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Saifedean Ammous and George Gammon: Swan Signal Live E23

Posted 8/20/20 by Brady Swenson

This week Saifedean Ammous, legendary author of The Bitcoin Standard, and George Gammon, Rebel Capitalist, joined Swan Signal live to discuss gold, central banking, the deval­u­a­tion of curren­cies and how Bitcoin is going to suck value out of every store of value. George and Saifedean connected well and needed nearly no prompting for a lively discus­sion hosted by Brady Swenson, Swan Bitcoin Head of Educa­tion.

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Summary:

0:00 Intro­duc­tion

1:59 Micros­trategy holds Bitcoin on balance sheet

8:32 Bitcoin vs Gold

15:01 Bitcoin vs Real Estate

21:07 Infla­tion’s conse­quences

29:00 Nation-state responses to Bitcoin

41:01 Histor­ical transi­tions between curren­cies

55:28 Fed Coin as compe­ti­tion

1:02:02 Which country will adopt Bitcoin first?

1:05:43 How will Bitcoin narra­tives change?

1:15:57 Closing thoughts

Transcript

Brady Swenson:

Welcome to the Swan Signal podcast, a produc­tion of Swan Bitcoin. The best way to accumu­late bitcoin with automatic recur­ring buys at swanbitcoin.com. Swan Signal pairs great guests for compelling discus­sions and this week we have author and educator, Saifedean Ammous and George Gammon, host of The Rebel Capitalist Show. Pairing up great guests is a unique format in the bitcoin content space and has produced some incred­ible content so far. In my opinion, Swan Signal absolutely deserves a spot in your rotation. So subscribe today if you’re not already. Glad you found your way here. Hope you enjoy.

Brady Swenson:

Hello and welcome back to Swan Signal live, a produc­tion of Swan Bitcoin. Swan Signal is a weekly show that pairs up great guests for compelling discus­sions about bitcoin and economics. I’m your host, Brady Swenson, head of educa­tion at Swan. But before we dive in, a quick word about the service we provide here at Swan. We’ve built the best way to accumu­late bitcoin with automatic recur­ring buys. It’s a very simple setup. One, you just connect your bank account to auto fund USD.

Brady Swenson:

Two, we automat­i­cally stack for you. Three, you can set up automatic withdrawals to your wallets. We do all this with very low fees in the industry up to 80% lower than Coinbase, absolutely crushing Coinbase and up to 57% lower than Cash App for automatic recur­ring purchases.

Brady Swenson:

Today, I have some big news for you all. We are launching our Daily Buys beta. We’ve had a huge demand to add Daily Buys to our weekly, bi-monthly, and monthly purchase frequen­cies. So we’re about to roll that out. You can sign up at swanbitcoin.com. Just add your email address, click get started to be added to the beta list or you can DM us on twitter @SwanBitcoin.

Brady Swenson:

We have about 400 out of our thousand Daily Buys beta slots filled up, so get in there. All right. I’m really excited to welcome our guest to the show today. First, we have the inimitable, Saifedean Ammous with us today. He’s author of a staple of the bitcoin canon, of course the Bitcoin Standard and he’s an economics educator researcher. You can find Saif’s work at saifedean.com. Saif, welcome to the show, man.

Saifedean Ammous:

Thank you very much for having me. It’s always fun to join you, Brady.

Brady Swenson:

All right. And we have finance and wealth manage­ment YouTuber, host of The Rebel Capitalist show and investor, George Gammon with us today as well. You can subscribe to George’s channel at youtube.com/georgegammon. Gammon is G‑A-M-M-O‑N. Welcome, George. How’s it going today?

George Gammon:

Doing very well. Thank you very much. I appre­ciate you having me on the show.

Brady Swenson:

I really appre­ciate your time. Okay. Let’s dive in and get started with the big news from yesterday that bitcoin Twitter is a buzz about the news that MicroS­trategy announced that they made a $250 million bitcoin purchase. Black­Rock, the largest asset manager in the world and Vanguard, the largest provider of mutual funds in the world, both hold a signif­i­cant stake in MicroS­trategy. The two of them together hold over 25%.

Brady Swenson:

So it seems likely that they had prior notice of this buy and if so, that means that these two finan­cial behemoths just essen­tially approved a massive bitcoin buy. The MicroS­trategy stock price is up around 15% on the news. So that means I’m sure that other CEOs are taking notice. We’ve also seen in the past few months big macro investors are publicly announcing their bitcoin positions. Paul Tudor Jones, Raoul Pal, Lyn Alden who we had on the show recently.

Brady Swenson:

For instance, Raoul Pal recently tweeted that bitcoin is the future and is wildly under­priced. So George, let’s start with you on this one. What do you think of these devel­op­ments and their impli­ca­tions for bitcoin?

George Gammon:

Well, I’d have to go with Lyn Alden. She’s my partner in Rebel Capitalist Pro. So anything she says, I’m definitely going to go along with because she is definitely one of the smartest people I have ever met in my life without excep­tion. But I think the best infor­ma­tion I can give you is just some insider infor­ma­tion right here from St. Barts and I came here maybe three weeks ago because I wanted to find a place in the world where I could just go to the gym or I could go to the beach where things were as close to normal as you could find.

George Gammon:

And if your viewers or your listeners have never been to St. Barts, it’s right in the Caribbean. It’s basically like Monaco. So there’s 9,000 people on this little island and it’s extremely affluent. I mean 90% of the people here are in finance. They’re hedge fund managers, they’re invest­ment bankers, they’re straight from Wall Street. This is the group that you were basically just mentioning. And I’ve gone to several social gather­ings, let’s say. And you’re having drinks with the guys just saying, “What do you do?” I’m not going to mention any names, but a lot of the people that I’ve met here, you’d recog­nize from CNBC, you’d recog­nize from Bloomberg.

George Gammon:

I would say pretty much every single one of them that I spoke with after a few drinks, we ended up talking about bitcoin. So you can take that for what it’s worth and I don’t really know what’s going on as far as the news. I don’t know what’s going on with this company or Black­Rock, but I do know that every hedge fund manager I’m talking to here in St. Barts after a couple drinks. That’s where the conver­sa­tion goes.

Saifedean Ammous:

Great. Tell them about my book.

Brady Swenson:

Yeah. It’s a great place to start for sure. It’s widely recom­mended. Saif, what are the impli­ca­tions here for bitcoin. I’ve got a follow-up after this, but I’d like to hear just your initial thoughts.

Saifedean Ammous:

I think it’s quite signif­i­cant because a lot of people have spent the last few years discussing bitcoin from the perspec­tive of payments and retail adoption, and the idea was when am I going to be able to pay for my coffee or for my McDon­ald’s with bitcoin? The point that I made in my book in the Bitcoin Standard is that bitcoin is not competing with Visa, with Master­cards, with all these payment methods. Bitcoin is not an alter­na­tive to these things. It doesn’t compete with them. It’s orthog­onal to them. You can install all of those things on top of bitcoin.

Saifedean Ammous:

Bitcoin is competing with the actual assets that are being traded on these networks. It’s competing with the curren­cies, with national curren­cies and with gold as a form of money and as a store of value. I think this devel­op­ment bears it out and of course it’s absolutely massive. It’s $250 million of bitcoin, which is not chump change. I mean, it’s a large company that makes about a half a billion dollars of revenue a year.

Saifedean Ammous:

It’s a company that has a signif­i­cant cash balance and it has reached the conclu­sion that the best thing for us to do with the signif­i­cant part of our cash balance is to hold some bitcoin. Somebody dug up there, I think it was the investor letter from a few weeks or a few months ago where they had discussed… I’m not sure if it was a confer­ence call or the letter, but they discussed their cash position and they said, “Our outlook on our cash position is becoming negative now because of all the devel­op­ments of the last three months with the coron­avirus lockdowns and so on. They have a negative outlook on their cash position and now we see that they’ve acted upon that and they’ve replaced part of their holdings of US dollar cash with bitcoin and I think a lot of people are going to see the benefit of this.

Saifedean Ammous:

I think really this is how bitcoin adoption happens. Bitcoin is going to become part of people’s cash balances and if it continues to work, if it continues to operate and it continues to appre­ciate, it’s going to become an increas­ingly signif­i­cant part of other people’s cash balances partic­u­larly as other curren­cies continue to lose value more and more over time. So the phenom­enon I described in my book is that in the long run, value accrues to the hardest money. I think Microsys­tems recog­nizing that, I think is I find it to be very exciting because it’ll be inter­esting to see what happens when more compa­nies really do that.

Saifedean Ammous:

I mean, if we look at bitcoin’s average perfor­mance over the last 10 years, I think it’s gone up. Last time I ran the numbers, it was maybe 500 or 400% per year on average. So if bitcoin has an average year for bitcoin next year, every company is going to pay atten­tion because this move is likely to end up being more profitable than anything else the company has done. I think that just shows the value propo­si­tion for investing in an alter­na­tive to central banks. The market is telling the world, invest in this central bank alter­na­tive that works well.

George Gammon:

I think that-

Brady Swenson:

Go ahead, George.

George Gammon:

I’m sorry. I don’t know the format here, but just to dovetail on that thought, I think going back to the people that I’m speaking with who are the profes­sionals, short term, I think it’s more of a specu­la­tion, and I don’t really see gold as competing with bitcoin or silver just because I see them as two completely separate asset classes. I would never buy bitcoin for the reasons I buy gold and vice versa because gold to me is just an insur­ance policy. It’s not a way to get rich, it’s a way to stay rich. And with bitcoin, it’s a fantastic asymmetric specu­la­tion.

George Gammon:

So I just see them as two completely separate things. Now, that said, I think long term what you were saying with your book is really inter­esting because you’re talking about how in the long run every­thing goes into hard curren­cies or hard money like we’ve seen in the past with gold. When you were saying that, it reminded me of Gresham’s law. Brady, if your viewers aren’t familiar with Gresham’s law, it’s basically the bad money chases out good money.

George Gammon:

So let’s use an example of Ancient Rome or some society where they used physical gold coins and when they get over indebted, what happens is the presi­dent or king or whomever says, “Okay. We’ll just solve this problem by making these new coins and we’ll just paint them gold. But really, they’re nickel or they’re copper or something like that. They’re trying to pull the wool over your eyes and they issue more and more of this currency, we’ll call it. But everyone knows it’s fake. So the more they issue these curren­cies, the more the real gold coins come out of circu­la­tion because smart people see the value, they see the intrinsic value and they start hoarding all of the real money. It’s Gresham’s law. Over the long-term, I’m not saying it’s happening today, but it could happen with bitcoin. It’s a very inter­esting concept.

Saifedean Ammous:

Yeah, but I think the nickel coins are nowhere to be found today, but gold coins are still around today. So I think Gresham’s law talks about which coins will be used for legal, commer­cial trans­ac­tions in the country. And the answer is clearly in Venezuela today, every­body wants to spend their Bolivars if they can, but nobody wants to take them. So officially, yes, the bolivar has driven out the US dollars because it is the worst money many, many times over. But in reality, the bolivar continues to drop further and further and further. And any actual real wealth that exists in Venezuela is stored in the US dollar or in bitcoin or in gold.

Saifedean Ammous:

It’s misin­ter­preted by Keyne­sians to suggest that, “Oh, if it’s an easy money, then it’s just going to win out over the harder money.” Well, no, it’s going to win out because people are just going to get rid of it, but eventu­ally it’s not going to be money very quickly because it’s going to just lose its value quickly and eventu­ally the harder money will remain.

George Gammon:

Yeah, I think that’s my point.

Saifedean Ammous:

Yeah. I think this is effec­tively what’s happening with bitcoin and you’re right that it is in this asymmetric bet now, but it’s an asymmetric bet where the positive upside outcome is that it becomes something like gold. It stops being an asymmetric bet. It becomes just the predom­i­nant monetary asset. We’re at least 100X away from there or maybe 50X away from there or a thousand X away from there. God knows how much more bull run we have to get there. But bitcoin keeps going up. It eats every­thing else. I’m not saying it will happen, but it hasn’t looked like it’s been stoppable over the last 10 years. So we’ll see.

George Gammon:

I’m sure you guys have done the math. I’d be curious to know how much the price of bitcoin would have to go up in order for it to be equiv­a­lent to the market value of gold or the market cap of gold.

Saifedean Ammous:

It’s at about the price of one gold bar like the 12 12 kilogram, 400 ounce bar. So basically one bitcoin would be worth about 400 ounces of gold.

George Gammon:

Yeah. The math I’d like to do is figure out how much gold is in the world right now?

Saifedean Ammous:

I think it’s about 180, 170,000 tons.

George Gammon:

Yeah. How much is that in dollar terms and then figure out how much bitcoin would have to go up to equal that amount?

Saifedean Ammous:

I think it’s about $10 trillion at this point if I’m running-

George Gammon:

Gold?

Saifedean Ammous:

Gold is about $10 trillion, yeah because it’s about 180,000 tons and then 1 kilogram is I think around $60,000 or something. I think you multiply these, you end up with around 10 trillion. It’s in that ballpark. So bitcoin is around 200 billion so far.

George Gammon:

Yeah. I think that’s your upside.

Saifedean Ammous:

Exactly. 2% of gold.

Brady Swenson:

And that’s-

Saifedean Ammous:

That’s not the upside actually. That’s just one way station on one base camp on the real launch because that’s just gold. Right now in a world in which all kinds of other monetary assets are used because gold is not allowed to be in a free market. If we could have a free market of money, I believe gold would win and every­body would be using more of the instru­ments back for gold.

George Gammon:

Good point.

Saifedean Ammous:

In that case, probably gold would be worth a lot more than what it is today because we would have all these national curren­cies. So there’s also that. So gold and then there’s the national curren­cies. And then there’s the question of how much of the store value market in the world. How much of the finan­cial markets in the world and the art market, and the real estate market is actually just store of value demand that could better be repli­cated by just going into bitcoin.

Saifedean Ammous:

How many people are just buying houses and real estate invest­ments not because they want to own houses, but because they want to store their wealth. So you think that could lead to poten­tially more stuff for bitcoin to eat as it rises.

George Gammon:

Another fantastic point. I do a lot of business in South America, and I’ve been doing so since, call it 2014. And for the Ameri­cans or people in more devel­oped economies, they might not get this. But in South America, I mean I’m going to call it almost 100% of the popula­tion stores their wealth in real estate. That’s just what you do. I mean, when I was in Ecuador, even the poor people in the fishing villages, if they earned an extra even hundred thousand dollars, what they do is they just build another 10 or 20 square feet on their house and they just keep building, and building, and building, and building.

George Gammon:

And the same thing in Medellin, Colombia where I’ve been doing real estate since 2015. I would say and I had the numbers for this, but almost like 90% of the apart­ments that are owned there are owned just outright. There’s no mortgage on them, because people really don’t have savings accounts there. Their currency hasn’t been a store of value at all. It’s lost a lot more than the dollar a lot faster. So for them, their house, their apart­ment, their property, their FINCA, it’s a store of value. It’s their savings account. So I think you just hit the nail on the head there, very inter­esting point.

Saifedean Ammous:

Yeah. I think in my book, I argue basically bitcoin is the most advanced technology for saving that we’ve ever invented because it’s strictly scarce. Gold was the most advanced because gold by nature of its chemistry can never increase it more than 1 or 2% per year, but bitcoin is even more advanced because in a few years, it’s going to go below gold’s growth rate and eventu­ally drops to zero. So it’s the one thing, one liquid asset that we have in the world that is strictly scarce. There’s never going to be more than 21 million. That’s it.

Saifedean Ammous:

When you think about it this way, there’s no better thing in which if you want to store value in the future, this offers, in my mind, the expla­na­tion for why we’ve seen so much gains in bitcoin and I think as long as this continues, the case is arguably very strong that this is quite useful as a store of value simply because nobody can make more of it. We’ve had 10 years, 11 years of this thing running and nobody managed to find a way of making one bitcoin more than what should be made in the schedule by this block height. And I think that’s an aston­ishing inven­tion really.

Saifedean Ammous:

Just thinking about it, it’s almost… Robert Breedlove on Twitter compares this to the inven­tion of zero. It’s a mental construct. Once we’ve invented… It changes the way that we can do math just by thinking of zero and in a sense inventing this first strictly scarce asset just changes the way that we deal with scarcity and with storing value and with saving for the future. It’s an aston­ishing idea.

George Gammon:

I would even take it a step further and that I don’t even think it’s a fixed number of bitcoin. I think it’s a decreasing number. These human beings are always going to lose them. That may be a crude way of looking at it, but there might be more than one billion, but sure next year, there’s going to be maybe 20.5 and as the years go on, you lose more, and more, and more of them. So it’s a scarce asset as is that becomes more and more scarce just because us, clumsy human beings are just going to lose our thumb drive or who knows what we’ll do.

Brady Swenson:

We call those donations, George.

George Gammon:

Okay.

Saifedean Ammous:

It’s philan­thropy. Defla­tionary philan­thropy.

George Gammon:

Yeah, right.

Brady Swenson:

So Saif, I want to circle back to this idea of monetary premiums in other assets especially real estate. So how much do you think that the monetary premiums in these actually hard assets drives wealth inequality or inequality of access to these assets that are needed?

Saifedean Ammous:

I think it’s quite signif­i­cant because it makes the market for people who are looking for homes. It’s not just young people who are looking to leave their parents home and start their own family and have their own home. On top of that, you have people who already have a house, but are looking for a savings account that can’t be confis­cated through capital controls and infla­tion by their govern­ment. The people in Latin America instead of putting money in a bank account or a stock market or something, some advanced technology for saving like bitcoin, they end up having to buy a new apart­ment.

Saifedean Ammous:

So you see this all over the world so many apart­ments are empty or are owned by people that are renting them out. It’s increased demand. Most people have no business specu­lating in the real estate business. This should be something that is provided by profes­sionals who have exper­tise in this business. If you’re a doctor, you’re not providing any value to the real estate business by investing in real estate proper­ties. In a healthy finan­cial system, what you’re looking for in terms of savings, you would keep in a decent saving vehicle like gold or bitcoin.

Saifedean Ammous:

Then what you’re looking to invest, you’d invest in things in which you have, some kind of specific edge that allows you to under­stand probably your own business. You’d open your own clinic, your own practice or some business that you have some exper­tise with. But I think this notion that every­body needs to be a real estate specu­lator just so that they can retire is in my mind massive ineffi­ciency in the housing market. I think we’d have cheaper houses avail­able for people if it was just the people who… If the people bidding for houses were only the people who were looking for houses to live in, to buy. And if credit for housing wasn’t so easy to get, houses would be far cheaper.

George Gammon:

I mean, I think that’s a huge point that I hope everyone just under­stands and I would take it and say all finan­cial assets. Let’s take it back to 1930 and if you look at a chart of infla­tion from 1930 to today, you see that every single year, it’s just pretty much going up. We’ve got a few years it just goes down a fraction. It might stay the same, but it’s just up, up, up, up. Take it prior to 1930 and you see that infla­tion and defla­tion was more like a heart­beat. It would go up, it would go down, it go up, it would go down and most of the time it stayed pretty consis­tent.

George Gammon:

If you look at the 1800s as an example, the late 1800s, we had about 3% defla­tion per year. So the price of goods and services were going down. Now most people especially Keyne­sians would have a heart attack and say, “Oh my gosh, that must have been the most horrible time in history.” But it wasn’t. We had nominal GDP growth and we had nominal wages increase. We also had about 4% nominal rates. So you could put your money in a bank back then and you could get a 7% real return. So you didn’t need to specu­late on real estate or in the stock market or in bonds.

George Gammon:

But now that we have a two or 3% per year infla­tion, I would argue that it’s higher going back to 1980. You don’t have a choice. The average Joe and Jane, whether they know it consciously or subcon­sciously, they realize that if they keep their money in the bank, they’re never going to be able to retire. The way that you get ahead is you buy a home or you take and you put as much money as you possibly can in your 401k to go in the stock market and then maybe, just maybe you’ll have enough money to retire.

George Gammon:

But if you think about it, that’s because we have lived in a state of infla­tion where those currency units are losing value every single day. If they were gaining in value every single day, it’s the complete opposite. I would go so far as to say it would not only alleviate the misal­lo­ca­tion of resources through just pure specu­la­tion of the overall economy, but it would make society so much better because people… Just as an example, a McDon­ald’s worker. Let’s say they’re making $1,500 a month. Their expenses are $1,500 a month.

George Gammon:

If you take and run that math over 20 years at 3% defla­tion and a 1% raise in their nominal wages, at the end of the 20 years, they’re making $1,800 a month doing the same job flipping burgers. If they don’t get a raise, if they don’t get a promo­tion. And you say, “George, that’s only a 300 raise over 20 years.” Right, but their expenses have gone from $1,500 down to $800.

Saifedean Ammous:

Exactly.

George Gammon:

So now they have a thousand dollar delta right there and they have a thousand dollars every single month of dispos­able income. They’ve gotten richer just as a result of letting the free market do its job, create goods and services at lower and lower prices.

Saifedean Ammous:

Absolutely. That’s all music to my ears. People don’t get the idea that economics is not a rat race. Economics is we produce stuff and then that makes life better for us. And really by burning the value of our money, we’re making it so that every person is constantly watching… The alter­na­tive is that you’re just going to watch your wealth be dissi­pated. So you have no reason to save, you have no reason to think about the future. Your focus is going to be about what can I do with this money right now.

Saifedean Ammous:

So that destroys the incen­tive for saving. In fact, think about it. With a hard money that appre­ci­ates at 1 or 2 or 3%, children could start getting their birthday gifts in small little sums of money and then they can start watching them appre­ciate over time. From the age of three, five, 10, you start saving and you watch them appre­ci­ating. And it makes sense that you’d work little jobs in the summer as a kid. You do a little bit of work here and there and you could see people actually saving up from their own money with the help of some savings, some work and some defla­tion.

Saifedean Ammous:

It’s not impos­sible to imagine that any normal person working any kind of menial job given the techno­log­ical capacity of our society today. It’s normal that people should be able to afford normal and decent homes with 24-hour electricity and running hot water. It’s just something that is so cheap to produce given our techno­log­ical capac­i­ties today that really any burger flipper should be able to afford it. If you spend eight hours a day flipping burgers, that’s an extremely valuable thing. You should be able to afford saving up to that after a few years. You should be able to afford to buy a house.

Saifedean Ammous:

I think it would be something that would be taken for granted in this world. For most of the 19th century, you’re right, people could save. People had that ethic of saving. They had that idea that you put your money aside and you save and you watch it grow. Now, that’s completely replaced with the idea that no, you just continue to spend and all of your life you spend, you spend, you spend and then when you have major expenses, you just take out a loan, and you get into the debt. Then the more income you get, the bigger debt you can take on.

George Gammon:

Yeah. It’s ironic that we’ve got the people in the central bank, all these PhDs that see infla­tion as the solution, right? They see it as the solution to every­one’s problems instead of looking at it as the cause of the problem.

Saifedean Ammous:

Absolutely.

George Gammon:

If we could just get people to rearrange their thinking and say, “Okay, wait a minute. If all this additional govern­ment spending, let’s say through welfare, this creates infla­tion. It creates additional money supply. Now, whether that comes out in the CPI due to velocity, that’s a whole other story. But you’re increasing the money supply through the debt moneti­za­tion of the fed and let’s say they’re spending it on welfare, that’s the solution that as a society we look to or the govern­ment just has to spend more money, the govern­ment just has to provide health­care or whatever. But if we turned it on its head, so to speak and said, “Well, if we just go back to defla­tion, we don’t need the govern­ment to solve all these problems, which they just make worse, that society could handle it on their own because they’ve got a hard money that stays consis­tent or appre­ci­ates over time.”

George Gammon:

Listen, if that’s where bitcoin can take us, then I think everyone should be on board. Philo­soph­i­cally, I don’t think anyone is more aligned with bitcoin than I am whether it pans out, only time will tell, but I think if you under­stand really the ramifi­ca­tions for society at large to have a currency or a store of value, that’s scarce, that’s limited. You almost solve every single problem that we have at least in the devel­oped economies today.

Saifedean Ammous:

Yeah. A lot of people make fun of bitcoiners because one of the things that we’re always saying is whatever problem there is bitcoin fixes this. But really, if we do manage to put central banks out of business and replace them with a form of software where every­body in the world can have access to a hard money that they could save in, really that’s going to fix an enormous amount of problems all over the world.

George Gammon:

It’s all about hard money.

Saifedean Ammous:

It really is.

George Gammon:

It’s all about hard money whether it’s gold, whether it’s bitcoin, whether you want a price in oil, whatever you want to do. As long as you got that hard money, that’s what it’s all about.

Saifedean Ammous:

Yeah. But oil is not a hard money.

George Gammon:

I’m just saying you use anything you want. I don’t care what you plug into the equation. As long as-

Saifedean Ammous:

I mean, the reason gold was used is because it is hard, but I think the inter­esting thing about bitcoin is that it gets over the one limita­tion of gold, which is that gold is physical and clunky to move around. Bitcoin is native to the internet so there’s no physical asset to it anywhere. There’s nothing in the world that is a physical manifes­ta­tion of bitcoin that is needed for bitcoin to operate. So it exists purely digitally. So it can travel around the world very fast, very cheap. That’s the really powerful thing about it.

Saifedean Ammous:

And so far, the past 11 years we don’t really have time to get into the technical details, but judging by results, we’ve had 11 years in which the supply has not been inflated by anybody or corrupted by anybody. That’s the really inter­esting thing.

George Gammon:

Yeah. Where do you… I’m sorry, Brady. Do you have another question, Brady? I was going to…

Brady Swenson:

No. Go ahead man. Go ahead. This is great.

George Gammon:

How do you guys recon­cile the advance­ment of bitcoin? Let’s say that it triples in values. It quadru­ples in value. So now all of a sudden, it’s a competitor where the govern­ment really sees this as competing with the dollar. And I under­stand that they can’t ban it from a stand­point that it’s decen­tral­ized. I totally get that, but they make it illegal to where the conse­quences of being caught although very few people actually do get caught, but the conse­quences are so extreme that it prevents people from using it or holding it or want to. How do we get around that with bitcoin?

Saifedean Ammous:

I mean, first of all, there’s no promises and no guaran­tees. So obviously this is a risk that any investor needs to assume and assess on their own. But I would say the… First of all, the fact that trying to pass a ban like this is highly unlikely to succeed. You can see it from the fact that you can still get drugs in pretty much any major city in the world even though drugs are illegal and even though drugs need to be physi­cally produced and processed and trans­ported and sold, and yet you can still secure them.

Saifedean Ammous:

So bitcoin requires people to just run code on their computers and it can be encrypted. Of course, there’ll always be surveil­lance mecha­nisms, but there are always ways to get around them. It’s a compli­cated cat and mouse game, but I think ultimately it’s very hard to ban it and I think it seems that… At some point, it might even be ridicu­lous that we are discussing this because it’s been 11 years now and some govern­ments have issued recom­men­da­tions against it here and there, but practi­cally we haven’t seen any kind of real crack down on bitcoin.

Saifedean Ammous:

It’s getting to a point where it’s entering into the mainstream and I think the way that I look at it is that in a sense this isn’t a superior technology and this is a point that I make repeat­edly in my talks. People think about this as if it’s just like a new gimmick, whether they let us adopt it or they won’t let us adopt it. But I think it’s better to think about it as something like dynamite. So when you’ve invented dynamite, govern­ments can make it illegal, but the smarter ones would rather have the dynamite themselves.

Saifedean Ammous:

I think this is the case with bitcoin. I think the ultimate security of bitcoin rests not on maybe the technical speci­fi­ca­tions, but it rests on the fact that it’s going to be compelling as an economic option for every­body including people in govern­ment. I think we see this increas­ingly. Members of congress are open about the fact that they hold bitcoin and we see more and more finan­cial insti­tu­tions getting into it. It’s more likely that people once they under­stand the impli­ca­tions of bitcoin, it’s more likely that they would want to be on the side of bitcoin rather than fighting it because fighting it is extremely expen­sive and it has an extremely high oppor­tu­nity cost because if you failed, you could have spent all that time and money on securing yourself more of the scarce bitcoin buy.

Saifedean Ammous:

Inciden­tally, I think the point where I started really paying atten­tion to bitcoin was in 2013 when it didn’t really collapse after the Silk Road incident. After that was shut down and bitcoin continued to operate. Later on, I remember hearing from one of the inves­ti­ga­tors where she I think said something along the lines of, “Once I started learning about bitcoin, my initial intuition was all right, we should just shut this thing down. But then as I dug into it, I thought to myself no, we should use this to identify the drug dealers and to work with them.”

Saifedean Ammous:

I’ve heard several stories of this both in person to talking to people as well as reading about them. Inter­est­ingly enough, that same inves­ti­gator ended up also working in bitcoin and holding bitcoin, and using it. Now, she works in some bitcoin compa­nies as well. So I think there’s this allure to hard money that I think you clearly obviously under­stand the value propo­si­tion of gold. And in a sense, if you under­stand gold and you see bitcoin as digital gold, it starts to make sense that people don’t want to ban gold. They want to get their hands on it.

Saifedean Ammous:

So they if they’re banning it, they’re probably taking it away from you so that they would have it rather than banning it because they don’t want to touch it. Because it’s really scarce and if it’s banned, I’d rather have it banned while I possess it rather than take my chances and not own it because I can’t get it back again because of that scarcity.

George Gammon:

I see what has happened, let’s just say, since we can go back a long time, but let’s just take recently what has happened 2020 with the the coron­avirus and the fed coming in and doing limit­less quanti­ta­tive easing, commit­ting to a trillion dollars a day and repo. Just taking their balance sheet from under four trillion up to seven trillion. Or war. Bitcoin would prevent them from going into war, which I’m all about. I think everyone would be in favor of that except for the people in politics that gain polit­ical power through going to war and doing all of these, what I would consider nefar­ious things.

George Gammon:

But I think that it’s just… If we were to say, “Okay, listen. We want to use this bitcoin that takes away the power of the central bank to increase the money supply and it elimi­nates the warfare state, it elimi­nates the welfare state. I don’t think govern­ments are going to… Or at least the United States govern­ments and the devel­oped economies are going to jump on board with that. But what I do think is inter­esting, if we get to a point where if bitcoin rises in value that much, then my guess is there’s going to be a lot of skepti­cism at that time even more so than today with fiat curren­cies.

George Gammon:

One thing that I’ve looked into just recently because of how hard it is to travel right now, and I don’t even want to go into the story of me trying to get from Medellin, Colombia just to St. Barts. I mean it was like a mission impos­sible movie with Tom Cruise. I mean it was just crazy having to get a human­i­tarian flight out of Medellin to Fort Lauderdale. Then in Fort Lauderdale, I couldn’t get a COVID test in time to get to St. Bart’s because every­where in the Caribbean right now, you have to have a negative test that had been taken within three days.

George Gammon:

And in Florida, when I was there, the fastest you could get the results was five days. So effec­tively, you’ve got a Berlin wall around Florida right there if you’re trying to get even somewhere like Puerto Rico. So I had to fly from Fort Lauderdale to St. Thomas in the Virgin Islands just to get a COVID test. Get it in 24 hours or 48 hours. Then once I got the test done, then go to Puerto Rico then down to St. Barts on a semi charter flight.

George Gammon:

I mean, it was insanity. But my point is I’m like, “Okay. I’m in the process right now of getting my Colom­bian passport to have dual citizen­ship, but I’ve looked into some of these Caribbean islands.” Now, the passports in these islands right now as an example St. Kitts, St. Lucia, the ones that you always hear about that are actually very good passports, they’re a fraction of the price of what they were prior to COVID because all of their revenues are decreasing so they have to lower their prices to compete with other countries that are selling these passports.

George Gammon:

So fast forward or go back to what I was saying about bitcoin and the lack of confi­dence in fiat currency, maybe if we have a United States, Japan that takes those draconian measures, because they want to keep the warfare and the welfare state alive and well, and give the the federal reserve the power to create money supply or at least base money supply or M2. Who knows where it goes in the future? But maybe there’ll be other countries that say, “Hey, listen. What we’ll do is we’ll go and we’ll use bitcoin.

George Gammon:

Puerto Rico right now with Act 20 and 22. I know a lot of bitcoin guys have gone there for that. So what Puerto Rico is doing, saying, “Hey, guys. Come here and spend your money. We’ll take bitcoin or we’ll lower your taxes. We’ll do whatever needs to be done to encourage you to come here and create jobs, create businesses, do these things.” So maybe if you’re a country that’s an emerging market and you’re saying, “Hey, how do we get out of our debt problem? How do we save our economy? I know what we’ll do. We’ll take bitcoin, guys. Come here. Bring all your money. Bring all your wealth. Bring your human capital. Bring your brain power, your experi­ence. Come here and create a tech industry, create businesses, create jobs. I think that’s where it could go.

George Gammon:

Also too, if central banks, and you guys would know this a heck of a lot better than I would, but a few people that I’ve talked to recently that know the bitcoin space have kind of gone over this hypoth­esis when I was inter­viewing them about if central banks start bringing bitcoin on and using that as an asset on their balance sheet a little bit like they do with gold, so then if you had the central banks that were kind of giving it the green light although it might not become and replace their hallowed fiat currency, it becomes more adopted and then you kind of have that boiling of the frog effect, with bitcoin boiling the frog, being the politi­cians, the federal govern­ment and the central bank of that nation.

George Gammon:

They just gradu­ally adopt it. So that kind of goes along with what you’re saying. But that’s kind of where I find the argument very inter­esting against what I brought up initially with the govern­ments just not wanting to lose power over the printing press and just saying, “You know what, bitcoin is illegal.”

Saifedean Ammous:

Yeah, and I think… Go ahead, Brady.

Brady Swenson:

I want to steer this into a certain direc­tion. Excuse me. So the irony that you were trying to point out, George was that govern­ment inter­ven­tions under the guise of trying to fix the problems, fix certain problems in society and the vast majority of them were caused by this singular inter­ven­tion that we all know as the govern­ment take over control of money. As you say, this is how Saif says bitcoiners have this meme and bitcoin fixes this. Saif, in your book, you write that human civiliza­tion flour­ished in times and places where sound money was widely adopted. Whereas unsound money all too frequently coincided with civiliza­tional decline and societal collapse. So question on the table now, how do you guys see the path toward a better society unfolding given that we transi­tion to a bitcoin based economy? And what lessons might we be able to draw from histor­ical transi­tions between global curren­cies? Saif, you want to start this one?

Saifedean Ammous:

Sure. So gener­ally as a little disclaimer, my friends will probably let you know that I am the most optimisti­cally delusional person or delusion­ally optimistic person.

George Gammon:

You must be a great entre­pre­neur.

Saifedean Ammous:

It’s best reflected in my support of my football team where I’ve believed for every one of the last 30 years, the Liver­pool are going to win the league, and they never do. Of course, until this year they’ve won it. So now I guess-

George Gammon:

Like being a Chicago Cubs fan.

Saifedean Ammous:

I’m sorry?

George Gammon:

Like being a Chicago Cubs fan.

Saifedean Ammous:

Yeah, basically. So now perhaps my delusional optimism is not entirely misplaced since it did work out eventu­ally. I think in this situa­tion, I like to take the optimistic take that it’s not going to neces­sarily… Or bitcoin is what’s going to mean that the collapse of govern­ment money is going to be less painful and less problem­atic. I think this is the way that I would like to think of it. When hyper­in­fla­tion happens, the reason hyper­in­fla­tion is terrible is not just because people lose money, it’s not just because people lost their wealth.

Saifedean Ammous:

It’s not just that every­body got an 80 or 90 or 99% haircut on their wealth, it’s the fact that businesses are no longer working. Shelves are empty and economic produc­tion breaks down. Farmers can’t grow food and then food can’t get to the shelves. And all that stuff breaks down because money is no longer usable, because there’s no longer a money in society. So that’s the real catastrophe of hyper­in­fla­tion much more than just the finan­cial losses that are attached to it.

Saifedean Ammous:

Now, in the case of bitcoin, I’m slightly optimistic that perhaps what’s going to happen is that, because bitcoin is avail­able, as we witness more and more of these hyper­in­fla­tions around the world, more and more people will have access to bitcoin. More and more people will be able to hedge against their national curren­cies with bitcoin, hold a 5% position in bitcoin, 10% position in bitcoin, which could end up being 50% of your net worth after a couple of years of national currency infla­tion and a couple of years of bitcoin appre­ci­a­tion 50 or even 90.

Saifedean Ammous:

So I think with this being there, it means that… And I don’t think bitcoin is yet at that point where the liquidity is large enough, but possibly in a few years, 10 years maybe let’s say when more hyper­in­fla­tionary cases like, say, Zimbabwe and Venezuela and Lebanon start happening, more and more people will have access to bitcoin and these things will start mattering less and less. The way that I see it is, and I discussed this in my forth­coming book, The Fiat Standard, bitcoin is the way that we eutha­nize and get rid of the fiat standard peace­fully and without too much blood­shed.

Saifedean Ammous:

We don’t have to butcher it and risk it. Jumping and killing us while we’re butchering it. Nobody needs to be reliant upon it and as it starts to collapse, people can choose to opt out and use bitcoin. Bitcoin is better than gold in this regard because you can continue to use it inter­na­tion­ally whereas gold is much harder to use. So I’m going to go with the… I discuss all different scenarios in the book, maybe delusion­ally, but I’m optimistic that bitcoin ends up being more of an upgrade of the finan­cial software of the world rather than messy cataclysmic Roman empire collapse.

George Gammon:

Well, I can tell you that if you can get some way to transact, it gets around the swift system that we have right now and around FATCA. The increase in global produc­tivity would be meaning­less. I mean we’re talking about something that I think would be very much like the airplane. Let me explain.

Saifedean Ammous:

That’s a great metaphor, yeah.

George Gammon:

An airplane would, let’s say, go from Phoenix to Las Vegas. Let’s just say we only had cars, right? So it takes you six hours. Well, that’s six hours of your time. Well, if it only takes you an hour to fly, then that’s five hours that you have saved that you could be producing goods and services. Well, times that by however many flights there are, how many hours we save as a result. I can tell you by doing so much business in South America and in Medellin that just getting my own money that it’s not someone else’s, I’m not going to loan. It’s my money from the United States just down to Colombia and then take the dollars and then buy the pesos, and put them in the bank, and go to the paper­work, and go to the reporting system and blah, blah, blah, blah, blah, blah.

George Gammon:

Then you’ve got to pay the spread to the bank for doing the transfer. So think about how much money is flushed down the toilet right there and then how much time is wasted. I mean, we’re talking about billions if not trillions of dollars a year. This is completely wasted in economic output and produc­tivity as a result of having to deal with something so cumber­some as the current dollar fiat system we have. It’s not just about the global reserve currency, just these green pieces of paper, but people have to under­stand it’s about the infra­struc­ture.

George Gammon:

So that’s why it’s so hard to go from, let’s say the dollar to the euro, or the yen, or the won, or something like that, it’s not neces­sarily it would be hard to change green pieces of paper for red pieces of paper.

Saifedean Ammous:

No, but every­body’s locked into the infra­struc­ture and the KYC and all that.

George Gammon:

The infra­struc­ture. But this infra­struc­ture is very cumber­some. So to your point, if we could get this seamless way to transfer money… I remember the first time I spoke with my buddy, Alex with Nuggets News, he made me… Right when I was talking to him on the phone. I don’t know if we were live or not, but he had me download this app on my wallet while I was talking to him. I think I still got it right here. It’s this Wallet of Satoshi. He told me to open it up like this and I put it right in front of the the camera there and he trans­ferred me like 2 or $3 in Satoshi’s just through the little webcam thing. I mean, to think about how hard that would have been if he would have tried to transfer me, let’s say 100,000 or something like that from Australia to where I was in Medellin, Colombia at the time.

George Gammon:

I mean, this is a huge, huge advance­ment. It’s really a game changer as far as global produc­tivity. Also, what I wanted to say is you were talking about how the current system completely distorts the economy and it creates this… Well, let me back up here. So it distorts the economy, but I would go so far as to take it even a step further back. So what I mean by this is we were talking about infla­tion distorting the economy, but if you look at govern­ment debt, it distorts the economy as well and people say, “Well, yeah. But it’s when the debt gets to a certain level.” But what they don’t realize is it’s getting from A to B that really matters.

George Gammon:

I think most people really don’t get that. So let me give you an example. Right now, the United States govern­ment is almost 50% of GDP. The govern­ment spending is over 50% of GDP. So that means that private sector economy or the produc­tive part of the economy is only 50%. Take that back before we had the federal reserve and it was over 90% of the govern­ment was the actual private sector that really produced the goods and services.

George Gammon:

So now even if we could just elimi­nate all 26 trillion in debt, the problem is that our economy has been built around this govern­ment spending and these ineffi­cien­cies just like Venezuela using them as an example. You could solve all their debt problems or the dollar denom­i­nated debt, but the problem is they still have a really unstable economy because it’s built around oil where we would have the same thing. You could wipe out all these things that people perceived to be the problem, but it wouldn’t rearrange our economy.

George Gammon:

Our economy still is the same. You look at the zombie corpo­ra­tions in Japan. Even if you could wipe out their debt, zombie corpo­ra­tions are still there. So would anything really change if you just do a couple accounting tricks? Not really. So what bitcoin does or what any hard money system does is it starts from the ground up and every­thing that you build on top of this infra­struc­ture, on top of this founda­tion is solid, it’s secure, it’s sustain­able. I mean I know that’s a buzzword now with everyone in the green commu­nity and whatnot. But for me, something that’s sustain­able, number one is something that is profitable. I know it’s a bizarre concept in today’s stock market.

Brady Swenson:

Revenues.

George Gammon:

It’s profitable, but also it doesn’t require massive amounts and ever expanding amounts of debt in money printing and fiat currency. That’s sustain­able. So again, my main point is that whether it’s Bitcoin Standard, whether it’s gold, anything that fixes these currency units and provides us with natural defla­tion, a free market economy where entre­pre­neurs are always producing more efficient goods and services at lower and lower prices, that’s where we want to be. And I think looking at this through an optimistic lens hopefully I think we could get there. I know we could get there as human beings because we’ve done it many, many times before we’re very resilient and I think that’s how we kind of come out the other side.

Saifedean Ammous:

Yeah. And I really think it’s shaping up to be bitcoin. That’s the solution. Bitcoin really is the… Because you identify the problem exactly in terms of the problem of not having a hard money and how govern­ment captures that and bitcoin just routes around the way govern­ment is able to capture it. And this is why I think… I’m not one of the people who puts a high proba­bility on there being the violent crack­down on bitcoin because I think it’s just… The natural techno­log­ical limita­tions of physical gold naturally led to govern­ment having the ability to abuse its authority over gold and then having that ability led to all these insti­tu­tions that were built around it.

Saifedean Ammous:

When new technology is created, it creates its own reality and the world adjusts to it. So people deal with it from a self-interest perspec­tive, and that’s eventu­ally what bitcoin does. That’s the cycle of skepti­cism. You start off thinking, of course, this can’t work, of course, it’s going to fail. Then it continues to work and then you’re starting to appre­ciate why it continues to not fail. Then eventu­ally you under­stand that there’s value related there and that it’s relevant to you and you could use it yourself.

George Gammon:

Yeah. I think that every day that goes by, as we see more adoption with bitcoin, the better proba­bility you have that that’s the default mecha­nism. So many people say, “Oh, we’ll never go on a bitcoin center. We’ll never go on a gold standard again. It will never ever happen. Govern­ments will never choose to go on XYZ standard.” But what they’re not under­standing is it might not be govern­ment’s choice.

Saifedean Ammous:

Exactly.

George Gammon:

You might not have an alter­na­tive.

Saifedean Ammous:

Yeah. The Roman empire didn’t choose to go out of business.

George Gammon:

Exactly, right. So if you get this gradual adoption, the more time goes on, the more bitcoin isn’t a new thing. It’s not a bizarre thing. You don’t have these grand­mothers like, “Bit what? Bit who? What’s going on here?” I think it’s very inter­esting and I’m not sure the specific countries in Africa, but I know many of them, the people aren’t even using cash. They’re just trading their their cellphone minutes back and forth on their cellphone or whatever little… I forgot the name of the little unit of exchange, but it just goes back and forth on their cellphone.

George Gammon:

Although it might not be bitcoin directly, the bottom line is it’s a currency that’s completely digital that’s going back and forth that people are already starting to adopt. And of course the millen­nials are doing it. Even on your twitter feed, I know someone was making fun of both of us calling us boomers like, “Oh, I’m not watching that one. You got two boomers on there.” Right? But my point is obviously, it’s being more and more adopted by the younger gener­a­tion. So as those kids get older, it’s not so bizarre to them and that benefits bitcoin even more, I think.

Saifedean Ammous:

Absolutely.

George Gammon:

You get to that point where govern­ments don’t have a choice because of a total loss of confi­dence in fiat current.

Saifedean Ammous:

Absolutely.

Brady Swenson:

Yeah. All right. So I’m going to sneak in two questions here because you guys are going for 45 minutes on one question, which I love. It’s great. I’m going to sneak two in here.

Saifedean Ammous:

Making your job easy, huh?

Brady Swenson:

Yeah, exactly. And I want to check in, we’re about 15 minutes away or so from end time.

George Gammon:

I forgot where we’re at.

Brady Swenson:

So I want to know if you guys can go a little longer than we had planned or if you have a hard cut off?

George Gammon:

I’m fine. Go ahead and let me look at my calendar here. Are people-

Brady Swenson:

You check it out. All right. So here’s the questions. To follow up on the question about transi­tions. So we have some chatter in the YouTube chat about central bank digital curren­cies like a fed coin, right?

George Gammon:

Yeah.

Brady Swenson:

So Saif, what do you think about the prospects of a fed coin and the compe­ti­tion that it might bring against bitcoin?

Saifedean Ammous:

I think ultimately we might get some forms of more digiti­za­tion. I think there will be things like that, but ultimately it’s not a digital currency. It’s still any national currency. And it’s orthog­onal to bitcoin, it’s irrel­e­vant to bitcoin or I shouldn’t say irrel­e­vant, it’s different from bitcoin because it doesn’t do anything that bitcoin does. In partic­ular, there are two things that are distin­guishing bitcoin from current national curren­cies, which is that bitcoin’s monetary policy is algorithmic, it’s not discre­tionary. Nobody wakes up in the morning and decides what to do with bitcoin’s monetary policy.

Saifedean Ammous:

Also, the bitcoin payment final­iza­tions, clear­ance, and settle­ment is also algorithmic and crypto­graphic and program­mable rather than discre­tionary. So nobody can freeze your bitcoin account, nobody can confis­cate it. So those are the two main functions of central banks. That’s why central banks are there to decide who can pay and who can’t pay on one hand and secondly to decide what’s going to happen with the monetary policy.

Saifedean Ammous:

So the notion that central banks would invent a digital currency or intro­duce a digital currency that takes away those two things, I think is a non-starter. They’re not getting themselves out of business. They’re not going to intro­duce a currency who supplies algorithmic or whose payment clear­ance is totally crypto­graphic. They’re still going to want what programs call god mode. They’re still going to want the ability to say, “No, you can’t send them money.” And they’re still going to want to set the money supply.

Saifedean Ammous:

All they’re doing is that they’re just making it more digital­ized and there­fore hopefully making it, just as George was saying getting bitcoin accep­tance into people’s minds. So we thank them for the free PR.

Brady Swenson:

Basically like a last gasp like rebranding of the dollar basically.

Saifedean Ammous:

Yeah.

George Gammon:

I think bitcoin could get us there a lot faster. And going back to what we’re talking about of the collapse of confi­dence in fiat currency itself. So I don’t want to get too wonky on everyone here, but if we create, let’s call it a fed coin and I actually talked to Ron Paul about this the other day. Basically what would have to happen is everyone would have to have a bank account with the fed with bank reserves just like the primary dealer banks and the banks under the fed’s umbrella because the fed right now can’t really create broad money directly as of right now. I think that may change, but right now they just create base money.

George Gammon:

And I don’t want to bore anyone with details, but that’s why quanti­ta­tive easing, they could take it up to 10 trillion, 20 trillion and it wouldn’t neces­sarily affect consumer prices because the transfer mecha­nism there is A, the debt moneti­za­tion with the govern­ment. If they’re not doing that, then it has to be lent out into new money by the commer­cial banking system. And those bank reserves, they’re not lending those out directly. Those only just backstop additional loans and increase the capacity of their balance sheet, okay?

George Gammon:

So that’s the way it works right now, but I’m thinking that maybe very soon here and we saw this how cumber­some it was to get out these stimulus checks that the fed because, they’re thinking okay, we’re going to take on more power. We want more control over the currency and how money is spent and we want to know where you’re spending every single dollar. We want more and more control over that whether it’s the fed, the govern­ment just the central planners, let’s call them. They want to micro­manage every­thing. So they take that. They set up this fed coin and say, “What you have to do is download this app on your phone and every single month, we’ll send you these stimulus checks or UBI,” whatever you want to call it of let’s say $2,000.

George Gammon:

Then you can go right to Starbucks and use that on your phone. Okay. Well, everyone is going to… In my opinion, most people will adopt that because it’s free money and then you are on this fed coin system, if we look at the work of Dr. Lacey Hunt who’s one of my favorite econo­mists, he’s someone that’s really in the defla­tionary camp, but he says that once you change the Federal Reserve Act to allow the federal reserve to change what he calls their liabil­i­ties into actual currency units, into broad money, increase M2 money supply directly, that’s where he goes from being a defla­tionist to someone who sees us being on the path to hyper infla­tion.

George Gammon:

Those are his words, not mine. And if you don’t know who Lacy Hunt is, not a tin foil hat guy. He goes all the way back to the Milton Friedman days. He is an OG. He is legit. You can look him up, google him for sure. So that’s how he sees this. So my point is that by creating this fed coin, what they’re doing is they’re getting us on the path to hyper­in­fla­tion. And the faster we get to hyper­in­fla­tion, obviously, that’s by defin­i­tion a loss of confi­dence in fiat currency. That’s when as a society, as a global society, we start looking for an alter­na­tive, whatever it is.

George Gammon:

So you see my point? I think they’re going to a fed coin. Obviously, it’s not a cryptocur­rency, it’s just a more digital currency that gives them more control, but I think inadver­tently if they do that, they put us right on the path that will lead to their own destruc­tion.

Saifedean Ammous:

Poten­tially.

Brady Swenson:

All right. So here’s the second question I was going to ask then because I didn’t get it in. That was my mistake. All right. So we’re talking about how bitcoin might global, talking about hyper­in­fla­tion, hyper­bit­coiniza­tion. We’ve talked about the path that might be taken to get to a bitcoin future. So yeah, I wanted to go back to that idea, but ask a more specific question. What country do you guys think will be the first to publicly disclose that they have bought some bitcoin for their own treasury if they’re sover­eign treasury.

Brady Swenson:

Again, remem­bering that at the top we talked about how we have macro investors, big investors buying in. We have compa­nies now buying in. It seems like the last kind of stone to fall is a sover­eign nation. Obviously, the game theory says that because it’s an asymmetric bet, you could make an asymmetric bet on the future of your country’s power and really rise and increase your country’s power on the global stage signif­i­cantly by accumu­lating bitcoin now. So what do you guys think? Saif, you want to start?

George Gammon:

I think Venezuela.

Brady Swenson:

Okay.

George Gammon:

Because what’s their downside? I mean obviously, the guy running the show there is a complete nut, but if you got someone that actually had some sense, then why not start going on what’s called a Bitcoin Standard. Because if you look at hyper­in­fla­tions throughout history, the way you partic­u­larly get rid of that like with Zimbabwe as an example. You say, “Okay. Just automat­i­cally overnight, we’re not using this Zimbabwe thing anymore. We’re using the dollar.” It’s just a change of confi­dence.

George Gammon:

I employ a lot of them in Colombia, so believe me, they’re no fans of what’s going on there to say the least. I mean, viscer­ally it makes them sick when I even talk about it on my videos. So they’re going to have this complete loss in anything that the govern­ment comes out that even resem­bles a fiat currency which just puts them right back in the same position. So why not just say, “Okay. We’re on a bitcoin standard. We are no longer going to control…” I mean, the only other thing they could do is like dollarize something like that. But I don’t think Venezuela would do that because they want nothing to do with the US govern­ment. Although Ecuador did it, but I think that’s kind of what have you got to lose? There’s no downside. The only thing you have is upside so why not?

Saifedean Ammous:

We know that Venezuela is using bitcoin. We know that Venezuela that some govern­ment depart­ment, I think for passport renewal, they were charging people in bitcoin because they can’t get their money from the regular banking system because they’re bankrupt and they were charging bitcoin. But I think it’s not so much about charging and holding it or using it, it’s about holding it for the long term. That’s the really inter­esting thing.

Saifedean Ammous:

With a govern­ment like Venezuela, it doesn’t matter how much bitcoin they buy and sell and spend. I mean, it doesn’t matter how much bitcoin they get in, they’re going to continue to spend it and so they won’t really benefit from holding and appre­ci­ating in the long run. It’s really hard to say. I mean, it’s 200 govern­ments or something in the world. It’s really hard to say which one of them is going to take the plunge on it.

Saifedean Ammous:

If I were to make a wild guess, I’d say Switzer­land just because they were the ones who had the gold standard for the longest time and they went off the gold standard the most recently. So perhaps, they might be the ones that are most percep­tive to it.

Brady Swenson:

Yeah. I’d like to dive into talking a little bit about the market narra­tives in bitcoin and we’ve seen the narra­tive change quite a bit. It seems like the prevailing narra­tive now is probably digital gold in terms of like the widespread view of bitcoin. So Saif, how do you see bitcoin narra­tives evolving as adoption happens and works its way up the S curve?

Saifedean Ammous:

I mean, I think the main evolu­tion is going to be the one that we mentioned earlier from asymmetric bet on this happening in over long-term into it becoming more and more of just a boring monetary asset that every­body holds and that’s ultimately it. I think we’ve seen a lot of narra­tives come and go and we’re going to continue to see a lot of narra­tives come and go that missed the point. But it may just be that hard money is really… It’s just going to be the narra­tive that is dominant.

George Gammon:

Yeah. What I’d be curious to know and I’m sure you guys have your finger on the pulse of this more than I do is what is the proba­bility of the tech around bitcoin advancing to the point where it could legit­i­mately be a medium of exchange? Because correct me if I’m wrong right now, it’s rather cumber­some. The amount of trans­ac­tions that happen on a daily basis would just completely overwhelm the system and it would be slow or the amount of electrical needs what not. But I’m assuming there’s tons of people that are trying to figure out workarounds for that.

Saifedean Ammous:

Yeah, there are. The thing that I argue in my book is… And that’s why the title of my book is The Bitcoin Standard is that you can’t really compare bitcoin trans­ac­tions with credit card payments. Bitcoin trans­ac­tions are final settle­ment trans­ac­tions so you have to compare them with settle­ment payments across inter­na­tional borders. That’s the advan­tage. If I send you a bitcoin trans­ac­tion and you’re in the same room, it costs let’s say five cents and it takes a few minutes or a couple of hours to confirm.

Saifedean Ammous:

But if I send that same trans­ac­tion across the world to China, that’s also going to cost the same thing. So the trans­ac­tions that are going to be used in… I mean bitcoin is going to be used, in my opinion more as a settle­ment layer rather than for individual payments. I don’t think individ­uals are going to be using bitcoin to pay for their coffee, the bitcoin tune. And scaling limita­tions, and I show some numbers in my book, bitcoin does, what is it, half a million trans­ac­tions a day or something like that and Visa does I think something like 2 billion.

Saifedean Ammous:

Even if we improve bitcoin in all kinds of way, there are limita­tions because it’s decen­tral­ized that mean that it will always be different from Visa. But you can’t compare Visa payments to bitcoin payments because Visa payments are credit payments. Visa payment is my credit card goes to your machine and in your shop and then my bank tells your bank that they’re going to settle with them and then they sort it out and it takes several weeks for it to finally settle. But a bitcoin trans­ac­tion is final.

Saifedean Ammous:

Once you’ve gotten six, 10 confir­ma­tions, whatever, it’s going to take a few hours. Once you’ve gotten a few of these confir­ma­tions, then you’ve gotten to the point where the trans­ac­tion is completely secure. Well, completely is obviously a big word, but it’s secure and it’s irreversible. So in this regard we need to think of the bitcoin chain base layer as being similar to physical gold or physical money and that it’s going to be moved around. Central banks will exchange gold and they will exchange physical cash with each other and banks will move physical cash around, but ultimately the majority of trans­ac­tions will be done digitally without the physical under­lying asset having to move.

Saifedean Ammous:

I think bitcoin is going to scale with that like there will be second layer solutions that are settled with the second layer bitcoin. It’s the second on the first layer, settled on the first layer of bitcoin chain.

George Gammon:

How do you see the exten­sion of credit, if we’re on a bitcoin standard because obviously, you’re not lending… or how does that… Let me just…

Saifedean Ammous:

My feeling… Well, I wouldn’t say feeling. I think the way that I think about it is that in that kind of situa­tion where we have hard money and what would happen is that banking would have two functions. Deposits where you pay people in order to store your money for you and have it avail­able for you and use it to settle payment around the world. And I think this is a very valuable service that your money is at once safe from theft and also a click of a button away from being sent to China.

Saifedean Ammous:

So you pay people for offering you that service, so deposit banking and then there’s equity banking in my mind or equity invest­ment. I don’t see the possi­bility of… I don’t think credit really makes sense in this world, but I don’t think that’s neces­sarily a bad thing. I don’t see why it wouldn’t be a problem. I think deposit banking and equity are all that anybody needs. If you want your money to just remain safe or if you want your money to be there, then you pay people to store it.

Saifedean Ammous:

Now, if you want your money to earn a return, they can’t just store it for you, they have to put it out, which means that there’s going to be a risk involved, which means that it’s going to be invested. And in a world in which nobody has a money printer and central banks can’t bail out banks, I don’t see how you can give depos­i­tors guaran­tees on their invest­ment. If lenders are not offered the guarantee on the downside because the central bank can’t bail them out, I don’t see why they would want to lend with a fixed interest rate rather than just taking equity, which has unlim­ited upside.

George Gammon:

Right. So if I’m hearing you correctly, we’re not looking at a fractional reserve system there?

Saifedean Ammous:

I don’t think it would work. I think bitcoin fixes the glitch in gold that makes fractional reserve banking work, because gold requires banks and places so much value in bank’s ability to clear money that it almost allows them to print money because they almost have like a monopoly network on banks. So bitcoin, by making settle­ments so cheap and open to anybody an open source and not monop­o­listic, anybody can set up their own bitcoin node and settle payments for people all over the world. I think by making it into an open market, it makes it very hard for banks to engage in things like fractional reserve banking or maturity trans­for­ma­tion. That’s also something I get into in detail in the fiat standard.

George Gammon:

Yeah. I just wonder how that would work with the growth of the economy needing a growth of the money supply or if it just comes through defla­tion like you’re talking about.

Saifedean Ammous:

Maybe we get five, 10% defla­tion a year.

George Gammon:

Yeah, right because that in essence would increase the amount of… I want to call them units of measure­ment avail­able. Let’s just say that we had one bitcoin or had one dollar. A lot of people say, well, then the economy could never grow. But it could if you just divided the dollar into small amounts. Such as pennies, right?

Saifedean Ammous:

Yeah.

George Gammon:

And then everyone that was saving those quarters or in this case bitcoin, they would just get richer and richer and richer just by holding it. So anyway, it’s just kind of a thing that I’ve tried to think through there. I appre­ciate your feedback.

Saifedean Ammous:

Yeah. It’s an absolutely amazing idea when you think about it that anybody can have their wealth, hold its value and appre­ciate over time, and that’s avail­able for anybody anywhere. Then if you want to take on extra risk. Once you’ve estab­lished an amount of saving that can protect you from say a rainy day or losing your job or whatever, and then you’re able to take risk, then you’re able to put invest­ments in. You’ll only invest and take risk once you find something that’s extremely compelling as an invest­ment. I think in that world, we’d only get resources diverted toward really valuable invest­ments that produce value in the long-term.

George Gammon:

100%. We go back to what I said with a sustain­able business because your hurdle is so much higher. I mean, think what your hurdle rate is when you’re getting a business loan that costs 3% fixed rate over 30 years compared to if your hurdle rate was 10%. I mean, how much stronger would the cash flows of those businesses need to be? So, yeah.

Saifedean Ammous:

Okay. Yeah, absolutely.

Brady Swenson:

We had Jeff Booth on a couple of episodes ago with Lyn Alden. In his book, The Price of Tomorrow, he talks a lot about the defla­tionary forces that technology brings. We’ve actually like with the fiat standard been overcoming or suppressing the defla­tionary forces of technology.

George Gammon:

Yeah, I’d agree.

Brady Swenson:

I think the risk of defla­tion causing some problems or making… I don’t believe in the hoarding effect anyway or bringing the economy to a stand­still anyway. But with the defla­tionary effects of technology then there’s like no risk at all. I think we’re going to see really quick defla­tion especially with the hard money economy. Okay, guys. Time is up there. I want to respect you guys’ time and we’ll wrap it up. Any closing words?

George Gammon:

No. This has been a fasci­nating conver­sa­tion. I appre­ciate you both for your time and expressing your views. I’ve learned a lot.

Saifedean Ammous:

Likewise. Thank you. I really enjoyed this as well. I want to pick your brain about refer­ences on a couple of things that you mentioned, the 7% return in the 1890s. If you can give me refer­ences-

George Gammon:

I was just using the 4% combined with 3% defla­tion to get the 7% real.

Saifedean Ammous:

I’m looking for sources on this and a couple of other things. I’ll probably email you about them.

George Gammon:

Okay. I think you’ve got my email, don’t you?

Brady Swenson:

I’ll make sure, Saif has it.

George Gammon:

Okay, okay.

Brady Swenson:

All right. Thanks so much guys. And again, you know can find Saifedean’s work at saifedean.com. That’s S‑A-I-F-E-D-E-A‑N and George Gammon at youtube.com/georgegammon. It’s been a fantastic episode, guys. Of course, you can start stacking some bitcoin. I know you want to now. You can go stack some bitcoin regularly and steadily with automatic recur­ring buys at swanbitcoin.com. Thanks everyone for being here today.

George Gammon:

Thank you.

Brady Swenson:

Take care.

Saifedean Ammous:

Thank you so much, Brady. Take care. Bye-bye.

Brady Swenson:

Thanks so much again to Saif and George for joining us today. You can find Saif on Twitter at @saifedean. That’s at S‑A-I-F-E-D-E-A‑N and George @GeorgeGammon. I am @CitizenBitcoin. On behalf of the Swan team, thanks so much for joining us. We hope you enjoyed this episode of the Swan Signal podcast. It’s fun to join us live on the YouTube broad­cast at youtube.com/swansignal. So head over there, subscribe, and turn on the notifi­ca­tion. We have a lot of fun in the live chat and we often are able to work in some questions for listeners.

Brady Swenson:

Swan Signal is a produc­tion of Swan Bitcoin at swanbitcoin.com, the best way to accumu­late bitcoin with automatic recur­ring buys. Follow us on twitter @SwanBitcoin and subscribe to the podcast at swansignalpodcast.com.

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

Episode 22– Robert Breedlove and Cory Klipp­sten

Links

Swan Bitcoin

Saifedean Ammous

Saifedean’s Personal Website

Saifedean on Twitter

The Bitcoin Standard– Saifedean’s book

George Gammon

George Gammon on Twitter

George Gammon on Youtube

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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