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Robert Breedlove and Cory Klippsten: Swan Signal Live E22

Posted 8/7/20 by Brady Swenson

In Episode 22 Cory Klipp­sten (CEO of Swan) and Robert Breedlove (CEO of Parallax Digital) joined our host Brady Swenson to discuss how Central Banking steals human time and corrupts human values. They also discuss Nassim Taleb’s ideas, ancient wisdom, and the future of the world under a Bitcoin standard.

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Summary

0:00 Preshow

4:34 Intro­duc­tions

6:30 Rob’s writing–Masters and Slaves of Money

12:04 Bitcoin settles basic arguments

14:47 Central Banking steals human time

21:23 Corrup­tion in the existing finan­cial system

26:44 Fragility in the existing finan­cial system

32:44 How to avoid reces­sions without money printing?

42:07 Valuing human life and ancient wisdom

54:11 Fiat incen­tivizes uneth­ical and unhealthy behavior

1:04:58 Bitcoin and the future of scale and work

1:24:28 Bitcoin fractional reserve banking?

1:31:06 Next writing for Rob and wrap up

Transcript

Brady Swenson:

All right, we are live. Welcome back to Swan Signal Live, episode 22. I’m hyped for this one, guys. We’ve got Cory Klipp­sten, founder of Swan, and Robert Breedlove, writer of some fantastic pieces and CEO, CIO of Parallax Digital, but before we get into the episode I want to let you guys know what we’ve done here at Swan.

Brady Swenson:

Swan Bitcoin is, of course, the producer of this podcast, and we have built the best way to accumu­late bitcoin slowly and surely over time with automatic recur­ring buys. It’s really simple. You just connect your bank account and auto-fund USD. We automat­i­cally stack bitcoin for you, and then you can set up automatic withdrawals to your wallet if you’d like to do so.

Brady Swenson:

We do that with very low fees for recur­ring purchases in the industry, absolutely low fees, as low as we can get them. 57% lower than Cash App and 80% lower than Coinbase, so if you are on Coinbase making recur­ring or onetime purchases right now, absolutely get yourself over to Swan and save yourself some money, some sets. You can also join our referral program, the Swan Force.

Brady Swenson:

When you join Swan Force you’ll get a custom URL and a landing page. You can put a message there, you can put your beautiful face there, an avatar, and each person you refer will get $10 of free bitcoin and you will stack 25% of Swan’s fees for three years. It is a fantastic deal. You can get out there and get paid to recruit new bitcoiners. All right, let’s get into this episode. Welcome, Cory. How’s it going, man?

Cory Klipp­sten:

It’s great to be here, and I’m ecstatic to be on here. I haven’t been on in a while, so good to take the time, and I’m glad that I get to hang with Rob on this one. It’s going to be awesome.

Brady Swenson:

Awesome. Rob, how you doing, man?

Robert Breedlove:

Doing good, Brady. Nice to see you, Cory, and glad to be here again.

Brady Swenson:

All right. We’ve got a lot to get into today. Both of these guys are huge Taleb fans. Have studied the material thoroughly, and we will be getting into some of the ideas and philoso­phies of Nassim Taleb today, but first, we’d like to dive into Rob’s most recent piece, Masters and Slaves of Money. And this is really an explo­ration of an idea that Rob had laid out already for us in lots of tweets, and has been talking about on podcasts and shows. It is that basically the Fed Reserve and the fiat regime is, amounts to time theft, and so, Rob, I’ll let you take it away and talk about this master­piece of writing that you have put together here for us.

Robert Breedlove:

Thank you very much. I think it’s really commonly misun­der­stood. People think infla­tion is a natural phenom­enon in an economy, and those of us that are deeper into bitcoin I think clearly under­stand infla­tion for what it is. It’s a mode of theft, and it’s also, I like to say that counter­feiting is the illegal form of infla­tion and infla­tion is the legal form of counter­feiting. They’re the same thing. You’re producing basically a redemp­tion certifi­cate for what was money, like it was for gold, and that redemp­tion was revoked over time, so this has a really perverse conse­quence in that it creates …

Robert Breedlove:

Those that monop­o­lize the produc­tion of money basically become defacto currency counter­feiting opera­tion, so the piece goes deep into that. It goes through a probably familiar history with aggry beads that was explored in the Bitcoin Standard. It also discusses another ancient form of money called panos, which is a cloth strip form of money used in Ancient Africa as well, and in both instances they were essen­tially techno­log­i­cally disrupted by people that use it more efficiently, but this, and a lot of people made this point. That it was just a technical, techno­log­ical disrup­tion, but it bled over into something much more immoral.

Robert Breedlove:

They actually started to use the counter­feit money to acquire slaves, and it was panos and aggry beads specif­i­cally. Aggry beads later became known as slave beads, because they were instru­mental in the Transat­lantic Slave Trade, so I’m making the case that before bitcoin there was this huge incen­tive to monop­o­lize the produc­tion of money, and I think that’s essen­tially the impetus for the existence of central banking today.

Brady Swenson:

Cory, do you want to follow up on that? Any thoughts and reaction to Rob’s thoughts?

Cory Klipp­sten:

Yes. I obviously agree, and it’s a great piece. Thanks for writing. I wish I had your stick with it attitude when it comes to writing, putting out these longer pieces, but I’m glad you do. What you were just talking about obviously was reflected in your piece, and it also reminded me of, I’m still making my way, I’m about halfway through the Ethics of Money Produc­tion, and so if somebody’s looking for another leg down the rabbit hole on that I highly recom­mend that book. I think Stephan Livera initially recom­mended to me. It’s really, really well done and it’s an easy read, and it weighs out this case very clearly as well.

Cory Klipp­sten:

I think we’re headed toward a much more just world wresting control of the printing press away from govern­ments, or at the very least providing a check on their excess, because of the threat of exit, finan­cial exit from their populace, so that’s I often talk about a brighter orange future and we created a whole show about that. That’s really what I’m looking for out of bitcoin. There’s a lot of different ways we can get into that.

Robert Breedlove:

I make the case that money is tidal to human time, so in the same way that a stock certifi­cate is tidal to company capital, that money is essen­tially redeemable for time. A lot of people have touched on this, like Misir has written about it. I’ve written about it a little bit, but under­stood intuitively from that stand­point is if you have access to a printing press that can just generate these tokens that are redeemable for human time ad infinitum, that you basically become a slave master. And through that lens it’s almost as if true capitalism were never even possible for bitcoin, because there’s always such a tempta­tion to violently coerce and monop­o­lize the market for money, that there’s always a social­istic element to ever economic system before bitcoin, so I think we’re really …

Robert Breedlove:

The more I think about it, I think we’re actually going to get past this capitalism socialism frame­work into something almost entirely new, to say more a pure form of capitalism where no govern­ment or entity can actually, you can’t monop­o­lize bitcoin neces­sarily. That race has already been run. There are people that hold a large portion of the network, but you can’t monop­o­lize its produc­tion and you can’t manip­u­late its supply, and that’s just a game changer for any organi­za­tion.

Cory Klipp­sten:

I love this idea that bitcoin will settle two thirds to three quarters of arguments that you had freshman year and college, where it just seemed like, well, there are reason­able people could disagree about this, and no, it’s actually bitcoin and its spread is going to create all sorts of new facts on the ground that will just be accepted about human nature, about the way societies and economies work. And there will be other edge case areas of contro­versy that we then argue about, or other things that are still left over, but so many big ideas will just get settled for good. In favor of reality, in favor of praxi­ology and hard money, and shared recog­ni­tion. Not shared belief, and all these different things that appear now to be true and will just spread.

Robert Breedlove:

Yes. I love that. I love that bitcoin’s making the Keyne­sian versus Austrian economics, making it a real market test, instead of this philo­soph­ical debate. I think it’s doing the same for capitalism and socialism, and just honestly I think we’re going to rewrite the books a little bit. I don’t think that all the Austrian frame of refer­ence is very useful here. I don’t think it fully captures what bitcoin repre­sents. There’s never been something that just completely breaks the incen­tive surveil­lance more or less, and I think we touch on it a million times, but the book, the Sover­eign Individual, probably paints the best prospect for what that could look like, but we really have no idea. I think this’ll be regarded as a neo enlight­en­ment or renais­sance type event 500 years down the road. I know Brady touches on that a lot, but I think it’s pretty apt.

Brady Swenson:

Yes. The dawn of the bitcoin renais­sance, and I think it is true. I think it’s a huge claim, but like we talk about a lot here as bitcoiners, money is the founda­tion of society, and if the founda­tion is shaky, if it is able to be manip­u­lated and debased, then you have ripple effects through the rest of society and human behavior. And collec­tively that leads to societies that are not optimal and certainly not capable of producing a renais­sance-like era, so I think with bitcoin we’ll see individual and collec­tive changes that will lead to a renais­sance of sorts in the coming decades and centuries.

Robert Breedlove:

I could maybe jump in a little bit, so I mentioned the aggry beads, came to be known as slave beads or panos, they were instru­mental in this Transat­lantic Slave Trade, and just to give you an idea from a quanti­ta­tive stand­point how big of a deal this was, so the data that I found, it was a 365 year episode essen­tially, and there were over 12 and a half million human lives basically stolen. This is direct stuff, so 12.5 million people left the shores of Africa and landed on European or American shores as slaves.

Robert Breedlove:

This all occurred between the years 1501 and 1806, and that number does not include all of the second order conse­quences, right? Clearly, they had kids when they came here, who were born in slavery and all this, so just looking at it from an hour’s stand­point, which I use to draw compar­isons to other systems of slavery. If you assume that every slave labor is about 5,000 hours each year, and they had a roughly 40 year working life, we’re talking about over that 365 year period 6.8 billion human hours stolen per year for 365 years straight, for a total time theft of 2.5 trillion hours.

Robert Breedlove:

Just a massive atrocity, and again that doesn’t include their kids. It’s really sick, and it was all made possible or facil­i­tated, because of this ability to violently coerce and monop­o­lize money at the end of the day. Had there been something like a bitcoin back then, which clearly is not possible, it just would have drasti­cally reduced the incen­tives for any type of opera­tion like that to be carried out. There would have been no economic disrup­tion that would have led to this usurpa­tion of their human time, form of slavery, so it’s disgusting.

Robert Breedlove:

I think bitcoin, as I draw later similar­i­ties to, the central bank system that we operate under today, if you can print money that everyone else is forced to use you’re effec­tively confis­cating their time, so while it’s a less overtly violent and visible system of time theft it is still the same type of mecha­nism, essen­tially. And terribly, when you actually run the numbers, it’s a much larger scale on a per year basis. I think the numbers were 23 and a half billion hours stolen per year for the past 40 years by just the Fed. That’s not looking at other central banks, and that calcu­la­tion was done by taking the average annual wage rate and then the annual changes in M2, so how much human time was the Fed printing essen­tially?

Robert Breedlove:

It’s just inter­esting. That’s why I think the moniker pyramid scheme for fiat currency is correct, because it is this hierar­chical system of network marketing where the monop­o­lists at the top are basically confis­cating from those lower down, and we’ve seen systems like that in the Transat­lantic Slave Trade. We saw systems like that with the actual construc­tion of the great pyramids, and to me it’s just the deeper I look the more I see bitcoin as something funda­mental to breaking this habit, if you want to call it, of people enslaving people. It just breaks the whole method.

Cory Klipp­sten:

Carry this forward to the last four and a half months, and obviously we’ve seen a massive accel­er­a­tion of money crunching and handouts, and it’s already almost in order of magni­tude larger, almost 10X what it was in 2008, 2009. Why have we not seen massive protests over this? Why have the populace not learned their lesson about where this goes? What has the govern­ment pulled off this time around that let them get away with money printing to this degree? The six to eight trillion on the road to double digit team trillions over the next year. How’d they get away with it this time?

Robert Breedlove:

I think we would all agree here that the true nature of money is there’s a deep ignorance surrounding it, right? I said this the other day. Gold is a tool so old that many of us forgot why it even became money, right? Really, most people think today that the govern­ment paper in their pocket is money, but as we all know it’s basically an un-collat­er­al­ized debt under­going slow motion default while it’s being forced on the popula­tion, and I think this time, they’ve always been able to pull the wool over peoples’ eyes, because it just sounds good I think. Printing money, sure. How would more money not solve the problems we’re having in the economy, right?

Robert Breedlove:

When there’s a liquidity crisis or a debt crisis money solves those things in a first order of thought process, but again I think in the digital age, I hope, I think people are wising up to this a little bit. A lot of this aware­ness is centered around the bitcoin movement, but this time we did see helicopter money, right? We did see the checks going directly to people with Trump’s signa­ture for 1,200 bucks.

Robert Breedlove:

I think they’re just preying on ignorance, as they always have, but now the monetary and fiscal response has become increas­ingly exotic, so I think the last I looked at the numbers was a $3 trillion expan­sion. Equaled roughly 130, over 130 million house­holds is roughly $46,000 per US house­hold and each US house­hold got an average of $2,400, so the delta there of 46,000 less 2,400 went to Washington and Wall Street. I think they’re just buying passivity and preying on ignorance, but I hold out hope for the digital age.

Robert Breedlove:

I think people are going to wise up to this, and I make the point in the essay that central­ized currency counter­feiting opera­tions, they just cannot stand the constantly galva­nizing gaze, which is ever present in the digital age. I think people just learn a lot of faster, but I guess the verdict’s still out on that one.

Cory Klipp­sten:

Yes. We’ve definitely entered a bread and circuses stage of the empire. Don’t know if we’ll stay here and make it worse and go to collapse, or bounce back and recover something. I think in the middle of all of the noise, even if you took bitcoin out of the equation, the US system in partic­ular has proven to be pretty resilient and may have found its way back from the abyss, and not go full Roman, but it does seem like we’re in that stage. We’re arguing over things at the periphery.

Cory Klipp­sten:

They’ve been doing handouts like crazy. They found an incred­ible mecha­nism by which to end run the money printing, which was to use the commer­cial banks to hand out the money directly to small businesses. Essen­tially, every­body’s complicit, and can’t complain about the handouts to the banks and private equity firms, and Citadel and whatever else, because they’re sitting there with their other hand and actually taking the money. So almost nobody really has the moral authority to complain about the money printing right now, because they are, as you noted, distrib­uting it and that money is meaningful, even though it’s only 5% to 10% of what the banks are getting, so it was a genius move.

Cory Klipp­sten:

It’s essen­tially the same move that you see with anyone that wants to just bribe some people with a little bit, and then go and do something horrible over there off stream, but it does appear that there’s never been a system in history that something like this, longterm techno­log­ical effects leading to defla­tion aside, this will lead most likely to near term infla­tion. It’s just, you saw the Fed news came out this week and it seems like people are pointing toward a 4% sort of target. Try to deflate this dollar away, or inflate this dollar away and make our debts easier to pay off, because there’s no other way out. They can’t let the assets deflate and they’re just going to try to keep this thing on the rails somehow.

Robert Breedlove:

That’s right. The fiat currency pyramid scheme is a debt based system, and you have to feed it more and more leverage to keep it sustain­able at the time. That’s been the life history of every fiat currency today, right? It just inflates slowly ideally for a long time, and then finally it explodes in hyper­in­fla­tion, but I think you touched on something else that’s inter­esting, that actually is favor­able for the dollar. Is this fiat currency system we have world­wide, it incen­tivizes debt accumu­la­tion, because real debt burdens are slowly being eroded by infla­tion, and that’s what created the Eurodollar system, right?

Robert Breedlove:

We have this second order dollar deriv­a­tive system, if you will, world­wide, where people have created these dollar denom­i­nated debts to finance themselves, to not be exposed to lesser curren­cies, and this has created a ton of demand for dollars, so that when we see these situa­tions where like a COVID strikes and economic activity collapses, the demand for dollars actually escalates, because people are trying to fly to safety. There’s less dollars to service debts, there’s less revenues to cover debts, so I actually think that the Eurodollar system constrains infla­tion to a great degree, but which gives the Fed this false sense of security to print into it.

Robert Breedlove:

They’re just pedal to the metal, so to speak, on currency counter­feiting or US M2 produc­tion, which to give you an idea of the numbers, I think the last three trillion, we’ve produced three trillion in the past four, five months. Three trillion prior to that, so it goes four years, so we’ve increased, we’ve accel­er­ated 12X roughly on US M2 produc­tion, and that demand for dollars globally in the Eurodollar system I think will keep the US dollar viable for longer than it other­wise would, but it’s just like we said about bankruptcy or every fiat currency goes.

Robert Breedlove:

It’s gradu­ally, then suddenly, and who knows where that tipping point is? It doesn’t seem like you could keep economic activity muted for much longer and not see just gigantic infla­tionary pressures, which absent bitcoin they would have probably been able to keep the scam going, but now that there’s a barom­eter, right? A true barom­eter that’s not being manip­u­lated like gold is, and an exit patch, the behind door B if you will, I think this decade is going to be defining for bitcoin. This is what it’s been designed for. This is what we’ve all been beating the drum about for years. Watch out for this type of event. Global pandemic notwith­standing, but whatever the event was that triggered the collapse and here we are, so I think it’s a very exciting time to be in this space and I think you guys are in a great space.

Cory Klipp­sten:

I actually want to poke at the COVID notwith­standing element, and I think this’ll be a nice bridge into getting into some Taleb with you, because the system’s response in how it’s played out with the pandemic is really just exposing how fragile the system was to begin with, and this goes for politics, this goes for infra­struc­ture, this goes for CDC and WHO, this goes for how decisions are made at the top down, and the confu­sion between states and federal, and the willing­ness of a popula­tion to band together and wear masks or not for whatever reason. Things like that.

Cory Klipp­sten:

We’ve shown by the drop in GDP in Q2, if you want to just use numbers, that our system was very fragile to, not even a black swan, something that was bound to happen and isn’t even anywhere close to the worst it could have been. This thing could have been more virulent, it could have had worse effects, it could have affected young people more. This isn’t even the worst pandemic that you could conceive of by a long stretch, and it’s done this kind of devas­ta­tion to the US and our economy, so I don’t like to divorce it.

Cory Klipp­sten:

I think it’s just the symptom of a fragile system that was ignoring these shocks and just surfing along with our 2% or 3%, or one and a half percent for the last decade GDP growth, ignoring the fact that we were essen­tially short a call option basically. Somebody, the pandemic was going to be able to cash that in and just stomp us out really hard at some point, and that it was predictable that, that could happen, and this is the type of stuff that Taleb loves to talk about. Rob, how do you view the events of the past six months? It’s actually been six months basically, since Taleb’s first research that he put out about COVID, and likely impact on the global economy in late January. How do you see it through a Talebian lens?

Robert Breedlove:

I think, first of all, it’s very clear that the economy is fragilized by the incen­tives related to fiat currency, which again are driving us into debt accumu­la­tion and away from savings basically, and just using your economic intuition it makes sense to have a rainy day fund put aside for when the unexpected happens, as it inevitably does, but we’ve perverted that incen­tive struc­ture by trying to manip­u­late the nature of money essen­tially, and I think it … I view the entire COVID situa­tion as a highlight of the short­com­ings of the top down nation state model. Gladstein made a great argument about this.

Robert Breedlove:

That it actually became a global pandemic, because of the state response. The fact that China was muting the story, the fact that they continued to allow flights in and out of Wuhan, I think the tune of six or seven million people coming in and out of Wuhan while the pandemic was unfolding, basically gave it an incuba­tion period to become a global virulent situa­tion. I think we’re back to this, Taleb would call this maybe ancient wisdom or whatever.

Robert Breedlove:

Just people need to get out of their own way. We need to be humble enough to recog­nize that we can’t manage complex systems. The best we can do is try and position ourselves to benefit from the intrinsic volatility of the future. Over time, the unexpected happens. That is an irrefutable aspect of reality. What we cannot do is try and manage those changes. What we can do is try to position ourselves to benefit from the volatility and minimize our loss, so I think as general invest­ment point there is make sure the risk of ruin is nil, right?

Robert Breedlove:

Always manage the downside first, before managing the upside, and that one and a half percent GDP growth we’ve experi­enced over whatever the past decade, again, that’s what the central bank is trying to do. Is manage us to a number, right? Low infla­tion, low unpre­dictable infla­tion, low unpre­dictable unemploy­ment, steady GDP growth, so we’re trying to use human inter­ven­tion to manip­u­late a complex system, such that it has less volatility, but what that inevitably creates is delayed and exacer­bated volatility, so this last liquidity selloff, it was entirely unprece­dented in terms of its speed and sharp­ness.

Robert Breedlove:

If you plot it next to the 1929 liquidity collapse, it’s almost an order of magni­tude faster and sharper down. Not sharper down, but faster. It was just so quick, which is a testa­ment to how inter­con­nected the world has become, so looking at it through the bitcoin lens I think we just really start to see the short­com­ings of the top down state and the need for more local­ized, dynamic response.

Robert Breedlove:

Another thing we saw in New York, where the guy was selling masks at a markup, and the state came in and arrested him, and did all this stuff. That’s how markets resolve supply and demand discrep­an­cies, right? Is through the price signal. That guy had access to masks and he was selling them at a premium, and people were willing to pay it. Well, he was satis­fying a want, but again we have the state inter­vening, spending taxpayer resources to manip­u­late the market, even at that scale. I struggle to see where the state adds benefit throughout a lot of this.

Brady Swenson:

One thought that I have, and I think bitcoiners have been talking about quite a bit, or even new coiners who come in, is the question that’s common is how can the govern­ment, the federal govern­ment and the federal bank, how can they help to limit the downside risks of natural capitalist cycles if they can’t print money? This is the main tool, aside from interest rates, to osten­sibly limit the downside effects, and I think this applies to the idea of anti fragility and fragility. The Keyne­sian belief that we need to try to manage that downside risk leads to anti fragility, as opposed to the opposite side. Cory, do you want to start on this one?

Cory Klipp­sten:

Sure. One of the good things is we do have hundreds of examples of local and national societies that have gone through long stretches of not actually irrespon­sibly printing currency. In fact, we had a pretty nice stretch in this country from founda­tion through 1913, 1933, 1971, whatever you want to consider your cutoff is, where essen­tially the people who shaped the nation and laid down the protocol for the United States were all pretty much of the view that we’re lost as soon as the ability to print money just becomes abused essen­tially.

Cory Klipp­sten:

In fact, some of them just were very eloquent in the late 1700s and 1800s about never going off of hard metals. That it should always be that way, and these notes that we carry in our pocket that are now backed by nothing, as we know, if you hang out on bitcoin Twitter at all, they used to say that they were redeemable for silver, and that goes away and here we are.

Cory Klipp­sten:

I think you have the method by which govern­ments have always raised funds to complete their opera­tions, which is taxation, and that is what you’ll go back to, and will tax people based on trans­ac­tions or based on income or whatever it is, and you’ll right­size govern­ment to be held in check by the people who actually pay for the govern­ment and serve the govern­ment, and the govern­ment will not be able to steal from those people. It’s just infla­tion is just taxation without repre­sen­ta­tion. Money printing is taxation without repre­sen­ta­tion.

Cory Klipp­sten:

We had revolu­tions over this. We had the revolu­tion over this and we need a new revolu­tion over this, and we actually are in the middle of it right now and we’re all partic­i­pants. If you’re on this podcast or watching this, listening to it, you’re part of the bitcoin revolu­tion and this is the best tool that we’ve had. We were just lost, people that were gold bugs or the lone person in their freshman econ class reading about Austrians. You were lost and there was no path forward, but we do now have this tool that’d perfectly fit for the moment and has every­thing that we need to get it done, and let’s just get it done.

Robert Breedlove:

I think that’s perfectly well said. The princi­ples on which this country were founded are almost perfectly embodied in bitcoin, right? Just money that can’t be stolen. It’s a market you can freely enter or exit. It’s an amazing techno­log­ical manifes­ta­tion of American ethos, and that’s why I always am beating this drum I call gold or bitcoin monetary capitalism at central banking compared to central banking, which is monetary socialism, and people get into the weeds about that’s not socialism. This is socialism, but at the end of the day I just say it’s capitalism means you have the right to see the fruits of your labor, socialism meaning the state has some, a greater or lesser right to the fruits of your labor.

Robert Breedlove:

I think, to answer the question about what can govern­ments do if they can’t print money? I think it’s very impor­tant, even when we say printing money, it’s a euphemism. You’re creating more debt, and what you’re actually doing when you’re ‘printing money’ is it can only do one thing, and that is create wealth inequality. It reallo­cates wealth from some and allocates it to others. You’re not creating any new wealth. Wealth being the capital we create or in the process of econo­mizing human action. Nothing new is coming into existence when you’re creating new paper dollars or new entry at the Federal Reserve’s database.

Robert Breedlove:

There’s no new wealth created, which is a very common fallacy, so in that sense printing money, it can only create wealth inequality. Now, is that justi­fied? There’s a whole lot of nuance there. Who are you taking from? Who are you giving to? What is the purpose? I would say in general, no matter which way you cut it, it’s antithet­ical to capitalism, because if someone has an ability to siphon wealth stealthily out of your back pocket, that’s not engaging in a free market trans­ac­tion.

Robert Breedlove:

No one consented to that. Taxpayers don’t consent to that. Users of dollars don’t consent, so I like to actually say that, I forget the quote. Every tool is a weapon if you hold it right, so I think maybe printing money has some useful­ness. Essen­tially managing money supply. Maybe it did, but I don’t think it has fitness in the modern age. It just doesn’t make sense to steal from someone and give to others, and something Cory touched on was there were exper­i­ments done with free banking, I think it was in Scotland, 18th and 19th century, and they showed a lot of success.

Robert Breedlove:

It was just freely compet­i­tive banking. It wasn’t, there was very minimal state control and inter­ven­tion. It wasn’t a long exper­i­ment, because of some conflict with England I believe, but there was some promise shown there, so we have a little test tube for what a free banking system could look like. The rest of it’s just theoret­ical, because frankly govern­ments have always comman­deered the banks. Just it’s the means of control, and I actually say this in the piece.

Robert Breedlove:

Contrary to the common refrain that money is the root of all evil, or love of money is the root of all evil, that money is actually the root of all sover­eignty, so it gives us the authority to act as we see fit in the world. So I think in a hard money world where people are incen­tivized to hold savings, that wouldn’t be as relevant of a question. What can govern­ments do to resolve economic calami­ties? I think just it would be much less relevant of a question, because people will be figuring it out at the local level.

Robert Breedlove:

Markets will be adapting dynam­i­cally in realtime, making do with what they have, and so it’s inter­esting, because we all, as people that have lived under this fiat paradigm for 100-somewhat years, we almost have to question our a‑priori assump­tions. How are we, when we say printing money, what are we talking about? Is that an actual thing that should exist? Is it morally good? We take it as the norm, do you see what I’m saying? And there’s a number of things like that, but to Cory’s point, America laid down this protocol justly.

Robert Breedlove:

That’s what the princi­ples of the country were founded upon, and the imple­men­ta­tion of the central bank violated that. That’s when we got back. We had basically respect for private property rights, respect for the fruits of your own labor in the US. That’s what we were giving rebel­lion to, tyranny, to create a system based on that, and then we imple­mented after a number of, I think two failed attempts, central bank got through and insti­tuted itself to get back to violating peoples’ private property rights via money printing, so I think we really are fighting. In fighting for bitcoin, we’re fighting for an American ideal.

Cory Klipp­sten:

Yes, it is inter­esting. It is the re insti­tu­tion of the monarchy essen­tially. They have the divine right to print money and take from the people, right? Do we have to do this every 150 years basically? Hopefully, it won’t take that long.

Robert Breedlove:

No, and you see like I think Krugman on TV recently, these guys, they even present themselves as the high priest of moder­nity, right?

Cory Klipp­sten:

Yes.

Robert Breedlove:

They’re talking with their fancy jargon, saying we need to increase infla­tion here, to tweak this and pull this lever, and it’s all bullshit. They’re all, the trans­la­tion is we need to steal more money from you, because we overspent.

Cory Klipp­sten:

Yes, and not only that, we pulled consump­tion forward by about 30 or 40 years, and gave it to ourselves today. Just screw the rest of you.

Robert Breedlove:

Enter gener­a­tional dispos­ses­sion, I think, Taleb calls it.

Cory Klipp­sten:

Yes. He’s got some inter­esting points about, we don’t often talk much about society type level things, and I think it is inter­esting though. He had a podcast that he just went onto last week, that I think you and I both listen to, where he just talked about respect for elders and how some of these older cultures that have lower time prefer­ence just have that passed down cultur­ally with stronger tradi­tions than a young country like the United States have. It’s not even in the realm of discus­sion that you would have a conver­sa­tion around the worth of a life, or let’s sacri­fice some old people, so the kids can go back to school and things like that.

Cory Klipp­sten:

It’s off the table. It’s not polite discus­sion. It’s not in the overtone window. It’s not. It’s just a cultural given in most of human society throughout history that you look up to the elders, that you protect them, that you do every­thing you can. There’s no price at which you would feel comfort­able, because of the shame, and being essen­tially exiled from your family and your local society, and having to move if you espoused the kind of views that we see every single day in the Western world now. In partic­ular the countries of the Common­wealth and the United States, so it’s inter­esting. This is an aberra­tion in human history, to have this much disre­gard for our elders.

Robert Breedlove:

I agree. One thing he touches on, how he puts it in his book, he’s like don’t listen to consul­tants. Listen to your grand­mother, kind of thing. It’s almost like the wisdom that’s been filtered through a number of gener­a­tions tends to be more reliable than neo sort of, what is it? I forget what he calls it, but where you have consul­tants creating fancy charts and graphs saying this is how you should run your business, versus just using common sense that you’d have got from your grand­mother.

Robert Breedlove:

You’re on better footing listening to your grand­mother than consul­tant, so just that, and I would argue too, that quantifi­ca­tion of human life. That itself is a byproduct of this scien­tism that we have, and it really is at the founda­tion of Western civiliza­tion. That we think, we view the world as material reality. We think every­thing is materi­alist, quantifi­able, can be managed. That’s why we’re trying to manage the economy, manage the weather, all this stuff. Damming rivers.

Robert Breedlove:

Granted, this has some, it’s propelled us to a place that’s unprece­dented, right? We’re having a Zoom call right now. This is an amazing techno­log­ical innova­tion. It gives us the ability to grip nature and partic­u­larize it in a way we never before could, but I think it does come at a cultural cost, and when you’re reducing human life to a number or a row on a spread­sheet, as he says, that the system starts to dehumanize and deper­son­alize people. You get to that Stalinist thing where one death is a tragedy and a million are statistic. We all become statis­tics to the central­ized planning committee for the state, and I like that argument as well.

Robert Breedlove:

When people try to argue about intrinsic value of an economic good I’m quick to shoot that one down, which I think everyone under­stands that all value’s subjec­tive, right? It’s whatever your aims and desires are, the tools and imped­i­ments along your path have different values based on what you’re trying to accom­plish, and that’s always changing based on the motiva­tional signif­i­cance of what you’re trying to do, so I always, especially in bitcoin, a lot of these people come out of the woodwork like, “It doesn’t have any intrinsic value,” so you can just crush that one easily. I think Conner Brown wrote a good piece on that as well.

Robert Breedlove:

One domain where I think intrinsic value is true is human life, and possibly life more gener­ally. I’m not a vegan or anything. I eat lots of beef, but I think we should try and respect life as much as possible. Respect our environ­ment, respect our world, and it’s exciting to me that I think bitcoin has the promise of taking this back that direc­tion actually. There have been studies done at the UN, that once your per capita GDP gets above a threshold, I think it’s $5,000, people start to become naturally environ­men­tally concerned or environ­men­tally conscious, because you have the luxury to do so.

Robert Breedlove:

All of a sudden, if all your needs are met you’re relatively comfort­able. You’re accumu­lating some savings. You’ve got a job you like. Then you can start to set your sights on higher ideals, right? Or whether it’s artistic aim, or spiri­tual aim, or environ­mental aim, so I do see bitcoin as reinvig­o­rating this free market economy will actually push us back to a head space where hopefully we’re going to be more respectful of our elders. Of life in general. As I’ve said before on Brady’s podcast, that’s why I see this resur­gence of ancient wisdom, right? It’s getting us back to our roots. Not just bitcoin, but the internet more broadly.

Cory Klipp­sten:

I want to pick this apart just a little bit, because I think one of the most impor­tant things that Taleb by fits and starts is bringing back into the discus­sion is that it’s not a choice between economic success and optimiza­tion, or culture and respect for human life, or not maximizing every­thing through a super tight, over optimized supply chain, or whatever. That actually some of the biases and heuris­tics that the white paper­back authors, the Thalers, the Sunsteins, the Gladwells, et cetera, which was basically my world for a decade or more, going to school and just thinking about how stupid humans are, and you learn all these tricks in finance.

Cory Klipp­sten:

It turns out that most of that liter­a­ture is just basically throw­away. It’s little tricks and fun things or whatever, but the heuris­tics and the biases and the way that our mind works, and the fact that we have two kidneys and that we gener­ally care about our families, and all of these things that are passed down through the gener­a­tions are actually the best thing for the economy too, so it’s not a choice between one or the other.

Cory Klipp­sten:

Not wanting to get stocked out and have to create new cities, because you completely abused the environ­ment and the one that you’re in is actually econom­i­cally sound to give up a little sliver of GDP growth today, to make sure that doesn’t happen, or … There’s a million different examples like this. I don’t know what it would have cost to just do certain things like keeping cash aside or not have it all committed, or whatever it is. These downsides.

Cory Klipp­sten:

It seems like when assets fall, and we talked about this before, when assets fall it seems like the advice that you always see is have cash aside, so you can buy assets on the cheap, but what the cash is usually for, for 99% of people, is not that. It’s so that you don’t have to sell all the stuff that you have into a down market. It’s really the safety margin, the margin of safety. That’s why cash is in trash, and that’s why I think it’s just awesome that we have so many people buying bitcoin now, and we’ll under­stand it very quickly in this country.

Cory Klipp­sten:

It seems like it’s going to be pretty clear by this time next year, that while it’s a volatile asset it is a store of value. We’ve got, it’s been above the all-time high in the Argen­tine peso for quite some time now. These last couple of weeks it jumped above the all-time high in Turkish lira. It’s about 10% over its peak in December 2017 now, so there are a lot of countries around the world with people waking up to, wow, that thing worked, didn’t it?

Robert Breedlove:

Yes. 100%. Taleb describes natural systems as, he says nature doesn’t over optimize, which I think is what we, the consul­tants, and again, the scien­tism of the world, we try to squeeze every last drop of efficiency out of every system in the world, but what that does is make you super fragile to volatility. So in a supply chain, if you’ve got one path super dialed in and it’s the cheapest path, and goods are flowing great, but as soon as one kink in that chain is broken then the whole thing comes unrav­eled, so nature, instead of just having one kidney, one kidney goes out and you’re dead, we’ve got two, right?

Robert Breedlove:

We’ve got backup, so we’re bifur­cated in a lot of ways, and it seems to me like in a lot of domains people are wising up to this. That nature is much smarter than we are, right? Brandon Quittem talks about this with the slime mold, right? They’ve figured out the Tokyo Railway System more efficiently than the entire committee of planners spent millions of dollars once trying to do, so nature has this, the deepest wisdom. Nature, of course, it does. It’s been around longer than any of us by defin­i­tion.

Robert Breedlove:

Anything that exists now in nature has had strategy, has survived count­less gener­a­tions and filtra­tion, so I think we’re wise to take a step back, look at our social and economic systems, and try and mirror the intel­li­gence of nature. I think that thread is woven throughout Taleb’s writings, right? Is that you just need to get out of your way, get back to your roots. There’s a reason we have all these heuris­tics.

Robert Breedlove:

They’ve served us, they’ve survived for a long time, so you’re in that Lindy effect domain, where if something has made it this far that is testa­ment to its utility, right? It’s very unlikely to be disrupted quickly, which is inter­esting with the gold. That’s why bitcoin is so inter­esting, because gold is in my opinion a funda­mental tool to human organi­za­tion still, right? It under­pins central banking. Central banking runs the world, right? You pull that carpet out from under central banking, all of a sudden, it’s much less relevant, and that’s what bitcoin is doing.

Robert Breedlove:

It’s a digital technology disrup­tive to this ancient monetary sover­eignty layer called gold, which is just crazy to think about. You’ve got gold’s Lindy effect versus bitcoin’s order of magni­tude superi­ority in monetary proper­ties going head to head, and that’s really, really inter­esting. And a little more broadly, again, I think we’ll look back on this age in 500 years as, whatever, the digital renais­sance, digital enlight­en­ment. I think some people were calling it the great awakening.

Robert Breedlove:

It’s hard to see it when we’re living it. Things just feel chaotic and crazy, but I really think digital tech is rapidly changing human lives in a way we barely under­stand, and bitcoin is the latest and greatest test to the disrup­tive poten­tial of digital tech. Can it disrupt the oldest and most signif­i­cant tool in the world today, gold? That’s the battle being fought, and as we all know the rabbit hole is incred­ibly capti­vating.

Cory Klipp­sten:

I have an inter­esting thought, so once the telephone became widely spread it became pretty clear that the telephone was more impor­tant than the telegraph, right? Even though you couldn’t have the telephone without the telegraph it had to come first, and then once the internet came along it’s very clear that, that’s a more impor­tant innova­tion than the telephone, but it never happens without the telecom­mu­ni­ca­tions network, right?

Cory Klipp­sten:

It were internet born late ’60s, spread commer­cially early ’90s, we’re only not even 30 years since then, bitcoin’s spreading. By the year 2030 or 2040, when we look back at what bitcoin is, are we going to look at that quaint, ad driven atten­tion economy internet and say, well, that was a nice little stop on the way to the thing that really matters, and bitcoin will just be so much more impor­tant than the internet?

Robert Breedlove:

I think we probably all agree that we think there’s at least a strong possi­bility of that happening. Saifedean said this – he thinks that maybe the internet was actually, will be regarded as, as you said, the stepping stone to bitcoin. Bitcoin is one of the most brilliant ideas we’ve ever had, basically, as a species. I talk about this in the piece, that market compe­ti­tion is a process of discovery, so we’re constantly trying to figure out better ways of satis­fying wants, and we’re doing that by betting against one another, right?

Robert Breedlove:

That’s what your business is and every­thing else, and that the net outcome of that is the best ideas rise to the service and those entre­pre­neurs that develop them, they have and incen­tive to sell them into the market, so the innova­tion becomes the fuse and it just builds itself in layers, layers and layers. And I think that bitcoin, it’s probably, maybe the best idea humanity has ever had, and I’m looking into this now. I’m reading a bunch about ancient ideas, but it’s really inter­esting to think about it that way, and then this is a little bit of a tangent, but I wrote about this in the piece as well. I think this is very impor­tant.

Robert Breedlove:

That, because we have monetary infla­tion under­pin­ning our economic system, which is basically as you said Cory, it’s taxation without repre­sen­ta­tion, what I would say is it’s just theft. Infla­tion is theft. It’s a non-consen­sual trans­ac­tion. It actually has the inter­esting effect of corrupting the morality of market actors and market partic­i­pants, and I give this example in the piece of the winemaker operating in a centrally banked economy, so there’s a guy that makes wine, typically sells his wine for $20 a bottle. He knows that his central bank, they just doubled the money supply to ‘save the economy’, and so he basically has three choices.

Robert Breedlove:

He can keep selling his wine for $20 a bottle and will take a 50% haircut in post infla­tion dollars, right? He can water down his wine or user cheaper ingre­di­ents, so start selling his customers an inferior product, but at the same rate, say $20 to preserve his margin, or he can mark his wine up to $40, so that he’d receive the same value for his wine in post infla­tion dollars. So, because there’s monetary infla­tion in the economy, even if he’s a good, a truthful, honest guy and chooses to mark his wine up to $40 and sell it at full quality, he’s going to face compe­ti­tion with people that are willing to compro­mise on quality, or water down their wine.

Robert Breedlove:

Infla­tion actually incen­tivizes dishon­esty. It incen­tivizes you to defraud your customers, and this becomes like an infec­tious disease in our economy. It really corrupts the character of who you are, because you’re forced as a market partic­i­pant to weigh your economic wellbeing against your moral integrity, right? Am I going to defraud my customers? It could be very marginal and small. Maybe I’m putting one ounce in my whole bottle of wine. Who’s going to notice? It’s no big deal, but it’s these little accre­tions of theft that …

Robert Breedlove:

When he deceives his customers, all of a sudden, they’re getting less value for their money, so they’re incen­tivized to defraud their customers, so on and so forth, so again back to bitcoin being this major break­through. We’ve never had a monetary technology with a guaran­teed 0% terminal infla­tion rate, and if infla­tion is the source of this moral cancer that’s riddling our world, then bitcoin could be this, not only a pragmatic break­through, but a moral break­through, and that’s getting back into the renais­sance. What kind of enlight­en­ment does this usher in?

Cory Klipp­sten:

Bright orange future one might say. No, but it is inter­esting. Obviously, I’ve done a lot of work in corpo­rate America pre startups and pre bitcoin, and yes, you see studies constantly and come across compa­nies all the time that are just looking, they do both really. They raise the prices and they try to cut the costs, and then they also try to lever up as much as possible, and this is because that’s the playing rules in front of them, because if they don’t do it their competi­tors will, and they will get the talent, and they’ll get the investors, and they’ll get the higher stock price, and it all just …

Cory Klipp­sten:

They’re playing the game according to the rules that’ve been set forth. This is the protocol and you’re playing, and it requires you to go and put as much cornstarch and subsi­dized soybeans as possible. Corn syrup or whatever, and market the health of aspar­tame and saccharin, because those are actually super cheap to get it more sweet than sugar, even though they have horrible effects on people, et cetera, et cetera. And we’ve been watching this play out in the food supply and with the obesity crisis, which made us fragile to COVID for the last, since the ’60s.

Cory Klipp­sten:

Since they got a hold of the recom­men­da­tions and stopped them in Congress with lobbying, and put out the food pyramid, instead of the one that was going to say, liter­ally, the crossfit paleo recom­men­da­tions was what was initially in there. It was lean meat, nuts, fruits, some carbs. They replaced it with all this snack food. It’s just hilar­ious.

Robert Breedlove:

Yes. That’s a great point. I think from that starting point, where you have the moral infec­tion weeding out into society, fiat food, that’s a great one, right? We had this, again, another govern­ment pyramid scheme by the way, right?

Cory Klipp­sten:

Liter­ally.

Robert Breedlove:

Food pyramid, and the fiat food, like we’re seeing now that these high sugar, high carb diets, they contribute to a wide assort­ment of autoim­mune diseases, so if you look at the charts of autoim­mune, we have all … There’s many autoim­mune diseases out there, and a lot of them go undiag­nosed. A lot of them, they don’t know really what causes them, so in the tradi­tional medical commu­nity, if you have one of these things, I actually had a mild one at one point and my doctor says, “We don’t know what causes it. We don’t know how to fix it, but fortu­nately it’s mild and you just live with it.”

Robert Breedlove:

That was his answer, and so that got me actually into researching the carni­vore diet and the paleo diet, and I was able to self heal myself just by changing the diet, and so there’s a perverse effect there where you’ve got a fiat currency creating this incen­tive schema to defraud your customers, which leads to fiat food, which leads to autoim­mune disease, a preva­lence of autoim­mune disease, which leads to this every doctor in the world shoving prescrip­tion medicines down their patient’s throat, right?

Robert Breedlove:

Just whatever problem you have throw a pill at it, and we fuck ourselves up. I don’t know how else to say it, but we … And you just look at, as Taleb would say, looking at us moderns versus the ancients. We’ve come a long way in a lot of techno­log­ical respects, but we have regressed signif­i­cantly in many cultural and health respects, family respects. Like the nuclear family is being torn apart.

Robert Breedlove:

That’s very popular for us in bitcoin, to root all this in fiat currency or we say bitcoin fixes this, but I really think, not to say that it’s the sole source of all these problems, but it is a contrib­utor to many things, many aspects of moder­nity that we don’t like, but people don’t yet under­stand, so I do think that is the art of the game right now. Is finding a way to artic­u­late that and develop empir­ical proof for it. Say no, this is … Do you guys listen to the Weinstein Podcast, the Portal?

Cory Klipp­sten:

Yes.

Robert Breedlove:

There’s this episode with him and Peter Thiel, and they keep going back to, they’re going down this whole gamut of things that went wrong somewhere in the early ’70s. Things started to get weird, right? Like admin­is­tra­tors in the univer­sity were getting more polar­ized, and educa­tion was getting worse, and scien­tific innova­tion started to collapse, and all the while I’m sitting there thinking how do these guys …

Robert Breedlove:

These are supposed to be one of the smartest, two of the smartest guys in the world, no one has even brought up the fact that maybe it has something to do with the Nixon shock in 1971. If you go and check out the guy’s website –heavily armed clowned and whatthefuckhappenedin1971.com – it goes through that whole dataset. It’s crazy. I think it’s really crazy, and if it’s even half true we’re going to look back on this whole fiat currency thing as sourly as we do commu­nism. It’s a really bad exper­i­ment.

Brady Swenson:

Yes. I tweeted earlier this week, about how I think that we’ll look back, histo­rians, future histo­rians will look back and mark this era along­side histo­ry’s greatest atroc­i­ties. Robert, you were talking about time theft, and we can only imagine the time theft that has occurred, because of the infla­tion, like you said, over 100 years or so. Jeff Booth, who was on Swan Signal last week, and his book, Price of Tomorrow, talks about how we should have been in this defla­tionary, techno­log­ical defla­tion should have us working in a much different way, right?

Brady Swenson:

Much different hours. Maybe not even at all, and dedicating ourselves to our passions and perfecting our artisanry. There’s a question actually related to this in the YouTube chat from James, and he’d like to know how do you think bitcoin will change the way we work in the future? And I think we can also then talk about a topic that Cory wanted to get into, about scale trans­for­ma­tions. How bitcoin will change the way that we scale, the way that our gover­nance scales from top to bottom, and maybe makes us more of a local­ized culture again.

Robert Breedlove:

Yes. Real quick on the defla­tion thing. I think Jeff Booth’s work is great. I keep going back to the words, because I think people, there’s a lot of euphemisms in economics, and infla­tion-defla­tion’s a big one, right? Many of us are operating under the fiat illusion, if you approach someone on the street and said, “Hey, do you prefer infla­tion or defla­tion?” I think most people just lean towards infla­tion. It just sounds better, right? Of course, you want things to inflate and get bigger, and the economy bigger. It’s a growth oriented term, when in fact it’s as we all know, it’s stuffed, right?

Robert Breedlove:

Defla­tion I think in the same respect is a poor euphemism for, it’s just produc­tivity enhance­ment. That’s why we’re all trading in the first place. Prices are designed to go down. Prices being the exchange ratio of any one good to another, right? Money being the most marketable of those goods. You would expect other goods, by compar­ison, to become cheaper over time. That means we’re becoming smarter as a society. Our knowl­edge is becoming more special­ized, so the fact that we’ve tricked an entire planet into thinking infla­tion is good for the economy is a testa­ment to the magni­tude of the con artistry of central bank, in my opinion.

Robert Breedlove:

I beat that drum, because I think we have to fix the language. We have to get people under­standing what this means, and yes, to your point, especially recently, techno­log­ical defla­tion or produc­tivity enhance­ment has created this giant surplus, and you see it in things that are further away from the state or closer to a pure tech industry, right? Like prices of electronics and software’s going to come down over time, but it’s creating this surplus that central banks and govern­ments are just feeding on. They’ve been feeding on it through fiat currency. I listened to that pod the other day, that woman, I don’t know her name. Sarah something, that’s an advocate for MMT, and she’s saying that-

Cory Klipp­sten:

Sounds like Stephanie Kelton probably.

Robert Breedlove:

Stephanie, that’s right. Infla­tion doesn’t matter, because every deficit, you’re monetizing a deficit, but it doesn’t matter, because every deficit is someone else’s surplus. I’m like you’re stating it right there. Entre­pre­neurs are creating an economic surplus doing the real work in the real world, and then bureau­crats and central bankers are harvesting that surplus through fiat currency infla­tion. I think it’s we’re trying to de-parasite ourselves in the modern world. That’s what bitcoin repre­sents.

Cory Klipp­sten:

Yes. That is very inter­esting. I think the games from playing politics and playing social games are just going to decline relative to doing real produc­tive work, and producing goods and services that people actually want to exchange their highly valued bitcoin for more and more. People are going to seek this hard money and want to earn it over time, or very quickly exchange the remnants of their fiat for it over time and it’ll just get, it doesn’t even need to take over the whole, take over. It doesn’t need to eat fiat’s $90 trillion broad money lunch right out of the gate.

Cory Klipp­sten:

All you need to know is enough people need to know that they could very quickly exchange their fiat for bitcoin, and their decisions of what to do with that fiat start to hit a bitcoin hurdle, an expected value of bitcoin. Right now, it’s really diffi­cult to pry fiat out of bitcoiners hands, because, whether it’s for a car or for lunch, or for a date or whatever, because we have this expec­ta­tion of appre­ci­a­tion, but that continues, even if you just think that it’s going to hold its value and just go up by a little bit.

Cory Klipp­sten:

Knut Svanholm is thinking more and more many decades out, and has a great point. Even when bitcoin reaches stability, it’s going to grow in value a little bit each year, just along, because it needs to serve the needs of growing produc­tivity. Growing GDP, and that’s going to be a positive feedback cycle too, because you’re going to have more produc­tivity, which means a higher bitcoin price, which means more money that you’ve saved for investing in capital.

Cory Klipp­sten:

The whole system is more efficient, because the whole globe is using the same protocol for economic activity, so even when bitcoin hits Murad’s magical 10 million a coin, it’s going to be 10,200,000 next year. In 2020 dollars, so I think that’s where we’re headed. I think we’re headed toward the opposite of cash is trash. It’s cash is king and the hurdle rate for, the costs for malin­vest­ment, because there’s going to be nobody to bail out, and because you’re going to have given up some of your bitcoin is just going to make people think they’re going to have skin in the game for real. You have bitcoin in the game.

Robert Breedlove:

Yes. You’re restoring account­ability to the economic order, and that’s all central banking was designed to do. Was heads I win, tails you lose, right? You just take the risk on everyone else’s back and never really suffer any conse­quences, or be held account­able for the decisions. That’s basically what works, and I think I … Bitcoin’s inter­esting, and I go into this a little bit in the piece, but it’s the closest thing we’ve ever had to economic perfect infor­ma­tion, so I vacil­late on this.

Robert Breedlove:

I don’t know if bitcoin’s going to take decades to play out, or if it’s all going to play out this decade, especially the way things are speeding up now, because at some point, if the price model continues to adhere to its prior growth pattern, or especially if it adheres closely to the stock and flow model for an entirely other cycle. The incen­tive to front run the antic­i­pated adoption of bitcoin becomes a self fulfilling prophesy, right? Which Satoshi called out way back in the begin­ning, so I think that’s a really inter­esting thing to keep a close eye on. How closely is bitcoin adhering to our expec­ta­tions of the time? Because at some point there is an inflec­tion point.

Robert Breedlove:

As it becomes more mature, bitcoin appre­ci­a­tion rate, if it’s a total maturity, you would expect it to increase roughly equal to the value of the produc­tivity in the global economy, so that becomes your new hurdle rate for value investing. So I think bitcoin’s also going to have this, bring us back to value investing, which is completely out the window today. All the economic ratios and prices are just completely distorted beyond imagi­na­tion right now, and to you point, we talked about how infla­tion is infec­tious to the moral character of people with the parable of the winemaker, but I think the opposite is also true.

Robert Breedlove:

That if we move to a money that is premised on proof of work, that it does actually, it influ­ences your character. Of course, you become more account­able and harder working. There’s no other way to create value in society than to do something that people want, to satisfy peoples’ wants. You can’t go out and get close to the fiat currency spigot, and make a few polit­i­cally favored friends, and get a bailout. You can’t steal from people as easily, so you have to go back. You’re incen­tivized to go and be an honest worker, an honest contrib­utor to society, so it’s exciting.

Robert Breedlove:

And I think the other point I make in the piece is that we’ve learned in the 20th century that free speech is the check on despo­tism. We have to have free speech, such that we can let our ideas go to battle, so that our bodies don’t have to. We can resolve things in intel­lec­tual space, so we don’t have to do so in kinetic space, and you really drill down into what speech is.

Robert Breedlove:

It’s rooted in the Logos, which is the Greek term for word or ratio, and in that sense words are our primary commu­ni­ca­tion tool in the intel­lec­tual domain, but prices are our primary commu­ni­ca­tion tool in the economic domain, so I really think that we learned this lesson about freedom of speech in the 20th century, in the intel­lec­tual domain, and now we’re going to learn this lesson again in the domain of prices, which central banks have totally bastardized.

Robert Breedlove:

It’s a restora­tion of free speech, to move back, to move away from a centrally planned monetary model, and in that sense it’s I think bitcoin digs the grave for despo­tism, and it really is disrup­tive to the tyranny of central bank. It sounds grandiose, but I’m trying to pick this argument apart every day and one inter­esting thing I’ve found recently is I used to google and research bitcoin detractor arguments pretty actively. It’s always going to see who’s smart thinking contrary to what I was thinking? How are they formu­lating their argument?

Robert Breedlove:

I don’t know what you guys are finding, but I don’t find, there’s no smart people out there with really strong arguments against bitcoin anymore. It’s become like maybe it’ll work a little bit at the margin. That’s probably the worst you’re going to get, so I see it changing the nature of who we are at a societal level slowly, but surely.

Cory Klipp­sten:

Not going to find any disagree­ment there. I did just have a thought and I don’t want to leave us exposed as being monetary theory total noobs, but we do have to remember MV=PQ. Going back to the Knut argument, and it could also just be that the friction was nature of cash that lives on the internet. Just lets us whip these stats around the globe way, way easier, and essen­tially velocity goes way up and you don’t need quite as much monetary value, so that is one thing that may fly out in the far future.

Robert Breedlove:

I actually have heard that argument and I think there may be some merit to it, but the one thing it will never do is reduce uncer­tainty.

Cory Klipp­sten:

That’s true.

Robert Breedlove:

Money is an insur­ance policy against uncer­tainty. There will always be a demand for that.

Cory Klipp­sten:

I think we’ve also seen that it’s so good at job one store value. That you’re going to have Hodlers for the next few centuries, as long as we’re still alive on this planet, and they’re going to be sucking up more and more of the supply. And you may be running the global economy on 500,000 coins that are actually floating around, and the rest are just being Hodles, so …

Robert Breedlove:

That’s right. There’s that old, getting back to ancient wisdom, an old Jewish axiom that you should maintain a third of your wealth in land, a third of your wealth in your business and a third of your wealth in cash, and I think we’ll probably got that sort of direc­tion again, where we have 300-whatever-50 percent debt to GDP. That number’s going to collapse, and then maybe it works out to about that, a third each. A third bitcoin, a third land, third equities.

Cory Klipp­sten:

Sounds good. Sounds like a good target alloca­tion. Some of you have some work to do, getting up to 33% bitcoin, dammit.

Robert Breedlove:

Someone asked the question. I don’t know if I answered it or not, but forgot what it was.

Brady Swenson:

Yes. Well, we were going to talk about the future of work, right? How will bitcoin … Work, and also the way we govern our … Cory had the docket, talk about scale trans­for­ma­tion. Do you want to take it, Cory?

Cory Klipp­sten:

Yes. We can just talk real quick about scale trans­for­ma­tions and then just do a little brain­storm there, because I didn’t prep thoughts on that, but it’s essen­tially that the way we organize ourselves or the way that functions are organized in society are different depending on how many people are involved and what the scope of the organi­za­tion of the system is, so we’re all essen­tially totally comfort­able being socialist in our own home with our nuclear family, and close to it with our extended family. I just think of giving my cousin a sandwich is like giving myself a sandwich. There’s just no differ­ence there at all, right?

Cory Klipp­sten:

Then you start to expand out a little bit, and maybe in your town, because you have to live with these people all the time, and you don’t want to hang the rich dude out to dry and put a target on his back, so you do something like pure democ­racy, because there’s only a few hundred people in town, so it’s one person, one vote. Then you go much bigger and you get to states and nations, and little by little what you usually end up doing is, if you want to do it right, you end up setting it up more like a protocol with fewer and fewer, less and less oversight, and less and less central­ized control.

Cory Klipp­sten:

You can be a head of a house­hold and you can be a mayor of a town, but you don’t want one dominant person dominating every­thing at the nation level, and you certainly don’t want anyone with power at the global level. So Taleb would say you should never have organi­za­tions like the WHO and the UN, and that any sort of one omnipo­tent power over any aspect of the entire globe is just an absolute ridicu­lous under­taking that is bound to have second, third order effects signif­i­cantly worse than what is probably a misguided attempt at positive first order effects in the first place.

Robert Breedlove:

Yes, we touched on it a bit earlier, where to you person, right? In your home, someone else, and then as you scale out from that at the extreme other end you’re just a ruinous spread­sheet at best, to the Word Health Organi­za­tion or even your own federal govern­ment, so in so far as I guess bitcoin, it demon­e­tizes those insti­tu­tions that really engage in that large, the scale trans­for­ma­tion, right? Just a federal govern­ment I think becomes much less relevant than a bitcoinized future, because there’s just no way to adequately fund themselves, right?

Robert Breedlove:

You’ve got direct taxation and infla­tion, and if all of the real services of the govern­ment are being provided at the local level, why am I going to fund a large central­ized group 3,000 miles away to oversee? I don’t know that it goes completely away, but it’s without a doubt smaller than it is today, because again it doesn’t have that avenue, confis­cate well. One of the other, this touches on one of the other euphemisms that I don’t like. Is it’s very common in macro to call countries sover­eign. A sover­eign currency. Bitcoin’s a non sover­eign currency.

Robert Breedlove:

I don’t partic­u­larly like that, because it only gained the name of the sover­eign, because it basically confis­cated all of the self sover­eign money. It sits on top of the horde of gold and silver, and all these things, and that’s what gives it the authority to act in our lives as it does, so along the same lines of intrinsic value. I think that sover­eignty, and this is consis­tent with national law, that sover­eignty inheres at the individual level, and then where we vote, what we buy with our dollars was a contribu­tive piece of that to the insti­tu­tions that make sense, but in the current model it’s just been there’s a backdoor on it.

Robert Breedlove:

That we’re being stolen from, so the other thing I think to look out for in bitcoinized future is all the things we’ve touched on before, that govern­ments are forced to compete. That naturally forces them to have a better product offering, right? They actually have to listen to their customers. Again, that process of market compe­ti­tion, it incen­tivizes you to be honest. It incen­tivizes you to defer to customer prefer­ence, instead of being a federal govern­ment that dictates what’s going to happen.

Robert Breedlove:

That you actually have to listen to your customers, strange as that may sound, I know. You actually have to curate your business model to suit the people that are using it, to the self sover­eign actors that are engaging with the business, so I think we tilt that direc­tion, and then again just we’ve never lived in a world with something like bitcoin that so dramat­i­cally compresses the economics of violence.

Robert Breedlove:

Just when you’re running an honest business model and there’s the economic incen­tive, is to maintain a longterm relation­ship with people, who are the producers of wealth, by the way, in a knowl­edge based economy, right? That’s what’s creating value in the world, and you can’t steal from them. You can’t go and conquer them, horde their central bank. All of a sudden, all these, there’s a lot of downward pressure on violence in the world, and I would say that’s the great hope of bitcoin. Is just a more civilized, less violent future.

Brady Swenson:

We have a question from Brandon. He asks do they think that fractional reserve banking in a bitcoin denom­i­nated world is a bad thing? And if so, how would you propose to stop it? Who wants to take this one?

Cory Klipp­sten:

I’ll take a crack at that. It’s neutral in my view. You’re going to see people try all kinds of different ways to organize banking based on bitcoin, and some of them are absolutely going to try fractional reserve, but my expec­ta­tion would be that the market will tell them that they want to see exactly how much bitcoin they actually have, and proof of reserves on chain using something like Caravan, or something like that, and showing exactly what their lending ratio is. The way it used to be.

Cory Klipp­sten:

You used to be able to see exactly what your local bank, you were usually a share­holder in your local bank, in your town back in the day, and it was a commu­nity bank. You were fine with Joe building his house over in Potter­ville or whatever, because you knew that they had plenty of reserves and it was going to be fine, so I don’t think you’re going to stop that from happening. I think you’ll just see exper­i­men­ta­tion with different models and different lending ratios, and I think it’ll be much, much, much more account­able, because there’ll be no central bank backstop­ping them by printing more bitcoin.

Robert Breedlove:

Yes, I agree completely. Rehypoth­e­ca­tion and fractional reserve banking was only able to exist, because of the poor infor­ma­tion systems related to money basically. You’re just trusting your local warehouse guy. Say that he’s got as many ounces on deposit as said, or your local banker, that he hasn’t lent out the same stash of money twice. That does not hold up in a world where crypto­graphic certainty is possible, so I think the market will decide. I’m sure.

Robert Breedlove:

People are already trying it, by the way. There’s rehypoth­e­ca­tion. I think, shout out to Friar Hass. He ran some numbers on this recently. The base on I think it was the Grayscale Numbers and the Cash App sales volume alone, that it was almost guaran­teeing that rehypoth­e­ca­tion was already taking place. That we’ve seen the net issuance didn’t cover what was being repre­sented, so you’ll have to check me on that, but businesses are already trying this, but I think in the long run you’ll see those businesses get busted in certain events, right? Whether it’s a liquidity collapse or a margin call that they can’t make good on, or whatever.

Robert Breedlove:

I think those business models will be compressed, and you’ll see things like unchained capitals doing the multi signa­ture custody, where you hold the piece of the key and you can see it, and can do ll the things against it. I think business models that more closely emulate the trust minimized nature of the bitcoin protocol will succeed, and this fractional reserve banking stuff will just get annihi­lated. That’s one of the core value props of bitcoin, is global incident final settle­ment, so why would you tolerate a fractional reserve bank or a guy saying, “Hey, just trust me, I’ve got the bitcoin,” versus crypto­graph­i­cally verifying? That’s one of the big ethos in the space. Don’t trust verify, so I think the market will go that way.

Cory Klipp­sten:

It’s funny. I was just thinking about this, because I had a quick little discus­sion with some vocif­erous young club bitcoiners that were very angry about a token being sold by the gaming company, that some of the Liquid Block­stream guys invested in or advising, or whatever. Essen­tially, they’re going to peg their in game currency to bitcoin, and it’s redeemable for bitcoin at a fixed rate forever or something like that, and these little reser­voirs of people taking bitcoin supply, taking it out of circu­la­tion and essen­tially saying hey, take it to the cashier’s window at the casino and you’re going to get some chips out. And you’re going to play in your Fortnite ecosystem or in your DeFi ecosystem, or whatever it is.

Cory Klipp­sten:

Fine. Great. Yes, best asset ever. Why wouldn’t you do that? Of course, you should take the bitcoin and lock it up or put it in a vault, or whatever, and whatever you can do creatively to serve customers and deliver what they want. You’ve got the best form of collat­eral in the history of man to be able to do that, and you will 100% for the next half millen­nium see people do shady shit with that balance.

Robert Breedlove:

I agree with that.

Cory Klipp­sten:

And it will absolutely be up to the market, and to the partic­i­pants, and to the customers to police that, and to make their own judgment about do they trust the person that says that they have this bitcoin? And are you going to require of them, will the market require of them to prove that they own the bitcoin, and what are going to be the different businesses and services?

Cory Klipp­sten:

This is where my mind just blows up being a startup operator and investor. All of these different pieces of infra­struc­ture that have to be created to facil­i­tate all of the different ways that the world will work once it’s more bitcoinized. It’s one of the reasons I love bitcoin in ventures, because right now we’re investing in bitcoin startups, but this thing flips in four or five years and we invest in startups started by bitcoiners.

Robert Breedlove:

Yes.

Cory Klipp­sten:

You know, and it just goes bananas, because they’re going to be the people that actually see the future. They see where the puck is going, and their business ideas are going to be more inter­esting and more valuable, and higher poten­tial than anything else out there.

Robert Breedlove:

I agree. You’re right. The incen­tive to rehypoth­e­cate does not go away, so you’re in those … Whoever can get away with that stuff in an endgame currency or whatever, they’re almost certainly going to do it, and for better or worse it’s going to take the collapse of those schemes to signal to the market that this doesn’t work, right? Customers, again, will start to demand certainty. We’re a long way from that, so I agree. You’re probably going to see a lot of the schemes being perpe­trated between here and now or now and then.

Cory Klipp­sten:

Brady, you’re on mute.

Brady Swenson:

It’s been an awesome discus­sion, guys. We’ll wrap it up with a question from YouTube, who he’s asking Rob what mind bending piece are you working on devel­oping?

Robert Breedlove:

One thing about Masters and Slaves of Money, I promised a lot of people it was going to be my 10 minute read, and it came in at whatever, 36 minutes, so my apolo­gies. I am working on a piece right now that, I hesitate to say this, but will be 10 minutes. 10 minute read or less, and it’s got the tenta­tive title, Our Most Brilliant Idea. I touched on this earlier, but I think bitcoin might be the best idea human beings have ever had, and that’s a big claim, so it’s trying to poke that and test it, and figure it out all in less than 10 minutes. That’s what I’m working on.

Brady Swenson:

No pressure, man. An easy lift. Easy lift or up. Awesome, guys. Thanks so much. Awesome to hear you guys, for sure. Had a lot of fun as well. You guys can subscribe to our YouTube channel, if you’re not already, youtube.com/swansignal. You can also find our new show, Bright Orange Future, Cory and his real life bro Matt Garrity, GenX brothers. They riff on music, life and the cultural effects of bitcoin. It’s really different than any other bitcoin pod out there.

Brady Swenson:

Matt is not steeped in the eco chamber like a lot of us are, so asks a lot of inter­esting questions and brings that perspec­tive. Plus, there’s lots of topics besides bitcoin brought up. It’s a really fun show. It’s at brightorangefuture.com. That’s where you’ll find the podcast, and like I said, it’s on youtube.com/swansignal. And finally, you can go to swanbitcoin.com/breedlove to get $10 of free … Shout out to Robert Breedlove, and thanks for supporting us on bitcoin.

Robert Breedlove:

Yes, thank you guys. You guys are doing great work. Thanks for having me.

Cory Klipp­sten:

Appre­ciate it, Rob. Thanks man.

Other Episodes

Episode 8 –Andy Edstrom and Ansel Linder

Episode 9 –Rockstar Devel­oper and Jeremy Rubin

Episode 10 – Bitcoin TINA and CK Snarks

Episode 11– Gigi and Knut Svanholm

Episode 12 –Adam Back and Preston Pysh

Episode 13 –Alex Gladstein and Matt Odell

Episode 14 –Robert Breedlove and Tuur Demeester

Episode 15 –Isaiah Jackson and Max Keiser

Episode 16 –Gigi and Udi Wertheimer

Episode 17 –Aleks Svetski and Jimmy Song

Episode 18 –Stephan Livera and Marty Bent

Episode 19 –Mark Moss and Ben Prentice

Episode 20 –Samson Mow and Parker Lewis

Episode 21–Lyn Alden and Jeff Booth

Links

Swan Bitcoin

Cory Klippsten

Cory on Twitter

Cory on Linkedin

Ten Million Bitcoiners –Cory’s Writing

Delete Coinbase in 3 Easy Steps –Cory’s Writing

Robert Breedlove

Breedlove on Linkedin

Breedlove on Twitter

Breedlove on Medium

The Number Zero and Bitcoin –Robert’s Writing

An Open Letter to Ray Dalio –Robert’s Writing

Masters and Slaves of Money –Robert’s Writing

Other

Nassim Taleb on Twitter

Nassim Taleb on Wikipedia

Nassim Taleb’s Incerto Series

Wtfhappenedin1971.com

This blog offers thoughts and opinions on Bitcoin from the Swan Bitcoin team and friends. Swan Bitcoin is the easiest way to buy Bitcoin using your bank account automatically every week, month, or paycheck, starting with as little as $10. Sign up or learn more here.

Brady Swenson

Brady is the Head of Education at Swan Bitcoin, the best place to buy Bitcoin with easy recurring purchases straight from your bank account. Brady also hosts Citizen Bitcoin, a podcast focused on documenting his journey learning Bitcoin, featuring some of the biggest names in the Bitcoin world.

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