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Dec. 30, 2020 - Freedomain Radio - Stefan Molyneux
24:49
What's Going on with Bitcoin?
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Hey everybody, Stefan Molyne from FreeDomain.
Hope you're doing well. So I just wanted to bunch you in for a couple of minutes and talk about the economy and what is going on with crypto and, in my view, real estate.
This is all big picture stuff. I'm not giving anyone any advice, but this is what is going on.
So a little Econ 101 for those who haven't watched me for a while or haven't heard this kind of stuff.
So, Econ 101 is that all human desires are infinite, but all resources are finite.
You always want a faster, better laptop, phone, whatever it is, but all resources are finite, and economics is a study of how these get allocated.
Now, how resources get allocated occurs really one of two ways, and you can think of it like sex, because who doesn't like thinking of everything like sex?
So how does sex get allocated?
Well, it gets allocated one of two ways, morally and evilly, right?
So the moral way is, you know, you woo a woman, the woman woos a man, not that that's too difficult, and you decide to voluntarily have sex with each other, and while that may not be ideal morally, it's certainly not evil, it may be unwise to have a lot of sexual partners, in fact it is, but it's not a violation of the non-aggression principle.
On the other hand, sexuality can be, quote, distributed by evil actions.
I'm talking about straight-up rape or roofing or, you know, having sex with unconscious women or drunk men or whatever it is, right?
So that's how sexual activity gets distributed voluntarily or violently.
That's kind of how it works.
So it's the same thing with the economy.
How do resources that people produce, how do those resources get Allocated, which means how do they get used?
How are they applied? Who gets to consume them?
There are two ways that resources can get allocated.
The first way is morally and voluntarily and so on through people making free decisions in a free market.
If you choose to buy iOS devices over Android devices, then more investors will invest in iOS devices and more resources will be applied to the creation of those devices or vice versa.
The voluntary free market way of doing it, and that's like wooing someone as opposed to rape.
The involuntary way that resources get allocated is through force or fraud, right?
So theft, violence, straight-up robbery, and a very subtle way that resources get redistributed is through inflation, right?
So when you have a certain amount of goods, and there's always a fixed amount of goods in society, I mean, it grows over time, obviously, as things get more efficient and new resources get found and so on, you get an increase in resources over time in society.
But when you have the money supply, the amount of dollars in an economy is outstripping the creation of new value, then the price of everything goes up.
It's a pretty simple equation if you sort of want to boil it down to something that's certainly, it's hard, for me at least, hard to think of these things macro.
But micro, if you have 10 $1 bills and 10 oranges in an economy, then Each orange is going to cost about a buck.
But if you then suddenly have 10 oranges but 20 $1 bills and you're trading them, then it's going to be quite quick that every single orange is going to cost $2 rather than $1.
In other words, adding new money to the economy does not add new resources or goods or services to the economy.
What it does is it dilutes the value of the goods and services already being offered and then the price of everything goes up.
The price of everything going up, what that means, of course, is that the value of everyone's money is going down, right?
And that's Kind of important.
One of the things that's happened over the last couple of years, you really could say since after the financial crash of 2007, 2008, but over the last couple of years, what's happened is that the rich have gotten staggeringly more wealthy and the middle class has declined what's happened is that the rich have gotten staggeringly more wealthy and the middle class has declined and the poor have kind of
And if you take into account that the rich are getting staggeringly more wealthy, middle class is declining, the poor are just kind of bumping along, losing some ground.
And if you understand that all of this has been achieved through the creation of tens of trillions of dollars of debt, I mean, around the world, I mean, obviously less so in, say, America in particular, then what you understand is that if you're going into debt but barely maintaining your lifestyle, you're then what you understand is that if you're going into debt but barely maintaining your lifestyle, you're You're losing a massive amount of money, but you're covering it up by going into debt.
I once knew a guy, Unwise Decision 101, who got fired from his job because he kept getting drunk at lunch, and he pretended that he still had a paycheck.
He was married, was married, being the operative word.
He pretended he still had a paycheck, but what he did was He would withdraw money from his retirement savings plan deposited into the joint account as if it was his paycheck.
And that obviously is bad, right?
You're burning the future to keep warm in the present.
So if you take into account the amount of money that's flowing to the super wealthy combined with the A hollowing out of the economy through massive amounts of government and to some degree private debt, then you know we're losing ground massively and enormously.
Now when the government creates money, I mean it's like giving an alcoholic the keys to the distillery or a cocaine addict the keys to the cocaine factory or whatever, right?
So governments love printing money.
They love printing money for a variety of reasons.
It's a hidden tax, particularly on the poor, those on fixed incomes and so on.
It's a really, really corrosive tax that usually not one person in a thousand or one person in ten thousand actually understands what's happening.
So they dilute the value of money.
So when you lose three or four or five percent of the value of your savings every year, that's a straight up tax and the government is benefiting from that.
Also, of course, governments don't create anything of value.
The best you could say is that in a small amount, in a small area, in a tiny area of human endeavor, governments prevent the loss of some value by having laws against stealing and so on, right?
But it's pretty hard to enforce those laws, and it's pretty corrupt in how they're managed and inflicted on the general citizenry.
But the government doesn't create anything of value itself, right?
So if you don't create anything of value, The question is, how do you give people the appearance that you are creating value?
What you do, of course, is you borrow money, you print money.
That's what you do. And that way you can create the illusion that you are adding value to a particular situation when you are not, right?
So if you go and buy a pizza with a credit card that you never intend to pay off, the pizza, it seems like you're adding economic activity, right?
You bought a pizza, the pizza guy's happy, he gets his money, but he doesn't end up getting his money because you don't pay your bills or whatever.
Maybe that gets withdrawn, but you only have the appearance of creating value.
You're not actually creating value. In fact, you're robbing value because you're consuming things that you're not going to pay for, which diverts resources from other people, creates jobs that can't be sustained.
I mean, it's a really massive blow against the economy to do all of this kind of crap, right?
But governments love doing it because If they say, well, we're going to spend a trillion dollars on infrastructure, then they create a lot of jobs, and it looks like, and, you know, maybe some of that infrastructure is valuable.
Of course, there's no way to generally know whether it's valuable or not while it's part of government coercion, right?
There's no way to know because, you know...
Because it's forced, it's not subject to the test of voluntary value, right?
But governments go out and spend a trillion dollars.
Everyone thinks, wow, government's pouring money into the local economy, people are getting jobs, roads are getting built, bridges are being built, and all that kind of stuff.
And so it looks like the government is adding a whole bunch of value, when the government is not, in fact, adding any value.
What it's doing, of course, is it's borrowing in the present, passing the debt down to future generations who are going to have to pay off What they're using to bribe their way into the appearance of value in the here and now, the government that is, and the people in the future, the children, the unborn and so on, are going to have to Deal with the hyperinflation if they try to monetize the debt.
Monetizing the debt is when you can't pay your debts, so you just print a whole bunch of money to pretend to pay off your debts and you wreck the economy as a whole.
You can look at the French Revolution, you can look at the Weimar Republic, you can look at Zimbabwe, you know, the trillion dollar bills or the billion dollar bills or whatever it is, right?
This way you just print a whole bunch of money And it's been being printed so fast and so hard that nobody can really believe that you're actually adding value and the dilution of the economy and its value becomes pretty clear.
Governments love to print money. That's basically it.
And of course, when the bill comes due, all of the politicians are out of office, long out of office, and they may even be dead by the time the bill comes due.
And in the same way that governments love promising retirement benefits to government workers, rather than wage hikes in the here and now.
Because if you say, well, you know, let's say that the average government workforce is like 40, and they're going to retire at 60, then, you know, 20 years down the road, the politicians who are big and powerful enough to make those decisions are probably out of office.
And if they do need to start paying for very expensive retirement packages for government workers, well they just borrow the money to do that and keep kicking the can down the road.
So the governments also love Printing money because it punishes savers and it rewards spenders, right?
So if your money is losing 3% or 5% every year, you might as well buy something now because you'll only be able to buy less of whatever it is you want next year because you'll have lost money.
So it stimulates, like cocaine, it stimulates economic activity in the here and now to have inflation.
And then also governments love it because it stimulates So there's a whole class, it's a monstrous, massive, giant, largely parasitical class of people who manage other people's investments.
And, of course, the stock market was originally designed to allow knowledgeable investors to invest in companies and businesses they knew something about.
But because everyone is being chased by the slow predator of inflation, everybody has to dump their money into the stock market or into bonds or whatever it is, some sort of financial instrument that provides a return just to keep even.
With inflation, and so it shifts money from sitting in a bank to going and being invested.
But at the same time, you know, hyperregulation, the fact that a third of Americans need permission slips from the government to even have a job, you know, the licenses or whatever.
There's just not that much economic opportunity and so you have this massive amount of money that's herded into the stock market by inflation and also tax breaks for investing in your retirement.
So if this massive amount of money that's sloshing around looking for investments that are going to go up and that shortens the time frame of managers to provide returns because everybody's so hysterical to just try and get some kind of returns from an underperforming stock market that they'll just chase after every possible good quarter or every possible Good result,
which raises the incentive of CEOs to misrepresent, to mislead, to be overly optimistic, because so much money gets poured into a company that's had a good quarter, that the CEO might be able to just retire based upon that, even if a quarter or two or three down the road, it all turns out to be pretty hollow, as of course may be the case with Cyberpunk 2077.
We'll see as time goes forward.
So the money classes, they love the fact that money is being printed because it means everybody's got to take refuge in investments which they get to manage and take their tasty percentage from in order to avoid the slow erosion of their savings.
And so it stimulates a whole bunch of investment, a whole bunch of economic activity, but in the same way that cocaine simulates and stimulates happiness, it's not sustainable.
So the upshot of all of this Is that, yeah, a whole bunch of money has been created.
2007, 2008, a whole bunch of money got created.
And what's happened in 2020, the year of the pandemic, is that governments have just been printing money like crazy.
And you can see the sort of slow curve and the spike just goes way through the roof of governments just creating money out of nothing.
How much would you restrain your spending if you could type whatever you wanted into your own bank account?
Obviously, you'd spend like crazy.
So governments have been spending like crazy.
And this is wallpapered over the harm that this virus has done to the economy.
The virus certainly attacks people and kills people, but it has an even more insidious effect on the economy.
Up here in Canada, 40% of the population is struggling with significant mental health issues.
30% of the population has gained weight just over the last year and reduced exercise and so on.
So people are becoming less healthy.
People are getting addicted to opiates because they're taking painkillers, because necessary surgeries to reduce their pain, hip replacements, knee replacements, you name it, has all been delayed or postponed somewhat indefinitely because of this virus and so on.
So governments have been printing money like crazy now.
A lot of the money that they print goes directly to the rich, the super rich, right?
Because they're a lot closer to the Fed or the central banks than you or I are.
So when the money heads out, it goes to the very wealthy first and they get to spend it at full value.
By the time it trickles down to the poor, the poor are spending it at a much lower value because the inflation is sort of hit by then.
Again, you can see the price of groceries is going up enormously and they're excluding a whole bunch of stuff from calculations of inflation so that they can keep the inflation number artificially low.
So yeah, a whole bunch of money gets printed and that money then lands safely in the pockets of the super rich.
Some of it trickles down and people can live off those crumbs as best they can.
But of course what's happening is there are people who understand this stuff and there are people who don't understand this stuff.
And I'm trying to move you from one category to another because I care about you as a listener and supporter of philosophy.
I want you to have a prosperous 2021.
It's really, really important to understand this stuff.
So when money gets diluted, when they're just printing money like crazy, creating money like crazy, borrowing money like crazy, Then what happens is people have a desire to get out of money and get into something else that can't be diluted as much.
Now, traditionally, what people go into is something like gold, because you can snap your fingers and pretend you're creating value.
You can just create currency out of nothing.
But you can't snap your fingers and just create gold out of nothing.
So people generally, in the past, would have gravitated towards something like gold.
If you want to gravitate towards an asset that you can both invest in and enjoy, I mean, unless you like standing, staring at a pile of gold, you can't really enjoy it, then people generally tend to move out of currency, out of savings, into real estate, right? Because a house can't be just, you can't just snap your fingers and create a house in the way that you can create assets.
Currency and when there's a lot of mass immigration and then there's zoning controls and restrictions, then the price of housing is going to go through the roof because you have people pouring into a relatively static economic environment of housing and it's just going to drive the house prices up like crazy.
Not just among the poor, but if a bunch of immigrants pour into a poor neighborhood, some of those poor people will try and get to middle-class neighborhoods.
Some of those middle-class neighborhoods people will try to get to the upper-class neighborhoods.
Partly because of school, partly because of cultural issues, who knows, right?
And so there's an upward pressure on real estate values the whole way.
So trying to get out of things which can be created on a whim, like currency, and trying to get into things which are limited, which you can't just snap your fingers and create, is the goal, I think, of a lot of modern investors.
Now, the question around crypto is interesting, right?
So normally people would be trying to get into real estate.
But the problem is, of course, that this is the end of 2020.
It looks like the Democrats are going to get the runoff elections in Georgia, which gives the Democrats control of the House, the Senate and the government.
So they're going to fast track a very radical leftist socialist ideology and agenda.
Now, real estate tends to be a safe haven from currency increase on one condition.
That condition being that you don't get socialism.
Because once you get socialism, then your property rights tend to evaporate pretty quickly.
Pretty quickly, right?
So, when the socialists get in, when the communists get in, they will just come and take.
So, if the stock market It's an uncertain investment because you have too much money chasing too few profits,
and particularly since the general stabilizing ballast of small business owners has been eviscerated by COVID. COVID is a direct attack upon conservatives because it eviscerates small business owners who tend to be very conservative because they actually have to deal with reality.
They have to write checks to cover people's taxes.
They have to deal with unemployment and regulations and so on.
So they tend to be Pretty small government, pretty laissez-faire, pretty free market people and if you have government policies that destroy Small business, which is the case throughout the world, and particularly in the West, then you are destroying the income, livelihood, faith,
hope, optimism, savings, and opportunities of people who generally will vote conservative in the same way that if you allow a virus into old age homes and it kills off a lot of old people, you generally are targeting people who are going to vote conservative.
I'm not saying it's conscious, I'm just saying it's kind of an effect of how this stuff rolls out.
So, you don't have very certain investments in the stock market.
Plus, of course, there's a lot of uncertainty around the future of social media companies.
Are people going to leave them in droves because of the mass censorship?
I know right now Mitch McConnell is trying to push through a repeal of Section 230 of the Telecommunications Act in the US that gives social media companies Immunity from lawsuits for content on the condition that they don't meddle, right?
They can't be like your phone company that says, Ooh, you know, sorry, I heard you discussing election fraud on your cell phone.
So, you know, we're not going to let you have a cell phone contract anymore.
Like they have to be neutral. So there's uncertainty in the tech world.
There's uncertainty in the future.
There's uncertainty because what's going to happen to all the small business owners who are going to go under and have gone under in 2020, where are they going to go?
Where are they going to land?
And so there's a lot of uncertainty in the economy.
So people are concerned about that.
Again, normally they would be heading to gold.
Normally they would be heading to Real estate, I think that there's some uncertainty about real estate because of the socialist agenda of the incoming Democrats and their administration.
And should Joe Biden prove unfit for office, which could potentially be the case, he's pretty old and does seem to sort of have trouble stitching sentences together from time to time, and Kamala Harris ends up as the president due to incapacity or impeachment, well then things are going to get pretty nuts pretty quickly.
So there's a lot of uncertainty in the economy, and there's a lot of uncertainty in the stability of real estate holdings, and normally people would be flocking to gold.
But now that there is a new alternative called crypto, People are saying, okay, to look at Bitcoin, right?
You can't have more than a certain amount of Bitcoin algorithmically.
And so Bitcoin is certainly limited.
Bitcoin is portable. And of course, portability in times of financial crisis becomes pretty important.
I mean, you've all heard of the super rich who are trying to figure out second passports and bunkers in New Zealand and you name it.
Now, if you have your savings in gold, well, it's really tough to transport and may not be legal to transport in certain locales.
So how are you going to be sure you actually can transport your wealth?
Well, of course, you can transport crypto because you can just have it in your head, so to speak, right?
So it's portable, it's fungible and so on, divisible and so on, right?
It has the opposite characteristic of the currency inflation that is driving everyone to seek safer havens for their money, which is that it is limited.
You can't just create crypto out of nothing in the Bitcoin sphere and other spheres as well, right?
So I think because of all of that, there is going to be a pretty fundamental shift.
Now, there is, of course, and you can see this happening in America and other places as well, there is a genuine concern on the part of the people who need The fiat currency who need the paper dollars propped up, that if people start removing their assets from the fiat currency economy,
which includes real estate and of course a lot of investment, if they start removing their value, their stored value from the fiat currency environment and putting it into crypto, there is of course a concern that what's going to happen is the actual inflation rate is going to become more real.
I said this before that currencies are somewhat stable relative to each other, but that doesn't mean that they're stable in terms of value.
Like if a bunch of people fall out of plane, they're pretty stable relative to each other.
Like everyone's kind of floating around the same area, but the ground is rushing up either way.
So if you look at sort of the latest run on Say Bitcoin, my particular take on it is that people are moving assets into Bitcoin because of the concern about socialism, because of the concern about the validity of continued real estate property rights or property sustainability.
I mean, if you get taxed out of being able to own your home, I guess you technically still have the right to it, but you simply can't keep it.
And so I think people are kind of moving over towards the cryptosphere and they would have moved towards gold but gold has its most value when you're in an environment like you're in a country where the economy is going through rough times but will come out the other side and be better off and if you feel that the entire country's economy It's going to be a problem wherever you live.
Then portability becomes the major value for you in terms of asset storage.
And then I think people look more towards crypto than to gold.
Sorry, Peter. I had this debate with Peter Schiff many years ago about Bitcoin versus gold.
And I think the portability is kind of a big issue.
So to me, it's not so much that crypto is gaining in value.
It's that I think the inherent Weakness of the dollar, the US dollar in particular, both in the present and in the future, is being baked into the price of crypto commodities.
And I think that the concerns about the other more traditional forms of storing value to weather an economic storm Those are being discounted, and I think people are heading towards crypto as a safe haven in a time of coming economic crisis.
Again, no advice, not telling anyone what to do.
I'm just telling you my particular big picture on what is going on.
So I hope this is helpful, and I hope you'll drop by for my live stream tonight, 7 p.m.
Eastern Standard Time. You can get that at dlive.tv forward slash free domain, where I'll be taking more questions.
We could talk about this or anything else that you like.
I hope you're having fun. A very good Christmas and holiday break.
And if you don't happen to catch my stream tonight, we don't talk before the end of the year.
I hope you have a very, very happy new year.
Thank you. Thank you so much for continuing to listen to, enjoy, and hopefully support philosophy.
I think it's even more essential in these troubled times than it has ever been before.
And I'm not going anywhere.
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