#2 Maximal Liberty: Sound Money, what is it?

Niko, you are not— there's no complaint.

Oh, I did that again. Okay, so let me just start again. I was muted. I hope you can hear me now. So what I was saying, like, part of exchange, like, for example, like, if Max is a dentist and I'm a mechanic, Then I will fix his car, he will fix my teeth, and then that's that's an exchange. And where it becomes tricky is that those two things are not necessarily time-wise or resource-wise comparable. So that's where money comes in.

It's basically a form of direct exchange.

Max, you're muted.

Yes.

Oh, that is—

yes,

I was about— I was saying this is the double coincidence of wants or the double coincidence of needs. So what this is, is that if I want to trade with Julius, I need to have the thing that Julius wants. And Julius needs to have the thing that I want. And this limits our economic transaction greatly, because now we can only trade within, well, one degree. I need to get that thing which I like to consume directly, and I need to give up that thing that another person wants to consume. The truth is, now that we see that barter economics and It is natural and it is something completely doable, but it is not that efficient. So tell us, what is the medium of exchange and how does this make the market a bit more efficient?

Yeah, well, the medium of exchange is kind of like if you have communities, which one, like how it originated was the way that there was multiple communities and people tried to exchange for like say fish for clothes. And they were looking for like better ways, like what's the most saleable good? You could get like 5 fishes for 1 meter of cloth. And at some point, people were thinking like, if there's something common we need, everyone, everyone needs. So the common object of need became the medium of exchange in the transactions.

Yes, that is exactly right. If you have a piece of bread and I would like to have that, but I only have, let's say, a bucket of water and you do not want to have that bucket of water, but Niko does want to have that bucket of water because he likes to have a drink, and Niko has, let's say, a watch, a small watch, and Now, I can trade this watch for the bucket of water with Niko, and now I have this watch, but I do not want to have this watch to consume it, but I want to have this watch in order to give it to Julius, because Julius wants to trade this watch for his bread. Now, I got what I wanted, I got the bread, and Julius got what he wanted, he got the watch. Niko got what he wanted, he got the water. And this means everyone in the society is better off. But the trade between me and Niko would not have happened if Julius and I could have had a direct exchange. But this is not always possible. And this is why just if you use something and you buy something, not because you would like to consume it, but because you would like to use it in a future transaction, future economic transaction, that is a medium of exchange. And that's pretty much it. But now the interesting question is, Niko, when does such a medium of exchange transform into a money? Because like in this example, we had the, the, uh, bucket— uh, sorry, the watch as the medium of exchange, but a watch is not a money. Where's, where's the difference here?

Well, um, if you look at the definition of money, money should be something that is, um, Easily divisible. I guess that's the first thing that pops into mind. Like, for example, if you think about prison, what's the money in prison? Maybe a pack of cigarettes could be a form of money because it's easily divisible. It's not great for storing. It's all right for storing, I guess, but it's a little bit fragile. So there's some some problems there, but it certainly works as money there if that's what you.

Yes, yes, I agree. There, there are some goods that are more suitable to be a money, to be a good medium of exchange, and some goods that are not. And I think the, the line that— or the area where a medium of exchange becomes a money is that point where the entire society, or the vast majority of the community, community is using this money. So in the, let's say, in the real world, cigarettes are not really a money because not everyone uses them. You know, you just use your euros or hopefully your Bitcoin. But in the prison society, you know, in this isolated economy, the cigarettes are money. They are not just a medium of exchange. They are money because everyone is using it. And I think this is where You know, you could draw a small distinction, but it is really hard to find that exact point where a medium of exchange turns into a money.

I could give a counterargument here because it's impossible to define the exact society or which group. For the small group of prisoners, the cigarette might be might be the actual money. So I think like every medium of exchange is money to some group of people. So it's hard to make a really like division which one, even if like 5 people use it, if that is the medium of exchange for the 5 people, that is their money. So this is how I would like phrase it.

Yes, absolutely. I agree. And it can be a money even in a small community. You know, if a small community is self-sufficient and they themselves use rocks as their medium of exchange, then for them the rocks are money. For us outside this community, it is not money. Yeah. And this is why it is— this, this is why it is so beautiful. On the free market, you have thousands of monies. You have endless amounts of monies. There's infinite competition because everyone might be using a different money. And Niko, you brought up the first point that makes a medium of exchange a good medium of exchange, and that is the visibility, so that you can cut it up without it losing any value. Let's say you use a cow as a medium of exchange. Well, if you have a living cow and you cut it in half, it's not really 2 cows that add up together to be one cow. You lose a lot of value. Because now you have a dead cow in 2 pieces. So a cow is not divisible. On the other hand, gold is super divisible. Because no matter if you have a huge chunk of gold, or a bar of gold, or a coin of gold, or a grain of gold, it is gold. And you can easily recast it and melt it. So the divisibility in gold is really, really high. And similar to Bitcoin, you know, you can divide a Bitcoin up to the 8th digit to 1 Satoshi. You know, 100 million Satoshi is 1 Bitcoin, so it's quite divisible. And so, Niko, what would you say is another of the main important aspects? We had general acceptability and divisibility so far.

Well, I guess stability in terms of like day-to-day exchange, like you don't It's less than ideal if the value of your money changes rapidly or it's unstable, so you don't actually know how much bread can you buy tomorrow, which is what happens, for example, in Venezuela due to hyperinflation. So that's certainly something that you would hope a money has.

Yes. Absolutely, that is, that is true. I would put that into general acceptability again and under the ability to calculate prices in it. So the value stability. Oh.

Yeah, okay.

We'll be back in a couple seconds. Yes. Yeah, you can join with the other account and make him the admin. Yep. And I think that will give it the pro version. I'm not sure. Try it. Either it's going to cut up. Okay. Okay. Oh yes, that is a really nice picture. Julius, would you like to comment on it? I thought it was hilarious.

Yeah, yeah, that's how people see us gold bugs. In a way, in a way, I'm more like a hard currency bug, but gold being the one before Bitcoin. So let's say I used to be more of a gold bug.

So, and now, um, you're a Bitcoin bug, or is that it?

Uh, I assume I'm just a hard money bug.

Yeah, okay.

We are back. The stream.

I'm back.

Yep.

Right?

Yeah, you are back. Yeah, yeah, yeah. Happened anyway.

I can hear y'all perfectly.

Apparently this is amateur hour.

Okay.

Now we're also back in the stream. We're still learning the ropes. I think we're good. Are we good?

Yes. Perfect.

All right. Sorry about that. So yeah, about the gold bug. I'm gonna push it a little bit, Julius, and which is better, Bitcoin or gold?

Yeah. Gold— Bitcoin, Bitcoin, because gold is not really censorship-proof. And gold can be, and as we have seen throughout the time, gold has been misused. And like, The property rights of gold are not respected currently, and I don't see any change to it. So Bitcoin is the way to force governments to respect property rights.

Yes, I agree. Censorship resistance is, in my opinion, the most important part of a good medium of exchange. If you do not have the true property of it, if you do not have the true right to do with it as you please, then it is not your property, and then it is no longer a good medium of exchange, because you don't know if you can use it in the future or if you're being censored. If you live in Greece and you have money in a bank account, or if you live in Europe and have your money in a bank account, you live with the quite high risk of being censored really, really soon. And this is a risk that has to, you know, be accounted for. And this makes it really expensive and really unreliable. You know, talking about an unreliable currency.

And audio's cut off from me or from you?

I can still hear you.

Okay. Yeah, I can hear you now.

Okay. Yeah. So, okay. So let's talk about the next important aspect of a good medium of exchange. Which is durability. So durability, I define it as how long can you store the good before it turns bad. For example, if you have a banana and you want to use it as money, you want to use it in future exchange, well, after about a week or so, it's gonna look quite not so good, you know, and it's gonna be rotten. So this means a banana is not a durable medium of exchange. However, for example, precious metals Like, gold can almost not be destroyed. Once you have extracted it, it's pure and it does not decay. So gold is quite durable. Niko, how would you categorize the durability of Bitcoin?

Interesting question. Well, obviously, there's no moving parts or mechanical parts that can decay or any kind of like a living material. Like, obviously, it's run by computers. You know, even if the computers would be destroyed, the code still remains. So I guess it's more like— I would say it's fairly durable. I don't think there's any other form of money that would be more durable at the moment, at least.

I would say it wouldn't require the abolition of the internet to get rid of Bitcoin. And that's basically like— If the world doesn't end, internet doesn't end. So that's, that's, that's, that's how durable it basically is.

Yeah, you could still, you know, a person with eidetic memory could still memorize the code and it will just keep living until that guy lives or the next guy. And I don't think like, you know, after the electricity is back and it's business as usual.

Yeah, yeah. But if the infrastructure for internet is destroyed by some magic force, that could be the ending point because you would have to build the whole infrastructure again. That's one way of seeing it getting broken.

Yeah, it's a stretch, but it's always useful to think about these scenarios because that gives you kind of like perspective.

And just to keep in mind, software is rotten when it is no longer able to be used. So a good indicator of how durable a software is, is its uptime. How long is it running functionally? Well, what is the uptime of Bitcoin since January 3rd, 2009? 99.997%. It's been up almost the entire time other than like a couple days. I think one or two days are missing where they had to do like a hardcore software repair, and back in 2011 or something. So the durability of Bitcoin after this statistic Is outstanding. We have never seen such a durable money.

Yeah, I just shared, uh, there's actually bitcoinuptime.com, which, which will give you the real-time uptime, and it is in fact 99.99 and then some. So really impressive.

The question is, how long can Bitcoin keep this up? And may in the future this uptime decrease? We don't know. This is speculation. So far, it's sure the hell not looking like it. And another important aspect of money is neutrality. Neutrality that the money, the rules of the money cannot easily be changed by one person. You might also call it decentralized. talk about it in Bitcoin terms. So, you know, how neutral is the current fiat system? Julius, what would you say?

Like, very, very unneutral. Because basically money is like fed into the economy through like certain institutions. And basically all the money flows through like a group of people where it flows from the next group of people. So I would call it highly unneutral in that sense. Yes, I agree. Fiat money is typically political money and they use fiat for those purposes.

And the official goal of fiat money is that it is used in economic stimulation, that you use it to stimulate the economy. So it's everything but a neutral money. But now, Niko, how about the neutrality of gold and Bitcoin?

Well, gold is obviously— seems to me like it's neutral enough. Like, there's nobody really issuing it. It is mined, much as Bitcoin is mined as well via computer power. So the question is, what are the incentives of mining those things? And then that way you can start to think who will be those miners and how the structure will be. Like, for example, I think that if gold value would go up rapidly, let's say similarly than some cryptocurrencies could, then there would be created a new incentive to mine with different methods that are more efficient. For example, There could be like asteroid mining, for example. You could send rockets to space to mine those asteroids if the price went high enough. And that's why the price, in my opinion, will never go that high because it's not truly scarce. But in terms of neutrality, yeah, gold is pretty neutral, I would say. But it's no Bitcoin.

Absolutely. Because in my opinion, Bitcoin is the epiphany of neutrality. It is as decentralized as it can get. And even at this current stage, after over 9 years now, it is still really, really, really neutral and decentralized. We saw it with the troubles with SegWit2x and with the Bitcoin Cash hard fork and everything else. Bitcoin is hard to take down. It is really hard to take down. If you run your own node, if you hold your own private keys, You are sovereign. There is no one ruling over you. It's impossible. No one can force you into doing anything. It's a libertarian's wet dream. You have to voluntarily consent to do it. You know, it's perfect. And nobody can force any rule changes onto you because you have to update the software. And you decide which software is running on your hardware. And that just provides so much neutrality, so much stability. And now we— go ahead, Niko.

Yeah, I was just going to say that because I often hear these like, well, to me, it seems like it's kind of like conspiracy theories that Bitcoin ownership will be extremely centralized because of Bitcoin whales or stuff like that, or manipulation. And I was just wondering, what are you guys' thoughts on that? Is it a real problem? And in my opinion, it's actually— it's not a big problem, and it's at least— it's way better than what we have now. What do you guys think?

I think like if someone is like a Bitcoin whale, it of course causes volatility to the price. But as they dump the coins and amount of Bitcoin spreads around the multiple peoples around the world, the whales become not so whales anymore. And throughout the time, it will like the coins will spread to trade. There's a high incentive to sell when the price is overpriced for the whales. Even for the whales, they are at some point dumping their coins. It's for sure. And that's currently it's causing. a lot of volatility on the price. And throughout time, like in the future, it will spread. And so I don't see any problem with there being some whales at this point. Of course there's whales. It's a highly profitable asset right now.

Really good points. And there are many whales here in Bitcoin. And you have to realize that the monetary model, the monetary inflation model, which we're going to talk much more about later, has been set up to favor early investors. The first 9 years of Bitcoin is now history, and so far we have mined, uh, what, 17,040,000 Bitcoin. You know, that means by now 17 million out of the 21 million are already in ownership. You know, only 3— what, 4 more million Bitcoin will be issued over the next 200 years. Or 150 years.

That's crazy.

So there, yes, there are many people that got into Bitcoin super early and really benefited by this high inflate— early inflation rate and can now— they now definitely do have an advantage, yes. But they took tremendous risk in doing so. In 2010, in 2011, in 2012, nobody knew if Bitcoin was even going to survive. And they backed it with big money and they took tremendous risk. And yes, they got rewarded. They got rewarded quite handsomely, actually. But this is nothing good or bad. This is normal business. This is good. They did a tremendous service to the community. We have to also remember that in the Euro system, there are whales as well. They are called central banks. They're like the biggest whales ever. Because they are unlimitedly wealthy. They can print as much money as they want for themselves. There are also not just central banks, normal retail banks have a lot of control in the system. They own a lot of currency. There are big, big multinational companies, you know, huge conglomerates— Nestlé, Monsanto, and who else? They own a lot of money. They can mess with the economy quite a bit. Now what we have with the first time in Bitcoin That it's no longer those big companies that have the power, but the individual person. And that is fabulous. And furthermore, the individual person that is the big whale that has all those Bitcoin, he does not have any more voting power than anyone else. He is a sovereign for his own money, yes, but he cannot dictate anything, and he cannot force anyone else to do that.

It's very interesting points. And yeah, Julius, go ahead, you had something.

I had some question about, do you think Satoshi Nakamoto like overdid the inflationary, like the amount of Bitcoins that will be spread throughout the years? Because I've been thinking lately, he possibly couldn't have known how like quickly this all evolved here. But I've been thinking like, Like, was it like 100 years when all those coins were mined? So I think like 80 years unnecessary. What do you think?

Niko, go ahead.

Well, that, yeah, that's another, another thing that I hear a lot, that there's not enough for everybody. I, I think he got it like pretty much. Like, well, yeah, I know you're talking about the inflation.

Yeah, yeah. Did he overdo it? Like, is it necessary to have like extra 80 years for the inflation to go on. Is it necessary for Bitcoin? Because currently, like, the amount— like, this amount of Bitcoin at this moment is enough for everyone, basically, because it doesn't need to increase the quantity of money to have— like, it just shows in the price. But for— I've been like, lately I've been thinking about the problem in a way, like, the next 80 years or so, for me, I feel they're kind of unnecessary.

Yeah, maybe he overdid it, but I don't— I mean, yeah, to answer your question, yeah, maybe he did overdid it, but it's not a problem per se because, I mean, I would assume that in 100 or 200 years we will have a different system already. So better safe than sorry, I guess.

Yeah, yeah, I understand. Yeah, go ahead, go ahead.

If he would have modeled it similar to gold, then he would have modeled it like Ethereum with no cap and a 2% inflation throughout history, because that's how gold pretty much inflated, roughly at 2%. It never increased more than that. And we will talk much more about inflation in just a second and what that actually means. But Bitcoin's inflation was really, really, really high in the beginning because, you know, you had the first 50 Bitcoin. And then you had the second 50 Bitcoin. That is 100% inflation in the first 2 blocks. And then it decreased exponentially. So for the first 200,000 blocks or 210,000 blocks, you had the 50 new Bitcoin every block, every 10 minutes. And throughout that time, each additional Bitcoin that was mined was marginally less valuable. Because it was marginally, uh, the percentage of already existing Bitcoin to the Bitcoin that was flowing into the system. The flow-to-stock ratio, um, got smaller and smaller. And right now we got a, you know, after 2 halvings, having now 12.5 Bitcoin every 10 minutes, and after 9 years of Bitcoin's existence, we now have an inflation rate of roughly 3.5%. So every year, roughly 3.5% new Bitcoin come into the market. But this, again, this is decreasing exponentially with time. So yes, this does incentivize early adopters, but maybe this was a good choice.

Yeah. Yeah, I mean, Bitcoin was nearly worthless in the beginning, and that's probably one of the big reasons because Because it was it was just an accumulating phase and then creating these like huge whales who then I guess partly at least unloaded on on exchanges. But the first exchange was like when 2011 or 2012? When was Mt. Gox? I think it was maybe 2012.

2000 yes.

But

anyway, well yeah, very very different times. Sorry, go ahead.

But I would challenge you that Bitcoin did not have value in the beginning. I think it had tremendous value from day one, because at day one, it had the prospect of being a good system, a good monetary system. So first of all, you have the speculative value, which is always the first step in any valuation, that you speculate that the good will have value in the future. So we had that speculation even before day 1. And now when it really proved that this speculation was turning out to be correct was the first Bitcoin transaction, which I think happened on January 17th. I'm not 100% sure. I knew that Hal Finney was running Bitcoin on January 11th, so a couple days after Satoshi, and he got the first Bitcoin transaction from Satoshi himself. So that first transaction from Satoshi to Hal Finney, that was the first time that proved that Bitcoin was a suitable medium of exchange, that it could be sent from person A to person B. And now the question was, how good of a medium of exchange is it? And back then, it was not that usable. It was not that easy to use. It was clumsy. It had a lot of bugs. It wasn't that usable, but it was a medium of exchange. And then over the coming 9 years, so much development had happened and so many more new, well, user interfaces and wallets and blockchain explorers and multisigs and anything else that you can do today with Bitcoin builds on, like, from that first transaction that proved that it was a good medium of exchange.

All right, you got me there, Max. That's a fair point. What I, of course, meant was that you had zero fiat value, which means nothing obviously. One Bitcoin is always one Bitcoin. But it means a lot to a lot of people, so that's why I mentioned that. I mean, let's face it, like the market is still mostly about speculation and fiat speculation. Moreover, it's less— I think there's more and more people who buy in because of the tech and because one Bitcoin is one Bitcoin. They want to be a part of the new power elite. But still a lot of it is to get more euros and get more dollars.

Hello?

Yes. And I've shown Hal Finney's first tweet on running Bitcoin. That's indeed 10th of January 2009.

Yes, great guy.

Yeah, awesome guy. I actually made a t-shirt about that as well.

I'll show that.

Nice. Actually, there's a couple of questions from— hold on— Derek Smith.

Oh, yes.

Can you guys see it?

Yeah. I

can just read it if you can't see it. So maybe we should answer him since he's been putting in some effort. There's like 2 different ones. Actually, it's related to the topic we had earlier. 2 aspects to durability. Bitcoin is just a database of ledger entries. That database is replicated to anyone who wants it. So in terms of availability, Bitcoin is very durable. Yeah, that makes sense.

Yeah, I agree. It is, it is just pieces of data. It is information. And as long as you have a way to store that information, and, you know, Bitcoin is stored on thousands of nodes, you know, there are thousands of copies of the blockchain, So it is stored quite, quite, you know, exhaustively. So definitely this information is not getting lost. You do not delete the blockchain. This is not happening.

Yeah, that's a very interesting point. And a lot of people maybe forget, or maybe they don't know, that Bitcoin is actually a messaging, a very secure and immutable messaging protocol where you can actually send messages, which are in this case transactions between 2 parties, and those can't be Intercepted, which is unprecedented. And he goes on, he goes on to say, other aspect is private key. That's easily lost through losing your keys. Doesn't really affect the availability of the coins themselves, which remain locked in the blockchain. Um, hold on, let me get this straight. So that is losing the private keys. Actually, that that does decrease the total supply, which would then further deflate the currency. Wouldn't you agree?

Yeah, but if if someone doesn't find it, like someone just get it, you know. Okay, if loss losing means someone stealing it, it doesn't mean that. But yeah, basically if you lose it, you lose for lost forever. Like you throw your USB ticket. Stick to the ocean and you lose it, then it's lost forever. But and of course it causes monetary deflation.

Yes, agreed. And this will cause monetary deflation. And there are some estimates that three to four million Bitcoin are actually lost, together with Satoshi's one million Bitcoin that he's not going to. that he's not going to touch. There are many— much money has been destroyed by losing it. But the same is true for gold. How much gold is buried in a treasure that you no longer find? A lot. The thing is the Bitcoin is still there. You just don't have access to it. Same with the gold that is lost in the treasure somewhere in the Caribbean. It is still there. You just don't have access to it. The interesting thing is if the Bitcoin security will break and when it will break, at least the elliptic curve signature, double hashed with SHA-256. If that combination breaks, then we know that Bitcoin is fundamentally broken when those early coins that are lost actually start to move, which is like a nice security alert if the Bitcoin cryptography is still running and still good.

That's a very good point. And Derek goes on to add, total supply remains the same, you just can't spend the coins. It's like losing your gold in a shipwreck. Gold exists at the bottom of the ocean, just not spendable. Yeah, that's a really good analogy. I respect that. That's cool. Yeah. However, like, do you guys think that at some point with quantum computing or whatever technical advances, will there be a way to excavate those lost bitcoins? Because I believe— I don't remember the website right now, but there's a website that tracks Those addresses that have had an extended period of not moving the coins. So do you guys think that there will ever be a day that people will start wanting to touch those, wanting to excavate those? And will it happen?

Sounds bad if it does, because if it can be done for them, it could be done for anyone else. So I would like the idea.

I mean, for instance, I don't know if you're familiar with a project called Bitcoin Private. I think they forked ZClassic and fork of ZCash, which is ZClassic. They forked it into Bitcoin, which was the first time ever. That was interesting. And what they did, what they are doing or planning to do apparently, is to unlock the Satoshi coins. In their chain, which will be interesting to see how that plays out, and distribute those as airdrop to the holders. What do you guys think of that?

Okay, first question comes to mind is—

Sorry, let me clarify what it means for the viewers. So what it means is that when a coin is forked, they share history. So in the new Bitcoin Private or whatever chain, there's also Satoshi coins. But they're, you know, if he doesn't exist anymore or he's never going to move those, so they figure they can just take it and distribute it, redistribute it. What do you guys think?

Okay, I, I, it is just like, uh, basically there's just some kind of trying to like, uh, like airdrop them, which would for me indicate like there should be some kind of central authority in the chain distributing the coins. And if you can do it for one address, what blocks you from doing it for every address? I don't know, I'm not too technical with Bitcoin. That's right. So I'm not too sure about if there's some coding stuff to some magical stuff I know nothing about. But for me, it sounds kind of bad. If you can do that kind of airdrop, drop those coins, get those coins out from from the locked wallets. It doesn't sound too good for the whole process and for the security of the blockchain.

I think you're completely right on the centralization because every fork they have kind of like this— well, I wouldn't say every, let's not generalize. But in this instance, for example, they have a clear incentive to do something different and they are the force that puts things in motion. And they kind of did make that call without consensus to do so. So that creates centralization right away. And I think you're also right that nothing will stop them from doing it again unless it becomes something big like Bitcoin at some point, which it can, because the way forks work is that every Bitcoin holder gets a share as well. So the distribution is just as good as Bitcoin. So it's hard to say, but it's an interesting question to think about. What do you think, Max?

Yes, and we see in Bitcoin Cash that they— I think they already did their 3rd hard fork just a couple of days ago. I mean, Bitcoin has not had one hard fork yet, or at least one contentious hard fork, and they now had 3 already. So I mean, a hard fork is just a software upgrade. So, you know, let's not overhype it. But after all, it's a software upgrade that you kind of force on the other people. Because if they do not upgrade, then they are out of that main system. You know? Yes, they can still run their own chain. They don't have to upgrade. But if they still want to use the system, then they have to upgrade. That is the good thing with something like a soft fork, as we had it in Bitcoin, the real Bitcoin, with Segregated Witness. We had that upgrade in, what, August 2017? You did not have to use SegWit back then. I did, and I'm still using it, and I only send SegWit transactions, and I save a lot of transaction fees. So it's doable. You can do it, but you don't have to. If you use Jaxx wallet or something, then, well, you're still going to use the normal non-SegWit addresses that are going to cost you a bit more. It's your choice. You can still use the same currency though. So I would argue that a hard fork is a bit more coercive than a soft fork. Although in such a decentralized system such as a blockchain, a real true Bitcoin blockchain, there is not much coercion anyhow.

Actually, since you mentioned the hard forks of Bitcoin Cash, I had to pull out the TX Highway, and to my amusement it looks like they upgraded it to 32-megabyte blocks. So if you take a look at it now, it demonstrates perfectly what good does a block size increase do. That's pretty hilarious. It's a lot of freeway. Yeah, it's like there's like one moped going every couple minutes. That's funny.

Okay, so maybe to get back a bit to the topic of sound money, we talked a lot about no censorship resistance and consent in using that system, which is also of course a prime example of a good currency, of a good money, is that it's not forceful, that it's not violent, but that it's peaceful interaction. such as Bitcoin. You know, the people at Bitcoin Cash, they can do whatever the hell they want. I don't care. No, because I don't use the system. And they don't have to— they cannot force me to use it. So that is always good in the money. But maybe now let's talk a bit more about inflation and the increase in monetary supply. So maybe first of all, Julius, would you explain what exactly the quantity stock of money is? Or yeah, the quantity of money or the stock of money.

Where do I start? The quantity of money is the amount of money in, let's say, dollars or euros. Let's say euros. Amount of euros available to use in an economy. So even if you are hoarding it behind your Like, inside, in your, like, under your carpet, it's still available for you. So it doesn't— so the availability is the main point, and then the quantity of money is the exact amount of available money to be used in the economy at some point of time.

Yes, great explanation. I couldn't have put it any better. And so, Niko, what would you say is the purchasing power of money or the price of money?

Hmm, that's interesting. So, um, wouldn't that be whatever the, um, market decides? I mean, from, from like free market and kind of like libertarian perspective and from Austrian economics, I think it should be decided by the market alone and no central party, because the situation we have right now is the value is kind of decided by— well, not kind of, it's decided by the fiat whales. So via inflation, the value is kind of stolen from— not kind of, it's stolen, flat-out stolen from the users of fiat money. And what Bitcoin does in contrast to this is lets the free market decide. All right, fair enough. There's whales, there's manipulation. It's pretty obvious if you look at the Bitcoin exchange, the rate of Bitcoin has been during the past 6 months, it becomes blatantly obvious to me that it's been manipulated. Is it still better than fiat? I think so. So the purchasing power of money comes from people wanting to use it. Good point. As long as people want to use it, the money should always have value. And what decides the value? Hard to say. Free market.

Yes, I agree. I agree. And, and when saying free market, what we basically mean is just individuals. You as a person, how do you value the money? Well, actually, you just value this pretty much the same way that you valued it yesterday. Because yesterday you went out and you went into the market and you saw, okay, what can I get with the money? With €1, I can get, I don't know, a liter of milk and a piece of bread and ice cream. I don't know. And this is the purchasing power of one money unit, is those 3 goods. And so, you know, at that point, okay, that's how much I can get with one money. That's the purchasing power of money. So you always know the purchasing power of money only after the fact, once you've used it in another system or in another transaction. Okay? So it's always individual valuation. There's, as Niko said, nobody can press on a button and say, okay, the value of this good is now 50 units. That's impossible. This always has to come by individual choice and individual preferences. So, but before we get going with the next topic, maybe let's just, yeah, give us a thumbs up if you like the content so far. If you like what we've provided, please leave comments in the chat. We would really love to discuss with this. Derek has had many great comments so far. Yeah, so thank you for that as well. And Niko, where can the people find you on Twitter and the website?

Oh, you can find me at with the name OmniFin, double N, like a Finnish guy, a Finn. That's where you find all my content pretty much, so I suggest you just go there. I'm pretty active on LinkedIn, on Twitter as well, and then yeah, I'm also active on ConsenSys, which is the Finnish cryptocurrency association, and we're borrowing their stream, so, you know, thanks for that. And yeah, just to make clear, this is us 3 guys, this is not consensus, but hopefully we can provide some value and some valuable content to you guys watching as well.

Julius, how about you?

About my Twitter? Oh, I'll just paste the link on the chat because—

Okay,

perfect. Oh,

that's cool. I'll include all those in the descriptions as well.

Okay, okay. Yeah, just because, because yeah, on the Twitter I'm Currently, like, that's the most public place, and I'm trying to increase my usage of Twitter right now. And I mostly tweet currently in Finnish because I argue with politicians all day long.

That's good. Someone has to check what they're doing, right?

Yeah,

I gave up a while ago.

For me, it is Max Hillebrand, uh, just like down here. Um, you can find me on Twitter, uh, you can find me on Steam, you can find me on LinkedIn, uh, pretty much anywhere. Telegram if you want to chat directly. And you can also find my website, website towardsliberty.com. And there's a resource webpage where I have a bunch, a bunch of resources right now for Austrian economics and Bitcoin. Much more will follow. All of those books I can highly, highly recommend. to read fantastic resources. And that's where I got most of my knowledge, you know, just reading books. And mainly thanks to mises.org and the Mises Institute. Great website, great institute, great organization. Gratis books. You don't have to pay upfront. You can give them a donation if you like. They really need it and they gladly appreciate it. So yes, support those guys and let's get back to the next topic.

Hey, Max. Yes. Let's say, name one book you would recommend for anyone interested in Austrian economics. What's the first one to start?

The first one to start, I think, is the book that I read for the first time in Austrian economics, which was by Murray and Rothbard, and it was For a New Liberty: The Libertarian Manifesto. And this book It is about economics, but it is also about the ethical aspects of freedom and the philosophical aspects of freedom. And it is incredibly, incredibly well-written. It is a joy to read and incredibly informative. The first time I read it, I read it twice in one sitting in like 18 hours nonstop because it was so good. I was enjoying myself so much during that reading. It is phenomenal. Rothbard is to this day my favorite economist and my favorite author. Great guy. How about you, Niko? Great books? Don't trust, verify. You know, that's never believe anything blindly, always verify and search for the truth. So Julius, one book that you can recommend?

I would say like if you are interested in economics and you want to like understand liberty, what is basically Bitcoin, is liberty, I would suggest reading Murray Rothbard's Man, Economy and State. It's a long book, but it's basically the whole economic spectrum in one book. So

it's everything.

Yes, it's really, really good book. Basically, I've said to any of my friends, if they read it, it will change their understanding and their life because it's really deep.

If you only have one book and you want to not just know a bit about economics, but really understand it, read that book. It's the only thing you need. Man, Economy and State with Power and Markets, the second part attached. It was supposed to be, I think it's in the second edition. The book is out there for free on mises.org. There's an audiobook for free. So go out, read it. As Julius said, it will change your life completely. There's no other book like it. Okay, so now that we have that as well, you know, some nice tips and resources.

One thing to add though, I think,

yes,

I'm gonna challenge you guys. Like, I know you guys are big book readers and you put me to shame in that, but I would say that the only thing you need to read, if you're not much of a reader like I'm not, read the Bitcoin whitepaper. That's actually what you need to read. And then if you do some peer review and, uh, you know, talk to people, you will soon understand everything falls into place. It did for me at least. Maybe for you too.

Yeah.

Yes, yes. And Bitcoin requires holistic knowledge. It's, it's not just about a computer network. It's not just about cryptography, about mathematics. It's not just about game theory or economics or Austrian economics and sound money monetary theory. It's about everything, you know. It's about philosophy, it's about ethics, it's holistic. It requires a lot of knowledge and the learning curve is quite steep. And the rabbit hole is never-ending. You are never fully educated in Bitcoin. It is impossible. So always get as much resources as you can, you know, get as much information. And don't trust, verify. That's so important,

you

know. Peer review, due diligence, vitally, vitally important. Yeah.

Yeah, there's no shortcut.

Anything else? Yeah,

that's

okay. Derek is putting in some work. He has another comment on purchasing power of money.

Oh, nice.

Yeah, he said that it's set on the margin by individuals making money trades. Interesting.

There are many, many good points in here. So Austrians like to talk about a couple of things. They'd like to talk about margins. They like to talk about Individuals and transactions. So he put a lot of Austrian theory into that sentence. Marginal value basically means, or Julius, what explain what marginal value means?

Just just go with go with do what you you did better.

Okay, so marginal valuation means that each additional unit. So if I have one unit of something, if I now get a second unit, the marginal unit is the second unit. And if I now get a 3rd unit, then this 3rd unit is the marginal unit. So a margin is just 1 unit added. And when we talk about marginal valuation, then there is a law in economics that means we have a diminishing law or a law of diminishing marginal values or marginal returns.

Yeah.

This means if we have 1 good, Let's say I have one apple. I like that apple. If I have now a second apple, I do like that apple as well, but I do not like it as much as my first apple. I like it just a little bit less. The third apple I like as well. It's a third apple, but I like it even less than the second one. Not by much, just a little bit. But this keeps going. So each additional good that we get brings us less value. Anything to add, guys?

No, let's move on.

Okay, so before the short break, we talked a lot about— or we talked about the quantity of money. So how much money is available in the economy? How much money is tradable and existing? So in Bitcoin right now, it's 17 million. We said although there might be 4 million coins missing, you know, so it's not just the coins that are linked, but all the coins that are available. It includes all the gold, even that that is missing. And we also talked about the purchasing power of money, so that you yourself as an individual value money because you can trade it for something else, and the amount that you value one money is the amount that you can get with this one unit. So if I can get a coffee or an apple or a banana for my €1, then the purchasing power is just that, the aggregate of all that value that I can get. And now let's talk a bit more about inflation, because inflation is a tricky term and there are quite so many misconceptions about it. Mainly the misconception between a Increase in the money supply. So we, we have 17 million Bitcoin, now we have 18 million Bitcoin. That's an increase in the money supply, or an increase in the flow-to-stock ratio. So new money flows into the existing stock. And the other thing that we have to differentiate, the purchasing power. So how much money is how much can I buy with my money? So Julius, would you please explain a bit more in detail what the increase in monetary base is?

Yes, basically how inflation needs to be thought is that there is always multiple components in the purchasing power of money. So there is the supply of money, the quantity of money available. And there is also, like, this transaction speed of the money. If you have— you send money for— you have gold bar here, you send it to the USA, it's on the way when you are transporting to the USA, it's not available to use at that point. So it is basically like holds the money away from the economy at that point on the way it is going there. So the speed of the transactions affects the price of the money and of course the quantity of goods available. Like many people think like, okay, some— if I am an economist, I'm working at the European Central Bank, I'm looking at inflation, I'm I need, okay, it is 2%. It's like 1.5%. I need to get to 2%. And there could be easy way to get there. You don't have to increase the supply of money. You could just go look at your Consumer Price Index, which is a basket of goods, which include, let's say, milk and apples. You could go, it's by like changing the inflation from 1.5% to 2% by decreasing the supply of apples or milk. So that would, because there's a decrease in supply, it increases the prices of the goods and the basket of goods could increase. So the price of the basket of goods would increase and inflation would increase. So you need to always think about, like, if you talk about purchasing power of money or you hear about inflation in the news, They're always talking about the increase— the decrease in the purchasing power of money. And there's an important component being the money, supply of money, and the transfer speed, and the quantity of goods available in the economy. And I had written some other points down here. And of course, how much you hoard it, it affects it. And it's like you hoard it, the money in circulation decreases, and the money used for transactions decreases, and it causes like a monetary deflation in a way when people hoard it. But it's always available to use, so it's not extinct.

Yes, agreed. And Niko, what are your thoughts on difference of monetary inflation and the decrease in purchasing power?

I don't have anything to add to that. I think Julius just cut it all, but I would have like, I would have a follow-up question, I guess. Like, you know, the Okay, well, there's 2 kinds of inflation. Like, there's inflation in Bitcoin right now, but effectively it's a deflationary currency. So when does inflation become so-called bad, I think, a thing? And when it's— in some instances, do you guys think it's necessary even?

I would say, like, inflation at this point when people are still adapting Bitcoin, it might incentivize people to get the Bitcoin because there's inflation right now. But basically there is no need for inflation in Bitcoin. The quantity of money doesn't matter at all for the whole economy. It's only the thing if you cut down the inflation of Bitcoin right now, it doesn't matter. The purchasing power of the monetary unit increases. So I think the When does inflation get bad in Bitcoin? It's useless from basically— it could be like, I would say it's basically useless at this point because the adoption is already so high. But when you think about inflation in government-run economy, the bad inflation is basically the way they inflate the money supply Through getting themselves goods in a way. So that's going to be some kind of bad inflation if you want to talk about it.

Yes, agreed. And the main difference or the distinction between good and bad inflation is mainly done in the classical mainstream economics. So Keynesianism and macroeconomics and microeconomics, monetary theory, Chicago School. So those are the schools of thought that differentiate between a good or the right amount that money can increase in, the quantity of money can increase, and the wrong amount. And they believe that only the central bank knows the exact amount that the money should inflate. And that's why they should manage the money supply. Well, Austrians think a bit different. And I kind of like that explanation as well. So what they say is that the quantity of money doesn't matter. Okay, as an example, we have a microeconomy, just us 3 guys, and let's say Niko has 50 units of money, Julius has 30 units of money, and I have 20 units of money. Well, okay, so this means that Niko has roughly half of the purchasing power, Julius has 30% of the purchasing power, and I have 20% of the purchasing power. In this economy, in this microeconomy. Now, what if we increase the money supply equally for everyone? This means by the factor of 2. So Niko now has 100 money units, Julius has 60 money units, and I have 40 money units. Well, did this change anything? No, not really. Our purchasing power is still the same. Niko has 50% of the purchasing power, Julius 30%, and I 20%. So it didn't change. So inflation or the quantity of money is useless in the currency. As long as it is divisible and as long as it still keeps its good, well, monetary attributes that we discussed earlier, it's good money. The quantity doesn't matter. Where's the difference between Bitcoin's 21 million coins and Litecoin's 44 million coins? Sorry, 48 million coins. Well, there is none. Lightning just had like like Litecoin. They just put the factor four in front of it. That's it. You know. Now the value of one Litecoin is four times smaller than the value of one Bitcoin. It's the terabytes.

I would like to add when we get to the political part that there is a use for inflation in politics. It's not used for the people.

Let's go a little bit further in that.

Yeah, yeah, let's go further. Are you meaning right now?

Yes, yes.

Oh yeah, I mean a way like the inflation, one way why central banks, why politicians, why governments, why do they want inflation is to avoid getting people fired in a depression. Because when depression hits, the real wages of the economy need to drop. And when there's labor unions making the wage sticky, and there is a lot of social benefits making— the social benefits are high. And when the wages are sticky, people tend to get— when there's labor unions going on strike, people Tend to get everyone who doesn't produce above the minimum wage gets out of the labor force. They get thrown out of labor force. So the way to cut that, and when they get out of labor force in these welfare states like we are living, they get on the payroll of the social security system. And why they do it? They want to increase the money supply to avoid people getting fired. at that point when the depression gets bad. But from Austrian point of view, the whole economic depression at that level where it gets this bad is caused by the monetary inflation done beforehand and by the boom period of the economy. And that's like the political implication. Of course, there's the political implication of inflation. How do you finance a war? basically right now. You don't— if you will want to go to war with, like, we would want to war with Germany, let's say, and how do you get the people behind you? If you would, like, suggest, like, let's raise tax rates for, like, 80%, nobody, absolutely nobody would agree with that. So the governments want to have a way to wage a war without like hiding the cost of the war in the monetary economy. So they can like deceive the people by diluting the value of money. And from like that, they are paying for the war expenditures. And that's like one of the political implications. And of course, when you use When you inflate the money supply, you get new money. Basically, you get new money through government bonds because the government bonds are used by the central banks to inflate the money supply. So central banks buy government bonds from the commercial banks, and like that, they get more reserves where they build more money. and their kind of money increases exponentially. And that's one reason they get— when the demand for government bonds comes from the way, like when ECB grants you, I will buy it, you get more money. So the demand for government bonds increases, and that basically gives government cheap money. That's like the way they get cheap money. They can fund every stupid thing. Politicians can promise anything. Deficit spending doesn't mean anything. Because you get more money, the money, the deficits is basically right now deficits are good thing in the economy because you can inflate more money and because inflating money is necessary on the modern monetary theory. So like for ECB right now, the problem is they already they are already owning almost 30% of the government bonds on the European Union. So currently for the next recession, one of the problems they're really thinking about. like, how do we get Germany to take more deficits so we can purchase their bonds and get more money in the markets? So there's a lot of like political incentives for the inflation, but for the economy as a whole, for the people, for individuals, for us, it's just, it's not good. It's taking away our money to fund some government stuff.

Really interesting point you bring up there, and you touched one of my favorite topics. Like the the in the fiat system, the whales hold infinite power, infinite power in terms of like way you know giving money to themselves, their friends, their family, waging wars for even more gains and power. And Bitcoin kind of takes that away. I mean, doesn't it? Like how are you supposed to wage wars? When all the transactions will be visible. And even if there wasn't that visible, even if it was fully anonymous and private, there wouldn't be enough to wage those kind of wars.

Yes, you need to fund it some way and wars aren't cheap. So easiest way to fund it is through monetary inflation. It's the easiest way.

So what essentially happens is that the fiat whales are stealing the people's money to kill the same people, which is pretty bad.

Yeah.

Yes, yes. It's—

It is a combination of economic warfare and physical warfare, which is terrific.

I don't— Oh yeah, go ahead, go ahead.

And maybe, maybe there's a coincidence, you know, the Federal Reserve was created in 2013, and, you know, we had inflationary monetary policy right around the turn of the century, which ultimately led to the, what, First World War? Great Depression after that. Second World War, even bigger depression after that. And then we had, you know, real long, long, long depressions.

Right.

Then now we had the war in Greece, the war in Afghanistan, in the Middle East, in Vietnam, in Korea. Countless, countless, countless wars and millions of people dying, not even to mention all the deaths that communism created. If you're interested in that kind of stuff, which is a sad topic to be interested in, but it's something that is real and that is really scary, read the book Death by Government. It is a book that details all the civilian murders by government in the last century. It is horrific. You will not sleep after reading this book,

but

it's the truth. So I have— Go ahead.

Oh, there's a funny fact about the Great Depression. How, if you guys know Paul Krugman, who is the famous post-Keynesian economist, and one of his articles, if I remember right, he said that the USA was saved from Great Depression because of the war, because the war got the USA government to spend. So it's kind of funny. Funny

point. And this is the basic broken window fallacy.

Yeah, yeah.

Niko, can you explain that?

Sorry?

The broken window fallacy.

Well, maybe you can explain it better. I don't think I can do it.

Okay, okay. So what it basically is that I think Hayek argued that point is that if If someone, or if a boy is playing soccer in the yard and he's kicking the ball too hard and it breaks the window of his neighbor, and then the boy comes to the neighbor and says, well, look at this, isn't this great? Now you get to repair something, which means that you have to spend money to give for the repairman. And then the repairman has more money that he can spend because he just made more profit, and he can spend that money on your business. So eventually, although I broke your window, in the end you benefited because you will receive some money from the repairman after he got your money. But this is completely wrong thinking because if the window was not broken, then the window owner, the shop owner, he would have got it. Like, he would have had that money to consume something else. that he would like to have, to either consume or to invest. So, by the act of being forced to repair that window, he shows that he would not have done that action if the window was not broken. He would have allocated those resources somewhere more suitable to him. So actually, war never creates any wealth, obviously not, because the resources that were spent during that wartime could have been allocated much more effectively and So

to speculate on that, do you guys think that one more world war is going to be funded by fiat?

Currently there is, I think, some kind of rise in the nationalism of countries. People are— and I understand the reason for nationalism. right now because there's heavy welfare states. They need to be protected from the markets. And currently, if you look at China, you look at USA, Europe, and their currencies, they are basically waging war right now through their currencies. They are competing each other, like they're devaluing it. It's also one of the political reasons for inflation because if you devalue your money, your exports get cheaper and your export industry blooms for the reason of the exchange ratio of your currencies decreasing. And so in a way, currently we are doing those monetary warfare right now. And what I'm afraid when people get more nationalistic monetary warfare, And I think monetary warfare is one of the reasons we got World War II, because there was a lot of this falling exchange rates in Europe. And currently we are at the same point, basically. And we are fighting like the same situation right now. Countries are fighting each other through monetary inflation to devaluate their currency and boost their exports. And maybe through fiat war, basically we are right now in the currency war. Pace. And I hope not. I hope not. But I will also think, even if we go through the hard money way as we are going through Bitcoin, it won't be easy because there's a lot of conflict. Because this current boom period that has basically gone through for a long time right now, when we like transfer the hard money, inflation needs to like really pop up. It needs to deflate all the way. And for that, there will be a lot of problems with basically with the labor unions. You cannot anymore with hard currencies, you cannot inflate. There will be strikes. There will be people losing social security benefits. And from that way, I think we are in a way in a warpath. right now, however we do it. But I hope everything turns right, and I'm just scared myself. But I see many reasons for upcoming conflict. I don't know if it's a national war. It could be like inside, like civil wars inside the countries, but some kind of conflict is, in my opinion, building up right now.

Yes, good points that you bring up. And to expand on that, I think the main problem with inflation is that the person that controls the inflated money and the person that controls where the new money is flowing to has a lot of power. So let's bring this back to this example. Niko has 50 units, Julius has 30, and I got 20. Now, if Niko is the one that controls all of the inflating power, then he can give himself, let's say, 100 new units. So all of a sudden, Niko has 150 units, Julius has 30, and I have 10. This means that Niko now has 75% of the purchasing power, and Julius has now 15%, and I got 5%. No, I got 10%. And what this shows here is that if, if you can simply print new money, print new money, because that is all what inflation is, printing money fraudulently, you benefit yourself because you are the receiver of this money. Now Niko has much more of the purchasing power. Now let's say that Niko goes and buys something from Julius for 20 or for another 30 units. So now Niko only has 120 units, so he gave up some of his purchasing power. And Julius now has 60 units, which he now gained some in the purchasing power. However, I still only have the 20 units. This means right now, I still only have 10% of the purchasing power. And now even if Julius is doing business with me afterwards, he will have higher purchasing power than I do. So this means the earlier you are in this chain of receiving the newly printed, the fraudulently printed money first, the more purchasing power you have and the more benefits you have. And so to see who benefits the most from the current inflation scheme is to see, well, who gets the printed money. And Niko, you brought up a good point, is that One person or one entity that gets that money first is the welfare state. So go ahead.

Yeah, so yeah, I really like the point Julius brought up that the welfare state needs to be protected, actually. So why? Why should it be that way? Isn't the welfare state supposed to protect us? At least that's kind of like the whole deal that it's supposed to be. Now, if the welfare state needs to be funded by inflationary money, printing money and giving it to them, and then they will very inefficiently use it for public services, wouldn't it be just better to let the free market kind of like supply those services for people that actually need those Because what happens now is like there's a lot of, at least in my opinion, there's a lot of services that not need to be necessarily. And also the public sector is quite inefficient and it takes a lot of resources, which leads to even more money printing. So I don't— I fail to see how this is a sustainable system, and it is not in my opinion at all.

The question here is benefits who? Like the current system, if we are to privatize, what about the politicians? What about the bureaucrats? They need their job. So there's a heavy incentive to keep it this way right now. And the way, like, welfare states needs to be protected, you need to control immigration. You cannot get people to get here, like, to get on our welfare states, like, benefits so easily because it will Require more funding and you need to tax people more and it's an everlasting chain of bad things.

Yeah, I mean, you got to think about the incentives. Like, it all boils down to pure game theory and incentives. Like, who benefits? Who benefits and why things happen the way they do? Like, you know, who is getting all the money? Who is getting all the contracting deals, for example? Who is building like these Who owns the construction companies and who gets the government money and who owns the infrastructure. And you will soon see that there's a lot of misalignment in the incentives.

Yes, and I think like if we are in terms of hard money world, the Fortune 500 will look a whole lot different because I think many, many, many companies, at least the big ones, are basically indirectly at least funded by the governments right now. So I think the whole structures of companies currently, the big ones, I think if we are moved to hard currency, there will be a lot of mixing and meddling. And I don't know what comes out, but I think many of the big companies are the ones getting the money right now.

Yeah, let me quickly take a stab on social democracy as well and democracy in general. Like that is practiced widely in the world. Like we already have blockchain, we already have an immutable ledger, a messaging service that could be used, for example, these days technology could be used to hold a totally transparent immutable election that can't be rigged. Because right now, let's face it, there's no system that is not centralized that always creates a centralized point of failure. For sure. for counting the votes. So whoever owns that counting machine or those people owns the vote. Curiously enough, no countries so far have advocated it, to my knowledge, to use blockchain technology to hold a fully transparent election. I wonder why.

One point about democracy and the Iranian democracy right now is the point that People think that the individuals are not smart enough to decide themselves what to do for themselves, but they are smart enough to elect for the politician to do the same decisions for them. So what's, what's the deal here?

Yeah, go figure, right?

Yes, yes, I agree. Democracy is forcible rule by the majority over the minority. So the minority has no chance of getting their righteous share of freedom because they are being ruled by the majority. And even if the 95% of the society say that all people with red hair should be killed, that doesn't make this a right action. And any forceful action is wrong, and therefore any direction that is made in a democratic process is wrong. Now, this is just a brief overview. If you want to read a book by Hans-Hermann Hoppe, called Democracy: The God That Failed. Beautiful book. And he explains why actually a monarchy is better than a democracy. Why? Both systems are shitty. Both systems, we have a ruler that is forcefully ruling over others. But at least in the monarchy, the— and this may— this sounds a way a bit weird, but in the monarchy, the ruler actually owns his slaves. and he has to take care of them. He has private property in his slaves because he can do with them whatever he wants, and he himself, you know, he has this control as long as he lives. In a democracy, the rulers do not own their slaves. This means that after 4 years they are gone and new slave owners will come in. And this means that we have the big and famous problem of the public good, that now the owners no longer take care of their livestock of their human slaves because, well, they don't care. They'll be gone in 4 years. It's an interesting argument. It is a bit weird. So if you want to read more about that, go to Hans-Hermann Hoppe.

I want to add to that real quick. That's a really interesting point. And yeah, like, I call it modern slavery because it's a genius system in terms of like the rulers because you don't have overhead from taking care of your slaves, you will create a system that makes the slaves take care of themselves, feed themselves, get their apartment, and then steal the money via taxation and inflation. So brilliant. Kudos on the, on the great system for you. Unfortunately, it doesn't work for most of the world, but, you know, can't have everything, right?

Yes. Okay, so let's, let's jump to the next big topic. And that is, in general, interest rate, which is really interesting. And in order to understand interest rates and why money has a value in the future, we first have to understand what time preference is. So time preference basically means that, anything else equal, we value a good now more than a good in the future. This means if we have the choice Would you like to consume this piece of cake today or tomorrow? We will choose today because we want to have gratification as soon as possible. However, there is something called time preference. That means that the amount of increase in value that we get today versus tomorrow, that might differ. So if I'm on a long diet, For example, and I do not want to eat the piece of cake right now, and I have a lot of willpower, then I can make myself wait for, let's say, a month before I eat that cake. And this means I now have a higher time preference. Sorry, I have a lower time preference, which means that— yes, which means that— but thanks for keeping an eye out. That's good. So this means that I value my I do not value the satisfaction today, the immediate satisfaction, as much as the potential satisfaction in the future. So Julius, how would you say, how does time preference affect money?

Well, I would say through the interest rates, like how much you save. If you have a low time preference, you basically save a lot, and when you If you save a lot, there's a lot more capital goods to be lent out, and that reflects on the interest rate.

Yes, because saving is just the postponement of current consumption. If you save, you do not use the money to buy yourself current consumption instantly, but you save it to do that in the future, which is time preference, right? And so, Niko, could we say that there is something such as a value on time or the value of time?

Yeah, of course. I used to be into— like, due to not my own free will but to the circumstance, because I haven't found out about sound money, I used to be part of the fiat system, which created me me an extremely, like, this kind of instant gratification. I was looking for those. I would spill away the money, go out for drinks and buy useless electronics and stuff like that. And what now I do whenever I'm about to make a purchase, I will ask myself, do I value this thing I'm about to buy more than my freedom? And more often than not, I don't actually. So that actually has improved my life hugely because now I've learned the joys of delayed gratification, which makes it much, much more valuable, the experience, whatever it is. Whether I'm buying something or I'm going on a trip or whatever, if I can delay it for a while, it will taste much better. The cake will be way better.

Yes, agreed. Absolutely. And Julius, how would you say, now that we've established that there is such a thing as time preference and that there is a difference between goods right now and goods in the future, is— and this applies also to money. So having money right now is valuable, more valuable than having money in the future. This is why people either save or they take on loans. save if they want to, if they have a low time preference that they, you know, can get the gratification in the future. And they take on a credit, a loan, if they had a long, a high time preference, which means that they want to have instant gratification. So Julius, how would you say that, or is there a supply and demand market here?

Well, basically you said it yourself right now. I went in on the intersection of the question Because the ones with the lower time preference are the ones providing the loans, like supply for money, and the ones with the higher time preference are the ones with the demand for the money. So there is supply and demand for interest rates.

Yes, absolutely. And how does this influence the price? And what is the price in this instance?

Price of, like, you mean the interest rate?

Exactly, yes. That's where I want to get.

Yeah, yeah. Well, it depends on the valuations of the lower time preference people who have the lower time preference and they are like able to loan out their money. So in a way, it depends on their time preference, on the whole economy's time preference. But those are the guys basically loaning the money. And when the guy on the margin will get to the level, like, if his time preference is to— If the demand for loans because of the huge bigger amount of higher time preference guys is on the market and the guy on the margin She's like, the interest rates are rising because the demand is higher. So the one on the margin, like let's say 3% to 3.5%, and it rises because of the demand, the interest rate rises to follow 3.5%. The guy on the margin who didn't land at 3% but will land at 3.5% will get on that market and loan its money also. So as the demand increases, the supply also increases. That's how the price of the interest rate is. Like, if I can say a price of the interest rate, but the interest rate is demand-driven. It's evident.

Yeah, good points. Good points. So you're saying that the people that want to save money, they can give it to the people that want to invest and consume money. And now this means the interest rates, the price here, is the price of time, the price of time preference, of having the instant gratification versus the prolonged gratification. And Niko, how would you say, now that we established that there is a free market in such a good, the good of time, what happens if someone artificially stimulates this demand and supply side? So either the demand or— yeah, just go ahead.

I talk about market manipulation. Or like price cartels or banking cartels?

Both cartels in general, but also what does it mean if the person inflating the money, the person or the individual, the group of individuals that have the power to inflate the money, how does their actions mess with the market of time?

Well, of course, it generates a situation where you want to get rid of your money as fast as possible, which creates a lot of consumerism and people putting money on disposable goods that are not sustainable, and it's not good for the environment, and it creates a lot of problems. So I don't think it's good at all.

Yes, I agree. And I would go even further and say that if artificially the central bank increases the money supply, This means that more money is on the market, which means that the interest rates will become lower. You know, supply and demand. It's as simple as if someone will increase the supply of current gratification, the price of current gratification is going to get lower. The interest rate, the price of money is going to get lower. But what does this signal to the investors, to the people that produce, you know, to the entrepreneurs and the capitalists? Because to the market, this looks like, it looks like that this is money that is coming from the decrease of instant gratification in order to increase the prolonged, the future gratification. So it looks like people are saving in order to consume in the future, but as a matter of fact, it's completely opposite. People are not saving, people are actually consuming and investing much, much more. And this means that here we have a misalignment between the expectation of consumption and investment rate and the actual true consumption and investment rate. And this means that the goods that are being produced by the entrepreneurs that have to speculate on the future consumption of consumers, Because that's what entrepreneurs do. They check if consumers like their products. If yes, then the consumers produce that. And if they are hindered in estimating the amount of consumption that the consumers will bring to their economy, well, then they're gonna allocate their resources in the wrong way. So Julius, would you talk a bit more about misallocation of resources?

I would like to add to that point, like, When when the central banks increases the quantity of money, there's thing called like people have different kind of of course time preference, meaning different amount of the money is consumed and different amount of money is saved. So one of the way like how people on the monetary side defend the monetary inflation is the way that it causes forced. Saving because the money always on the market goes through basically through securities and people buying securities are basically rich guys. So, and the rich guys have like lower time preference than the poor guys. So it increases the total time preference, like lowers the total time preference if you aggregate all time preferences. So in some way it lowers them on the whole market economy and it forces people to save more. That's one of the defense points for monetarist theory. And what I'm saying here, it's like the forced saving, like in the liberal world, why should you be forced to save? It's like you do what you want. But that's one of their defense, but they don't think about the rest of the effects. But that's one of the effects to think about. That's a good thing for them.

Sorry guys to be a bummer, but I gotta run pretty soon. So can we maybe— Yeah, sure.

Yeah, is there some— could we get like to the Bitcoin part more if we take a few guest questions from the end? On Bitcoin.

Yes. Okay.

So we have five. So Niko, go ahead. We only have five viewers left. So we we've managed to shake half of our viewerships with without talk. Excellent job.

Should be like the recording will be up. Yeah.

Take a few Bitcoin questions.

Yeah.

You guys need to know where your window is. But next time, we'll get it right next time. That's a good idea. So maybe some final thoughts about the Bitcoin? I would like to talk about Bitcoin volatility actually, because we had this question here that could somebody say that Bitcoin is unsound because of its volatility? And to that I would say it's not volatile. Because one Bitcoin is one Bitcoin.

In a sense, yes. But I was thinking like the unsoundness, because people are looking at Bitcoin like you cannot use it because the price is rising and dropping every now and then. But as we talked earlier on this panel about the whales dumping their coins and through the dumping it's fastest distribution of the money. So the volatility is a problem at this moment, a problem for the money to be really acceptable by most of the people and the companies, but it's a problem that will alleviate through time when people get dumped on enough times.

Yes, yes, good points. So my thoughts on Bitcoin, I think Bitcoin is the perfect currency. I think it's the best currency that we will get in a long, long time. Why is that? It fits all the attributes of Menger's salability. So it is just a really, really useful money, and we talked about that earlier. And furthermore, it is a money that has a slow and a steady and a neutral, an uncontrollable flow-to-stock ratio, an inflation rate. And that will bring so much economic prosperity. Because it, number one, stops stealing from people, which is nice. And number two, it makes economic calculation possible again. We've lived with fiat money that is pretty much uncontrollable and uncalculable for almost 100 years now. This has been horrible if you follow the Austrian school. And there have been so many malinvestments. And Bitcoin will— yes, maybe it will It will uncover those malinvestments, which might be a crash, yes, but then afterwards we can build a society with sound economic calculation for the first time in over 100 years. And this will bring incredible amounts of prosperity, of liberty, of peace, of justice, and of overall well-being and happiness. And who wouldn't like to have that?

Yeah.

So I want to, I want to thank you 2 guys for joining me, Niko and Julius. It's been It was an enormous pleasure to talk to you. You're both really, really smart and woke, and it's fun to talk to you and to discuss this. And we discussed many, many cool topics. So Niko, just say goodbye and tell the people where they can find more about you.

Yeah, yeah. Thanks, Max, and thanks, Julius. It was always a pleasure, and I hope we can do more of these. And we're always looking for people, smart people, and not necessarily like-minded either. can be totally opposite, and as long as we can have a debate, actually sometimes it's very beneficial. Like now we have pretty much 3 guys who agree on everything, so that might be interesting to get somebody who totally disagrees with us for the next panel, and we can have an even more fun time, at least to watch. Yeah, you can find our links in the description, how to find more about us, and if you like our stuff, be sure to hit the like button, maybe even subscribe. And yeah, we try to keep the content coming, and any suggestions on the content are warmly welcomed, always. Yeah, that's pretty much it. Go ahead, Julius.

Oh

yeah, well, thanks, thanks for everything. It was fun talking. And, uh, yeah, there's nothing to add. Just add me on Twitter and talk to me and ask me questions. I'm still on the learning phase on Bitcoin, on everything basically, but the technical sides on Bitcoin are really, really like— I'm on the elementary level, in my opinion, on Bitcoin's technical sides. And if you have information on Bitcoin's technicals and stuff like that and you want to teach me, I'm more than willing to take that information.

Oh yeah, we are all learning here. Same here.

We are, absolutely. So guys, thank you very much for joining us, and thank you, Niko. You can find him on Twitter @OmniFin. Thank you, Julius. You can find him on Twitter @isoanselme. Yeah. And you can find me @HillebrandMax and towardsliberty.com. And it's been a pleasure talking to you guys. I had a lot of fun. I learned a lot. So thank you very much for joining us, and we'll see you at the next one. See

you next time, guys.

Thanks. See you.

Maximal liberty.

Oh yeah, I have the outro.

Oh, professional.