← The Peter McCormack Show
The Peter McCormack Show
WTF Happened in 1971 with Ben Prentice & Heavily Armed Clown - WBD213
01:20:35
Location: Zoom Date: Wednesday, 1st April Project: WTFhappenedin1971.com Role: Host The gold standard was a monetary system in which the value of countries currency was directly linked to the amount of gold held in reserve. Although not currently used...
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- [00:04]
Colin
Hyper bitcoinization is probably our only hope because there is just no other way out of this. All they can do is keep kicking the can down the road. They cannot fix the systemic imbalances that are created by this continual expansion of debt and continual expansion of the money supply.
- [00:26]
Peter McCormack
Hello there from Bedford. How are you all? Welcome. Welcome to the what Bitcoin did podcast which is brought to you by Kraken, the best place to buy, sell and trade bitcoin. I'm your host Peter McCormack and today I have an interview with Ben and Colin from the website wtfhappenedin1971.com to discuss what the fuck happened in 1971. But before that, I do have a message from my show sponsors. So first up today we have the amazing blockfi, my longest ever sponsor and they are the future of bitcoin and financial services. This Friday I've got a show coming out with their co founders Florian Zak, talking about recent market volatility and what is coming up for the company. You definitely want to check that one out. But they have crushed it over the last two years and not only that, they've just raised another $30 million to keep growing their business. Now with BlockFi you have access to their interest accounts which lets you put your crypto to work and their monthly interest payments with your bitcoin. I'm a customer, I've been with them using it for eight months and I do love getting my interest every month. They also have their crypto backed loans which allows you to access liquidity without selling. By using your crypto as collateral, you can unlock up to 50% of the value of your assets in USD. If you are interested in checking out BlockFi, I do recommend you do your own research. Then you head over to blockfi.com which is B L O-C-K-FI.com and next up we have Kraken, the single best exchange in the world for buying bitcoin. Are you buying bitcoin right now? Are you following the market? Are you stacking sats? Well there is no better place to do it right now than with Kraken and with their beautiful mobile first app, it couldn't be easier. It doesn't matter if you're out on a walk, if you're getting away from the lockdown, you wander around the park, you think I want to buy some bitcoin, you can do it right there, right then with their mobile app. Or look, if you just sat on the couch and you're watching Netflix you want to buy some bitcoin, you can do it there and then. And listen, if you are a trader, they have the most comprehensive suite of trading products out there. Everything from kraken.com to their market leading OTC desk. If you want to find out more about Kraken do head over to their website. They are the most secure crypto exchange. They do have the best customer service of any crypto exchange. As I keep saying they there is no better place to buy bitcoin. Find out more@kraken.com or download the app which is available for the iPhone or Android. Just search for Kraken Pro which is K R A K E N P R O. Okay, so onto the show today and this is a really, really fucking cool interview. So in a recent interview I was talking with someone about the gold standard and their website, wtfhappenedin1971.com came up. Now I hadn't seen this site before. I know it had done the rounds, but I hadn't seen it. So I made a note, I checked it out and then I got in touch with the guys. I was like, come on, you got to, come on, you got to explain this to me. You got to explain this to the listeners. Now 1971 marked the abandonment of any remaining ties to the gold standard in the US and this website has a whole ton of charts that show the economic and social impact of the event. It has everything from income inequality to national debt. And it's really, really fascinating. Now while I may have a basic understanding of what the gold standard is and what the Bretton woods agreement was, I treated this like a school lesson. Like everything, I'm always here to learn, I always want to ask the basic questions. So we went right back to the start and we covered it all. Really loved making the show big thanks to Ben and Colin. Their knowledge on the event is pretty cool and the fact that they were patient and held my Hanthro all was very, very interesting. So listen, this might be a lens in what's going to happen in the rest of this year, next year with all the money printing that's going on, this could be a very useful lens. I hope you enjoyed this interview. If you do have any feedback you want to reach out to me. My email address says hello at what bitcoin. I do read every email and I do respond to every email, apart from the nonsense ones, but I do. So if you want to get in touch, I massively do appreciate getting these cool emails you send. Now listen, if you Want other content? If you're bored, if you've watched everything on Netflix, please do check out my other show. It's called Defiance. It's available at Defiance News. A whole bunch of interviews about other topics outside of Bitcoin. And I also have my films up there. I've made a couple of films in Colombia and Venezuela. I also hopefully got a new film coming out this week in Turkey. Anyway, as I said, any questions, do reach out to me. And please stay safe out there. Stay healthy in mind, body, spirit. And if you want to chat, you can reach out to me. Ben, Colin, how are you both doing good?
- [04:53]
Ben
Doing good, man.
- [04:54]
Peter McCormack
All right, so listen, I can't remember which show, but a show I did recently, your website came up. Trying to remember which one it was. It was one of my last, like, three or four shows. It might have been with Alex Vetsky, I can't exactly remember, but your website came up. I'd never seen it before, right? And then it came up in my feed on Twitter, like, two days later, and I was like, right, this is a sign. We need to. We need to talk about what the fuck happened in 1971. And I went through the website and I was like, okay, I'm a bit of a dumbass. I don't think I'm going to try and find. Figure this out myself. So what I want today, if you guys are keen to do this, can we do this? Can we run this like a school lesson? Can you teach me about what happened in 1971? And I'll put my hand up when I'm like, I don't get this. Can you explain it? Because I don't know shit about economics.
- [05:44]
Colin
Right, yeah.
- [05:45]
Peter McCormack
You ready?
- [05:46]
Colin
I think Ben should. I think this is. This is Ben's, like, forte.
- [05:50]
Peter McCormack
Come on, Ben. What happened in 1971, I wasn't even born.
- [05:53]
Ben
Is a good question, Peter. I'm glad you asked. I started doing research on this because obviously we're all falling down the bitcoin rabbit hole quite precipitously. And I started doing research about money and what types of money we use. And I was reading about the gold standard versus not the gold standard, trying to figure out when we were on the gold standard, when we weren't. And in 1971, obviously, as many people know, the end of the Bretton woods agreement happened. And when that happened, it effectively took every country off of whatever close to a gold standard thing we had at the time. It was the closest thing we've had in modern history. And I was literally just on Wikipedia, reading about that event. And I started finding a few different charts. And it's some of the first few charts I have at the top of what the fuck happened in 1971. Com. And you can see that there's a lot of kind of crazy stuff. This is under the Nixon Shock page, which is a term for when Nixon took us off of the gold standard and that it had these far reaching implications on all the other countries too. You can see all these. Yeah, okay, I see you can have a question already, Peter.
- [07:12]
Peter McCormack
Yeah. All right. So my first question is talk through what the Bretton Woods Agreement was and talk about why Nixon took us off the gold standard. Well, not us, because I'm in the uk, but talk about what happened for people who don't know.
- [07:24]
Ben
Sure. Colin, you want to take this one?
- [07:26]
Colin
Yeah. So the Bretton Woods Agreement was an international agreement. And I believe. When was it, Ben? Was it the. It was the mid-40s? Right. It was right after World War II or right in the tail end of World War II. And it was an international agreement that was done by between most of the world. I mean, it wasn't the entire world. But essentially what they agreed to do was get together and peg the US Dollar to gold and then peg every other international currency to the US dollar. So indirectly, this made any other country that was in the agreement also on the gold standard, but they were more of on the dollar standard, and the dollar was the gold standard. And this was pushed really hard by John Maynard Keynes, who a lot of us are familiar with. And in his mind, it wasn't a perfect system, it wasn't exactly what he wanted, but it was sort of a step in the direction of globalization of economics that he wanted to see. And the problem was, over the years there was everybody cheats, right? I mean, you can never expect everybody to do exactly what they're supposed to do. Every nation, probably the US too, was printing more money than they actually had gold reserves for. And the US was seeing a net arbitrage of gold out of the country. And then we were also having issues with physically transporting and settling that gold between countries. And in 1971, Nixon basically just said, yeah, this is over. We're not doing this anymore. Gold windows closed, okay?
- [09:06]
Peter McCormack
So without any prediction of what would happen, they just went ahead and did it.
- [09:14]
Ben
Well, so it's interesting to look if we can start back at the start for a moment. The classical gold standard was that individual banks or even countries would issue currencies against gold. Gold was kept in vaults. We transacted largely with these pieces of paper. And if you wanted to redeem the pieces of paper for gold, you'd go down to the bank and you would redeem. In 1913 was established the Federal Reserve, which is the central bank of the United States. And there's similar stories in other countries. And then we all know in 1929, everything kind of crashed. My thesis is that after the establishment of Federal Reserve, there was monetary inflation during the World War, and they created too much money and they didn't have enough gold. And it was a contraction of that paper money supply that caused that crash in 1929. And then you had the New Deal in 1933, and there was a lot of price controls and a lot of issues. 1944, which was the beginning of the Bretton woods, was kind of returning to some kind of sanity in our monetary supply. So you're asking about what was the actual. Why were we coming off of the gold standard then again in 1971? My understanding of the situation is that essentially everyone was inflating their supply. Even though we're on this technical redeemability between countries, by the way, this is not. Individual humans would take their $10 bill down to the bank and say, $10 worth of gold, which was pegged at that time technically to, I believe it's an ounce, $35. Regardless, essentially, they were inflating too much. And they realized that if one of these countries came to the US and said, hey, we'd like to redeem some of these paper, some of these US Dollars that they've been printing for gold, they stood to lose the gold that they had in reserve. They literally were like, oh, corrupt. We don't have enough gold for all these dollars if we don't take this off. And then In Nixon in 1971, he said, I am going to temporarily suspend the convertibility of dollars into gold. But that was over 50 years ago. It seems like it was not temporary.
- [11:32]
Colin
The question that you asked Peter, did they not really think about it? And that's an interesting question, because no doubt they did. I mean, certainly they did. But if you ever go back and read Nixon's memoirs, there's only one or two sentences in his entire book of memoirs that even mentions the closing of the gold window. And he basically just says, well, my economic advisors told me to do it, so I did it. And if you. We've actually kind of experimented with this a little bit. If you ask people who were alive back then, most of them, I mean, like, they don't. They remember it as a non event. They don't even really talk about it. It's not something, you know, it's not something I was taught in school growing up. It's something that I might have heard about in passing, but it didn't mean anything to me until we went and started looking at some of the economic anomalies that have happened since then that are really clearly visible when you look at the data in aggregate.
- [12:27]
Peter McCormack
Yeah, I mean, I'd never heard of any form of gold standard until I'd heard of bitcoin. And then I'd heard about the gold standard and then I'd heard about us coming off it. I think I heard about the gold standard about the same time I read the bitcoin standard, which my good friend Safety in a Moose wrote. But I wasn't aware of any of this. So this was all new to me.
- [12:48]
Ben
And SAFE will tell you that if you ask a vast majority of people, if you ask them what's the dollar backed by? They'll say, oh yeah, gold. They still think essentially the gold standard is round in some shape or form. But obviously we all know now that that's not the case.
- [13:04]
Colin
Well, and what's interesting is that central banks still settle in gold internationally. But what's really been happening over the last 150 years or so is the slow demonetization of metals as money for the average person. We saw the demonetization in the states of silver back in the late 1800s. And then for a brief period of time in the 1930s, owning gold was actually illegal for United States citizens because of Executive Order 6102. And we've seen this slow transition from people using gold and silver coins to people storing those gold and silver coins and bullion in bank vaults and using paper instead. And those having a one to one exchange ratio and then moving to a sort of state issued paper peg to gold that's kept in vaults to that gold peg just completely going away. And central banks being the only ones who settle internationally with gold.
- [13:59]
Ben
On the history lesson part of it, the 6102 order that he was talking about that banned gold and confiscated gold from actual citizens, that was in 1933, right after the 1929 depression. So just so you understand where the timeline of events are.
- [14:14]
Peter McCormack
Right, okay, so what was the immediate impact?
- [14:18]
Colin
Life went on. I mean nobody, nobody, the average American didn't notice anything. The only thing that really changed for them was a little word or a little phrase on their paper currencies that said that this dollar was worth an equivalent amount of gold at the U.S. treasury. That was no longer the case. They could no longer make that exchange. And I don't really get the feeling that people did. I don't even know if you could, if you were a citizen of the United States, if you could walk down to the US treasury and exchange your dollar for gold. I don't know that people did. Because why would you. What are you going to do with that gold once you have it? Are you going to take it to the store and buy groceries? I don't think so. It was more of just a slow. I mean, at that point in time, people didn't even really think about gold as money anymore. At least from my understanding. I wasn't around back then. But dollars were money, paper wasn't money, or gold wasn't money. The paper was the money and that was what they needed to have commerce and buy and sell goods and services. I think people had already long been disconnected from the fact that gold was the underlying money, even at that point in time.
- [15:23]
Peter McCormack
But having gold as the underlying money creates a certain expected behaviors with respect of money.
- [15:32]
Ben
Due to the supply being constrained. And once the supply was not constrained of our money, what we saw that the most direct result of this event. And I think it's very clear, if you look at the consumer price index over very long period of time, even dating back to the 1700s, there's very little change in that price index. And then in 1971 it skyrockets, meaning prices rise. And that has all sorts of effects we can talk about. That is the main direct effect of this event from my perspective.
- [16:07]
Peter McCormack
And why though, why did that happen?
- [16:09]
Ben
Because in this Bretton woods agreement, when there was this quasi gold standard where countries could redeem and kind of keep in check each other. Oh, looks like Europe is printing too many great British pounds or US is printing too many dollars. Oh, well, I'll take some of that gold back from you at this inflated rate. If they start, let's just say, let's try to break this down, that's what you'd like. So if you start, the United states has exactly $100 and they have exactly 100 bars of gold. And the Great Britain has exactly 100 Great British pounds and 100 bars of gold. Now Great Britain prints 150 Great British pounds. So now their total supply is 150 Great British pounds. And the US doesn't print anything. Well, they get some of those great British pounds. Really those pounds aren't worth as many, you can get more gold if they're pegged to one. I'm not explaining this very well.
- [17:11]
Peter McCormack
No, no, you are, you are. Because what you're saying is it creates a system of fairness, right?
- [17:17]
Colin
In theory.
- [17:20]
Peter McCormack
In a world of international trade, you need this.
- [17:23]
Colin
Right?
- [17:24]
Ben
It's a check on that. So after 1971. Right. And after 1971, there was no more check. So everybody can freely cheat and they can make more money. And we know when they make more money, prices go up. Very simple.
- [17:39]
Colin
So what we saw directly, what Ben is trying to say here is that what we saw directly when the gold window closed was a large expansion of the money supply. And with that, a large expansion of credit. The 70s is also when we saw the rise of the consumer credit card. You could just go to the store and buy something with money that you didn't have and then pay that off at. At a future date and time, maybe with some interest, depending on how long you waited. And that expansion of the money supply is necessary to keep that expansion of credit from completely collapsing in on itself with enough default.
- [18:16]
Peter McCormack
Right. Okay, okay, so I understand it. So I'm looking at your chart here. Productivity versus compensation. But it's compensations for specific workers. Right?
- [18:27]
Ben
Right. This number is an aggregate, kind of an average of what people earn.
- [18:34]
Peter McCormack
Yeah. So what does this say? Does this say the distribution of money became unfair?
- [18:40]
Ben
What we're seeing here is in this first chart is that productivity and compensation appeared to be linked. So that means. What does productivity means? It means we can make more things for the same amount of man hours that seem to be linked with wages. And that's a great thing because, you know, as we get better at making things, we theoretically can make them cheaper to acquire. Right. And if wages are kind of increasing with this at the same time that we're getting better at making things, then the standards of limiting actually go up over time. And that's a fantastic thing. This is kind of like the idea of deflation is good, is because goods get cheaper, because we're getting better at making it. It's just like computers and you can get a better iPhone every year or laptop or whatever it is. And that's fantastic. That's the progress of society. But my thesis is that that's been torn away from us in this ominous year.
- [19:35]
Colin
Well, I think it's worth pointing out that the artificial expansion of the money supply, one that happens outside of a traditional supply and demand structure of something like gold. Right. That requires capital and labor to extract from the ground and turn into the Bars and coins, an artificial expansion of the money supply where whoever controls that money supply is just printing dollars to meet demand of their financial obligations or demands of credit expansion. That is essentially socialized redistribution of wealth. Because what you're doing is everyone's got their piece of the pie, right? And if I make everyone pieces of the pie a little bit smaller and print a bunch over here, well, now you have a little bit less pie and Ben has a little bit less pie and I have more pie because I've made your pieces worth less and I've made my pieces worth more. So I'm essentially redistributing wealth. I'm taking what you've saved. Because if you have $100 in the bank and there's only $200 in the world and I print 1,000 more dollars, well, now I have 90% of the money supply, whereas before, before we each had 50. 50. Does that make sense?
- [20:44]
Peter McCormack
Yeah, it does. Are there any other factors that come into play in any of this? Improvements in production, movement, to more kind of machine based production. Is there, is there anything in here to do with kind of greed and that? Actually what's just happened is the, the companies, the people who own the company have just become more greedy. Does any of that play into this? Or is.
- [21:08]
Ben
I mean, I know where you're going with that here, but I kind of try to ask you to change your perspective instead of looking at that. Look at it like this. If the price level, if we all agree that the price level seems to go up more quickly after 1971, meaning if I want to buy a dozen eggs, the price of eggs goes up more quickly after 1971. Each year the price is going up more rapidly. It was still going up before, but it's going up more rapidly. And then the price of housing and all these other things. If me as a wage earner, this wage slave, I try to get a raise from my boss every year, I try to get about 2 or 3% raise. That's good. I'm doing better every year. Well, if you're getting only 3% on average over the last 50 years, you're only keeping pace with, you haven't actually gotten any wage increase at all. And when the price level is going up even faster, you have to get 5, 6% raises every year, every single year, consistently, just to just stay afloat and just to be making a little bit more. And then on top of that, the money that you're putting in the bank, because there are a lot of people today in this World that can barely afford stocks or 401ks or. Or maybe even afford to buy a house, which is. Stocks and houses all inflate because of inflation. That's an inflationary thing that most of the people can just barely keep money in a bank, and that's getting inflated away, too. And when this stuff is happening more rapidly, it makes the quality of life very difficult to maintain.
- [22:48]
Colin
I think it's important to remember the cantillion effect as well. The best way that I've ever heard this described is pouring some honey into the bottom of a glass. You see the honey hit the glass and it very slowly pulls its way out into the rest of the glass. That's sort of a great visualization of the way the cantillion effect works, where essentially the fewer degrees of separation you have from the printing press, the more concentrated wealth you're going to get from the new money that's printed. Whereas wage earners, laborers like myself, the further we are away from that spigot of money, the less we actually benefit from that new money creation, and the more of our wealth is actually redistributed to that process.
- [23:37]
Peter McCormack
Right? So everything that's happening right now must be fascinating for you guys. You must have a lens into this new money creation, and we will come to that. And I guess an easy way of understanding it is if I went now and played a game and Monopoly with my kids. We start out with a fixed amount of money each, right? That's the way it starts. And we can go and buy our properties, and we can add our houses to it. And you have to be very careful about your money. You can't buy too many properties too quickly in case you get fined or you land on some property. You have to be really careful about your money. But I guess if just like partway through the game we just tripled our money, then suddenly we can all start spending like crazy. I guess it's a similar effect in my simple version.
- [24:17]
Ben
Do you know there's a rule in that game, Peter, that if you play the game. Because the game could be very long, sometimes you play the game long enough, the bank can actually run out of the bills that you're supposed to get for selling a property or whatever. And there's a rule in the game that says if the bank runs out of money, the bank can never run out of money. Simply write down on pieces of paper. 1, 5, 10.
- [24:40]
Peter McCormack
It's in the rules.
- [24:41]
Ben
Go look it up.
- [24:42]
Peter McCormack
I know, I've seen this on Twitter. Now you've told me I've seen. Seen. I've seen it on Twitter. It's funny. I've got a copy of Monopoly Socialism, the socialist version. I don't know if you've seen it. I played it with my kids and they hated it. So the first chart when I went through your website, that really was like, whoa. What. What was going on here was the consumer price index. Now. Now, that seemed to be pretty steady for a good couple of, you know, nearly 200 years. But it was going up. It was going up before 1971. Right. To unprecedented levels. So was something. Was this. Is this what you said about earlier, said the things were already. The wheels were already in motion here?
- [25:29]
Colin
Yes.
- [25:29]
Ben
Right, yeah. So temptation to print money is so great that it's almost unstoppable that if you can print money, I believe you will.
- [25:43]
Colin
The other thing, too, a lot of times, I think we mistakenly think of inflation as a new phenomenon. But inflation stems its way back to the days of gold and silver coins issued by the King's mint. This is not a new phenomenon. It's new that we have these neoliberal economists telling us that it's necessary for the economy. It used to be called coin clipping, right. The king taxes his serfs, he collects all of the coin, and he takes it into his vaults and heat gold off of each coin, and then recirculates those coins as if they're still worth the weight that they were when he received them. And then he takes all of those gold clippings, melts them into new gold coins and circulates those as well. That's essentially what's going on here when you're printing new money and introducing it into the economy are artificially outside of that traditional supply and demand structure of the metals market. And even when we were on a bimetal peg in the United States when we used gold and gold was pegged, or silver was pegged to gold at a certain price, that's inflationary as well, because that's essentially a fiat peg, because it's by decree that normally the market would decide how much gold exchanged for how much silver based on how much the supply of those metals change and what their demand is like. And that changes their value. Right. Because value decisions are constantly being made by people all around the world all the time. So when a government enforces an artificial peg between gold and silver, that's actually a form of inflation because it's making purchasing power than it should actually have. So, yeah, inflation's been.
- [27:28]
Ben
But if you look at the chart, this Consumer price index from 1775 until 2012 when it runs, you'll see that the creation of the Federal Reserve is when things started getting weirder. So Peter was talking about. It seems like it was fine for a really long time, but the unprecedented stuff kind of started right before 1971. Well, that's why when I originally found this chart, it just had the 1913 date. I added the 1971 date on it because now you can see this is when central banks really started to proliferate and it starts to kind of push its way up and it's trying to get up. But 1971 was when all limitations were removed and they can just print as much as they want. That's the way I see this. They were trying to inflate more. This is also around the time Keynes was getting more and more popular in the 1930s, 1940s, 1950s, and his economic thought, his way of trying to manage the economy through the monetary supply, became more and more proliferated. And again, the shackles come off in 1971 and the sky's the limit.
- [28:32]
Colin
And it's worth repeating that the Federal Reserve, the organization, the private organization that oversees the creation of the money and it lends to the U.S. treasury, that organization was formed in 1913, long before the closing of the Golden.
- [28:50]
Peter McCormack
Right, okay, so look, the next one that really stood out to me and I just went through for the quite alarming looking charts, but was the national debt, the US national debt chart, because to be honest, it looks like a picture of a skyscraper. It's phenomenal. But the US started building some quite significant debt, it looks like around 1945. So that's obviously after the Second World War. What happened there?
- [29:16]
Ben
Well, so this chart is nominal, right? A lot of these charts that we're looking at are kind of inflation adjusted. So one of the reasons why this chart looks so alarming and people have even criticized me for being deceptive with this chart is by saying, oh well, if you adjust for inflation, it doesn't look as bad. And I agree. But I leave it up for this sole purpose, just to see what we've really done, how many dollars we've created. So the truth is why this thing looks so incredibly crazy is because of inflation itself. That's the visualization of inflation in addition to how much debt we've added. If you kind of look a little bit around, there's another one that says the debt as a percentage of no. So the federal debt held by the public, and it's purple and there's all these kind of wavy lines that is more adjusted. That's a percentage of gdp.
- [30:13]
Peter McCormack
Okay.
- [30:14]
Ben
And you can still see this one is not as clear, I think, of what's happening. But you can see that this is projected by the Congressional Budget Office. So it's not like some crazy crackpot, you can see the projections than we were in World War II already. We're almost there and we're projected to go higher. I think that it's a more real look at what the debt looks like today.
- [30:40]
Colin
The other thing that's interesting about this is that if I'm a government and I have, we wind it all the way back and I have, let's just call it a billion dollars worth of debt. And in my current paradigm, a billion dollars is a lot of money. It might be most of the money I already might owe most of the money in existence as a debt. But if I print more money, if I expand the money supply to let's make it astronomical and call it 100 billion, now my $1 billion in debt is suddenly a lot less consequential because it's only 1% of the money supply. As before, it was close to 100% of the money supply. So as governments continue to increase their debt obligations, they're benefited by continuing to increase the total money supply because that reduces their future debt obligations in terms of nominal percentage of outstanding circulating money.
- [31:37]
Ben
The way I think about inflation is that it's an addiction that we're all addicted to and that we need more and more of it to have the same effects that we desire today.
- [31:47]
Peter McCormack
See, every time I look at these national debt figures, I always think, this shit's never getting paid off.
- [31:54]
Colin
No.
- [31:54]
Peter McCormack
Like when I take out a debt, I've got a mortgage, right? I know it's a 25 year term and I know at the end of it I'm paying that off. And I have to, I can't miss a mortgage payment. Same with a car, same with any debt. And I look at this and I'm like, this shit is never getting paid off. So what does that mean?
- [32:10]
Colin
It's a good question. What does it mean? I mean, we're in uncharted waters. Ben and I talk about this almost every day. I mean, the world is making less and less sense as we just sort of lose touch with reality. I mean, this meme, this WTF happened in 1971 has been so rewarding for Ben and I because we can reverse track the hits and see the conversations happening about our site all around the Internet. And People have some wild ideas about what happened. What the fuck happened in 1971. You know, you hear people blaming the sexual revolution, you hear them blaming the hippies, you hear them, you hear them blaming the Vietnam War, you hear them blaming the opening of Disney World and corporate greed. I mean there are some crazy theories out there for what caused WTF happened in 1971 and none of them really come close to. They're all second order effects. They're all describing usually things that are a consequence of inflation, not necessarily the direct cause of these economic anomalies.
- [33:14]
Peter McCormack
Yeah, I'm just looking at an extra sketch. Was $2.83 in 1971. I'm actually looking at some of the things that also actually happened. Yeah, Disney World opens. People blame it on Disney World. Next up I talked to Ben and Colin more about what the fuck happened in 1971. But before that I do have a message from my amazing sponsors. So firstly sportsbet IO my new sponsor. Firstly a massive thumb. Thanks to them they organized the premier what bitcoin did poker tournament. We had over a bitcoin in prices. We had some bounties on players. I think we had 503 people register which is really amazing. So thank you to everyone who joined that, everyone who got involved. It was a load of fun. I think I'm going to try and organize another one soon. So yeah, keep an eye out for that. So anyway, who are Sportsbet? Come on, you know who these are. These are the people who put the bitcoin logo on a Premier League football shirt. Sadly it wasn't Liverpool but it was Watford. Pretty cool team. I've been down to watch them a couple of times, saw them play Tottenham. Bloody saw them beat Liverpool, didn't I? Which was really frustrating. Liverpool's only defeat this season. Now listen, when I met them they were like pete, we want to sponsor the show. Can we sponsor the show? Back when the football was on and then we had all this coronavirus stuff cake over and all the sports has been ended. But they got in touch and they're like doesn't matter, we still want to work with you Pete. We still want to sponsor the show. So very cool of them. So I've been checking out the site, I've been having a play on it. Now they have got sports you can bet on. They've got the Russian ping pong but they've introduced a bunch of other stuff. They've got esports including e FIFA as well as their bitcoin casino and obviously my favorite the poker rooms. Now if you want to find out more, you want to go and bet some of your bitcoin, head over to sportsbet IO, which is S P O R T S B E T IO if you want to check out the promotions, they are all available at SportsBet IO. And also, let's talk about Cointracker. And as we approach the end of the month, we are also approaching the end of tax season. We're getting towards the end of the Cointracker sponsorship. So I do want to say a massive thanks to them as well. Thank you for sponsoring the show, guys. Now, it's been working for them. I spoke to Chandan, we also recorded a show and he said they've had a bunch of inquiries. So that's very cool. Now, I know as a sponsor, some people will question why I'd have a tax company. This is antithetical to bitcoin. Now listen, tax is optional. It's your choice. You want to pay it or not and you deal with the consequences. I do pay my tax. I don't want to. I think it's bullshit. But I do pay my tax because I do not want to go to jail. Now, with Cointracker, it could not be easier. You upload your wallets and your exchanges and your tax is calculated in just a couple of minutes. Their filings work in the us, uk, Canada and Australia. And it is free if you've got less than 200 transactions. Now, look, if you're one of those crazy traders who's got loads of transactions and you're thinking, shit, how do I figure this out? Well, you can get a 10% discount by using the URL Cointracker IO a WBD. And Cointracker is spelt C O I n T R A C K E.
- [36:10]
Ben
R.
- [36:13]
Peter McCormack
I mean, we could go through every single chart. But I think I'm kind of understanding the general points you're making. But what I really want to know about now is you've done this work, you've built this website, you've got this lens into what happened with the money supply and the money printing coming off the gold standard. And I've got two, like, really, really big questions for you, and one's going to be about Bitcoin. But before we do that, we are in unprecedented times, this very weird situation that the world finds itself in, that I don't underestimate how difficult the decisions that governments are having to make. I don't. But outside of, like the complexity of it all, there is a very significant amount of money printing happening right now. Globally, what is the lens of what happened in 1971 for you guys? If you, if you transplant that over what's happening now? What are the biggest alarm bells for you and what are the things you think, the kind of, the unknowns that this is going to cause? I know they're unknowns, but I mean, unknown to me.
- [37:20]
Ben
No, no, this is unknown even to people that follow global macro environments for the last 50 years. Nobody really knows what's going on. I think one of the biggest alarm bells, which both Colin and I have talked about a lot, is the negative interest rates. Right.
- [37:36]
Peter McCormack
Which will come in before which they precede this coronavirus world. I was talking about them with Travis Kling last year.
- [37:47]
Ben
Sure. Yes. But I think it's becoming more apparent now that that's they're just trying to get people to borrow money. And I think a just trying to understand the concept of negative interest is like, why even do it? Because it doesn't make sense. There's no reason. Negative interest breaks the concept of lending money in the first place. So therefore, I think it breaks, you know, if lending money is an essential part of markets today, it breaks the way that we do business at all.
- [38:18]
Colin
For your listeners who might be listening to this and really don't understand why negative interest is such a big deal, imagine you're having a conversation with your banker, right? Imagine you go to your banker in 1980 and you say, hey, I want to take out a loan for this house. I need to have a place for my family to live. And the banker says, all right, that's fine, I'll give you $40,000 and you pay us back over the next 30 years. And you're going to have to pay us back interest, of course, because it's only fair. And then you Fast forward to 2015 and you're having the same conversation with a banker in a different bank. And he says, all right, yeah, I'll give you this $250,000 loan. You don't have to pay us back any interest. We don't need any interest now just make sure you pay us back the money that we give you. And then you fast forward to like 2022 and you're having a conversation with the banker and he says, we will literally pay you if you take this money from us and go and use it to buy a house.
- [39:10]
Peter McCormack
Because they have so little confidence in the future value of money. Is it that or they just need to get it off their balance sheets? What's going on here?
- [39:20]
Ben
To me, what is happening here is the government is trying to create inflation in any way they can. And you've heard this term helicopter money before?
- [39:31]
Peter McCormack
Yeah, of course, man. Especially this last few weeks.
- [39:34]
Ben
Right, but so what does that mean? Like they're, you know, the idea is that there's literally a helicopter driving around dropping all this money everywhere. And you could do that. But see that if you literally just put more money in everybody's bank account, nothing changes at all. If you put the proportional amount, if this guy has a hundred dollars, that guy's $5,000, and you multiply them by some proportion, like just 10x everybody's money supply, then nothing changes, just the unit of account, just the prices change. Everybody still has the same relative amount of money and actually nothing changes at all. You have to give more to somebody else in order for it to change anything at all. So the method of how you determine where new money goes becomes a very prickly process. And one of the ways we do that today is by creating money through credit expansion and creating new credit. So that should be kind of letting off a bell in your head that they need to lend money in order to create inflation. And they need to get people to try to borrow money. And because they can make as much money technically as they'd like, their incentive method mechanism is to lower the interest rate, to incentivize higher, to borrow more money.
- [40:50]
Peter McCormack
Because if they don't have inflation, they have deflation. And if they have deflation, it slows the economy because people spend less, because things will get cheaper in the future.
- [41:01]
Ben
I disagree with that.
- [41:02]
Peter McCormack
I disagree with that.
- [41:03]
Ben
Their biggest motivator, their biggest motivator is to inflate the debt. That was what we were talking about before. The debt is addictive too. They've created all this debt and they have to pay it back. They need to inflate that away. I think that's the biggest motivator.
- [41:18]
Colin
But economies that are heavily over leveraged, right, like our world economy was, probably still is, but was two months ago, they're very, very fragile and they demand that there is a continual expansion, a continual interchange of lending. And we were seeing this break down all the way back in September with the meltdown in the United States overnight lending markets. And we were seeing the Federal Reserve have to step in and provide liquidity in these markets because this lending scheme that is necessary for this beast to continue to live was breaking down. And when you're seeing an environment like we're in right now that is deflationary, because you mentioned, are they trying to avoid deflation yes, in a sense they are. Because in a deflationary environment, when there is a debt cascade like we are seeing, you're watching the effects happen of it in real time. The bigger this thing gets, the more overleveraged it gets, the more credit is swapped for other credit and used as collateral and rehypothecated. The more sort of like Ben said, the more hungover we get, the more hair of the dog we need to get us back to the high before we crash. It's almost like we're on the fourth or fifth hair of the dog now. We've been drinking, we're on like a three day binger.
- [42:52]
Ben
Yeah. And can I push back on something too, Peter?
- [42:55]
Peter McCormack
Yeah, of course. I mean, I'm at my depth here, so you tell me.
- [42:59]
Ben
Yes, the Keynesian narrative, if you will, is that deflation is bad because people will spend less money because they'll hoard it. But I love countering this with the example of electronics. Now electronics are deflationary. Today we understand that you can buy more computer for the same money or you can get a better computer for less money, even every year. That in my opinion is because of Moore's law, because technology has gotten better so fast that it outpaces inflation altogether. But it is deflationary and it does not stop people from buying electronics. Or Hue and Apple are two of the largest corporations in the entire world. So it's not that people aren't buying things because of deflation. So that narrative is a bold faced lie.
- [43:49]
Peter McCormack
I've never bought it as well. I mean, yeah, you might hoard some money, but saving isn't such a bad thing. But you can't not spend. There's things you have to buy. So perhaps you just become a little bit more considered about what you buy like you do as an adult. I guess as a kid, like when I got my first job, I spent like a motherfucker. Whatever I earned just went out the door, Right. But now I'm older, I'm kind of in. I'm in time deflation now.
- [44:18]
Ben
Yeah. And you started talking about savings. We have a chart on there about savings too, that in 1971 the savings rate, it's clearly declines. The only time you see a little bit more Savings was in 2008 when there was massive deflation. I would also point out that today, in the time that we're in right now, that if we had a little bit more savings, we might be a little bit better off. Because now we have millions and billions of people begging their governments for money, just so they can pay rent.
- [44:47]
Colin
And it's interesting.
- [44:48]
Peter McCormack
Let me just throw something in there. I did an interview a couple of days ago for my other podcast, Defiance, with a British girl who lives in China. I wanted to understand what it's like they're living in China through the lockdown, her feelings on it. And I did ask her about what government. What support is the government providing for people? She said, well, they don't have to provide as much support because people have savings. Most people I know have got probably a good five to six months in savings. I was like, really? I was like, no. I mean, a few of my friends have. Most of my friends, a month to month, we've lost that savings culture. My parents always saved. Your parents probably always save, but we've kind of lost that. Outside of bitcoin, certainly we've lost that saving culture. But you can see it. You can see it with bitcoin, right? No one wants to spend their bitcoin. Every time you got to spend your bitcoin, you're disappointed. You want to hold onto it.
- [45:41]
Ben
But you said the cause, right already. You said inflation kind of causes you to save less and use more debt. And it makes sense. That makes perfect sense. So that's what we're talking about. This paradigm shift in 1971 has not only corrupted our markets, but it's corrupt our culture itself.
- [45:59]
Colin
You know, it's interesting because I've been.
- [46:01]
Peter McCormack
At a war about this recently. Corrupted our culture. Which way then, has it corrupted our culture?
- [46:09]
Ben
I think it's pushed us towards consuming plastic crap and buying things on credit that we don't need, versus saving, you know, investing in sound things as well.
- [46:22]
Peter McCormack
No, I agree with that. Just. Just don't go into modern art or we'll be at war.
- [46:27]
Ben
I didn't. Your buddy's safe is rolling over right now.
- [46:33]
Colin
We tweeted just the other day from. From our WTF71 Twitter account, the actual personal savings chart. And we love to kind of play up the meme. We love to ask the rhetorical question. Obviously we know what happened in 1971, but we like to play up the meme, right? Like, somebody tell me what the fuck happened in 1971 that caused Americans to abandon centuries of sound wisdom and saving for an unforeseen crisis? And that really resonated with people right now because they're like, yeah, like, what? What the fuck did happen that caused this chart to go from here all the way down to here? What caused that? And you see people, a lot of people you see them blaming consumerism, you see them blaming greed. You see them blaming keeping up with the Joneses. They blame all sorts of these second order effects of inflation. What's interesting to me is that I don't think Americans are very financially savvy. I don't think that they might spend more than they should in a lot of cases. But I think in general, Americans are very financially savvy. They love to invest. You get in any office environment and you'll have everybody giving you their 2 cents on their favorite stock, their favorite new trading thing that they saw on YouTube. Americans love to talk about money. So why did we see this destruction? And of course, people have always been greedy. That's the question that I like to phrase to people when they blame greed. I say, were people not greedy before 1971 did a switch flip in everyone's head and they were like, oh, I got to get more money. No, I mean, the world doesn't work that way.
- [48:13]
Peter McCormack
Okay, all right, so I'm getting it. So let's go back to the lens. I know this is a tough question, and I know you don't want to answer, but what is your interpretation of the money printing? Now, obviously there's a lot of bailouts. Corporate bailouts are going to happen for all the billionaires and the friends of the elite. But also money is going to be provided to people who can't go to work and have lost their jobs, who need to eat. They're going to get their $1,200 of the 18,000 it costs per person to do this. But what is your read on all this and what are your big fears over the next year?
- [48:50]
Ben
I have a very short question or answer, and then I'll let Colin answer that what this is doing is it's picking winners and losers and that if something is failing now, you know, we don't. I don't think that every single best business on the world would fail today if there was no government printing money. But some of them are going to fail. And that means that, you know, possibly these capital allocators, people that run businesses, weren't allocating capital properly. So if we bail out people that weren't allocating property, then we keep afloat capital allocators that we're not doing well and therefore the future will probably have more poor capital allocation.
- [49:30]
Peter McCormack
Yeah. And that I can't disagree with. And I find Boeing as the great example of a company that should be allowed to fail. Because it was failing. It was unable to deliver planes that can stay in the sky. There's serious inherent problems in that business. Let it fail and let somebody else take. And this is where I like the libertarian arguments about free markets. Let them fail and let them rise. But what about people? Let's separate. Because they're two separate issues. There's bailing out companies and then there's bailing out people.
- [50:00]
Colin
So there's a certain level of civil social order that must exist for a society to function. Right? I mean, if things get so bad, we see revolution. You see it all throughout history, right? Where people just get pushed to their breaking point and they start killing whoever they need to kill, whoever gets in the way to uproot some sort of major revolutionary change, systemic change. Right? And it happens. It's absolutely a real thing. And the way that I think about this is our system, because it's become so leveraged, because it's become so fragile, because it's become so interdependent because of things like the monetary policy and the expansion of credit, that people, they're not going to be able to survive unless we get this kind of intervention. And believe me, Ben and I are very sympathetic to that. We are not these two hard asses who don't care about other people and want to see them suffer. Certainly it's the exact opposite. That's one of the reasons that we spend so much time highlighting these things, because it's the general progression of this constant expansion and swapping and expansion and swapping and booms and busts that hurts people and gets us to this point where we can't survive a crisis for several weeks. And certainly, yes, the government has to intervene. If they don't intervene here, if they don't print more money, because it's not like they have the money saved up. If they don't print more money and give it to people, if they don't provide that social relief valve for all this pressure that's building up, there will be revolution. And I was talking about this on Twitter just yesterday. Revolution isn't always a good thing. Violent revolutions kill a lot of people and a lot of times they're innocent. Even in the French Revolution, they imprisoned Louis XVII and he was 5 years old at the time. That doesn't even make sense when you think about it logically. But revolutions don't happen with a logical order to them. So yes, the governments have no options right now. They must print this money, they must bail out these businesses, because if they don't, the consequences will be so severe that none of us might live to see what happens next?
- [52:30]
Peter McCormack
I'm really glad you said that, Ben, because I got into an argument with Michael Arrington on Twitter last week and he blocked me because he had a poll or a meme about the money printing. And I said, all right, but what would you do? And his reply was very much alarmed that you're in bitcoin and you don't have the answer. I was like, well, that's not an answer to my question. Just ask my question. What would you do? And he said, well, hard money. I was like, yeah, but that's not going to solve the problem right now. We have a problem right now. Bitcoin will not solve this problem now. Bitcoin is like the medicine for the future. What would you do right now? And he couldn't give me an answer. And I've asked this of a few people because this keeps coming up. This meme, like, just keeps saying to people, what would you do? Because if anyone turns around and says, what? I wouldn't do anything. I was like, well, you better be prepared for some social unrest. We've got this crisis. The interesting thing is we have a way of looking into the future. We can now look into the future in China and see what happened, or we can look at Italy. Italy is a good way for, say, the uk, the US to all look into the future. So we've seen in terms of their response to the crisis, what the impact and what happens is. We're now seeing social unrest. So we saw a guy the other day trying to smash down the front window of a bank. He's got no money. They're trying to get his mum's pension because that's all they can get to eat. And he's got no money and no food in the house. There are gangs raiding supermarkets. There was a guy offering to kill people for money. Social unrest has started in Italy, and I'm really glad you said that, because my view is there is no other option to give people money who can't get out their house, who can't eat. Yeah. The nuance of how you do it can be debated, but the do nothing means mass social unrest to levels of disorder that I don't think I've witnessed in my lifetime. That could happen in your country. You've got a bigger problem is you've got social unrest in a country where everyone owns a gun.
- [54:30]
Colin
Well, I do want to caveat what I said a little bit.
- [54:33]
Peter McCormack
Okay.
- [54:34]
Colin
You know, we've been kicking the can down the road for this great liquidation for so long that it only continues to get worse and worse. One of my friends on Twitter just the other day described this as it's either sink now or it's sail off the 10,000 foot waterfall. We are in such uncharted waters right now when it comes to over leveraging and expansion of credit and expansion of money that the longer we prolong this, the worse it's going to be when it does finally happen. And we have an interesting chart on the site about hyperinflationary episodes in the recent two centuries and how as obviously they become much more prevalent the more these systems tend to get over leveraged. And you look at case studies of hyperinflation like Zimbabwe or the Weimar German Republic, these events are catastrophic for the people that exist in those societies. People can't eat, people lose everything. I mean they're terrible, terrible events. And I think Ben and I actually both agree that hyper Bitcoinization is probably our only hope because there is just no other way out of this. All they can do is keep kicking the can down the road. They cannot fix the systemic imbalances that are created by this continual expansion of debt and continual expansion of the money supply.
- [56:04]
Peter McCormack
And I don't disagree. I mean, I've just got back from Venezuela and I've seen firsthand on the border in Colombia and in Venezuela itself, I've seen, it's the first time I've seen firsthand this kind of impact on people and how desperate a situation it is. I don't disagree. I guess what I'm saying is I think I understand about kicking the can down the road. I don't think you want to stop kicking the can down the road during a public health crisis. I think the two of them together is potentially a nuclear social unrest problem. But I don't disagree. You can't that you can keep kicking the can down the road. So I guess now is the time. Let's bring bitcoin into this. Because I just did an interview with Andreas, which is really interesting because he talked about something I've talked about for a while when people ask me what is, what is bitcoin or what does it do? And I always say, well, there's two. There's two real strong arguments and they can sit in parallel. But one is all about censorship resistant money. It's about money that no one can take from you, that you can spend without anyone telling what to do. You can live on bitcoin now. You can live on bitcoin and be out in a parallel monetary system, which is one, the other one Is this central banking era, this monetary policy area, this, this taken. This kind of change to the monetary system, which I think it feels like that's come later on when I've gone back and researched early bitcoin. It was all about just. It was more about. And I know what Satoshi put in the. The genesis block, but really it was still about. People were talking about the use case of spending money. So this central banking thing does, does keep coming up. And so let's, let's, let's talk about this in terms of bitcoin for you guys. You obviously think bitcoin is a solution. You obviously therefore believe in a bitcoin standard similar to a gold standard. But what is the actual reality of it?
- [57:58]
Ben
I don't think that Satoshi misunderstood this concept of sound money. And I'm sure you're well aware of the quote about the problem with central banking is all the trusts that is required to make it work. Of course, I think most people read that in our community that we, you know, the trust to not inflate the money supply. Right. And I would implore you.
- [58:22]
Peter McCormack
I should just put something in there. You know, in tracking back the history of this, the very early days of bitcoin seem to be dominated by. I know there are libertarians in there, but also kind of nerds who just wanted to send money between each other and were interested in the technology. It feels like the economists have come later on.
- [58:37]
Ben
Well, I think we're all trying to understand this enigma. What bitcoin is and what bitcoin did. Right. I love the name of your podcast. Right. Hey, because it did do something. It shifted the paradigm. It changed it forever, in my opinion. And I think what it will do is encourage everyone to save more because I feel like, I think you actually had a little mini epiphany in this episode. We're about halfway through and you said, oh, well, I guess that would cause me to save a little bit more money and maybe not spend as much.
- [59:14]
Peter McCormack
No, that's already happened. That's happened. That's how my life has changed.
- [59:18]
Ben
But we weren't talking about bitcoin then. You were talking about hard money versus inflation. You're talking about inflation. You're like, oh, well, if there was less inflation, I suppose I would be more encouraged. Obviously, you're saving more money now you're a bitcoiner. And why. What is incentivizing you to do that? Might be a very complicated question, but I think. Don't think of just individual humans either. Think about businesses. Okay. Businesses themselves, do they save money today or do they have to go gamble it on the stock market to preserve their wealth too? And governments, do governments save money? Well, nobody just printed, right? So who has any savings these days? And what would savings look like under a sound monetary paradigm? Because today we save using stocks and assets because they inflate, because, because of inflation. If we saved using money, we would always have the most liquid good on hand and then we would invest only in the most sound investments that could cause a return on our investment above what we already enjoy from the increases of productivity from society as we progress.
- [60:19]
Peter McCormack
And I am actually worried about my pound savings right now. Genuinely right now I'm looking at. I see. So my allocation is, I would say in terms of like cash versus bitcoin. It's a 25% cash, 75% bitcoin. But that's only because of the, the time of when I bought bitcoin. Right. I'm still holding a good few months of survival in cash. But I'm looking at now going, I mean, is there a chance in another year that's going to be worth so like significantly less? Should I be buying more scarce assets? Should I have some gold and should have and more Bitcoin? But the bitcoin price has been dropping. They're hard decisions to make.
- [61:00]
Ben
That's the paradigm shift that we're talking about that happened in 1971. And then in 2009 there was a new paradigm shift that bitcoin is here now and it's changed the way that we approach things. And just to go back and kind of answer your other question a little bit better, because I didn't really answer it, you were saying, oh well, they weren't really talking about central banking back then. No, we were talking about cheap payments, remember? That's how people understood. In fact, when I first learned About Bitcoin, probably 2010 on Slashdot, and I was not into bitcoin back then, I was probably like, oh, probably wouldn't work. They weren't talking about that either. They were talking about anonymous money.
- [61:33]
Colin
Right?
- [61:34]
Ben
And we all know that bitcoin isn't anonymous. Now just think about how our perception of Bitcoin has changed so many times and how as you learn more about it, you understand it as different things because now you understand it for people in Venezuela. They're using it to maybe move between Colombia and Venezuela. It's so many different things to so many different people. And our continued understanding of all these different disciplines and all these different second order effects really Affects how we perceive this thing.
- [61:58]
Peter McCormack
You know what there might be in a few years time, there might be a new website that comes out that says, what the fuck happened in 2020?
- [62:05]
Colin
We've already had it proposed to us. Yeah.
- [62:07]
Peter McCormack
Have you bought the domain?
- [62:09]
Colin
No, but we probably should. A few things that I do want to add to that, though, in regards to the, you know, you're looking at your bank account and wondering, do I have enough? Like, will. Will I be able to make it through the future? No, I think all of us to some degree are going through that right now. Like, no matter how much money you have in the bank, no matter how much you have in bitcoin or gold or whatever it is, everybody right now has had to, like, take a moment and look at their situation and say, like, where will we be in six months? And the having to do that is not economically productive. That's energy and time that you're taking away from. Focusing on your business, focusing on the people around you, focusing on improving the world and improving, meeting the needs of the consumers, satisfying human action. All of those things are not productive. Having to wonder whether or not you should have more money available in the most liquid good, whether or not you should be speculating on something that might turn out to be a harder store of value. Those are not economically productive decisions. You guys were talking about Satoshi. Interestingly, we know Satoshi well, Satoshi was an Austrian because you had said, it seems like the economic people came in later. If you look at some of the early bitcoin talk threads, this is very apparent. There's actually a pretty famous quote where someone was reading the white paper when it first came out, and they said, oh, so you're not just an Austrian, but you're a Machiavellian. This is because Satoshi not only had a really good understanding of money and the history of money and of sound economics and of human action, he also understood power dynamics, and he understood how to get people to do what you want without necessarily directly telling them what you want them to do. And Ben and I talk about this a lot in terms of the hyper bitcoinization thing. Our biggest strength is number go up. Number go up is what we have to rely on because that is what brings new people into this market. But I tweeted the other day that you teach a man to buy bitcoin and he'll hodl for a day. You teach a man to understand bitcoin and he'll hoddle for life. And I think that there's a lot of wisdom there, But I think we need more than that. And, I mean, that's what Ben and I are here doing. I could stand on a street corner for the next three days and try to talk to every single person that walked by about monetary economics, and they would look at me like I had three eyes. They just don't care. And you can't make people care about something, even if it's the most important thing in the world. But what you can do is meme certain things into the collective conscious. You can force people to ask the right questions. And if you get them asking the right questions, if you get them started down the right rabbit holes, well, then when bitcoin comes up, they might think about it a little bit differently. They might say, hey, that sounds like what I'm looking for. That sounds like what we need.
- [65:07]
Peter McCormack
You're entirely right. So I've done 200 odd shows now. Every single one goes on my Facebook wall, right? Maybe one in five gets a. Like, no one listens. I've always said to people, I've even. I've even tried to, like. I've even tried to, like, slip it in there. I was like, you know, with all this money printing that's coming, there might be an inflationary event that's a risk to your savings. You might want to hold some scarce assets, like gold and bitcoin. Like slipping in the bitcoin in there. No one gives a. No one gives a fuck. Yeah, like, no one cares. I cannot get it into them. But actually, the what the fuck happened in 1971 is a great meme. It is a really interesting meme. Look, it's confirmation bias for me, but at the same time, I'm looking, like, thinking, okay, this is. This is something I can show to people. So I think you're entirely right. I think you're entirely right. I will add, yes, number go up is important. I had this, the conversation this morning. I think there's two things. Number go up is the most important. The 2017, all my friends were like, hey, P, how'd you get bitcoin? How do I buy Ripple? And blah, blah, blah. But. But, you know, it's not been so much recently. But the other thing is pain. Pain is another. Pain is where they may ask the questions. If we go through an inflationary event, if people aren't working, if they're having to go to the shops, and suddenly they're realizing, shit, everything's more expensive. I can't really afford, they might start asking the questions or they might look back and go, shit, Pete was talking about this. So I think pain, I agree that pain is another point.
- [66:43]
Colin
Yeah, absolutely.
- [66:45]
Peter McCormack
All right, man, so come on, what happens now? Tell me exactly what is going to happen over the next year and how this is all going to play out month by month.
- [66:55]
Ben
Well, problem with our, I was going to say the problem with our today is that the answer to that question depends entirely on what 12 people of room in the Federal Reserve decide.
- [67:06]
Peter McCormack
Yeah, well, they've got to decide to try and keep Donald Trump as president right now, which is a very, could be a very tricky thing. But I mean, are you concerned or do you think we will ride this out? And how much is, how much does time play into this? So for example, I'm assuming you're considering, okay, we've got a bump now for three, four months, perhaps we're back to work and four months, shit, what happens if we're not back into work for a year? Are you weighing up the time on this?
- [67:36]
Colin
Yeah, yeah, absolutely. I think, you know, I'm certain that we're already seeing it, but we're going to see more continued and accelerated erosion of civil liberty, something that we've been seeing for decades and right now we're seeing accelerate. That has to happen because when you come to rely on government systems more for your livelihoods, it's necessary, it's just simply necessary that the government needs more power. And that's one of the main arguments behind libertarians, is that if we're all agorists, if we're all self sufficient, if we're all solving things at the lowest level, if we're all localists, and maybe that isn't necessarily anarcho capitalist directly, but it's certainly libertarian. It's certainly in line with what the constitutional authors in the United States had in mind. You don't want more government control. You need more freedom so you can solve all of your problems at the local level. But when we become dependent on the government for things like checks to feed our children, checks to pay our mortgage, and bailouts of the banks so that our money is still there when we go to withdraw it and bail out of the corporations, so that our job is still there and so we keep our benefits and our pension plans, these things, they're just a part of the deal. If you're going to take that, you're going to get maybe mandatory curfews, you're going to get locked in your home for weeks at a time, you're going to get price controls on things at the grocery store. That's just the natural progression of the way these things go. So I think we're going to see more pain. I think we're going to see more liquidation of the stock market. If you look at the stats, most retail investors, the average American who just passively contributes to their 401, they don't pay attention to where it goes. They don't pay attention to what it does. They haven't changed a thing. They've still been buying this market collapse all the way down. And that's really bearish because that means that people aren't making the decision to withdraw their capital from failing systems. That means that lots of wealth could get wiped out. And if we see a cascade of debt default in the United States and the Federal Reserve isn't able to stop it fast enough, we could see a complete liquidation of all unfunded liabilities. You could see Ben and I were talking about how on Macro Voices, they're talking about how the, the Federal Reserve's balance sheet could easily climb to 50 or 100 trillion within the next year. We think that might be a little bit conservative because if we have a complete collapse of just complete cascade of debt default, we have unfunded liabilities in the hundreds of trillions. It goes all the way down to the money that you have in your bank account. The bank has somewhere around 100 or a couple hundred billion dollars worth of money, which is enough for like $250 per person in the United States. That's how much cash reserves the banks have. And I bet you right now it's even less because people have been going and withdrawing their cash as a safety net. So if that collapses, that's an unfunded liability. If we start to see an increase on people drawing social benefits like unemployment, Social Security, Medicare, those problems are also going to stress the systems. Those are unfunded liabilities. And then you have mortgages start to default and those are unfunded liabilities. And it just goes on and on and on and on. If the entire thing just all the dominoes fall, you're going to see everything get nationalized. You're going to see right now we have the system that socializes losses and privatizes gains. And that might change. We might see a shift to everyone becomes a worker and the government gives you a job number and that determines what job you go into do. And then you get a check from the government. You know that that is not out of the question here. Like that might become inevitable global communism, it could happen and that's like really why Ben and I sound the alarm bells on these things like all the time. And like we're constantly trying to wake people up to this reality. The world as you know it is changing very quickly.
- [71:53]
Peter McCormack
So how are you preparing? And I know that's like a personal question and you can choose to ignore it, but. But how are you preparing for this?
- [72:02]
Ben
Hold dollars and hold Bitcoin. Hold the most liquid. Good. One of the things I've learned in my research about money and like he mentioned macro voices, I don't know if you've ever heard of it, but they have a series called the Euro Dollar. Oh, okay. So have you heard the Euro Dollar University? It's a whole series. It's like 18 hours long. It's insane. And one of the things you learn about the banking system that really even started in the 1950s and 60s that explained some of that inflation, is the bank's use of these assets as money and monetary instruments. That we use stocks and real estate as monetary instruments. The mortgage backed securities in 2008 should sound familiar, but stocks, that's how people save money. Everybody's savings is in the stock market, which in the past month has declined by 30 or 40%. So everyone's lost all their savings. It's the problem of dollars and euros being the most important part of money, most likely the store of value. That part of money is so broken that we need to use these other things as money. For me, I try to hold the most liquid money and that's the best way that I can prepare because holding a cash balance is hedging against uncertainty. And that's what you saw the markets actually do. They sold their stocks to get into the most liquid thing for short term things because they didn't know what they would need to spend on.
- [73:33]
Peter McCormack
Raoul Pal the other day said to me, he said the way to prepare for this, he said hold cash, but physical cash as well. Hold gold and hold bitcoin. And he said cut your spend and prepare to hustle. Yeah.
- [73:48]
Ben
And he was saying before he was saying diamonds and bonds and now he's saying dollars and bitcoin and gold.
- [73:54]
Peter McCormack
So yeah.
- [73:55]
Ben
What does that tell you?
- [73:57]
Peter McCormack
Yeah, tells you a lot. Okay. It would be good to try and finish on some kind of positive outlook. So do either of you hold any optimism? Well, I know you're obviously optimistic about bitcoin, but do you hold any optimism generally over the economy or is it all baked into Bitcoin as, as a solution to this?
- [74:17]
Ben
Just briefly. I mean, we still have all these buildings, we still have all these people that want to work, we still have all the fields to till and we still have people that are going to want things. And you know, I do think that things can return to normal. So yes, I am optimistic even in the medium term. But you know, things are just kind of tough right now. We got gotta hunker down and hopefully people will learn a little bit and educate themselves so that we can make good decisions.
- [74:48]
Peter McCormack
What about you, Colin?
- [74:50]
Colin
You know, I think that humanity has made tremendous progress. You know, if you look back in time to when we were all running around in loincloths and fighting off packs of wolves and finding berries to eat, I mean, look at, look at where we are today. When's the last time you had to worry about survival, people? Peter? Yeah, never. Probably never in your life. For most of us, that's the case. And life continues to get better on average for most people as time goes on. And humans are a remarkable thing. They just are. You know, they're ingenious, they're creative, they solve problems in ways that you could never expect, especially under pressure. And we've come a long way just in the last 100 years. I mean, I mean, rewind time and look at where we were. People were dying from all kinds of different diseases 100 years ago that today we don't even think about because they're not a problem anymore, like bacterial infections and polio and all this type of stuff that human ingenuity eradicated. And now we're seeing this growth in information spread. And that's a double edged sword because a lot of that information is noise. And it's becoming harder and harder to discern truth in the world. But at the same time, you're seeing people like us, people like bitcoiners, collaborate with ideas and collaborate on world changing technologies from all over the world in real time. We don't know what the long term effects of this information collaboration is on human progress. If history is any indication, at the very least, we're going to be continuing to press forward, continuing to solve problems, because that's what humanity does. So I would say I am optimistic. But that doesn't mean that I don't think there might be potential consequences for what we've allowed to go on for so long in the short term or in the midterm. And like you said, Peter, pain wakes people up. And we don't like pain. Humans don't like pain. They tend to do whatever they can to avoid pain. So my hope would be that A little bit of pain wakes enough people up to avoid a lot of pain.
- [76:58]
Peter McCormack
All right, man. Well, that's a solid answer to a great show. Look, I really appreciate this, guys. You're teaching me about things I don't know about. I don't understand. One of the funny things is the more interviews I do, they're all like one giant jigsaw puzzle, right? All these interviews and they all kind of come together and you start to make the puzzle and you start to see how this all come together. And so it's really useful for someone like me. Mean, this is the kind of interview I can easily point my friends to and say, just go and listen to this one. Just go and listen to this. Go and check this website out. Just see what fuckery is going on. You know, this is. I think you're right about the memes. I think it's certainly right about number go up. I'm a firm believer in pain, too, but. All right, just to close out, is there anything outside of the website you want to point people to? Anything you're working on? How do people get hold of you? Just. This is your bit to kind of shout out.
- [77:46]
Colin
Go ahead, Ben.
- [77:48]
Ben
I'm not currently working on anything right now, except I definitely recommend checking out the website. And then if you have any questions at all, reach out to me on Twitter. I'm @MrCoolBP. M r c O O, L, B P. I'm happy to chat anytime.
- [78:00]
Peter McCormack
All right, man.
- [78:02]
Colin
Yeah, and likewise for me, reach out to me on Twitter @ heavilyarmedc. That's the letter C. I'm Heavily Armed Clown. And I also run a podcast of my own. It's the Bitcoin echo chamber. BitcoinEcho Chamber.com tends to focus on a lot of the same things what bitcoin did does, but maybe gets. Yeah, that's it.
- [78:21]
Peter McCormack
You can say. I know what you're about to say. You can say it.
- [78:23]
Colin
No, no, I don't. I don't know. I don't even know what I was going to say.
- [78:27]
Ben
You've had a lot better guests.
- [78:28]
Colin
Yeah, we probably get into the economics a little more, but you've had a lot better guests on your show than I have.
- [78:33]
Peter McCormack
So, yeah, I'm the tabloid version. You're like the ft.
- [78:38]
Colin
I don't know about that, man.
- [78:39]
Peter McCormack
Listen, guys, massively appreciate you coming on. Really enjoyed this. This is really awesome. Look, best of luck to you both. If you ever want to come on again. You got any other stories you want to tell, please just reach out to me. Anything I can do for you, just let me know. I'm very grateful to have had your time today.
- [78:54]
Ben
Thank you so much. Peter.
- [78:57]
Peter McCormack
Okay, so what do you think of that one? Do you enjoy that one? Do you understand the gold standard and what people talk about when they refer to a bitcoin standard? Was this useful? I think Ben and Colin did an excellent job of breaking this down. They're really complicated events. They did a perfect job walking me through this, so massive thanks to them. Now, bitcoin is full of people who are fans of Austrian economics and libertarians, so you will often hear about the gold standard and the bitcoin standard. So it's really useful to look at the facts around what happened when the gold standard was abandoned, what the economic impact was. So if you haven't checked out the website, do head over to WTF happened in 1971.com it's in the show notes as well. Worth taking a look at. It's probably worth having an open when you're listening to the show. Anyway, I hope this was useful for you. If you do have any questions, you know you can reach out to me. It's hello or what bitcoindid.com and as I said in the intro, if you need any additional content. If you want to check anything else out, please do check out my other show. It is available at different clients news, other podcast interviews and videos I've been making are there. Stay safe out there. Stay healthy. Mind, body, spirit. If you want to talk to somebody, you can reach out to me. My email address is hello or what bitcoindid.com.