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Tuur Demeester and Robert Breedlove: Swan Signal Live E14

Posted 6/15/20 by Brady Swenson

Episode 14 was broad­cast on June 10th, 2020 at block height 634,102. We were joined by Tuur Demeester, Founding Partner of Adamant Capital, and Robert Breedlove, CEO and CIO of Parallax Digital. Swan cofounder Cory Klipp­sten joined and Head of Educa­tion Brady Swenson hosted.

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Episode Summary

  • The macro­eco­nomic climate
  • How Central Banks “print money”
  • Infla­tion
  • The transi­tion from a fiat world to a Bitcoin world
  • The separa­tion of money and state
  • Bitcoin bridges the physical and the digital realm
  • Bitcoin encom­passes the founding values of America
  • The resur­gence of ancient wisdom
  • Digital disso­lu­tion of anachro­nistic insti­tu­tions
  • “The Bitcoin Refor­ma­tion” by Tuur
  • “The Number Zero and Bitcoin” by Robert
  • Near term Bitcoin price

Episode Transcript

Brady Swenson:

Welcome to the Swan Signal podcast, a produc­tion of Swan Bitcoin, the best way to accumu­late Bitcoin using automatic recur­ring buys at swanbitcoin.com. I’m Brady, head of educa­tion at Swan, and every week we invite two Bitcoiners to join us for a discus­sion hosted by myself and variously joined by Swan founder Cory Klipp­sten, co-founder Yan Pritzker, and creative director Jason Don, AKA Brekkie von Bitcoin. It’s a unique format in the Bitcoin content space to pair up Bitcoiners who have never or are rarely heard or seen together. This makes for some great new discus­sions to add to the Bitcoin content scene, and this one is absolutely no excep­tion. Follow @swanbitcoin on Twitter so you can tune in live whenever you’re able. We also broad­cast on YouTube, youtube.com/swansignal as well as Facebook and Twitch. But if you can’t join us live, you’ll be able to catch all the discus­sions here on this podcast. This week, we are joined by Tuur Demeester, founding partner of Adamant Capital, and Robert Breedlove, CEO and CSO of Parallax Digital. I’m glad you found your way here. Hope you enjoy.

Brady Swenson:

All right, we are live. Another episode of Swan Signal Live. Welcome back, everyone. Today we have two incred­ible guests, Tuur Demeester, Robert Breedlove. Swan Signal Live is a produc­tion of Swan Bitcoin. It’s the best way to accumu­late Bitcoin with automatic recur­ring buys. And in honor of Robert Breedlove being a guest today, you can visit swanbitcoin.com/breedlove to get $10 of Bitcoin dropped into your account after you start accumu­lating with Swan.

Brady Swenson:

Okay. So Tuur Demeester of Adamant Capital has dropped some of the best Bitcoin writing on the scene in the past few years. And we paired him with Robert Breedlove, who has also done the same. His piece, “Bitcoin and the Number Zero,” one of the best in the past year for sure. Robert Breedlove is CEO and CSO of Parallax Digital. Welcome, Tuur. Welcome, Robert.

Robert Breedlove:

Thanks, Brady. Glad to be here.

Brady Swenson:

Absolutely man. All right. So let’s just start with the macro­eco­nomic climate. Starting most conver­sa­tions here on Swan Signal when we have guests on who are equipped to speak on this subject, it’s a topic that all Bitcoiners are inter­ested in right now. Pretty much everyone in the world is being affected by the monetary policies of central banks and govern­ments around the world. Are we in the midst of a currency collapse? What’s going on, and what do you guys think is going to play out in the next months and years?

Tuur Demeester:

What are you talking about? It’s just business as usual.

Robert Breedlove:

It’s unfor­tu­nately true.

Tuur Demeester:

Well, yeah. Exactly. Yeah, I’ve been worried about infla­tion. I really think it’s coming. And, of course, it’s one of these things that a lot of people have cried wolf about infla­tion starting in 2008 and some of them even before that. But I just think that we are seeing the writing on the wall now, and I’m expecting infla­tion in all the major curren­cies the next two, three years to really ramp up signif­i­cantly. And maybe the stock market is going to keep going up, because who the hell wants to be in bonds these days? I feel very good just focusing on liquid assets with low third-party risk, which is bound to be Bitcoin and gold.

Robert Breedlove:

You know, I echo that senti­ment a lot that hard money as a category is going to perform very well amid these exces­sively expan­sionary monetary condi­tions. So gold and Bitcoin will do really well, but it does seem to me like we are actually in the end game now, so to speak. I think we’ve printed more money in the past six months than we have in the past 10 years almost. And when you under­stand this business model of central banking, that it is a leverage-based business, it requires steadily more leverage to remain sustain­able. So you have to keep servicing prior debts, you have to keep feeding the beast more and more. And this thing is full parabolic. I tweeted a photo the other day showing the U.S. M2 money supply. It’s full on parabolic from 1980 to today. And, against that, we have the flattening of the curve, so to speak, with the Bitcoin money supply, so I think we’re going to see a lot of that value flow to scarce assets.

Tuur Demeester:

Yeah. And, to me, it’s scary because, I mean, I was rereading, I think it’s called… Well, it’s the little book by… Oh my God. I’m embar­rassed now, because we’re live.

Can you cut this? Let me look it up. But it’s a little book about the events just prior to the French Revolu­tion, and it’s just eerie how many similar­i­ties there are. And also this idea that at the time, “Oh, but France is strong and credit worthy, and we’ve been doing this for 200 years. What are you talking about? Every time there’s a crisis, we’ll just step up.” And, initially, which was something new that I learned, is that the assig­nats, they were not just money backed by the [inaudible 00:05:48] of the church from day one. They actually started as govern­ment debt certifi­cates, and then eventu­ally, or pretty quickly, actually, the govern­ment decided to declare those money. And that could be something to look out for. If a central bank declares govern­ment bonds to be money, that could really just be like, “Okay, this is code red. Hyper­in­fla­tion is liter­ally around the corner now.”

Tuur Demeester:

That’s one of the challenges of central banks now, is that they can issue more debt, but often their mandate does not allow them to directly print money, so that would be that phase change that could really make things go bonkers.

Robert Breedlove:

That’s correct. I think, too, another thing to look out for there is an amend­ment to the Federal Reserve Act, where they can start actually directly monetizing to pay govern­ment expen­di­tures. Right now, there’s a bit of an inter­face there they have to go through, but that could quickly be removed.

Tuur Demeester:

And appar­ently this is already happening in the U.K., So the U.K. could be a little bit of the canary in the coal mine if things start going weird there, because they are actually already directly doing that now.

Robert Breedlove:

That’s right. Yeah.

Brady Swenson:

So for people out there who may not under­stand, I mean, we talk about the central banks printing money, and that’s the short­hand that we use since the effect essen­tially is the same. What mecha­nisms do central banks use to effec­tively print money now, since they don’t have the mandate, for the most part, to directly print money, as you put it, Tuur?

Tuur Demeester:

Well, yeah. I mean, they lend money, so they lend money to the guys that spend it. Eventu­ally, it trickles down into the economy, but, of course, the guys who spend it, you bail out compa­nies, you bail out govern­ments, and, of course, Wall Street. And a lot of that money goes into not neces­sarily to very base consumer goods. So that’s the very sad part of the story, is that once the infla­tion shows up in consumer goods, it’s like the balloon every­where else is already so blown up that it’s about to burst. But it’s like there is no warning signals like that. We get all these asset bubbles. I’m specu­lating, of course, but the last ones to be warned is going to be the blue collar workers and people who just live from paycheck to paycheck. All the sudden, these costs are going to skyrocket, and that’s, of course, when every­body knows it’s here.

Robert Breedlove:

Yeah. I think defin­i­tions are very impor­tant in this respect because it’s common for us to say that central banks are printing money, but what they are, in fact, doing is creating additional claims on produc­tive assets, right? Still in the world today, gold is the only money. Gold is at the founda­tion of all central banking. And the claims that they’ve created on top of it, which were once redeemable for gold, and, as we all know, they are no longer, they are just now essen­tially claims on produc­tive assets that they’re using to manip­u­late markets. And I do think that it’s insid­ious almost in how illusory it is, because even if you look at Venezuela, they had the best performing stock market as they’re going through hyper­in­fla­tion, because the nominal returns in the stock market are denom­i­nated in a failing currency. And I think you’re seeing that today.

Robert Breedlove:

The writing’s on the wall. We have 40 million plus unemployed, new all-time highs in the stock market. So I do think we are in the early stages of a currency collapse. And the other real trigger event that I’m looking for is that around 2022, the total U.S. Govern­ment manda­tory outlays will exceed tax revenue, so that’s interest in manda­tory outlays will exceed tax revenue. And, from there, you have to print the interest, so to speak, and that’s just totally unsus­tain­able. They have to default either implic­itly or explic­itly.

Tuur Demeester:

Yeah. And a lot of people are saying, “Oh, but what are you talking about? The infla­tion is only 2%, 3%.” Actually, if you look at cost of living, for example, in the U.S. in just an average city, the past five years, it’s gone up 10% every year. Just the CPI, like the govern­ment issued infla­tion rates. Guess what? They have an incen­tive to under-report what’s really going on. And they have a tendency to change their method­ology over time, so it’s impor­tant to also try and find some real numbers. There’s a website called Shadow­stats where you can go that actually uses the govern­ment’s methods to calcu­late infla­tion, except they go back to the 1980s method and they just project that forward instead of agreeing with the govern­ment and changing it all the time, and there as well, you can see it’s actually already 10%.

Robert Breedlove:

That’s right. They do that too infla­tion. I think unemploy­ment as well. They liter­ally show how the govern­ment has changed their calcu­la­tion criteria for each of these core economic metrics over time, and it’s always to their favor, right? Always trying to under-report unemploy­ment or under-report infla­tion. So, yeah, it is quite radical, the shift we’re going through, and I think there’s just a lot of histor­ical inertia. Some people would call it Lindy effect for the dollar, that it’s just been stable, it’s been a reserve currency for a hundred-some odd years, every­one’s comfort­able with it. And it gets really to the roots of belief systems, frankly, and belief systems are here to preserve us. It shakes up people’s identity to talk about the U.S. dollar depre­ci­ating at all, much less hyper-inflating. I think it really gets to people’s root nation­alism, religious identity, all these things, so it’s a scary time.

Tuur Demeester:

I agree. It goes really deep. And that’s probably why you and I both look at religions and the history of insti­tu­tion­al­ized religion to find something that’s poten­tially analo­gous, that’s powerful enough as a compar­ison, rather than just another incre­mental step change and the evolu­tion of technology or something.

Brady Swenson:

Let’s dive into the transi­tions, as we were starting to get into it there. Throughout history, the transi­tion of the reserve currency has always been marked by turmoil and uncer­tainty. One country’s decline, the rise of another. Obviously, that’s marking some radical changes in the world. The country that dominates the global currency in any given period is usually marked with the status of the reserve currency. Spain and Portugal, 15th and 16th centuries, Nether­lands in the 17th century, France and Britain, and then finally the U.S.

Brady Swenson:

Tuur, let’s start with you. What do you think we can learn from past reserve currency transi­tions, and how might a transi­tion to a Bitcoin standard be different?

Tuur Demeester:

Yeah. I’m not sure how much we can learn. I think it’s, of course, impor­tant to look at, but these changes in reserve currency status, I think they were not as meaningful as the poten­tial change we’re looking at now, because back then, you could always call bluff. Like if you received some kind of certifi­cate of debt or whatever, you could always cash it in for real money. And, often­times, like the right to issue coin, it just meant Great Britain was the dominant trade partner, and so, obviously, they had rules about who was able to issue coin. And, yeah, of course, there was some [inaudible 00:13:47]. You would clip off a little bit and re-smelt it so that, in a way, it was like a tax that you could levy, but that’s just not compa­rable to where we are today.

Tuur Demeester:

The kind of tax that the U.S. Govern­ment can levy today is just way beyond anything a histor­ical empire in charge of the reserve currency could do. So, yeah. And I guess for that reason, I haven’t dived in that deeply in terms of what changed that. I feel like it was a marketing bit as well, to some extent, where the face of the Spanish king is circu­lating around the world. I was just thinking the other day, these statues, the amount of money that was invested in just putting up statues every­where. I mean, those were the billboards back in the day, and, in a way, I think that money had a function in that sense as well, to really adver­tise like, “Look who’s in charge here. We’re able to get into your pocket liter­ally.” So I think it was a propa­ganda tool as well.

Robert Breedlove:

Yeah, I like that analogy, actually. So gold and Bitcoin, we call them bearer instru­ments, but what they really are is self-sover­eign assets so that each market actor is deter­mining what’s best for him or her in any given moment. And they’re contributing, I think, what is a little shard of their sover­eignty towards whatever they decide is best. And that’s what gave gold its sover­eignty in the free market. And what we’ve seen across history is people taking advan­tage of that, right? Trying to step in, provide a certi­fi­ca­tion function via coinage, and then abusing the trust placed in them. And now it’s just been taken to the ultimate extreme where we’re not tethered to economic reality whatso­ever. It’s just this unbri­dled race to the bottom across all national curren­cies. The game theory liter­ally is print as much as you can as fast as you can without disturbing the peace, so to speak, keep the host alive, and acquire as many scarce assets as you can on the way to the bottom.

Robert Breedlove:

And every nation is accusing every other nation of currency manip­u­la­tion. I listened to a session with Novogratz and Morehead this morning, and Novogratz said, “The kids are at play in the candy shop. The adults are gone. Every­one’s taken what they can get.” And when you come to see central banking as that, that’s what the model is designed for. It’s liter­ally designed to reallo­cate claims on things from one group of people to another. It’s hard to say what shape this change takes, but I think the biggest lesson for global reserve assets is that change is coming. It has contin­u­ously changed over time. The one thing that hasn’t is gold, which makes Bitcoin so inter­esting because it is disrup­tive to gold across all proper­ties of money, right? It’s more divis­ible, durable, recog­niz­able, portable, and scarce. And it also intro­duces the same secur­ability, where it’s so much easier to secure it. I think that’s the real entry point to the rabbit hole there. Another portal in the rabbit hole is that gold is being disrupted amid all this inter­na­tional currency crisis.

Tuur Demeester:

Yeah, I mean, gold has been artifi­cially under­valued for such a long time.

Robert Breedlove:

Right.

Tuur Demeester:

There’s even some evidence that the intro­duc­tion of the Euro was actually a way to try and diminish the role of gold because, in a way, you had the dollar versus gold, but what if you had a new boxer in the ring that was more exciting and sexy, and the idea would be that’s the Euro. And then you can have this shadow fight that every­body’s distracted by, and then the real money is faded into obscu­rity. There’s a paper called “The Demon­e­ti­za­tion of Gold,” by Alexandre Lamfalussy written in the ’60s, and he’s consid­ered to be one of the founding fathers of the Euro. I don’t know.

Robert Breedlove:

There’s great paral­lels there, too, to the shadow fight with politics, right? This red and blue thing, but they’re all taking handouts-

Tuur Demeester:

Yeah. Yeah, with the two parties?

Robert Breedlove:

… from banks, right?

Tuur Demeester:

I don’t know if you’re getting at the two party system?

Robert Breedlove:

Yes. Exactly.

Tuur Demeester:

Yeah, yeah, yeah.

Robert Breedlove:

Yeah, I think there’s a lot of theatri­cality put before us to distract us from the truth, and the truth is gold is money. It has been central­ized and controlled for a long time. And now there’s a technology that’s disrup­tive to gold, but very few people under­stand that today.

Tuur Demeester:

But what if govern­ments manip­u­late the Bitcoin price? Then I’m always like, “Yeah, but how much Bitcoin do they have in their vaults to then put selling pressure on the market?” They could only manip­u­late it by buying it, I guess.

Robert Breedlove:

That’s right. Yeah. They have 20% of the gold supply, so assuming they would need at least 20% of the Bitcoin supply. That’s a very bullish sign.

Tuur Demeester:

Yeah. It’s like the negative price manip­u­la­tion. You can safely say it’s decades ahead.

Robert Breedlove:

Yeah.

Brady Swenson:

So you guys both have dropped some fantastic Bitcoin writing lately, and that’s one of the reasons we wanted to pair you up. You both have dived into history to draw analo­gies to help us under­stand what’s happening here with Bitcoin. Tuur compared Bitcoin to the Refor­ma­tion and Robert to the number zero. I know you both reread each other’s pieces last night, and I’d love to hear you guys just discuss them. Robert, you want to start? Or, Tuur, let’s start with you. What did you think of Robert’s piece? And let’s hear any questions you might have for Robert.

Tuur Demeester:

Yeah. I think it was Cory maybe asking, “Oh, what’s your favorite piece you’ve read in the past year?” I would say it’s “The Number Zero and Bitcoin” by Robert. I really enjoyed it. And what I like about it is just the multi­dis­ci­pli­nary approach where you’re just trying to tie in a lot of things together. And I find one of the most exciting ways to read history is to read it through a certain prism. And then, of course, you can’t just stick with that one prism. You want to look at it from multiple angles, because it makes it clear what the under­lying approach is, whereas if you read some generic history, well, you know that there’s criteria for filtering and selec­tion, but you don’t really know what they are, so there’s this faux neutrality to them.

Tuur Demeester:

And so that’s why the [inaudible 00:20:50] stuff I also like because it’s usually also from a very specific angle. You can read the world history of the past 100 years through the prism of crude oil, for example, so I thought “The Number-”

PART 1 OF 4 ENDS [00:21:04]

Tuur Demeester:

Through the prism of crude oil, for example. And there’s, so I thought the number zero is just a fantastic way to do it. And of course, the way you tied in with Bitcoin is what makes it so original. And I think it’s spot on. Maybe except for, there’s a little line that’s like, “Oh, well, you know, Aristotle’s edifice was shattered,” and then I’m like, I’m kind of [inaudible 00:21:24], it’s like goddammit. He’s still relevant.

Robert Breedlove:

He is. Super relevant.

Tuur Demeester:

But other than that, I really enjoyed it.

Robert Breedlove:

Yeah. By no means do I intend to discount Aristotle, by any means. Thank you. That’s, thank you very much. And the one point there was that I think it broke the power base of the church, right? The church was using Aristotle’s story to substan­tiate their claim to sover­eignty on earth. And the premise on that claim was that there was no infinity and no void, so zero sort of shattered that, so to speak. But yeah, so big fan of Aristotle, and I agree that looking at history through multiple prisms, I like the way you said that. It really does give it much more of a… I mean, that’s what a free market is, right? We’re looking at the world through a lot of different prisms. Every­one’s individual perspec­tives and actions being compressed into a market price that we all orient ourselves against. And markets too, they generate prices, but also they’re gener­ating these innova­tions, which are our best approx­i­ma­tion of dealing with uncer­tainty effec­tively. It’s the best means we’ve come up with, to satis­fying this want.

Robert Breedlove:

And I would argue too, that true entre­pre­neurs operating in the free market with skin in the game, that’s where you develop compe­tence and character as well. So I think that’s where people become virtuous, I guess. So I think I see free markets as gener­ating those things like truthful price signals, real innova­tion and virtuous charac­ters. And Tuur, your piece, I read it again last night, The Refor­ma­tion. I loved the part about the Amsterdam Wissel­bank, and how it became sort of this ultimate safe haven for monetary metals, basically. People were stashing their gold and silver there. And then because of its geographic positioning, so it was surrounded by water, I think it had a moat or creeks or something around it. So it was very diffi­cult-

Tuur Demeester:

It was in downtown Amsterdam. Really smack downtown, which was, the heart of, the one place that every­body had the most reason to want to protect.

Robert Breedlove:

Right. And Amsterdam at the time was, they had the reserve currency, right? Or maybe this is-

Tuur Demeester:

it’s a matter of [crosstalk 00:23:58] debate. I would say gold and silver specie was more, just the money.

Robert Breedlove:

So they were, again, because of their access to water, they were becoming like a preem­i­nent merchant, a civiliza­tion, basically, right? They were becoming very wealthy through trade. Mercan­tilism was disrupting kind of the older models that landlords and churches controlled. Which you made the real good argument which I thought was inter­esting, that because more trade, the world was trading more, and more wealth was being created, such that land became less of an overall compo­nent of wealth, which actually took power away from landlords and churches, which I thought was really inter­esting. But at the Wissel­bank, I came to see it as sort of this ancestor to Bitcoin in a way. And that it was a safe haven because they had what, four bookkeepers and then four counter bookkeepers. So they had all these segre­ga­tion of duties across the accounting functions. Every­one’s checking each other’s work, it’s isolated by water. So it’s in a place it’s diffi­cult to invade. They had very specific rotations as of duties. So it was kind of like this WET code version of what Bitcoin is becoming DRY code-

Tuur Demeester:

So it’s a proto­type blockchain or something.

Robert Breedlove:

Like a proto blockchain, yeah. It was super inter­esting. Yeah. That’s what stood out to me.

Tuur Demeester:

Thank you. Yeah. I’m glad you liked it. And I think in general, in order to do, to produce reports or articles like that, you have to like go through a slog of material and one of the things I always enjoyed so much about Nick Szabo and actually a lot of the Cypher­punk writers is that they’re kind of like the Sophists, or something. And I mean it in the neutral or in the positive sense, in Ancient Greece, where they just really are market partic­i­pants and they’re not so much part of the estab­lish­ment, they’re not so much kind of entrenched in academia.

Tuur Demeester:

The other day I wanted to read this book on Aristotle’s four causes, and I looked it up and it was $120 and it was just, what? And I contacted the author and he said, “Yeah, the price is way too high. Here, let me send you the last draft,” and I just got it for free. But there’s just so much stuff behind these paywalls, and there’s just something about that, that I feel like is going to change. I think that there’s too much intel­lec­tuals are stuck in kind of an ivory tower. And I think the internet really is the kind of the catalyst for changing that. Because now it’s so, like we’re talking here, we don’t need a publisher or an insti­tu­tion to back us up to make this possible. So I’m excited about that.

Tuur Demeester:

I think that this is kind of, really, the world is changing and knowl­edge is made more acces­sible, but also because the dialogue is so much more open, I think we’ll see leaps in terms of new paradigms that are breached open or new ideas. Or ideas that were valid and true, and they were produced decades ago, are going to find new podia. And that’s really exciting to me.

Robert Breedlove:

You know, you’ve done a lot of things that I’m really big on. I really consider, digital age is so inter­esting. Because it really does feel like a time where the possi­bil­i­ties are endless. Not to sound cliche, but it’s almost as if again, if we’re back to that free market perspec­tive where that more wealth is created, the more rapidly, and we can share perspec­tives and iterate against one another. So another way to think about a market is it’s basically just a forum for betting against one another. We’re all just trying to prove each other wrong in the market­place. And in that betting process, I think we naturally stumble upon things, discov­eries, innova­tions, whatever, that actually benefit the world [inaudible 00:28:18], right? And we have an incen­tive to sell them into the market­place. So I think that the digital age intro­duces an entirely new… It just disrupts the forum.

Robert Breedlove:

It’s almost like this digital dissolving agent to anachro­nistic insti­tu­tions that we used to need for trust and belief. And, as you said, the ivory towers. You see them in academia, you see them in nation state polit­ical struc­tures across the board. And I really see what I like to call the digital dissolving fluid just sort of eroding those, and shifting the need to trust someone because they sit behind the bigger desk or a nicer suit. You can just trust the math, right? Or just trust the code. So it actually lowers these barriers to trade and inter­ac­tion, such that it enriches human poten­tial to a way we’d never seen, or even contem­plated.

Robert Breedlove:

And I think too, as you said, more access to knowl­edge, it is through acces­si­bility, that’s what leads to the colli­sion and recom­bining of ideas. Right? I think Matt Ridley, the author talks about ideas having sex. They need to go into the market­place. They meet, they recom­bine. New ideas spin off, some die, some live. It’s a Darwinian natural selec­tion of ideas, basically. That’s what the global economy is intended to be. And that’s why we trade, right? Because we all have different ideas and perspec­tives.

Robert Breedlove:

So the acces­si­bility to knowl­edge and the sharp­ening with special­iza­tion of knowl­edge are directly corre­lated. And we now have unprece­dented access to knowl­edge, right? Such that not only spatially, but also tempo­rally. We can go deeper into history, and we have the Library of Alexan­dria, so to speak, at our finger­tips, in our pocket and our smart­phones. And it’s radical, and it’s hard to even get your head around how profound that is. And I’ve talked about this on your show, Brady, that as a result of all that, there seems to be a resur­gence of ancient wisdom in the world.

Robert Breedlove:

We’ve seen through markets and trade and inter­con­nec­tion, some of the wisdom of the East, for instance, come to the West. We’ve had yoga, medita­tion, Ayurvedic medicine. Now you’re seeing things like paleo diets, carni­vore diets. It’s all these things that are getting us back to our roots of who we are. And in that context, I argue Bitcoin is essen­tially the same thing.

Robert Breedlove:

We’re redis­cov­ering the Austrian economics of money. And Austrian economics are basically the compressed ancient wisdom if you will, of economics. Whereas Keyne­sian economics is central bank propa­ganda we’ve used for the past 200 years. So I’m reading this book right now, it’s radical that, the torch was so dimly lit on Austrian economics, and it was down to just Mises at one point. It was one guy in the world basically, carrying the torch. And he went to the front lines of battle. He was deployed. So it’s like, that’s how close the thing was to never having Mises. If you didn’t have Mises, what would Bitcoin have been? Like, who knows? But it was that fucking close. And by some miracle, it survived. And now we have Bitcoin turning Austrian versus Keyne­sian economics from a philo­soph­ical debate into a real live market test. And this is, [crosstalk 00:10:43].

Tuur Demeester:

Yeah. And we’re really are seeing an Austrian revival. When I first got involved with Austrian economics, it was 2005. And yeah, it was better than the ’80s. It was definitely… But it was catching up with just the internet, but I feel like its market share in the digital space has now been increasing too. I guess Ron Paul was a little spike of interest for people, but I think, and it’s a bit sad that some of the original Austrian economics propo­nents took a long time to under­stand Bitcoin. They were saying that it was violating some of the basic-

Robert Breedlove:

The Regres­sion Theorems.

Tuur Demeester:

Theorems, yeah. Things like that. And so that’s a little bit sad. They really missed a signif­i­cant oppor­tu­nity. But I agree that the internet is like the Library of Alexan­dria and our pocket. And, and I think that, to me, explains also why univer­si­ties are eroding. And I don’t think they’ll disap­pear. I think there is value in the commu­nity aspect of a univer­sity and you can network, and there’s a high concen­tra­tion at the good univer­si­ties, a high concen­tra­tion of very smart and capable people. And as an 18 year old, you can, all of a sudden get exposure to that. That’s valuable.

Tuur Demeester:

But I think a big reason why univer­si­ties became so big and dominant as a system, it was because they were the gatekeepers of knowl­edge. They had the libraries and you had to go there, you had to somehow be affil­i­ated to get access. And then later they tried to digitize that. And then you have Elsevier and these other publishers with these crazy paywalls. But that’s just blown to smithereens now. It’s just incred­ible how acces­sible knowl­edge is. I thought I was lucky that when I was a student, I could access Google Books and at least read some snippets, but now it’s just, it’s incred­ible.

Tuur Demeester:

And then there’s this Dutch author, I forget his name, but he has this metaphor of the golden wall. I think his book is called The Discovery of Heaven. The idea of a golden wall where we’re all on one side of that wall as the plebs, the plebeians, and then behind the wall, this is where the experts are doing their thing, like where the politi­cians are making the laws or where, I guess the epidemi­ol­o­gists are figuring out what is going to happen with this pandemic. But then there are sometimes moments in history where you get to really peer over that wall and stand on top of it and realize this is all pretty messy, and these people, they’re not like some other race. They’re not angels, they’re just fallible, and often they don’t know what they’re doing.

Tuur Demeester:

And so we can kind of get over this restraint of, “But I’m not allowed to talk or speak up because I’m not an expert. I don’t have my PhD. And so I should shut up.” I love that in Twitter or whatever, the internet, anybody is allowed to speak up and we’re getting more and more into this era of meritoc­racy when you can just pave your own way. And the quality of your work is going to prove itself.

Tuur Demeester:

Which obviously is one of my pet peeves, because I dropped out of univer­sity. So I did have that fear for a while of, “Oh, am I even allowed to speak up, or speak my mind, or speak with any kind of… Anything resem­bling authority on something.” So anyway, I agree that this library in our back pocket is very, very powerful.

Robert Breedlove:

I think what you’re saying is very impor­tant as well, that univer­si­ties will always serve a purpose. It’s when people leave child­hood and go into adult­hood so that they can assemble in these new groups and become equipped with knowl­edge of history and philos­ophy and all these really impor­tant things. That, here is basically the heritage of who you are as a human. Now, go and take on the world, right? That’s always going to be an impor­tant system.

Robert Breedlove:

But like with so many other things, I think the fiat system has corrupted it, right? I remember being in college, the number one expense, second to tuition, was the cost of books. I would go and buy six to 10 books per semester for three to four thousand dollars, which is just, it’s asinine. Right? It’s monop­o­listic. And then you factor in the student loan, the student debt piece, right. We’ve saddled all of our best and brightest, coming fresh into the world with, I don’t know what the number is now two or three trillion dollars in student loan debt, right? Clearly that’s a poor idea, that the people that you’re investing with the future of your world, to straight out of college, give them, 50, 100, $200,000 student loan oblig­a­tions. That dramat­i­cally reduces their poten­tial, right? Just out of the gate. So it’s really, it’s a true fiat problem.

Robert Breedlove:

And I think [crosstalk 00:15:53], again, you’re just saying to your point, the monop­o­lies are being eroded by digital tech, right? And the gatekeepers, if you’ve got a gatekeeping or inter­me­diate business model today, I’d be worried. I think all of your gates that can be eaten by software will be eaten by software, because the cost collapses 10,000x. This isn’t like, “Oh, someone’s going to outcom­pete you.” It’s like a extinc­tion level event for your business model. And you’re seeing that in banking, you’re going to see that in academia. I don’t know what form it’s going to take, but it’s going to decen­tralize to bring your costs down a lot.

Robert Breedlove:

And so through that lens, I love that you dropped out of univer­sity. I gradu­ated, but that doesn’t matter. I paid for it. I learned some, sure I learned some things, but I’ve learned 99 times more as a self-taught person. And I think in that lens, in the digital renais­sance, whatever we’re going to call it, the autodi­dacts are the Neo-Renais­sance men. If you have a hunger to learn, you can satisfy it.

Tuur Demeester:

Yeah. When I learned about the history of the univer­sity and this is a while ago, but it really blew my mind. Because the original, in the high Middle Ages, it was not the univer­sity. It was called univer­sitas schol­arium et magistrorum. So it was the commu­nity of students and teachers. And they were student led. They were, the student body, who was paying the teacher and who was basically telling them. And every year, they would have a meeting without the teacher being present, where they would discuss what wage he was going to get. And there’s examples of teachers not being allowed to leave the city because they had to finish the term for the students.

Tuur Demeester:

And it is just this kind of incred­ible reality where the students were really in charge of these univer­si­ties. And where you could just enter, in a way, a univer­sity. I think Abelard did that. And you start debating with the teacher, and if the student body thinks that you’re actually better, they can just switch and they can join you. And all of a sudden you have univer­sity, which is pretty much what’s happening with podcasts nowadays. And I think that’s, if you will, the model that I think should inspire us to kind of keep the torch alive of higher educa­tion.

Robert Breedlove:

I love that. I’ve never heard of that, but being able to fork your college, that’s super cool.

Tuur Demeester:

Well, Aristotle did that. He left Plato’s univer­sity and he started his own lyceum.

Robert Breedlove:

Yup. That’s right.

Tuur Demeester:

Yeah.

Brady Swenson:

I love this conver­sa­tion, guys. First of all, I love this format. I love bringing two knowl­edge­able, thoughtful Bitcoin­ists together to have these, give a forum for these discus­sions. This is exactly what we’re looking for. So this is awesome. I love the idea of the internet freeing infor­ma­tion, freeing money, freeing individ­uals, empow­ering people who are inter­ested in learning on their own to dig and research and synthe­size thoughts, and really come up with new ideas. It’s an amazing time to be alive.

Brady Swenson:

One thing that I am curious about and like to talk about right now is ideas about the future of the way we govern our society in a Bitcoin world with all of this change that we’re seeing. Kind of funda­mental change to society in general, the under­lying bedrocks of society. The Refor­ma­tion itself was marked by the questioning of longterm insti­tu­tions, of the church. I would argue that this led to the separa­tion of church and state, the fight for that in the United States and Consti­tu­tion. How do you guys think that the separa­tion of money and state would affect the way we govern society? Would it be a drastic change? The end of the nation state? Are we talking more like smaller changes to kind of the system that we have now? Robert, you want to take this one first?

Robert Breedlove:

Sure, that’s a small question to tackle. I would just like to say for starters, there is no playbook for this, right? As such, when there was the separa­tion of church and state, there was no playbook for that up until then, right? No one could have foreseen moder­nity as we now experi­ence it. So I guess that’s a disclaimer. Do your own homework, do your own research. But I do like to point people on this topic, to the book that we’ve all probably read, and I’ve mentioned it a thousand times, but, The Sover­eign Individual. Written in 1997, dual authored, basically predicted the rise of social media. So, they predicted a shift from broad­casting… Tuur’s got the book right there. A shift from broad­casting to narrow­casting, which we would say is social media today. They predicted anony­mous digital cash being disrup­tive to the nation state model. And they compared that to, they compared digital space to essen­tially being like the high seas. And that it’s the one-

PART 2 OF 4 ENDS [00:42:04]

Robert Breedlove:

…essen­tially being like the high seas, and that is still one terri­tory that no juris­dic­tion can project dominion over. The costs are too high to control the high seas, and they said digital space would be like that. It also predicted, which we haven’t seen as much yet, but the digiti­za­tion of all property rights and securi­ties, as we under­stand it today. So I think Bitcoin really is the biggest piece of all of that, but you will see distrib­uted crypto­graph­i­cally-empow­ered software eat all the functions of govern­ment over time. Every­thing that it can eat, it will eat.

Robert Breedlove:

Now, what shape does all this take? I think the main takeaway is that govern­ment would become a lot smaller and a lot more boutique, because, as we know as human beings, one size does not fit all. And if a govern­ment no longer has a monopoly on money, such that it can enrich itself via infla­tion and taxation, then it can’t neces­sarily impose its cultural model onto people. So people can fork off a lot more, like we were just talking about. People will be much more free to fork society, I think would be the big takeaway of it.

Robert Breedlove:

And again, it gets strange here, because people are like, “What do you mean? I’m American.” Some people have American excep­tion­alism, which I think is total bullshit, by the way. If you have that, you really need to check yourself. But I under­stand national pride, like there’s history there. We should identify with that. But I think the closer you look at it, there’s this… I forget the name of the poet, but he said the oldest lie, he said, the oldest lie is that it is glorious to die for your country.

Robert Breedlove:

I really think that the closer you look at nation­alism, that it’s just kind of… Maybe it was a useful fiction at one point, but it might be a lot less relevant going forward. Especially now that we’ve got a much larger perspec­tive on who we are, where we are in the universe. We’re all in one little, tiny, pale blue dot, as it’s been called, and clearly we’ve misman­aged the resources. It’s a complex system, such that our decisions impact everyone else. You know, chaos theory, you’ve got a butterfly flapping its wings. It calls a hurri­cane here. We’re all super inter­con­nected. And I think that is really coming to the fore in conscious­ness.

Robert Breedlove:

And now you’re seeing people… We have a protest in the streets in the US. All these things are being questioned. Every­thing is being put to the test of scrutiny now, and I think what that does is it just washes out all the bullshit, and you’re left with things of substance.

Robert Breedlove:

So yeah, not to get too carried away, but in general, you see the monopoly of… Govern­ment becomes a more private function. It has to service its customers, and it has to satisfy them at market rates. I think that takes you from world of 200 countries to 20,000 or more, in the long run.

Tuur Demeester:

Agrees. I don’t know. No, but yeah, I agree with a lot of that. And also with just the caveat, all we know is change is coming. That’s kind of the thing with the market, is the defin­i­tion of it is that it’s unpre­dictable, and it’s going to reflect people’s desires. Like in some ways, dicta­tor­ships are a bit more predictable, but yeah, in terms of…

Tuur Demeester:

It’s a bit of maybe a nuance or something, a small differ­ence, but I don’t talk so much about Bitcoin being a separa­tion of money and state. I feel like it’s more like monetary freedom, basically, similar to religious freedom, where you can just believe whatever you want. So in a way, it dimin­ishes the impor­tance of going for the monopoly option.

Tuur Demeester:

And so to me, I looked a lot at the early days of New York City as like the citadel. That was just incred­ible. It was Flemings and Dutch guys who went out there, and what was different about that place from other colonies was that it was totally not religiously inspired. It wasn’t like, “Oh, we’re going to build paradise on earth here.” It was just a trading post, and they were super pragmatic, and in the begin­ning they were kind of like, “Ah, I don’t know. I don’t know if we want to allow Jews and these Muslims.” And they were actually trying to stop that, but then they had to corre­spond with the home base back in Amsterdam, the VOC home base, corpo­rate headquar­ters, basically, and ask like, “Hey, tell us what to do.” And I think the Jews even petitioned back to Amsterdam and the word came back like, “Sorry, guys, this is about markets and profit maximal­iza­tion, and we’re just not going to have this discrim­i­na­tion anymore. It’s not good for business.”

Tuur Demeester:

So maybe that’s kind of a sidestep, but so I think that places like that is where the new world is going to flourish, and it’s hard to predict where that’s going to be. Likely it’s going to be with a fairly high concen­tra­tion of people that under­stand this new paradigm, that are tech-oriented, that have belief in the rule of law. I think some old centers are going to weaken, and I think we will see… I mean, we have already seen peak govern­ment. I think that that’s… Either it’s now, where it’s like a few years ago, in terms of the percentage of GDP that a govern­ment can control without devolving into pure commu­nism. I think we’ve seen that, but it’s…

Tuur Demeester:

I think in terms of practical takeaways, you probably want to stay flexible if you’re young, especially, like maybe avoid investing too much in one partic­ular spot, because that’s going to become less relevant where you live, and countries are going to accom­mo­date to that. They’re going to know that in a matter of a few years, they can have so many thousands of nomad workers who love this tax regime that’s super friendly, or… Maybe we will see a revival of city-states, where this big empire… Maybe it is fiat money that’s the glue keeping all these empires together, and what if that goes away? We’re all seeing like, “Defund the police.” People are looking into like, “What is a city?” And then they’re like, “Oh, 80% of any city’s budget is the police force. So basically, the city is the police force.

Tuur Demeester:

I’m not saying that it should be one way or another, but all these discus­sions about… I love the word unbundling. I think it’s Fred Wilson, the VC, that they came up with that, or at least I heard it there first, this idea that big conglom­er­a­tions and monop­o­lies, they bundled together a lot of services. Sometimes, because the technology is not advanced, you kind of have to do it that way. Like the old newspa­pers, they used to bundle a lot of services together, or like the telecom compa­nies. But now, because of technology, we can totally unbundle that, and I think we’re going to see that with govern­ments, like their service package is going to be questioned and slowly unbun­dled.

Tuur Demeester:

But I do think some are going to behave like Spain, that are just feeling entitled and resentful. They don’t care that it’s very econom­i­cally expen­sive to wage war and crack down and fund the inqui­si­tion, and it’ll be bad to be there. It won’t be fun to live in those places. China could be one of those countries, and maybe Hong Kong is the new Antwerp that got sacked and that was this amazing trade hub for a couple of decades and then kind of faded. Within the US, it remains to be seen. It’s possible that it’s going to split up, like that we’ll see a breaking-up of the empire, and that maybe it’ll be West and East. Who knows?

Robert Breedlove:

I love what you brought up on the succes­sion piece. I think Texas has a clause in their consti­tu­tion, right? That they can succeed as their own nation?

Tuur Demeester:

I have to look into that.

Robert Breedlove:

Yeah.

Tuur Demeester:

But they definitely are in a good position, because they have their own electricity grid. They’re energy-indepen­dent, and yeah, several other reasons.

Robert Breedlove:

Yeah, so I think it’s a real possi­bility. I don’t know the timeframe at all, clearly, but [crosstalk 00:08:54].

Tuur Demeester:

Oh, I mean, look at the history of Russia, right? And it fell apart.

Robert Breedlove:

Exactly.

Tuur Demeester:

Once the ruble fell apart, then the Baltic republics were like, “Why do we need Moscow anymore?”

Robert Breedlove:

That’s right. I love that you referred to New York, which… My favorite movie is Gangs of New York. I think it’s just a great, beautiful cinematic master­piece of every­thing we’re talking about, where… It’s very zeroed in on New York, clearly, but it was this fork. America was basically this merchant-driven fork off of monar­chical England, right? This monar­chical struc­ture that couldn’t cast its dominion across the Atlantic Ocean, basically, and Ameri­cans just gradu­ally realized that they’re indepen­dent, and eventu­ally that culmi­nated in a war for their indepen­dence. And so again, you see there this oceanic wall, where it’s hard to project your dominion across that space.

Robert Breedlove:

Again, you’re back to that sover­eign individual analogy to cyber­space. Like it’s very hard to cast dominion across cyber­space, because the walls are just… They’re impen­e­trable basically, right? This is what Bitcoin is, is you’re basically preserving capital behind a mathe­mat­ical wall that no one can really penetrate. So there’s going to be a lot of demand for that.

Robert Breedlove:

And so I think that Bitcoin’s emergence, it really does speak to the founding princi­ples of America. Like I think America as a state has really gone awry, but America as an idea is something really worth fighting for and preserving and defending. We were founded on capitalism, basically, right? It’s individual sover­eignty, that the individual… Actually, the sover­eignty of the individual actually super­sedes the sover­eignty of the state.

Robert Breedlove:

And that was a big deal, right? Because throughout history, it was not that way. It was top-down. From the Egyptian ruler or the Pharaoh as God, everyone else as a peon… It’s a monarchy, to aristoc­ra­cies, and that was a big phase shift, to put the individual on top of the state, effec­tively. So that idea that America repre­sents is really something worth fighting and preserving.

Robert Breedlove:

And capitalism, just to drill down into what that is, it’s very common… People think that we have a free market capitalist society, but it’s just not true, right? Because, as we know, money is one half of every trans­ac­tion, and our money is not a capitalist struc­ture. Capitalism, for me, basically means the exclu­sive right to the fruits of your labor. So whatever you spend your time producing, culti­vating, making, whatever value you create, you have rights to that, to be able to trade it with others that have done the same. So all the people spend their time working and producing. Everyone gets to trade the fruits of their labor. The net outcome of that is an increase in wealth and prosperity for all. That system of wealth creation has been hijacked by central banking, effec­tively.

Tuur Demeester:

Somebody had to build the roads. You don’t get it.

Robert Breedlove:

Yeah, right. Central banking is liter­ally the fifth dictate in Marx’s manifesto.

Tuur Demeester:

Yep.

Robert Breedlove:

It is monetary socialism, is what I call it. I guess you could call it commu­nism, author­i­tar­i­anism, whatever. I distin­guish capitalism as you get to own your own time. You decide how you spend your time and what to do with it. Time is money, right? Socialism is the state gets to decide. They have a greater or lesser extent in deciding how you spend your time and money. And as we see today, our monetary struc­ture is fully socialist. Anyone that wants to deacti­vate your bank account, deautho­rize your bills, reverse your trans­ac­tions, they have that authority to do so. And so I think Bitcoin is just… We have a true American monetary capitalism coming back into the world. And I think that idea is really, really worth fighting for.

Tuur Demeester:

It’s like under monetary socialism, the govern­ment defunds you.

Robert Breedlove:

That’s right.

Brady Swenson:

All right, this is a good time to bring in Cory Klipp­sten, founder of Swan. Cory, welcome to the discus­sion. Take the floor, man.

Cory Klipp­sten:

Yeah. This has just been spectac­ular listening to you guys. Really appre­ciate it. As we were saying before the show started, really nice to talk to you again, Tuur, after meeting you, I think, one time a year ago at Bitcoin 2019 [crosstalk 00:55:33].

Tuur Demeester:

At the very last confer­ence I ever went to.

Cory Klipp­sten:

Yeah, yeah. It’s been awhile. I look forward to CK and Dave and the crew getting the next one set up so we can all go hang out again sometime soon, hopefully. And Rob, you and I obviously hang every once in a while here in LA, but I was sad to have a sched­uling conflict when you and I were first posed to discuss and argue about Nassim Taleb in Bitcoin on Brady’s show.

Cory Klipp­sten:

So I’m glad to actually be able to bring that in a little bit here, because I was listening to the last section of the conver­sa­tion, and one of the things that kind of strikes me, and this also ties in the work of like Peter Zeihan and Stratfor, and what’s happened in the world order since World War II. In a lot of ways, the American order, Pax Ameri­cana, that’s been created since World War II and then layering on the demon­e­ti­za­tion of gold in 1971 and fiat banking, which is coming to its absurd apex with the Robin Hood rally right now, as the economy goes in the shitter… It really just got me thinking about Taleb and basically, how fragile this is, and how we’ve been papering over all of the volatility that should be there in the system, but is not.

Cory Klipp­sten:

And this goes for all of these countries that exist only because of free passage of ocean shipping that’s provided by the American Navy, let’s say, or just like IMF bailouts of countries that other­wise wouldn’t exist anymore. They would have gone away a long, long time ago and would have been parti­tioned by neigh­bors or had been split up and balka­nized by different groups within those hilar­ious borders. So this is not a natural state of things, to have the borders as fixed as they’ve been for the last 80 years. So that was the jumping-off point. I wanted to get your reactions on some of those thoughts. (silence)

Brady Swenson:

Tuur, you want to start?

Cory Klipp­sten:

Or I can just drop the mic.

Robert Breedlove:

Another resounding question. Thank you, Cory. I will chime in on part of it, at least. A couple of the authors you referred to I actually haven’t read yet. Is that The Fourth Turning? Is it?

Cory Klipp­sten:

No, but that was going to be the next topic I bring up, so [crosstalk 00:57:46].

Robert Breedlove:

Oh, okay, fine.

Cory Klipp­sten:

No, so Peter Zeihan just came out with Disunited Nations, but he was also kind of like the main analyst for Stratfor down in Austin in the 2000s and early 2010s [crosstalk 00:57:57].

Brady Swenson:

They were in Austin? I didn’t know that.

Cory Klipp­sten:

Yeah. Strat­for’s in Austin. So George Friedman authored The Next Decade and The Next 100 Years and there’s-

Robert Breedlove:

Oh, I read The Next 100 Years.

Cory Klipp­sten:

Yeah, so Peter’s work is sort of reflected in those books, and then he’s gone indepen­dent the last few years and been on the speaking circuit and finally came out with a book. It’s a good one.

Robert Breedlove:

The book that concludes with a Mexico being the next world super­power in the next hundred years.

Cory Klipp­sten:

Yeah. It’s a little bit dated and things have gone a little bit sideways, but…

Robert Breedlove:

Yeah, it’s gone… I think he missed Bitcoin, largely. Every-

Cory Klipp­sten:

He’s still missing Bitcoin.

Robert Breedlove:

Yeah.

Cory Klipp­sten:

Eventu­ally.

Robert Breedlove:

Yeah, yeah.

Cory Klipp­sten:

By the way, he will.

Robert Breedlove:

So I think a big theme there that I’d like to touch on, and this is Talebian, is that our human attempts to inter­vene with complex systems typically backfire, right? Like we really need to learn to work with them, not try to manage them, and in Talebian speak, he says that when we intro­duce human inter­ven­tionism, we move from Medioc­ristan to Extrem­istan. These are two proba­bilistic domains wherein Medioc­ristan is something much more organic, like your body weight. You can’t double your body weight overnight. Like you probably couldn’t even double it in a year, but when you’re dealing with abstract functions, like your net worth, for instance, you can make or lose that in an incident, right? One trade.

Robert Breedlove:

So I think Taleb’s point is that in our attempts to manage complex systems, we’ve created these abstrac­tions around them to try to repre­sent them as if they’re reality. And we move from this domain where things are more organic and adapted and occur nation­ally to this domain that hides a lot of that natural volatility for long periods of time. And then finally, as it’s diverged suffi­ciently from reality, it snaps in these cataclysmic collapses, and I think that’s what central banking is. It’s designed to mute price volatility. It’s designed to mute unemploy­ment volatility. It’s designed to manage business cycles, which is, as we all know, total bullshit, and in that attempt by humans to inter­vene with the complex system that is the economy, we’re just creating and exacer­bating these cataclysms that we’re seeing today. So yeah, I think that’s my general feedback on that.

Cory Klipp­sten:

So I love that because I think it also actually dovetails with long-term credit cycles and The Four Turnings and this 80-year thing where we have the War of the Spanish Succes­sion and it destroyed Europe 1700, and then the revolu­tions of 1780-ish and then the Civil War of 1860 and then World War II, 1940. And it’s like, okay, here we are, 80 years later, every­thing’s absurd in the economy and govern­ments around the world. It’s just this ridicu­lous thing that’s going on, and we’re going to kick off this new whatever-it-is.

Cory Klipp­sten:

And the grand hope and what I think Bitcoin maybe repre­sents… I’ve been tweeting every now and again about the fifth turning, and that maybe we don’t need to go through these things anymore, that that’s not a natural state of affairs to keep on blowing every­thing up every 80 years. Because if you can go back and allow for localism and a natural level of organic volatility and some of the things, then you don’t build so much fragility into the system by trying to smooth it out so much. So Bitcoin is like an escape valve that gets us off of this stupid every 80 years, destroy every­thing and start anew with 50 to a few hundred million people dying. And maybe we can just be better as humans going forward.

Tuur Demeester:

Yeah, I agree with that. I think that debt cycles will probably always exist, but the extremes that we’ve seen in the past hundred years are just not natural. And I actually wrote a paper that closely relates to that in 2010, 2011. Basically, I was trying to find a defin­i­tion for the business cycle, and weirdly, if you look throughout liter­a­ture, it’s just not really there. There’s not really a defin­i­tion for what the business cycle is.

Tuur Demeester:

I think Guido Hulsmann came really close when he called it an error cycle. It’s like a period of time when people are accumu­lating a lot of errors, which is the suppressed volatility Robert was talking about, and then all of a sudden it becomes clear to the market that this whole edifice was built tilted and needs to be restruc­tured. And so then you get the crash and every­thing comes down, but it doesn’t make sense unless you differ­en­tiate just the natural occur­rence that the market sometimes gets it wrong for awhile. You can’t differ­en­tiate that from the business cycle. People intuit that there’s a differ­ence there, that it’s not just like, “Oh, people happen to be wrong.” And the Austrians correctly point out there’s this-

PART 3 OF 4 ENDS [01:03:04]

Tuur Demeester:

… people happen to be wrong. And the Austrians correctly point out, there’s this credit expan­sion. But so to me, it’s a fraud cycle. It’s a fraud cycle that is caused by insti­tu­tion­al­ized fraud in the finan­cial realm, that’s the defin­i­tion I came up with. And I still think it’s true and valid. And yeah, I mean, Cory, to your point, I think that it’s possible to get rid of this. It’s not just some storm that comes around every couple of decades, we can get rid of this.

Tuur Demeester:

And we have examples, like 19th century America was just incred­ible in terms of … And it was a defla­tionary economy, but it just kept growing and growing. And there were a few crises, but nothing off the size of a currency crisis or of 2008 or anything like that. They’re just isolated events, they didn’t lead to mass unemploy­ment and things like that. I mean, even look back at the Spanish Flu in 1918, it didn’t lead to mass unemploy­ment. The reason why we do have mass unemploy­ment now is that it was like a hollowed-out tree, the economy was like a hollowed-out tree and it just needed a little gust of wind to start collapsing.

Tuur Demeester:

And so it frustrates me that we have the pandemic because it’s the best excuse for any politi­cian. “All this hardship is caused by the pandemic, and then we can then discuss and talk about what we did wrong.” And so it’s a sideshow, but the main event is just a finan­cial corro­sion. And so I don’t know, in terms of, where are we going in the long run? To me, I’m suspending some of that because I think in the short run, we’re going to have infla­tion and it’s rough. That stuff is rough. And I think it’s impor­tant to, I guess for everyone, and people are free to do what they want, but in terms of thinking about how am I going to deal with this in the next five years, once infla­tion comes around.

Tuur Demeester:

And I think the effects are going to ripple across all strata. It doesn’t matter if you’re rich or not, you’re going to feel it. If you’re rich, you might be targeted. If you’re poor, you’ll lose your job and you might have to figure out, “What do I …” Your diploma might become worth­less. So I just think that it’s impor­tant to think beyond, “Oh, but I have some Bitcoin.” The struc­ture of society is going to change I think in the next couple years.

Robert Breedlove:

I agree completely, I just want to add a couple things to that. That’s Dicta­tor’s Playbook, never let a good crisis go to waste. And man, are they playing that to a T. All they needed was that gust of wind, as you call it. Now they’re engaging all the measures that they wanted to basically.

Robert Breedlove:

And it’s true that infla­tion is much more insid­ious than just a loss of purchasing power. And you’re not just protected from it by being in an infla­tion hedged asset. Because what happens is that it actually, it reduces … I would say it dilutes the trust fabric basically. So people are less willing to enter into trustful business relation­ships because the future is more uncer­tain. So people will come more protec­tion­alist, more nation­alist, more defen­sive, I guess in general.

Robert Breedlove:

And that has an impact on trade, and trade is what gener­ates wealth. So you can’t really protect yourself from it. Even if you’re fully, perfectly infla­tion hedged, maybe your assets are going to do okay on a net value basis. But if trade is impeded and reduced in the world, then the world becomes less wealthy, every­thing loses value. So I think that’s really inter­esting.

Robert Breedlove:

And then to go really deep, because I know we’re here to do that. Bitcoin is such a fasci­nating inven­tion because it bridges physical and digital reality in a sense. And so, in physical reality, we had the medioc­ristan, as Taleb calls it. Like your body weight, it fluctu­ates slowly and somewhat naturally. Whereas an extrem­istan, which we could call something in digital space, is more like your net worth. They can go a hundred X to zero in an instant basically.

Robert Breedlove:

But Bitcoin, by connecting digital space and anchoring it into the thermal dynamic reality, the energy of the universe, it’s preserved the advan­tages of a physical-like money. So we have physical-like scarcity is actually even better than that, that’s absolute scarcity. We have the settle­ment assur­ances of something like physical goal. We have the privacy of something like a private trans­ac­tion. But you get all the digital-like benefits as well in terms of porta­bility, money supply auditability, and trans­parency.

Robert Breedlove:

So we’ve never had an inven­tion that bridges medioc­ristan and extrem­istan, or physical reality and digital reality, like we do with Bitcoin. And that’s why I think we’re all, the 10 blind guys touching the elephant, they all describe it differ­ently. Every­one’s like, “Oh.” One guy’s touching the truck. It’s like, “It’s like a long rope.” And another guy is touching the leg, and it’s like “It’s like a big tree stump.” But they’re all describing the same thing. It’s hard for us to get our heads around how big of a deal this is, because we’ve never seen anything like it.

Tuur Demeester:

I agree. By the way, something, I forgot to mention is a little book by a Brazilian entre­pre­neur called Ricardo Semler, and the title is Maverick. And I would definitely recom­mend it for anyone who’s in the entre­pre­neurial space and, because he’s basically describing how he survived and thrived throughout the eighties as an entre­pre­neur in hyper­in­fla­tionary Brazil. It’s a really cool little book.

Brady Swenson:

Nice. Okay. So let’s wrap up with some price talk. It’s being demanded in the chat room. We have about five minutes left here. So let’s maybe follow up to her on Bitcoin and Heavy Accumu­la­tion, the report you published for Adamant Capital last April, talking about accumu­lating in the $3,600, $500 range for the rest of that year. So, and then, in the abstract, it talked about how a new bull market will perma­nently summit Bitcoin as a multi-trillion dollar asset class. What’s your latest take on near future Bitcoin price action?

Tuur Demeester:

Yeah, so I think the bottom is in … We had the puke phase and that, and then we had a 50% crash since, but we managed to stay above. That was just so brief and it was just caused by this crazy global liquidity event. So to me, I still see us being in this, trading in this range of 10,500, all the way down to 6,500. That to me is the reacu­mu­la­tion band. And it’s like the early stage of the bull market. It’s where a lot of the weak ends are still selling and insti­tu­tions, family offices are accumu­lating. I think actually today, Fidelity came out with this report. They did a survey among large insti­tu­tions and over 30% of them now own Bitcoin.

Tuur Demeester:

And so I think that’s the big money, those are the early movers. And right now retail is still distracted by stocks. I think it’s going to turn out to be a bad idea because it’s just … Some of these compa­nies are actually going to go bankrupt. And so, you’re going to have zero. It’s better than bonds still, but it’s still very volatile and diffi­cult to navigate. So I think a lot of that money is going to go back to Bitcoin.

Tuur Demeester:

I think the reason why retail has not piled back into Bitcoin is that there’s just this hangover. There was this massive outpouring of greed in 2017, and now every­body who got caught on the wrong side of that is still a bit embar­rassed. Your family dinner, “Oh, you’re still into that crypto stuff?” So I think some of that has to dissi­pate still. And eventu­ally I think 10,000 is one of these major psycho­log­ical price points. It just takes some time to punch through it. And once we do, we’re not going to go back. I think that’s why we’ve been hovering above it and around it.

Tuur Demeester:

But yeah, I mean, I think we’re in a bull market. This is not going to die down. I think the codom­i­nance is going to increase still. I think there is going to be other assets together with Bitcoin that are going to go up, but it might really not be old coins, it might be … A lot of the music is playing in the deriv­a­tive space now, so maybe it’ll be over there. Maybe it will be when some of these Bitcoin compa­nies start going public and that’ll be the equiv­a­lent of the gold mining boom of the 1930s.

Tuur Demeester:

So something is going to rally along­side Bitcoin that’s going to give you alpha, but I think it’s a little too early to really know what it is. But usually a good rule of thumb is that the previous cycle just does not repeat one-on-one, it’s just, it won’t.

Robert Breedlove:

I mean, it’s great perspec­tive. And in general, a lot of value in fluids, anything that cannot have its quantity eased, and anything that’s trust less. So again, gold, Bitcoin do well there.

Robert Breedlove:

Zeroing in on Bitcoin a bit. I do think that at this point, it’s safe to say that it’s next milestone is gold. I think the narra­tive is pretty firmly estab­lished. It is being invested in, in that way as a hedge against central banking or expan­sionary monetary policy. And it’s being evalu­ated based on its monetary proper­ties, which is what made gold, gold. So I do think that, and let’s call it gold poten­tially in our market, but it’s also highly suppressed as Tuur mentioned earlier. Central banks own 20% of the supply. They have a number of schemes that they use, the [inaudible 00:10:41], et cetera, et cetera, to actively suppress that price, to defend their curren­cies from direct compe­ti­tion.

Robert Breedlove:

So who knows what that rule number is? But say it’s 10 trillion, that’s I think the next milestone for Bitcoin. I don’t know that it will be in this cycle. I still expect Bitcoin to continue to move to these price cycles of having, boom, exces­sive FOMO [inaudible 00:11:04]. But I think by the, call it the 2028 to 2030 peak, it should be there. It should be at or beyond gold. And from there, I would say maybe even before there, in that four trillion market cap range, we started talking about the Talebian minority rule, where it starts to impose its rule set on the majority, basically.

Robert Breedlove:

Because as we know, the rules of Bitcoin are totally obsti­nate, totally intol­erant. And whatever that magic number is, call it 4% of global market cap of money, around 100 trillion, so it’s $4 trillion. I think things get, they start to accel­erate in a really inter­esting way. And you might see prior patterns become less relevant.

Robert Breedlove:

And the other thing I think is that to me, the value propo­si­tion, although you have to dig very deep and you have to approach Bitcoin from first princi­ples to under­stand it, like [inaudible 01:14:59] saying what made gold money, that it was the most visible, durable, recog­niz­able, portable, and scarce technology in the world. That’s why people chose gold as money. And when you see that Bitcoin is superior across all five monetary proper­ties, I think smart money is going to land on that. I can spit out that whole value prop in 30 seconds. I don’t think smart money is going to let this thing get away from them.

Robert Breedlove:

So when Bitcoin breaks a hundred thousand dollars, whatever the psycho­log­ical threshold is, that it really reaffirms itself, that it’s here to stay, it’s not going away. And people are paid to figure out what the fuck it is and where it’s going, they’re going to start evalu­ating our work. And I think if you dig deep enough, you’ll land on that bedrock, that from a first principle stand­point, Bitcoin is the best monetary technology you’ve ever had, and it is poten­tially disrup­tive to gold. And when that realiza­tion starts to dawn on people and so our money, I don’t know, it’s going to be really inter­esting.

Tuur Demeester:

Yeah. It’s like, what if you could buy an equity stake liter­ally in the internet. And we’re early nineties, and the internet is just this one thing, one protocol, and you can just get a piece of that, Internet Island. Get some real estate there. What would you project the value of it as, it just boggles the mind.

Robert Breedlove:

There’s an old, I think it’s a Jewish axiom, or it talks about wealth alloca­tion. And it basically says you should have a third of your wealth in cash, a third of your wealth in your business, a third of your wealth in land. And if you look at Bitcoin in that respect, and it really could become cash, that could become our defin­i­tion of cash. And that could be it for all time. It’s a call option on the produc­tivity for the rest of history. I mean, that’s a really big deal. It’s a hundred trillion dollar market today, who knows what it is going down the road.

Robert Breedlove:

And when you combine that with govern­ments that are going to become increas­ingly overreaching and Bitcoin has this one property, I call it inper­script­able, which means it cannot be taken away prescrip­tively. It’s a one asset you can own, one property you can have, that to govern­ment can take away from you. I think the demand is just going to surge. So I don’t know what that timeframe is. I don’t know how long it takes people to realize it. I’ve been tempted to be more bullish in the past, but I think it will happen. The free market finds truth.

Tuur Demeester:

One thing that I would also suggest, and it’s in line with, with Rob’s points, is to the audience, is to try and start looking at markets denom­i­nated in gold really. Just look at stock markets denom­i­nated in gold bonds, real estate. And that’ll demys­tify some of the narra­tives that we’re seeing in the media like, “Oh, the stock market rebounded all the way.” No, it didn’t.

Tuur Demeester:

If you look at denom­i­nating gold, it did not reach the previous highs and it’s going to keep … I think it allow you to just have a more of a sober look, because denom­i­nated in dollars, every­thing is going to go through the roof. And it doesn’t mean anything if your cost of living is also going through the roof, expressed in dollars.

Robert Breedlove:

I agree 100%.

Tuur Demeester:

And then of course, you want to say, “Yeah, well, why not express in a Bitcoin?” It’s just because you can go back 40 years and express it and go, there’s just way more … And you don’t have that startup aspect anymore, gold is a five or $10 trillion market. So I think it’s good to use it as the gold glasses, put them on and look at the world through them.

Robert Breedlove:

And it’s good bait down the rabbit hole. Because then you’re like, “What made gold valuable?” And then when you figure that out, you figure out why Bitcoin is valuable.

Tuur Demeester:

But I mean, in terms of keeping assets safe, if you trust the Bitcoin mining, that that’s decen­tral­ized enough, it just, how exciting is it for any family office? They used to park their money in the US because it’s safe there. But now, because of all these anti-money laundering laws, that infor­ma­tion is leaking. And so they’re basically so vulner­able, some of these second world entre­pre­neurs and family offices. And the idea that you can just have a multisig wallet and you store one key per conti­nent, that’s the defin­i­tion of robust­ness.

Tuur Demeester:

I think that is going to excite a lot of people as we move into … First capital flight, people trying to get their money out. Then capital controls, that is going to make all this boring stuff, was like, “Oh, Bitcoin doesn’t have any innova­tion.” It’s not true. The innova­tion is happening where it matters, which is wealth preser­va­tion and secure manage­ment of keys, which is very hard. That is going to start shining I think.

Robert Breedlove:

I agree. And I think, I’m not saying to dump some of that, for family offices, a lot of them I’ve spoken to in the past, they do collat­er­al­ized lending type of arrange­ments. And Bitcoin, another thing, we didn’t touch on it today, but it’s super collat­eral. It’s encum­bered with the bare assets, so just by holding it, it’s unencum­bered. It’s 24 by seven liquid. There is no title search, there’s no legal anything.

Robert Breedlove:

And then you couple that with … You mentioned Texas earlier with all this excess energy produc­tion, it’s like any juris­dic­tion that’s in that situa­tion can now monetize that energy directly and anony­mously. So there’s going to be this huge demand as people wake up to govern­ment overreach, and I think you’ll see people entering Bitcoin mining markets and then using it as collat­eral to fund myriad other business models.

Brady Swenson:

All right, guys, we’ll wrap it up there. Thank you so much for the incred­ible conver­sa­tion. I just want to repeat that I’m loving this format, providing a forum to pair our Bitcoiners for discus­sions you’re not going to find anywhere else. So subscribe to the podcast at swansignalpodcast.com, or on YouTube, youtube.com/swansignal. Swan Signal Live is a produc­tion of Swan Bitcoin.

Brady Swenson:

It’s the best place to accumu­late Bitcoin, the easiest place. You just auto fund your USD. We auto buy BTC for you. You can set up auto withdrawals of your BTC to your own wallets. Check out swanbitcoin.com/breedlove for $10 of BTC droped to your account after you start saving with Swan. All right, we’ll see you all next week. Thanks so much.

Brady Swenson:

Thanks to Tuur and Robert for joining us on Twitter. You can follow Tuur at Tuur Demeester, T‑U-U‑R. D‑E-M-E-E-S-T-E‑R. Robert is at Breedlove22, B‑R-E-E-D-L-O-V‑E. 22. Cory is at coryk­lipp­sten. That’s C‑O-R‑Y. K‑L-I-P-P-S-T-E‑N. And I myself am at citizen­bit­coin. On behalf of the Swan team. Thanks for joining us. We hope you enjoyed this episode of the Swan Signal podcast. Join us live next time if you can. Jump into our Swan signal Telegram chat room, we have a lively crew in there that chat during our conver­sa­tion, ask questions of the guests and continue the conver­sa­tion throughout the week. Find that chat at t.me/swansignals.

Brady Swenson:

Swan Signal is a produc­tion of Swan Bitcoin at swanbitcoin.com, the best way to accumu­late Bitcoin. One, we auto fund USD from your bank account. Two, we automat­i­cally purchase Bitcoin for you. Three, you can set up automatic withdrawals to your wallet. All at the lowest fees for recur­ring purchases in the industry. Up to 80% lower than Coinbase, up to 57% lower than Cash App for automatic recur­ring purchases. Follow us on Twitter at swanbit­coin and subscribe to the podcast at swansignalpodcast.com.

Brady Swenson:

That’s it for this week. Thank you so much for joining us.

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 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

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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