Latest / Merryn Talks Money / Lyn Alden Makes the Case for Bitcoin, Explains Why Money is Falling Behind the Times

Transcript

Lyn Alden Makes the Case for Bitcoin, Explains Why Money is Falling Behind the Times · Merryn Talks Money

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