflation and people are really scared of a dollar collapse, that fear can be very easily, well, skillfully, perhaps not easily, can be skillfully channeled into the idea that the digitization of the dollar is what's going to fix it. The inflation is caused by the fact that the dollar is made out of paper in a sense. And if we move to the central bank digital currency that's made out of digits, then we can all have it on our phone.
And then we can know exactly how [00:46:39] much there is. And then there won't be inflation anymore. I can see some kind of, obviously it needs a few PR spinsters to sit down and figure out how to package this, but I can see this being used as the whoops, we broke your banking system, but don't worry.
We got you a better replacement because this one is digital. It's like Bitcoin, you can send it around the world and then they'll have all the advertisement of the digital aspects of it being presented as if it is the solution to the inflation problem that is destroying the analog economy.
And I think, with this, you can devalue a lot of debt liabilities, and then you can carry on with the new currency. It will be massively redistributive, obviously dependent because you're collecting the cards and then dealing them out again. And so dealing the cards out is going to be an entirely political process, depending on your political brownie points.
[00:47:39] That'll govern your conversion rate from dollars to a central bank digital dollars. I think that might be a part of it. And of course, I agree with you that I think it will be more inflationary because if you get rid of the debt-based system, it's much easier to have hyperinflation if you don't have the debt based system, because, and I'm discussing this in the Fiat standard, which I'm writing right now, the fact that money is debt in the Fiat system is probably the strongest protection against hyper inflation in the system.
Because debt to an extent is self-correcting because you create new money when you make a new loan. But then when that loan is paid off, that money is disappeared essentially. It's uncreated, it goes away. So the money supply declines and then when you get bankruptcies or when you get defaults or when you get a business cycles, you also have a large amount of money supply burned away.
So effectively debt deflation is probably the thing that keeps Fiat [00:48:39] currencies maintaining some value, as opposed to how much more they would be devalued. So if you get rid of that, if you get rid of the debt bubbles that inflate and deflate, if you get rid of the banking Ponzi schemes that go up and down, and then it's just money printer go brrrrr, obviously digital money printer go brrrrr well, then you've taken away the last working brake in this car, I think.
Simon Dixon: Yeah, that's fascinating. So for me a de-leveraging that's a different perspective of looking at it, but a de-leveraging to me, if you take all the interest out of the creation of money, then I think that is a de-leveraging I don't think that's an inflationary effect, but giving all of that power to the central bank, to be able to do this in a way where it doesn't have to go through the manipulation of interest rates and tools and mechanisms to determine how much money [00:49:39] is created by a bank just means that they can create deflation or inflation a lot easier.
But one thing we know is that central banks and governments have entered into a world where it's not acceptable to have deflation. It's not acceptable to have de-leveraging it's not acceptable to let markets crash. It's not even acceptable to let stock markets crash. Or correct themselves.
Real estate is not allowed to go down. The people that can't afford to buy real estate, they're not allowed to get their shot. So I think you're right in the effects in the end is that they'll use it to create inflation because inflation is the easiest story to sell, especially in the environment we are in today because it's hidden. Increase in taxes is a lot harder to sell.
Saifedean Ammous: Yeah, we have Boris in the chat, he's saying with regards to the surveillance he's saying in Mexico, you cannot use bank apps without taking pictures by the app and having GPS enabled. This is regulation of the central bank of Mexico. [00:50:39] And they're getting rid of physical keys for two factor authentication and you'll be forced to use cell phone bank app for two factor authentication to collect the GPS data.
Yeah, yeah, exactly. I mean, I think...
Simon Dixon: But I mean that that's coming everywhere. You can see the trends. I've been at this subject for two decades since I started. And all of what you just said was ultra extreme just five years ago, but we are all experiencing it.
We're all living through it and we can see the rate at which has accelerated. I remember just being able to easily open a bank account, not so long ago. It feels like a lifetime ago. And I remember a world where if the bank called you up and asked what you're spending your money on, you'd say piss off.
It's none of your business. Yeah. Now that would lead to your bank account getting shut down. And we just live in a world now where we completely accept that it's okay to have to [00:51:39] provide a document for every payment. If you're deep into debt-based scheme and I'm not, I've been in debt. Before I found Bitcoin, I was deep in debt. And so I'm not trying to pass judgment on that, but when you're in debt, you don't experience it, but we're in a position if you're fortunate enough to get on the right side of a Bitcoin trend and you're transacting larger sums of money, the money that I have at a bank, I just don't even see it as my money it's just something that I'm parking that in order to meet some expenses that I know every time I'm going to spend it, I've got to provide all these invoices and all this documentation and put data at risk.
And at the end of it, I'm very fortunate if they just let me spend my money. And that's how I see it right now. So I'll keep as minimum amount as possible in a bank. And we do live in a day and age today, where it's just perfectly accepted that you don't own your money. You can't spend it. And the environment that you just talked about in Mexico, that's just normal. [00:52:39] People have accepted that. We are there and everyone's okay with that. Whereas if my bank calls my father and asked him, what are you doing, Mike? My dad would just say, none of your business sod off, you know? Cause he comes from that generation and it's just amazing how far and how fast this has come to just live in this social norm of complete privacy invading lifestyle that we live in today.
And it was only 2000 that this whole anti money laundering agenda really kicked off. And look what's happened in 21 years. You can't do anything. You can't open an account anywhere. You can't do anything. The user experience of money is just horrific now.
Saifedean Ammous: Yeah, absolutely. And I think there are definitely benefits to centralization. As you mentioned, it's going to be very efficient. Like you're just going to wave your phone. And all you have to do is just think the right things. Believe the correct state prescribed [00:53:39] ideology, wherever you live, eat the correct state prescribed slop and industrial sludge that they recommend wherever you live. Think, say, and do everything they tell you to do.
And then it's going to be massively convenient. You just swipe your phone and it pays and it settles everything. And you can see how it can be much more efficient than the current banking system. And I think that convenience is going to draw people in. But of course, I think the main draw is going to be governments. Governments are just going to be using it to hand out money and people are going to want free money.
And then there's going to be universal basic income and all forms of social assistance handed out with this.
Simon Dixon: The most efficient system is a dictatorship. You don't need to get votes. You don't need to ask anyone. You don't need to do anything. The king makes the decision.
That's the ultimate efficiency. Democracy is a lot of inconvenience and a lot of inefficiency.
Saifedean Ammous: The the most efficient form of government is a cattle farm. I guess you could say, that's really, it gets the job done because government is there for the [00:54:39] benefit of the people in charge of the government, not for the people that are being milked.
And if you treat them like cattle and their own will is completely out of the question and you don't have to worry about what they want you to just tell them what to do. That's really the most effective way of dealing. I mean, imagine if you had a cattle farm and you had to deal with every single cows emotions and feelings and demands and desires, you can't do that.
And that's kind of where this is going. It's the cattle existence where you're moved around in little cages and told what to do and, stay home at the right time. Watch the state mandated propaganda, replace in person education and a personal connection between teachers and students replacing that with cookie cutter curriculum for millions of people all over the world and, stuff beams through Zoom all for supposedly efficiency.
But obviously it's going to have a lot of propaganda aspect to it. So I think we'll be seeing [00:55:39] this is happening already and we'll be seeing people going there, but I think we're going to have another economy where that's going to be the only place where you can get illegal things like rib-eye. The urge to control people can't be stopped. The more control they get, the more control they'll want. And so they're going to prescribe all aspects of morality and all aspects of what you can do and what you can eat and all manners of decisions. You can't buy oil and you're going to have to run your car on electric and if you can't afford an electric car, then you just should have stayed home anyway, because we're in a climate crisis and the oceans are literally boiling.
So just stay home. So basically if you want to use gasoline, if you want to eat rib-eye, if you want to do all of those thought crimes and economic crimes that are going to likely be restricted or might impact your credit score badly, your social credit score in the Fiat CBDC, you're going to have to use Bitcoin.
And [00:56:39] it's fascinating to imagine the world economy bifurcating essentially into the state Fiat based cattle dominated economy and the free Bitcoiners economy where people can just buy what they want and use their own money when they want and do it at what they want.
Simon Dixon: Yup, absolutely. So, well thank God for Bitcoin and thank God we've got this counterforce, is there any way to think about it right now.
Saifedean Ammous: Yeah, absolutely. So how do you see the dynamic evolving between banks and central banks as they continue to produce more central bank digital currencies? What do you think happens? Are banks just going to go silently into the night?
Simon Dixon: Well, I think the banks will do banking until they can't do it anymore. So, every bank needs to become the Lehman brothers. They're not gonna walk away. They're not going to do the thing, but I think they're just going to eventually, if this becomes the whole money supply becomes a central bank digital currency, then it levels the playing field.
They're just a FinTech company [00:57:39] essentially. They've got an API they can build on top of, they can offer financial services built on top of central bank digital currencies, or they figure out a way it turns out that they do have more control than the central banks. And they've got a few more chess moves up their sleeves. But, yeah, I do think that they all end up building on top of the infrastructure.
The leverage is so high, whether they can survive that and actually become it's interesting. Cause this is the world where money is not created as debt. You end up getting that world and, it's essentially that peer to peer lenders. The peer to peer lending industry is how the banking industry works in the future. Or they figure out some other kind of re hypothecation. And we end up in these new forms of money and competing forms of currencies. That would be great if we had lots of competing, but yeah, I think the banks will try and pull out a few more chess moves, but eventually they rehypothecate, they are so [00:58:39] overexposed and they're just public companies.
We are the banks at the end of the day, it's our pension. We're all just shareholders. They've all made their money and the people just move on and build the next wave of technology.
Saifedean Ammous: There's also the distinct possibility that banks pivot into Bitcoin. If central banks is going to stay with their CBDC's and banks aren't needed, well banks can offer actual banking services over Bitcoin.
And I think there will be banking services over Bitcoin. How do you see a Bitcoin financial system? And you've written about this, the bank of the future. So what is the bank of the future going to look like?
Simon Dixon: You could think of it as replacing a debt-based system.
We are already seeing it right now. So most people don't want to sell their Bitcoin. And so they're taking loans against that Bitcoin and using Bitcoin as collateral, because it's tax efficient and also it means that they can well play Gresham's law spend shit money and save money that they believe is going to go up in value.
And so Bitcoin [00:59:39] is like a government's worst nightmare. And the velocity of money in Bitcoin is nowhere near what they needed to be in order to perpetuate Ponzi scheme. So they need money to be recycled. The only way to recycle money is to make sure you have money that people don't want to save.
And so having money that people want to save gets us to actually see what an equity based system looks like rather than the debt-based system. And many people, because they're used to adapt based system and there's nothing wrong with that in itself. It's money created as debt that causes the system that we're in now.
So we get to actually see that experiment that when you create genuine wealth effects, and I think we've seen it in Bitcoin while the velocity of money decreases and people try to save that money. We also see the wealthier a Bitcoiner gets, the more they start diversifying, investing and looking at things to actually invest in, which actually creates real businesses that are [01:00:39] trying to create something new and then they create something new.
And then you have job creation based upon genuine wealth effects. So really, there is an entire financial system to be built upon that. And just because banks are now playing in the debt-based system, there's nothing stopping them creating innovation in financial products in an equity based system.
And so an equity based system rewards the saver and punishers the debtor. And we're already starting to see that in the Bitcoin space. And then when you get wealthy, you start engaging in job creation by investing in companies, startups, and that leads to job creation. So we get to see whether that can work.
And so, yeah, there's nothing to stop a bank engaging in that. And in a sense they are perfectly positioned. I use a crypto friendly bank. I won't mention who they are because they like to keep that secret, but it's very convenient being able to OTC with your bank. And the opportunity that we've seen the highest performing [01:01:39] investments I've made were in crypto exchanges. And now they're becoming banks. And there is the convenience that can be offered from that. And so I think the banks are going to need to do a lot of mergers and acquisitions of crypto exchanges.
And, I think we're going to see, yeah, banks can certainly adjust to that. And we're seeing the next wave of regulations to support that. And it's just like, for example, when, you know, China's made some weird moves over the years. They allowed mining, but banned exchanges at one stage.
Now that is a really dumb move because exchanges are the mechanism for getting all of the data in your country from those off-boarding into fiat and going into crypto. And so when you ban exchanges, all of the data went from China to Korea, in Japan and Singapore, but they allowed mining. Now, mining is the process of taking your fiat currency, investing in machinery with no KYC and ending up with Bitcoin. So you start to [01:02:39] see the reversal of that, where governments realize, well, the exchanges is the data collection halo. And so therefore we need to support the ecosystem and create constructive regulations for the bank so that they can engage in crypto. So that at least we can control the off-boarding to fiat into crypto and understand and have that data so that then they can try and perform analysis once people have offboarded into the crypto ecosystem.
Saifedean Ammous: Yeah. So what do you think in terms of the question of debt? I heard you earlier, you mentioned that you used to be in debt before you got into Bitcoin and I was expecting that this would be the case that as people get into Bitcoin, they hold Bitcoin. They no longer need debt. They have savings and then they'll be spending from that.
But then thinking more about it. And particularly after a couple of discussions we had in Michael Saylor on this podcast, it seems like this won't really be the case until Bitcoin is the only, or [01:03:39] the predominant currency in the world. Until then, as long as Fiat's exists, Michael Saylor makes a pretty compelling case to argue that you should be borrowing as much as you can.
Essentially. I think that the thing that Saylor made me really appreciate and come to peace with is that the best way to hedge against Fiat is to borrow lots of it. That's really the best inflation hedge is to just be short Fiat as much as you can and use it to buy productive assets. So that's the key. Productive, hard assets that appreciate with the time from inflation.
Borrow to buy them. That's really the key trick. So do you think this is what Bitcoiners... I mean, I'm not asking you for investment advice, but what do you see as the case in terms of borrowing versus just stacking and spending from your stack?
Simon Dixon: Yeah. So really it depends on what stage of the wealth effect you're on.
So for Michael Saylor, that makes a lot of sense, cause [01:04:39] Michael Saylor's thinking in terms of allocation of funds, knowing that everything I could ever want in my lifestyle is taken care of already. I've got enough savings, I've got enough. If you're at that stage of life, which is where I think every Bitcoin are can get, if they pay these trends right then you can play debt and you can go short fiat playing debt and stacking your Bitcoin. But I think for someone that's not on the right side of the wealth effect, that's still in the part where everything they earn every month start servicing their debt and paying their mortgage and paying their rent.
These people don't separate their investment money from their spending money. You've got to get to the stage where you're making that conscious separation. Everyone needs security. Everyone needs to cover their mortgage. Everyone needs to pay that debt. Everyone needs to meet their expenses and most people are living month to month.
So if you get on [01:05:39] the wrong side of that, then it's a very tricky thing to get out of. And the tax conversation comes in as well, because if Bitcoin is seen as property, you start speculating, get on the wrong side of these trends, you could end up having to sell all your Bitcoin to pay tax because you got on the wrong side.
And that's why it's about getting to the stage where you can separate. And what I've always said to people, the way I got out of debt. So I was in the UK. I was about 150,000 pounds in debt. I had a great job in investment banking, but I quit. And I put all my money into business and it took a long time to get those businesses moving and I was deeper and deeper into debt.
The only way I managed to get myself out of that situation was because I made a conscious decision not to pay my debt before I funded my investment account. And so I said to myself, I'm going to pay myself first and I'm going to put this money in my investment account and whatever's left over I'm going to pay my debt with. And then I learned to invest and I spent [01:06:39] less than I earn, invest the difference. And then the stars and the moons lined up. I found Bitcoin early and that worked for me. And I still think that's a strategy. I still invest in Bitcoin today. Some people think accused me, you were there cause you, you got in early now of course there was an element of luck involved. I was having the right conversations that drove me to Bitcoin very early on, but I'm still buying today just as I was back then. It doesn't change. So you've got to get yourself in a position where you spend less than you earn, invest the difference. Stack.
And then when you've got a wealth effect and you're starting to get something interesting, your expenses are covered. You can start figuring out about how to play the Michael Saylor game, but most people get these things wrong. Michael Saylor is a really smart guy. He knows what he's doing.
And at the end of the day, he's going to pay his rent no matter what, or even if he has to pay rent. Yeah. He probably owns everything outright. And I'm fortunate enough to be in a position where I've achieved a certain level of security. I never need to [01:07:39] worry about money again. And that makes it a lot easier to play that game.
But it is something anyone can do. That's the thing. Just because what you would do with a thousand dollars is the same as what you might do with 10,000, it the same as a hundred thousand, a million, 10 million, or a billion it's just percentages at the end of the day. And you start with small amounts, but at the same percentages, and then those percentages become larger effects.
And one thing I've always said to people, and especially in crypto, the reason that you get driven into trying to buy Dogecoin or trying to buy all these things or putting in yield farming or whatever you're doing is I found that most people are overestimating what they can achieve in one year.
They're looking for that big, get rich quick. They're looking for that. And that drives them away from Bitcoin and into something else, but they completely underestimate the results that can be achieved over 10 years. And so if people have that 10 year time horizon, you don't need higher returns than what Bitcoin's given us.
And you don't need to [01:08:39] gamble and create all these mistakes and end up trading and creating taxable events and all these things. And it's all because of short-termism. And I think it's a generational thing. I don't think this generation, they were brought up in debt. They don't know or understand the concept of savings and investing, and that drives them to what's the fastest thing I can do to make as much money in crypto. And they end up on the wrong side of, and even, and especially when they win, if they end up in a Dogecoin and they end up with a 20000% return in one year, it's just like national lottery winners. 80% of national lottery winners after two years ended up in the same position that they were before they won the lottery.
And we see that a lot in crypto. I'm not going to mention names, but I know a couple of people that were there at that first Bitcoin conference involved...
Saifedean Ammous: When was that Bitcoin conference?
Simon Dixon: 2011. So I spoke at the [01:09:39] conference in Prague.
There was one in America and then one in Prague in 2011, I know a couple of people that were there that were involved in the highest performing asset class in history. And they're still not really in a very strong financial position relative to those that just went through this longer-term philosophy.
They overtraded their tax. They spent their Bitcoin, they bought Bitcoin pizzas or whatever, you know, we've all done it, but that's the definition of depression to be involved in Bitcoin from that early and still not be in a position where you've got a life-changing amount of wealth, because you were overtrading and getting involved in all sorts of other things.
See that too much.
Saifedean Ammous: Absolutely. And I think it explains a lot of the Bitcoin hate that you see. A lot of the Bitcoin haters are like spurned lovers of Bitcoin who were there early, dismissed Bitcoin, and then just can't get over the fact that their judgment was wrong. And if they made the correct judgment, they would have benefited enormously.
And so it just militates them [01:10:39] against Bitcoin and makes them completely irrational and their hatred of it. But you know, what are you going to do? People are going to have to learn one way or the other. Yeah, but yeah, I think, I think your analysis is absolutely correct. The long-term strategies is what works.
And this is something I know you emphasize in the bnktothefuture. It's a drum I love to beat here in this podcast and in the book, the Bitcoin standard and in my coming books, it's all about time preference and absolutely our generation, people who were born after 1970, particularly as in 1980, we were born into a world in which all of the wisdom of thousands of years just went out the window.
Every culture, every religion tells its people, be frugal, don't spend too much. Every grandmother says this, save money. Don't spend your money. Like an idiot. Don't spend more than you earn, put a little bit aside, save money. And that strategy just does not work in the Fiat standard. People who have saved money in Fiat will [01:11:39] have gotten destroyed by inflation pretty much anywhere in the world on a long enough time horizon. The value of the currency that you save just tends towards zero. Whereas people who went and borrowed and took on a risk that arguably or in many cases, they shouldn't have taken off, taken on, many of them failed and many of them got wrecked, but they also constitute the majority of the winners that come out of the system. So you have to take that extra risk. You have to be irresponsible in order to win almost. You have to take on debt and you have to have a high amount of risk involved in your business.
Because other than that, you can't take the sure and steady and slow path to success, which is available when you have a hard money, which is save hard money. And only invest when you know what you're doing with something that you definitely understand and know what you want to do with, with a clear vision of where this investment is going.
If you have a [01:12:39] hard money, you have the basis from which you can only make good investments because you know that you don't have to make the investment. Because if you don't, your money is sitting there earning two, three, 4% return in real terms, even though it's earning 0% return in nominal terms. Take that away and all of our economic bearings are essentially ripped out. In my mind, it's like trying to drive a car blindfolded. It's not possible to plan properly. Well, it is possible. I shouldn't say it's not possible, but it's difficult and it's quite counter intuitive and flies against millennia of human wisdom. You try and read what people have always said.
It's always save money. And then you get to the 20th century and you see the people who saved money end up getting destroyed. And you realize, no, you have to get it to death. But yeah, as you said, it depends on where you are and what you use the debt for and how you use it.
Simon Dixon: Well, you said the right word, which is save money. That didn't work in the debt-based Ponzi scheme, but save [01:13:39] hard money, that worked. And that one word, those four letters, is the difference.
Saifedean Ammous: Yes, absolutely. All right. Does anybody have any questions for Simon?
Attendee: Simon? Do we expect that these banks are going to know when to quit killing the host? In other words, are they just going to choke themselves if they have this amount of power?
Simon Dixon: Banks are going to do what banks are going to do, which is that their power is derived from the ability to create the digital representation of the government's currency.
And so, as long as they have that power, they have lots of power. Now, whether they try to put up a fight against central bank digital currency, or they try and integrate. I think that there's going to be huge resistance that they're going to put up for that. And I think there's going to be massive lobbying power.
And that's where it becomes pretty interesting. There's this trend that I didn't quite forecast, where banks and central banks [01:14:39] aren't part of the same parcel here, they're playing against each other. And those are two very powerful organizations that are going to battle it out. And I think they're going to battle it out till the bitter end, but I don't think many people forecasted that power play between banks and central banks.
And that's what central bank digital currencies has brought us. I don't know who's going to win, but I do think that they're going to try and fight to the bitter end.
Saifedean Ammous: Fantastic. Anybody else have anything else they want to add?
Peter Young: I guess a Simon's sense on a kind of timeframe for when he thinks we might see the introduction of central bank digital currencies.
Do you think it's going to take a big crisis for it to happen? Or do you think that it will gradually come in in the next few years?
Simon Dixon: Yeah. Well, it has gradually come in, but it's definitely innovation by crisis. That's the story that I see that no one does in the thing until they absolutely have to.
So yeah, you [01:15:39] have to have a absolute catastrophe to get the level of adoption that they want. And you obviously are going to get the beta test. You're getting the beta test now, but no one gives a damn about them and no one's using them, but yeah, it's definitely introduction by severe crisis. And that's the only strategy that works.
We saw that with anti money laundering laws. We saw that with the removal of privacy and in these pandemic and yeah, you have to have a big crisis event until you get those adoption because people aren't going to volunteer that adoption.
Peter Young: So perhaps this is it. Or perhaps we are heading to a sort of, I guess it doesn't really feel like we've had a kind of financial crisis.
We've had the coronavirus crisis, but it doesn't feel like that's, there's been the financial panic in the way that there was in 2008. Do you think something like that is coming a 2008 style event is coming in in a couple of years?
Simon Dixon: The difference between what we're having now and what we had before is [01:16:39] that there was a willingness to let the market have deflation and let the market correct itself and let asset prices normalize again.
I've never seen or studied in history, a market whereby central planners are not willing to allow that to happen. Maybe Saifedean's got some case studies and use cases, but it feels to me. And I know like every investor says, well, nothing's different here and nothing's new, but it certainly feels to me that we've never had a willingness to completely centrally plan in order to save it.
So we would have had a million 2008 events by now, but they're willing to give up free market capitalism to move to socialism and eventually moved to communism in order to save it. So it's the trade off is are we as a society willing to give up everything in order to protect these assets and this wealth, or [01:17:39] is that going to be an event that they just let it be. Let the market correct itself, move to deflation, raise interest rates, send people bankrupt, let asset prices normalize again.
And I see nothing that indicates that they're willing to do that. And instead they're just willing to take more and more freedoms away in order to protect it.
Saifedean Ammous: Yeah, I agree with that. One thing I disagree with is we wouldn't have had a thousand or I can't remember the number you said.
I think he just had a million or a thousand bank failures from 2008. If they let it happen. I think we just had one big one and then that's it. You know, after that we'd start on a clean blank slate. There'll be a lot of upset billionaires because they'll become millionaires and there'll be a lot of millionaires who'll be left with nice houses and not a lot of liquid wealth. But I think for everybody else it's going to be a collapse in the prices of the things that they actually desire. And then the [01:18:39] possibility of living in a world with a hard money and a solvent banking system and a place where you can park a dollar in the bank and expect it to at least hold its value.
All right. Well, I guess, that's it for today. Thank you so much Simon for joining us and thank you everybody else for joining and for your questions. And I will see you next seminar, which is going to be on a Monday.
Simon Dixon: Okay. Thanks for having me.
Saifedean Ammous: Cheers. Thanks a lot. Take care.