Latest / Simply Bitcoin / Lyn Alden | "Bitcoin was Invented & Discovered" | Simply Bitcoin IRL

Transcript

Lyn Alden | "Bitcoin was Invented & Discovered" | Simply Bitcoin IRL · Simply Bitcoin

0:01
Hello everybody. Welcome to another episode of
0:05
Simply Bitcoin IRL. Today's guest is Lynn Alden.
0:09
Before I bring her on stage, I want to give a shout-out to the
0:12
awesome Bitcoin company that powers the show.
0:14
So on bitcoin, best place to stack SATs the incentivize
0:18
dollar cost averaging and self custody by any size of Bitcoin
0:23
from $10 to 10 million dollars. What do you waiting for visit
0:27
Swan Bitcoin.com today, Anyways Lynn, thank you so much for for
0:34
joining us today. Happy to thanks for having me.
0:37
So purely by chance, you came on the show a day or two after the
0:44
FED had a 15-year record of rising interest rates.
0:49
What was your perspective, what was your perspective on that
0:52
well? So far that was in line with
0:54
expectations. So, the markets were expecting
0:55
the rate hike that they got. It's slower than some of these
0:58
prior rate hikes, but it's still Faster than what has been common
1:01
in modern times, you know, this kind of current regime that
1:04
they've been in and was surprised markets.
1:06
A little bit was that the Dot Plot was more hawkish.
1:10
And so basically the FED raised in line with expectations but
1:13
also was a little bit more hawkish in terms of the future
1:16
in terms of how high or how long they plan on keeping those
1:19
rates. Now something to keep in mind is
1:21
that you know, the FED Dot Plot is not historically been very
1:24
accurate. You know if anyone looks at the
1:27
Dot Plot and then trades based on it.
1:30
You know, I wouldn't do that necessarily but that doesn't
1:32
mean that, you know, that kind of thing happens is still shows
1:36
what their intentions are and so that can speak the market and
1:39
sometimes, those markets spooking events are what
1:42
eventually contribute to the Dot Plot changing, right?
1:45
So the fact that if markets are so strong that gives the FED
1:48
more ammo to keep tightening, whereas if you do start to see
1:52
more problems in the market and the economy in general, that can
1:57
slow down overall fed actions. But basically the Stop summary
2:00
of yesterday was right, they raised in line with
2:03
expectations, but we're more little bit more little bit more
2:05
hawkish about the future than anticipated.
2:08
So, and what are your expectations for 2023?
2:14
Right? Because the whole, you know,
2:16
what you're hearing over and over again.
2:17
And I was fortunate enough to have Nick badia on yesterday and
2:22
I asked some very similar questions and I'm comparing what
2:25
you guys are saying and what are your expectations for?
2:29
Or 2023 specifically for how Bitcoin will perform.
2:34
And the reason I ask that is because Bitcoin has never
2:38
existed in a recessionary environment.
2:41
Is it going to continue to act like a risk on asset?
2:44
I think most likely, but I'll put some caveats on that.
2:48
So, you know, in this this year, for example, we've seen an
2:52
economic slowdown but not a recession necessarily and a lot
2:58
of the We've seen in most assets is about valuation compression,
3:03
right? So if you, if you say, for
3:05
example, invest in a stock right now, determining what is the
3:08
right price to earnings ratio to pay for the stock?
3:11
I was just going to depend on growth rate, it's going to
3:13
depend on company, safety, all sorts of different reasons, but
3:17
one of the factors you take into account is what, what could you
3:20
get with another investment, right?
3:21
And the most common one is compared to is the 10-year
3:24
treasury yield. So if you can, if you, you know,
3:27
if you can put your money into a 10-year Treasury and get a Five
3:30
percent annualized rate of return, then you'd maybe expect,
3:33
you know, I don't know, 12% return from equities.
3:36
So a 7 percent, premium it over to, you know, take on the added
3:39
volatility risk and risk of loss that you get from an equity.
3:43
You know, at least in the modern system as currently constructed
3:46
another hand. If Treasure of the yielding
3:48
point five percent so practically.
3:49
Nothing then you might say, well I mean if equities can return 7%
3:53
I'll take that and so you'll pay a higher multiple for the same
3:58
expected stream. Cash flow.
4:00
So all the all the company details of the same but you're
4:03
willing to pay more for it because you're comparing it to
4:05
the range of possible, you know, traditional asset Alternatives.
4:10
And so as the FED is raised rates, you know, they raised the
4:14
short end but it trickles out into the long end and so do
4:17
things like inflation, expectations and economic
4:19
performance, expectations and things like that.
4:22
But when those rates short and long move up across the board,
4:26
that reduces the, the fair value to pay for equities, He's and
4:31
then also to some extent impacts things like gold or Bitcoin
4:34
because you base have a hardening of the dollar at least
4:37
in a relative sense, compared to other currencies and compared to
4:40
what's been happening. So we've not had, you know, fast
4:42
money supply growth this year, actually kind of flat to down
4:44
for the year which is unusual compared to the prior, two years
4:47
of Rapid money supply growth. And so that puts a lot of
4:52
pressure on all assets, kind of equally.
4:53
So bonds are down. Stocks are down, you know, kind
4:56
of harder assets in general or down.
4:58
And obviously, If you've leveraged attached to them, you
5:01
can be down more which is kind of what we've seen in the
5:03
Bitcoin crypto whole Space is whole kind of rehypothecation
5:06
blowing up. When we look at the 23, I see
5:09
something a little different, which is, you know, we're
5:12
getting probably close to the top of the FED hiking cycle.
5:16
And so, I'm not as concerned about valuation compression
5:19
going forward, at least after, maybe quarter 123 or so.
5:24
But I'm concerned about corporate earnings going down
5:27
because I think, the economic deterioration is likely to
5:29
Continue and so I think you could see better results out of
5:33
things that don't have earnings, you know, things like gold or
5:36
Bitcoin. They don't have earnings or not
5:37
value based on their earnings, their monetary assets.
5:41
Whereas I think you could still see some weakness out of
5:43
equities and so I think you could see more differentiation
5:47
next year. But I you know, I try to avoid
5:50
giving one-year price predictions for an asset that so
5:52
volatile. Because, you know, it's like
5:56
part of that part of answering that question is.
5:58
Well, what happens Genesis? What happens.
5:59
Grayscale, what happened? It was buying is fine, I think
6:02
so but maybe not, I don't know. And so it kind of you have to
6:06
answer industry specific questions often with opaque
6:10
balance sheets and human decisions and things like that.
6:13
But I think that historically if you look at it Bitcoin generally
6:17
does well in Rising PMI environment.
6:19
So economic acceleration, gently does flat to down in Falling PMI
6:24
environments. So economic deceleration and it
6:28
usually historically. To the bottom before PMI
6:31
bottoms. And that's it.
6:32
I think because liquidity tends to bottom before PMI bottom.
6:36
So actually probably the closest overall correlation to bitcoin.
6:38
Price has historically been liquidity and I think we're
6:42
seeing maybe signs of that bottoming perhaps in the in the,
6:46
you know, the first half of 2023 but that's kind of just where we
6:50
are right now. I mean, things can change in a
6:52
month based on new information coming out.
6:54
So you mentioned that you believe it's it, it 20 believe
6:59
that. III could potentially be the end
7:01
of the head hiking cycle, but, isn't that dependent on the
7:05
inflation numbers? Do you believe that, we've
7:07
already peaked inflation and is it coming down?
7:11
And also, to add on top of that, right?
7:13
You're starting to see articles by the Legacy.
7:16
Mainstream media, there was an article by The Wall Street
7:19
Journal, and trying to attempt to normalize, you know, the, the
7:24
way that they, the way that they advertise is like, we don't
7:27
really need two percent. We need four percent inflation.
7:29
So do you think that if they do get it down to four percent
7:33
that's good enough for them, they'll start trying to
7:35
normalize that moving forward. And the first part of the
7:38
question was is the end of the FED hiking cycle dependent on on
7:44
if inflation is in fact under control.
7:47
So yeah, couple different questions there.
7:49
I'll try to go through them one. Is that I do think we're at the
7:52
top of a local Peak and inflation.
7:56
The way I've been framing it and this is before inflation rolled
7:59
over. Is that I think that you're just
8:01
like the 70s and just hit the 40's that this is going to be an
8:05
inflationary decade, but that doesn't mean you just
8:07
constantly, go straight up. You often have periods of
8:09
disinflation cyclical, disinflation within a structural
8:13
inflationary environment. And so the usually it's because
8:17
there's a Temps at counter-attacks, right?
8:19
It could be fed tightening, it could be twice the price and
8:23
wage controls. You know, it is basically
8:24
various kind of push backs that these top down, you know,
8:28
planners can kind of do. Into that those forces that work
8:31
for a period of time, until something breaks, you have to
8:33
change course. And so you know I it actually if
8:38
anything came about a quarter later than expected because
8:40
starting at the end of 2281, I was predicting that around 1:45
8:44
would probably be the peak inflation.
8:46
I think the Russian war added like a quarter to that it kind
8:50
of It kind of stirred things up a little bit more than they
8:53
otherwise would have been. And so we got the peak in
8:56
quarter three and now we're rolling over and I think as long
9:00
as you know, it kind of comes down to how quickly chatter
9:04
reopens if they did. If they just tomorrow say hey
9:06
we're going to go all out. We're going to completely rope
9:08
and we're going to give everyone you know, thousand dollars.
9:11
We're to promote like flights and travel and other fuel
9:14
intensive. Things you could get a major
9:16
break out and oil for example, and that's opposite.
9:17
Extreme example. That just shows how some
9:20
decisions can influence this, but essentially, I do think
9:23
we're in a disinflationary environment, you know, at least
9:26
in the maybe first half of this year.
9:28
I mean, next year like 23, maybe throughout the whole year we are
9:32
would get concerned about another wave of inflation is
9:35
maybe 20, 24, 25, you know, next time when we kind of enter like
9:40
another growth period and that kind of goes back to the FED.
9:45
I do think if you got an inflation drop down to say 4%, I
9:49
think you'd have more questions among fed officials.
9:52
I think some of them were dovish ones.
9:54
We would be in favor of kind of loosening policy, especially if
9:57
economic growth isn't very good, or is it out?
9:59
Recession. Some of the Hawks might still
10:02
stick to it though because for example it seems to be the case
10:05
that Powell has tied his legacy to his ability to get inflation
10:09
back down. And so I think that he might be
10:12
stickier than some of the others.
10:15
But I certainly think that as it gets lower that raises some
10:18
questions but it really comes down to what else is happening,
10:22
right? So 4%, inflation, in the economy
10:25
is very strong, they still justify raising rates more on
10:29
the other. And if it's 4% inflation but
10:31
they're in a, you know, unmistakable recession.
10:35
And you know, they have like, you know, Congress breathing
10:37
down their neck and, you know, just as rising problems or if
10:41
they have some sort of problem at the treasury market, you
10:45
know, due to illiquidity, then that's a different discussion.
10:47
Then they might have to do some sort of, you know, a different
10:51
approach and kind of reject liquidity to the market.
10:55
Despite the fact that inflation above their target.
10:57
I think that the the overall end game You know, kind of later in
11:01
this decade is that they are going to be forced into recorder
11:04
where there's inflation and they're stuck adding liquidity
11:08
to it basically, to finance, kind of, you know, to monetize
11:11
government deficit. So it could be in the form of
11:13
yield curve control depth of monetization.
11:16
Kind of, you know, another round of QE.
11:19
Kind of like what we saw I think is a microcosm of what happened
11:21
in the UK. So they attend percent
11:23
inflation. They were talking about reducing
11:25
their balance sheet and then they have this awkward period
11:27
for a few weeks where they had to, you know, by giving Guilts.
11:30
They had to buy UK Sovereign bonds to build their pension
11:32
system. And I think you could see rounds
11:34
of that in the u.s. maybe not right away, but I think that
11:37
that will be something that happens is, you know, here in
11:40
the 2020s. So you said something
11:42
interesting, which was the that literally Miss.
11:48
Oh there, I literally hide it highlighted, it inflationary
11:52
decade ask is you believe there's going to be an
11:54
inflationary decade last time that happened in the 1970s the
11:58
stock market. Is relatively flat as well.
12:01
Do you believe that is going to happen?
12:04
And and are we does this mean we're finally going to see a
12:08
decoupling? Are we going to finally see
12:10
decoupling from traditional assets, right?
12:12
Because Bitcoin has been highly correlated so far.
12:17
So both in the 40s and the 70s. You had Commodities do better
12:20
than equities, Commodities. Equities were kind of range
12:23
bound as you point out in the 70s, large part.
12:26
That was because, you know, if you had interest rates that are
12:27
double digits, that goes back to my Higher point.
12:30
Where, what is the fair value of equity?
12:32
If you can get 10% on treasuries, you probably have to
12:34
price the equity in such a way that you can get 15% or more
12:37
returns which means paying a very low multiple.
12:40
And so you basically had, you know, nominal growth from
12:43
inflation of earnings and things like that.
12:46
But there was offset by valuation reductions, as you got
12:49
this big flat choppy pattern in the 40s.
12:52
It was different because, you know, due to how high debt was
12:55
government debt, the Federal Reserve did yield curve control,
12:58
so they kept in touch Slow, despite the fact that inflation
13:01
was high and it you still had equities Beaver range bound.
13:06
Now obviously that would there's other factors and investors at
13:09
the pricing like the probability of winning or losing the war,
13:11
for example, and, and the market basically bottomed.
13:15
As soon as United States started making major victories like
13:19
after the Battle of Midway. For example, when they really
13:21
kind of tight turn the tide on Japan.
13:23
And so there are other factors that always make these things
13:25
complicated. But overall, if you have an
13:28
environment with If - roh yields Equus can still probably do
13:33
okay. Whereas if you have high, you
13:36
know, High nominal yields and High real yield that puts a lot
13:38
of downward pressure and equities.
13:40
So overall, my expectation is generally that we won't see
13:44
great performance out of equities over the next decade.
13:47
You know, I think that the prior decade was is Big gain.
13:50
It was, you know, very disinflationary, which was very
13:53
good for corporate profit margins.
13:56
But I think now they can have higher higher, you know, Cyril,
13:59
wage pressures in many cases and I think that's going to just
14:04
challenge overall profit margins and they're likely to, you know,
14:07
face some degree of valuation compression and kind of trend
14:11
sideways, at least in real terms, right?
14:12
So, I mean, if inflation is bad enough, like, if you look at an
14:16
Emerging Market Equity index, you know, they'll be doing great
14:19
in nominal terms, local currency terms, but they'll be doing, you
14:23
know, sideways to down in dollar terms.
14:26
And so, I think you could see something like that view, a
14:28
swear, If you do kind of, by the end of the decade have, you
14:32
know, runaway inflation and some sort of fed, repression and
14:35
yield curve control, you could get a nominal breakout
14:37
inequities but it wouldn't necessarily be a good break out
14:41
in real terms. So I think my higher conviction
14:43
cases, you know, a long period of sideways chop at least in
14:48
real terms and probably for a number of years and nominal
14:51
terms as well. And and as for decoupling yeah I
14:54
think so. Basically inflationary decades
14:56
are very good for Commodities, basically things that are
14:58
scarce. It's, you know, they don't have
15:00
margins. So gold oil copper or silver
15:04
Bitcoin, things like that Bitcoin.
15:08
You know, the challenge there is, it is still perceived as a
15:10
risk on asset in large part because it's not well
15:13
understood. It's not widely held and it's
15:16
often leverage because if it's upside potential and so that
15:19
creates downward explosions. So I think it'll still probably
15:23
be correlated to say the the PMI cycle for quite a while.
15:27
Meaning it's generally going to do better.
15:29
Risk on conditions and were scanned in risk-off conditions,
15:33
but I do think that it can, you know, if decade if equities go
15:37
sideways for that deck and I do think that Bitcoin keep grinding
15:40
higher, even if it's still often correlate on a day-to-day basis,
15:44
you know, more often than not interesting.
15:46
Interesting. So then one of the reasons that
15:50
I invited you on the show is we had this amazing conversations
15:54
amazing, amazing conversation at Pacific Bitcoin and I really
15:58
found it interesting. And it was actually one of the
16:00
tweets when we were at suits from up from a long time ago,
16:03
that, that made, you ask this quiet made me ask you this
16:07
question. Basically, the Tweet said
16:09
something along these lines and paraphrasing here, it says
16:11
Bitcoins peer-to-peer transactions will make it harder
16:14
for governments to tax individuals and that might for
16:17
that might Force to revamp, the taxing collecting mechanism all
16:21
together and it makes complete sense, right?
16:24
And what would that new mechanism look like and another
16:28
component? In to kind of tie this in with
16:31
the recent Bill introduced by Senator Warren.
16:35
And Senator Marshall, which I don't think it has enough votes
16:38
has enough votes to pass, but in that bill, right, you know, the
16:42
justification for that bill is, you know, to stop money.
16:45
Laundering, Etc. So, how does that play out?
16:48
I feel like that's going to cause a lot of commotion.
16:52
Well, okay, so the bill question that and then the other.
16:54
So, the first question was it kind of a long-range approach?
16:58
Like, let's say we move. Multiple Solutions Bitcoin very
17:00
successful Bitcoin becomes very widespread Bitcoin becomes more
17:04
private due to various layers and things like that, they could
17:07
thicken, you know, do that. Then that percentage challenge
17:10
of the government because it makes it harder to generate
17:12
income from seigniorage and also makes trouble, you know,
17:15
determining what people's income is or what their wealth is and
17:18
things like that and you kind of have to go back to know the
17:22
1800's or earlier that kind of era to see how they handle, that
17:26
kind of situation. Because, you know, a lot of
17:27
transactions were just It bear asset transactions, you give
17:30
someone a silver coin. You get your bread right or even
17:34
if you're just handling Bank notes that are, you know,
17:37
redeemable for those those metals and so that that creates
17:40
a problem and that's why you didn't really see a lot of
17:43
income taxes formalized back then.
17:45
It's just the administrative overhead was complex, and the
17:49
ability to hide things was very easy and so instead you put
17:53
taxes on, you always have to put tax on things that you have a
17:56
very high degree of transparency.
17:59
Aaron C into and so that would be things like property, right
18:02
properties? Very transparent physical
18:03
property. You could also, you know, tax
18:06
big things at the point of entry.
18:08
So, you know, import taxes, export taxes, you can also tax
18:12
retail establishments basically businesses, you know, that that
18:15
have a presence in the end, you know, you know, they have a
18:19
formal accounting and so it's easy to look into their books,
18:23
you can it you can attack certain things that like alcohol
18:27
or tobacco, or things like That. And so, that's how government
18:32
used to get a lot of their tax revenue, but in this era of Fiat
18:37
Banking and more transparency of incomes.
18:39
You've had, you know, now, in most countries, the income tax
18:43
is often the biggest line item where they get, especially when
18:46
you add income tax with say, payroll taxes, all the different
18:50
types of income taxes together that are tied to income uses.
18:53
The vast majority of Taxation and it is harder to maintain
18:56
that if you had overall better privacy as A widespread usage.
19:00
But that's I think that's something that we don't see this
19:02
decade. I think that's something that if
19:04
you look at the long Arc of time, that's something that we
19:06
have to consider, you know, with the rise of just, you know,
19:10
encryption and money, right? So if you have Bitcoin and
19:13
especially if you have lightning or, you know, just various ways
19:18
to make that naturally more transparent and if those are
19:22
widely done, it just changes how the government has to get
19:24
Revenue. Just had a necessity and then as
19:28
for this No, I mean right now it is clear that you know
19:31
governments don't like privacy. They use the rapid in terms of
19:38
either drug trade or terrorist financing and of course on the
19:41
margins those are problems that law enforcement should be
19:44
looking into but the problem is where they say okay?
19:47
Because these things exist, the margins nobody's entitled to
19:50
privacy anymore. That's that's where they would
19:52
get pushed back and that's where there's these debates where, you
19:56
know, some people say it, we have to stamp About a hundred
19:59
percent of x y z and therefore all citizens have to give up
20:02
certain rights of expectation of privacy, obviously I would take
20:05
a different approach. I would argue the other side, it
20:07
says no no. Like you know, go after people
20:10
that commit a crime but we don't we're not going to go back and
20:14
call back privacy and rights for all people to catch.
20:18
You know, the 1% of people that are that are, you know, using
20:21
that privacy in a very deleterious way.
20:24
And so I do think that's going to be a big Battle Ground.
20:27
Kind of for the foreseeable future, the next decade or so.
20:30
Right? So I mean most governments are
20:31
not threatened by you holding Bitcoin in some sort of
20:35
custodial environment that they can easily just, you know,
20:37
control and surveil. But the idea of self custody
20:41
money using privacy techniques and moving around that
20:45
threatens, their revenue model. And then, you know, they'll
20:49
often phrases terrorists concerns and Drug concerns and
20:52
things like that. Which I think some of them are,
20:54
you know, say legitimately concerned about.
20:56
But I think that Overall, it just kind of threatens their
20:59
General ability for seigniorage and transparent, taxation.
21:04
And let's talk about that, right?
21:05
The, the senior is the senior is aspects, right?
21:09
And we know that how it currently how it currently
21:11
works, right? The government's get away with
21:14
this tremendous amount of deficit spending.
21:17
If a large portion, if enough, a portion of the population Ops
21:23
out into Bitcoin adopts, a Bitcoin standard, will they be
21:27
able to maintain that privilege? Keep that privilege being able
21:32
to Print money for free, for themselves that everybody else
21:37
has to work for. Or does that with his that
21:39
change people adopting a Bitcoin standard does that affect their
21:43
ability to do that? Well, so again, if you had
21:47
extremely, widespread usage of it then.
21:49
Yes. I think that would reduce it.
21:50
Essentially what I what I'd argue is that in addition to
21:54
shrinking parts of it. It would make it more honest.
21:56
Essentially, hold on, sorry, to interrupt you.
21:59
I just, I need to understand and I want my viewers to understand
22:02
as well. How would it reduce it?
22:04
How would, how would a enough usage of Bitcoin enough
22:07
individuals adopting Bitcoin, how would it reduce their
22:11
ability to do that? Essentially by forcing them to
22:15
be more transparent and I'll go explain why.
22:18
So for example, if everybody holds cash and the government
22:23
runs a deficit which most governments do most years, they
22:26
run some degree of a deficit and what happens is they essentially
22:30
print the difference where that you know they have their Central
22:32
Bank print the difference. And so what they're doing is
22:34
they're they're contributing to the growth of money supply in
22:39
the broad sense. And, you know, in addition to
22:42
bank lending being a big driver of overall nominal money supply
22:47
growth and what that does is it says, okay.
22:49
Everybody's paying, you know, XYZ tax, it was, let's say what
22:53
he's paying a 20 percent income tax, you know, here's the
22:55
government revenue, here's the government expenses, the
22:59
government's expenses exceed that.
23:01
And so instead, you're paying A hidden tax because your cash
23:05
Holdings are getting diluted it. Most people are not you, they
23:09
might vaguely be aware of it but they don't know how to measure
23:11
that necessarily. The what does that mean?
23:13
What what is the equivalent tax rate of that level of inflation
23:17
happening and not just inflation relative to 0, but inflation
23:22
relative to deflation, right? Because, you know, if you had a,
23:26
you know, like back in the 1800's United States, for
23:28
example, deflation was the norm Which which you'd expect to be
23:32
the case, it kind of like how in modern terms TVs get cheaper
23:35
most years you know phones get you know either stay the same or
23:39
get cheaper but either way they're getting cheaper per unit
23:42
of quality, right? So, you know, even if it's a
23:45
thousand dollar TV today is the equipment like a ten thousand
23:48
dollar TV from like five ten years ago and if you get like a
23:52
kind of almost like an apples-to-apples TV, it's way
23:54
cheaper today, that's technology.
23:57
Deflation in many cases. Same thing.
23:59
Like if you measure ER, the price of wheat in gold is
24:04
generally trended down over the past Century because we have
24:07
better technology for say harvesting wheat, whether it's
24:10
health is another matter but we can, we can get more calories
24:13
out of the ground per gold equivalent because we have
24:16
better technology to do it. And so, actually, the Baseline,
24:19
we should be measuring inflation.
24:20
From is generally some low negative number, which changes
24:24
based on productivity growth over time.
24:27
And so, you know, you're saving should be going up by maybe one
24:30
or two. Then per year, in terms of their
24:32
buying power on average roughly speaking but instead if they're
24:36
going down by 5% or 7% a year you know, for buying high
24:43
quality scarce Goods, like high-quality real estate, and
24:45
things like that, then you're essentially being diluted in a
24:49
way that's hard for you to measure.
24:51
And and the, the other side of that dilution is the government
24:55
and the way that I've framed it before, is that, you know, in a
24:59
more on a system. To some extent.
25:02
We need a smaller government but it would also mean a more
25:04
transparent government in a sense that to the extent that
25:06
they want to pay for something. They have to tack something
25:09
like, let's say the United States wanted to invade Iraq.
25:11
You know, they did 20 years ago and he pull people and you say,
25:15
you know, should we do it? There was like, yeah, go get
25:17
them. And it's okay, well, we're gonna
25:19
have to do a, you know, 5% income war tax.
25:22
They still in favor of it will suddenly like, you know, some
25:25
percentage of those hands are going to go down, right people
25:27
who have to pay for this know but it's like, of course we had
25:30
to pay for it. So I'm gonna have to For it
25:31
wasn't free. And it was it was paid through
25:34
higher debt, and currency dilution.
25:37
And so, in a harder money environment where people are
25:39
taking their, you know, if enough people take their money
25:42
out of Banks and out of that currency in general out of, you
25:45
know, assets, nominee that currency, whether it's Banks,
25:47
whether it's, whether it's t-bills, things like that.
25:51
And if they're hoarding Bitcoin or gold, or whatever the case
25:53
may be or, you know, for talk about another country and
25:56
they're there, instead hoarding dollars, for example, they're
25:58
not holding their, you know, I don't know.
26:01
Indian rupees and they're said, holding dollars, whatever
26:03
they're not holding. That's basically it allows that
26:07
currency to depreciate faster which kind of pressures the
26:10
government ability to kind of keep printing at the rate, they
26:13
have been. And so that's kind of how that
26:15
plays out long term in the sense that if, if this network is
26:20
successful and if it's more widely held and if people
26:22
didn't, we prefer that over holding cash, it does constrain
26:26
government's ability to do things that specifically things
26:29
that are not popular among the public.
26:31
So, if something, still popular, let's say you have a country
26:34
like Sweden and they want, you know, certain types of health
26:38
care, right? And, and say, 80% of the want
26:40
it, the government can still do that because there's a, okay,
26:43
we're Evans going to pay this tax and we're going to get this
26:46
benefit. And if swedes are happy with
26:48
that, then it works. The things that don't work, are
26:51
things that when you pull people and say, would you pay a tax for
26:54
this, if they have trouble comfortably getting over,
26:57
maintaining 50%, those are the types of programs.
27:01
In that country that are unlikely to survive in that kind
27:04
of harder money, more transparent honest environment
27:07
understood. So one of the things and I want
27:11
to ask you, you said, if the network is successful, what
27:16
things keep you up at night, what are the things about
27:19
Bitcoin? What are the things about the
27:21
Bitcoin Network that potentially worry?
27:23
You is it's a failure of a potential you know introduction.
27:28
I mean that'd be so hard to do with how You know, the nodes are
27:32
really the central, the centralization of it.
27:35
But what are the things that maybe we don't foresee?
27:41
Do you think it's a nation-state attack?
27:45
Do you think it's the centralization of minors?
27:49
Because you did say, if the network is successful, I tried
27:53
to think of, in terms of inevitabilities because I think
27:55
that leads to complacency. And so, I always I always frame
27:59
things in terms of risk so that the risks that I've outlined
28:02
before and I can, I can share here essentially, our one would
28:05
be some sort of bug introduced to the code that, you know,
28:09
cause the problem now that's not necessarily unrecoverable.
28:11
It's happened in the past and they've been bugs before that
28:15
have not been exploited, like they were kind of fixed.
28:18
And then it became more understood that they existed and
28:22
so, but they can, they can lead to, you know, unintended change
28:25
splits, they can lead to loss in confidence in the, you know,
28:28
kind of the immutability of the protocol.
28:29
If they were to be big enough and catastrophic enough and hard
28:32
enough to fix, basically, you know, if if enough nodes upgrade
28:36
just upgrade to something kind of all point of running a note
28:39
is that yourself Sovereign but of course, most people don't
28:42
comb through every line of code and confirmed is no bugs.
28:45
Even if your professional you can still miss, you know, even
28:48
even Facials, you do, do that for a living can miss issues and
28:51
so if they're that forced to update to something to fix a
28:53
critical bug, they're essentially kind of losing some
28:57
degree of their self sovereignty.
28:58
So I think that the the instance of kind of the severity and
29:02
frequency of bugs can be a problem or you know some sort of
29:05
degradation that happens over time, you know, if there's kind
29:09
of like you know problems with updates that are discovered like
29:14
years later that this kind of already soaked into the network.
29:17
Those I think are or something to kind of keep in mind for a
29:19
tail risk. Minor centralization is a I
29:23
think a partial risk, right? Is something I would like to see
29:26
more and more decentralisation of mining.
29:29
I would, I'd prefer not to see, you know, over one country or
29:32
one kind of Alliance of countries have over 50% of hash
29:35
rate, but that's at least a recoverable risk, right?
29:40
So, if the, if the network does get censored then, there should
29:43
be fee incentives to entice minors to spin up another
29:47
jurisdictions. Too kind of unsent to that
29:49
Network and so I think over time that's not a risk I'm super
29:53
concerned about unless the Bitcoin Network just kind of
29:57
stagnates in terms of users and transaction volumes which is not
30:02
my base case, I think another risk is if the United States
30:08
were to ban Banks from connecting to crypto exchanges
30:12
or Bitcoin Brokers or just, you know, all the different field on
30:16
ramps. If they were to be shut off the
30:17
United States and other kind. Western Nations, you know, kind
30:20
of like what's a Nigeria is done.
30:23
And I think that's again, it's a survivable thing.
30:26
But I mean that'd be like a nuclear winter for I think price
30:29
for a period of time because you know inflows become instead of a
30:34
flood of inflows, you can get a trickle of and flows through,
30:37
you know, kind of peer-to-peer methods.
30:38
Like, again, they use the Nigeria, the, the caveat with
30:43
that is that if they were to do that, then probably something
30:45
really bad's happening, right? I mean it, you know, No, it's
30:49
almost like a signal that you know, if they don't want you to
30:51
own it you probably should own it.
30:53
Most of the countries that in a Banning Bitcoin or reducing,
30:57
their bank's ability to, you know, kind of let you flow into,
31:01
you know, Bitcoin Brokers or crypto exchanges and, and kind
31:04
of freely trade uses because their courage is not very
31:08
strong. And so those are the major kind
31:11
of risks. I think about essentially bugs.
31:14
Some degree of mining centralization which in which
31:18
can include, you know, supply chain centralization and I want
31:21
to see more diversification in terms of the production of
31:24
minors, as well as the operators of minors.
31:28
And I do think we still are have a window here of nation state
31:32
attacks. That can at least make the lives
31:35
of bitcoiners. A lot more difficult and damage
31:37
the Fiat price for a long period of time.
31:40
Because part of what makes Bitcoin attractive is that it
31:42
goes up, you know, even if it doesn't go up, Every year does
31:45
grind up over time. And if you the longer you have
31:48
periods of stagnant price, the more people can lose interest
31:51
and that can that can very much slow down adoption.
31:54
Yeah. And what you said about in
31:57
Nigeria's fascinating and deny, the Nigeria case is really
32:01
interesting to me Lynn because you know you had this Infamous
32:04
report by the United Nations. Basically making the case, we
32:07
must stop Bitcoin, adoption and developing countries.
32:11
It's a threat to monetary saw sovereignty.
32:13
They It's Central Bank, digital currencies of which I'd really
32:17
launched its called. The it's called the E.
32:19
Naira. The adoption of the NRA though
32:22
is like, point five percent of the population compared that to
32:25
bitcoin and other cryptocurrencies, it up to, I
32:29
think it was up last time. Last metric I saw, it's up to
32:32
35% of the youth population. Even after the crackdowns, and
32:38
then why that happened? The reason is because a central
32:42
bank, digital currency doesn't solve.
32:44
Of the reason as to why people are opting out in the first
32:47
place which is inflation and censorship.
32:51
So and it's interesting because you see this in the countries
32:57
that are trying to stem the flow, the most which is
33:01
country's High inflation. Governments don't want their
33:03
citizens. You know.
33:05
Running out with us. Lebanon.
33:06
Turkey Argentina. But people still kind of find a
33:10
way out of necessity. What worries me is that in the
33:14
west that incentive isn't there? People are complacent, people
33:18
are very happy with the financial rails, but I do see
33:21
that incentive in developing countries.
33:24
And that makes me at least more optimistic about the adoption of
33:28
Bitcoin happening on a much quicker.
33:31
Much quicker Pace. Yeah, I think I think Global
33:34
options where it comes from for the most part.
33:37
I think that's the That's the optimistic, take, right.
33:39
That, that, basically, they were the way I would phrase it is
33:42
that there's 180 currencies there.
33:44
Probably shouldn't be. I mean, that's, that's, that's
33:46
almost a barter system. I mean, I think that that's
33:48
evidence of how bad the current Financial system.
33:50
Is the fact that you have this kind of 180 different local
33:54
monopolies. The vast majority of those
33:56
currencies are not saleable outside of their legal
33:58
enforcement. I plea.
33:59
I mean, I ended in the desk drawer.
34:00
Next, to me, I have some Egyptian pounds, I have some
34:02
Norwegian kroner even though the even though the Crone is a
34:05
pretty strong currency, if I try to use it around Here.
34:08
Yeah, there you go. It just does not accept it
34:10
right. It did.
34:11
It's actually really hard to get rid of it and, you know, other
34:15
than the dollar maybe the Euro this was Frank a couple others
34:17
just, you know, it's just there's not that many saleable
34:20
monies and the way that I've described that before is that,
34:24
you know, for thousands of years Commerce and money mood with the
34:28
same spin speed which was foot horses, ships, things like that,
34:33
even when you had banking systems, you know, those Bank
34:36
notes and those Ledger's Only move again at the speed of
34:40
people at the speed that the people could move, right?
34:42
But once we invented telecommunication systems in the
34:44
1800s and lay those undersea cables in the second half of the
34:48
1800s, we now could update Global Ledger's around the world
34:53
and but we can't move the base, you know, we can't move gold
34:55
that quickly, write it. So that this asset ated
34:58
abstraction centralization and allowed all this
35:02
financialization and games to recur.
35:05
And gold was never, you know, kind of good enough to be a
35:08
alternative because it can't move around that quickly without
35:10
abstracting it. And when you can abstract it,
35:12
then it gives the abstractor. The ability to sever that Peg
35:17
basically to drop that abstraction.
35:19
And so with, you know, with, with satoshi's invention, for
35:22
the first time since the invention of telecommunication
35:26
systems and 1800's it reinvented the the, you know, basically
35:31
added up the speed of Commerce and the speed of money again,
35:34
right? So, it's we're kind of back in
35:36
the environment where they move it the same, B.
35:38
It is just that money caught up to the speed of Commerce and and
35:42
so I think it's going to take time to explore what that means.
35:45
But one of the things that means is that there's really no longer
35:48
a reason to have 180 different little local Monopoly
35:52
currencies, you know, back in the gold era, you know, gold
35:55
silverware money, right? And and you know it's like not
35:58
like you know these countries have their own completely free
36:00
floating monies. You know they might have stamped
36:03
the money differently sometimes would be Banking and and you
36:07
know kind of representation Nations of money.
36:08
But essentially you had, you know, a few, a handful of
36:11
different Global monies or at least, you know, all of the
36:14
Fairly Advanced civilizations. And we've kind of degraded from
36:18
that in a way. Just because of the, the order
36:21
that technology develops, I mean, this is kind of no other
36:23
way that it can develop. I mean, telecommunication
36:25
systems are going to happen before something like Bitcoin
36:27
happens. You know, if you survey 100
36:30
alien civilizations, you know they're going to get
36:32
telecommunications before they get, you know this like a
36:34
beautiful Block Chain is getting past dependence.
36:38
So it's going to be this awkward period, where you know, signals
36:41
and commerce can move faster than money, but now they're
36:45
trying to fight back. So these local monopolies,
36:48
they've grown accustomed to the century and a half of having
36:51
this environment, that they kind of affords, government's, the
36:55
ability to be the sole issue of money and now that there's an
36:58
alternative, it just kind of, it's a challenge, right?
37:01
It's like if you're an auto, if you're a horse, you know, if
37:04
you're in the horse industry and then someone invent the
37:06
automobile, that's a challenge. JH.
37:08
And if you're in the business of trying to your a government and
37:12
your kind of uniquely capable of solving that mismatch, you're
37:16
able to get the Monopoly on money issuance and now there's a
37:19
way that doesn't need you that money can now move as fast as
37:22
Commerce and kind of overtime takes away your senior Edge or
37:27
threatens. It starting with the periphery
37:28
currency, starting with the weakest currencies, the smallest
37:31
currencies, you know, it doesn't start with the dollar or the
37:34
pound, or the Euro, or the Yen. It starts with, you know, the
37:38
That the currency. You can't even pronounce right.
37:40
It starts with one of those and threatens that one and then it
37:44
kind of moves up the chain and so it's natural that government
37:47
to trying to push back there saying, okay, here's the Central
37:49
Bank, digital currency, we're going to restrict cash, we're
37:51
going to do x y z, but I view it as kind of a flailing defense of
37:56
something that it's time. Has I would say come to pass now
38:01
in this early period, Bitcoin still super volatile.
38:04
So there still is a use case for things like dollars and the
38:07
dollar stable core. Coins and things like that, but
38:09
if you do get to a point where a Bitcoin is ten times bigger, 20
38:12
times bigger less volatile more widely held more ossified and
38:18
understood among the, you know, the general world that
38:21
increasingly your. It's like, who would want to not
38:24
hold that and instead want to hold some local less saleable,
38:29
you know, Monopoly money sexually and and it I completely
38:34
agree. And their their last gasp is The
38:38
Central Bank, digital currencies, right.
38:40
And the way the way that I see it is they really have coercion.
38:45
That's all they have. They can't match Bitcoins
38:48
incentives, but you can't doesn't mean they're not going
38:52
to try that. That Lawrence Lepard calls it
38:56
privilege. You called it seigniorage, but,
38:58
yeah, they want to hold on to that that, that special ability.
39:03
Let me ask you something. Because you said something
39:06
really interesting about About how, you know, if alien
39:09
civilizations, they're going to find their, they're going to.
39:12
They're going to, they're going to discover things first.
39:16
Do you believe that Bitcoin was discovered or invented?
39:22
So I think digital scarcity was a discovery.
39:25
I think basically using this type of technology is a
39:29
discovery. You know, like if you if you
39:32
surveyed 100 alien civilizations, they'd all
39:35
eventually discover electricity if they get too far enough
39:37
stage, You know, they might not get to that stage, but if they
39:40
do get Advanced enough, they will eventually discover
39:43
electricity could be different ways.
39:45
It slightly different orders, but they'll get there and I
39:47
think that, you know, the idea of digital scarcity is a
39:53
discovery. Once you have a, you know, you
39:57
know, Global or national network of computers and and basically,
40:00
all this, you know, fast-moving information, there's now a way
40:04
to, you know, have digital scarcity.
40:06
I think that would, that would be read.
40:07
Discovered in multiple contexts, the part that's an invention is
40:11
that things? That could have been different,
40:13
right? So it didn't have to be 21
40:15
million Bitcoins. It could have been 42 million
40:18
Bitcoin, right? It could be block times could
40:20
have been 15 minutes or seven minutes instead of ten minutes.
40:24
The the initial block size limit, could have been a half a
40:27
megabyte. It could have been four
40:29
megabytes, you know. I think he picked his variables
40:32
very carefully but you can imagine other, you know, the
40:34
chance that another alien civilization has that they get
40:37
here and they Also pick 21 million as their cap and they
40:39
also have, you know, one megabyte block size is that's
40:43
that's the best apart that. It's an invention that that's
40:45
the part that could be different.
40:47
So I would say that Bitcoin is both a discovery in an invention
40:50
because he discovered the core thing that makes it work.
40:54
And then he implemented it in the form of an invention and
40:59
that Discovery could only be made once, right?
41:02
Because every every Iteration every copy of Bitcoin.
41:07
After the fact was made after it was already discovered that this
41:12
type of Technology could potentially have value.
41:15
Therefore, its tainted right? The Bitcoin had this virgin
41:19
birth. So to speak.
41:22
Do you believe that for the most part I think?
41:25
Because once it's discovered, I mean, part of why I got so
41:28
widely distributed is because people didn't know it was going
41:30
to have this much value and the part I would somewhat Disagree
41:35
with is that you. So you can imagine a world where
41:38
Satoshi was a smart as he was, but he was like a scammer,
41:41
right? So the Satoshi, as we understand
41:43
from his writings and his actions is both intelligent and
41:47
ethical and almost like Professor like if you read the
41:50
white paper it looks like an academic paper.
41:52
He's not like a hype man, you can imagine someone who figures
41:56
out all the pieces but then he, you know, pre mines coins or he
42:02
he you know, decides to Our gigantic blocks or, you know,
42:07
starts with like tiny, tiny blocks that make no sense or
42:10
basically. He gets a variable wrong like he
42:14
gets 90% of the way there and they needed to something
42:16
ethically or technically, it's bad enough that it's just, it
42:20
doesn't really boostrap or starts to bootstrap and
42:22
stagnates and someone says, hey, I fixed this one thing and maybe
42:27
it's a second or third cryptocurrency and that's the
42:29
one that actually takes off, you know, kind of like how Facebook
42:33
Eclipse Myspace. Now this was a pretty T.
42:35
You know, people often talk about Bitcoin being eclipsed by
42:38
mean when you talk about say Facebook eclipsing Myspace, it
42:40
happened in a very early period in there their life cycle right
42:45
at a pretty small level, right? So especially in those first
42:48
couple years, it's not that hard to imagine that it could have
42:51
been not the first one that that became the biggest in my
42:55
opinion, when it's when the, the early variables are being
42:58
figured out when it wasn't clear that any of these are going to
43:02
be valuable yet, right? I think there's that pure You
43:05
could have Eclipse did it but I think that once you establish a
43:08
network effect and your you have reasonable variables and it's
43:12
workable and decentralized. I think that's the point where
43:15
you've essentially, you know, you kind of hit escape velocity
43:18
that, it very hard to have that be displaced and then it
43:22
becomes, you know of a better more liquid more hard money
43:27
that's crowding out all of these kind of weaker attempts that
43:30
either are not really decentralized or just will never
43:33
get the liquidity. And things like that.
43:38
Fascinating. So Lynn.
43:41
I want to take advantage of the fact that we got about roughly
43:44
14 minutes. Left is inflation necessary or a
43:51
healthy economy. Yes, this question and holy cow.
43:56
Do people have very strong opinions about it?
44:00
Well, I would say no, I mean, I think if you asked, if you
44:03
rephrase that question, is, does your currency have to be
44:06
constantly diluted it? Refer economy to function
44:09
properly, you know, I think you'd get people would be like,
44:12
well, why why does it have to happen?
44:14
I mean, if you look back at the 1800's in the United States, for
44:17
example, you had a booming economy.
44:19
I mean, that that's where a lot of technological inventions were
44:21
developed you. Cut colonize the whole continent
44:25
and you're doing it with, you know, a dollar gold back dollar
44:28
and you know, gold back independent you know, Bank notes
44:32
and things like that. Essentially the combination of
44:34
account was gold and you had Stable prices, you know, they
44:39
fluctuated sometimes up, sometimes Down based on what was
44:42
happening with supply and demand and you had a lot of growth
44:46
without inflation. I think the only time where
44:51
inflation becomes almost necessary is when it's already
44:55
bad enough that that that's the context of people think of it,
45:00
right? So they go, they go towards a
45:02
fully Fiat system that's inflationary it builds up a ton
45:05
of debt because that's what happens, you know?
45:07
If The currency dilute, there's an incentive to take out
45:10
leverage in that currency, you're essentially shorting that
45:12
currency to buy other things. So you build up all this debt,
45:15
if you then decide to be okay, we're going to be an ultra
45:18
deflationary hard hard money system will all the debts are
45:21
going to implode, right? And that's a process that has to
45:24
go through then converting from an inflationary system to a, you
45:28
know, hard money system. So when economists say that, you
45:31
know, things would implode without inflation, what they're
45:34
really referring to is the current system, the current
45:36
system, you know, At, you know, this level of debt to GDP would
45:42
implode in a harder money system.
45:45
But it's something, it's kind of like, ripping the Band-Aid off,
45:47
or, you know, something like that.
45:49
Where it, if a better technology presents itself and solidifies
45:53
and kind of assert itself as inevitable, then it's just, it's
45:57
meant to be. It's meant to happen.
46:00
And so, and who would be the losers if that Band-Aid did get
46:06
ripped off so to speak. Eek and the argument, right?
46:10
The Kenzie and argument is, you have to incentivize people to
46:14
spend, what would be your response to that well.
46:19
So I think governments would be losers, especially ones that are
46:24
just not in line with what people want.
46:26
So I think warhawks, for example, know, people always
46:28
want to go to war and things like that would be kind of first
46:31
in line to be, you know, disenfranchised under that
46:34
system. I think banks obviously, like,
46:37
you know, right now like asset managers people that do
46:40
leveraged buyouts basically, think people that don't really
46:43
build income streams. But that, you know, just either
46:46
take existing income streams and live with them up, or, you know,
46:51
people that just rent seek on the system without providing a
46:54
lot of value. Basically, this overall layer of
46:56
financialization would be much reduced in that environment.
46:59
There still would be a importance of financial
47:01
services, but that would just be a smaller percentage of global
47:04
economy. Those would be the losers.
47:08
What was it? What was the other question you
47:09
asked? Oh the Keynes Ian?
47:12
Yeah. The the kids in response would
47:14
be you, you need inflation in order to incentivize people to
47:18
spend in the economy. Yeah I mean think it's well one
47:21
is obviously falsifiable with modern technology, right?
47:23
So if that was the case, I would not have bought a TV for the
47:26
past 20 years. I would just say I'm waiting for
47:28
the day where a TV stop going down in price.
47:32
Of course, you know, if I want to TV now I'm like, you know, if
47:35
I If I was like a, you know, 18, I want a TV, I wouldn't wait
47:38
till I'm 38 to get a TV just because it's a deflationary
47:42
asset. So, I mean, people people
47:44
readily upgrade their phones, they readily buy new computers.
47:48
Even though these things, especially on a per quality
47:50
basis are getting cheaper over time.
47:53
And that shows that I mean, you know, people have a time value
47:56
of their expenses. They don't they don't delay
47:58
purchases and definitely just because you know, that that
48:04
purchase will be more effective. The future because we do want it
48:08
now, especially if it's important, you know, we might
48:10
DeLay. So I think in a harder money
48:13
system, you would, you would take out some of the more
48:15
frivolous purchases. I think people would take money
48:19
more seriously. And so, I think, in some ways,
48:23
you know, in terms of the way they choose to measure GDP it
48:26
could be a little lower. But I think quality of life, in
48:30
many cases would be higher, right?
48:31
I think would just, I think would reshape some purchases.
48:35
But I think the idea that you need to keep people on a
48:37
constant treadmill of consumption by constantly
48:40
diluting their savings when you phrase like that it's Madness,
48:43
right? And so, obviously, I disagree
48:46
with with Economist, that would assert that and instead I would
48:49
say that I do think people should ideally have access to
48:52
Builder to save money and that there it's good to save and that
48:58
people, you know, people know when they want to buy something,
49:00
right? If they they opted, there's a
49:02
lot of things you just have to buy.
49:03
You have to buy food, you have to buy shelter, you have to By
49:05
Transportation, you have to buy clothes, you have to buy, you
49:10
know, electronic equipment, things like that, to do your
49:12
job. And then, you know, everybody
49:15
has to buy some entertainment, some of the time, some people
49:18
are, you know, basically you're entertaining yourself somehow
49:23
and when people really want something, they get it, no one,
49:26
no one, no one is like you know, short on things that they'd like
49:31
to own for the most part and it just becomes you You know, what
49:35
do they prioritize? And so I think the economists
49:39
are kind of delusional when they think that people have to be
49:41
incentivized with like you know, constant basically like a rat on
49:46
a hamster wheel to keep buying. Yeah.
49:50
And so but why is it such? Like it's so green.
49:54
It's so ingrained into the mainstream acceptable thought,
50:01
right? Whether it's the Main tower
50:06
called Legacy Media. Really the Legacy mainstream
50:08
media Publications. Whether it's populations, right?
50:12
It's almost as if somehow they ended in this magical two to
50:17
three percent number. Is it even possible to get the
50:25
these ideas that we're discussing into the mainstream?
50:29
Because I think you'll like it it's it's so entrenched or is it
50:34
the type of thing where It's just going to happen because of
50:40
the nature of Bitcoin. Well, so the two percent number
50:44
was arbitrary. It started in New Zealand, then
50:46
it spread from there. I mean, it's just an arbitrary
50:49
number. Now at the fun is kind of like,
50:52
thought experiment that I've seen is that it's kind of
50:54
indirectly based on gold. So, if you look at gold over the
50:56
past Century, the estimate is Supply.
50:58
Growth was one point five percent per year in a pretty
51:01
tight band between 1 and 2% per year.
51:04
There's a really good neidig chart that shows that that I've
51:08
The number of times and so 2% is kind of like this.
51:12
It's almost like a like a gold proxy attempt but what they miss
51:19
is the fact that again you're measuring from a negative
51:21
number, right? Because productivity is
51:23
generally positive over time. And so, you know, basically
51:28
money supply growth is not the same as inflation growth.
51:31
So the average fiat currency is inflating by.
51:34
I think, safety is book, slated 14% on a weighted average.
51:38
If you look at the United States has been around 7% or 8% on
51:41
average decade out, you know, over over many decades, many
51:45
other developed countries are similar when you get into
51:47
Emerging Markets, developing countries.
51:48
Those are those are generally higher numbers in the past, two
51:51
decades, lowest have been Japan, something like three percent on
51:55
average per year in terms of broad money and so a lot of that
52:01
just ingrained. But again, it's based on the
52:03
current system, I think a lot of this is we've had a century and
52:06
a half, going back to my prior point.
52:08
Of Commerce, moving faster than money.
52:11
And so there's this kind of structural period where all
52:16
these Norms get developed and that's that's what we're used to
52:20
and once you build up very high debt levels based on that how
52:23
that system works, you know, it becomes somewhat self
52:26
reinforcing because if you don't have constant growth constant
52:30
inflation those debt levels quickly become untenable, right?
52:34
So it feeds on itself and I think you'd have to have a Clear
52:37
Vision. Vision of another system and
52:39
that system start to just assert itself whether people like it or
52:42
not, just the incentives are aligned people that use that
52:45
system get rewarded over time versus those that don't.
52:48
And if that's if that's a powerful and hard enough and
52:51
Unstoppable and a force and it just kind of takes over that
52:54
eventually realize what people thought I mean, if you if you
52:57
teleport yourself back to the 1800s and you said, you know,
53:01
you know and then if we just going to take away our gold and
53:04
we're going to give you papers and you're going to trade that
53:06
we're not going to back those papers up.
53:08
Thing. Right?
53:08
Because you never is like, back in the time how to do it in
53:10
steps. It's okay, you've gold well.
53:13
Now if you put your gold in the bank and you get a bank know,
53:15
you can always get your gold back, right.
53:18
And then later you say, okay, now it's worth less gold but
53:20
it's still worth something. And then you say, okay now it's
53:23
not worth any gold, it's always in steps and so that the Overton
53:27
window or like the, you know, the consumer what they normally
53:31
think about money, if they're not thinking about it very
53:33
closely changes based on what's happening at the time.
53:36
And so, I think over time you can go You can go back you can
53:39
you can kind of you know it'll be like Steps up like you know
53:42
it would be it would be weird to look back and be like a when
53:45
there's like 180 currencies and most of them were like utterly
53:48
terrible. And like there's Pate they just
53:50
paper and like we were all using like these like individual small
53:54
like actively manage, Ledger's, that that were opaque and like
53:58
it basically, it's like things that seem normal.
54:00
Now can go away and look funny in the future, but it's not
54:05
something that snaps overnight. I mean it's something that You
54:08
know, you get accustomed to over time as it adds, it just becomes
54:11
more commonplace and only people that are kind of really thinking
54:14
about it or that any industry. Like they either their kind of
54:19
force to think about it, or they just their, their nature, makes
54:22
them think about these things more.
54:24
They can maybe identify and think of it as normal earlier.
54:27
Whereas other people just have to experience it and grow up in
54:30
it and just, it just becomes normal.
54:34
Very interesting soul in. I want to take advantage of our
54:38
last for 4. Last four minutes to ask you
54:42
this? A lot of people had expectations
54:45
for the last cycle, Bitcoin was meant to hit 100K.
54:51
I think that there is a lot of variables that a lot of people
54:54
Miss. For example, the CCP Banning
54:57
Bitcoin mining literally in the run-up.
54:59
Right. I think I took a lot of momentum
55:01
out of it. The pressure by the miners to
55:04
dump a lot of their coins to fund, basically the relocation
55:07
of the Asics. And then, you know, we the think
55:12
the last cycle was 69 top and then, you know, this very famous
55:16
very predominant people expecting Bitcoin to hate.
55:21
I think it was, I think it's either half a million dollars or
55:24
a million dollars by 2030. I don't want to get this part it
55:27
into price speculation because that's not what we do on this
55:30
channel. But what were your, what were
55:34
your expectations last cycle? Why do you think we, why do you
55:38
think we were let down and what are your expectations moving
55:43
forward? Is this, are we witnessing
55:46
diminishing returns is this? What's happening to bitcoin?
55:49
So my expectation changed a little bit over the course of
55:52
the cycle. So if you read my June 2020
55:56
piece for example, I put 30 to 50 k as kind of a base case, I
56:01
tend to be kind of conservative. And so I was basically saying,
56:03
look, look prior Cycles were huge.
56:06
They've got a little smaller each time.
56:08
And I think I even, like cited the stock to flow and I'm like,
56:11
they're looking for this, but I wouldn't trust these numbers.
56:15
I, you know, I like the charts back then I like the fact that,
56:17
you know, you put the log chart and the do having Cycles.
56:21
Like when I when I first saw stock to flow ratio, I kind of
56:23
immediately disregarded the number but actually found that
56:26
the visual helpful for understanding it.
56:28
So I found it like a stepping stone to be to be like a insight
56:32
and I just scarred the number and I had something like 30 to
56:35
50 k is kind of my just Baseline expectation.
56:38
Once we got pretty high I said okay.
56:41
Well now the now the probability is higher and you know when
56:44
people were asking in interviews I said I mean I expect probably
56:47
we're going to see 100K the cycle and so you know, pick one
56:51
and falling short of that, you know, is probably not my base
56:56
case that we would say, pick out a 69 and fall back into the
56:59
teens. I thought maybe we'd get up to
57:02
like Ordered something then fall back to the, I don't know the
57:04
40s 50s, you know, that that probably would've been my base
57:07
case you know in the kind of the middle 2021, for example, I
57:13
think a number of reasons, one is you had some degree
57:15
rehypothecation going on in the space.
57:18
I think another part of it is just altcoin dilution and that's
57:21
actually the first risk identified, you know, it's kind
57:24
of what prevented me from investing for a number of years.
57:27
In the early days is I would say, well, I can't just anyone
57:30
make more of these things and who says that That you know it's
57:34
not going to be some very diluted thing.
57:36
And eventually when I saw the block size War and the
57:39
resolution of that and when I saw just kind of network effects
57:42
and came to really understand the difference between Bitcoin
57:45
and the rest of the space. I said, okay now this one is I
57:47
think the winner I think this is obviously the way to go but I
57:51
still think in every bull cycle that altcoin dilution is a
57:56
limiter in terms of how big Bitcoin can get because everyone
58:02
says. Okay.
58:02
Why Put in Bitcoin, but I can put it in this little tiny coin
58:06
that could go up 50 x and now, you know, they all think they're
58:08
going to get out of the top. And so I did get concerned in
58:12
2021. There are periods where I
58:14
started to predict something like 2013, right?
58:17
I thought like a double cycle where I was living when I saw
58:19
like Dogecoin going vertical. When I saw like you know like a
58:23
theorem classic was going vertical, there's like come
58:26
rocket just like all these like the worst coins.
58:28
You can see just like bad coin just going completely vertical
58:32
in early 2012. We won.
58:33
I was kind of saying like, you know, I would be surprised to
58:35
see like a period of, you know, consolidation here to kind of
58:40
burn some of this out before we can go higher and so when we did
58:44
experience that with the China banned, that's what I Max
58:47
petition was okay. The next one I'll probably get
58:49
us higher and that's when we kind of I think stalled lower
58:51
than I would have guessed and I think a lot of that which is
58:53
because during the rising PMI environment, which is when
58:57
Bitcoin really has this opportunity to go up, it was
58:59
diluted in terms of going into all these other malinvestments.
59:03
And so I think that the way that Bitcoin can have a stronger
59:06
cycle is one would be a more significant breakdown of the
59:11
dollar, right? So the dollar stayed pretty much
59:13
the dollar Index, a pretty strong in this cycle and you
59:18
know the feds managing to tighten pretty significant if
59:20
they get to a part later in the 2020s where they just kind of
59:22
lose control their currents in a way that Emerging Market does
59:25
that's where you can see Bitcoin.
59:26
Have a much stronger cycle. And another one would be
59:31
essentially that you just kind of run out of Of things to try
59:33
in altcoin land, right? So each cycle, kind of had a
59:36
different theme, I think eventually you just kind of run
59:39
out of new ways to, you know, try new things, right?
59:43
So their first it was like, oh, you know, block size is
59:46
different or block times different and then you had icos
59:48
and then you had Define. N of T is and it's like a bench.
59:51
I think you can kind of run out of rope in terms of all.
59:54
These kind of ways you can say, okay, we made it better Bitcoin
59:57
and eventually people are kind of like, well we've gone through
1:00:00
enough of these, I think Bitcoins it and I think you
1:00:02
could get Less and less dilution.
1:00:03
But I think it's a process. Yeah, wow.
1:00:08
Linda I really really enjoyed that.
1:00:10
Thank you so much for for joining me on simply Bitcoin
1:00:14
IRL. Why don't you tell everybody
1:00:16
where they can find you online and what you're working on these
1:00:19
days? Strong atlanta.com on Twitter at
1:00:22
Linden contact as well. I just I put out a lot of free
1:00:26
content. I have low-cost research Service
1:00:28
as well and the big thing I'm working on.
1:00:30
Now on the side is a book, I'm trying to take some of my
1:00:33
articles and essays put them together.
1:00:35
ER, with new content and, and make a book, and it's not
1:00:39
specifically a Bitcoin book. It's a book about money that
1:00:43
naturally in this day and age will, you know, have a
1:00:46
significant Bitcoin component to it but it also covers history of
1:00:49
money. It covers, you know, Central
1:00:52
Bank digital currency stable coins just you know, basically
1:00:55
the technology will progression of money over time and just My
1:00:58
overall view of it would love to have you back on the show to
1:01:02
talk about it. And thank you so much for
1:01:04
joining us. Today and see you on the next
1:01:07
one guys. By the way, the show continues
1:01:11
going live with BTC sessions, in about five minutes to do the
1:01:14
news Roundup. So, see you guys there.
1:01:16
Lynn, thank you so much for joining us.
1:01:18
Thank you. Good job.