Latest / Merryn Talks Money / Best Of: Lyn Alden Talks Bitcoin and Explains Why Money is Falling Behind the Times

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Best Of: Lyn Alden Talks Bitcoin and Explains Why Money is Falling Behind the Times · Merryn Talks Money

• 0:03
  Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
• 0:20
  Speaker 2: This week we're bringing you our conversation with Lynn Alden,
• 0:22
  Speaker 2: author of Broken Money, While our financial system is failing
• 0:25
  Speaker 2: us and how we can make it better. We picked
• 0:28
  Speaker 2: this episode because I get a lot of tweets from
• 0:30
  Speaker 2: people suggesting I speak with Lynn, and I have already
• 0:33
  Speaker 2: spoken with Lynn. So if you haven't heard this one,
• 0:35
  Speaker 2: listen in because it's a great conversation on my money
• 0:37
  Speaker 2: is falling behind the times and what roll bitcoin has
• 0:40
  Speaker 2: to play in the future. So this week we've had
• 0:46
  Speaker 2: or were should we say were This week we've had
• 0:48
  Speaker 2: results out from Saint James's place, and boy they've been
• 0:50
  Speaker 2: a shocker.
• 0:50
  Speaker 3: I'm sure you've seen them. Everything is lower, cash props
• 0:55
  Speaker 3: is a slightly lower anyway, but that's entirely overshadowed by
• 0:57
  Speaker 3: the provisions they've taken a version of four hundred and
• 0:59
  Speaker 3: twenty six million pounds, which they say is linked to
• 1:03
  Speaker 3: evidencing and delivery of client servicing. I they can't prove
• 1:08
  Speaker 3: that they have been providing clients with the advice that
• 1:11
  Speaker 3: they should have been gotting on the ongoing service they
• 1:13
  Speaker 3: should have been getting, and they may have to pay
• 1:15
  Speaker 3: an awful lot of them back. It's absolutely huge. So
• 1:18
  Speaker 3: the share price fell. We're talking, by the way, everybody.
• 1:21
  Speaker 3: On Thursday the twenty eighth, the share price fell around
• 1:24
  Speaker 3: thirty percent first thing this morning. Is back up a
• 1:25
  Speaker 3: little bit now, but it is still down over one
• 1:27
  Speaker 3: year sixty two percent. And that is a direct result
• 1:31
  Speaker 3: of the regulatory authorities starting to look at what represents
• 1:35
  Speaker 3: value in the financial services industry. So a lot of
• 1:38
  Speaker 3: people will get a nice little bit of money. It's
• 1:40
  Speaker 3: a bit like the cars where everyone didn't get quite
• 1:42
  Speaker 3: what they're expecting from their interest rates and may now
• 1:44
  Speaker 3: get a pile of money back. But do you know
• 1:46
  Speaker 3: what I want to talk about when it comes to
• 1:48
  Speaker 3: Saint James's Place is not so much the advice that
• 1:50
  Speaker 3: people weren't getting, thought they might be getting, didn't know
• 1:53
  Speaker 3: they were paying.
• 1:53
  Speaker 4: For, or whatever it was.
• 1:55
  Speaker 3: It's ESG because I like to bring a lot of
• 1:58
  Speaker 3: stuff back to ESG. Now, yeah, I have had a
• 2:02
  Speaker 3: look at Saint James Place ESG risk ratings and here
• 2:07
  Speaker 3: we are on Sustainalytics and the ESG rating for Saint
• 2:12
  Speaker 3: James Place is eighteen point six and that is considered
• 2:17
  Speaker 3: to be low risk. So if we look, you can
• 2:20
  Speaker 3: be negligible on zero to ten and the at medium
• 2:23
  Speaker 3: twenty to thirty, high thirty to forty, and severe forty. Now,
• 2:27
  Speaker 3: if you were an investor fund manager who invested with
• 2:31
  Speaker 3: an ESG overlay and you held Saint James's Place, which
• 2:36
  Speaker 3: I think some do, would you have fulfilled your brief
• 2:41
  Speaker 3: even though the company has technically rated low risk for
• 2:45
  Speaker 3: ESG purposes. I would say it, and I'd like to
• 2:47
  Speaker 3: hear your view on this that for S and G purposes,
• 2:51
  Speaker 3: this was a very high risk STOC to hold.
• 2:56
  Speaker 5: I mean, I think you're absolutely righty. I think that
• 3:00
  Speaker 5: anyone who read the papers, the financial bits of the papers,
• 3:05
  Speaker 5: including no very very mainstream, high profile newspapers the Sunday Times,
• 3:09
  Speaker 5: did a lot of good work on this from what
• 3:10
  Speaker 5: I remember, they would have realized that there was at
• 3:13
  Speaker 5: the very least some controversy around Saint James's Place and
• 3:17
  Speaker 5: the fees that it was charging and exactly how that
• 3:21
  Speaker 5: fitted in with the FCA's overall view of how customers
• 3:24
  Speaker 5: should be treated. And that's been saying it in the
• 3:26
  Speaker 5: most diplomatic way possible. So yeah, I think if they'd
• 3:30
  Speaker 5: actually been doing any other than box ticking, then they
• 3:33
  Speaker 5: should have realized that. I do think it also points
• 3:36
  Speaker 5: to the fact that grouping ES and G it's kind
• 3:41
  Speaker 5: of a mishmash of compute bollocks. If I'd allowed to
• 3:44
  Speaker 5: say that, you know, it's like, as far as I
• 3:47
  Speaker 5: can see, the E is the bit that gets all
• 3:51
  Speaker 5: the attention. That's what people think of. So it's like,
• 3:56
  Speaker 5: if it's a wind turbine creator, then yes, I'm going
• 3:58
  Speaker 5: to buy that because it's E, and they don't really
• 4:00
  Speaker 5: think about the S or the G. And if there's
• 4:03
  Speaker 5: an oil major, then not going to buy it because
• 4:05
  Speaker 5: they just think about but they don't actually think, actually,
• 4:06
  Speaker 5: this is a well driven oil major. And that's before
• 4:09
  Speaker 5: we even talk about how we meant to do with
• 4:11
  Speaker 5: forceil fuels, you know, et cetera, et cetera. So yeah,
• 4:15
  Speaker 5: I think it's more just it just points to that
• 4:17
  Speaker 5: it was always a you know, a marketing tool at best,
• 4:24
  Speaker 5: and a weird kind of metastasization. All of the stupid
• 4:29
  Speaker 5: ideas that have come out during the zero percent interest rate.
• 4:32
  Speaker 3: It al seems to me that if you look at
• 4:34
  Speaker 3: the G, that should be the only one that really matters,
• 4:37
  Speaker 3: because if the G is good, the rest will follow, right,
• 4:39
  Speaker 3: A well management a well managed company will obviously have
• 4:43
  Speaker 3: an I to an S and an I to an
• 4:45
  Speaker 3: E to environmental and social issues. But the G is
• 4:49
  Speaker 3: the core thing. And you could say, and you know,
• 4:52
  Speaker 3: we'll we'll look more closely. It's in games places over
• 4:54
  Speaker 3: the next couple of days. But you could say that
• 4:56
  Speaker 3: it's the G that has fallen down here. I've just
• 4:58
  Speaker 3: looked up when they announce their new fee structure, because
• 5:01
  Speaker 3: everything changed again under regulatary pressure the end of last
• 5:04
  Speaker 3: years and change place introducing a new fee structure. And
• 5:07
  Speaker 3: if you look at what these CEOs said at the time,
• 5:10
  Speaker 3: given our confidence and making these changing there is also
• 5:13
  Speaker 3: no change to our ongoing dividend guidance, which continue to
• 5:15
  Speaker 3: be based on blah blah blah. But what we found
• 5:18
  Speaker 3: out today was that the dividend has been slashed fairly significantly.
• 5:21
  Speaker 3: So there's a you know, there's a G issue there
• 5:23
  Speaker 3: and that seems to be the one that we should
• 5:24
  Speaker 3: be looking at going forward. Anyway, that gave me an
• 5:27
  Speaker 3: excuse to round about ESG briefly, but we'll move on
• 5:30
  Speaker 3: from that just to say this is complicated, look at
• 5:34
  Speaker 3: it more carefully than you ever might have thought that
• 5:36
  Speaker 3: you needed to. Now, the next thing that's coming up
• 5:40
  Speaker 3: is the budget quite soon. There's a lot of G
• 5:42
  Speaker 3: issues going on there. Right, we can't tell you exactly
• 5:49
  Speaker 3: where's the G anyway, so inadequate G coming up next
• 5:55
  Speaker 3: week definitely. We can't tell you what's going to happen,
• 5:58
  Speaker 3: but we can tell you in advance to make absolutely
• 6:00
  Speaker 3: sure that you have done everything you can to use
• 6:03
  Speaker 3: all your tax allowances. Might as well use that ice
• 6:07
  Speaker 3: rub now, might as well put what you can into
• 6:09
  Speaker 3: your sip. Now, you just never know, right, doohant anything
• 6:11
  Speaker 3: else we should be doing in advance?
• 6:14
  Speaker 5: Well, it's well, the ISA SEP. If you're in the
• 6:18
  Speaker 5: marginal income tax rates, obviously look at things like salary sacrifice.
• 6:24
  Speaker 5: If you have got a lower learning spouse or your
• 6:28
  Speaker 5: spouse is the higher earn in one make sure your
• 6:30
  Speaker 5: assets are distributed in a sensible tax efficient way. I
• 6:35
  Speaker 5: don't see anything wrong with that. VCTs and the ses
• 6:40
  Speaker 5: are obviously options if you really have an awful lot
• 6:42
  Speaker 5: of money and you've used up your SIP allowance and
• 6:46
  Speaker 5: your eyesa allowance. But I think the other thing is
• 6:50
  Speaker 5: and I mean I think it almost feels that it
• 6:53
  Speaker 5: should be redundant to say this by now, because this
• 6:56
  Speaker 5: has been the case for at least ten years now.
• 6:59
  Speaker 5: But if you have your money and anything that even
• 7:04
  Speaker 5: smells faintly like a tax dodge vehicle, then you shouldn't
• 7:10
  Speaker 5: have because nowadays it's all about the spirit of the
• 7:14
  Speaker 5: law rather than the letter of the law. So if
• 7:18
  Speaker 5: the HMRC comes across the scheme that says that it's
• 7:21
  Speaker 5: a bit avoiding tax, but they didn't intend it to
• 7:24
  Speaker 5: be allowed to avoid tax, then you're going to carry
• 7:26
  Speaker 5: the can for that at some point, and they are
• 7:28
  Speaker 5: pretty aggressive it pursuing this. So don't be invested in
• 7:32
  Speaker 5: anything dodgy. Basically, just use the government approved tax efficient
• 7:37
  Speaker 5: vehicles as best you can and then crush your fingers
• 7:40
  Speaker 5: because the tax burdon is going to be high for
• 7:43
  Speaker 5: a long time.
• 7:44
  Speaker 4: Probably.
• 7:44
  Speaker 3: Yeah, it's interesting in a Johinay and I was looking
• 7:46
  Speaker 3: for a new accountant about five six years ago for
• 7:48
  Speaker 3: various reasons, and I went round a couple of accountants,
• 7:51
  Speaker 3: you know, just saying who would suit, et cetera. And
• 7:54
  Speaker 3: they're seemed to be an incredibly easy way to decide
• 7:56
  Speaker 3: which accountant not to use because several of them just
• 8:00
  Speaker 3: did to me various tax avoidance schemes which turned out,
• 8:04
  Speaker 3: of course in the end to be classed evasion schemes
• 8:06
  Speaker 3: to do with films being the obvious, etc. And it
• 8:09
  Speaker 3: turned out the very very very easy way to check
• 8:13
  Speaker 3: which accountants you want to use, and anyone who offers
• 8:15
  Speaker 3: you that stuff is not the accountant you want to use.
• 8:17
  Speaker 3: That fascinating.
• 8:19
  Speaker 5: It's interesting.
• 8:20
  Speaker 3: I mean, I do think.
• 8:23
  Speaker 5: Something that sort of felt at the time. I think
• 8:27
  Speaker 5: it's not ideal that we have sort of moved to
• 8:34
  Speaker 5: a situation where it's all about the intent of the
• 8:36
  Speaker 5: law rather than the letter of the law, because I
• 8:39
  Speaker 5: think that that's a blanket for lots of bad governance.
• 8:44
  Speaker 5: And also, I mean, I do wonder how much that's
• 8:47
  Speaker 5: kind of influenced the way that a lot of politicians
• 8:52
  Speaker 5: seem to want to now just say things and make
• 8:56
  Speaker 5: it so, and that whole virtue signal and idea where
• 9:00
  Speaker 5: you think you've passed the law and therefore you have
• 9:02
  Speaker 5: dealt with the problem, as opposed to haven't you think
• 9:05
  Speaker 5: about what the consequences of the law may be. So
• 9:09
  Speaker 5: I do wonder how much of that is don't Well, Okay,
• 9:12
  Speaker 5: now that the spirit of the law rather than the
• 9:15
  Speaker 5: later of the law, kind of saying, but you just
• 9:17
  Speaker 5: have to live with it. Unfortunately, you have to operate
• 9:20
  Speaker 5: in the world as it is.
• 9:23
  Speaker 3: That's interesting how often we have to remind people of that,
• 9:25
  Speaker 3: isn't it?
• 9:27
  Speaker 4: This is quite striking.
• 9:31
  Speaker 3: Welcome to Merren Drook's Money, the podcast in which people
• 9:33
  Speaker 3: who know the markets explain the markets. I'm Maren sumset Web.
• 9:36
  Speaker 3: This week I speak with Lynn Alden, the author of
• 9:38
  Speaker 3: Broken Money, Where financial system is failing us and how
• 9:41
  Speaker 3: we can make it better. This book came highly recommended.
• 9:45
  Speaker 3: Lots of other people have read it and told me
• 9:47
  Speaker 3: I should too. I have no and I have now
• 9:49
  Speaker 3: and I have it. It's a tremendous guide to the
• 9:52
  Speaker 3: history of money and where we are now with the
• 9:54
  Speaker 3: modern money system. Lynn, thank you so much for joining
• 9:58
  Speaker 3: us today.
• 9:58
  Speaker 4: Happy to be here. Thank you for having.
• 10:00
  Speaker 3: It's interesting you put money in the context of LEDGIS systems.
• 10:06
  Speaker 3: So in the very beginning people you used always talk
• 10:08
  Speaker 3: about just barter and trading shells, et cetera, et cetera.
• 10:11
  Speaker 3: But you take a slightly different approach to the beginnings
• 10:14
  Speaker 3: of money. So I wonder if you could just talk
• 10:16
  Speaker 3: to us a little bit about that.
• 10:17
  Speaker 4: Sure, and so in kind of historical economic literature, there's
• 10:20
  Speaker 4: really two camps for what money is at its foundation,
• 10:23
  Speaker 4: and so the most common one that people hear about
• 10:25
  Speaker 4: is that before money, people had to use barter, so
• 10:28
  Speaker 4: they had to trade different things, and then eventually they
• 10:30
  Speaker 4: realized that if they all agree on a shared unit
• 10:32
  Speaker 4: of account, that it can make trade way easier. And
• 10:35
  Speaker 4: this tends to be an emergent phenomenon that happens in
• 10:38
  Speaker 4: societies all over the place. They choose different types of
• 10:40
  Speaker 4: money based on their technological development, based on what's available
• 10:44
  Speaker 4: to them, but those moneys tend to have certain attributes
• 10:46
  Speaker 4: and certain technical changes tend to obsolete certain types of money,
• 10:50
  Speaker 4: and it tends to be like an iterative process. So
• 10:52
  Speaker 4: if you choose the wrong type of money, someone else
• 10:54
  Speaker 4: can basically exploit your wrong choices until the society settles
• 10:58
  Speaker 4: on the right Money's basically the good that you'd like
• 11:01
  Speaker 4: to hold. It's liquid, that's portable, that's long lasting, and
• 11:04
  Speaker 4: that you can basically always have a high likelihood that
• 11:07
  Speaker 4: you can trade it for something else. That's not the
• 11:09
  Speaker 4: one camp of money. The other one less from the
• 11:12
  Speaker 4: economic side and more from the anthropology side, which is
• 11:15
  Speaker 4: to point out that not a lot of barter is
• 11:17
  Speaker 4: found even in hunter gather societies or in kind of
• 11:21
  Speaker 4: history as we know it, the barter tends to be
• 11:23
  Speaker 4: a pretty rare state. And instead they point out that
• 11:25
  Speaker 4: societies tend to sidestep the need for barter before it
• 11:29
  Speaker 4: even arises. It's basically such a basic problem that, even
• 11:33
  Speaker 4: pre dating commodity money, usually they use credit to try
• 11:36
  Speaker 4: to reduce the number of times they actually have to
• 11:38
  Speaker 4: make a physical transaction. They say, but instead of trying
• 11:41
  Speaker 4: to trade spears for furs and trying to figure out
• 11:44
  Speaker 4: exactly what you need when I need, instead I can
• 11:47
  Speaker 4: just give you what you need, because I happen to
• 11:49
  Speaker 4: have a surplus of many things at the moment. And
• 11:51
  Speaker 4: that's based on the premise that at a layer time
• 11:53
  Speaker 4: and I might be deficient on something, you owe me
• 11:56
  Speaker 4: whatever I need at that time. And so credit is
• 11:58
  Speaker 4: an early tool, a long way commodity money to mitigate that.
• 12:02
  Speaker 4: And I think that the two ways to summarize that
• 12:04
  Speaker 4: are if you're trying to avoid the double coinstence of wants,
• 12:07
  Speaker 4: basically the challenging thing of having a surplus is something
• 12:10
  Speaker 4: that someone else has a deficiency in, and having a
• 12:13
  Speaker 4: deficiency is something that someone else has a surplusit and
• 12:15
  Speaker 4: therefore being able to make a trade. The two ways
• 12:17
  Speaker 4: to make that easier are either a shared unit of
• 12:20
  Speaker 4: account that we can use for one side of every
• 12:22
  Speaker 4: transaction that's basically commodity money, or that we can delay
• 12:26
  Speaker 4: that over time by making it so that our double
• 12:29
  Speaker 4: coincidence of wants doesn't have to be for the same thing.
• 12:32
  Speaker 4: At the same time, that as long as there's a
• 12:34
  Speaker 4: period where you need something and there's a later period
• 12:36
  Speaker 4: writing something that can be extended and therefore have a
• 12:39
  Speaker 4: higher probability of success. Those are kind of the two
• 12:42
  Speaker 4: paths of where money has originally.
• 12:43
  Speaker 3: Yeah, and you use a wonderful example at the very
• 12:45
  Speaker 3: early part of the book with Godfather to explain about
• 12:48
  Speaker 3: this kind of social credit use of money.
• 12:51
  Speaker 4: Yeah, that was a key example because Veto in the
• 12:53
  Speaker 4: movie has most things that he needs, and so when
• 12:57
  Speaker 4: people come to him he doesn't really need anything from
• 12:59
  Speaker 4: them and want a little bit of money from them.
• 13:01
  Speaker 4: He doesn't want anything they really have at the time.
• 13:04
  Speaker 4: But instead of what he does, it says, I'll do
• 13:06
  Speaker 4: this favor for you now. Because he's in the position
• 13:08
  Speaker 4: where he has a surplus of many things, many resources,
• 13:11
  Speaker 4: and in their shadow economy that he's got a lot
• 13:13
  Speaker 4: of resources to deploy, and what he asks for in
• 13:16
  Speaker 4: favor is an unspecified favorite of future time. So he's
• 13:20
  Speaker 4: basically saying, there's absolutely nothing I really want for you
• 13:22
  Speaker 4: right now, but I perceive that there's a chance in
• 13:24
  Speaker 4: the future that I will, And so that's basically a
• 13:27
  Speaker 4: way of him granting them something even though he doesn't
• 13:30
  Speaker 4: get anything from them, because he employs the usage of credit.
• 13:33
  Speaker 3: Okay, interesting, Now, one of the other examples that you
• 13:36
  Speaker 3: use is one of my favorite examples in this island
• 13:39
  Speaker 3: in the South specific. Yeah, they've always have historically used
• 13:42
  Speaker 3: these very big round stones with a hole in the middle,
• 13:45
  Speaker 3: which they called ry stones. Is money, right, And this
• 13:48
  Speaker 3: has been very interesting to everyone who's been interested in
• 13:51
  Speaker 3: bitcoin since the very beginning because it really did operate
• 13:54
  Speaker 3: as what we now think of as a proper ledger system, right.
• 13:57
  Speaker 4: Yeah, And that's a useful example because in the book,
• 14:00
  Speaker 4: for example, when I talked about those two types of
• 14:02
  Speaker 4: money that I talked about, either credit or commodity money,
• 14:05
  Speaker 4: the thing that they really have in common is basically
• 14:07
  Speaker 4: people are deciding on what ledger they're going to use,
• 14:10
  Speaker 4: what is the unit of account, and what is the
• 14:13
  Speaker 4: record system that they're going to rely on. And so
• 14:15
  Speaker 4: if you're using commodity money, you're basically using nature as
• 14:19
  Speaker 4: your tool for saying, Okay, here's the number of units
• 14:22
  Speaker 4: that exist at a given time, here's and then those
• 14:24
  Speaker 4: units are updated by physical possession, whereas if you're relying
• 14:28
  Speaker 4: on credit or similar systems, you're relying on human administers
• 14:31
  Speaker 4: of that ledger, either orally or in writing. And the
• 14:35
  Speaker 4: aap stones are interesting because they were an early combination
• 14:38
  Speaker 4: of both. They kind of get to the root of money,
• 14:40
  Speaker 4: being a ledger itself, and so that's an instance where
• 14:44
  Speaker 4: a unique set of circumstances gave them a particularly unique
• 14:47
  Speaker 4: type of money. So most commodity moneys in early times
• 14:50
  Speaker 4: were things like grains and shells and cocoa, and they
• 14:53
  Speaker 4: tend to have these kind of common attributes, whereas the
• 14:55
  Speaker 4: yap stones the rise stones were quite different. So they
• 14:58
  Speaker 4: were on a small island and there's another island two
• 15:02
  Speaker 4: hundred and fifty miles away or so, and on that
• 15:04
  Speaker 4: other island they had very attractive limestone, and so they
• 15:09
  Speaker 4: did not have it on their own island, and so
• 15:11
  Speaker 4: they would go on fairly simple boats and they would
• 15:14
  Speaker 4: go across this kind of treacherous water. They'd go mine
• 15:18
  Speaker 4: the limestone, bring it back, carve it into big circles,
• 15:22
  Speaker 4: and they'd have different sizes that some of them could
• 15:24
  Speaker 4: be moved, and some of them were so big that
• 15:26
  Speaker 4: they could never realistically be moved again. And they had
• 15:29
  Speaker 4: all these these stones, these limestones, now on their own island,
• 15:32
  Speaker 4: and when they transacted with each other from major things,
• 15:36
  Speaker 4: they would just orally say, this stone now belongs to
• 15:39
  Speaker 4: this person. So the big stones themselves don't move, and
• 15:42
  Speaker 4: instead it just basically the island has a mental and
• 15:47
  Speaker 4: oral ledger of who owns all the stones, but then
• 15:50
  Speaker 4: it is backed up by the physical properties of the
• 15:52
  Speaker 4: stones themselves. It's very hard to add new stones to
• 15:55
  Speaker 4: the system. It takes a lot of work to do it.
• 15:58
  Speaker 4: It's very dependent on the time and play. So, for example,
• 16:01
  Speaker 4: the fact that a small island makes oral transmission of
• 16:04
  Speaker 4: the ledger possible. And two, the technological error that they
• 16:08
  Speaker 4: existed in made it so that the stones were very
• 16:11
  Speaker 4: hard to acquire, and that was eventually broken by the
• 16:14
  Speaker 4: fact that as people from industrial societies came to the
• 16:18
  Speaker 4: island saw how to exploit the system. They would use
• 16:21
  Speaker 4: their advanced technologies to more rapidly increase the number of
• 16:25
  Speaker 4: those stones on the island, or otherwise use forced to
• 16:28
  Speaker 4: coerce them through their appreciation of the stones to do things.
• 16:32
  Speaker 4: But in that era, that served as a particularly unique
• 16:35
  Speaker 4: type of money.
• 16:37
  Speaker 3: But both parts are interesting, aren't they First when the
• 16:40
  Speaker 3: money system was working well, and then secondly when it
• 16:42
  Speaker 3: was effectively destroyed by people with better technology bringing in
• 16:47
  Speaker 3: more stones and hence too much flow, destroying the whole thing.
• 16:50
  Speaker 3: So both parts of it are interesting in the context
• 16:52
  Speaker 3: of looking at how money works today.
• 16:54
  Speaker 4: Yeah, and it also shows that even dying money systems
• 16:58
  Speaker 4: can have a second wind or a way to try
• 17:01
  Speaker 4: to fight back. So, for example, when the stone system
• 17:04
  Speaker 4: started being disrupted by those more industrial technology, the people
• 17:08
  Speaker 4: that use that money system would say, well, older stones
• 17:12
  Speaker 4: are more valuable now because they are provably prior to
• 17:16
  Speaker 4: this technology. And so all these newer stones, they're kind
• 17:19
  Speaker 4: of like modern art. We're not going to treat them
• 17:20
  Speaker 4: the same way, whereas like these older stones are like
• 17:23
  Speaker 4: Da Vinci paintings, right, they're not able to be reproduced,
• 17:27
  Speaker 4: even with better technology, because we're now adding age as
• 17:30
  Speaker 4: a factor, and so there still were attempts to make
• 17:34
  Speaker 4: that system go longer, and just of course over the
• 17:38
  Speaker 4: long arc of time it became more of a relic
• 17:41
  Speaker 4: of the past.
• 17:42
  Speaker 3: Now I'm slightly wondering how to approach the rest of
• 17:45
  Speaker 3: the history of money before we get to the today,
• 17:48
  Speaker 3: because there's so much going on here, from money being
• 17:51
  Speaker 3: connected to commodities right through to the beginning of fractional banking, etc.
• 17:55
  Speaker 3: What do you think of the sort of key points
• 17:57
  Speaker 3: on the journey from effectively app to hear.
• 18:00
  Speaker 4: I think the main thing is that as different moneies
• 18:03
  Speaker 4: came together, so as all these societies met each other,
• 18:06
  Speaker 4: there is an iterative process where the weaker moneies increasingly
• 18:11
  Speaker 4: got sorted out, like the stones we just talked about
• 18:14
  Speaker 4: and other types of monies, until basically the ones that
• 18:17
  Speaker 4: kind of were left standing given all of humanity's shared
• 18:21
  Speaker 4: technology was gold and silver, because they were resistant to
• 18:24
  Speaker 4: debasement even with better technology, and they had better properties
• 18:28
  Speaker 4: of money in the more universal sense, and each society
• 18:32
  Speaker 4: had their own moneys based on what was available, what
• 18:34
  Speaker 4: was technologically suitable. But then as time progressed and as
• 18:37
  Speaker 4: societies met each other, there were objectively better answers than
• 18:41
  Speaker 4: other answers for what constitutes good money, and as those
• 18:46
  Speaker 4: came together, the more suitable money would win out until
• 18:49
  Speaker 4: the whole world found itself on a shared standard.
• 18:54
  Speaker 3: Okay, So then we end up with gold and silver
• 18:56
  Speaker 3: effectively being a global money system. And what was the
• 19:00
  Speaker 3: next big step after that?
• 19:02
  Speaker 4: The next big step after that was so that was
• 19:05
  Speaker 4: you know, thousands of years of kind of finding out
• 19:07
  Speaker 4: what is the best physical money. But the other big
• 19:09
  Speaker 4: step was how do you move money around? So even
• 19:12
  Speaker 4: those top money still had limitations for verification, a physical
• 19:16
  Speaker 4: transfer to visibility limitations in some cases. And so the
• 19:20
  Speaker 4: other kind of technical path was different proto banking and
• 19:25
  Speaker 4: full service banking arrangements that people and cultures would develop
• 19:28
  Speaker 4: on top of those money systems so that they could
• 19:31
  Speaker 4: move the ownership of the money more like more easily
• 19:35
  Speaker 4: and faster and cheaper. They didn't have to move the
• 19:37
  Speaker 4: physical money itself. An early example in the book that
• 19:40
  Speaker 4: I used is the Hawala system, which is prevalently even
• 19:43
  Speaker 4: before Italian city state banking basically throughout North Africa, the
• 19:47
  Speaker 4: Middle East and stretching into India basically along the silk
• 19:50
  Speaker 4: road path, there would be these money changers called houalidars,
• 19:54
  Speaker 4: and if you wanted to transport gold from one city
• 19:57
  Speaker 4: to another city, for example, the expensive ways physically transport it,
• 20:01
  Speaker 4: which you might do if you have a sufficient amount
• 20:04
  Speaker 4: and you're highly secure, you might want to do that.
• 20:05
  Speaker 4: But if you're doing that on a regular basis, a
• 20:08
  Speaker 4: service that was provided was that you could deposit gold
• 20:11
  Speaker 4: with your local haualidar. They would give you a receipt
• 20:14
  Speaker 4: for that gold, and then you or your messenger could
• 20:18
  Speaker 4: transfer that receipt to another city, and in that city,
• 20:22
  Speaker 4: that houalidar has a contact with another haualidar and you
• 20:25
  Speaker 4: would redeem the gold from that other haualidar, and those
• 20:29
  Speaker 4: haualidars between those cities would do multiple these transactions in
• 20:32
  Speaker 4: a given month or a given year, and they would
• 20:35
  Speaker 4: net out, so maybe every six months or every twelve
• 20:37
  Speaker 4: months they would actually do a physical settlement to sort
• 20:40
  Speaker 4: that out. But they're able to do multiple transactions between
• 20:43
  Speaker 4: them just by transferring kind of the knowledge that was made,
• 20:47
  Speaker 4: and so we can think of that as a series
• 20:49
  Speaker 4: of analog encryptions. Because when they invented paper, it was
• 20:53
  Speaker 4: improven over papyrus. When they invented book binding, that was
• 20:57
  Speaker 4: an improvement over scrolls. When they invented the printing press,
• 21:00
  Speaker 4: that was an improvement overhandwriting. They had to have analog
• 21:03
  Speaker 4: encryption techniques to make it so that people could not
• 21:06
  Speaker 4: just forge different types of receipts or copy different types
• 21:09
  Speaker 4: of receipts that are redeemable for gold for obvious reasons
• 21:12
  Speaker 4: relating to fraud, and so on top of all that
• 21:15
  Speaker 4: kind of global contest to see what types of moneies
• 21:18
  Speaker 4: are most suitable, there's also this kind of global growth
• 21:22
  Speaker 4: in terms of all these different methods to more efficiently
• 21:25
  Speaker 4: transfer the ownership of those underlying especially gold and silver,
• 21:29
  Speaker 4: but really any sort of physical object.
• 21:32
  Speaker 3: Okay, so now we're moving towards papers is bearer assets,
• 21:36
  Speaker 3: and we're moving towards the possibility of fractional banking, right.
• 21:40
  Speaker 4: Yeah, Because basically any sort of money change or any
• 21:43
  Speaker 4: sort of monetary entity would realize that a lot of
• 21:46
  Speaker 4: people would deposit their gold. They'd have these paper receipts
• 21:48
  Speaker 4: for gold, and they would find that way more convenient
• 21:52
  Speaker 4: than holding their gold themselves, and so they would realize
• 21:54
  Speaker 4: that most people do not redeem their gold all at
• 21:57
  Speaker 4: once any given time there's a small percentage that might
• 21:59
  Speaker 4: be being deemed or being deposited, but that they have
• 22:02
  Speaker 4: a common float there, and so the temptation there is, so, okay,
• 22:05
  Speaker 4: we can lend some of it out, earn interest and
• 22:09
  Speaker 4: therefore reduced the fees that you charge your depositors, maybe
• 22:13
  Speaker 4: even give them a share of interest, which allows you
• 22:15
  Speaker 4: to outcompete other custodian type entities. And that works for
• 22:19
  Speaker 4: a period of time, but it leads to obvious some
• 22:21
  Speaker 4: systemic issues. If you do get a bigger than normal
• 22:25
  Speaker 4: attempt to withdraw the gold, and your assets are denominated
• 22:30
  Speaker 4: partially in gold and partially in these less liquid loans
• 22:34
  Speaker 4: and other assets other types of collateral, then you could
• 22:36
  Speaker 4: fail to meet that, and so they started to introduce
• 22:39
  Speaker 4: basically systemic instability into some of these arrangements. Because the
• 22:44
  Speaker 4: way I put it in the book is there was
• 22:45
  Speaker 4: an increasing speed gap between transactions and settlements. So over time,
• 22:51
  Speaker 4: as all these different layers on top of gold and
• 22:53
  Speaker 4: silver became more and more efficient, it allowed those number
• 22:57
  Speaker 4: of claims to grow compared to how much underlying metal
• 23:01
  Speaker 4: there was, until it became systemic and a big technology
• 23:05
  Speaker 4: I focus on which people don't really think of the
• 23:07
  Speaker 4: telegraph as a monetary technology, but it was arguably one
• 23:10
  Speaker 4: of the biggest technologies for how we use money and
• 23:13
  Speaker 4: how banking works. Because prior to the telegraph, anytime you
• 23:17
  Speaker 4: transferred to information, you still had to get there. You
• 23:20
  Speaker 4: had to physically move people, ships and horses and all
• 23:23
  Speaker 4: that to get the information to another city. Whereas in
• 23:26
  Speaker 4: the eighteen sixties, once we had the telegraph over continents
• 23:29
  Speaker 4: and acrossed oceans, you could update each other's ledgers at
• 23:33
  Speaker 4: the speed of light, and you had a huge gap
• 23:36
  Speaker 4: between all these kind of banking arrangements and the physical gold,
• 23:39
  Speaker 4: and you had a very kind of elaborate, hierarchical system
• 23:43
  Speaker 4: of multiple claims for every unit.
• 23:45
  Speaker 3: Of underlying sounds like the beginning of the end.
• 23:49
  Speaker 4: That's how it ended up going. Basically. One of my
• 23:52
  Speaker 4: favorite sources in the book is in eighteen seventy five,
• 23:56
  Speaker 4: William Stanley Jevins wrote a book called The Money, Money
• 24:00
  Speaker 4: and the Mechanism of Exchange, and I cited that in
• 24:02
  Speaker 4: the book, and it's a fascinating read because it's one
• 24:05
  Speaker 4: hundred and fifty years ago and he's describing how the
• 24:09
  Speaker 4: monetary system works and how technologies are making their monetary
• 24:13
  Speaker 4: system more efficient. And he's very precient because he's on
• 24:17
  Speaker 4: one hand, he's saying, look how efficient we've become. Every
• 24:21
  Speaker 4: friction we encounter, we just centralize it. So you know,
• 24:24
  Speaker 4: basically all global trade can just go through London now
• 24:27
  Speaker 4: and everything can net out and gold rarely ever has
• 24:31
  Speaker 4: to ever move, and it's hyper efficient, and this is great.
• 24:35
  Speaker 4: The other hand is we have to remember that all
• 24:37
  Speaker 4: of these claims are redeemable for gold, and the system's
• 24:40
  Speaker 4: now levered twenty to one, and so if five percent
• 24:43
  Speaker 4: of people show up and want their gold back, the
• 24:45
  Speaker 4: system is illiquiated and not solvent, not able to make
• 24:49
  Speaker 4: those claims. And so it's like we he's balancing these
• 24:52
  Speaker 4: kind of observations around efficiency and stability. And of course
• 24:57
  Speaker 4: we know from history that a few decades later INLD
• 25:00
  Speaker 4: War One, that whole leverage system unraveled and we had
• 25:03
  Speaker 4: to go through major transformations of what we use as
• 25:06
  Speaker 4: money because that increasing kind of leverage, that increasing speed gap,
• 25:11
  Speaker 4: really changed how humans interact with money.
• 25:14
  Speaker 3: Well, you have them. I'm glad we've made it to
• 25:16
  Speaker 3: World War One. We've skipped hundreds of years. We've done brilliantly,
• 25:20
  Speaker 3: And in the middle of the book there's a really
• 25:22
  Speaker 3: terrifying chart of the buying power of one hundred pounds
• 25:27
  Speaker 3: over time seventeen fifty to twenty twenty three. And by
• 25:29
  Speaker 3: the way, Stelling is it is the oldest existing currency
• 25:33
  Speaker 3: in the world, isn't it. I mean, it's been going
• 25:34
  Speaker 3: for so many hundreds of years. It's really quite impressive.
• 25:37
  Speaker 3: Was it's lost the majority it was value over that time,
• 25:39
  Speaker 3: but nonetheless, Sterling it is the oldest consistent currency.
• 25:43
  Speaker 4: Yeah, it's the oldest consistent currency that is still alive today.
• 25:46
  Speaker 4: And it's interesting because for centuries it had a very
• 25:49
  Speaker 4: slow debasement rate. It was an average of something like
• 25:52
  Speaker 4: zero point one five percent per year. There were these
• 25:54
  Speaker 4: occasional mild devaluations. It used to be a pound of
• 25:57
  Speaker 4: silver now it's a couple of grams of silk. But
• 26:00
  Speaker 4: over like the first you know, six seven plus centuries
• 26:04
  Speaker 4: as a very kind of steady, slow debasement rate. But
• 26:07
  Speaker 4: once World War One happened and once kind of this
• 26:11
  Speaker 4: huge gap opened up between efficiency of trading all these
• 26:14
  Speaker 4: claims around and being able to fraction reserve everything, you
• 26:18
  Speaker 4: started to get this rapid deterioration in the pound sterling
• 26:22
  Speaker 4: compared to the underlying precious metals and for perching power
• 26:26
  Speaker 4: in general. And one of the observations I make in
• 26:28
  Speaker 4: the book is that that opened up a kind of
• 26:31
  Speaker 4: a problematic in setive structure, because debasement has been something
• 26:35
  Speaker 4: that has existed for thousands of years, I mean going
• 26:37
  Speaker 4: back to Roman times and prior coinage has always been
• 26:41
  Speaker 4: debased to varying degrees. But the modern system allowed that
• 26:44
  Speaker 4: debasement to happen practically overnight instead of over years and decades.
• 26:48
  Speaker 4: And so basically with a stroke of a pen, when
• 26:51
  Speaker 4: entity a government can now print a lot of money
• 26:54
  Speaker 4: and then break all the pegs to base all the money,
• 26:57
  Speaker 4: and then as in the years that follow, as the
• 26:59
  Speaker 4: inflation follows, then they go back and try to address
• 27:02
  Speaker 4: what happened. And so what would normally take many years
• 27:07
  Speaker 4: in a long period of time can be compressed into
• 27:09
  Speaker 4: it really with a stroke of a pen. And that's
• 27:11
  Speaker 4: the modern era of money that we find ourselves in.
• 27:15
  Speaker 3: One of the extraordinary stories around this that you tell
• 27:18
  Speaker 3: in the book is about the UK Warlon, which was
• 27:21
  Speaker 3: only paid off relatively recently, and there was a publicity
• 27:24
  Speaker 3: campaign at the time that suggested that the Warlone was
• 27:27
  Speaker 3: an easy sell and it was hugely subscribed, and the
• 27:30
  Speaker 3: British rushed to buy the Warlon to help finance the war,
• 27:34
  Speaker 3: and that was what was put about at the time.
• 27:36
  Speaker 3: But it turned out, of course not to be true
• 27:38
  Speaker 3: at all, and we only found out much later in
• 27:40
  Speaker 3: twenty seventeen that the Bank of England blog was called
• 27:44
  Speaker 3: Bank Underground wrote a piece explaining the in fact this
• 27:46
  Speaker 3: hadn't happened at all, and effectively the money is simply
• 27:49
  Speaker 3: been printed. And then in a wonderful little end point
• 27:52
  Speaker 3: of this saga, the ft that had written stories at
• 27:56
  Speaker 3: the time saying how wonderful it was that everyone had
• 27:58
  Speaker 3: rushed to buy the Warloonne printed an apology in twenty
• 28:01
  Speaker 3: seventeen saying that everything they had written was not true.
• 28:05
  Speaker 3: We are now happy to make it clear that none
• 28:07
  Speaker 3: of the above was true. So this is when the
• 28:10
  Speaker 3: central banks started this money printing process in real earnest
• 28:15
  Speaker 3: and also started not quite telling us the truth about it.
• 28:18
  Speaker 4: When we think of government finances, we often think of
• 28:20
  Speaker 4: taxation and spending, and that is a fairly transparent process
• 28:25
  Speaker 4: and that can be kind of debated each year and
• 28:28
  Speaker 4: each electacieson to see, Okay, what a tax is going
• 28:30
  Speaker 4: to be, what is the budget deficit or surplus, and
• 28:32
  Speaker 4: what kind of thing is are we spending on? Whereas
• 28:35
  Speaker 4: inflation is a more opaque form of taxation that can
• 28:39
  Speaker 4: be done first and then sorted out later after the
• 28:42
  Speaker 4: consequences have already occurred. And for example, in that arrangement
• 28:46
  Speaker 4: to finance that war, they could just lie and say, Okay,
• 28:49
  Speaker 4: the loans have been met, when really what they're doing
• 28:52
  Speaker 4: is they're just printing money. They're financing the loans through
• 28:56
  Speaker 4: new money creation, and therefore they're spending into the economy
• 29:00
  Speaker 4: money that they did not withdraw from the economy. Therefore
• 29:03
  Speaker 4: they're expanding the overall money supply, and therefore all of
• 29:06
  Speaker 4: the holders of the currents to all the holders of
• 29:08
  Speaker 4: the bonds, including foreign holders of currency and bonds, or
• 29:12
  Speaker 4: getting sharply devalued without knowledge that it's happening, and without
• 29:17
  Speaker 4: having given any sort of consent or any sort of
• 29:19
  Speaker 4: process to make that happen, and then only in hindsight
• 29:22
  Speaker 4: in this case comically like a century later, but even
• 29:25
  Speaker 4: if it takes place three years five years later, the
• 29:28
  Speaker 4: consequences to smooth out over time, they go back and
• 29:31
  Speaker 4: realize that they never actually consented to this. It was
• 29:33
  Speaker 4: basically taxation without input or knowledge, and therefore it could
• 29:37
  Speaker 4: not be debated, could not be protested, it could not
• 29:39
  Speaker 4: be discussed in a way that would normally be done
• 29:42
  Speaker 4: with taxation. I guess one of the themes in the
• 29:44
  Speaker 4: book is that as technologies come, it can sometimes change
• 29:48
  Speaker 4: the power structure, or the incentive structure, or where the
• 29:51
  Speaker 4: source of power is. Prior to that kind of era
• 29:53
  Speaker 4: of telecommunications and heavy use of banking, money was intrinsically
• 30:00
  Speaker 4: hard to debate. It was a very challenging, physical process,
• 30:03
  Speaker 4: slow process to do it. But in this modern era,
• 30:05
  Speaker 4: because it can be done so quickly, it really shifts
• 30:09
  Speaker 4: a lot of that power to those who wield the
• 30:12
  Speaker 4: power of the printing press.
• 30:14
  Speaker 3: And it makes central banks extraordinarily powerful, doesn't it. And
• 30:17
  Speaker 3: it's one of the bizarre things about recent times has
• 30:20
  Speaker 3: been the idea that an independent central bank is a
• 30:23
  Speaker 3: very good thing, whereas in fact, in some ways it's
• 30:26
  Speaker 3: a bit of a threat to democracy because if the
• 30:28
  Speaker 3: central banks have the power to do this, to create
• 30:31
  Speaker 3: the inflation and effectively to transfer wealth between different groups
• 30:34
  Speaker 3: and an economy. It's not necessarily something one likes to
• 30:37
  Speaker 3: think of happening outside democracy.
• 30:39
  Speaker 4: Yeah, and it's one of those things where so central
• 30:42
  Speaker 4: bank independence, the main purpose of it is so that
• 30:44
  Speaker 4: the like a president or a prime minister, some sort
• 30:47
  Speaker 4: of leader can't just call up the central bank in
• 30:51
  Speaker 4: a week leading up to an election and say, hey,
• 30:53
  Speaker 4: I need you to cut industrates, or I need you
• 30:55
  Speaker 4: to reduce the economy, or I'm going to fire you, right,
• 30:58
  Speaker 4: so that it's trying to avoid those kind of near
• 31:00
  Speaker 4: term abuses of the system by instead having some sort
• 31:03
  Speaker 4: of separate powers. The challenge is that, especially during crises,
• 31:09
  Speaker 4: central bank independence tends to go away. The government just
• 31:12
  Speaker 4: captures the central bank and says, look, it's a war,
• 31:14
  Speaker 4: you're going to finance the war, So it's not really
• 31:17
  Speaker 4: independent anymore. And then two, even when it is independent,
• 31:21
  Speaker 4: people are end up therefore very reliant on the competence
• 31:25
  Speaker 4: and the ethics of the central bank, which can be
• 31:28
  Speaker 4: people that they didn't necessarily lack. Obviously, each country will
• 31:31
  Speaker 4: have its own process for how the central bank is structured,
• 31:33
  Speaker 4: but these are generally appointed rather than elected officials, a
• 31:37
  Speaker 4: rather small number of people dictating what the price of
• 31:40
  Speaker 4: money is what the price of money and time is
• 31:42
  Speaker 4: essentially able to make low credit loans to certain entities
• 31:47
  Speaker 4: and not other entities, and therefore they get quite a
• 31:49
  Speaker 4: bit of power, the power of the purse, the power
• 31:51
  Speaker 4: of even defining what our money is, something that is
• 31:55
  Speaker 4: both powerful but opaque.
• 31:57
  Speaker 3: And as I say, uncomfortable outside the democratic Now, let's
• 32:01
  Speaker 3: flip forward another few decades and talk about today. And
• 32:04
  Speaker 3: the keep going to the book is that our money
• 32:06
  Speaker 3: system is broken and that were being failed by the
• 32:09
  Speaker 3: system as a whole. So let's talk about what's broken
• 32:12
  Speaker 3: now more than has been in the past. What's so terrible?
• 32:15
  Speaker 3: And that for most people money works. You know, they
• 32:17
  Speaker 3: have a bank account, they invest a bit, they buy
• 32:19
  Speaker 3: this out. There are debit cards work, that bank accounts work.
• 32:22
  Speaker 3: Now they're getting some interest on their bank account. That
• 32:24
  Speaker 3: I was saying, this is marvelous. So for most people
• 32:27
  Speaker 3: they would say, well, I don't know what you're talking about.
• 32:29
  Speaker 3: My money works.
• 32:30
  Speaker 4: Yeah. I distinction I make in the book is between
• 32:32
  Speaker 4: developed and developing countries. I argue in the book that
• 32:35
  Speaker 4: there's problems with money everywhere, but they're more obvious in
• 32:37
  Speaker 4: certain areas than others. So when zoom out, there are
• 32:40
  Speaker 4: about one hundred and sixty currencies in the world, and
• 32:43
  Speaker 4: outside of the handful, many many listeners of this are
• 32:46
  Speaker 4: probably in the handful of me and you and others
• 32:49
  Speaker 4: listening are in the handful of currencies that are the
• 32:52
  Speaker 4: least bad. These are the ones that lose value that
• 32:54
  Speaker 4: the slowest, despite all the problems we just discussed, outside
• 32:58
  Speaker 4: of major wartime, they are kind of slowly debasing currency,
• 33:02
  Speaker 4: Whereas when you look at the long tail of most currencies,
• 33:04
  Speaker 4: which is actually where most of the people in the
• 33:06
  Speaker 4: world live, they experience much more rapid currency debasement. And
• 33:10
  Speaker 4: therefore all of those issues we just talked about the
• 33:13
  Speaker 4: opaqueness of say, financing government through inflation, for example, things
• 33:18
  Speaker 4: like that happen way more magnitude and way more frequency
• 33:22
  Speaker 4: in many other countries in the world. So that's one
• 33:24
  Speaker 4: big problem. And two, there's actually a shocking number of
• 33:27
  Speaker 4: people in the world that are still unbanked. So you know,
• 33:30
  Speaker 4: banks have been now around for centuries even longer in
• 33:33
  Speaker 4: some forms, and yet there's in a fairly short period
• 33:36
  Speaker 4: of time more people have smartphones than have bank accounts.
• 33:40
  Speaker 4: In the current era, there's basically an inherent kind of
• 33:43
  Speaker 4: limitation to two banks and so the combination.
• 33:46
  Speaker 3: But if you have a smartphone, do not automatically have
• 33:49
  Speaker 3: a bank account. I mean, in Kenya, I noticed it's
• 33:51
  Speaker 3: all now, but there was empessa, et cetera. There's always
• 33:53
  Speaker 3: something you can do with the phone to create the
• 33:56
  Speaker 3: equivalent of a bank account.
• 33:57
  Speaker 4: The equivalent, yes, And I think that's one of the
• 34:00
  Speaker 4: kind of pieces of my book is that technology is
• 34:02
  Speaker 4: kind of enabling people to go around these issues. So
• 34:07
  Speaker 4: you know, in these countries I just talked about, all
• 34:10
  Speaker 4: these countries with failing currencies or mixed access to bank accounts,
• 34:14
  Speaker 4: technology is now enabling people to have more choice over
• 34:17
  Speaker 4: their money. So things like bitcoin or stable coins allow
• 34:21
  Speaker 4: people in all these different jurisdictions to say, instead of
• 34:24
  Speaker 4: my local rapidly debasing currency that my wages and my
• 34:27
  Speaker 4: savings are denominated in, I can go round that system
• 34:31
  Speaker 4: and I can say I want dollars from this jurisdiction,
• 34:34
  Speaker 4: or I want this decentralized currency bitcoin, or whatever the
• 34:37
  Speaker 4: case may be, depending on their preferences, their volatility tolerance,
• 34:40
  Speaker 4: their technical understanding. And so that's basically a way to
• 34:44
  Speaker 4: break into all these different silos and the other point
• 34:47
  Speaker 4: I make in the book is that when we look
• 34:49
  Speaker 4: at developed countries, so obviously we have a lot fewer
• 34:53
  Speaker 4: obvious problems with our money. Like you said, we don't
• 34:55
  Speaker 4: really have problems making payments, we don't really have problems
• 34:57
  Speaker 4: with rapid debasement. But instead the problems tend to be
• 35:01
  Speaker 4: more subtle. So, for example, the rapid accumulation of government
• 35:06
  Speaker 4: debt is one of those things where it's this kind
• 35:08
  Speaker 4: of slowly growing instability outside of our kind of immediate concern,
• 35:13
  Speaker 4: but something that long terms an issue, and I think
• 35:15
  Speaker 4: a more kind of short term issue. Something that kind
• 35:18
  Speaker 4: of happens on a regular basis is that people underestimate
• 35:21
  Speaker 4: the importance of credit. And so, for example, during major crisises,
• 35:26
  Speaker 4: when credit locks up, when governments and central banks give
• 35:30
  Speaker 4: selective credit to some entities. For example, in the United
• 35:33
  Speaker 4: States during the Global financial crisis, they gave credit to
• 35:37
  Speaker 4: large banks, but they would not give credit to say,
• 35:40
  Speaker 4: some smaller banks or homeowners and entities like that, And
• 35:44
  Speaker 4: so they can selectively basically bail out certain entities more
• 35:48
  Speaker 4: so than other entities. And this is kind of a
• 35:50
  Speaker 4: recurring cycle that happens recession after recession after recession, and
• 35:54
  Speaker 4: it's one of the key forces of wealth concentration that's
• 35:57
  Speaker 4: happening under the surface. So in some way, the kind
• 36:00
  Speaker 4: of the problems of the money that we have in
• 36:02
  Speaker 4: developed countries are more like the problems of having a
• 36:05
  Speaker 4: bad diet. And we talk about the quality of food,
• 36:07
  Speaker 4: for example, we might say, well, when we eat it,
• 36:10
  Speaker 4: we get full, we function, we don't really see a problem.
• 36:13
  Speaker 4: But of course if we're eating bad food over a
• 36:15
  Speaker 4: long period of time, those problems tend to accumulate, Whereas
• 36:19
  Speaker 4: in developing countries the money problems tend to be more
• 36:21
  Speaker 4: bad on the surface. It's more like the food is poison,
• 36:24
  Speaker 4: and it's more obviously in your face a problem. And
• 36:27
  Speaker 4: so there's all these kinds of inefficiencies built up in
• 36:29
  Speaker 4: the system. And I argue that a lot of it
• 36:31
  Speaker 4: is just because of the technological path that we've you know,
• 36:35
  Speaker 4: kind of the deterministic technological path and the order of
• 36:37
  Speaker 4: technologies that we've had up to this point.
• 36:41
  Speaker 3: Okay, so how do we fix it? Linn.
• 36:45
  Speaker 4: The book basically doesn't have a firmly prescriptive view, but
• 36:48
  Speaker 4: it basically emphasized that some of these open source technologies
• 36:51
  Speaker 4: that are still somewhat dismissed by academia and kind of
• 36:56
  Speaker 4: mainstream journalism, are I think a lot more powerful than
• 37:00
  Speaker 4: they get credit for. Basically, within that kind of one
• 37:03
  Speaker 4: hundred and sixty different currency framework that I mentioned, the
• 37:07
  Speaker 4: fact that these currencies can go around borders, the fact
• 37:10
  Speaker 4: that they can provide people more choice of what money
• 37:13
  Speaker 4: that they want to hold, regardless to where they are.
• 37:15
  Speaker 4: As long as they have some sort of basic internet connections,
• 37:18
  Speaker 4: some sort of basic phone service, they're able to go
• 37:21
  Speaker 4: around these types of blockades. And that's over the long
• 37:25
  Speaker 4: arc of time, I think able to put a lot
• 37:27
  Speaker 4: more restraints on the types of manipulations that can occur
• 37:30
  Speaker 4: outside of their purview and give them more options. For example,
• 37:34
  Speaker 4: I personally spend part of each year in Egypt, So
• 37:37
  Speaker 4: I live most of the year in the United States
• 37:39
  Speaker 4: part of each year in Egypt, and that's because some
• 37:42
  Speaker 4: of my family and friends are in Egypt. My husband
• 37:44
  Speaker 4: and I are kind of by country, and whenever we're
• 37:47
  Speaker 4: in Egypt, we see a lot of these problems a
• 37:50
  Speaker 4: lot more acutely compared to when we're in the United States.
• 37:53
  Speaker 4: And I'm always reminded when I go there. How in
• 37:57
  Speaker 4: the twenty first century are technological aspects of money have
• 38:02
  Speaker 4: not really caught up with the technological aspects of other
• 38:05
  Speaker 4: parts of our lives. And so, for example, an anecdote
• 38:08
  Speaker 4: that I'd like to share a lot is I know
• 38:10
  Speaker 4: a physician in Egypt that holds physical cash dollars that
• 38:14
  Speaker 4: he buys on the black market as his primary liquid
• 38:18
  Speaker 4: savings because he doesn't trust the local currency. They have
• 38:21
  Speaker 4: thirty seven percent inflation, They've had double digit inflation more
• 38:25
  Speaker 4: often than not over the past fifty years. That's in
• 38:28
  Speaker 4: the twenty first century, in twenty twenty four, that's his
• 38:30
  Speaker 4: chosen monetary technology. And it just shows that this whole
• 38:33
  Speaker 4: system I think is right for disruption. And I think
• 38:36
  Speaker 4: that these kind of open source things, and I tend
• 38:40
  Speaker 4: to focus on bitcoin and stable coins have thus far
• 38:42
  Speaker 4: kind of had the most utility in these areas, serve
• 38:45
  Speaker 4: people in these different jurisdictions and kind of go around
• 38:48
  Speaker 4: and present a alternative to somebody's more centralized and kind
• 38:52
  Speaker 4: of rapidly debasing or rapidly kind of financially abused systems.
• 38:57
  Speaker 3: One people like me say that quite get their head
• 39:01
  Speaker 3: around the likes of bitcoin as a long term entity
• 39:04
  Speaker 3: because they can't see the use case that is simply
• 39:07
  Speaker 3: because we're not looking outside the developed world for a
• 39:10
  Speaker 3: use case.
• 39:11
  Speaker 4: I think that's a big chunk of it. So in
• 39:13
  Speaker 4: the developed world, for example, we don't really have a
• 39:16
  Speaker 4: rapid like a major payment problem, And for our savings problem,
• 39:20
  Speaker 4: we have some issues with it, but not really so
• 39:22
  Speaker 4: for example, we can hold money in the s and
• 39:24
  Speaker 4: P five hundred. Our equity markets are fairly good and
• 39:28
  Speaker 4: we don't really face problems too often with bank accounts
• 39:31
  Speaker 4: being frozen or for kind of arbitrary reasons or things
• 39:35
  Speaker 4: like that. Whereas when you go to many other countries
• 39:38
  Speaker 4: one the currency is rapidly debasing generally faster too. They
• 39:42
  Speaker 4: don't really have access on average to as good equity
• 39:45
  Speaker 4: markets as we do. You know, they'll have a lot
• 39:47
  Speaker 4: of volatility, not a lot of upside. If the country
• 39:50
  Speaker 4: even has a significant equity market to the extent that
• 39:53
  Speaker 4: they can get access to offshore assets, it's usually more
• 39:56
  Speaker 4: restricted to the wealthy end of the spectrum. Right. If
• 39:58
  Speaker 4: you can afford an offshore bank account, if you can
• 40:00
  Speaker 4: afford an offshore brokerage account, you're generally in a better position.
• 40:03
  Speaker 4: And so there's a lot of these technologies are kind
• 40:06
  Speaker 4: of an equalizer. They basically say, if you have a smartphone,
• 40:08
  Speaker 4: then you can access the type of things that historically
• 40:11
  Speaker 4: we're more accessible to the wealthy. And then also, for example,
• 40:15
  Speaker 4: if your bank accounts are just arbitrarily frozen, right, there
• 40:17
  Speaker 4: are a lot of countries where if you protest or
• 40:19
  Speaker 4: things like that, your bank account's just frozen, confiscated. And
• 40:23
  Speaker 4: so there's actually you know, human rights organizations or democracy
• 40:27
  Speaker 4: advocates and things like that that make use of stable coins,
• 40:31
  Speaker 4: bitcoin and other sort of decentralized financial systems to go
• 40:35
  Speaker 4: around the fact that their local jurisdictions got a monopoly
• 40:39
  Speaker 4: over the monetary system. And I think that those are
• 40:41
  Speaker 4: these things that often go overlooked in a lot of
• 40:45
  Speaker 4: these discussions around the usefulness of this type of technology,
• 40:48
  Speaker 4: which to some extense understandable because there's been so much fraud,
• 40:51
  Speaker 4: there's been so much hype in the broader space. And
• 40:55
  Speaker 4: I think it's a shame because underneath all of that
• 40:57
  Speaker 4: kind of hype and fraud and problems, there are the
• 41:00
  Speaker 4: seeds of really important use cases, at least for a
• 41:04
  Speaker 4: subset of the technology.
• 41:06
  Speaker 3: Now, let me just ask you about one of the
• 41:08
  Speaker 3: other things that the skeptics such as me to say,
• 41:11
  Speaker 3: you mentioned earlier that in times of crisis, a central
• 41:14
  Speaker 3: bank is no longer independent because and we know that
• 41:17
  Speaker 3: it isn't a time of crisis that we understand properly
• 41:20
  Speaker 3: the sovereignty of the nation state. Right, So if stable coins, bitcoin,
• 41:26
  Speaker 3: any of the new cryptocurrencies were to become a threat
• 41:29
  Speaker 3: to an existing currency, surely the same thing can happen,
• 41:33
  Speaker 3: and that if they become a threat, we find out
• 41:35
  Speaker 3: about the power of the nation stage and they stop
• 41:37
  Speaker 3: being a threat.
• 41:38
  Speaker 4: So I think that depends on the authority of the
• 41:42
  Speaker 4: nation state. And so an interesting case study in recent
• 41:44
  Speaker 4: years was Nigeria. So that's a country of two hundred
• 41:47
  Speaker 4: million people. They ban cryptocurrencies from their banking system, so
• 41:51
  Speaker 4: they basically said banks can no longer send money to
• 41:53
  Speaker 4: known crypto exchanges, and they introduced their enira, the CBDC,
• 41:59
  Speaker 4: and yet for you know, years, three years or so,
• 42:02
  Speaker 4: they had very limited adoption of the enira. And they
• 42:05
  Speaker 4: have one of the highest adoption rates of cryptocurrencies, mainly
• 42:09
  Speaker 4: stable coins and bitcoin in the world, and specifically they
• 42:13
  Speaker 4: have really high peer to peer trading volumes because that's
• 42:16
  Speaker 4: how they go around their local banking system. And so
• 42:19
  Speaker 4: there are certain technologies or certain kind of transparency things
• 42:23
  Speaker 4: that make it pretty hard for governments to always get
• 42:27
  Speaker 4: away with specifically what they want to do. Now, obviously,
• 42:29
  Speaker 4: a country like China would would likely have more success
• 42:33
  Speaker 4: at pushing things that it wants to do than say,
• 42:35
  Speaker 4: a country like Nigeria.
• 42:36
  Speaker 3: I wonder if we can briefly move away from the
• 42:39
  Speaker 3: book and talk in general about markets and economics, because
• 42:42
  Speaker 3: you're not just an authoro strategist, And the most important
• 42:45
  Speaker 3: thing at the moment for everyone investing, for everyone is
• 42:48
  Speaker 3: to think about where inflation is going next. And we
• 42:51
  Speaker 3: talk a lot on this podcast about how we have
• 42:53
  Speaker 3: not expected inflation to go up, come down, and stay
• 42:56
  Speaker 3: down because mostly when you have these inflationary episodes, they
• 43:00
  Speaker 3: tend to come and go. You get inflation, and get
• 43:02
  Speaker 3: a little disinflation, you get inflation again, et cetera. And
• 43:05
  Speaker 3: having looked at your work, I see that's a viewpoint
• 43:07
  Speaker 3: that you agree with or repair to agree with.
• 43:08
  Speaker 4: Yeah, And I think a big factor to focus on
• 43:10
  Speaker 4: that's going to really dictate the pace of inflation is
• 43:13
  Speaker 4: the energy side. So if you look back at all
• 43:15
  Speaker 4: the major of modern history they always coincided with spikes
• 43:19
  Speaker 4: and energy prices because that's been underlying input for a
• 43:22
  Speaker 4: lot of things. It's the underlying input for wages, it's transportation, automation.
• 43:26
  Speaker 4: Now even currently things like AI run on quite a
• 43:30
  Speaker 4: bit of power. And if you have abundant energy then
• 43:33
  Speaker 4: some of those other inflationary forces in the economy. They're present,
• 43:37
  Speaker 4: but they're not as severe as one might think. Whereas
• 43:40
  Speaker 4: when the energy itself is inflationary, almost any reductions in
• 43:45
  Speaker 4: other areas tend not to be sufficient to offset that inflation.
• 43:48
  Speaker 4: So my kind of expectation is that on average this
• 43:51
  Speaker 4: decade is going to have higher average inflation than the
• 43:54
  Speaker 4: prior couple decades, but the timing and severity of any
• 43:58
  Speaker 4: kind of further inflat waves you might experience are likely
• 44:02
  Speaker 4: to be quite coincident with energy. So I think basically,
• 44:06
  Speaker 4: if one wants to have a strong opinion on that,
• 44:09
  Speaker 4: they really have to dive into, especially in their particular country,
• 44:12
  Speaker 4: the sources of energy that they use, the likelihood of,
• 44:16
  Speaker 4: for example, global oil disruptions, the growth rate of US
• 44:21
  Speaker 4: shale oil, and the ability to meat demands of the
• 44:23
  Speaker 4: next five years or so, And so my expectation is
• 44:27
  Speaker 4: that by the time this decade's finished, we're probably going
• 44:30
  Speaker 4: to have another energy price spike and another inflation spike,
• 44:35
  Speaker 4: And so I think that's where I'm focusing. I think
• 44:38
  Speaker 4: aside from that, it's just the ongoing issue of the
• 44:41
  Speaker 4: money supply growth that occurred a few years ago is
• 44:44
  Speaker 4: still working its way through the economy. It's still working
• 44:47
  Speaker 4: its way through weight growth as a price growth, and
• 44:51
  Speaker 4: so I think that process still has some time to go.
• 44:54
  Speaker 4: But that if not for an energy spike that can
• 44:57
  Speaker 4: eventually settle back down about the energy side, that I
• 45:01
  Speaker 4: think will determine the timing or magnitude of future inflation waves.
• 45:05
  Speaker 3: Okay, and how would that affect markets?
• 45:08
  Speaker 4: So if you were to get another sustained inflation wave,
• 45:12
  Speaker 4: that probably of the market would then price bond you'll hire.
• 45:16
  Speaker 4: And I would be concerned about some of these really
• 45:18
  Speaker 4: high valued equities that are trading at thirty forty fifty
• 45:21
  Speaker 4: times earnings in some cases, because you tend to have
• 45:25
  Speaker 4: a thing where during periods of low inflation, equity valuations
• 45:29
  Speaker 4: and can get very high because the cost of money
• 45:31
  Speaker 4: is very low, Whereas in environments where we have more
• 45:35
  Speaker 4: of these inflation of core inputs. Some of these more
• 45:38
  Speaker 4: disinflation type of assets. High valued equities or bonds and
• 45:42
  Speaker 4: things like that tend to do very poorly, so a
• 45:45
  Speaker 4: lot of investors are invested with structural disinflation in mind.
• 45:49
  Speaker 4: The classic sixty to forty portfolio of equities and bonds,
• 45:53
  Speaker 4: and especially market cap weighted equities, so they're very geared
• 45:56
  Speaker 4: towards the large gross stocks, especially in the United States markets.
• 46:00
  Speaker 4: I like having a separate segment in a portfolio focused
• 46:03
  Speaker 4: on energy because that is, in many cases a better
• 46:07
  Speaker 4: hedge against the rest of the assets during decades that
• 46:11
  Speaker 4: are more inflationary on average. So during disinflationary decades, bonds
• 46:16
  Speaker 4: are a better hedge for equities, whereas during inflationary decades,
• 46:19
  Speaker 4: energy tends to be a better hedge for the rest
• 46:21
  Speaker 4: of an equity portfolio. So I certainly like to have
• 46:24
  Speaker 4: that slice of protection.
• 46:26
  Speaker 3: Now, Lynn, I always ask at the end of the podcast,
• 46:29
  Speaker 3: I always asked the same question. I'm feeling slightly embarrassed
• 46:31
  Speaker 3: and a little pointless asking you this question, but I
• 46:33
  Speaker 3: have to because I ask everybody. Okay, if you here
• 46:37
  Speaker 3: we go, if you were to only be able to
• 46:40
  Speaker 3: invest in one acid over a ten year period, and
• 46:44
  Speaker 3: you were only given a choice of two assets. One
• 46:47
  Speaker 3: of those was gold and one of those was bitcoin.
• 46:51
  Speaker 3: Which would you choose?
• 46:53
  Speaker 4: So bitcoin is the risk your choice in the sense
• 46:56
  Speaker 4: that there's a non zero chance that the investment gets
• 46:59
  Speaker 4: heavily disrupted in some way, whereas gold by the end
• 47:02
  Speaker 4: of the decade that you're still going to have you
• 47:04
  Speaker 4: know roughly probably what your perching power is. But between
• 47:07
  Speaker 4: the two, I would have to probably go with bitcoin.
• 47:10
  Speaker 3: Okay, So you still have some confidence in gold. That's interesting.
• 47:13
  Speaker 4: So gold has had this place as a kind of
• 47:16
  Speaker 4: a mental backstop for kind of the global financial system.
• 47:20
  Speaker 4: It's kind of this this like hedge, this kind of
• 47:22
  Speaker 4: bar asset that you can hold that can't be rapidly debased.
• 47:25
  Speaker 4: And in a world of bitcoin and digital assets and equities,
• 47:30
  Speaker 4: I think gold is still an analog backup. It's basically
• 47:33
  Speaker 4: people say, what about cyber attacks, what about Internet outages,
• 47:36
  Speaker 4: what about power disruptions, all this kind of tail risk
• 47:39
  Speaker 4: that people can imagine. I think gold just transfers over
• 47:42
  Speaker 4: to that new world and still serves that kind of
• 47:45
  Speaker 4: similar mental backstop. And it's also still what central banks
• 47:49
  Speaker 4: prefer as their main underlying collateral aside from other currencies,
• 47:54
  Speaker 4: other countries, bonds.
• 47:58
  Speaker 3: Final question, everyone going to go out and buy your
• 48:00
  Speaker 3: book and read it now if they haven't already on
• 48:02
  Speaker 3: any also well listen as they've already got it and
• 48:04
  Speaker 3: already read it. But your book aside, is there are
• 48:07
  Speaker 3: there any books that well one book in particular that
• 48:10
  Speaker 3: you see as an investing bible that you would recommend
• 48:12
  Speaker 3: to everybody that they should read. Do you have a favorite?
• 48:14
  Speaker 4: So? I think actually a really simple one is the
• 48:17
  Speaker 4: most important thing by Howard Marx, and it's the reason
• 48:21
  Speaker 4: I like it. It's a very accessible read. It's not
• 48:23
  Speaker 4: really about the like the detailed mechanics of investing. It's
• 48:27
  Speaker 4: based on just investing principles. And so if people that
• 48:30
  Speaker 4: aren't familiar with him, Howard Marx is a billionaire investor
• 48:34
  Speaker 4: primarily in junk bonds, but the book itself applies to
• 48:38
  Speaker 4: He's well known for his kind of macro or insightful
• 48:41
  Speaker 4: articles on multiple topics, and the book itself is not
• 48:44
  Speaker 4: about any specific asset class. It's more about the mindset
• 48:47
  Speaker 4: and kind of the joke of the book is that
• 48:50
  Speaker 4: Howard found himself whenever people say would talk to him
• 48:53
  Speaker 4: and say the most important thing is this, and then
• 48:55
  Speaker 4: like in another conversation, you'd be like the most important
• 48:57
  Speaker 4: thing and it'd be like a different topic. So, as
• 48:59
  Speaker 4: a joke wrote, the book in every chapter is a
• 49:02
  Speaker 4: different most important thing, And so the book itself is
• 49:05
  Speaker 4: a fairly concise set of independent descriptions or recommendations for
• 49:11
  Speaker 4: how to think about investing, how to think about finance.
• 49:15
  Speaker 3: Wonderful, Lynn, thank you so much for all those fascinating insights.
• 49:18
  Speaker 3: We hugely appreciate you.
• 49:19
  Speaker 4: Johnnie, thank you for having me.
• 49:27
  Speaker 3: With me now to reflect to what we just had
• 49:29
  Speaker 3: from Lynn alden or through a Broken Money. As senior
• 49:31
  Speaker 3: reporter John Steppeck, John, I'm so glad you're had to
• 49:35
  Speaker 3: talk to me about this one. This was just the
• 49:37
  Speaker 3: most fascinating podcast, wasn't it.
• 49:40
  Speaker 5: I know, I thought it was great, actually, really really
• 49:45
  Speaker 5: the history of money is so interesting, and I would
• 49:48
  Speaker 5: say that Len's basically summed it up. You know, you
• 49:52
  Speaker 5: listening this, you actually probably don't really have to go
• 49:54
  Speaker 5: and read my cha about the hard book obviously, So no,
• 49:59
  Speaker 5: I thought I thought it was great.
• 50:00
  Speaker 3: Yeah, I mean I just loved the way. I love
• 50:02
  Speaker 3: the way that she looks at money from the very
• 50:05
  Speaker 3: beginning as being ledger based, you know, because people don't
• 50:09
  Speaker 3: think about it. We talked about this a bit about
• 50:11
  Speaker 3: about how people look at the origins of money of
• 50:13
  Speaker 3: being about barter, where in fact it's much more likely
• 50:15
  Speaker 3: it was never about barter. It was always about credit,
• 50:18
  Speaker 3: credit in people's heads, credit to credit, using stones, using
• 50:22
  Speaker 3: shells or whatever. But what we're not talking about barter.
• 50:25
  Speaker 3: We're talking about keeping ledgers. And I wrote about this
• 50:29
  Speaker 3: years ago. Atically I wrote about bitcoin first appeared, I
• 50:33
  Speaker 3: wrote about it ledgers and wrote about how the the
• 50:37
  Speaker 3: ry stones of yapp were a ledger currency and bitcoin
• 50:41
  Speaker 3: was the modern version of that. And you know, she's
• 50:43
  Speaker 3: really expanded on all that stuff in this book and
• 50:46
  Speaker 3: taken her through the entire history of money with this
• 50:48
  Speaker 3: idea of the ledger of the background. And I think
• 50:51
  Speaker 3: it's absolutely fascinating, brilliant.
• 50:53
  Speaker 5: I mean, I give you because one thing I remember,
• 50:56
  Speaker 5: when of FoST started getting interested in history and myn
• 51:00
  Speaker 5: which I guess was about twenty years ago, the prevailing
• 51:03
  Speaker 5: idea was the commodity idea, the idea that we'd kind
• 51:07
  Speaker 5: of gradually found better and better substances for solving the
• 51:12
  Speaker 5: you know, the the timing of kind of wants, and
• 51:16
  Speaker 5: so we've gone from whatever salty shells to gold eventually,
• 51:20
  Speaker 5: and I think it was I can't. I think it
• 51:22
  Speaker 5: was David Graeber's book that eventually kind of displaced that
• 51:25
  Speaker 5: in the popular imagination at that point where you start
• 51:28
  Speaker 5: to realize, well, so that's it's really daft to imagine
• 51:31
  Speaker 5: that that's how things started, because you couldn't get anything
• 51:36
  Speaker 5: done then until someone had come up with the idea
• 51:39
  Speaker 5: of a currency where it's like you say, this ledger thing.
• 51:42
  Speaker 5: If you've got small enough tribe of people, then everyone
• 51:44
  Speaker 5: can remember, well, you know Dave Owes Merrin, who was
• 51:48
  Speaker 5: John who owns Summer, you know, this amount of money,
• 51:52
  Speaker 5: and then you don't have to have any real you know,
• 51:57
  Speaker 5: there doesn't have to be a kind of anything that
• 51:59
  Speaker 5: represents it, that passing things sort that way. You've just
• 52:02
  Speaker 5: got all that big store is yours or know what
• 52:04
  Speaker 5: it's made now? So no, I do I think that
• 52:06
  Speaker 5: that made a lot of sayense, Yeah, I mean.
• 52:09
  Speaker 3: You think about the point here being that all money
• 52:13
  Speaker 3: does is moves goods and services through time, right, That's
• 52:16
  Speaker 3: all it does, and so you only need it. You
• 52:19
  Speaker 3: don't need anything physical for that you simply need the record.
• 52:22
  Speaker 3: And we didn't talk about this, but my favorite favorite
• 52:24
  Speaker 3: bit about Ryes right stones and Yap is the story
• 52:29
  Speaker 3: which may or may not be true, but I think
• 52:31
  Speaker 3: it is about one of the boats coming back from
• 52:33
  Speaker 3: the distant island with very large ry stones on the
• 52:37
  Speaker 3: boat thinking, and so the stones are then lost under
• 52:42
  Speaker 3: the sea, but they still exist as wealth. They're still owned.
• 52:48
  Speaker 3: Everyone knows they're there. They don't need to be seen.
• 52:53
  Speaker 4: To be part of the system.
• 52:54
  Speaker 5: I love that, are you?
• 52:55
  Speaker 4: Yeah?
• 52:56
  Speaker 5: You owin that one that's under the sea. No, I
• 52:58
  Speaker 5: know you win it? Yeah, exactly, I just I just
• 53:00
  Speaker 5: swapped to you for some I.
• 53:02
  Speaker 4: Do I think.
• 53:03
  Speaker 5: I mean, I think my question then low after this,
• 53:06
  Speaker 5: and probably the main thing that that actually I was
• 53:10
  Speaker 5: thinking was so, has this changed your view on Bitcoin
• 53:16
  Speaker 5: of crypto currencies in any way? No, No, because I
• 53:23
  Speaker 5: mean it's very it's all very logical, and it makes
• 53:27
  Speaker 5: an awful lot of sense. And I think that a
• 53:29
  Speaker 5: lot of lens points about the difference between developed markets
• 53:33
  Speaker 5: and developing markets were interesting as well.
• 53:38
  Speaker 3: Yes, absolutely, she's right with that one thing. She is
• 53:41
  Speaker 3: definitely right about And I thought it when I when
• 53:43
  Speaker 3: I looked at her work before is that you and
• 53:46
  Speaker 3: I and our conversations have very often overlooked the fact
• 53:49
  Speaker 3: that developed markets don't have the semi reliable money systems
• 53:53
  Speaker 3: that we do. But the bit where I didn't find
• 53:57
  Speaker 3: Lens replied to me to be satisfied, and where I'm
• 54:01
  Speaker 3: still concerned is that I believe in the nation state
• 54:05
  Speaker 3: and the sovereignty of the nation state and the reassertion
• 54:09
  Speaker 3: of the nation state in times of crisis. Right, And
• 54:12
  Speaker 3: we do find that that whenever there is a financial crisis,
• 54:15
  Speaker 3: or indeed any other kind of crisis, we see the
• 54:17
  Speaker 3: nation state showing who holds power. And interestingly, I think
• 54:22
  Speaker 3: back to the podcast we did a few weeks ago
• 54:24
  Speaker 3: on space, and that conversation has come up again. Now,
• 54:28
  Speaker 3: how do you control space? Who wins in space? What
• 54:30
  Speaker 3: are the rules in space? Why can't Elon must just
• 54:33
  Speaker 3: take over Mars if he feels like it, And the
• 54:35
  Speaker 3: answer is because he has to take off from the
• 54:39
  Speaker 3: territory of a nation state. Right, So therefore you can't
• 54:44
  Speaker 3: Nothing private can have power over the nation state, be
• 54:49
  Speaker 3: it in space or be it a new kind of money.
• 54:51
  Speaker 3: And that's the bit where that's the bit where I
• 54:53
  Speaker 3: really was hoping that Lin would give me an answer
• 54:55
  Speaker 3: that I could work with. But that was the one
• 54:59
  Speaker 3: point where she couldn't and didn't. So I still think
• 55:03
  Speaker 3: that you can't have a currency operating out with a
• 55:08
  Speaker 3: sovereign currency and hold its value indefinitely.
• 55:14
  Speaker 5: See I mean, I think that's a really good point,
• 55:16
  Speaker 5: and I agree because basically, what I mean, what it
• 55:22
  Speaker 5: bogs down is that in the absence of actually building
• 55:24
  Speaker 5: his own robot army, you're right, Eel and Musk can't
• 55:27
  Speaker 5: do anything about the permission of the nation state, and
• 55:30
  Speaker 5: the nation state has the monopoly over violence. And that's
• 55:34
  Speaker 5: basically what it boils down to. But I mean, within
• 55:39
  Speaker 5: all that, then it's that thing of well, we can still,
• 55:44
  Speaker 5: I guess, recognize that something like bitcoin does have value
• 55:50
  Speaker 5: within the context that it may or you know, it's
• 55:54
  Speaker 5: not going to go on and replace the dollar, and
• 55:56
  Speaker 5: it's not going to go on and replace the pound.
• 56:00
  Speaker 5: It's just but but I guess I guess the argument
• 56:03
  Speaker 5: that is digital gold makes the fear element sense.
• 56:09
  Speaker 3: John, You've been one over.
• 56:12
  Speaker 5: Oh well, you know, I've always been a bit wobblier
• 56:15
  Speaker 5: or nice than than you.
• 56:17
  Speaker 3: I've lost you to the other side.
• 56:21
  Speaker 5: The question is always a bit well what value is
• 56:23
  Speaker 5: it there? You know what place is it? But it's
• 56:25
  Speaker 5: got it has a function. It's not a scarmp think that.
• 56:31
  Speaker 3: Okay, if you are listening to this, you've done something
• 56:35
  Speaker 3: nobody else has been able to do. Your broad John
• 56:39
  Speaker 3: Steppic round the cryptocurrencies.
• 56:42
  Speaker 5: So I'm gonna finish change my mind.
• 56:44
  Speaker 3: On something I've never managed changing mind on anything. Don't
• 56:49
  Speaker 3: forget that. Limb finished by saying bitcoin is riskier than
• 56:55
  Speaker 3: gold in the sense that there is a non zero
• 56:58
  Speaker 3: chance that the investment gets heavily disrupted in some way,
• 57:01
  Speaker 3: whereas gold you know that by the end of the decade,
• 57:05
  Speaker 3: adding a little to a quota, you're still going to
• 57:07
  Speaker 3: have it.
• 57:09
  Speaker 5: I mean that's it was the fact partly that she
• 57:11
  Speaker 5: acknowledged that that I thought, well, you know, you're not
• 57:15
  Speaker 5: You're not one of these you know, idea logues or
• 57:18
  Speaker 5: one of these people is going to come on Twitter
• 57:20
  Speaker 5: afterwards and harasses because we didn't mention their particular favorite
• 57:24
  Speaker 5: crypto coin or something like that. You know, it's clearly
• 57:27
  Speaker 5: has a very deep understanding of the money system. But
• 57:31
  Speaker 5: I say the thing also I wanted to bring up
• 57:36
  Speaker 5: was I was recently reading an Old Bank for International
• 57:40
  Speaker 5: Settlements report on digital currencies because I was bored and
• 57:46
  Speaker 5: I was on a plane and it was the only
• 57:47
  Speaker 5: thing in my bike. And what was interesting about that
• 57:52
  Speaker 5: is because I think this is the other part of
• 57:55
  Speaker 5: what Linn's talking about in the cryptocurrency thing in general,
• 58:00
  Speaker 5: is that it's very clear that severeigns want their cut,
• 58:05
  Speaker 5: and they are taking this seriously, like central bank digital
• 58:08
  Speaker 5: currencies are the you know, the suffering the equivalent of
• 58:13
  Speaker 5: basically recognizing the threat posed by something like bitcoin or
• 58:19
  Speaker 5: more accurately, stable coins. The thing that's freaking them out
• 58:23
  Speaker 5: is stable coins because those are kind of like, I guess,
• 58:27
  Speaker 5: almost like counters, not counterfeit.
• 58:30
  Speaker 4: But.
• 58:32
  Speaker 5: Private versions of the dollar, but they're backed by dollars,
• 58:36
  Speaker 5: but they're being used in the digital realm, and if
• 58:39
  Speaker 5: that realm is gonna what the BIS was basically saying
• 58:43
  Speaker 5: is the central banks, and it was doing in a
• 58:45
  Speaker 5: very cuddly way, but was saying that central banks should
• 58:48
  Speaker 5: be part of that world so that they can provide
• 58:51
  Speaker 5: the asset elast resort, the currency elast resort basically for
• 58:54
  Speaker 5: all the future applications that will be on the blockchain,
• 58:58
  Speaker 5: if you like, and then when they were talking about
• 59:01
  Speaker 5: the applications, it was that was a bit fuzzier. I
• 59:04
  Speaker 5: think the problem there is it's like, if I want
• 59:06
  Speaker 5: to send money to you from my bank account, then fine,
• 59:09
  Speaker 5: there's about ten different transactions behind the curtain. But I
• 59:12
  Speaker 5: don't care, and you don't care because yeah, it takes seconds,
• 59:16
  Speaker 5: and if it doesn't arrive, then we can shout it somewhere.
• 59:19
  Speaker 4: You know.
• 59:19
  Speaker 5: It's not as from an end user point of view,
• 59:22
  Speaker 5: it doesn't matter.
• 59:23
  Speaker 3: I always use it something. I always use a calm
• 59:25
  Speaker 3: voice when I call customer services.
• 59:26
  Speaker 5: By the way, oh yeah, but it's a shouty cam voice.
• 59:33
  Speaker 5: I just use my accent. That helps a lot of
• 59:36
  Speaker 5: the time, unless it's a Classwegian call center. But sorry, no,
• 59:42
  Speaker 5: it's a trade finance. So where you've got to you know,
• 59:46
  Speaker 5: you've got to order a shiploaded goods from something from
• 59:49
  Speaker 5: you know, somewhere across the world. And the problem is
• 59:52
  Speaker 5: that you don't want to pay them before you've got
• 59:54
  Speaker 5: the goods. They don't want to send the goods before
• 59:56
  Speaker 5: you pay them, And then there's a whole load of
• 59:58
  Speaker 5: complicated bits and the middle where the person on the
• 1:00:01
  Speaker 5: other side of the world might also be staking the
• 1:00:04
  Speaker 5: goods is collateral to like five different people and you
• 1:00:07
  Speaker 5: don't know anything about it. So that's sort of areas
• 1:00:10
  Speaker 5: where they were talking about how kind of programmall bow
• 1:00:12
  Speaker 5: contracts and smart councies and all the rest of it
• 1:00:15
  Speaker 5: might actually work better for these specific applications. So I
• 1:00:19
  Speaker 5: guess a long way round, what I'm talking about is
• 1:00:21
  Speaker 5: that it's clear that this technology does have some use
• 1:00:25
  Speaker 5: in certain financial areas, and I think perhaps the biggest
• 1:00:31
  Speaker 5: threat to something like bitcoin is that central banks are
• 1:00:34
  Speaker 5: just going to come in and occupy that space. But
• 1:00:38
  Speaker 5: it is again, it is a real area of technology.
• 1:00:40
  Speaker 5: It's not something that is just, you know, a problem,
• 1:00:46
  Speaker 5: kind of looking for a solution, looking for a problem.
• 1:00:49
  Speaker 3: Well, I think we better leave with the John, leave
• 1:00:51
  Speaker 3: it with John the convert. And you know they were
• 1:00:53
  Speaker 3: saying nothing worse than a convert. Thanks for listening to
• 1:01:02
  Speaker 3: this week's Maren Talks Money. We'll be back next week.
• 1:01:04
  Speaker 3: In the meantime, If you like us show, rate, review,
• 1:01:06
  Speaker 3: and subscribe wherever you listen to your podcasts, and of
• 1:01:09
  Speaker 3: course tell your friends. And finally, we now have our
• 1:01:11
  Speaker 3: show emails those enderlong ideas, questions or comments to merin
• 1:01:14
  Speaker 3: money at Bloomberg dot Net. This episode was hosted by
• 1:01:18
  Speaker 3: me Maren Sumset Web produced by Sumasadi. Special thanks to
• 1:01:22
  Speaker 3: Lynn Alden and John Steppe.