June 11, 2011 - Freedomain Radio - Stefan Molyneux
08:13
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| Hi everybody, it's Devan Molyneux from Free Domain Radio. | |
| Thank you everyone who took the time to comment on my recent conversation about Bitcoin. | |
| I want to correct a general misperception that people have about the free market. | |
| Now here we're talking about a non-coercive, non-governmental controlled, non-violent scenario, free market. | |
| So people wrote a lot to say, well, it's dependent on electricity. | |
| That's true. Well, it doesn't have any hard assets backing it. | |
| That's very true. Well, it's volatile. | |
| That's very true. But that's completely irrelevant and completely and totally unimportant. | |
| Completely and totally and absolutely unimportant. | |
| And if you think it's important, then you're missing something very important about the free market, which is that in the free market everything is equal. | |
| Everything equals out in the free market. | |
| It's really, really, really important to understand that. | |
| It's like, if I say, I really, really want a house on the ocean, and you say to me, well, that's more expensive. | |
| It's like, well, yeah, because lots of other people want a house on the ocean. | |
| If I say, I want a hut in a cave in the middle of Montana, that's quite a bit cheaper because not many people want it. | |
| So if you say, I want to buy a house in a cave, a hut in a cave, and I say, I want to buy a mansion by the ocean, and some third party says to me, well, that's just too expensive, and the other one, it's in a cave. | |
| It's like, well, yeah, of course it is. | |
| The one that's in a cave is very cheap, and the one that's by the ocean is very expensive. | |
| So it all evens out. | |
| Like, if you want to live... | |
| In a city with very little air pollution, you can do that. | |
| And housing prices are going to be more than a comparable city with very high levels of air pollution. | |
| So saying to somebody who wants to live in the house with no air pollution, that's going to be more expensive is, well, of course it is, because you're buying cleaner air. | |
| And if you want to live in a place with bad air quality because you want to save money or whatever, then you just save money that way. | |
| Everything evens out, right? | |
| There's an economic argument that says that Putting seatbelts in has been negative. | |
| And there seems to be some significant proof behind this argument. | |
| So making people wear seatbelts is negative for human life and safety. | |
| Because when you put people in seatbelts, all they do is they drive less carefully. | |
| Why? Because they have seatbelts! | |
| And so you get more accidents because there are seatbelts. | |
| Unfortunately, this affects people on motorcycles and bicycles and pedestrians badly because they don't have seatbelts, right? | |
| So the argument is you would have exactly the same effect if you had everyone have a big metal spear coming out from the front of their steering wheel so that if they got into an accident they'd be impaled. | |
| Everybody would then drive very carefully, but the number of accidents wouldn't really change. | |
| The amount of risk to human life wouldn't really change. | |
| This is what is so frustrating. | |
| about the free market to people who want to control and to manage and to regulate it is that it's like trying to grab jello. | |
| It's always going to change its shape depending on what is occurring. | |
| So it's like people say, well, lending money out in multiples is really bad. | |
| Like you put a dollar in the bank and the bank lends out two dollars. | |
| That's really bad. No, it's not. | |
| It's really not. As long as the bank tells you what it's doing, there's nothing wrong with reserve currency. | |
| There's nothing wrong with anything like that. | |
| There's nothing wrong with fractional reserve banking. | |
| You pay your money and you take your chances. | |
| I mean, if you want to make money on the money that you put in the bank, the bank's going to have to do something productive with it. | |
| And the more the bank lends out, the more money you may make or lose on your deposit. | |
| It's as simple as that. If you want to buy a brick of gold and put it in a vault in your basement, yeah, absolutely. | |
| That has certain costs and benefits. | |
| So everything has costs and benefits, and it all evens out. | |
| Because when it doesn't even out, Things change, right? | |
| So if I release a block of mansions, like I build a block of mansions along the beach, and release it for the same price as the hut in the cave in Montana, everybody's going to go and want to buy those houses on the beach, which bids the price up so everything evens out. | |
| If I put a time machine in the hut in the cave in Montana, everybody's going to want to go and play around with the past, or the future, and therefore It's all going to even out. | |
| Everyone's going to bid that one up because there's a desire for it. | |
| So the market is constantly seeking equilibrium, of course, between supply and demand. | |
| So yeah, Bitcoin has no hard assets. | |
| Yes, Bitcoin is dependent upon electricity. | |
| Although those problems are solvable, there may be a variation of Bitcoin that has hard assets. | |
| But the moment you have hard assets, this is what I was trying to talk about, In the interview, the moment that you have hard assets backing up a currency, the price, the cost of using that currency is going to go up. | |
| You've got to buy all that gold, you've got to find some secure place to store it, you've got to hire people to guard it, you've got to install security systems, and so that people can redeem gold, hopefully, wherever they are. | |
| You have to have a transportation system for that gold to deliver it to people and so on, right? | |
| It's all very expensive. | |
| I don't understand why people say it has no hard assets. | |
| Well, that's why the transaction cost is zero. | |
| If it had hard assets, the transaction cost would be 2% or 3% probably. | |
| So it's infinitely cheaper than a currency with hard assets. | |
| Zero transaction costs. | |
| That's what not having hard assets buys you. | |
| So why people say that it's a problem that it doesn't have hard assets is It's completely crazy to me. | |
| It's like saying that a car without a sunroof is cheaper than a car with a sunroof, but it's a problem that the car doesn't have a sunroof. | |
| No, it's not a problem that the car doesn't have a sunroof, because that problem is taken care of by the fact that the car is cheaper. | |
| And Bitcoin's lack of hard assets and its dependence upon electricity is solved by the fact that it's free. | |
| That it's transaction free, that you can send a tenth of a penny through Bitcoin and it costs you absolutely nothing. | |
| So I just really wanted to point that out for people. | |
| If you don't understand this about the free market, it's really going to cripple you in your thinking about how to understand things in the free market. | |
| I remember some economists, I think it was the same guy who came up with the seatbelt example. | |
| uh was talking about how people were saying well you know if you put your money in a house you don't make as much money as if you put it in the stock market and he was saying well that's a stupid thing to say because if you put your money in the stock market you don't have a house to live in so yeah you may not make as much money in real estate as you do in the stock market But you have a place to live in, which if you put your money in the stock market, you still have to pay for a house to live in, which is going to cut into your profits from the stock market. | |
| So comparing the pluses of one thing with the minuses of other without taking anything else into account is a fool's game. | |
| I don't want you to waste your time, and I don't want you to appear uninformed. | |
| I want you to have the best mental tools to go out and criticize things as humanly, humanly possible. | |
| So I hope that that makes some kind of sense. | |
| As for it depending on electricity, Maybe yes, maybe no. | |
| Maybe there'll be some place, or maybe you can order a very cheap thing online, a USB port, you plug it in, you get a card swipe, swipes your bitcoins into that metallic stuff, and maybe there's some way of doing it that way, that these things can be solar powered. | |
| I mean, there's lots of different ways that you can solve these kinds of issues. | |
| So I think it's really, really important to be self-critical when you are going to be critical of something, which is a tough thing to do. | |
| Because when we're critical of something, what we want to do is find the flaws and the problems and all of that, and just remember That if you're comparing the pluses of something, well, you know, this has gold, this currency has gold behind it, so it has x, y, and z that are plus, and then you compare it to the negatives of another currency like Bitcoin, which has no gold behind it, you're not saying anything, anything at all. | |
| You're saying a car with a sunroof is better than a car without a sunroof, with no regard to price. | |
| But if you don't take price into account, you can't do an intelligent comparison. | |
| So the price of Bitcoin is zero, and the price of a fixed asset currency is not going to be zero. | |
| So it all balances out. |
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